Registrant’s telephone number, including area code: ~~(510) 848-4400~~(206) 485-7051

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 ☒ NONo ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). ~~YES~~Yes ☒ NONo ☐

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 ☐ NONo ☒

The number of shares of Registrant’s Common Stock outstanding as of ~~July 29, 2020~~August 10, 2021 was ~~81,059,005.~~44,799,736.

Chinook Therapeutics, Inc., (the “Company” or “Chinook”), is a clinical-stage biopharmaceutical company. On October 5, 2020, Aduro Biotech, Inc.(“Aduro”), completed its business combination with Private Chinook, as defined below, in accordance with the terms of a merger agreement dated June 1, 2020 and amended on August 17, 2020 (the “Merger”). In this Quarterly Report on Form 10-Q, ~~“we,” “our,” “us,” “Aduro”~~the term “Private Chinook” refers to Chinook Therapeutics U.S., Inc. prior to the consummation of the merger described in this report and references to the ~~“Company”~~terms “Chinook”, the "Company”, “we”, “our” and “us” refer to Private Chinook, prior to the consummation of the Merger described in this report and Chinook Therapeutics, Inc. (formerly known as Aduro Biotech, Inc.) and its subsidiaries upon the consummation of the merger described in this report. The term "Aduro" refers to the Aduro Biotech, Inc. and its ~~consolidated subsidiaries. Aduro, Aduro Biotech,~~subsidiaries prior to the ~~Aduro~~Merger described in this report.

Chinook, Chinook Therapeutics, the Chinook logo and other trade names, trademarks or service marks of ~~Aduro~~Chinook are the property of ~~Aduro Biotech,~~Chinook Therapeutics, 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.

	June 30,			December 31,			June 30,			December 31,
	2020			2019			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	71,103		$	59,624		$	135,466		$	187,750
Marketable securities		100,028			153,978			61,684			59,622
Accounts receivable		1,169			342			467			262
Income tax receivable		5,665			—
Prepaid expenses and other current assets		3,015			3,958			5,710			6,447
Total current assets		180,980			217,902			203,327			254,081
Marketable securities		14,995			—			32,682			3,000
Property and equipment, net		21,706			24,688			19,359			20,626
Restricted cash								2,074			1,750
Operating lease right-of-use assets		20,334			21,110			53,157			55,673
Equity method investment								9,972			—
Intangible assets, net								26,854			27,696
In process research & development								36,550			39,295
Goodwill		8,177			8,167			18,541			22,441
Intangible assets, net		18,723			18,978
Restricted cash		468			468
Other assets								5,349			4,440
Total assets	$	265,383		$	291,313		$	407,865		$	429,002
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,339		$	414			9,221			3,995
Accrued clinical trial and manufacturing expenses		2,615			4,253
Accrued expenses and other liabilities		9,673			8,181
Accrued and other current liabilities								11,269			15,674
Operating lease liabilities		1,741			1,803			3,280			3,045
Deferred revenue		4,935			6,950			—			95
Total current liabilities		20,303			21,601			23,770			22,809
Contingent consideration		2,013			1,051
Deferred revenue		161,312			166,963
Contingent value rights liability								29,050			13,780
Contingent consideration liability								4,780			1,800
Deferred tax liabilities		3,531			3,527			15,635			16,377
Operating lease liabilities		30,855			31,636
Operating lease liabilities, net of current maturities								37,147			38,709
Other long-term liabilities		753			940			754			905
Total liabilities		218,767			225,718			111,136			94,380
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; 0 shares issued and outstanding at June 30, 2020 and December 31, 2019		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized; 81,059,005 and 80,735,688 shares issued and outstanding at June 30, 2020 and December 31, 2019		8			8
Commitments and contingencies (Note 10)
Stockholders’ equity (deficit):
Preferred stock, $0.0001 par value; 10,000 shares authorized as of June 30, 2021 and December 31, 2020; 0 shares issued and outstanding at June 30, 2021 and December 31, 2020								—			—
Common stock, $0.0001 par value; 300,000 shares authorized as of June 30, 2021 and December 31, 2020; 44,776 and 42,282 shares issued and outstanding at March 31, 2021 and December 31, 2020								4			4
Additional paid-in capital		557,263			552,077			505,168			463,436
Accumulated deficit								(208,615	)		(128,829	)
Accumulated other comprehensive income		439			414			172			11
Accumulated deficit		(511,094	)		(486,904	)
Total stockholders’ equity		46,616			65,595			296,729			334,622
Total liabilities and stockholders’ equity	$	265,383		$	291,313		$	407,865		$	429,002

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

Three Months Ended June 30,

Six Months Ended June 30,

2020

2019

2020

2019

Revenue:

Collaboration and license revenue

$
5,574

$
4,888

$
19,524

$
8,826

Total revenue

5,574

4,888

19,524

8,826

Operating expenses:

Research and development

11,108

16,657

26,936

34,151

General and administrative

9,284

7,832

17,103

16,056

Restructuring and related expense

2,046

367

6,354

3,361

Amortization of intangible assets

136

139

272

279

Total operating expenses

22,574

24,995

50,665

53,847

Loss from operations

(17,000
)

(20,107
)

(31,141
)

(45,021
)
Interest income

413

1,497

1,333

2,968

Other expense, net

(28
)

(3
)

(47
)

(22
)
Total other income

385

1,494

1,286

2,946

Loss before income tax

(16,615
)

(18,613
)

(29,855
)

(42,075
)
Income tax benefit

—

35

5,665

70

Net loss

$
(16,615
)

$
(18,578
)

$
(24,190
)

$
(42,005
)
Net loss per common share, basic and diluted

$
(0.21
)

$
(0.23
)

$
(0.30
)

$
(0.53
)
Shares used in computing net loss per common
share, basic and diluted

80,862,621

80,032,022

80,810,211

79,847,960

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

Common Stock

Additional
Paid-In

Accumulated
Other
Comprehensive

Accumulated

Total
Stockholders

Shares

Amount

Capital

Income (Loss)

Deficit

Equity

Balance at December 31, 2019

80,735,688

$
8

$
552,077

$
414

$
(486,904
)

$
65,595

Issuance of common stock upon exercise of stock
   options

88,480

—

80

—

—

80

Release of restricted stock units

12,925

—

—

—

—

—

Stock-based compensation

—

—

2,035

—

—

2,035

Other comprehensive loss

—

—

—

(554
)

—

(554
)
Net loss

—

—

—

—

(7,575
)

(7,575
)
Balance at March 31, 2020

80,837,093

8

554,192

(140
)

(494,479
)

59,581

Issuance of common stock upon exercise of stock
   options

2,980

—

3

—

—

3

Issuance of common stock under
   Employee Stock Purchase Plan

42,916

—

40

—

—

40

Release of restricted stock units

176,016

—

—

—

—

—

Stock-based compensation

—

—

3,028

—

—

3,028

Other comprehensive income

—

—

—

579

��

579

Net loss

—

—

—

—

(16,615
)

(16,615
)
Balance at June 30, 2020

81,059,005

$
8

$
557,263

$
439

$
(511,094
)

$
46,616

Common Stock

Additional
Paid-In

Accumulated
Other
Comprehensive

Accumulated

Total
Stockholders’

Shares

Amount

Capital

Income (Loss)

Deficit

Equity

Balance at December 31, 2018

79,571,714

$
8

$
538,895

$
940

$
(404,532
)

$
135,311

Issuance of common stock upon exercise of stock
   options

254,481

—

251

—

—

251

Release of restricted stock units

25,850

—

—

—

—

—

Stock-based compensation

—

—

3,703

—

—

3,703

Other comprehensive loss

—

—

—

(449
)

—

(449
)
Net loss

—

—

—

—

(23,427
)

(23,427
)
Balance at March 31, 2019

79,852,045

8

542,849

491

(427,959
)

115,389

Issuance of common stock upon exercise of stock
   options

173,925

—

188

—

—

188

Issuance of common stock under Employee
   Stock Purchase Plan

58,748

—

164

—

—

164

Release of restricted stock units

45,556

—

—

—

—

-

Stock-based compensation

—

—

3,336

—

—

3,336

Other comprehensive income

—

—

—

551

—

551

Net loss

—

—

—

—

(18,578
)

(18,578
)
Balance at June 30, 2019

80,130,274

$
8

$
546,537

$
1,042

$
(446,537
)

$
101,050

	Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020
Collaboration and license revenue	$	34		$	—		$	385		$	—
Operating expenses:
Research and development		22,787			3,870			48,484			6,688
General and administrative		7,768			3,879			17,311			5,150
Change in fair value of contingent consideration and contingent value rights liabilities		19,557			—			21,396			—
Amortization of intangible assets		422			—			842			—
Total operating expenses		50,534			7,749			88,033			11,838
Gain on sale of assets to equity method investment		7,227			—			7,227			—
Loss from operations		(43,273	)		(7,749	)		(80,421	)		(11,838	)
Other income (expense):
Other income (expense), net		(39	)		(4	)		(106	)		115
Change in fair value of redeemable convertible preferred stock tranche liability		—			10			—			(1,169	)
Loss before income taxes		(43,312	)		(7,743	)		(80,527	)		(12,892	)
Income tax benefit		741			—			741			—
Net loss	$	(42,571	)	$	(7,743	)	$	(79,786	)	$	(12,892	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.97	)	$	(1.87	)	$	(1.86	)	$	(3.12	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		43,861			4,151			43,004			4,128
Other comprehensive income (loss):
Foreign currency translation adjustments, net of tax of $0		99			49			137			(166	)
Unrealized gain on marketable securities, net of tax of $0		8			—			24			—
Total other comprehensive income (loss)		107			49			161			(166	)
Comprehensive loss	$	(42,464	)	$	(7,694	)	$	(79,625	)	$	(13,058	)

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

Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive		Total Stockholders'
	Shares		Amount		Capital		Deficit			Income (Loss)		Equity
Balance at December 31, 2020		42,282	$	4	$	463,436	$	(128,829	)	$	11		334,622
Issuance of common stock upon exercise of stock options and warrants and vesting of restricted stock units		100		—		580		—			—		580
Stock-based compensation expense		—		—		2,478		—			—		2,478
Other comprehensive loss		—		—		—		—			54		54
Net loss		—		—		—		(37,215	)		—		(37,215	)
Balance at March 31, 2021		42,382	$	4	$	466,494	$	(166,044	)	$	65	$	300,519
Issuance of common stock upon exercise of stock options and warrants, issuance of common stock under Employee Stock Purchase Plan, and vesting of restricted stock units		178		—		1,188		—			—		1,188
Issuance of common stock under the at-the-market sales agreement, net of offering costs		2,216		—		33,891		—			—		33,891
Stock-based compensation expense		—		—		3,595		—			—		3,595
Other comprehensive income		—		—		—		—			107		107
Net loss		—		—		—		(42,571	)		—		(42,571	)
Balance at June 30, 2021		44,776	$	4	$	505,168	$	(208,615	)	$	172	$	296,729

	Redeemable Convertible Preferred Stock				Common Stock					Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’ Equity
	Shares		Amount		Shares			Amount		Capital		Deficit			Income (Loss)			(Deficit)
Balance at December 31, 2019		7,597	$	19,835		4,502		$	—	$	6,095	$	(47,207	)	$	(7	)	$	(41,119	)
Issuance of common stock upon exercise of stock options		—		—		4			—		1		—			—			1
Repurchase of unvested restricted stock awards		—		—		(40	)		—		—		—			—			—
Issuance of Series A redeemable convertible preferred stock, net of issuance costs of $21		4,237		14,479		—			—		—		—			—			—
Exercise of redeemable convertible preferred stock tranche liability		—		9,723		—			—		—		—			—			—
Stock-based compensation expense		—		—		—			—		100		—			—			100
Other comprehensive loss		—		—		—			—		—		—			(215	)		(215	)
Net loss		—		—		—			—		—		(5,149	)		—			(5,149	)
Balance at March 31, 2020		11,834	$	44,037		4,466		$	—	$	6,196	$	(52,356	)	$	(222	)	$	(46,382	)
Stock-based compensation expense		—		—		—			—		299		—			—			299
Other comprehensive income		—		—		—			—		—		—			49			49
Net loss		—		—		—			—		—		(7,743	)		—			(7,743	)
Balance at June 30, 2020		11,834	$	44,037		4,466		$	—	$	6,495	$	(60,099	)	$	(173	)	$	(53,777	)

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

	Six Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2021			2020
Cash Flows from Operating Activities
Net loss	$	(24,190	)	$	(42,005	)	$	(79,786	)	$	(12,892	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation		1,837			2,175
Depreciation and amortization expense								1,552			162
Amortization of finance lease right-of-use asset								—			22
Amortization of intangible assets		272			279			842			—
Impairment of property and equipment		1,202			1,177
Non-cash lease expense		768			436
Non-cash operating lease expense								2,596			124
Stock-based compensation expense								6,073			399
Change in fair value of redeemable convertible preferred stock tranche liability								—			1,169
Change in fair value of contingent consideration and contingent value rights liabilities								21,396			—
Accretion of discounts and amortization of premiums on marketable securities		(418	)		(856	)		(6	)
Stock-based compensation		5,063			7,039
Loss from remeasurement of fair value of contingent consideration		943			24
Gain on disposal of property and equipment		(544	)		(2	)
Deferred income tax		—			(70	)		(741	)		—
Gain on sale of assets to equity method investment								(7,227	)		—
Changes in operating assets and liabilities:
Accounts receivable		(820	)		10,674			(205	)		—
Income tax receivable		(5,665	)		—
Prepaid expenses and other assets		938			612			(153	)		(188	)
Accounts payable		1,245			(349	)		5,610			1,362
Accrued and other liabilities								(3,956	)		2,752
Operating lease liabilities								(1,413	)		(116	)
Deferred revenue		(7,666	)		(6,763	)		(95	)		—
Accrued clinical trial and manufacturing expenses		(2,007	)		1,359
Accrued expenses and other liabilities		1,056			(1,784	)
Operating lease liabilities		(838	)		468
Net cash used in operating activities		(28,824	)		(27,586	)		(55,513	)		(7,206	)
Cash Flows from Investing Activities
Purchase of marketable securities		(113,683	)		(133,478	)
Proceeds from maturities of marketable securities		153,082			114,159
Purchase of property and equipment		(9	)		(382	)
Purchases of marketable securities								(105,328	)		—
Proceeds from marketable securities								73,615			—
Purchases of property and equipment								(744	)		(400	)
Proceeds from sale of property and equipment		544			—			267			—
Net cash provided by (used in) investing activities		39,934			(19,701	)
Net cash used in investing activities								(32,190	)		(400	)
Cash Flows from Financing Activities
Proceeds from employee stock purchase plan		40			164
Proceeds from exercise of stock options		83			439
Proceeds from issuance of common stock, net of offering costs								—			1
Proceeds from exercise of stock options and warrants								1,768			—
Proceeds from at-the-market sales agreement, net of offering costs								33,891
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs								—			14,479
Repayment of finance lease liability-related party								—			(31	)
Net cash provided by financing activities		123			603			35,659			14,449
Effect of exchange rate changes		246			(65	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash								84			(152	)
Net increase (decrease) in cash, cash equivalents and restricted cash		11,479			(46,749	)		(51,960	)		6,691
Cash, cash equivalents and restricted cash at beginning of period		60,092			126,778			189,500			11,357
Cash, cash equivalents and restricted cash at end of period	$	71,571		$	80,029		$	137,540		$	18,048
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Purchase of property and equipment in accounts payable and accrued liabilities	$	65		$	—
Purchases of property and equipment included in accounts payable and in accrued and other current liabilities							$	129		$	15
Right-of-use asset for office space acquired through leases							$	—		$	199
Reconciliation of Cash, Cash Equivalents and Restricted Cash
Cash and cash equivalents	$	71,103		$	79,561		$	135,466		$	17,901
Restricted cash		468			468			2,074			147
Total cash, cash equivalents and restricted cash	$	71,571		$	80,029		$	137,540		$	18,048

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

~~Aduro Biotech,~~Chinook Therapeutics, Inc. (the “Company”, ~~and its wholly owned subsidiaries,~~“Chinook”, “we”, “our”, or ~~the Company,~~“us”) is ~~an immunotherapy~~a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing precision medicines for kidney diseases. Our lead clinical program is atrasentan, an endothelin receptor antagonist that was in-licensed from AbbVie in late 2019. In March 2021, we initiated the ~~discovery,~~phase 3 ALIGN trial of atrasentan for IgA nephropathy (“IgAN”) and in April 2021, we initiated the phase 2 AFFINITY basket trial of atrasentan for proteinuric glomerular diseases. Our pipeline also includes BION-1301, an anti-APRIL monoclonal antibody that is being evaluated in a phase 1b trial for IgAN, as well as CHK-336, an oral small molecule LDHA inhibitor in preclinical development ~~and commercialization of therapies that are designed to harness the body's natural immune system~~ for the treatment of ~~patients with challenging~~primary hyperoxaluria. In addition, we are building our precision medicine pipeline through research and discovery programs for other rare, severe chronic kidney diseases. We were incorporated in Delaware and are headquartered in Seattle, Washington.

The Company ~~is located in Berkeley, California and its wholly-owned subsidiary, Aduro Biotech Holdings, Europe B.V., or Aduro Biotech Europe, organized~~as used in the ~~Netherlands. The Company operates in 1 business segment.~~

~~The Company’s product candidates~~accompanying notes to the unaudited condensed consolidated financial statements, refers to Private Chinook prior to the completion of the Merger and Public Chinook subsequent to the completion of the Merger. See the note “Reverse Merger and Contingent Value Rights” in the A Proliferation Inducing Ligand (APRIL) and Stimulator of Interferon Genes (STING) pathways are being investigated in cancer, autoimmune and inflammatory diseases. The Company’s anti-APRIL antibody product candidate, BION-1301, an investigational monoclonal antibody that blocks APRIL binding to both the BCMA and TACI receptors, is being evaluated in patients with IgA nephropathy. The Company’s lead STING pathway activator product candidate, ADU-S100 (MIW815), which is designed to activate the intracellular STING receptor, is being evaluated in combination with KEYTRUDA® (pembrolizumab), an approved anti-PD-1 monoclonal antibody, as a potential first-line treatment for patients with recurrent or metastatic squamous cell carcinoma of the head and neck (SCCHN). The Company is collaborating with leading global pharmaceutical companies to help expand and drive its product pipeline. The Company’s strategy is to rapidly advance therapeutic candidates from its APRIL and STING programs through clinical development and regulatory approval.

On June 1, 2020, the Company entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Aspire Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company, or Merger Sub, and Chinook Therapeutics U.S., Inc., a Delaware corporation, or Chinook, pursuant to which, among other matters, and subjectaccompanying notes to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Chinook, with Chinook continuing as a wholly owned subsidiary of the Company and the surviving corporation of the merger.condensed consolidated financial statements.

2. Basis of Presentation and Consolidation, Use of Estimates and Recent Accounting Pronouncements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, and follow the requirements of the Securities and Exchange Commission, or the SEC, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the unaudited condensed consolidated financial statements do not include all of the information and notes required by U.S. GAAP for complete financial statements. These financial statements have been prepared on the same basis as ~~the Company’s~~our annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of ~~the Company’s~~ financial information. The results of operations for the three and six months ended June 30, ~~2020~~2021 are not necessarily indicative of the results to be expected for the year ending December 31, ~~2020~~2021 or for any other interim period or for any other future year.

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, ~~2019~~2020 included in ~~the Company’s~~our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on ~~March 9, 2020.~~April 7, 2021.

The condensed consolidated financial statements include the accounts of ~~Aduro Biotech,~~Chinook Therapeutics, Inc. and ~~its~~our wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities ~~and~~at the date of the financial statements as well as the reported amounts of ~~revenue~~expenses during the reporting periods. Such estimates include the valuation of intangible assets, acquired property and ~~expenses in the financial statements and accompanying notes. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, clinical trial accruals,~~equipment, investments, contingent value rights, contingent consideration, ~~income taxes,~~redeemable convertible preferred stock tranche liability, lease right-of-use assets, and lease obligations, as well as accruals for research and development activities, stock-based compensation expense, and valuation of intangibles and goodwill. Management bases its estimates on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances.income taxes. Actual results could differ from ~~these~~those estimates.

In June 2016, the Financial Accounting Standards Board ~~or FASB,~~(the “FASB”) issued Accounting Standard Update ~~or ASU,~~(“ASU”) No. 2016-13, – Financial Instruments—Credit Losses (Topic 326). The standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. Financial assets measured at amortized cost will be presented at the net amount expected to be collected by using an allowance for credit losses. In April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments – Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, which clarifies and corrects certain unintended applications of the guidance contained in each of the amended Topics. Additionally, in May 2019, the FASB issued ASU No. 2019-05, Financial Instruments – Credit Losses (Topic 326),: Measurement of Credit Losses on Financial Instruments, which ~~provides an option to irrevocably elect to measure certain individual~~requires the measurement and recognition of expected credit losses for financial assets held at ~~fair value instead of~~ amortized cost. ~~In November 2019,~~This ASU replaces the ~~FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives~~existing incurred loss impairment model with an expected loss model. It also eliminates the concept of other-than-temporary impairment and ~~Hedging (Topic 815), and Leases (Topic 842), which defers~~requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. The standard is effective ~~date for ASU No. 2016-13~~ for smaller reporting companies toin fiscal years beginning after December 15, 2022 ~~including interim periods within those fiscal years. Early~~with early adoption is permitted for all

periods beginning after December 15, 2018. ~~The Company does~~We do not plan to early adopt ASU No. 2016-13 and isare currently ~~in the process of~~ evaluating the impact the ~~standard~~adoption of this ASU will have on ~~its~~our consolidated financial statements.

In December 2019, the FASB issued ASU No. 2019-12 – Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ~~(ASU 2019-12)~~. The standard update simplifies the accounting for income taxes by removing certain exceptions to the general principles in ASC 740 and also improves consistent application by clarifying and amending existing guidance. The standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. ~~Early adoption is permitted. The Company has evaluated~~We adopted the ~~impact of this guidance~~standard on January 1, 2021 and ~~has~~ concluded that adoption of the standard ~~will~~did not have a material impact on ~~its~~our consolidated financial statements.

~~Recently Adopted Accounting Pronouncements~~3. Reverse Merger and Contingent Value Rights

~~In August 2018,~~We completed our Merger with Aduro on October 5, 2020. Based upon the FASB issued ASU No. 2018-13 – Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement. The standard eliminates certain disclosure requirements for fair value measurements for all entities, requires public entities to disclose certain new information, and modifies some disclosure requirements. The new standard is effective for fiscal years and interim periods beginning after December 15, 2019. The Company adopted the new standard on January 1, 2020. As the resultterms of the ~~adoption~~merger agreement dated June 1, 2020 and amended August 17, 2020, Private Chinook was determined to be the ~~Company is no longer required to disclose (1) the amount of~~acquiring company for accounting purposes, and the ~~reasons~~transaction was accounted for ~~transfers between Level 1 and Level 2~~as a reverse acquisition under the acquisition method of ~~the fair value hierarchy, (2) the policy~~accounting for ~~timing of transfers between levels, and (3)~~business combinations in accordance with U.S. GAAP. Accordingly, the valuation process for Level 3 fair value measurements. Additionally, the Company is required to disclose (1) the changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level 3 fair value measurements held at the end of the reporting period and (2) the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. Refer to Note 3 “Fair Value Measurements” for the newly required disclosures resulting from the adoption of this standard.

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~~of Aduro were recorded at estimated fair value as of the merger closing date.

At the effective time of the Merger, we also entered into an agreement pursuant to which Aduro’s common stockholders of record as of the close of business on ~~a non-recurring basis or disclosed at fair~~October 2, 2020 received one contingent value ~~are categorized based~~right (“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 ~~level~~receipt of ~~judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value~~consideration resulting from milestones and ~~requires~~royalties from certain ~~disclosures about how fair value is determined. Fair value is defined as~~pre-existing agreements and the ~~price~~disposition or licensing of any of Aduro’s non-renal assets, net of any tax, and certain other expenses that ~~would~~could 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 reporting 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 madededucted by ~~the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:~~us.

~~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

Cash, cash equivalents and marketable securities consisted 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 cash equivalents consisting of corporate debt securities and commercial paper along with the Company’s marketable securities consisting of available-for-sale securities are generally classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data. When quoted prices in active markets for identical assets or liabilities are not available, the Company relies on non-binding quotes from its investment managers, which are based on proprietary valuation models of independent pricing services. These models generally use inputs such as observable market data, quoted market prices for similar instruments, or historical pricing trends of a security relative to its peers. To validate the fair value determination provided by its investment managers, the Company reviews the pricing movement in the context of overall market trends and trading information from its investment managers. In addition, the Company assesses the inputs and methods used in determining the fair value in order to determine the classification of securities in the fair value hierarchy.

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):

June 30, 2020

Level 1

Level 2

Level 3

Total

Financial Assets:

Money market funds

$
30,913

$
—

$
—

$
30,913

U.S. government and agency securities

—

66,209

—

66,209

Corporate debt securities

—

17,702

—

17,702

Commercial paper

—

67,304

—

67,304

Total

$
30,913

$
151,215

$
—

$
182,128

Financial Liabilities:

Contingent consideration related to acquisition

$
—

$
—

$
2,013

$
2,013

Total

$
—

$
—

$
2,013

$
2,013

	June 30, 2021
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	15,545	$	—	$	—		$	15,545
Money market funds		114,921		—		—			114,921
Certificate of deposit		—		—		—			—
Commercial paper		5,000		—		—			5,000
U.S. government and agency securities		—		—		—			—
Total cash and cash equivalents	$	135,466	$	—	$	—		$	135,466
Marketable securities:
Commercial paper	$	52,665	$	4	$	(5	)	$	52,664
U.S. government and agency securities		35,677		5		—			35,682
Corporate debt securities		6,021		—		(1	)		6,020
Total marketable securities	$	94,363	$	9	$	(6	)	$	94,366

December 31, 2019

Level 1

Level 2

Level 3

Total

Financial Assets:

Money market funds

$
39,994

$
—

$
—

$
39,994

U.S. government and agency securities

—

43,333

—

43,333

Corporate debt securities

—

54,590

—

54,590

Commercial paper

—

67,536

—

67,536

Total

$
39,994

$
165,459

$
—

$
205,453

Financial Liabilities:

Contingent consideration related to acquisition

$
—

$
—

$
1,051

$
1,051

Total

$
—

$
—

$
1,051

$
1,051

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 unobservable inputs such as the probability of achieving development milestones, anticipated timelines and discount rate, the values of which as of June 30, 2020 are shown in the table below. Changes in the fair value of the liability for contingent consideration will be recognized in the consolidated statement of operations until settlement.

~~The Company did 0t have any financial assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2020 and December 31, 2019.~~

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

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

June 30, 2020

Amortized
cost

Unrealized
gains

Unrealized
losses

Estimated
Fair Value

Cash and cash equivalents:

Cash

$
3,998

$
—

$
—

$
3,998

Money market funds

30,913

—

—

30,913

Commercial paper

29,791

2

(1
)

29,792

U.S. government and agency securities

6,400

—

—

6,400

Total cash and cash equivalents

$
71,102

$
2

$
(1
)

$
71,103

Marketable securities:

U.S. government and agency securities

$
59,800

$
20

$
(11
)

$
59,809

Corporate debt securities

17,639

63

—

17,702

Commercial paper

37,493

20

(1
)

37,512

Total marketable securities

$
114,932

$
103

$
(12
)

$
115,023

	December 31, 2019									December 31, 2020
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value		Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	8,149	$	—	$	—		$	8,149	$	5,659	$	—	$	—		$	5,659
Money market funds		39,994		—		—			39,994		113,592		—		—			113,592
Certificate of deposit											157		—		—			157
Commercial paper		11,482		—		(1	)		11,481		40,844		—		—			40,844
U.S. government and agency securities											27,498		—		—			27,498
Total cash and cash equivalents	$	59,625	$	—	$	(1	)	$	59,624	$	187,750	$	—	$	—		$	187,750
Marketable securities:
Commercial paper										$	35,089	$	—	$	—		$	35,089
U.S. government and agency securities	$	43,295	$	40	$	(2	)	$	43,333		26,026		6		(3	)		26,029
Corporate debt securities		54,563		33		(6	)		54,590		1,504		—		—			1,504
Commercial paper		56,055		7		(7	)		56,055
Total marketable securities	$	153,913	$	80	$	(15	)	$	153,978	$	62,619	$	6	$	(3	)	$	62,622

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 June 30 ~~2020~~, 2021 (in thousands):

NaN of our marketable securities were in a continuous unrealized loss position as of June 30, 2021. We review individual securities in our portfolio to determine whether a decline in a security’s fair value below the amortized cost basis is other-than-temporary. We determined that as of June 30, 2021, there were 0 investments in its portfolio that were other-than-temporarily impaired.

The Company records certain financial assets and liabilities at fair value in accordance with the provisions of Accounting Standards Codification (“ASC”) Topic 820 on fair value measurements. As defined in the guidance, fair value, defined as an exit price, represents the amount that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants. As a result, fair value is a market-based approach that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering these assumptions, the guidance defines a three-tier valuation hierarchy that prioritizes the inputs used in the valuation methodologies in measuring fair value.

Level 1: Unadjusted quoted prices in active, accessible markets for identical assets or liabilities.

Level 2: Quoted prices in markets that are not active or financial instruments for which all significantinputs are observable, either directly or indirectly.

Level 3: Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable activity.

The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.

The following tables present information about our financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values (in thousands):

	June 30, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Cash and money market funds	$	130,466	$	—	$	—	$	130,466
Commercial paper		—		—		—		—
U.S. government and agency securities		—		5,000		—		5,000
Total cash and cash equivalents		130,466		5,000		—		135,466
Marketable securities:
Commercial paper		—		52,664		—		52,664
U.S. government and agency securities		—		35,682		—		35,682
Corporate debt securities		—		6,020		—		6,020
Total marketable securities		—		94,366		—		94,366
Total fair value of assets	$	130,466	$	99,366	$	—	$	229,832
Liabilities:
Contingent value rights liability	$	—	$	—	$	29,050	$	29,050
Contingent consideration liability		—		—		4,780		4,780
Total fair value of liabilities	$	—	$	—	$	33,830	$	33,830

	December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Cash and cash equivalents:
Cash and money market funds	$	119,251	$	—	$	—	$	119,251
Certificate of deposit		—		157		—		157
Commercial paper		—		40,844		—		40,844
U.S. government and agency securities		—		27,498		—		27,498
Total cash and cash equivalents		119,251		68,499		—		187,750
Marketable securities:
Commercial paper		—		35,089		—		35,089
U.S. government and agency securities		—		26,029		—		26,029
Corporate debt securities		—		1,504		—		1,504
Total marketable securities		—		62,622		—		62,622
Total fair value of assets	$	119,251	$	131,121	$	—	$	250,372
Liabilities:
Contingent value rights liability	$	—	$	—	$	13,780	$	13,780
Contingent consideration liability		—		—		1,800		1,800
Total fair value of liabilities	$	—	$	—	$	15,580	$	15,580

Money market funds are included within Level 1 of the fair value hierarchy because they are valued using quoted market prices. Other cash equivalents and marketable securities, such as commercial paper, U.S. government and agency securities, and corporate debt securities, as well as certificate of deposit, are classified within Level 2 of the fair value hierarchy as the valuation is obtained from third-party pricing services, which utilize industry standard valuation models, including both income-based and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate the fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar securities, estimated interest rates based on the issuer credit rating and term, and other observable inputs.

~~4. Balance Sheet Components~~The following table presents a summary of the changes in the fair value of our Level 3 financial instruments (in thousands):

The fair values of the CVR and contingent consideration liabilities related to the Merger are based on significant unobservable inputs, which represent Level 3 measurements within the fair value hierarchy. In determining the fair value of the CVR and the contingent consideration liabilities related to the Merger, we used a probability-adjusted, scenario-based income approach. For the three and six months ended June 30, 2021, the change in fair value of the CVR and the contingent value rights liabilities related to the Merger was $16.4 million and $18.3 million, respectively, and was recorded in the consolidated statement of operations and comprehensive loss. The change in the fair value during the periods, resulted from a change in estimate of the potential future proceeds derived from Aduro’s license agreement with Merck and from the sale of certain of our non-renal assets in exchange for preferred shares in Sairopa during the three months ended June 30, 2021. 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. Refer to Note 15, “Equity Method Investment,” for more information. In addition, we identified measurement period adjustments, which reduced the CVR liability. Refer to Note 7, “Goodwill and Intangible Assets” for more information.

June 30,

December 31,

2020

2019

Leasehold improvements

$
27,084

$
27,288

Lab equipment

6,046

8,817

Computer and office equipment

2,146

2,334

Furniture

1,427

1,590

Construction in progress

122

190

Total property and equipment

36,825

40,219

Less: accumulated depreciation

(15,119
)

(15,531
)
Property and equipment, net

$
21,706

$
24,688

	June 30,			December 31,
	2021			2020
Research and lab equipment	$	3,446		$	3,616
Computer equipment		1,151			921
Computer software		44			27
Furniture and fixtures		1,106			1,099
Leasehold improvements		16,189			16,111
Total property and equipment		21,936			21,774
Total accumulated depreciation		(2,577	)		(1,148	)
Property and equipment, net	$	19,359		$	20,626

~~Depreciation expense was $0.8~~Approximately $3.4 million of our property and ~~$1.1 million for the three months ended~~equipment as of June 30, ~~2020 and 2019, respectively and $1.8 million and $2.2 million for the six months ended June 30, 2020 and 2019, respectively.~~

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

The gross carrying amount and net book value of goodwill was $18.5 million at June 30, 2021, all of which resulted from the Merger. During the second quarter of 2021, we identified and recorded measurement period adjustments for taxes related to the merger, which reduced goodwill by $3.9 million from the preliminary purchase price allocation and reduced our deferred tax liabilities by $0.8 million and reduced the CVR liability by $3.1 million. The measurement period adjustments were the result of additional analysis performed and information identified during the second quarter of 2021 based on facts and circumstances that existed as ~~follows (in thousands):~~of the merger date. As of June 30, 2021, the preliminary purchase price allocation for the merger with Aduro is subject to change as we use the measurement period, not to exceed one-year, to adequately analyze all the factors used in establishing the asset and liability fair values as of the merger date.

~~The Company tests~~ We test goodwill for impairment on an annual basis ~~on November 1,~~ or more frequently if an impairment indicator exists. To determine if an impairment has occurred, ~~the Company performs~~we perform a quantitative test in which the ~~Company compares the~~ fair value of ~~its~~a single reporting unit is compared to its carrying value. If the carrying value of the reporting unit exceeds the fair value of the reporting unit, ~~the Company records~~we record an impairment loss equal to that difference. As a result of the Company’s planned closure of its European site, the Company performed a quantitative assessment of goodwill as of March 31, 2020, and concluded that there was 0 impairment of goodwill as the fair value of the Company’s reporting unit exceeded its carrying value.

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

June 30, 2020

Gross Carrying
Amount

Accumulated
Amortization

Net Book
Value

Intangible assets with finite lives:

License agreement

$
11,104

$
2,591

$
8,513

Total intangible assets with finite lives

11,104

2,591

8,513

Acquired IPR&D assets

10,210

—

10,210

Total intangible assets

$
21,314

$
2,591

$
18,723

	June 30, 2021
	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
Acquired license agreement	$	26,685	$	1,182	$	25,503
In-place lease		1,433		82		1,351
Total intangible assets with finite lives		28,118		1,264		26,854
Acquired in-process research and development assets ("IPR&D")		36,550		—		36,550
Total intangible and acquired IPR&D assets	$	64,668	$	1,264	$	63,404

Intangible assets are carried at cost less accumulated amortization and impairment. Amortization is over a period of 209 to 17 years, with a weighted average period of 16.7 years, and the amortization expense is recorded in operating expenses. ~~The Company tests its~~We test our Acquired IPR&D ~~intangible~~ assets for impairment on an annual basis, or more frequently if an impairment indicator exists.

~~In the first quarter of 2020, due to the Company’s decision to close its European site, the Company assessed its~~ Acquired IPR&D ~~intangible~~decreased by $2.7 million from the sale of certain of our non-renal assets in exchange for ~~impairment. Based on the qualitative assessment performed, 0 impairment of Acquired IPR&D intangible assets was recorded as of June 30, 2020.~~

~~Amortization expense was $0.1 million for each of~~stock during the three months ended June 30, 2021. Refer to Note 15, “Equity Method Investment,” for more information.

Amortization expense was $0.4 million and $0 for the three months ended June 30, 2021 and 2020, respectively, and ~~2019~~was $0.8 million and ~~$0.3 million~~$0 for ~~each of~~ the six months ended June 30, 2021 and 2020, ~~and 2019.~~respectively. Based on finite-lived intangible assets recorded as of June 30 ~~2020,~~, 2021, the estimated future amortization expense for the next five years is as follows (in thousands):

I~~n March 2015, the Company~~On December 16, 2019, we entered into a ~~collaboration and~~ license agreement (the “License Agreement”) with ~~Novartis Pharmaceuticals Corporation, or Novartis, pursuant to~~AbbVie Ireland Unlimited Company (“AbbVie”), which the Company is collaborating worldwide with Novartis regarding the development and potential commercialization of product candidates containing an agonist 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,~~us an exclusive license to ~~commercialize such products outside the United States and a non-exclusive license~~atrasentan, an endothelin receptor antagonist, under AbbVie’s patent rights 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 an upfront payment of $200.0 million in April 2015. During the second quarter of 2016, the Company earned a $35.0 million development milestone upon initiation of a Phase 1 trial for the first STING product candidate, ADU-S100, and recognized the payment as revenue in the period. The Company is also eligible to receive up to an additional $215.0 million in development milestones 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; provided that either party may opt out of early stage clinical trials subject to an obligation to fund and participate in any pivotal trials and reimburse certain early development costs if development of the product progresses into pivotal trials.

The Company will also receive 50% of gross profits 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 net sales of product sold by Novartis, its affiliates and sublicensees, with such percentage subject to reduction post patent and data exclusivity expiration and subject to reduction, capped at a specified percentage, for royalties payable to third party licensors. Novartis’ royalty obligation will run on a country-by-country basis until the later of expiration of the last valid claim covering the product, expiration of data exclusivity for the product or 12 years after first commercial sale of the product in such country.

With respect to 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 development and commercialization cost sharing obligation. If the Company elects to reduce its cost sharing percentage by 50% 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 the profit share, and instead Novartis will owe the Company royalties on any net sales of product for such region, as described above.

For revenue recognition purposes, the Company determined that the duration of the contract begins on the effective date in March 2015 and ends upon receipt of regulatory approval, estimated to occur in 2028. The Company’s performance period commenced in May 2015. The transaction price consists of the $200.0 million upfront fee, a $35.0 million milestone payment received in the second quarter of 2016 upon commencement of a Phase 1 study, and $2.1 million in reimbursement of research and development costs through June 30, 2020. The Company determined that the remaining potential milestone payments are probable of significant reversal of cumulative revenue as their achievement is highly dependent on the successful completion of Phase 1 studies. Therefore, these payments are not included in the transaction price. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Novartis and have been excluded from the transaction price. The transaction price of $237.1 million is allocated to one combined performance obligation. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company concluded that it will utilize a cost-based input method to measure its progress toward completion of its performance obligation and to calculate the corresponding amount of revenue to recognize each period. The Company believes this is the best measure of progress because other measures do not reflect how the Company transfers its performance obligation to Novartis. In applying the cost-based input method of revenue recognition, the Company uses actual clinical study enrollment figures as well as actual costs incurred relative to budgeted costs expected to be incurred for the combined performance obligation. These costs consist primarily of internal full-time equivalent effort and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligations and it is dependent on the clinical timelines and progress under the research and collaboration agreement. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company's performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company's performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

Cost-sharing payments from Novartis are included in the transaction price and subject to the cost-based input method to determine the amount to be recognized in license and collaboration revenue in the Company’s consolidated statements of operations, while cost-sharing payments to Novartis are accounted for as research and development expenses in the Company’s consolidated statements of operations.

If the Company recognizes revenue from the sale of any products commercialized pursuant to this collaboration in the United States, it 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 from the sale of any products commercialized pursuant to this collaboration in such countries. Profit sharing payments made to or received from Novartis will be aggregated by product by territory and reported as expenses or revenues, as applicable.

In December 2019, the Company received notification that Novartis has removed ADU-S100 (MIW815), an intratumoral STING pathway activator product candidate, from Novartis’ portfolio based on clinical data generated to date. This decision was not the result of any safety concern. The collaboration and license agreement between Novartis and Aduro remains in effect, and both parties continue to jointly pursue STING pathway activation through systemic delivery as a therapeutic strategy. The removal of ADU-S100 from Novartis’ portfolio did not have an impact on the overall transaction price nor the revenue recognition methodology being utilized by the Company.

The Company is funding the squamous cell carcinoma of the head and neck and preparation of the IND application for any non-muscle invasive bladder cancer studies evaluating ADU-S100 itself because Novartis has opted out of these trials.

For the three months ended June 30, 2020 and 2019, the Company recognized $3.9 million and $1.9 million, respectively, and for the six months ended June 30, 2020 and 2019, the Company recognized $5.7 million and $4.4 million, respectively, in revenue from its collaboration with Novartis. The remaining balance of the upfront fee of $163.3 million is included in deferred revenue at June 30, 2020.

On December 18, 2018, the Company entered into a research collaboration and exclusive license agreement, or the Lilly Agreement, with Lilly for its cGAS-STING Pathway Inhibitor program for the research and development of novel immunotherapies for autoimmune and other inflammatory diseases. Pursuant to the Lilly Agreement, the Company granted an exclusive and worldwide license under certain intellectual property rights controlled by the Company to research, develop ~~manufacture~~ and commercialize ~~certain cGAS-STING~~licensed products for the treatment of ~~autoimmune and other inflammatory~~rare, severe chronic kidney diseases. ~~The license granted is sublicensable during a specified time period.~~

Under the ~~terms~~agreement, we assumed all global development and commercialization responsibilities for atrasentan. In consideration of the ~~Lilly~~license and rights granted under the License Agreement, ~~the Company received~~we made an upfront cash payment and issued 1,999,415 shares of ~~$12.0~~common stock for total consideration of $6.7 million to 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 the statements of operations and comprehensive loss, as the product has not reached technological feasibility and does not have alternative future use. Under the License Agreement, we are obligated to make contingent development, regulatory and commercial milestone payments of up to a maximum of $135 million in the ~~first quarter of 2019. The Company will also be eligible for development and commercial milestones of up to approximately $620.0 million per product. Lilly is also obligated to~~aggregate, as well as pay royalties on the ~~Company tiered royalty payments at percentages in the single to low-double digits based on annual~~worldwide net sales of ~~the~~ licensed ~~products. Lilly must pay such royalties on a product-by-product and country-by-country basis until the latest~~products ranging from upper-single-digit to occur of (i) the expiration of the last-to-expire valid claim of certain patents, (ii) the expiration of the data exclusivity period in such country or (iii) a specified anniversary of the first commercial sale of such product in such country. The Company will be reimbursed for up to a certain amount of research funding spent during the research term. In addition, the Company has the option to co-fund the clinical development of each product in exchange for an increase in royalty payments and a reduction in certainhigh-teen percentages.

We did 0t recognize any milestone payments ~~to the extent relevant to such co-funded product. Lilly will be responsible for all costs of global commercialization.~~

For revenue recognition purposes, the Company determined that the Company’s performance period commenced in January 2019 and ends upon completion of the research term, estimated to occur in 2021. The transaction price consists of the $12.0 million upfront fee and variable consideration related to reimbursement of research and development costs. The Company determined that the remaining potential milestone payments are probable of significant reversal of cumulative revenue as their achievement is highly dependent on the successful completion of research activities and advancement through clinical studies. Therefore, these potential milestone payments are not included in the transaction price. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Lilly and have been excluded from the transaction price. The transaction price is allocated to one combined performance obligation. The Company will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

The Company concluded that it will utilize a cost-based input method to measure its progress toward completion of its performance obligation and to calculate the corresponding amount of revenue to recognize each period. The Company believes this is the best measure of progress because other measures do not reflect how the Company transfers its performance obligation to Lilly. In applying the cost-based input method of revenue recognition, the Company uses actual costs incurred relative to budgeted costs expected to be incurred for the ~~combined performance obligation. These costs consist primarily of internal full-time equivalent effort~~three and third-party contract costs. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company's performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company's performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.

~~For the three months ended June 30, 2020 and 2019, the Company recognized $1.7 million and $3.0 million, respectively, in revenue. For the~~ six months ended June 30, 2021 and 2020. As of June 30, 2021 and December 31, 2020, ~~and 2019,~~we did not have any payable or receivable balances associated with the ~~Company recognized $3.9 million and $4.4 million, respectively, in revenue from the Lilly~~License Agreement. ~~The Company recorded $2.9 million in deferred revenue at June 30, 2020.~~

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 promises 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 determined that the promises were not distinct which resulted in them being combined into one performance obligation. The Company completed its performance obligation under the agreement by the end of 2016.

The Company received a milestone payment of $2.0 million in 2017 for the initiation of a Good Laboratory Practice, or GLP, toxicology study and $3.0 million in the first quarter of 2018 for the initiation of a Phase 1 trial for the anti-CD27 antibody and $10.0 million in the first quarter of 2020 for the initiation of a Phase II trial for the anti-CD27 antibody. The payments were recognized in revenue when received as the Company had 0 remaining performance obligation. The Company isMerger. We are eligible to receive future contingent payments, including up to $297.0 million in potential development milestone payments, and up to $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 ~~the Company has~~we have no ~~remaining~~ performance obligations under this agreement. Any such milestones and royalties earned prior to October 4, 2030 will be payable by us to the holders of the CVRs, net of tax and certain other expenses that could be deducted by us.

In connection with the 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 agreement is to perform research services through 2021, for which we will be reimbursed up to a specified amount.

For the three and six months ended June 30, 2021, we recognized revenue of less than $0.1 million and $0.4 million, respectively, under the Lilly agreement.

In connection with the Merger, we assumed an ongoing collaboration and license agreement with Novartis Pharmaceuticals Corporation (“Novartis”) for the development and potential commercialization of product candidates in the field of oncology. On April 1, 2021, we received notice that Novartis terminated for convenience the Collaboration and License Agreement, dated March 12, 2015.

As a result of the termination, the only remaining activity under this agreement is reimbursement resulting from development costs that are shared between us and Novartis. We record any amounts paid to Novartis under the agreement as research and development expense and any amounts received from Novartis as an offset to research and development expense. For the three and six months ended June 30, 2021, the amounts recognized under the agreement with Novartis were not material.

In February 2019, as amended in July 2019, we entered into a Series A financing transaction, pursuant to which we were authorized to issue up to 18,992,220 shares of Series A redeemable convertible preferred stock having a per share par value of $0.0001, at a purchase price of $3.4225 per share.

The terms of the Series A redeemable convertible preferred stock agreement include provisions requiring the investors to purchase, and obligating us to deliver, additional shares of redeemable convertible preferred stock at a specified price in the future based on the achievement of certain development-based milestones by us. The investors are also able to waive the milestone requirements, which provides the investors with an option to purchase additional Series A redeemable convertible preferred stock if the milestone is not met. The rights to purchase additional shares were recorded as a tranche liability at the estimated fair value of the obligation on the date of issuance with the carrying values adjusted at each reporting date for any changes in the estimated fair values. For the three and six months ended June 30, 2020, we recorded less than a $0.1 million and $1.2 million, respectively, for the ~~Company recognized 0 revenue from its collaboration~~change in the fair value of the redeemable convertible preferred stock tranche liability.

Upon closing of the Merger, the outstanding redeemable convertible preferred stock tranche rights terminated and all redeemable convertible preferred stock that had been issued converted to common stock.

We have a total of 5 operating leases as of June 30, 2021 with ~~Merck while~~remaining lease terms of approximately 6 months to 9 years.

In June 2021, we entered into a sublease agreement for office space in Seattle, Washington (“Seattle Sublease”), which we expect to use as our corporate headquarters. The Seattle Sublease commenced on July 1, 2021 and continues for a period of 58 months. The aggregate estimated base rent payments due over the term of the Seattle Sublease is approximately $5.7 million.

As of June 30, 2021, we are subleasing approximately 100,000 square feet in one of our facilities. Sublease income was $1.4 million and $0 for the three months ended June 30, 2021 and 2020, respectively, which was netted against rent expense. Sublease income was $2.6 million and $0 for the six months ended June 30, ~~2020,~~2021, respectively, which was netted against rent expense. Total sublease income to be earned, in aggregate, will be approximately $69.2 million over the ~~Company recognized a $10.0 million milestone payment related to the initiation of a Phase II trial for the anti-CD27 antibody.~~

~~The Company leases 1 facility in Berkeley, California under an operating lease that has a~~ remaining ~~lease~~ term of ~~approximately 10 years. The Company also leased 1 facility in Oss,~~ the Netherlands, under an operating lease that was set to expire in December 2020. In June 2020, the Company terminated its lease agreement for its leased facility in connection with the closure of its European site in Oss, the Netherlands. The Company will continue to pay the lease obligation, which is reimbursable to the Company if the landlord enters into a new lease agreement with a new tenant, until the original expiration of the lease agreement in December 2020. Both leases contain an option to extend for an additional term, however, the Company is not reasonably certain to exercise the option for the Berkeley lease and the Company will not be exercising the option for the Oss lease due to the closure of the Oss facility in June 2020. Refer to Note 10 “Restructuring and Related Expense” for additional information.sublease agreement.

The Company is subleasing approximately 26,552 square feet in its Berkeley facility under subleases that expire on or prior to February 28, 2021. Sublease income was $0.4 million for each of the three months ended June 30, 2020 and 2019, and $0.7 million and $0.8 million for the six months ended June 30, 2020 and 2019, respectively.

~~During 2016, the Company established~~We maintain a letter of credit ~~with Bank of America Merrill Lynch~~ as security for ~~the Berkeley lease~~one of our leases in the amount of ~~$0.5 million. The letter of credit~~$1.8 million, which is collateralized by a certificate of deposit ~~for $0.5 million which has been~~that is included in restricted cash in ~~the consolidated balance sheet~~our Condensed Consolidated Balance Sheet as of June 30, ~~2020.~~2021. Additionally, in connection with the Seattle Sublease, we posted a security deposit of $0.3 million in the form of a letter of credit, which was collateralized by a certificate of deposit and is included in restricted cash in our Condensed Consolidated Balance Sheet as of June 30, 2021.

The maturity of ~~the Company’s~~our operating lease liabilities as of June 30, ~~2020~~2021 is as follows (in thousands):

~~Straight-line rent~~Rent expense recognized for operating leases was ~~$1.4~~$2.1 million and ~~$1.2~~$0.1 million for the three months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively, and ~~$2.7~~was $4.1 million and ~~$2.5~~$0.3 million for the six months ended June 30, 2021 and 2020, ~~and 2019, respectively.~~respectively. Variable lease payments, including non-lease components such as common area maintenance fees, recognized as rent expense for operating leases ~~was $0.3~~were $0.6 million and less than $0.1 million for ~~each of~~ the three months ended June 30, 2021 and 2020, respectively, and ~~2019, and $0.7~~were $1.2 million and ~~$0.6~~$0.1 million for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. ~~The Company does not have any finance leases.~~

~~The following information represents supplemental disclosure for the condensed consolidated statement of cash flows related to operating leases (in thousands):~~

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 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.

~~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 ~~its~~ 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 results of operations, financial condition or cash flows.

~~The Company has~~We have various manufacturing, clinical, research and other contracts with vendors in the conduct of the normal course of its business. All contracts are terminable, with varying provisions regarding termination. If a contract with a specific vendor were to be terminated, ~~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 payment obligations for costs or expenses incurred by the vendor for products or services before the termination became effective. In the case of terminating a clinical trial agreement at a particular site, ~~the Company~~we would also be obligated to provide continued support for appropriate medical procedures at that site until completion or termination.

The ~~Company had reserved shares of common stock for future issuance as follows:~~

The fair value of RSAs vested during the six months ended June 30, 2021 was $0.8 million.

In ~~August 2017, the Company~~April 2021, we entered into an “at-the-market” sales agreement ~~as amended in February 2019, or the 2017~~(the “2021 Sales ~~Agreement,~~Agreement”), with ~~Cowen,~~Cantor Fitzgerald & Co. and 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 through ~~Cowen,~~Cantor Fitzgerald & Co. and SVB Leerink LLC, as ~~the Company’s~~our sales ~~agent. The Company~~agents. We will pay ~~Cowen~~the sales agents a commission of up to 3% of the gross proceeds of sales made through the ~~arrangement. There were 0 sales of~~2021 Sales Agreement. In April 2021, we sold 2.2 million shares ~~of common stock pursuant to~~for $33.9 million in net proceeds under the ~~2017~~2021 Sales Agreement. We have $40.0 million remaining under the 2021 Sales Agreement, during the year ended December 31, 2019 or the six months ended June 30, 2020. As of June 30, 2020, the Company had an aggregate of $81.5 million remaining for future sales under the 2017 Sales Agreement,which is subject to the continued effectiveness of ~~its~~our shelf registration statement on Form S-3 (Registration No. ~~333-219639), which~~333-255099) that expires on ~~August 11, 2020,~~April 7, 2024, or upon an effective replacement shelf registration statement.

In ~~March 2015,~~February 2019, Private Chinook adopted the ~~Company’s board of directors adopted and in April 2015~~2019 Equity Incentive Plan (the “2019 Plan”). In connection with the ~~Company’s stockholders approved~~Merger, we assumed Aduro’s 2 equity incentive plans, the 2015 Equity Incentive Plan or(the “2015 Plan”) and the 2015 Plan, which became effective upon the initial public offering of the Company’s common stock, or IPO, 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”). NaN 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 board of directors or a committee appointed by the board of directors, which determines the types of awards to be granted, including the number of shares subject 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% of the fair value per share of the Company’s common stock on the date of grant. If an individual owns capital stock representing more than 10% 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 on December 31 of the preceding calendar year, or (ii) a lower number determined by the board of directors. On January 1, 2020, the shares issuable under the 2015 Plan increased by 3,229,427. The Company had 10,941,502 shares available for future grant under the 2015 Plan as of June 30, 2020.

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 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. ~~Prior to the 2009 Plan termination, the~~The number of ~~options~~shares subject to and the exercise prices applicable to these awards were adjusted to reflect the one-for-five reverse stock split.

As of June 30, 2021 and December 31, 2020, there were 1.2 million and 0.9 million shares available for future grant, ~~was increased by 360,000 shares. At June 30, 2020, 2,691,784 options under the 2009 Plan remained outstanding.~~respectively.

The following table summarizes stock option ~~activity for the six months ended June 30, 2020:~~activity:

Options Outstanding

Shares
Available
for Grant

Number of
Shares
Underlying
Options

Weighted-
Average
Exercise
Price

Aggregate
Intrinsic
Value

(In thousands)

Balance—December 31, 2019

8,751,436

10,297,444

$
5.49

$
680

Authorized

3,229,427

—

RSUs forfeited, net

83,007

—

Granted

(3,136,000
)

3,136,000

3.14

Exercised

—

(91,460
)

0.91

Canceled

2,013,632

⁽¹⁾

(2,024,708
)

5.87

Balance—June 30, 2020

10,941,502

11,317,276

$
4.81

$
3,671

Options exercisable—June 30, 2020

6,264,788

$
5.82

$
3,369

Options vested and expected to vest—June 30, 2020

10,204,429

$
4.97

$
3,608

The aggregate intrinsic value represents the difference between the exercise price of the options and the closing price of ~~the Company’s~~our common ~~stock.~~stock for stock options that were in-the-money at June 30, 2021.

The ~~aggregate intrinsic~~weighted average grant-date fair value of options ~~exercised during~~granted was $10.65 and $3.64 for the six months ended June 30, 2021 and 2020, ~~was $0.1 million.~~

respectively. As of June 30 ~~2020,~~, 2021, the total unrecognized compensation expense related to unvested options ~~net of estimated forfeitures,~~ was ~~$9.0~~$29.1 million, which ~~the Company expects~~is expected to ~~recognize~~be recognized over ~~an estimated~~a weighted-average period of ~~2.9~~3.1 years.

We estimate the fair value of stock options using the Black Scholes option-pricing model. The fair value of stock options is amortized on a straight-line basis over the requisite service period of the awards. The fair value of stock options is estimated at the date of grant using a Black-Scholes option-pricing model with the following weighted-average assumptions:

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, which is intended to serve as a standard form agreement for RSU grants issued to employees, executive officers, directors and consultants.(“RSUs”)

The total fair value of RSUs that vested in the six months ended June 30 ~~2020:~~

, 2021 was $0.2 million. The fair value of RSUs is determined on the date of grant based on the market price of ~~the Company’s~~our common stock on that date. As of June 30, ~~2020,~~2021, there was ~~$1.8~~$11.1 million of unrecognized stock-based compensation expense ~~net of estimated forfeitures,~~ related to RSUs, which is expected to be recognized over a weighted-average period of ~~1.8~~2.5 years.

~~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 Internal Revenue Code, or the Code, and is administered by the Company’s board of directors and the compensation committee of the board of directors.(“ESPP”)

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 equal 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. There was 0 annual increase of shares issuable under the 2015 ESPP on January 1, 2020. The CompanyWe had ~~1,527,421~~0.7 million shares available for future issuance under the 2015 ESPP as of June 30 ~~2020.~~, 2021.

The ~~following table summarizes the assumptions used in the Black-Scholes option-pricing model to determine~~ fair value of ~~the Company’s~~our common ~~shares~~stock to be issued under the 2015 ~~ESPP:~~

~~Total stock-based compensation expense recognized for employees and non-employees was as follows (in thousands):~~

~~In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs~~ESPP is ~~subjective and generally requires significant judgment.~~

~~Fair Value of Common Stock~~—~~Since the Company’s IPO, the Company has used the market closing price of its common stock as reported on the Nasdaq Global Select Market.~~

~~Expected Term~~—The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term for employee options). ~~The Company uses the contractual term to determine the non-employee award fair value at the grant date.~~

~~Expected Volatility—The Company’s expected volatility is based on the historical volatility of the Company’s common stock price since its IPO in 2015.~~

~~Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.~~

~~Expected Dividend—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of 0.~~

~~The fair value of stock option awards granted was~~ estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

In January 2020, the Company’s Board of Directors approved a restructuring to further extend the Company’s operating capital and align personnel towards executing the clinical development strategy. As of June 30, ~~2020,~~2021, the ~~Company reduced its workforce by 27 employees (approximately 28%~~unrecognized stock-based compensation expense related to the ESPP was $0.1 million, which is expected to be recognized over a weighted-average period of ~~total employees) and intends to reduce its workforce by an additional 11 employees in the remainder~~0.4 years.

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

We recorded income tax benefit of the year under the restructuring plan. Additionally, in June 2020, the Company closed its European site in Oss, the Netherlands. As of June 30, 2020, the Company estimates that it will incur aggregate charges of approximately $6.8$0.7 million ~~including $2.4 million in one-time severance and employee termination related costs, approximately $4.1 million in one-time retention costs and relocation costs of approximately $0.3 million. During~~for the three and six months ended June 30, 2020, the Company accrued approximately $2.0 million and $5.2 million, respectively, of restructuring compensation and paid approximately $1.5 million and $2.5 million, respectively, of restructuring compensation. As of June 30, 2020, the Company has a remaining restructuring compensation reserve balance of approximately $2.7 million. The restructuring is expected to be substantially complete by the end of the third quarter of 2020.

The restructuring plan includes the closure of the European site leased facility as of June 30, 2020. As a result, the Company fully impaired the European site’s property and equipment, consisting of lab equipment, computer and office equipment, furniture, and leasehold improvements, during the six months ended June 30, 2020. Additionally, the Company accelerated the amortization of the ROU asset associated with the leased facility so that the ROU asset will be fully amortized by June 30, 2020 rather than by December 31, 2020, the expiration of the Oss lease. For2021. NaN income tax benefit or expense was recorded for the three and six months ended June 30, ~~2020, the Company recorded an additional ROU asset amortization expense of $0.1 million~~2020. Our effective tax rate was 1.7% and ~~$0.2 million, respectively. On June 10, 2020, the Company terminated its lease agreement~~0.9% for the European site’s facility and will continue to pay the lease payments until December 31, 2020. The Company will be reimbursed for rent and fees paid from the termination date until December 31, 2020, if the landlord enters into a new lease agreement with a new tenant.

~~For~~ the three and six months ended June 30, ~~2019 in~~2021, respectively. The effective tax rate is lower than the ~~consolidated statement~~statutory tax rate of ~~operations, the Company reclassified $0.4 million and $3.4 million, respectively, of restructuring and related expense~~21% primarily due to us maintaining a full valuation allowance against our net deferred tax assets, offset by deferred tax benefits associated with the ~~January 2019 strategic reset~~sale of certain non-renal assets.

The following table sets forth the 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 amounts):

The following outstanding shares of potentially dilutive securities were excluded from ~~research~~the computation of diluted net loss per share attributable to common stockholders for the period presented because including them would have been antidilutive (in thousands):

On April 2, 2021, we entered into a definitive agreement with Sairopa B.V. (“Sairopa”), a private company created by Van Herk Royalty B.V. and ~~development and general and administrative~~D.S. Chahal (the “Sairopa Investors”) to ~~restructuring and related expense to be consistent~~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 in Sairopa. In accordance with the ~~presentation~~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 taxes and certain expenses that could be deducted by us, will accrue to the benefit of the CVR holders.

~~On March 27, 2020,~~2021, we own a 44% interest in Sairopa. We determined that we have the ~~Coronavirus Aid, Relief,~~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, participation in policy-making decisions and ~~Economic Security Act, or~~material intercompany transactions. The Sairopa Investors provided an initial capitalization of 12.5 million Euros. We recorded the ~~CARES Act, was enacted~~equity method investment at $10.0 million, which is the fair value of the equity received by us in ~~response to the COVID-19 global pandemic. The CARES Act, among other things, permits certain net operating losses, or NOLs, to be carried back~~exchange for the ~~preceding five taxable years~~non-renal assets. The sale of the non-renal assets to ~~offset 100%~~Sairopa resulted in a $7.2 million gain, which is the difference between the fair value of ~~taxable income.~~

~~Income tax benefit for~~ the equity received and the carrying value of the non-renal assets. The gain is reported in our Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2020 and 2019 was approximately $5.7 million and $0.1 million, respectively. The income tax benefit recorded for the six months ended June 30, 2020 was primarily related to the tax refund due to the carryback of NOLs and AMT credit refund. The income tax benefit for the six months ended on June 30, 2019 was primarily related to the foreign deferred tax benefit from the amortization of intangibles. The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense.

The Company files income tax returns in the United States and 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, 2016 through December 31, 2018. 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.2021.

~~Since~~Our equity method investment is reported at cost and adjusted each period for our share of the ~~Company was~~investee’s income or loss, which are reported in our Condensed Consolidated Statement of Operations on a ~~loss position~~one quarter lag. We assess our equity method investment for ~~all periods presented, diluted net loss per common share is~~impairment whenever events or changes in circumstances indicate that the ~~same as basic net loss per common share for all periods presented as~~carrying value of the ~~inclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were~~investment may not ~~included in the diluted per common share calculations because they would~~ be ~~anti-dilutive were as follows:~~recoverable

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, ~~2019,~~2020, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission.

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 risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors” and elsewhere in this report. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

We are ~~an immunotherapy~~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, an endothelin A receptor antagonist that we in-licensed from AbbVie in late 2019. In March 2021 we initiated the ~~discovery,~~phase 3 ALIGN trial of atrasentan for IgAN, and in April 2021 we initiated the phase 2 AFFINITY basket trial for proteinuric glomerular diseases. Our second product candidate, BION-1301, is an anti-APRIL monoclonal antibody also in development for patients with IgAN and ~~commercialization~~we anticipate presenting results from the ongoing phase 1b trial at future nephrology conferences, including ASN in November 2021. We are also advancing our third program, CHK-336, which is currently in IND-enabling studies, towards an expected start of ~~therapies that are designed to harness~~a phase 1 clinical trial in the ~~body's natural immune system~~first quarter of 2022 for the treatment of ~~patients with challenging diseases. Our~~ primary ~~technologies related to the A Proliferation Inducing Ligand (APRIL) and cyclic GMP-AMP Synthase–Stimulator of Interferon Genes (cGAS-STING) pathways have led to what~~hyperoxaluria, or PH. In addition, we ~~believe is a strong pipeline of clinical candidates that~~ are ~~being investigated~~conducting research programs in ~~cancer, autoimmune and inflammatory~~several other rare, severe chronic kidney diseases. We seek to build our pipeline by leveraging insights from kidney single cell RNA sequencing, human-derived organoids and new translational models, to discover and develop therapeutic candidates with mechanisms of action targeted against key kidney disease pathways. To support these efforts, we have entered into a strategic collaboration with Evotec SE, or Evotec, to jointly identify, characterize and validate novel mechanisms and discover precision medicines for lupus nephritis, IgAN, polycystic kidney disease, or PKD, and other primary glomerular diseases. The collaboration will also involve further characterization of pathways and patient stratification strategies for programs currently in Chinook’s clinical and preclinical pipeline.

Our approach to precision medicines leverages recent advances in identifying targeted kidney therapies linked to mechanistic biomarkers by the application of systems biology approaches in nephrology. The application of systems biology to nephrology has advanced over the past decade through the study of multiple patient groups across a wide variety of kidney diseases and their associated multilevel data sets, including genome, transcriptome, proteome, metabolome, pathology and prospective long-term clinical characteristics and outcomes. A key objective of these investigations is to define kidney diseases in molecular terms to drive the development of targeted treatments. We believe we are ~~collaborating with leading global pharmaceutical companies~~well-positioned to ~~help expand~~exploit the insights provided into the key molecular drivers and ~~drive our product pipeline.~~classifiers of kidney diseases by the application of these systems biology tools to nephrology. Our strategy is to ~~rapidly advance therapeutic~~use these mechanistic insights to select compelling drug targets and deliver novel and differentiated product candidates ~~from our STING~~for rare and ~~APRIL technologies through clinical development and regulatory approval.~~ severe kidney diseases with high unmet medical need.

Our ~~anti-APRIL antibody~~lead product candidate ~~BION-1301,~~ is ~~designed~~atrasentan, a potent and selective endothelin A receptor antagonist that we are developing for the treatment of proteinuric glomerular diseases. In March 2021 we initiated a phase 3 trial of atrasentan called ALIGN for IgAN, and in April 2021 we initiated a phase 2 basket trial called AFFINITY for proteinuric glomerular diseases.

IgAN, the leading cause of primary glomerulonephritis, is a serious progressive autoimmune disease of the kidney with no approved therapies. Up to ~~suppress~~45 percent of IgAN patients progress to end-stage kidney disease, or ESKD. Although IgAN is an orphan

disease, we estimate that it affects approximately 140,000 – 150,000 people in the ~~autoimmune response~~United States, approximately 200,000 people in Europe and several million people in Asia. Galactose-deficient immunoglobulin A1, or Gd-IgA1, is recognized as a critical autoantigen to which IgAN patients develop circulating autoantibodies, resulting in the formation and deposition of immune complexes in the glomeruli of the kidney. This process initiates an inflammatory cascade that damages the glomeruli, resulting in protein and blood leaking into the urine, called proteinuria and hematuria, respectively. Ultimately the filtration function of the kidney is impaired, reducing the ability to remove waste products from the blood. As the disease progresses, these waste products accumulate and can result in potentially life-threatening complications that often lead to the need for dialysis or kidney transplant. Sustained proteinuria is the most widely studied and the strongest predictor for the rate of progression to ESKD in IgAN.

Activation of the endothelin A receptor, or ET_A receptor, has been implicated as a key driver of proteinuria, renal cell injury, including podocyte dysfunction and mesangial cell activation, along with promoting kidney inflammation and fibrosis, all resulting in the progression of IgAN. Atrasentan, by blocking ET_A, has the potential to provide benefit in multiple chronic kidney diseases by reducing proteinuria and having direct anti-inflammatory and anti-fibrotic effects to preserve kidney function. We in-licensed atrasentan in December 2019 from AbbVie, which previously developed atrasentan for diabetic kidney disease through multiple clinical trials, including the phase 3 SONAR trial, which evaluated atrasentan in over 5,000 patients. We presented new preclinical data elucidating the mechanism of action of atrasentan in IgAN at the ISN World Congress of Nephrology in April 2021, or WCN ’21. In this preclinical study, atrasentan rapidly reduced albuminuria and downregulated intra-renal transcriptional proliferative, inflammatory and fibrotic signaling in the gddY mouse IgAN model. The data also showed that atrasentan attenuated human renal mesangial cell activation induced by endothelin-1 or IgAN patient immune-derived immune complexes in a translational model system.

Based on the encouraging data from SONAR and strong mechanistic rationale, in March 2021 we initiated the phase 3 ALIGN trial of atrasentan in patients with ~~IgA nephropathy (IgAN). Our~~IgAN at high risk of kidney function decline. We chose IgAN as the lead ~~STING pathway activator product candidate, ADU-S100 (MIW815), is designed~~indication for evaluation of atrasentan due to ~~selectively modulate innate~~the role of endothelin activation and ~~adaptive immune responses~~proteinuria in disease progression, potential improved tolerability of atrasentan in this patient population, high unmet need, and the possibility of submitting an NDA seeking accelerated approval based on surrogate endpoints, including proteinuria. In April 2021 we initiated the phase 2 AFFINITY trial in other proteinuric glomerular diseases, including cohorts of patients with lower proteinuria IgAN, FSGS and Alport syndrome, as well as diabetic kidney disease combined with SGLT2 inhibitors, such as canagliflozin or dapagliflozin, which have recently been shown to ~~enhance immune control~~provide clinical benefit in ~~oncology.~~patients with diabetic kidney disease. If our trials proceed as planned, we anticipate reporting data from initial cohorts of the AFFINITY trial during 2022, and data for the primary proteinuria endpoint in the ALIGN trial in 2023 to support potential accelerated approval.

We are also developing BION-1301, an investigational humanized IgG4 monoclonal antibody that blocks APRIL ~~is a soluble factor that binds~~binding to both the B-cell maturation antigen, or BCMA, and transmembrane activator and CAML interactor, or TACI, receptors, as a novel disease-modifying therapy for IgAN. APRIL is a soluble factor that binds to BCMA and TACI receptors thereby inducing signaling and is believed to be implicated in ~~IgA nephropathy~~IgAN and other indications.

A phase 1b clinical trial of BION-1301 is currently ongoing. Parts 1 and 2 of this trial evaluating the safety and tolerability of BION-1301 in healthy volunteers have been completed. In healthy volunteers, BION-1301 was well-tolerated, demonstrated dose-dependent increases in target engagement as measured by free APRIL levels, dose-dependently and durably reduced IgA, IgM and IgG levels (to a lesser extent) and had a half-life of approximately 33 days, suggesting the potential for an extended dosing interval. Recently analyzed data in healthy volunteers from this trial were presented at WCN’21. In this trial, BION-1301 produced dose-dependent reductions in serum Gd-IgA1 levels that were greater in magnitude than previously reported for total IgA concentrations.

In addition, we have completed a phase 1 intravenous, or IV, to subcutaneous, or SC, bioavailability study in healthy volunteers. Results from the bioavailability study were presented at WCN’21. In this study, BION-1301 was well-tolerated when administered by both IV and SC routes in healthy volunteers, the pharmacokinetic profile of BION-1301 was consistent with previous clinical studies, the absorption rate of BION-1301 was typical of a monoclonal antibody and the magnitude of pharmacodynamic responses were largely retained with SC dosing compared to IV dosing.

We are ~~developing~~currently enrolling patients with IgAN in Part 3 of this trial, and we presented a subset of interim data from this trial at the 58^th ERA-EDTA conference in June 2021. The interim data presented was from the first several patients with IgAN enrolled in Cohort 1 of Part 3, in which patients were dosed with 450 mg of BION-1301 ~~an investigational monoclonal antibody~~IV every two weeks. The preliminary data that ~~blocks~~were presented at the conference demonstrate that BION-1301 was generally well-tolerated to date in patients with IgAN, with no serious adverse events or treatment discontinuations due to adverse events. The pharmacokinetics of BION-1301 observed in patients with IgAN are consistent with those previously reported in healthy volunteers and are sufficient to drive rapid and sustained reductions in free APRIL ~~binding~~levels. BION-1301 has durably reduced Gd-IgA1, IgA, IgM, and to ~~both~~a lesser extent, IgG levels in patients with IgAN.

BION-1301 demonstrated a clinically meaningful mean reduction in 24-hour proteinuria (UPCR) in the first several patients enrolled in the study, providing initial proof-of-concept for BION-1301 in IgAN.

We expect to complete enrollment of ~~its natural ligands,~~Cohort 1 in the ~~BCMA~~third quarter of 2021, and ~~TACI receptors.~~then transition to SC dosing for future cohorts of the study. Patients in Cohort 2 will receive a SC dose of 600 mg of BION-1301 every two weeks for up to 52 weeks. Recent amendments to the design of Part 3 also include the option for a third cohort of patients to receive a SC dose of BION-1301 at a dose and schedule that would be determined based on data generated from Cohort 2. Moving forward with Cohort 3 may help us better understand the SC dose-response relationship prior to the next phase of development.

We have taken a number of actions this year to improve enrollment dynamics in this study, including streamlining the protocol, adding new experienced nephrology investigative sites, and increasing physician and patient awareness and enthusiasm about BION-1301. Going forward, we also expect to benefit from improved COVID-19 environments in many geographies. We plan to present additional and more mature data from this study at future nephrology conferences, including ASN in November 2021.

Our third clinical development candidate is ~~being evaluated in~~CHK-336, a ~~Phase 1 clinical trial~~liver-targeted oral small molecule lactate dehydrogenase, or LDHA, inhibitor, which we are developing for the treatment of ~~IgA nephropathy,~~PH. Hyperoxalurias, including PH, are diseases caused by excess oxalate, a ~~chronic autoimmune~~potentially toxic metabolite typically filtered by the kidneys and excreted as a waste product in urine. Symptoms of PH include recurrent kidney stones, which when left untreated, can result in kidney failure requiring dialysis or dual kidney/liver transplantation. In patients with hyperoxalurias, excess oxalate combines with calcium to form calcium oxalate crystals that deposit in the kidney, resulting in the formation of painful kidney stones and driving progressive kidney damage over time. PH1, PH2 and PH3 are a group of ultra-rare diseases caused by genetic mutations that result in excess oxalate, and in their most severe forms, can lead to end-stage kidney disease ~~with unclear causality. Because there currently are no approved therapies for IgA nephropathy with curative intent, we~~at a young age. We also believe ~~there is opportunity for BION-1301 to address a significant unmet patient need. We~~CHK-336 may have ~~completed dosing healthy volunteers~~potential in the ~~first-in-human study~~treatment of BION-1301 in IgA nephropathy and announced the dosing of the first patient with IgA nephropathy on June 24, 2020. We currently anticipate presenting interim results from this trial in the first half of 2021.

Our STING pathway activator technology is designed to activate the intracellular STING receptor, which we believe may result in a potent tumor-specific immune response. We are developing STING pathway activator product candidates in oncology under our worldwide collaboration with Novartis. ADU-S100 (MIW815), the first STING pathway activator to enter the clinic that we are aware of, is being investigated in a Phase 2 clinical trial of ADU-S100 in combination with KEYTRUDA® (pembrolizumab), an approved anti-PD-1 monoclonal antibody, as a potential first-line treatment for patients with ~~recurrent or metastatic squamous cell carcinoma of the head~~secondary hyperoxaluria and neck. We currently anticipate presenting interim results from this trial in the first half of 2021. We are also preparing the submission of an Investigational New Drug application (IND) for ADU-S100 as a single agent administered intravesically in patients with non-muscle invasive bladder cancer who are unresponsive to Bacillus Calmette-Guerin (BCG), an approved intravesical immunotherapy, in the second half of 2020, subject to any delays resulting from the COVID-19 pandemic. ADU-S100 has also been evaluated in a Phase 1 clinical trial as a single agentidiopathic stone formation.

Research and ~~in a Phase 1b combination trial with spartalizumab (PDR001), an investigational anti-PD-1 monoclonal antibody, in patients with cutaneously accessible metastatic solid tumors or lymphomas.~~Discovery Programs

~~In addition to our current STING pathway product candidates that activate the STING receptor,~~Beyond CHK-336, we ~~are~~have active research and discovery efforts focused on other rare, severe kidney diseases. Our overall precision medicine research approach focuses on developing product candidates ~~that are designed to prevent or control immune responses through~~targeting the ~~STING pathway~~most promising molecular pathways identified as ~~part of our cGAS-STING pathway inhibitor program under a research~~key disease drivers in collaboration with key scientific advisors. Our scientific advisors provide valuable guidance on target selection, prioritization and exclusive license agreement with Eli Lilly and Company, or Lilly. Our cGAS-STING pathway inhibitor program involves the research and development of novel inhibitor product candidates for autoimmune and other inflammatory diseases.

Since commencing our operations, our efforts have been focused on research, development and 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 licensing agreements with pharmaceutical partners. We incurred a net loss of $16.6 million and $18.6 million for the three months ended June 30, 2020 and 2019, respectively, and $24.2 million and $42.0 million for the six months ended June 30, 2020 and 2019, respectively. At June 30, 2020, our cash, cash equivalents and marketable securities totaled $186.1 million and our accumulated deficit was $511.1 million. We have intellectual property protection on our STING and APRIL programs and each of our product candidates, some of which we believe can be maintained into 2040.

In January 2020, our Board of Directors approved a restructuring to further extend our operating capital and align personnel towards executing our clinical development strategy. As of June 30, 2020, we reduced our workforce by 27 employees (approximately 28% of total employees) and intend to reduce our workforce by an additional 11 employees in the remainder of the year under the restructuring plan. As of June 30, 2020, we estimate that we will incur aggregate charges of approximately $6.8 million, including $2.4 million in one-time severance and employee termination related costs, approximately $4.1 million in one-time retention costs and relocation costs of approximately $0.3 million. The restructuring is expected to be substantially complete by the end of the third quarter 2020. At this time, we are actively focused on identifying and evaluating strategic options for our non-renal programs.

On June 1, 2020, we entered into an Agreement and Plan of Merger and Reorganization, or the Merger Agreement, with Aspire Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Aduro, and Chinook Therapeutics U.S., Inc., a Delaware corporation, or Chinook, pursuant to which, among other matters, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, Merger Sub will merge with and into Chinook, with Chinook continuing as a wholly owned subsidiary of Aduro and the surviving corporation of the merger, or the Merger. The surviving corporation following the Merger is referred to herein as the combined company.

Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, (a) each outstanding share of Chinook common stock and Chinook preferred stock, collectively, the Chinook Capital Stock, will be converted into the right to receive a number of shares of Aduro common stock equal to the exchange ratio described below, and (b) each outstanding unexercised option to purchase shares of Chinook common stock that, following assumption by Aduro at the effective time of the Merger, will be eligible to be registered on Form S-8, will be assumed by Aduro and will be converted into an option to purchase shares of Aduro common stock, with necessary adjustments to reflect the exchange ratio described below.

Under the exchange ratio formula in the Merger Agreement, as of immediately after the Merger, the former Chinook securityholders, other than holders of Chinook convertible promissory notes, are expected to own approximately 50% of the outstanding shares of Aduro common stock on a fully-diluted basis and Aduro securityholders as of immediately prior to the Merger are expected to own approximately 50% of the outstanding shares of Aduro common stock on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) our net cash (as defined in the merger agreement) as of closing being equal to $145.0 million and (b) Chinook’s cash and cash equivalents as of closing being equal to $10.0 million.

On June 1, 2020, Chinook and certain investors named therein entered into a Note Purchase Agreement pursuant to which, immediately prior to the closing of the Merger, the investors will purchase convertible promissory notes in an aggregate amount of $25.0 million, or the Notes, which Notes are convertible into securities issued in an equity financing transaction that closes concurrently with or within 30 days following the Merger in which the aggregate gross purchase price paid to the combined company is no less than $15.0 million, or alternatively into shares of common stock of the combined company after closing of the Merger based on the volume weighted average closing trading price of a share of Aduro common stock on Nasdaq for the five trading days ending the trading day immediately prior to the date such Notes are converted, which must occur within 30 days following the Merger.

~~The conversion of the Notes into Aduro securities~~validation strategies, as well as ~~any Merger Financing~~access to technology platforms that support target validation efforts through deep biological insights into human disease mechanisms and translational cellular and animal model systems.

In March 2021, we announced a strategic collaboration with Evotec focused on the joint identification, characterization and validation of novel mechanisms as well as the discovery of precision medicines for lupus nephritis, IgAN, PKD and other primary glomerular diseases. The collaboration will ~~result in material dilution~~leverage access to the ~~percentage ownership of Aduro stockholders~~National Unified Renal Translational Research Enterprise (NURTuRE) patient biobank for chronic kidney diseases and nephrotic syndrome as well as Evotec’s proprietary PanOmics platform, which combines enhanced throughput proteomics, high throughput transcriptomics and cell imaging with PanHunter, Evotec’s unique data analysis platform. Through our collaboration with Evotec, we intend to characterize molecular drivers, identify and validate novel targets and drive patient stratification strategies in ~~the combined company. There can be no assurance that any Merger Financing will occur.~~

Concurrently with the execution and delivery of the Merger Agreement, we entered into support agreements with certain executive officers, directors and stockholders of Chinook, who, as of July 1, 2020, owned an aggregate of approximately 98.0% of the outstanding Chinook Capital Stock on an as converted to common stock basis, pursuant to which, among other things, each of these stockholders agreed, solely in his, her or its capacity as a Chinook stockholder, to vote all of his, her or its shares of Chinook Capital Stock in favor of (i) the adoption of the Merger Agreement and approval of the Merger, (ii) the approval of the related transactions contemplated by the Merger Agreement, (iii) the conversion of Chinook preferred stock into shares of Chinook common stock and (iv) the approval of certain additional proposals in connection with the Merger that the Chinook board of directors may recommend. These Chinook stockholders also agreed to vote against (i) any competing acquisition proposal (as defined in the support agreement) and (ii) any action, proposal, agreement, transaction or proposed transaction that would reasonably be expected to materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement, subject to certain specified exceptions..

In addition, concurrently with the execution and delivery of the Merger Agreement, certain of our executive officers, directors and stockholders, who, as of July 1, 2020, owned an aggregate of approximately 22.9% of our outstanding common stock, entered into support agreements with Chinook, pursuant to which, among other things, each such stockholder has agreed, solely in his, her or its capacity as an Aduro stockholder, to vote all of his, her or its shares of Aduro common stock in favor of (i) the approval of the Merger Agreement, (ii) the transactions contemplated thereby, including the issuance of Aduro common stock to Chinook stockholders, (iii) if deemed necessary, an amendment to the amended and restated certificate of incorporation of Aduro to effect a reverse stock split, (iv) any proposal to adjourn or postpone the special meeting of Aduro stockholders to a later date, if there are not sufficient votes for the approval of the Merger Agreement and the transactions contemplated therein and (v) the approval of certain additional proposals in connection with the Merger that the Aduro board of directors may recommend. These Aduro stockholders also agreed to vote against (i) any competing acquisition proposal (as defined in the support agreement) with respect to Aduro and (ii) any action, proposal, agreement, transaction or proposed transaction that would reasonably be expected to materially impede, interfere with, delay, postpone, discourage or adversely affect the Merger or any of the other transactions contemplated by the Merger Agreement, subject to certain specified exceptions.

Concurrently with the execution and delivery of the Merger Agreement, certain of our officers, directors and stockholders who, as of July 1, 2020, owned approximately 22.9% of the outstanding Aduro common stock and certain officers, directors and stockholders of Chinook who, as of July 1, 2020, owned approximately 98.0% of the Chinook Capital Stock on an as converted to common stock basis entered into lock-up agreements pursuant to which they accepted certain restrictions on transfers of Aduro securities for the 180-day period following the closing of the Merger.

At the effective time of the Merger, we will enter into a Contingent Value Rights Agreement, or a CVR Agreement, with Computershare Trust Company, N.A., as Rights Agent, pursuant to which our common stockholders of record as of the close of business on the last business day prior to the day on which the effective time of the Merger occurs will receive one contingent value right, or a CVR, for each outstanding share of Aduro common stock held by such stockholder on such date.

Each CVR will represent the contractual right to receive payments from us upon the actual receipt by us or certain of our affiliates of certain contingent proceeds derived from any consideration that is paid to us as a result of the disposition of any of our non-renal assets or revenue received from the license of certain non-renal assets, or as a result of our equity ownership in any subsidiary that is established to hold such non-renal assets or the subsequent disposition of any such equity securities, collectively, the CVR Milestones, net of any tax, transaction costs and certain other expenses.

The contingent payments under the CVR Agreement, if they become payable, will become payable to the Rights Agent for subsequent distribution to the holders of the CVRs. In the event that no CVR Milestones occur, holders of the CVRs will not receive any payment pursuant to the CVR Agreement. There can be no assurance that any CVR Milestones will be achieved or that any holders of CVRs will receive payments with respect thereto.

The right to the contingent payments contemplated by the CVR Agreement is a contractual right only and will not be transferable, except in the limited circumstances specified in the CVR Agreement. The CVRs will not be evidenced by a certificate or any other instrument and will not be registered with the SEC. The CVRs will not have any voting or dividend rights and will not represent any equity or ownership interest in Aduro or the combined company or any of its affiliates. No interest will accrue on any amounts payable in respect of the CVRs.

In response to the COVID-19 global pandemic, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States and Europe, including in the locations of our offices, clinical trial sites, key vendors and partners. The COVID-19 global pandemic is rapidly evolving, and the timing of delays and overall impact to our clinical trials and business are currently unknown. In our Current Report on Form 8-K filed with the SEC on April 9, 2020, we provided an update on the current status of our clinical programs and business operations.

As previously disclosed, though we have dosed the first patient in Part 3 of the of the BION-1301 clinical trial for the treatment of IgA nephropathy and are continuing to activate sites and enroll patients, we have experienced, and expect that we will continue to experience delays, in our ability to activate additional sites and enroll patients at existing and any additional sites depending upon the duration and nature of COVID-19 public health guidance measures in much of the United States and Europe. These measures are also likely to impact our ability to conduct patient follow-up. As a result, our ability to report interim data in IgA nephropathy patients will likely be delayed until the first half of 2021.

~~As previously disclosed, though we are continuing to enroll patients in our~~ Phase 2 clinical trial of ADU-S100 in combination with KEYTRUDA® (pembrolizumab), an approved anti-PD-1 monoclonal antibody, as a potential first-line treatment for patients with recurrent or metastatic squamous cell carcinoma of the head and neck (SCCHN), we have experienced delays, and expect that we will continue to experience delays, in site activation, patient enrollment~~, our ability to conduct patient follow-up and our ability to complete analyses of data.As a result, our ability to report interim data in the SCCHN trial will likely be delayed until the first half of 2021.~~

~~In addition, we expect the evolving situation surrounding COVID-19 may~~delay our ability to conduct patient follow-up and our ability to complete analyses of data from our study with Novartis in ADU-S100 + Spartalizumab (PDR001) for the treatment of advanced/metastatic solid tumors or lymphomas, and, as a result, our ability to report complete dose escalation and enrichment results will likely be delayed.

Please also see the risk factor below titled “Public health crises such as pandemics or similar outbreaks could materially and adversely affect our clinical trials, business, financial condition and results of operations.”kidney disease.

We have not generated any revenue from product sales. ~~Our~~Prior to the completion of the Merger, Aduro generated revenue ~~to date has been primarily derived~~ from ~~our~~ collaboration and license agreements. ~~Our~~These collaboration agreements may ~~include~~have included the transfer of intellectual property rights in the form of licenses, promises to provide research and development services and promises to participate on certain development committees with the collaboration party. The terms of such agreements ~~include~~included payment to usAduro 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.

~~Revenue associated~~We have evaluated the remaining performance obligations under these pre-existing agreements and concluded that the only revenue we expect to recognize in the near term is under the agreement with ~~nonrefundable upfront license fees where the license fees and~~Lilly related to research and development ~~activities cannot~~services expected to be ~~accounted for as separate performance obligations is deferred~~performed by us in 2020 and ~~recognized~~2021. Potential milestone payments related to development, regulatory or commercial milestone payments may be earned in the future, but all such payments are uncertain and beyond our or our collaborators’ control and would be recorded as revenue upon receipt or over a period following receipt, such as under the ~~expected period of performance based on a cost-based input method. Revenue from contingent development, regulatory~~CAPM model, if and ~~commercial milestones,~~ when not deemed probable of significant reversal of cumulative revenue, is also recognized over the performance period based on a similar method. Where we have no remaining performance obligations, revenue from such ~~milestones is recognized when the accomplishment of the milestones is deemed probable.~~payments are earned.

We expect that any revenue we generate from the pre-existing collaboration agreements will be nominal, as such agreements relate to non-renal development programs, all of which are outside our ~~current collaboration, research and license agreements and any future collaboration partners will fluctuate from year to year as a result of the timing and number of milestones and other payments.~~ongoing focus in renal disease.

The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical development of our product candidates. Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates, as well as the development of product candidates pursuant to Aduro’s pre-existing collaboration and license agreements. Research and development costs include employee-related costs; licensing costs; materials and supplies; contracted research and manufacturing; consulting arrangements; allocated costs, such as facility costs; and other expenses incurred to advance our research and ~~license agreements with Novartis, Lilly and Merck.~~development activities. 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 technologies may be affected by a variety of factors including: the quality of our product candidates, early clinical data, investment in our clinical programs, 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.

General and administrative expenses include ~~personnel~~employee-related costs, expenses for outside professional services, and other allocated expenses. ~~Personnel~~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 consist of rent expense related to our offices and research and development facility.

~~Restructuring~~Change in Fair Value of Contingent Consideration and ~~Related Expense~~Contingent Value Rights Liabilities

~~Restructuring~~At the effective time of the Merger, we also entered into an 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 milestones and ~~related expense includes restructuring compensation charges~~royalties from certain pre-existing agreements and the ~~impairment~~disposition or licensing of ~~property~~any of Aduro’s non-renal assets, net of any tax, and ~~equipment. Restructuring compensation charges consist of one-time severance, employee termination related costs, and retention costs. Specifically, as part~~certain other expenses that could be deducted by us. Change in the fair value of the ~~closure~~contingent consideration and CVR liability at each reporting consists of the changes in this contractual right.

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

We entered into an agreement with Sairopa B.V., or Sairopa, to acquire certain of our ~~European site~~non-renal assets in exchange for preferred stock in Sairopa during the second quarter of ~~2020,~~2021. The sale of the non-renal assets to Sairopa resulted in a $7.2 million gain, which is the difference between the fair value of the equity received and the carrying value of the non-renal assets. The gain is reported in our Condensed Consolidated Statements of Operations during the three and six months ended June 30, 2021.

Change in Fair Value of Redeemable Convertible Preferred Stock Tranche Liability

As a private company, we ~~impaired our property~~issued Series A redeemable convertible preferred stock (Series A stock). The terms of the Series A stock agreement included provisions requiring the investors to purchase, and ~~equipment balance for certain property and equipment located~~obligating the Company to deliver, additional shares of redeemable convertible preferred stock at ~~that site~~a specified price in the ~~first quarter~~future based on the achievement of ~~2020.~~certain development-based milestones.

The Company estimated the fair value of the redeemable convertible preferred stock tranche liability related to each milestone utilizing the income approach using unobservable inputs including (a) future per share value of Series A stock upon achievement of the milestone, (b) estimated term until date of milestone achievement, and (c) probability of milestone achievement. The future per share value of Series A stock upon achievement of the milestone and the probability of milestone achievement for each tranche were calculated on a probability-weighted basis giving equal weighting to public offering and private exit scenarios. The future cash flows were discounted to their fair values as of the valuation date using one or more discount rates, depending on the number of probability-weighted scenarios employed.

~~Interest~~Upon issuance, the fair value of the redeemable convertible preferred stock tranche liability was recorded as a reduction in the amounts paid by investors for the purchase of Series A stock.

Upon closing of the Merger, the outstanding redeemable convertible preferred stock tranche rights terminated pursuant to the terms of the merger agreement.

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

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

We are subject 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 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.

	Three Months Ended June 30,									Three Months Ended June 30,
	2020			2019			Change			2021			2020			Change
	(in thousands)									(In thousands)
Revenue:
Collaboration and license revenue	$	5,574		$	4,888		$	686		$	34		$	—		$	34
Total revenue		5,574			4,888			686
Operating expenses:
Research and development		11,108			16,657			(5,549	)		22,787			3,870			18,917
General and administrative		9,284			7,832			1,452			7,768			3,879			3,889
Restructuring and related expense		2,046			367			1,679
Change in fair value of contingent consideration and contingent value rights liabilities											19,557			—			19,557
Amortization of intangible assets		136			139			(3	)		422			—			422
Total operating expenses		22,574			24,995			(2,421	)		50,534			7,749			42,785
Gain on sale of assets to equity method investment											7,227			—			7,227
Loss from operations		(17,000	)		(20,107	)		3,107			(43,273	)		(7,749	)		(35,524	)
Interest income		413			1,497			(1,084	)
Other expense, net		(28	)		(3	)		(25	)		(39	)		(4	)		(35	)
Loss before income tax		(16,615	)		(18,613	)		1,998
Change in fair value of redeemable convertible preferred stock tranche liability											—			10			(10	)
Loss before income taxes											(43,312	)		(7,743	)		(35,569	)
Income tax benefit		—			35			(35	)		741			—			741
Net loss	$	(16,615	)	$	(18,578	)	$	1,963		$	(42,571	)	$	(7,743	)	$	(34,828	)

~~Total~~Collaboration and license revenue was ~~$5.6~~less than $0.1 million for the three months ended June 30, ~~2020, an increase of $0.7 million~~2021 compared to $0 for the three months ended June 30, ~~2019. The increase for the quarter~~2020. Revenue recognized was ~~primarily due~~related to ~~fluctuation in revenue recognized under our Novartis collaboration which is dependent on clinical timelines and progress under~~ the research and development services provided under our collaboration ~~agreement.~~ agreement with Lilly, which was acquired through the Merger.

The following table summarizes our research and development costs by program and by category incurred during the three months ended June 30, ~~2020~~2021 and 2019. Each year, we present and describe our research and development expenses based on programs and categories that are considered critical to us at that time and all other non-critical programs and categories are reported in Other R&D and Other, respectively. Therefore, the presentation in the Research and Development Expense tables may change from year to year.2020:

Three Months Ended June 30,

2020

2019

Change

(in thousands)

APRIL

$
4,512

$
5,013

$
(501
)
STING

3,291

3,271

20

cGAS-STING

841

1,214

(373
)
Other R&D

61

3,529

(3,468
)
Subtotal

8,705

13,027

(4,322
)
Stock-based compensation

1,363

1,713

(350
)
Facility costs

1,040

1,917

(877
)
Total research and development

$
11,108

$
16,657

$
(5,549
)

	Three Months Ended June 30,
	2021		2020		Change
	(In thousands)
Product Candidates
Atrasentan	$	10,327	$	1,436	$	8,891
BION-1301		2,094		—		2,094
CHK-336		2,432		753		1,679
Other		3,221		194		3,027
Discovery research and other development costs		2,484		971		1,513
Subtotal		20,558		3,354		17,204
Stock-based compensation expense		1,732		143		1,589
Facility costs and depreciation		497		373		124
Total research and development	$	22,787	$	3,870	$	18,917

The following table summarizes our research and development expenses incurred during the three months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

Three Months Ended June 30,

2020

2019

Change

(in thousands)

Clinical trial and research expenses

$
4,643

$
7,791

$
(3,148
)
Compensation and related personnel costs

2,361

3,862

(1,501
)
Facility costs

1,040

1,917

(877
)
Professional services

1,500

1,317

183

Stock-based compensation expense

1,363

1,713

(350
)
Other

201

57

144

Total research and development

$
11,108

$
16,657

$
(5,549
)

	Three Months Ended June 30,
	2021		2020		Change
	(In thousands)
Contract research and manufacturing	$	11,248	$	1,388	$	9,860
Employee-related costs		5,728		1,576		4,152
Supplies used in research and development		726		243		483
Stock-based compensation expense		1,732		143		1,589
Facility costs and depreciation		497		373		124
Consulting and outside services		2,526		29		2,497
Other		330		118		212
Total research and development	$	22,787	$	3,870	$	18,917

Research and development expenses ~~allocated to our programs~~ were ~~$11.1~~$22.8 million for the three months ended June 30 ~~2020, a decrease~~, 2021, an increase of ~~$5.5~~$18.9 million compared to $3.9 million for the three months ended June 30 ~~2019.~~, 2020. The ~~decrease in expenses from 2019 to 2020~~increase was primarily due to ~~2019 costs~~external clinical and manufacturing expenses related to the ~~deprioritized programs that substantially wound down in 2019 offset by~~atrasentan and BION-1301 clinical programs; higher employee-related costs, ~~as a result of focused spending towards our STING~~including salaries, benefits and ~~APRIL programs. The decrease was further attributable to lower compensation and related personnel costs as well as~~ stock-based compensation ~~in 2020 due~~expense, associated with hiring staff to ~~reduced headcount as a result of the January 2020 restructuring. In June 2020, the Company sold a portion of its impaired assets resulting in a gain on disposal of approximately $0.5 million.~~build out our clinical and development capabilities; increased spending for consulting and outside services; and higher facilities and other costs.

The following table summarizes our general and administrative expenses incurred during the three months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

General and administrative expenses were ~~$9.3~~$7.8 million for the three months ended June 30, ~~2020,~~2021, an increase of ~~$1.5~~$3.9 million compared to $3.9 million for the three months ended June 30, 2020. The increase was primarily due to higher employee-related costs, including salaries, benefits and stock-based compensation expenses associated with the addition of administrative staff to build out our public company infrastructure and an increase in facilities and other costs.

Change in fair value of contingent consideration and contingent value rights liabilities

Change in fair value of contingent consideration expense increased by $19.6 million for the three months ended June 30, 2021 compared to the three months ended June 30, ~~2019.~~2020. The increase ~~was mainly due to professional service fees related to the Merger transaction, offset by lower personnel and stock-based compensation expense as~~primarily resulted from a ~~result~~change in estimate of the ~~January 2020 restructuring.~~

~~Restructuring~~potential future proceeds derived from Aduro’s license agreement with Merck and ~~Related Expense~~

~~Restructuring and related expense was $2.0 million~~from the sale of certain of our non-renal assets in exchange for ~~the three months ended June 30, 2020, an increase of $1.7 million compared to the three months ended June 30, 2019. The increase was primarily due to severance and retention expenses recognized~~preferred shares in Sairopa. During the second quarter of ~~2020.~~ 2021, Merck informed us that they intend to explore the potential benefit of the product candidate MK-5890, previously out-licensed to Merck by Aduro, in a phase 2 clinical study for a new indication. This could result in potential milestone and royalty payments for the benefit of the CVR holders.

~~Interest income was~~Amortization of intangible assets expense increased by $0.4 million for the three months ended June 30, ~~2020, a decrease of $1.1 million~~2021 compared to the three months ended June 30, ~~2019. The decrease was primarily~~2020, due to amortization of finite-lived intangible assets acquired in the ~~lower cash balance~~Merger.

Gain on sale of assets to equity method investment increased $7.2 million for three months ended June 30, 2021 resulting from the agreement to sell certain non-renal assets of ours in exchange for stock in Sairopa during the second quarter of 2021. The gain is the difference between the fair value of the equity received and ~~lower interest rates.~~the carrying value of the non-renal assets.

~~Income Tax Benefit~~Change in fair value of redeemable convertible preferred stock tranche liability

~~There was no income tax benefit~~Change in fair value of redeemable convertible preferred stock tranche liability decreased by less than $0.1 million for the three months ended June 30, ~~2020~~2021 compared to ~~$35,000~~the three months ended June 30, 2020, due to the termination of the convertible preferred stock tranche rights pursuant to the terms of the merger agreement.

We recorded a benefit for income taxes of $0.7 million for the three months ended June 30, ~~2019.~~2021, primarily resulting from deferred tax benefits associated with the sale of certain non-renal assets.

	Six Months Ended June 30,									Six Months Ended June 30,
	2020			2019			Change			2021			2020			Change
	(in thousands)									(In thousands)
Revenue:
Collaboration and license revenue	$	19,524		$	8,826		$	10,698		$	385		$	—		$	385
Total revenue		19,524			8,826			10,698
Operating expenses:
Research and development		26,936			34,151			(7,215	)		48,484			6,688			41,796
General and administrative		17,103			16,056			1,047			17,311			5,150			12,161
Restructuring and related expense		6,354			3,361			2,993
Change in fair value of contingent consideration and contingent value rights liabilities											21,396			—			21,396
Amortization of intangible assets		272			279			(7	)		842			—			842
Total operating expenses		50,665			53,847			(3,182	)		88,033			11,838			76,195
Gain on sale of assets to equity method investment											7,227			—			7,227
Loss from operations		(31,141	)		(45,021	)		13,880			(80,421	)		(11,838	)		(68,583	)
Interest income		1,333			2,968			(1,635	)
Other expense, net		(47	)		(22	)		(25	)
Loss before income tax		(29,855	)		(42,075	)		12,220
Other income (expense), net											(106	)		115			(221	)
Change in fair value of redeemable convertible preferred stock tranche liability											—			(1,169	)		1,169
Loss before income taxes											(80,527	)		(12,892	)		(67,635	)
Income tax benefit		5,665			70			5,595			741			—			741
Net loss	$	(24,190	)	$	(42,005	)	$	17,815		$	(79,786	)	$	(12,892	)	$	(66,894	)

~~Total~~Collaboration and license revenue was ~~$19.5~~$0.4 million for the six months ended June 30, ~~2020, an increase of $10.7 million~~2021 compared to $0 for the six months ended June 30, ~~2019. $10.0 million of the increase~~2020. Revenue recognized was ~~due~~related to recognition of a development milestone payment received under our exclusive license and research agreement with Merck (known as MSD outside the United States and Canada) for Merck’s initiation of a Phase 2 clinical trial of MK-5890, an anti-CD27 agonist, in non-small cell lung cancer (NSCLC). The remaining increase of $0.7 million was primarily due to the fluctuation in revenue recognized under our Novartis collaboration which is dependent on the clinical timelines and progress under the research and development services provided under our collaboration ~~agreement.~~ agreement with Lilly, which was acquired through the Merger.

The following table summarizes our research and development costs by program and by category incurred during the six months ended June 30, ~~2020~~2021 and 2019. Each year, we present and describe our research and development expenses based on programs and categories that are considered critical to us at that time and all other non-critical programs and categories are reported in Other R&D and Other, respectively. Therefore, the presentation in the Research and Development Expense tables may change from year to year.

Six Months Ended June 30,

2020

2019

Change

(in thousands)

APRIL

$
10,557

$
10,505

$
52

STING

6,833

6,124

709

cGAS-STING

1,968

2,270

(302
)
Other R&D

2,609

7,989

(5,380
)
Subtotal

21,967

26,888

(4,921
)
Stock-based compensation

2,226

3,746

(1,520
)
Facility costs

2,743

3,517

(774
)
Total research and development

$
26,936

$
34,151

$
(7,215
)

	Six Months Ended June 30,
	2021		2020		Change
	(In thousands)
Product Candidates
Atrasentan	$	19,054	$	2,271	$	16,783
BION-1301		6,175		—		6,175
CHK-336		5,030		1,617		3,413
Other		6,716		1,045		5,671
Discovery research and other development costs		7,238		1,139		6,099
Subtotal		44,213		6,072		38,141
Stock-based compensation expense		2,760		183		2,577
Facility costs and depreciation		1,511		433		1,078
Total research and development	$	48,484	$	6,688	$	41,796

The following table summarizes our research and development expenses incurred during the six months ended June 30, ~~2020~~2021 and ~~2019:~~

Six Months Ended June 30,

2020

2019

Change

(in thousands)

Clinical trial and research expenses

$
13,147

$
16,000

$
(2,853
)
Compensation and related personnel costs

5,650

7,957

(2,307
)
Facility costs

2,743

3,517

(774
)
Stock-based compensation expense

2,226

3,746

(1,520
)
Professional services

2,764

2,576

188

Other

406

355

51

Total research and development

$
26,936

$
34,151

$
(7,215
)

	Six Months Ended June 30,
	2021		2020		Change
	(In thousands)

Contract research and manufacturing	$	27,084	$	2,600	$	24,484
Employee-related costs		11,044		2,440		8,604
Supplies used in research and development		1,432		524		908
Stock-based compensation expense		2,760		183		2,577
Facility costs and depreciation		1,511		433		1,078
Consulting and outside services		4,021		328		3,693
Other		632		180		452
Total research and development	$	48,484	$	6,688	$	41,796

Research and development expenses ~~allocated to our programs~~ were ~~$26.9~~$48.5 million for the six months ended June 30 ~~2020, a decrease~~, 2021, an increase of ~~$7.2~~$41.8 million compared to $6.7 million for the six months ended June 30 ~~2019.~~, 2020. The ~~decrease in expenses from 2019 to 2020~~increase was primarily due to ~~2019 costs~~external clinical and manufacturing expenses related to the ~~deprioritized programs that substantially wound down in 2019 offset by~~atrasentan and BION-1301 clinical programs; higher ~~spending towards our STING~~employee-related costs, including salaries, benefits and ~~APRIL programs. The decrease was further attributable to lower compensation and related personnel costs as well as~~ stock-based compensation ~~in 2020~~expense, associated with hiring staff to build out our clinical and development capabilities; increased spending for consulting and outside services; and higher facilities and other costs. The six months ended June 30, 2021 also includes an upfront fee of $3.3 million due to ~~reduced headcount as~~Evotec International GmbH under a ~~result of our strategic reset of January 2019~~research collaboration and ~~the restructuring of January 2020.~~

The following table summarizes our general and administrative expenses incurred during the six months ended June 30, ~~2020~~2021 and ~~2019:~~2020:

General and administrative expenses were ~~$17.1~~$17.3 million for the six months ended June 30, ~~2020,~~2021, an increase of ~~$1.0~~$12.2 million compared to $5.2 million for the six months ended June 30, 2020. The increase was primarily due to higher employee-related costs, including salaries, benefits and stock-based compensation expenses associated with the addition of administrative staff to build out our public company infrastructure; higher legal, consulting and other professional services costs; and an increase in facilities and other costs.

Change in fair value of contingent consideration and contingent value rights liabilities

Change in fair value of contingent consideration and contingent value rights liabilities expense increased by $21.4 million for the six months ended June 30, 2021 compared to the six months ended June 30, ~~2019.~~2020. The increase ~~was mainly due~~primarily resulted from a change in estimate of the potential future proceeds derived from Aduro’s license agreement with Merck and from the sale of certain of our non-renal assets in exchange for preferred shares in Sairopa. During the second quarter of 2021, Merck informed us that they intend to ~~professional service fees related~~explore the potential benefit of the product candidate MK-5890, previously out-licensed to Merck by Aduro, in a phase 2 clinical study for a new indication. This could result in potential milestone and royalty payments for the ~~Merger transaction,~~benefit of the ~~increase was partially offset~~CVR holders.

Amortization of intangible assets expense increased by ~~lower personnel and stock-based compensation expense as a result of both our strategic reset in January 2019 and the restructuring of January 2020.~~

~~Restructuring and related expense was $6.4~~$0.8 million for the six months ended June 30, ~~2020, an increase of $3.0 million~~2021 compared to the six months ended June 30, ~~2019. The increase for the six-month period was primarily~~2020, due to ~~severance and retention expenses recognized as well as~~amortization of finite-lived intangible assets acquired in the ~~impairment~~Merger.

Gain on sale of ~~property and equipment associated with~~assets to equitymethod investment

Gain on sale of assets to equity method investment increased $7.2 million for six months ended June 30, 2021, resulting from the ~~closure~~agreement to sell certain non-renal assets of ~~our European site~~ours in ~~Oss,~~exchange for stock in Sairopa during the ~~Netherlands as part~~second quarter of 2021. The gain is the difference between the fair value of the ~~January 2020 restructuring plan.~~equity received and the carrying value of the non-renal assets.

~~Interest Income~~Change in fair value of redeemable convertible preferred stock tranche liability

~~Interest income was $1.3~~Change in fair value of redeemable convertible preferred stock tranche liability decreased by $1.2 million for the six months ended June 30, ~~2020, a decrease of $1.6 million~~2021 compared to the six months ended June 30, ~~2019. The decrease for the six months ended June 30,~~ 2020, ~~is primarily~~ due to the termination of the convertible preferred stock tranche rights pursuant to the terms of the merger agreement.

~~Income tax~~ benefit ~~was $5.7~~for income taxes of $0.7 million for the six months ended June 30, ~~2020 compared~~2021, primarily resulting from deferred tax benefits associated with the sale of certain non-renal assets.

As of June 30, 2021, we had $229.8 million in cash, cash equivalents and marketable securities. We expect that our research and development and general and administrative expenses will increase, and, as a result, we anticipate that we will continue to ~~$0.1~~incur increasing losses in the foreseeable future. We believe that based on our current business plan, our cash, cash equivalents and marketable securities as of June 30, 2021 will enable us to fund our operating expenses and capital expenditure requirements through the middle of 2023.

We have 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 product candidates. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue the research, development and clinical trials of, and seek regulatory approval for, our product candidates. As of June 30, 2021, our material cash requirements from known contractual and other obligations include our contractual obligations related to our operating leases. Accordingly, we anticipate that we will need substantial additional funding in connection with our continuing operations.

Until we can generate a sufficient amount of product revenue to finance our cash requirements, we expect to finance our future cash needs primarily through the issuance of additional equity, borrowings and strategic alliances with partner companies. To the extent that we raise additional capital through the issuance of additional equity 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 marketing and distribution arrangements or 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 delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market our product candidates to third parties that we would otherwise prefer to develop and market ourselves.

Net cash used in operating activities was $55.5 million for the six months ended June 30, ~~2019.~~2021, an increase of $48.3 million compared to $7.2 million for the six months ended June 30, 2020. The ~~change~~increase was primarily ~~related to the tax refund~~ due to an increased operating loss resulting from increased research and development and general and administrative spending.

Net cash used in investing activities was $32.2 million for the ~~carryback~~six months ended June 30, 2021, an increase of $31.8 million compared $0.4 million cash used for the six months ended June 30, 2020. The increase was primarily due to net purchases of marketable securities.

Net ~~Operating Loss and Alternative Minimum Tax credit refund under~~cash provided by financing activities was $35.7 million for the ~~CARES Act, that~~six months ended June 30, 2021, an increase of $21.2 million compared to $14.4 million for the six months ended June 30, 2020. The increase was ~~enacted in response~~primarily due to net proceeds received from the ~~COVID-19 global pandemic.~~

~~To date,~~sales of shares of our ~~operations have been financed primarily~~common stock through the ~~public issuance of common stock, sale of convertible preferred stock and proceeds from our collaboration and license agreements. At~~at-the-market sales agreement during the six months ended June 30, ~~2020, we had cash, cash equivalents and marketable securities of $186.1 million.~~2021.

In ~~August 2017,~~April 2021, we entered into ~~an “at-the-market” sales agreement, as amended in February 2019, or~~ the ~~2017~~2021 Sales Agreement with ~~Cowen~~Cantor Fitzgerald & Co. and ~~Company,~~SVB Leerink LLC, ~~or Cowen,~~ through which we may offer and sell shares of our common stock having an aggregate offering ~~price~~ of up to ~~$100.0~~$75.0 million through ~~Cowen, acting~~Cantor Fitzgerald & Co. and SVB Leerink LLC, as our sales ~~agent.~~agents. We ~~agreed to~~will pay ~~Cowen~~the sales agents a commission of up to 3% of the gross proceeds of sales made through the ~~arrangement. There were no sales~~2021 Sales Agreement. During the six months ended June 30, 2021, we sold 2.2 million shares for $33.9 million in net proceeds under the 2021 Sales Agreement. We have $40.0 million remaining under the 2021 Sales Agreement. In addition, proceeds from the exercise of ~~shares of common~~ stock ~~pursuant to the 2017 Sales Agreement~~options and warrants totaled $1.8 million during the six months ended June 30, ~~2020. As~~2021, an increase of ~~June 30, 2020, we had an aggregate of $81.5~~$1.8 million ~~remaining for future sales under the 2017 Sales Agreement, subject~~compared to ~~the continued effectiveness of our shelf registration statement on Form S-3 (Registration No. 333-219639), which expires on August 11, 2020, or an effective replacement shelf registration statement.~~

Our primary uses 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 used to fund operating expenses is impacted by the timing of when we pay expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We expect to incur substantial expenditures in the foreseeable future for the development, manufacturing and potential commercialization of our product candidates.

We plan 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 or outlicensing non-core assets. In addition, we expect to continue to opportunistically seek access to the equity capital markets to support our development efforts and operations.The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to 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, financial condition and results of operations. Please also see the discussion of the Merger under the section titled “Potential Business Combination with Chinook” above.

~~Net cash used in operating activities was $28.8 million~~zero for the six months ended June 30, ~~2020, compared to $27.6 million for the six months ended June 30, 2019. Net cash used in operating activities was higher primarily due to the increase in operating expenses.~~

Net cash provided by investing activities was $39.9 million for the six months ended June 30, 2020, compared to $19.7 million of net cash used for the six months ended June 30, 2019. The change was primarily due to greater ~~maturities of~~ ~~marketable securities in 2020 as compared to 2019.~~

Net cash provided by financing activities was $0.1 million for the six months ended June 30, 2020, compared to $0.6 million for the six months ended June 30, 2019. The change is primarily due to a lower amount of proceeds from the issuance of common stock under our stock incentive plans in 2020 as compared to 2019.2020.

Our 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 in our critical accounting policies during the six months ended June 30, ~~2020,~~2021, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting

Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2019~~2020 filed with the SEC on ~~March 9, 2020.~~April 7, 2021.

We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.

~~The following table summarizes our contractual obligations as of June 30, 2020:~~

For information with respect to recently issued accounting standards and the impact of these standards on our consolidated financial statements, refer to Note 2 “Basis of Presentation and Consolidation, Use of Estimates and Recent Accounting Pronouncements” in our condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~The primary financial risk we are exposed~~A smaller reporting company is not required to ~~is foreign currency exchange, as certain operations, assets and liabilities are denominated in foreign currency. Foreign currency exposures arise from transactions denominated in a currency other than~~provide the functional currency and from foreign denominated revenue and profit translated into U.S. dollars. The primary foreign currency to which we are 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.

Furthermore, we have positions in financial instruments including corporate debt securities and similar financial instruments. Financial markets are volatile and the markets for asset backed or similar securities could be illiquid. The value of these securities will continue to be impactedinformation required by ~~external market factors. Should we need to convert these positions to cash, we may not be able to sell these instruments without significant losses or other market considerations.~~this Item.

Our management, with the participation of our President and Chief Executive Officer and our ~~Interim~~ Chief 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 on Form 10-Q. Based on that evaluation, our President and Chief Executive Officer and our ~~Interim~~ Chief Financial Officer have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were not effective at a reasonable assurance level due to the material weaknesses identified in our internal control over financial reporting as of December 31, 2020, which our management views as an integral part of our disclosure controls and procedures. Management’s assessment identified the following material weaknesses in our internal control over financial reporting: lack of segregation of duties due to lack of sufficient accounting and finance personnel, lack of sufficient entity level controls and lack of a sufficient technology infrastructure to support the financial reporting function.

Our management, under the supervision of our President and Chief Executive Officer and our Chief Financial Officer, has undertaken a plan to remediate the material weaknesses identified above. The remediation efforts summarized below, which are in the process of being implemented, are intended to address the identified material weaknesses.

In addition to the items above, during the second quarter of 2021, we engaged a third-party service provider to complete an independent risk assessment of our internal control over financial reporting to evaluate sources of potential risks to our financial

statements. This also included an assessment of key systems supporting financial reporting in order to improve the design and ~~operation, effective.~~operating effectiveness of information technology general controls. As a result of this risk assessment, we identified and designed key controls across several processes supporting internal control over financial reporting and developed a workplan for remediation of the enhancements identified.

We believe that the implementation of the above steps has already allowed us to make progress on addressing a number of the deficient controls within our internal control environment, which will help facilitate the remediation of the material weaknesses identified above. As we continue to evaluate and work to improve our internal control over financial reporting, we will take additional measures to address control deficiencies, or we may modify certain of the remediation measures described above. However, we require additional time to complete the design and implementation of our remediation plans and demonstrate the effectiveness of our remediation efforts. The material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded, through testing, that these controls are operating effectively.

~~There~~Other than the changes described above, there were no changes in our internal control over financial reporting during the quarter ended June 30, ~~2020~~2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

The effectiveness of any system of 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, not absolute assurances. In addition, 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 actions will be sufficient to provide us with effective internal control over financial reporting.

We are not party to any 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.

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.

~~The exchange ratio will not be adjusted based on the market price of Aduro common stock so the merger consideration at the closing may have~~ a ~~greater or lesser value than at the time the Merger Agreement was signed.~~

At the effective time of the Merger, outstanding shares of Chinook capital stock will be converted into shares of Aduro common stock. Applying the exchange ratio, and without giving effect to the Chinook note financing, as further described below, the former Chinook securityholders immediately before the Merger, without giving effect to the Chinook convertible promissory notes, are expected to own approximately 50% of the aggregate number of ~~shares~~risks and uncertainties, including those immediately following this summary. Some of Aduro common stock following the Merger on a fully-diluted basis, and Aduro securityholders immediately before the Merger are expected to own approximately 50% of the aggregate number of shares of Aduro common stock following the Merger on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) Aduro’s net cash (as defined in the merger agreement) as of closing being equal to $145.0 million and (b) Chinook’s cash and cash equivalents as of closing being equal to $10.0 million.

Any changes in the market price of Aduro stock before the completion of the Merger will not affect the number of shares Chinook stockholders will be entitled to receive pursuant to the Merger Agreement. Therefore, if before the completion of the Merger, the market price of Aduro common stock increases from the market price on the date of the Merger Agreement, then Chinook stockholders could receive merger consideration with substantially more value for their shares of Chinook capital stock than the parties had negotiated when they established the exchange ratio. Similarly, if before the completion of the Merger the market price of Aduro common stock declines from the market price on the date of the Merger Agreement, then Chinook stockholders could receive merger consideration with substantially lower value. The Merger Agreement does not include a price-based termination right.

Failure to complete the Merger may result in either us or Chinook paying a termination fee to the other party, which could harm our common stock price and future business and operations of each company.

~~If the Merger is not completed, we and Chinook are subject to the following risks:~~these risks are:

If the Merger Agreement is terminated and the board of directors of Aduro or Chinook determines to seek another business combination, there can be no assurance that either Aduro or Chinook will be able to find a partner with whom a business combination would yield greater benefits than the benefits to be provided under the Merger Agreement.

~~If the conditions to the Merger are not satisfied or waived, the Merger may not occur.~~

Even if the Merger is approved by the stockholders of Chinook and the merger proposal is approved by our stockholders, specified conditions must be satisfied or waived to complete the Merger. These conditions are set forth in the Merger Agreement and described in the section titled “The Merger Agreement—Conditions to the Completion of the Merger” of our Form S-4 Registration Statement, as filed with the SEC on July 22, 2020 (as amended, the Form S-4 Registration Statement). We and Chinook cannot assure you that all of the conditions to the consummation of the Merger will be satisfied or waived. If the conditions are not satisfied or waived, the Merger may not occur or the closing may be delayed, and we and Chinook each may lose some or all of the intended benefits of the Merger.

~~The merger may be completed even though a material adverse effect may result from the announcement of the Merger, industry-wide changes or other causes.~~

In general, neither we nor Chinook is obligated to complete the Merger if there is a material adverse effect impacting the other party between June 1, 2020, the date of the Merger Agreement, and the closing of the Merger. However, certain types of changes are excluded from the concept of a “material adverse effect.” Such exclusions include but are not limited to changes in general economic or political conditions, industry wide changes, changes resulting from the announcement of the Merger, natural disasters, pandemics (including the COVID-19 pandemic), other public health events and changes in GAAP. Therefore, if any of these events were to occur affecting us or Chinook, the other party would still be obliged to consummate the closing of the Merger. If any such adverse changes occur and we and Chinook consummate the closing of the Merger, the stock price of the combined company may suffer. This in turn may reduce the value of the Merger to the stockholders of Aduro, Chinook or both. For a more complete discussion of what constitutes a material adverse effect on us or Chinook, see the section titled “The Merger Agreement—Representations and Warranties” of our Form S-4 Registration Statement.

If we and Chinook complete the Merger, the combined company will need to raise additional capital by issuing equity securities or additional debt or through licensing arrangements, which may cause significant dilution to the combined company’s stockholders or restrict the combined company’s operations.

Immediately prior to the execution and delivery of the Merger Agreement, Chinook entered into a Note Purchase Agreement with certain existing investors of Chinook named therein, pursuant to which the investors agreed to purchase, in the aggregate, $25.0 million in promissory notes convertible into securities of the combined company, referred to as the Chinook note financing. The notes are convertible into securities issued in an equity financing transaction that closes concurrently with or within 30 days following the Merger in which the aggregate gross purchase price paid to the combined company is no less than $15.0 million, or alternatively into shares of common stock of the combined company after closing of the Merger based on the volume weighted average closing trading price of a share of the combined company’s common stock on Nasdaq for the five trading days ending the trading day immediately prior to the date such notes are converted, which must occur within 30 days following the Merger. The closing of the Chinook note financing is conditioned upon the closing of the Merger as well as certain other conditions. The Chinook note financing will have a dilutive impact on all securityholders of the combined company, including our pre‑merger securityholders and Chinook’s former securityholders, other than the holders of the notes. The Chinook note financing is more fully described under the section titled “Agreements Related to the Merger—Note Purchase Agreement” of our Form S-4 Registration Statement.

Additional financing may not be available to the combined company when it is needed or may not be available on favorable terms. To the extent that the combined company raises additional capital by issuing equity securities, such financing will cause additional dilution to all securityholders of the combined company, including our pre‑merger securityholders and Chinook’s former securityholders, other than the holders of the notes. It is also possible that the terms of any new equity securities may have preferences over the combined company’s common stock. Any debt financing the combined company enters into may involve covenants that restrict its operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of the combined company’s assets, as well as prohibitions on its ability to create liens, pay dividends, redeem its stock or make investments. In addition, if the combined company raises additional funds through licensing arrangements, it may be necessary to grant licenses on terms that are not favorable to the combined company.

Some of our and Chinook directors and executive officers have interests in the Merger that are different from yours and that may influence them to support or approve the Merger without regard to your interests.

Directors and executive officers of Aduro and Chinook may have interests in the Merger that are different from, or in addition to, the interests of other Aduro stockholders generally. These interests with respect to our directors and executive officers may include, among others, acceleration of stock option or restricted stock unit vesting, retention bonus payments, extension of exercisability periods of previously issued stock option grants, severance payments if employment is terminated in a qualifying termination in connection with the Merger and rights to continued indemnification, expense advancement and insurance coverage. Certain current members of our board of directors will continue as directors of the combined company after the effective time of the Merger, and, following the closing of the Merger, will be eligible to be compensated as non-employee directors of the combined company pursuant

to our non-employee director compensation policy that is expected to remain in place following the effective time of the Merger. These interests with respect to Chinook’s directors and executive officers may include, among others, certain of Chinook’s directors and executive officers have options, subject to vesting, to purchase shares of Chinook common stock which, after the effective time of the Merger, will be converted into and become options to purchase shares of the common stock of the combined company; Chinook’s executive officers are expected to continue as executive officers of the combined company after the effective time of the Merger; and all of Chinook’s directors and executive officers are entitled to certain indemnification and liability insurance coverage pursuant to the terms of the Merger Agreement. Further, certain current members of Chinook’s board of directors will continue as directors of the combined company after the effective time of the Merger, and, following the closing of the Merger, will be eligible to be compensated as non-employee directors of the combined company pursuant to our non-employee director compensation policy that is expected to remain in place following the effective time of the Merger. The directors and executive officers own options and/or RSUs to purchase the shares of their respective companies.

The Aduro and Chinook boards were aware of and considered those interests, among other matters, in reaching their decisions to approve and adopt the Merger Agreement, approve the Merger, and recommend the approval of the Merger Agreement to Aduro and Chinook stockholders. These interests, among other factors, may have influenced the directors and executive officers of Aduro and Chinook to support or approve the Merger.

For more information regarding the interests of Aduro and Chinook directors and executive officers in the Merger, please see the sections titled “The Merger—Interests of Aduro Directors and Executive Officers in the Merger” and “The Merger—Interests of the Chinook Directors and Executive Officers in the Merger” of our Form S-4 Registration Statement.

~~Our stockholders may not realize a benefit from the Merger commensurate with the ownership dilution they will experience in connection with the Merger.~~

If the combined company is unable to realize the full strategic and financial benefits currently anticipated from the Merger, our stockholders will have experienced substantial dilution of their ownership interests without receiving any commensurate benefit, or only receiving part of the commensurate benefit to the extent the combined company is able to realize only part of the strategic and financial benefits currently anticipated from the Merger. Our stockholders will experience further dilution upon the conversion of the convertible promissory notes issued in the Chinook note financing.

The market price of our common stock is subject to significant fluctuations. During the 12-month period ended July 31, 2020, the closing sales price of Aduro’s common stock on Nasdaq ranged from a high of $4.04 on February 20, 2020 to a low of $0.90 on October 25, 2019. Market prices for securities of pharmaceutical, biotechnology and other life science companies have historically been particularly volatile. In addition, the market price of our common stock will likely be volatile based on whether stockholders and other investors believe that we can complete the Merger or otherwise raise additional capital to support our operations if the Merger is not consummated and another strategic transaction cannot be identified, negotiated and consummated in a timely manner, if at all. The volatility of the market price of our common stock is exacerbated by low trading volume. Additional factors that may cause the market price of our common stock to fluctuate include:

Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market fluctuations may also adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against such companies.

Aduro and Chinook securityholders will have a reduced ownership and voting interest in, and will exercise less influence over the management of, the combined company following the completion of the Merger as compared to their current ownership and voting interests in the respective companies.

After the completion of the Merger, the current stockholders of Aduro and Chinook will own a smaller percentage of the combined company than their ownership of their respective companies prior to the Merger. Immediately after the Merger, without giving effect to the Chinook note financing, our securityholders as of immediately prior to the Merger are expected to own approximately 50% of the outstanding shares of the combined company on a fully-diluted basis and former Chinook securityholders, without giving effect to the Chinook convertible promissory notes, are expected to own approximately 50% of the outstanding shares of the combined company on a fully-diluted basis, subject to certain assumptions, including, but not limited to, (a) our net cash (as defined in the merger agreement) as of closing being equal to $145.0 million and (b) Chinook’s cash and cash equivalents as of closing being equal to $10.0 million. The chief executive officer of Chinook will serve as the chief executive officer of the combined company following the completion of the Merger.

During the pendency of the Merger, we and Chinook may not be able to enter into a business combination with another party on more favorable terms because of restrictions in the Merger Agreement, which could adversely affect their respective business prospects.

Covenants in the Merger Agreement impede the ability of Aduro and Chinook to make acquisitions during the pendency of the Merger, subject to specified exceptions. As a result, if the Merger is not completed, the parties may be at a disadvantage to their competitors during that period. In addition, while the Merger Agreement is in effect, each party is generally prohibited from soliciting, proposing, seeking or knowingly encouraging, facilitating or supporting any inquiries, indications of interest, proposals or offers that constitute or may reasonably be expected to lead to certain transactions involving a third party, including a merger, sale of assets or other business combination, subject to specified exceptions. Any such transactions could be favorable to such party’s stockholders, but the parties may be unable to pursue them. For more information, see the section titled “The Merger Agreement—Non-Solicitation” of our Form S-4 Registration Statement.

Certain provisions of the Merger Agreement may discourage third parties from submitting competing proposals, including proposals that may be superior to the transactions contemplated by the Merger Agreement.

The terms of the Merger Agreement prohibit each of Aduro and Chinook from soliciting competing proposals or cooperating with persons making unsolicited takeover proposals, except in limited circumstances as described in further detail in the sections titled “The Merger Agreement—Non-Solicitation—Aduro” and “The Merger Agreement—Non-Solicitation—Chinook” of our Form S-4 Registration Statement. In addition, if we terminate the Merger Agreement under specified circumstances, either Aduro or Chinook would be required to pay the other party a termination fee of $6.4 million and reimburse up to $2.0 million of expenses. This termination fee may discourage third parties from submitting competing proposals to us or our stockholders, and may cause our board of directors to be less inclined to recommend a competing proposal.

Because the lack of a public market for Chinook’s capital stock makes it difficult to evaluate the fair market value of Chinook’s capital stock, we may pay more than the fair market value of Chinook’s capital stock and/or the stockholders of Chinook may receive consideration in the Merger that is less than the fair market value of Chinook’s capital stock.

The outstanding capital stock of Chinook is privately held and is not traded in any public market. The lack of a public market makes it difficult to determine the fair market value of Chinook’s capital stock. Because the percentage of Aduro equity to be issued to Chinook stockholders was determined based on negotiations between the parties, it is possible that the value of the Aduro common stock to be received by Chinook stockholders will be less than the fair market value of Chinook’s capital stock, or Aduro may pay more than the aggregate fair market value for Chinook’s capital stock.

~~Our stockholders may not receive any payment on the CVRs, and the CVRs may expire valueless.~~

The right of our stockholders to receive any future payment for or derive any value from the CVRs will be contingent solely upon the occurrence of the CVR Milestones within the time periods specified in the CVR Agreement and the consideration received being greater than the amounts permitted to be withheld or deducted by us under the CVR Agreement. There is no guarantee that we will be able to successfully partner or sell any of our non-renal assets or establish a viable entity to manage the development of these assets. In the event that no CVR Milestones occur within the time periods specified in the CVR Agreement or the consideration received is not greater than the amounts permitted to be withheld or deducted by us, no payments will be made under the CVR Agreement, and the CVRs will expire valueless.

Following the effective time of the Merger, subject to ongoing clinical trial obligations and obligations to use commercially reasonable efforts to complete dispositions for which a sale agreement has been entered into, neither we nor Chinook will have any obligation to develop the non-renal assets, or to expend any effort or resources to divest or otherwise monetize the non-renal assets.

Furthermore, the CVRs will be unsecured obligations of the combined company and all payments under the CVRs, all other obligations under the CVR Agreement and the CVRs and any rights or claims relating thereto may be subordinated in right of payment to the prior payment in full of all current or future senior obligations of the combined company.

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, as discussed in the section titled “Agreements Related to the Merger—Contingent Value Rights Agreement—Material U.S. Federal Income Tax Consequences of the CVRs of Holders of Aduro Common Stock” of our S-4 Registration Statement, we do not intend to report the issuance of the CVRs as a current distribution of property with respect to our stock, but it is possible that the IRS could assert that our stockholders 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 our stockholders 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 proposed reverse stock split described in our S-4 Registration Statement 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 our S-4 Registration Statement, including with respect to the timing and character of income.

~~Our ability to utilize our net operating loss carryforwards and tax credit carryforwards may be subject to 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 dates of the net operating losses, and we cannot predict with certainty when, 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 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, 2019, we reported U.S. federal, state and foreign NOLs of approximately $153.8 million, $107.8 million, and $66.5 million, respectively.

Under Section 382 of the Code, our ability to utilize NOLs or other tax attributes, such as federal tax credits, in any taxable year may be limited if we experienced an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in our equity ownership by certain stockholders over a three-year period. Similar rules may apply under state tax laws. We believe that we have experienced an ownership change in the past, and may experience ownership changes in the future and/or subsequent shifts in our stock ownership (some of which are outside of our control). Finally, the Merger, if consummated, may constitute an ownership change (within the meaning of Section 382 of the Code) which could eliminate or otherwise substantially limit our ability to use our federal and state NOLs. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities. As a result, even if we attain profitability, we may be unable to use a material portion of our NOLs and other tax attributes, which could potentially result in increased future tax liability to us.

~~The reverse stock split may not increase the combined company’s stock price over the long-term.~~

Our Form S-4 Registration Statement includes a proposal to approve an amendment to our amended and restated certificate of incorporation to effect a reverse stock split of our issued and outstanding common stock within a range to be determined by our board of directors and agreed to by Chinook. The principal purpose of the reverse stock split is to increase the per-share market price of our common stock above the minimum bid price requirement under the Nasdaq rules so that the listing of Aduro and the shares of our common stock being issued in the Merger on Nasdaq will be approved. It cannot be assured, however, that the reverse stock split will accomplish this objective for any meaningful period of time. While it is expected that the reduction in the number of outstanding shares of common stock will proportionally increase the market price of our common stock, it cannot be assured that the reverse stock split will increase the market price of our common stock by a multiple of the reverse stock split ratio mutually agreed by us and Chinook, or result in any permanent or sustained increase in the market price of our common stock, which is dependent upon many factors, including our business and financial performance, general market conditions, and prospects for future success. Thus, while our stock price might meet the continued listing requirements for Nasdaq initially, it cannot be assured that it will continue to do so.

~~The reverse stock split may decrease the liquidity of the combined company’s common stock.~~

Although our board believes that the anticipated increase in the market price of the combined company’s common stock resulting from the proposed reverse stock split could encourage interest in its common stock and possibly promote greater liquidity for its stockholders, such liquidity could also be adversely affected by the reduced number of shares outstanding after the reverse stock split. The reduction in the number of outstanding shares may lead to reduced trading and a smaller number of market makers for the combined company’s common stock. In addition, the reverse stock split may not result in an increase in the combined company's stock price necessary to satisfy Nasdaq’s initial listing requirements for the combined company.

~~The reverse stock split may lead to a decrease in the combined company’s overall market capitalization.~~

Should the market price of the combined company’s common stock decline after the reverse stock split, the percentage decline may be greater, due to the smaller number of shares outstanding, than it would have been prior to the reverse stock split. A reverse stock split is often viewed negatively by the market and, consequently, can lead to a decrease in the combined company’s overall market capitalization. If the per share market price does not increase in proportion to the reverse stock split ratio, then the value of the combined company, as measured by its stock capitalization, will be reduced. In some cases, the per-share stock price of companies that have effected reverse stock splits subsequently declined back to pre-reverse split levels, and accordingly, it cannot be assured that the total market value of the combined company’s common stock will remain the same after the reverse stock split is effected, or that the reverse stock split will not have an adverse effect on the combined company’s stock price due to the reduced number of shares outstanding after the reverse stock split.

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 a clinical-stage biotechnology company with a limited operating history. Biotechnology product development is a highly speculative undertaking and involves a substantial degree of risk. Our operations to date have been limited primarily to organizing and staffing the Company, business planning, raising capital, acquiring and developing product and technology rights, manufacturing, and conducting research and development activities for our product candidates. We have never generated any revenue from product 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 common stock and the merger between Aduro and Private Chinook.

We have incurred net losses in ~~every~~each year since our ~~inception and anticipate that we will continue to incur substantial and increasing~~inception. We incurred net losses ~~in the foreseeable future.~~

We are an immunotherapy company with a limited operating history. Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. We have financed our operations primarily through the sale of common stock, and licensing agreements with pharmaceutical partners. Since our inception, most of our resources have been dedicated to the preclinical and clinical development of 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 generated any revenue from product sales to date, and we continue to incur significant research and development and other expenses related to our ongoing operations. We incurred a net loss of $16.6$42.6 million and ~~$18.6~~$79.8 million for the three ~~months ended June 30, 2020~~ and ~~2019, respectively, and $24.2 million and $42.0 million for the~~ six months ended June 30, ~~2020 and 2019,~~2021, respectively. AtAs of June 30, ~~2020,~~2021, we had an accumulated deficit of ~~$511.1~~$208.6 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.~~

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 cash since inception. At June 30, 2020,~~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 and cash equivalents held as of June 30, 2021 will enable us to fund our operating expenses and ~~marketable securities were $186.1 million.~~capital expenditure requirements for at least the next twelve months. 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 are 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:

We do not have any committed external source of funds or other support for our development efforts other than our license agreements, including our collaboration and license agreement with Novartis, which may be terminated by Novartis upon 180 days’ notice, our license agreement with Merck, which may be terminated by Merck upon 120 days’ notice, and our collaboration and license agreement with Lilly, which may be terminated following a specified notice period. Until we can generate sufficient product and royalty revenue to finance our cash requirements, which we may never do, we expect to finance 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 financing may not be available to us when we need it or it may not be available on favorable terms.

If we raise additional capital through marketing 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, including our “at-the-market” offering, 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. 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.

On January 9, 2020, we announced a restructuring plan to further extend our operating capital and align personnel towards executing our clinical development strategy. The success of this restructuring will depend on our ability to reduce operating expenses, reduce our facilities footprint, retain senior management and other highly qualified personnel and generate multiple clinical data readouts over the next several years. In connection with the restructuring we intend to reduce our workforce by approximately 59%. Our workforce after these actions may not be sufficient to fully execute our strategy, and we may not be able to effectively attract or retain senior management or other qualified employees needed to implement this strategy. If we are unable to successfully execute our strategy, our business, financial condition and results of operations may be materially and adversely affected.

We intend to sublease a significant amount of space in our headquarters in Berkeley, California. If we are unable to sublease our facilities on favorable terms, our subtenants are unable to meet their obligations under the subleases or our landlord recaptures the subleased space, we may be responsible for unexpected costs or the value of the lease asset may be reduced, which could impact our financial results.

At June 30, 2020, we had approximately 110,853 square feet of leased space in Berkeley. In connection with our restructuring plan, we expect to sublease a significant portion of our Berkeley facility to third parties. The COVID-19 global pandemic may result in reduced sublease demand or the amount of rent we are able to obtain. In the event that we are unable to sublease our excess space on favorable terms, or at all, or if we are able to sublease space but our subtenants fail to make lease payments to us or otherwise default on their obligations to us, we could incur substantial payment obligations to our landlord. In the event our estimates regarding our ability to sublet our available space are incorrect, we would be required to adjust our restructuring reserves, which could have a material impact on our financial results. In addition, in the event that we sublease 50% or more of our Berkeley facility to third parties, our landlord may recapture such subleased space, which would require us to reduce the value of the operating lease right-of-use asset on our balance sheet and could have a material impact on our financial results.

~~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 immunotherapy product candidates are designed to stimulate and/or regulate innate and adaptive immune responses as potential treatments for cancer, autoimmune and inflammatory diseases. Any products we develop may not effectively modulate the immune response. The scientific evidence to support the feasibility of immunotherapy product candidates is preliminary and limited. Our business and future success depend on our ability to obtain regulatory approval of, and then successfully commercialize, our product candidates. Advancing these novel therapies creates significant challenges for us, including, among others:

Our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of product candidates that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives, which may not be available to us on acceptable terms, or at all.

We have identified material weaknesses in our internal control over financial reporting. Failure to achieve and maintain effective internal control over financial reporting could harm our business and negatively impact the value of our common stock.

We have identified material weaknesses in our internal control over financial reporting. A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. In preparing our consolidated financial statements as of and for the years ended December 31, 2020 and December 31, 2019, our management identified the following material weaknesses in its internal control over financial reporting: (i) we did not design or maintain an effective control environment commensurate with its financial reporting requirements due to lack of sufficient accounting professionals with the appropriate level of skill, experience and training commensurate with its financial reporting requirements. Additionally, the limited personnel resulted in our inability to consistently establish appropriate authorities and responsibilities in pursuit of its financial reporting objectives, as demonstrated by, among other things, insufficient segregation of duties in its finance and accounting functions. This contributed to additional material weaknesses as: (ii) we did not design and maintain formal accounting policies, procedures and controls to achieve complete, accurate and timely financial accounting reporting and disclosures, including controls over the preparation and review of account reconciliations, journal entries and period end financial reporting; and (iii) we did not design and maintain controls over the operating effectiveness of information technology general controls for information systems that are relevant to the preparation of its financial statements. Specifically, we did not design and maintain effective controls over program change management; user access, including segregation of duties; or computer operations.

These material weaknesses could result in adjustments to our consolidated financial statements. Additionally, these material weaknesses could result in a misstatement of our accounts or disclosures that would result in a material misstatement of our future annual or interim financial statements that would not be prevented or detected, and accordingly, we determined that these control deficiencies constitute material weaknesses.

We have recently hired and are actively recruiting additional accounting personnel with appropriate experience, certification, education and training as a component of our plans to remediate the material weaknesses. To the extent that we are not able to hire and retain such individuals, the material weaknesses identified may not be remediated and management may be required to record additional adjustments to our financial statements in the future.

Our internal control over financial reporting may not meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, could have a material adverse effect on our business and share price.

Following the merger, our management is required to report on the effectiveness of our internal control over financial reporting. The rules governing the standards that must be met for our management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.

In preparing our consolidated financial statements as of and for the years ended December 31, 2019 and 2020, we identified material weaknesses in our internal control over financial reporting. We cannot assure you that the material weaknesses identified will be remediated on the timelines currently anticipated by us, or at all, and/or that there will not be additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain effective internal control over financial reporting could severely inhibit our ability to accurately report on our financial condition, results of operations or cash flows. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting once that firm begins its reporting on internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions

or investigations by Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

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 conduct sales and marketing activities necessary for commercialization. Consequently, any predictions you make about our future success or viability may not be as accurate as they could be if we had a longer operating history.

If we are unable to develop, obtain regulatory approval for and commercialize atrasentan or any other future product candidates, or if we experience significant delays in doing so, our business will be materially harmed.

We plan to invest a substantial amount of our efforts and financial resources in our current lead product candidate, atrasentan, an endothelin receptor antagonist, for the treatment of proteinuric glomerular diseases. We initiated the ALIGN phase 3 clinical trial of atrasentan, for the treatment of IgAN in March 2021, and in April 2021 we initiated the phase 2 AFFINITY clinical trial for certain proteinuric glomerular diseases. In addition, we are conducting a phase 1 clinical trial of BION-1301 for the treatment of IgAN and expect to present interim results later in 2021. We also plan to advance our CHK-336 program in primary hyperoxaluria towards a phase 1 clinical trial expected to begin in the first quarter of 2022, and are advancing multiple research programs for rare, severe chronic kidney diseases. Our ability to generate product revenue will depend heavily on the successful development and eventual commercialization of atrasentan and our other product candidates, which may never occur. We currently generate no revenue from sales of any product, and we may never be able to develop or commercialize a marketable product.

Each of our programs and product candidates will require further clinical and/or preclinical development, regulatory approval in multiple jurisdictions, obtaining preclinical, clinical and commercial manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and significant marketing efforts before we generate any revenue from product sales. Atrasentan and our other product candidates must be authorized for marketing by the U.S. Food and Drug Administration, or FDA, the Health Products and Food Branch of Health Canada, or HPFB, the European Medicines Agency, or 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 depends on multiple factors, including:

All of our product candidates will require additional clinical and non-clinical development, regulatory review and approval in multiple jurisdictions, substantial investment, access to sufficient commercial manufacturing capacity and significant marketing efforts before we can generate any revenue from product sales. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA or comparable foreign regulatory authorities, and we may never receive regulatory approval for any of our product candidates. If we ~~are unable to develop~~do not succeed in one or ~~receive marketing approval for our product candidates~~more of these factors in a timely manner or at all, ~~our business, financial condition and results of operations may be materially and adversely affected.~~

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

~~A key element of our strategy is to use and expand our technologies 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 indications, 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~~indicative of the results that may be obtained in later clinical trials, including our phase 3 clinical trial for ~~clinical development, including as a result of being shown to have harmful side effects~~atrasentan, which may delay 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 inprevent obtaining ~~product revenues in future periods. See also the risk factor titled, “Our corporate strategy and restructuring plan may not be successful.”~~regulatory approval.

Clinical development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future clinical trial results. Our clinical trials may fail to demonstrate adequately the safety and efficacy of one 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, or in the case of biologics, safe, pure and potent, for use in each target indication. Clinical testing 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.

Additionally, because our product candidates are based on new technologies and costs to treat potential side effects that may result from our product candidates are uncertain, our clinical trial costs may be significantly higher than for more conventional therapeutic technologies or drug products.

~~The results of~~ Success in preclinical studies and early clinical trials ~~of our product candidates~~ 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 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 diabetic kidney disease, 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 ~~later-stage~~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 3 and phase 2 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 BION-1301 and CHK-336, have only been evaluated in early-stage clinical trials or have yet to enter clinical trials, and we may experience unexpected or negative results in the future as our other product candidates are evaluated in clinical trials. ~~There is typically an extremely high rate~~Any positive results we have observed in preclinical animal models may not be predictive of ~~attrition from the failure of~~our future clinical trials in humans, as animal models carry inherent limitations relevant to all preclinical studies. Our product candidates ~~proceeding through clinical trials. Product candidates in later stages of clinical trials~~ may also fail to show the desired safety and efficacy ~~profile despite having progressed~~in later stages of clinical development even if they successfully advance through ~~preclinical studies and~~ initial clinical trials. ~~A number~~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 ~~biopharmaceutical~~biotechnology industry have suffered significant setbacks in ~~advanced~~late-stage clinical trials ~~due to lack of efficacy or adverse safety profiles, notwithstanding promising~~after achieving positive results in ~~earlier trials. We cannot be certain that we will not face similar setbacks. Most~~early-stage development, and there is a high failure rate for product candidates ~~that commence~~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 ~~never approved as commercial products. The outcome of preclinical studies and early-stage clinical trials~~promising, these data may not be ~~predictive of~~sufficient to support approval by the ~~success of later clinical trials. Moreover, preclinical~~FDA or foreign regulatory authorities. Preclinical and clinical data ~~are often susceptible to varying interpretations and analyses, and many companies that have believed their product candidates performed satisfactorily~~can be interpreted in ~~preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their drugs. We cannot guarantee that~~different ways. Accordingly, the FDA or foreign regulatory authorities ~~will~~could interpret ~~trial results as we~~these data in different ways from us or our partners, which could delay, limit or prevent regulatory approval. If our study data do ~~and more trials could be required before we are able to submit applications seeking approval~~not consistently or sufficiently demonstrate the safety or efficacy of any of our product ~~candidates. To~~candidates, including atrasentan, to the ~~extent that the results~~satisfaction of ~~the trials are not satisfactory to~~ the FDA or foreign regulatory authorities, then the regulatory approvals for ~~support~~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, 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 ~~application,~~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 ~~required~~unable to ~~expend significant resources, which~~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 ~~available~~effective, may be only moderately effective or may prove to ~~us,~~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 ~~conduct~~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 product candidates meet their pre-specified safety and efficacy endpoints in clinical trials, the regulatory authorities may not complete their review processes in ~~support~~a timely manner and may not consider such the clinical trial results sufficient to grant, or

We may not be 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 may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in regulatory authority policy during the period of ~~potential~~product development, clinical trials and the review process.

Regulatory authorities also may approve a product candidate for more limited indications than requested or they may impose significant limitations in the form of narrow indications, warnings, contraindications or Risk Evaluation and Mitigation Strategies, or REMS. These regulatory authorities may also grant approval subject to the performance of costly post-marketing clinical trials. In addition, regulatory authorities may not approve the labeling claims that are necessary or desirable for the successful commercialization of our product candidates. ~~Even if regulatory approval is secured~~Any of the foregoing scenarios could materially harm the commercial prospects for ~~any of~~ our product candidates and adversely affect our business, financial condition, results of operations and prospects.

The outbreak of COVID-19, or similar public health crises, could have a material adverse impact on our business, financial condition and results of operations, including the ~~terms of such approval may limit the scope and use~~execution of our product candidate, which may also limit its commercial potential. Furthermore, the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical ~~data insufficient for approval, which may lead to the FDA or comparable foreign regulatory authorities delaying, limiting or denying approval of our product candidates.~~trials.

~~Any delay, suspension, termination or request to repeat or redesign a trial could increase our costs and prevent or significantly delay our ability to commercialize our product candidates.~~

We may experience delays in our ongoing clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. ~~In addition, due to delays in clinical trials related to the COVID-19 global pandemic, we expect that our clinical development program timelines will be negatively affected.~~ ~~See also the risk factor titled, “~~Public health crises such as pandemics or similar outbreaks could adversely impact our business. In March 2020 the World Health Organization declared the disease caused by SARS-CoV-2, COVID-19, a pandemic. The pandemic and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred, supply chains have been disrupted, facilities and production have been suspended, and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The extent to which COVID-19 impacts our business and operating results will depend on future developments that are highly uncertain and cannot be accurately predicted, including new information that may emerge concerning COVID-19 and the actions to contain the virus or treat its impact.

For instance, our phase 1b clinical trial of BION-1301 and our phase 3 and phase 2 clinical trials of atrasentan have been and may continue to be affected by the pandemic. Site initiation, participant recruitment and enrollment, participant dosing, distribution of clinical trial materials, study monitoring and data analysis for our clinical trials has been and may continue to be delayed due to changes in hospital or university policies, federal, state or local regulations, prioritization of hospital resources toward pandemic efforts, or other reasons related to the pandemic. Additionally, some participants and clinical investigators may not be able to comply with clinical trial protocols. For example, quarantines or other travel limitations (whether voluntary or required) may impede participant movement, affect sponsor access to study sites, or interrupt healthcare services, and we may be unable to conduct our clinical trials. If the global effort to control the spread of COVID-19 and treat COVID-19 patients continues on the current trajectory for an extended period of time, we risk a delay in activating sites and enrolling subjects as previously projected. Any such delays in our phase 3 ALIGN clinical trial for atrasentan and the clinical trials for our other product candidates could impact the use and sufficiency of our existing cash reserves, and we may be required to raise additional capital earlier than we had previously planned. We may be unable to raise additional capital if and when needed, which may result in further delays or suspension of our development plans.

Further, infections and deaths related to COVID-19 are disrupting certain healthcare and healthcare regulatory systems globally. Such disruptions could divert healthcare resources away from, or materially delay review by, the FDA and comparable foreign regulatory agencies. It is unknown how long these disruptions could continue, were they to occur. Any elongation or de-prioritization of our clinical trials or delay in regulatory review resulting from such disruptions could materially adversely affect the development and study of our product candidates.

We currently utilize third parties to, among other things, manufacture raw materials and our product candidates, components, parts, and consumables, and to perform quality testing. If either we or any third-party in the supply chain for materials used in the production of our product candidates are adversely impacted by restrictions resulting from the COVID-19 pandemic, our supply chain may be disrupted, limiting our ability to manufacture product candidates for our clinical trials.

In response to the COVID-19 pandemic, we have limited access to our offices and have undertaken safety precautions to reduce the risk of transmission in our workforce. Due to mandated local travel restrictions, third parties conducting clinical or manufacturing activities may not be able to access laboratory or manufacturing space, and our core activities may be significantly limited or curtailed, possibly for an extended period of time.

The spread of COVID-19, which has caused a broad impact globally, including restrictions on travel and quarantine policies put into place by businesses and governments, may have a material adverse effect on our business. While the potential economic impact brought by and the duration of the pandemic may be difficult to assess or predict, it has already caused, and is likely to result in further, significant disruption of global financial markets and the trading prices of biopharmaceutical companies have been highly volatile as a result of the COVID-19 pandemic, which may reduce our ability to access capital either at all or on favorable terms. In addition, a recession, depression or other sustained adverse market event resulting from the global effort to control COVID-19 infections could materially and adversely affect our business.

The ultimate impact of the current pandemic, or any other health epidemic, is highly uncertain and subject to change. We do not yet know the full extent of potential delays or impacts on the Company’s business, our planned clinical trials, healthcare systems or the global economy as a whole. However, these effects could have a material adverse impact on our business, financial condition and results of ~~operations~~operations..”

~~The commencement or completion of clinical trials can be delayed or aborted for a variety of reasons, including delays or failures related to:~~

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs/ECs 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 regulatory authorities. Such authorities may impose a 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 other regulatory authorities, unforeseen safety issues 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 the clinical trial, or safety concerns raised by other clinical trials of therapies with similar mechanisms of action.

~~If we experience delays in the completion, or termination, of any clinical trial for our product candidates, the commercial prospects of that product candidate will be harmed,~~Atrasentan and our ability to generate product revenues from the product candidate 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.

In addition, many of the factors that cause, or lead to, termination or suspension of, or a delay in the commencement or completion of, clinical trials may also ultimately lead to the denial of regulatory approval of a product candidate. Any delays to our clinical trials that occur as a result could shorten any period during which we may have the exclusive right to commercialize our product candidates and our competitors may be able to bring products to market before we do, and the commercial viability of our product candidates could be significantly reduced. Any of these occurrences may harm our business, financial condition and prospects significantly.

Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary or topline data from our preclinical studies and clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a more comprehensive review of the data related to the particular study or trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, the topline or preliminary results that we report may differ from future results of the same studies, or different conclusions or considerations may qualify such results, once additional data have been received and fully evaluated. Topline data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, topline data should be viewed with caution until the final data are available.

From time to time, we may also disclose interim data from our preclinical studies and clinical trials. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between preliminary or interim data and final data could significantly harm our business prospects. Further, disclosure of interim data by us or by our competitors could result in volatility in the price of our common stock after this offering.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our company in general. In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is material or otherwise appropriate information to include in our disclosure.

If the interim topline, or preliminary data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize, our product candidates may be harmed, which could harm our business, operating results, prospects or financial condition.

~~Actual or potential conflicts of interest arising from our relationships with investigators could adversely impact the FDA approval process.~~

Principal investigators for 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 provide 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.

~~Our~~other product candidates 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.

~~Side~~As is the case with pharmaceuticals generally, it is likely that there may be side effects orand adverse events associated with ~~the use of~~ our product ~~candidates may be observed at any time, including~~candidates’ use. For example, in ~~clinical trials or when a product is commercialized, and any such side effects or~~the phase 3 SONAR trial, the most common adverse events ~~could cause us or regulatory authorities to interrupt, delay or halt clinical trials, result in a more restrictive label or the delay or denial~~ of ~~regulatory approval by the FDA or comparable foreign regulatory authorities, or negatively affect our ability to market our product candidates.~~atrasentan included fluid retention and 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 or~~ If any such adverse events or AEs, including AEs that were considered moderate or severe. Examples of the AEs experienced include among others, fevers, chills, injection sight pain, headaches, increased lipase and elevated amylase, tumor pain, dyspnea and respiratory failure. We cannot provide assurances that there will not be further adverse events.

~~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, require us to conduct additional animal or human studies~~further development of, or deny approval of, our product candidates for any or all targeted indications. ~~Treatment-related side effects~~Even if we can demonstrate that all future serious adverse events are not product-related, such occurrences could ~~also~~ affect patient recruitment or the ability of enrolled patients to complete the trial. Moreover, if we elect, or are required, to not initiate, delay, suspend or terminate any future clinical trial or result in potential product liability claims. In addition, if side effects are observed in competing product candidates that are perceived to have similarities to ours, regulators or patients may infer thatof any of our product candidates, ~~could cause similar side effects.~~the commercial prospects of such product candidates may be harmed and our ability to generate product revenues from any of these product candidates may be delayed or eliminated. Any of these occurrences may ~~materially~~harm our ability to develop other product candidates, and may adversely affect our business, financial condition, ~~and~~ results of ~~operations.~~operations and prospects significantly. Other treatments for kidney diseases that utilize an ET_A 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 ERAs have been required to include a REMS for women of child-bearing age regarding the risk of embryo-fetal toxicity. 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 materially and adversely affect~~occurrences may harm our business, financial condition, ~~and~~ results of ~~operations.~~operations and prospects significantly.

Certain of the diseases we 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 ~~may encounter difficulties enrolling~~estimate that IgAN affects approximately 140,000 – 150,000 patients in ~~our clinical trials.~~

~~The~~the United States, approximately 200,000 people in Europe and several million people in Asia. 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. Small target patient populations could pose obstacles to the timely ~~completion~~recruitment and enrollment of ~~clinical trials in accordance with their protocols depends on, among other things, our ability to enroll~~ a sufficient number of eligible patients ~~who remain in the studies until their conclusion. We may experience difficulties in patient enrollment~~ in our ~~clinical~~ trials, ~~for~~or limit a ~~variety of reasons. The~~product candidate’s commercial potential. Patient enrollment ~~of patients depends on many~~may be affected by other 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. Because the number of qualified clinical investigators is limited, we 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 sites. Moreover, because our product candidates represent a departure from more commonly used treatment methods, in some cases potential patients and their doctors may be inclined to use conventional therapies rather than enroll patients in our clinical trials.

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 our ability to advance the development of our product candidates.

~~Public health crises such as pandemics or similar outbreaks could materially and adversely affect our clinical trials, business, financial condition and results of operations.~~

In March 2020, the World Health Organization declared COVID-19 a global pandemic and the United States declared a national emergency with respect to COVID-19. In response to the COVID-19 global pandemic, “shelter in place” orders and other public health guidance measures have been implemented across much of the United States and Europe, including in the locations of our offices, clinical trial sites, key vendors and partners. We expect that our clinical development program timelines will be negatively affected by COVID-19, which could materially and adversely affect our business, financial condition and results of operations. Further, due to “shelter in place” orders and other public health guidance measures, we have implemented a work-from-home policy for all staff members excluding those necessary to maintain operations and those doing laboratory work. Our increased reliance on personnel working from home may negatively impact productivity, or disrupt, delay or otherwise adversely impact our business.

As a result of the COVID-19 global pandemic, or similar pandemics, and related “shelter in place” orders and other public health guidance measures, we have and may in the future experience disruptions that could materially and adversely impact our clinical trials, business, financial condition and results of operations. Potential disruptions include but are not limited to:

~~These and other factors arising from the COVID-19 global pandemic could worsen in countries that are already afflicted~~Our inability to enroll a sufficient number of patients with COVID-19, could continue to spread to additional countries or could return to countries where the pandemic has been partially contained, each of which could further adversely impact our ability to conduct clinical trials and our business generally, and could materially and adversely affect our business, financial condition and results of operations.

~~The COVID-19 global pandemic continues to rapidly evolve. The extent to which the outbreak may affect~~these diseases for our clinical trials ~~business, financial condition~~would result in significant delays and results of operations will depend on future developments, which are highly uncertain and cannot be predicted at this time, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and actionscould cause us to ~~contain the outbreak~~not initiate or ~~treat its impact, such as social distancing and quarantines~~abandon one or ~~lock-downs~~more clinical trials altogether. Enrollment delays in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. Future developments in these and other areas present material uncertainty and risk with respect to our clinical trials ~~business, financial condition~~may result in increased time to potential approval and ~~results of operations.~~

In addition, the trading prices for our common stock and other biopharmaceutical companies have been highly volatile as a result of the COVID-19 global pandemic. As a result, we may face difficulties raising capital through sales of our common stock or such sales may be on unfavorable terms.

~~The market opportunities~~development costs for our product candidates, ~~may be small or limited~~which would cause the value of the Company to ~~those patients who are ineligible for established therapies or for whom prior therapies have failed.~~decline and limit our ability to obtain additional financing.

~~Our~~Additionally, our projections of both the number of people who have IgAN and other proteinuric glomerular diseases, as well as the ~~indications that we are targeting and~~people with these 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 indications.~~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.~~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 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 revenue. We may be unable to maintain or obtain sufficient therapy sales volumes at a price high enough to justify our development efforts and our sales, marketing and manufacturing expenses.

We may not be 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 limited number of internal product candidates we are researching or have in preclinical development. Even if we ~~obtain significant market share for~~are successful in continuing to build our pipeline, development of the potential product candidates ~~because the potential target populations~~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 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 ~~small,~~unlikely to be products that will receive marketing approval and achieve market acceptance. If we cannot develop further product candidates, we may ~~never achieve profitability without obtaining regulatory approval for additional indications.~~ ~~If the market opportunities for~~not be able to obtain product revenue in future periods, which would adversely affect our ~~product candidates are smaller than we estimate, our~~ business, prospects, financial condition and results of ~~operations~~operations.

Although our pipeline includes multiple programs, we are primarily focused on our lead product candidates, atrasentan, BION-1301 and CHK-336, and we may be ~~materially~~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 ~~adversely affected.~~

~~Additionally, cancer therapies are sometimes characterized as first line, second line or third line,~~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 ~~FDA often approves~~discovery and development of 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. Initially our oncology product candidates may ~~only~~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 will be ~~approved as a therapy for patients who have received one~~subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or ~~more prior treatments. Subsequently, for those products that prove~~withdrawal from the market, and we may be subject to ~~be sufficiently beneficial,~~penalties if ~~any, we would expect~~it fails to ~~seek approval potentially as a first-line therapy, but there is no guarantee that~~comply with regulatory requirements or if it experiences unanticipated problems with our product candidates, ~~even~~when and if ~~approved, would be approved for first-line therapy,~~any of them are approved.

Our product candidates and ~~prior~~the activities associated with their development and potential commercialization, including their testing, manufacturing, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to ~~any such approvals, we may have~~comprehensive regulation by the FDA and other U.S. and international regulatory authorities. These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, requirements relating to ~~conduct additional clinical trials.~~manufacturing, including current Good Manufacturing Practices, or cGMPs, quality control, quality assurance and corresponding

Wemaintenance of records and documents, including periodic inspections by the FDA and other regulatory authorities and requirements regarding the distribution of samples to providers and recordkeeping. In addition, manufacturers of drug products and their facilities are subject to ~~a multitude of manufacturing, supply chain, storage~~continual review and ~~distribution risks, any of which could substantially increase our costs~~periodic, unannounced inspections by the FDA and ~~limit the supply of our product candidates.~~other regulatory authorities for compliance with cGMPs.

The ~~process~~FDA may also impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of ~~manufacturing~~any approved product. The FDA closely regulates the post-approval marketing and promotion of drugs to ensure that they are marketed in a manner consistent with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding use of their products. If we promote our product candidates ~~is complex, highly regulated and~~in a manner inconsistent with FDA-approved labeling or otherwise not in compliance with FDA regulations, we may be subject to ~~several risks,~~enforcement action. Violations of the Federal Food, Drug, and Cosmetic Act relating to the promotion of prescription drugs may lead to investigations alleging violations of federal and state healthcare fraud and abuse laws, as well as state consumer protection laws and similar laws in international jurisdictions.

In addition, later discovery of previously unknown adverse events or other problems with our product candidates, manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:

Any adverse developments affecting manufacturing operations for our product candidates and/or damage that occurs during shipping may result in delays, inventory shortages, lot failures, withdrawals or recalls or other interruptions in the supply of our drug substance and drug product. We may also have to write off inventory, incur other charges and expenses 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 materially and adversely affect our business, financial condition and results of operations.

We currently have no marketing and sales organization and have no experience in marketing products. If we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to generate product revenue.

We currently have no 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 able to establish or maintain such collaborative arrangements, or if we are able to do so, that they will have effective sales forces. Any revenue we receive will depend upon the efforts of such third parties, which may not be successful. We may have little 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 efforts of our product candidates.

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 the United States or elsewhere.

A variety of risks associated with conducting clinical trials and marketing our product candidates internationally could materially and adversely affect our business, financial condition and results of operations.

We conduct clinical trials, and plan to seek regulatory approval of our product candidates outside of the United States. The acceptance of study data by the FDA, other comparable foreign regulatory authorities from clinical trials conducted outside of their respective jurisdictions may be subject to certain conditions. For example, in cases where data from foreign clinical trials are intended to serve as the basis for marketing approval in the United States, the FDA will generally not approve the application on the basis of foreign data alone unless (1) the data are applicable to the United States population and United States medical practice; (2) the trials are performed by clinical investigators of recognized competence and pursuant to GCP requirements; and (3) the FDA is able to validate the data through an on-site inspection or other appropriate means. Additionally, the FDA’s clinical trial requirements, including the adequacy of the patient population studied and statistical powering, must be met. In addition, such foreign trials would be subject to the applicable local laws of the foreign jurisdictions where the trials are conducted. There can be no assurance that the FDA or any applicable foreign regulatory authority will accept data from trials conducted outside of its applicable jurisdiction. If the FDA or any applicable foreign regulatory authority does not accept such data, it would result in the need for additional trials, which would be costly and time-consuming and delay aspects of our business plan, and which may result in our product candidates not receiving approval for commercialization in the applicable jurisdiction.

~~We are subject to additional risks related to operating in foreign countries in conducting clinical trials and if we obtain the necessary approvals, including:~~

~~These and other risks associated with our international operations may materially and adversely affect our business, financial condition and results of operations.~~

~~We face significant competition from other biotechnology and pharmaceutical companies, and our business, financial condition and results of operations 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, biotechnology companies, specialty pharmaceutical companies, universities and other research institutions continue to invest time and resources in developing novel approaches to immunotherapies. Promising results have spurred significant competition from major pharmaceutical and biotechnology companies alike. Our competitors in the STING pathway activator technology include Merck & Co., Inc., Bristol-Myers Squibb Company/IFM Therapeutics, GlaxoSmithKline plc, Synlogic, Inc., Spring Bank Pharmaceuticals, Inc., Codiak Biosciences, Inc., Eisai, Co., Ltd./H3 Biomedicine, Inc., AbbVie (following its acquisition of Mavupharma), Curadev, Trillium Therapeutics Inc., Mersana Therapeutics, Stingray Therapeutics, Ryvu Therapeutics, Cancer Therapeutics CRC, ImmuneSensor Therapeutics, Nimbus Therapeutics and STINGINN LLC. Our competitors for the anti-APRIL program include Otsuka Pharmaceutical Co., Ltd. (following its acquisition of Visterra, Inc.) and Merck KGaA (EMD Serono). Our competitors for the cGAS-STING pathway inhibitor program include Pfizer Inc., Spring Bank Pharmaceuticals, Inc., GlaxoSmithKline plc, Curadev, Sirenas, LLC, Nimbus Therapeutics/ Bristol-Myers Squibb Company, IFM Due (a subsidiary of IFM Therapeutics, LLC), AbbVie (following its acquisition of Mavupharma), ImmuneSensor Therapeutics and STINGINN LLC. While we believe that our product candidates, technology, knowledge and experience provide us with competitive advantages, we face competition from established and emerging pharmaceutical and biotechnology companies, among others. 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 prices of our competitors’ products could limit the demand and the prices we are able to charge for our product candidates. We may not be able to implement our business plan if the acceptance of our product candidates is inhibited by price competition or 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 Medical Officer and our Interim Chief Financial Officer and our Chief Administrative Officer. As previously disclosed, our former Chief Scientific Officer resigned effective as of June 30, 2020 in connection with our restructuring plan and the closure of our European site in Oss, the Netherlands, where our Chief Scientific Officer was based. 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 may need to grow the size of our organization in the future, and we may experience difficulties in managing this growth.~~

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:

The occurrence of any event or penalty described above may inhibit our ability to commercialize our product candidates and generate revenue and could require us to expend significant time and resources in response and could generate negative publicity. 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. 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 have obtained, and we may not achieve or sustain profitability.

Non-compliance with Canadian and European requirements regarding safety monitoring or pharmacovigilance, and with requirements related to the development of products for the pediatric population, can also result in significant financial penalties. Similarly, failure to comply with Canada’s or Europe’s requirements regarding the protection of personal information can also lead to significant penalties and sanctions.

Our ~~future financial performance~~failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates 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 non-compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or 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 ~~commercialize~~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 ~~our ability~~the acceptance of providers, patients and third-party payors of drugs designed to ~~effectively manage any future growth, and our management may also have to divert~~act as 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 accuracyselective blocker of the ~~services provided by consultants is compromised~~ET_A receptor in particular for ~~any reason, our clinical trials may be extended, delayed or terminated,~~atrasentan, and ~~we may not be able to obtain regulatory approval of our product candidates or otherwise advance our business.~~

If we are not able to effectively expand our organization by hiring new employees 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, consultants or vendors, may fail or suffer security breaches.~~

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors, consultants or vendors are vulnerable to damage from, among others, computer viruses, malware, natural disasters, terrorism, war, telecommunication and electronic failures, cyberattacks or cyber intrusions over the Internet, attachments to emails, persons inside our organization, or persons with access to systems inside our organization or similar disruptive problems. The risk of a security breach or disruption, particularly through cyber attacks or cyber intrusion, including by computer hackers, foreign governments, and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. Any such material system failure or security breach 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. 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. For example, there has been an increase in phishing and spam emails as well as social engineering attempts from “hackers” hoping to use the recent COVID-19 pandemic to their advantage. 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 material legal claims and liability, and damage to our reputation, 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 or outages, 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 in ~~some cases on a patient by patient basis. Our ability~~general, as medically necessary, cost-effective and safe. In addition, we may face challenges in seeking to ~~obtain clinical supplies~~establish and grow sales of atrasentan or our other 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.

~~For example, the current COVID-19 global pandemic has disrupted businesses globally. We cannot at this time predict the specific extent, duration, or full impact~~candidates. Any product that the COVID-19 global pandemic will have on our financial condition and operations, including ongoing and planned clinical trials, or the financial condition and operations of our CROs, contract manufacturers or other partners. We believe that there will be an impact on the clinical development of our product candidates, which may include potential delays, halts or modifications to our ongoing and planned trials.

~~Even if~~ we ~~obtain regulatory approval of our product candidates, the products~~commercialize may not gain ~~market~~ acceptance ~~among physicians,~~by providers, patients, ~~hospitals~~patient advocacy groups, third-party payors and ~~others in~~ the general medical community.

~~The use~~ If these products do not achieve an adequate level of ~~APRIL or STING~~acceptance, we may not generate significant product ~~candidates as potential immunotherapy treatments, even if approved,~~revenue and may not become ~~broadly accepted by physicians, patients, hospitals~~profitable. The degree of market acceptance of atrasentan and ~~others in the medical community. Additional factors will influence whether~~ our other product candidates, ~~are accepted in the market,~~if approved for commercial sale, will depend on several factors, including:

IfEven 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 obtain or maintain adequate coverage and reimbursement for our product candidates, if approved, could limit our ability to market those products and decrease our ability to generate product revenue.

Our target indications, including IgAN and other proteinuric glomerular diseases, are ~~approved but fail~~indications with relatively small patient populations. For product candidates that are designed to ~~achieve or maintain market acceptance among physicians, patients, hospitals or others in~~treat smaller patient populations to be commercially viable, the ~~medical community,~~reimbursement for such product candidates must be higher, on a relative basis, to account for the lack of volume. Accordingly, we will ~~not~~need to implement a coverage and reimbursement strategy for any approved product candidate that accounts for the smaller potential market size. If we are unable to establish or sustain coverage and adequate reimbursement for our product candidates from 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 ~~generate significant revenue.~~

Ifafford these treatments. Accordingly, sales of atrasentan and our other product ~~liability lawsuits are brought against us, we may incur substantial liabilities~~candidates will depend substantially, both domestically and ~~may be required~~internationally, on the extent to ~~limit commercialization of our product candidates.~~

~~We face an inherent risk of product liability as a result of~~which the ~~clinical testing~~costs of our product candidates will be paid by health maintenance, managed care,

pharmacy benefit and similar healthcare management organizations, or will ~~face~~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 high enough to allow 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 as the Medicare and Medicaid programs, play an ~~even greater risk if we commercialize any products. For example, we may~~important role in determining the extent to which new drugs will be ~~sued if our~~covered and reimbursed. The Medicare program covers certain individuals aged 65 or older, disabled or suffering from end-stage kidney disease. 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 used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs. One payor’s determination to provide coverage for a drug product, ~~candidates cause~~however, does not assure that other payors will also provide coverage for the drug product. Further, a payor’s decision to provide coverage for a drug product does not imply that an adequate reimbursement rate will be approved.

In addition to government and private payors, professional organizations such as the American Medical Association, 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 requiredAMA, 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 ~~commercialization~~utilization of, and therefore reimbursement for, certain products deemed to provide limited benefit to existing alternatives. Such organizations may set guidelines that limit reimbursement or utilization of our product candidates. Even ~~successful defense would require significant financial~~if favorable coverage and ~~management resources. Regardless~~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.

Outside the United States, 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 therapeutics such as our product candidates. In many countries, particularly the countries of the ~~merits~~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 ~~eventual outcome, liability claims may result in:~~

~~We currently hold product liability insurance~~pricing approval 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 sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, which could inhibit the commercialization of products we develop, alone or with collaborators. Our insurance policies may have various exclusions, andsome countries, we may be ~~subject~~required to conduct 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~~clinical trial 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.

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.

~~We have, and we may seek to enter into additional, collaboration agreements with other pharmaceutical or biotechnology companies. In~~compares the ~~event we grant exclusive rights to such partners, we would be precluded from potential commercialization~~cost-effectiveness of our product ~~candidates within~~candidate to other available therapies. In general, the ~~territories~~prices of products under such systems are substantially lower than in which we have a partner. For example, we have 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 research collaboration~~Other countries allow companies to fix their own prices for products, but monitor and ~~exclusive license agreement with Lilly~~control company profits. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our cGAS-STING Pathway Inhibitor program for the research and development of novel immunotherapies for autoimmune and other inflammatory diseases and a worldwide development and commercialization agreement with Merck for the development of an anti-CD27 antibody. 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. ~~Any termination of our collaboration agreements, or a decision by a partner to reduce its development efforts under a collaboration agreement, will terminate or reduce~~Accordingly, in markets outside the ~~funding we may receive under~~United States, the relevant collaboration agreement and may impair our ability to fund further development efforts and our progress in our development programs. For example, effective December 2019, Novartis determined to remove ADU-S100 from its portfolio and we are funding the current ADU-S100 trials on our own.

~~Our commercialization strategy~~reimbursement for our product candidates may ~~depend on~~be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Moreover, increasing efforts by governmental and third-party payors, in the United States and internationally, to cap or 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 ~~ability~~product candidates. We expect to ~~enter into agreements~~experience pricing pressures in connection with ~~collaborators to obtain assistance and funding for~~ the ~~development and potential commercialization~~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 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 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 ourFDA-approved 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. If~~our competitors, which may draw time and resources from our programs. The third parties 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 iscontract with might not ~~in our best interest, and we may terminate the collaboration. Our potential future collaborators could delay or terminate their agreements with us, and as a result our product candidates may never~~ be ~~successfully commercialized.~~

~~Further,~~diligent, careful or timely in conducting our ~~collaborators may develop alternative products~~discovery, manufacturing, preclinical studies or ~~pursue alternative technologies either on their own~~clinical trials, resulting in testing, discovery, manufacturing, preclinical studies or clinical trials being delayed or unsuccessful, in whole or in ~~collaboration~~part.

If we 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. In addition, we could have disputes with our collaborators, including regarding development plans or 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, ~~or otherwise conduct the trials as required or comply with regulatory requirements, we may not be able to obtain regulatory approval of or commercialize our product candidates when expected or at all.~~

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 GCP, 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 ~~GCP~~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 requirements,~~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 ~~GCP requirements.~~GCPs. In addition, our clinical trials must be conducted with product produced ~~under cGMP regulations.~~in accordance with cGMPs. Our failure ~~or any failure by these third parties~~ to comply with these regulations may require usit to repeat clinical trials, which ~~would~~could delay or prevent the receipt of regulatory approval process. Moreover, our business may be implicated if any of these third parties violates federal or state fraud and abuse or false claims laws and regulations or healthcare privacy and security laws.

approvals. Any ~~third parties conducting our clinical trials are not our employees and, except for remedies available to us under our agreements with~~ such ~~third parties, 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~~event could 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 and we may not be able to complete development of, obtain regulatory approval of, or successfully commercialize, our product candidates. As a result, our financial results and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenue could be delayed.

If our relationships with any third parties conducting our trials are terminated, we may be unable to enter into arrangements with alternative third parties on commercially reasonable terms, or at all. Switching 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 delays in the future or that these delays or challenges will not have a material andan adverse effect on our business, financial condition, ~~and~~ results of ~~operations.~~operations and prospects.

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

The biotechnology and pharmaceutical industries are characterized by rapidly changing technologies, competition and a strong emphasis on ~~third party contract manufacturers~~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 no approved drugs for IgAN, but there are a variety of treatments utilized that include renin angiotensin inhibitors, 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 AstraZeneca PLC, Calliditas Therapeutics AB, Novartis AG, Omeros Corporation, Reata Pharmaceuticals, Inc., Travere Therapeutics, 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 ~~provide~~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 ~~supplies~~trials of our product ~~candidates. If~~candidates, obtaining marketing approval for these ~~parties do not successfully carry out their contractual duties or encounter problems in manufacturing our~~ product candidates, itmanufacturing, marketing and selling those products that are approved and 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 achieve profitability. If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of the company and could ~~increase~~impair our ~~costs, limit~~ability to raise capital, maintain our research and development efforts, expand our business or continue operations. A decline in the value of the Company also could cause you to lose all or part of your investment.

The manufacture of drugs is complex, and our third-party manufacturers may encounter difficulties in production. If any of our third-party manufacturers encounter such difficulties, our ability to provide supply of atrasentan or our other product candidates for clinical trials, our ability to obtain marketing approval, or our ability to provide supply of our product candidates ~~and interfere with obtaining product commercialization approvals.~~for patients, if approved, could be delayed or stopped.

We ~~currently rely on outside vendors~~intend to ~~manufacture clinical supplies of our product candidates and have limited experience~~establish manufacturing our product candidates. In order to develop our product candidates, apply for regulatory approvals and commercialize our products, if approved, we will need to develop, contract for, or otherwise arrange for the necessary manufacturing capabilities.

~~We may manufacture limited quantities of clinical trial materials ourselves in the future, but we currently rely on~~relationships with a limited number of ~~contract manufacturing organizations,~~suppliers to manufacture raw materials, the drug substance and finished product of any product candidate for which we are responsible for preclinical or ~~CMOs, for~~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 ~~product supplies. There~~trials of atrasentan; however, we do not yet have a long-term manufacturing agreement for atrasentan with AbbVie or any other CMO. We will need to establish manufacturing relationships for the production of sufficient atrasentan in order to complete our existing and planned clinical trials and for any potential commercialization. Each supplier may require licenses to manufacture such components if such processes are ~~risks inherent in~~not owned by the manufacture of drug and biologic products that could affect the ability of our CMOs to meet our delivery time requirements or provide adequate amounts of material to meet our needs. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up and validating initial production. Typical manufacturing problems include longer lead times, low product yields, quality control failures, product instability, operator error, shortages of raw materials, shortages of qualified facilities or personnel, storage mistakes and unpredictable production costs. If contaminants are discovered in our supply of our product candidatessupplier 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 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 drugs is complex, highly-regulated and subject to multiple risks. Manufacturing drugs 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 ~~manufacturing~~of our manufacturers, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, ~~thereby interrupting supply.~~

Ifwhich could delay clinical trials and adversely harm our business. Moreover, if the FDA determines that our CMOs are not in compliance with FDA laws and regulations, including those governing cGMPs, the ~~future~~FDA may deny regulatory approval until the deficiencies are corrected or we ~~develop~~replace the manufacturer in our ~~own manufacturing capabilities by building our own manufacturing facilities, we will incur significant expenditures.~~regulatory approvals with a manufacturer that is in compliance. In addition, approved products and the ~~construction~~facilities at which they are manufactured are required to maintain ongoing compliance with extensive FDA requirements and ~~qualification~~the requirements of ~~a drug substance facility may take several years~~other similar agencies, including ensuring that quality control and manufacturing procedures conform to ~~complete~~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, it is responsible for ensuring compliance with applicable laws and regulations, including cGMPs.

In addition, there are ~~many~~ risks ~~inherent in the construction~~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 issues, compliance with good manufacturing practices, lot consistency and timely availability of ~~a new facility that could result in delays and additional costs, including the need to~~raw materials. Even if our collaborators obtain ~~access to necessary equipment and third-party technology, if any. In addition, we would likely need to continue to hire and train qualified employees to staff our facilities.~~

The manufacturing process for any products that we may develop is subject to the FDA and foreign regulatory authority approval process and we will need to meet, and will need to contract with CMOs who can meet, all applicable FDA and foreign regulatory authority requirements on an ongoing basis. In addition, if we receive the necessary regulatory approval for any of our product ~~candidate,~~candidates, there is no assurance that manufacturers will 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 requirements for the potential launch of the product or to meet potential future demand. If our manufacturers are unable to 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 ~~also expect~~will rely upon on 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 ~~rely~~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 ~~produce materials required~~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 ~~commercial supply.~~the sales, marketing and distribution of atrasentan, BION-1301, 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. This will reduce the revenue generated from the sales of these 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 factors beyond our control. If we are unable to establish effective alliances to enable the sale of our product candidates to healthcare professionals and in geographical regions, including the United States, that will not be covered by our marketing and sales force, or if our potential future strategic alliance partners do not successfully commercialize the 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 third parties, we may not 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 support of a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

We may not be successful in finding strategic collaborators for continuing development of certain of our 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. We face significant competition in seeking appropriate 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 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 in our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and 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 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 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 increase our expenditures to fund development or commercialization activities on our product candidates, we may need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be able to further develop our product candidates 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 such collaboration arrangements. These disagreements can be difficult to resolve if neither of the parties has final decision-making authority. Collaborations with pharmaceutical or biotechnology companies and other third parties often are terminated or allowed to expire by the other party. Any such termination or expiration would adversely affect us financially and could harm our business reputation.

A Fast Track Designation by the FDA, even if granted for any of our product candidates, may not lead to a faster development or regulatory review or approval process, and does not increase the likelihood that our product candidates will receive marketing approval.

While we do not intend to seek Fast Track Designation for atrasentan, we may seek such designation for our other product candidates. If a drug is intended for the treatment of a serious or life-threatening condition and the drug demonstrates the potential to address unmet medical needs for this condition, the drug sponsor may apply to the FDA for Fast Track Designation. The FDA has broad discretion whether to grant this designation. Even if we believe a particular product candidate is eligible for this designation, we cannot assure you that the FDA would decide to grant it. The FDA may also withdraw Fast Track Designation if it believes that the designation is no longer supported by data from our clinical development program. Even if we receive Fast Track Designation for any of our product candidates, such product candidates may not experience faster development, review or approval processes compared to conventional FDA procedures. Many drugs that have received Fast Track Designation have failed to obtain approval.

We may attempt to secure FDA approval of atrasentan and our other product candidates through the accelerated approval pathway. If we are unable to obtain accelerated approval, we may be required to conduct additional clinical trials beyond those that we currently contemplate, which could increase the expense of obtaining, and delay the receipt of, necessary marketing approvals.

We are developing certain product candidates for the treatment of serious conditions, and therefore may decide to seek approval of such product candidates under the FDA’s accelerated approval pathway. A product may be eligible for accelerated approval if it is designed to treat a serious or ~~maintain CMOs~~life-threatening disease or condition and provides a meaningful therapeutic benefit over existing treatments based upon a determination that the product candidate has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability of or lack of alternative treatments. For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of clinical benefit.

The accelerated approval pathway may be used in cases in which the advantage of a new drug over available therapy may not be a direct therapeutic advantage, but is a clinically important improvement from a patient and public health perspective. If granted, accelerated approval is usually contingent on the sponsor’s agreement to conduct, in a diligent manner, additional post-approval confirmatory studies to verify and describe the drug’s anticipated effect on irreversible morbidity or mortality or other clinical benefit. In some cases, the FDA may require that the trial be designed, initiated, and/or fully enrolled prior to approval. If the sponsor fails to conduct such studies in a timely manner, or if such post-approval studies fail to verify the drug’s predicted clinical benefit, or if other evidence demonstrates that the product candidate is not shown to be safe and effective under the conditions of use, the FDA may withdraw its approval of the drug on an expedited basis.

We intend to use reduction in proteinuria as a surrogate endpoint in our phase 3 ALIGN trial of atrasentan. However, atrasentan may not show a sufficient treatment benefit on the expected surrogate endpoint to satisfy the FDA that the anticipated benefit on loss of renal function will be confirmed in the planned post-marketing phase of the trial. If we decide to submit an NDA seeking accelerated approval or receive an expedited regulatory designation for ~~these~~atrasentan or any of our other product candidates, there can be no assurance that such submission or application will be accepted or that any expedited development, review or approval will be granted on a timely basis, or at all. If any of our competitors were to receive full approval for an indication for which we are seeking accelerated approval before we receive accelerated approval, the indication we are seeking may no longer qualify as a condition for which there is an unmet medical need and accelerated approval of our product candidate would be more difficult or may not occur.

Failure to obtain accelerated approval or any other form of expedited development, review or approval for our product candidates would result in a longer time period to commercialization of such product candidate, if any, and could increase the cost of development of such product candidate and harm our competitive position in the marketplace.

We may be unsuccessful in obtaining Orphan Drug Designation for our product candidates or transfer of designations obtained by others for future product candidates, and, even if we obtain such designation, we may be unable to ~~do so~~maintain the benefits associated with Orphan Drug Designation, including the potential for market exclusivity, for atrasentan or our other product candidates.

Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs intended to treat relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a drug as an orphan drug if it is intended to treat a rare disease or condition, which is defined as a patient population of fewer than 200,000 individuals in the United States, or a patient population greater than 200,000 in the United States when there is no reasonable expectation that the cost of developing and making available the drug in the United States will be recovered from sales in the United States for that drug. Orphan

drug designation must be requested before submitting for regulatory approval. In the United States, Orphan Drug Designation entitles a party to financial incentives such as opportunities for tax credits for qualified clinical research costs and exemption from prescription drug user fees. Similarly, in the EU, the European Commission grants Orphan Drug Designation after receiving the opinion of the EMA’s Committee for Orphan Medicinal Products on ~~commercially reasonable terms,~~an Orphan Drug Designation application. In the EU, Orphan Drug Designation is intended to promote the development of drugs that are intended for the diagnosis, prevention or treatment of life-threatening or chronically debilitating conditions affecting not more than five in 10,000 persons in the EU and for which no satisfactory method of diagnosis, prevention or treatment has been authorized (or the product would be a significant benefit to those affected). In the EU, Orphan Drug Designation entitles a party to financial incentives such as reduction of fees or fee waivers.

Generally, if a drug with an Orphan Drug Designation subsequently receives the first marketing approval for the indication for which it has such designation, the drug is entitled to a period of marketing exclusivity, which precludes the FDA or EMA from approving another marketing application for the same drug and indication for that time period, except in limited circumstances. If a competitor is able to obtain orphan drug exclusivity prior to us for a product that constitutes the same active moiety and treats the same indications as our product candidates, we may not be able to ~~successfully develop and commercialize~~obtain approval of our ~~products.~~

Todrug by the ~~extent~~applicable regulatory authority for a significant period of time unless we are able to show that ~~we have existing, or enter into future, manufacturing arrangements with third parties, we depend, and will depend~~our drug is clinically superior to the approved drug. The applicable period is seven years in the United States and 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.

As part of our business strategy, we may seek Orphan Drug Designation for atrasentan in the United States, Europe and other countries. However, we may not obtain Orphan Drug Designation and even if we do, Orphan Drug Designation does not guarantee future ~~on these third parties~~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 ~~perform their obligations~~be safer in a ~~timely manner and consistent~~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 ~~contractual and~~the rare disease or condition. Orphan Drug Designation neither shortens the development time or regulatory ~~requirements. The failure~~review time of a drug nor gives the drug any ~~CMO to perform its obligations as expected,~~advantage in the regulatory review or ~~to the extent we manufacture all or a portion of~~approval process.

We may be unsuccessful in obtaining Rare Pediatric Designation for our product candidates ~~ourselves, our failure to execute on our manufacturing requirements, could materially and adversely affect our business, financial condition and results of operations.~~

~~If any CMO with whom we contract fails to perform its obligations,~~ ~~our ability to provide our~~or for future product candidates, and, even if we obtain such designation, we may be unable to ~~patients~~maintain the benefits associated with such designation, including the potential for use or sale of a future priority review voucher.

Section 529 of the FD&C Act 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 for rare diseases, pediatric populations, and unmet medical needs, section 529 provides an additional incentive for rare pediatric diseases, which may be used alone or in ~~clinical trials would be jeopardized. Any delay~~combination with other incentive programs. Rare pediatric disease is defined as a disease that:

is a serious or ~~interruption~~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 ~~supply~~FD&C Act, which includes diseases and conditions that affect fewer than 200,000 persons in the U.S. and diseases and conditions that affect a larger number of ~~clinical trial materials could delay the completion of clinical trials, increase~~persons and for which there is no reasonable expectation that the costs ~~associated with maintaining clinical trial programs~~of developing and ~~depending upon~~making available the ~~period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.~~

~~We may not realize~~drug in the ~~benefits of acquisitions or strategic transactions, including our proposed merger with Chinook and our acquisition of Aduro Biotech Europe.~~

~~We signed the merger agreement with Chinook on June 1, 2020 and, subject to satisfaction~~U.S. can be recovered from sales of the ~~closing conditions~~drug in the ~~merger agreement, including obtaining approval~~U.S.

Under section 529, the sponsor of ~~our stockholders~~a drug application for a rare pediatric disease drug product may be eligible for a voucher that can be used or sold to obtain a priority review for a subsequent drug application submitted under section 505(b)(1) of the ~~issuance~~FD&C Act or section 351 of ~~common stock in~~ the ~~merger and resulting change~~Public Health Service Act after the date of ~~control and the Chinook’s stockholders adoption and~~ approval of the ~~merger, expect to close the merger~~rare pediatric disease drug product. The rare pediatric disease priority review vouchers program was most recently re-authorized by Congress in the ~~second half~~Consolidated Appropriations Act of ~~2020. We acquired Aduro Biotech Europe in October 2015. We may also acquire or license other businesses, products or technologies,~~2021, 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 have obtained designation of CHK-336 as ~~well as pursue strategic alliances, joint ventures or investments in complementary businesses from time to time. The success of mergers and acquisitions depends on~~ a ~~number of risks and uncertainties, including:~~

~~If any of these risks or uncertainties occur,~~rare pediatric disease, we may not ~~realize~~meet the ~~anticipated benefit~~eligibility requirements for a priority voucher at the time we seek approval of ~~any acquisition~~CHK-336 or strategic transaction. For example, subsequent to our acquisition of Aduro Biotech Europe we have incurred intangible asset impairment charges of $9.0 million and related reductions in deferred tax benefit of $2.2 million related to the Aduro Biotech Europe business. Further, in January 2020, we announced plans to shut down our Netherlands operations, which resulted in impairment and other charges. While BION-1301 was originally developed by Aduro Biotech Europe, it is currently uncertain whether the Aduro Biotech Europe acquisition will result in any product candidates that are ultimately approved for sale. Additionally, foreign acquisitions 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. See also the risk factor titled, “Impairment of goodwill and other intangible assets may result in significant impairment charges, which would adversely affect our financial condition and results of operations.”

~~The FDA regulatory approval process is lengthy, time-consuming and inherently unpredictable, and~~ we may ~~experience significant delays~~not meet the current deadline for receiving a priority review voucher, in which case we would not be able to use priority review for a subsequent product of ours or be able to sell such voucher to a third party.

Enacted and future legislation may increase the ~~clinical development~~difficulty and ~~regulatory~~cost for us to commercialize and obtain marketing approval of our product candidates ~~or ultimately be unable to obtain regulatory approval for our product candidates, in which case our business will be substantially harmed.~~

We will not be permitted to market any of our product candidates in the United States until approval from the FDA is received. The time required to obtain approval 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. Regulatory authorities have substantial discretion in~~affect the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other data. We have not previously submitted a biologics license application, or BLA, or a new drug application, 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 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 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 oncology product candidates regardless of cancer type or origin, which the FDA may have difficulty accepting if our clinical trials only involve 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 to obtain regulatory approval to market our product candidates, which would significantly harm our business, results of operations and prospects.

In addition, even if we were to obtain approval, regulatory authorities may approve any of our product candidates for fewer or more limited indications than we request, may not approve the price we intend to charge for our products, may grant approval contingent on the performance of costly post-marketing clinical trials or may approve a product candidate with a label that does not include the labeling claims necessary or desirable for the successful commercialization of that product candidate. Any of the foregoing scenarios could materially harm the commercial prospects for our product candidates.

Obtaining and maintaining regulatory 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 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.

For instance, in the European Economic Area, or EEA, which is comprised of the Member States of the EU plus Norway, Iceland and Liechtenstein, medicinal products can only be commercialized after obtaining a Marketing Authorization, or MA. There are two types of MAs:

Requirements for the conduct of clinical trials in the European Union including GCP are set forth in the Clinical Trials Directive 2001/20/EC and the GCP Directive 2005/28/EC. Pursuant to Directive 2001/20/EC and Directive 2005/28/EC, as amended, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the EU member states. Under this system, approval must be obtained from the competent national authority of each EU. member state in which a study is planned to be conducted. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion on the clinical trial application in that country.

In April 2014, the EU passed the new Clinical Trials Regulation, (EU) No 536/2014, which will replace the current Clinical Trials Directive 2001/20/EC. To ensure that the rules for clinical trials are identical throughout the European Union, the new EU clinical trials legislation was passed as a regulation that is directly applicable in all EU member states. All clinical trials performed in the European Union are required to be conducted in accordance with the Clinical Trials Directive 2001/20/EC until the new Clinical Trials Regulation (EU) No 536/2014 becomes applicable. According to the current plans of EMA, the new Clinical Trials Regulation will become applicable in 2021.

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

~~Any~~Existing regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the products 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 candidates. We will be required to immediately report any serious and unexpected adverse events and certain quality or production problems with our products to regulatory authorities along with other periodic reports. The FDA may also require a risk evaluation and mitigation strategy, or 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 and registration, as well as continued compliance with cGMP and GCP for any clinical trials that we conduct post-approval. We will also have to comply with requirements concerning advertising and promotion for any of our product candidates that receive regulatory 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:

Any new legislation addressing drug or biologic products could result in delays in product development or commercialization, or increased costs to assure compliance. In addition, 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.

~~Disruptions~~For example, 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. As implementation of the ACA is ongoing, 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 legislative and judicial efforts to modify, repeal or otherwise invalidate all or certain aspects of the ACA, including measures taken during the Trump administration. By way of example, the Tax Cuts and Jobs Act, or the TCJA, was enacted, effective January 1, 2019, and included, among other things, 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 U.S. Supreme Court held that plaintiffs did not have standing to challenge constitutionality of the individual mandate. It is unclear whether there may be other 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. These changes included aggregate reductions to Medicare payments to providers of 2 percent per fiscal year, which went into effect April 1, 2013 and will stay in effect through 2030 unless additional Congressional action is taken. The Coronavirus Aid, Relieve, and Economic Security Act, or the CARES Act, which was signed into law in March 2020, suspended the 2 percent Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030. The Consolidated Appropriations Act, 2021 extended the suspension of the 2 percent Medicare sequester through March 31, 2021. 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 healthcare funding, which could have a material adverse effect on customers for our drugs, if approved, and accordingly, our financial operations.

Recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to 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 drug products. At the federal level, the Trump administration’s budget proposal for fiscal year 2021 included a $135 billion allowance to support legislative proposals seeking to reduce drug process, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower cost generic and biosimilar drugs. In particular, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that seek to implement several of the administration’s proposals. FDA also released a final rule in September 2020 providing guidance for states to build and submit importation plans for drugs from Canada. Further, in November 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers. The CMS also issued an interim final rule implementing President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021. On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule. In December 2020, CMS issued a final rule implementing significant manufacturer price reporting changes under the Medicaid Drug Rebate Program, including regulations that affect manufacturer-sponsored patient assistance programs subject to pharmacy benefit manager accumulator programs and Best Price reporting related to certain value-based purchasing arrangements. It is unclear to what extent these new regulations will be implemented and to what extent these regulations or any future legislation or regulations by the Biden administration will have on our business, including our ability to generate revenue and achieve profitability. 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.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn and 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.

We expect that the ACA, 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 candidates.

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 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 marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other ~~government agencies caused~~requirements.

The FDA’s ability to review and approve new products may be hindered by a variety of factors, including budget and funding ~~shortages or global health concerns could hinder their~~levels, ability to hire and retain ~~or deploy~~ key ~~leadership~~personnel, statutory, regulatory and ~~other personnel, or otherwise prevent new or modified products from being developed, or approved or commercialized in a timely manner or at all, which could negatively impact our business.~~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. ~~Average review times at the agency have fluctuated in recent years as a result.~~ 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 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 certain regulatory agencies, such as the FDA, have had to furlough critical ~~FDA~~ employees and stop critical activities.

The ability of the FDA and other government agencies to properly administer their functions is highly dependent on the levels of government funding and 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 other agencies to fulfill their functions and could greatly impact healthcare and the pharmaceutical industry.

Separately, in response to the COVID-19 ~~global~~ pandemic, on March 10, 2020, the FDA announced its intention to postpone most foreign inspections of manufacturing facilities and, ~~products,and~~ subsequently, on March 18, 2020, the FDA temporarily postponed routine surveillance inspections of domestic manufacturing facilities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 pandemic. Subsequently, on July 10, 2020 the FDA announced its intention to resume certain on-site inspections of domestic manufacturing facilities subject to a risk-based prioritization system. The FDA intends to use this risk-based assessment system to identify the categories of regulatory activity that can occur within a given geographic area, ranging from mission critical inspections to resumption of all regulatory activities. Regulatory authorities outside the United States may adopt similar restrictions or other policy measures in response to the COVID-19 ~~global~~ pandemic. If a prolonged government shutdown occurs, or if global health concerns continue to prevent the FDA or other regulatory authorities from conducting their regular inspections, reviews, or other regulatory activities, it could significantly impact the ability of the FDA or other regulatory authorities to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

~~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 insurance coverage and reimbursement from third-party payors. In addition, because our product candidates represent new treatments, 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. Additionally, obtaining coverage and adequate reimbursement for our products may be particularly difficult because of the higher prices often associated with drugs administered under the supervision of a physician. Separate reimbursement for the product itself or the treatment or procedure in which our product is used may not be available. A decision by a third-party payor not to cover or separately reimburse for our products or procedures using our products, could reduce physician utilization of our products once approved. Assuming there is coverage for our product candidates, or procedures using our product candidates by a third-party payor, the resulting reimbursement payment rates may not be adequate or may require co-payments that patients find unacceptably high.

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.

Our ~~product candidates may be subject to government price controls that may affect our revenue.~~

~~There has been heightened governmental scrutiny in the United States~~operations and abroad of pharmaceutical pricing practices in light of the rising cost of prescription drugs and biologics. In the United States, at the federal level such scrutiny has resulted in several recent congressional inquiries and proposed legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products. Congress and the Trump administration have each indicated that they will continue to seek new legislative and/or administrative measures to control drug costs. 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. Outside of the United States, particularly in the EU, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain coverage and reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidate to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed.

~~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, 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 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.

Some of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and Congressional challenges to certain aspects 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. The Tax Act includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all or part of a year (this requirement was commonly referred to as the “individual mandate”). On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Affordable Care Act are invalid as well. On December 18, 2019, the U.S. Court of Appeals for the 5th Circuit upheld the District Court's decision that the individual mandate was unconstitutional but remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well. On March 2, 2020, the U.S. Supreme Court granted the petitions for writs of certiorari to review the case, although it is unclear when a decision will be made or how the Supreme Court will rule. In addition, there may be other efforts to challenge, repeal or replace the Affordable Care Act. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

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, included aggregate reductions of Medicare payments to providers of 2% per fiscal year. These reductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute will remain in effect through 2030, with the exception of a temporary suspension from May 1, 2020 through December 31, 2020, unless additional Congressional action is taken. In January 2013, the American Taxpayer Relief Act of 2012, or the ATRA, was signed into law, 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. 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.

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. For example, there have been several recent Congressional inquiries and proposed and enacted legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer’s patient programs, and reform government program reimbursement methodologies for pharmaceutical products. ~~At the federal level, Congress and the Trump administration have each indicated that it will continue to pursue new legislative and/or administrative measures to control drug costs.~~ Individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical 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 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:

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 approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent regulatory approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

~~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 ~~current and~~ future arrangements with providers, third-party payors ~~healthcare providers, patients~~ 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 ~~research, develop,~~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 may affect our ability to operate include:~~include the following:

~~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, including our consulting arrangements~~practices may not comply with ~~physicians, some of whom receive stock options as compensation for services provided, could be subject to challenge under one~~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 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 a material and adverse effect on our business, financial condition and results of operations.

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,~~ imprisonment, ~~additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar 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 subject us~~is found to ~~foreign equivalents of the healthcare laws mentioned above, among other foreign laws.~~

~~If we or our third-party manufacturers use hazardous and biological materials~~be not 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 us and our third-party manufacturers. We and our manufacturers are subject to federal, state and local laws and regulations in the United States governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our and 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. Compliancecompliance with applicable ~~environmental~~ laws, and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could materially and adversely affect our business, financial condition and results of operations.

We are subject to governmental regulation and other legal obligations related to privacy, data protection and information security. Compliance with these requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.

Privacy and data security have become significant issues in the United States, Europe and in many other jurisdictions where we may in the future conduct our operations. As we receive, collect, process, use and store personal and confidential data, we are subject to diverse laws and regulations relating to data privacy and security. Compliance with these privacy and data security requirements is rigorous and time-intensive and may increase our cost of doing business, and despite those efforts, there is a risk that wethey may be subject to ~~fines and penalties, litigation and reputational harm, which could materially and adversely affect our business, financial condition and results of operations.~~

Most healthcare providers, including research institutions from which we obtain patient health information, are subject to privacy and security regulations promulgated under HIPAA, as amended by HITECH. We do not believe that we are currently classified as a covered entitycriminal, civil or business associate under HIPAA and thus are not subject to its requirements or penalties. However, any person may be prosecuted under HIPAA’s criminal provisions either directly or under aiding-and-abetting or conspiracy principles. Consequently, depending on the facts and circumstances, we could face substantial criminal penalties if we knowingly receive individually identifiable health information from a HIPAA-covered healthcare provider or research institution that has not satisfied HIPAA’s requirements for disclosure of individually identifiable health information. In addition, we may maintain sensitive personally identifiable information, including health information, that we receive throughout the clinical trial process and in the course of our research collaborations. As such, we may be subject to state laws requiring notification of affected individuals and state regulators in the event of a breach of personal information, which is a broader class of information than the health information protected by HIPAA. Our clinical trial programs outside the United States may implicate international data protection laws, including the GDPR and/or the UK Data Protection Act 2018.

Our activities outside the United States impose additional compliance requirements and generate additional risks of enforcement for noncompliance. Failure by our CROs and other third-party contractors to comply with the strict rules on the transfer of personal data outside of the European Economic Area and/or the United Kingdom into the United States may result in the imposition of criminal and administrative sanctions, on such collaborators, which could adversely affect our business. Furthermore, certain health privacy laws, data breach notification laws, consumer protection laws may apply directly to our operations and/or those of our collaborators and may impose restrictions on our collection, use and dissemination of individuals’ health information. Moreover, patients about whom we or our collaborators obtain health information, as well as the providers who share this information with us, may have statutory or contractual rights that limit our ability to use and disclose the information. We may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

If we or third-party CMOs, CROs or other contractors or consultants fail to comply with applicable federal, state or local regulatory requirements, we could be subject to a range of regulatory actions that could affect our or our contractors’ ability to develop and commercialize our product candidates and could harm or prevent sales of any affected products that we are able to commercialize, or could substantially increase the costs and expenses of developing, commercializing and marketing our products. Any threatened or actual government enforcement action could also generate adverse publicity and require that we devote substantial resources that could otherwise be used in other aspects of our business. Increasing use of social media could give rise to liability, breaches of data security or reputational damage.including exclusions from government-funded healthcare programs.

Even when HIPAA does not apply, according to the Federal Trade Commission or the FTC, failing to take appropriate steps to keep consumers’ personal information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the Federal Trade Commission Act, or the FTCA, 15 U.S.C § 45(a). The FTC expects a company’s data security measures to be reasonable and appropriate in light of the sensitivity and volume of consumer information it holds, the size and complexity of its business, and the cost of available tools to improve security and reduce vulnerabilities. Individually identifiable health information is considered sensitive data that merits stronger safeguards.

~~Additionally,certainstateshaveadoptedcomparableprivacyandsecurity lawsandregulations,some~~of~~whichmay~~be~~morestringentthan~~HIPAA. By way of example, the California Consumer Privacy Act, or CCPA, effective January 1, 2020, creates individual privacy rights for California consumers and increases the privacy and security obligations of entities handling certain personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability, and similar laws have been proposed at the federal level and in other states.

In addition, the regulatory framework for the receipt, collection, processing, use, safeguarding, sharing and transfer of personal and confidential data is rapidly evolving and is likely to remain uncertain for the foreseeable future as new global privacy rules are being enacted and existing ones are being updated and strengthened. For example, on May 25, 2018, the General Data Protection Regulation, or GDPR, took effect. The GDPR is applicable in each EU and EEA member state and applies to companies established in the EU and EEA as well as companies that collect and use personal data to offer goods or services to, or monitor the behavior of, individuals in the EU and EEA, including, for example, through the conduct of clinical trials. The GDPR imposes stringent data protection obligations for processors and controllers of personal data. Among other things, the GDPR requires the establishment of a lawful basis for the processing of data, includes requirements relating to the consent of the individuals to whom the personal data relates, including detailed notices for clinical trial subjects and investigators, as well as requirements regarding the security of personal data and notification of data processing obligations or security incidents to appropriate data protection authorities or data subjects. Further, recent legal developments in Europe have created complexity and uncertainty regarding transfers of personal data from the EEA to the U.S. For example, on July 16, 2020, the Court of Justice of the European Union, or the CJEU, invalidated the EU-US Privacy Shield Framework, or the Privacy Shield, under which personal data could be transferred from the EEA to U.S. entities which had self-certified under the Privacy Shield scheme. While the CJEU upheld the adequacy of the standard contractual clauses (a standard form of contract approved by the European Commission as an adequate personal data transfer mechanism, and potential alternative to the Privacy Shield), it made clear that reliance on them alone may not necessarily be sufficient in all circumstances. Use of the standard contractual clauses 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 and additional measures and/or contractual provisions may need to be put in place, however, the nature of these additional measures is currently uncertain. Penalties and fines for failure to comply with the GDPR are significant, including fines of up to €20.0 million or 4% of total worldwide annual turnover, whichever is higher. Additionally, following the United Kingdom’s withdrawal from the European Union, we will have to comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, each regime having the ability to fine up to the greater of €20.0 million/ £17.5 million or 4% of global turnover. The relationship between the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, for example around how data can lawfully be transferred between each jurisdiction, which exposes us to further compliance risk.

~~If we are unable~~Our success depends in part on our ability to obtain, maintain and protect our intellectual property. It is difficult and costly to protect our ~~intellectual property~~proprietary rights ~~or if our intellectual property rights are inadequate for our~~and technology, and ~~product candidates, our competitive position could~~we may not be ~~harmed.~~able to ensure their protection.

Our commercial success will depend in large part on ~~our ability to obtain~~obtaining and ~~maintain~~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 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 licenses 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 owns 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 fail to comply with these obligations, our licensor 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. 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 ~~inventions claimed~~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:

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. We have applied for patent applications intended to specifically cover additional methods of treatment 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 and in-licensed patents and patent applications contain claims directed to compositions of matter on the active pharmaceutical ingredients, or APIs, in our ~~owned~~other product candidates, as well as methods-of-use directed to the use of an API 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 ~~licensed patents~~other third party from developing or ~~pending patent applications,~~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 able to prevent competitors or ~~that we or our licensors were the first to file for patent protection of such inventions.~~

~~Our pending applications cannot be enforced against~~ 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-licenses 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 ~~in some cases~~not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

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 key technologies through in-licenses may not be ~~possible. In some cases, it~~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 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 research partners provide that improvements developed in the course of our relationship may be ~~difficult~~owned solely by either us or ~~impossible~~our third-party research partner, or jointly between us and the third party. If we determine that exclusive rights to ~~detect third-party infringement~~such improvements owned solely by a research partner or ~~misappropriation~~other third party with whom we collaborate are necessary to commercialize our drug 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 drug 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 drug 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 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 in our trade secrets or proprietary technology and processes. We have also adopted policies and conducts 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 ~~issued patent~~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 secret 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 in 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, or USPTO, at the request of a third party.~~

~~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.~~development efforts.

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 ~~USPTO. Third~~large number of patents issued and 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 ~~could be required to obtain~~may face a ~~license from such third party to continue commercializing~~number of issues, including, but not limited to:

Some of our ~~product candidates. However, we~~competitors may ~~not~~ be able to ~~obtain any required license on commercially reasonable terms or at all. Under certain circumstances,~~sustain the costs of complex patent litigation more effectively than we ~~could be forced, including by court order, to cease commercializing our product candidates.~~can because they have substantially greater resources. In addition, in any ~~such proceeding or~~uncertainties resulting from the initiation and continuation of any litigation we could also be found liable for monetary damages. A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business operations, which could materially and adversely affect our business, financial condition and results of operations. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a ~~similar negative impact~~material adverse effect on our ability to raise the funds necessary to continue our operations or could otherwise have a material adverse effect on our business, financial condition, ~~and~~ results of ~~operations.~~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, particularly if such patent is owned or controlled by one of our primary competitors. If we are unable to obtain a necessary license to a 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 claims, regardless of their merit, would involve substantial litigation expense and would be 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 pay substantial damages, including treble damages and attorneys’ fees for willful infringement, obtain one or more licenses from third parties, pay royalties or redesign our infringing products, which may be 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 obtain licenses from third parties to advance our research or allow commercialization of our product candidates and we may fail to 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 commercialize our product candidates, which could significantly harm our business.

We may be involved in lawsuits to protect or enforce our patents or the patents 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 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.~~

~~Our commercial success depends on our ability,~~business financial condition, results of operations 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 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.prospects.

We have granted Lilly and Merck rights to control certain matters related to our intellectual rights for our licensed products. Our inability to control the filing, prosecution, maintenance and enforcement of such patents could materially and adversely affect our business, financial condition and results of operations.

As part of our license and collaboration agreements with Merck and Lilly related to anti-CD27 and cGAS STING pathway molecules, respectively, we have granted Merck and Lilly the first rights to prosecute certain patent rights and we are required to consult with Merck and Lilly with respect to infringement and defense matters related to certain licensed patents. Further, Merck has rights to determine the strategy for patent term extensions for anti-CD27 and we are required to cooperate with Lilly with respect to obtaining patent term extensions for certain patents related to the cGAS STING pathway program. Our inability to control theselimited foreign intellectual property rights could materially harm our business. For example, if a third party is infringing our patent covering anti-CD27, by marketing a product that is identical or similar to anti-CD27, Merck would have the initial right to enforce the patent against the third party and may make decisions with which we may not agree. Further, Merck 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.

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 has 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 licensors’~~ patents or marketing of competing products against third parties in violation of our proprietary rights ~~generally in those countries. Proceedings~~generally. The initiation of proceedings by third parties to ~~enforce~~challenge the scope or validity of our patent rights in foreign jurisdictions could result in substantial cost 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 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 generic or biosimilar 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 materially and adversely affect our business, financial condition and results of operations. 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 STING Activators, which, expire, or if issued will expire, between 2025 and 2038, subject to claims of 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. We expect~~claims of this nature, in addition to ~~seek extensions~~paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against these types of ~~patent terms in~~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 ~~United States~~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 ~~in other countries where~~for development activities, and 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 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 continuation of intellectual property litigation or other intellectual property related proceedings could adversely affect our 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 growth of our ~~investment~~business may depend in ~~development~~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 ~~clinical trials by referencing our clinical and preclinical data and launch their~~efficiently, we may develop product ~~earlier than might otherwise~~candidates containing pre-existing pharmaceutical compounds, or we may be ~~the case.~~

The BPCIA established legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing branded product. Under the BPCIA, an application for a biosimilar product cannot be approvedrequired by the FDA ~~until 12 years after the original branded~~or comparable foreign regulatory authorities to provide a companion diagnostic test or tests with our product ~~was approved under a BLA. The law is complex and is still being interpreted and implemented~~candidates, any of which could require us to obtain rights to use intellectual property held by ~~the FDA. As a result, its ultimate impact, implementation and meaning are subject~~third parties. In addition, with respect to ~~uncertainty. While it is uncertain when~~any patents we may co-own with third parties, we may require licenses to such ~~processes intended~~co-owners interest to ~~implement BPCIA~~such patents. We may be ~~fully adopted~~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 compositions or methods covered by those third-party intellectual property rights, and 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 of our competitors may also receive access to the ~~FDA,~~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 institution’s rights in technology resulting from the collaboration. Even if we hold such ~~processes could~~an option, we may be unable to negotiate a license from the 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 order to commercialize our product candidates. More established companies may have a ~~material adverse effect on~~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 ~~future commercial prospects for our biological products.~~

~~We anticipate being awarded market exclusivity for each of our biological~~rights to the intellectual property surrounding the additional product candidates that ~~is subject~~we may seek to ~~its own BLA for 12 years in~~develop or market. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain 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.existing intellectual property rights we have,

~~Additionally, there is a risk that this exclusivity~~we may have to abandon development of certain programs and our business financial condition, results of operations and prospects could suffer.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be ~~shortened due to congressional action~~reduced or ~~otherwise, or that the FDA will not consider our product candidates to be reference products~~eliminated 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 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~~non-compliance with other pharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involves technological and legal complexity, and obtaining and enforcing pharmaceutical patents is costly, time-consuming and inherently uncertain. Changes in either the patent laws 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.

For instance, under the Leahy-Smith America Invents Act, or the Leahy-Smith Act, U.S. patent applications containing or at that at any time contained a claim not entitled to priority before March 16, 2013 are subject to a “first to file” system, in which the first inventor to file a patent application will be entitled to the patent. This “first to file” system requires us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing, we cannot be certain that we were the first to file any patent application related to our product candidates. Furthermore, for United States applications in which all claims are entitled to a priority date before March 16, 2013, an interference proceeding can be provoked by a third-party or instituted by the USPTO, to determine who was the first to invent any of the subject matter covered by the patent claims of our applications.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. IfWere a noncompliance event to occur, our competitors might be able to enter the market, which would 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 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.

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 in our 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 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 diagnosis are not patent-eligible. U.S. law regarding patent-eligibility continues to evolve. While we do not believe that any of our owned or in-licensed patents will be found invalid based on these changes to US 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 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 ~~licensors fail~~partners commercialize those candidates. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to ~~maintain~~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 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 ~~covering~~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 have others use the 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 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,~~candidates. To manage our ~~competitive position would~~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 contract with third parties to provide these capabilities for us. Due to our limited financial resources and the limited experience of our management team in managing a company with such anticipated growth, we may not be ~~adversely affected.~~able to 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 ~~become involved~~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 ~~lawsuits~~developing, manufacturing and marketing any new drugs resulting from a strategic alliance or acquisition that delay or prevent us from realizing their expected benefits or enhancing our business. We cannot

assure you that, following any such acquisition, we will achieve the expected synergies to ~~protect~~justify the transaction. The risks we face in connection with acquisitions, include:

Our failure to address these risks or ~~enforce~~other problems encountered in connection with our ~~intellectual property,~~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 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 the 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 ~~expensive, time consuming~~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 such actions are instituted against us, and ~~unsuccessful~~we are not successful in defending or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines or 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, ~~and~~ results of ~~operations.~~operations and prospects.

~~Competitors may infringe~~We will face an inherent risk of product liability exposure related to the testing of atrasentan and our ~~patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary~~other product candidates in ~~the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity~~clinical trials and ~~scope~~will face an even greater risk if we commercialize any of our ~~own intellectual property rights~~product candidates. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in a product, negligence, strict liability or ~~the proprietary rights~~breach of others. Also, third parties may initiate legal proceedings against us or our licensors to challenge the validity or scope of intellectual property rights we own or control. These proceedings can be expensive and time consuming. Many 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, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. Litigation could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, 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 result in any litigation proceeding could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly. Furthermore, because 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 of the results of hearings, motions or other interim proceedings or developments in any such proceedings.~~asserted under U.S. state consumer protection acts. If ~~securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares~~we cannot successfully defend itself against claims of our ~~common stock.~~

We may be subject to claims by third parties asserting that our licensors, employees 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 secrets or other proprietary information, of any such third party. Litigation may be necessary to defend against such claims. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel or sustain damages. Such intellectual property rights could be awarded to a third party, andproduct candidates caused injuries, then we could ~~be required to obtain a license from such third party to commercialize our technology~~incur substantial liabilities. Regardless of merit or ~~products. Such a license~~eventual outcome, liability claims 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:in:

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 Code, changes in a company’s ownership may limit the amount of 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. Each of Private Chinook and Aduro likely experienced ownership change under Section 382 as a result of the 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 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 use of net operating losses, or NOLs, or other 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 current taxable income annually for taxable years beginning after December 31, 2020. Accordingly, we, Private Chinook or Aduro, as applicable, generated or will generate NOLs after the tax year ended December 31, 2017, and we might have to pay more federal income taxes in a subsequent year as a result of 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.

The right of the holders of our contingent value rights, or CVRs, issued prior to the closing of the merger will be contingent solely upon the occurrence of the milestones described in the CVR agreement and the consideration received being greater than the amounts that could be deducted by us under the CVR Agreement. 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 any tax, and certain other expenses that could be deducted by us, will be distributed to CVR holders, provided such liquidity event occurs during the 10-year CVR period. In the event that no CVR milestones occur within the 10-year CVR period specified in the CVR Agreement or the consideration received is not greater than the amounts that could be deducted by us, no payments will be made under the CVR Agreement, and the CVRs will expire valueless.

Subject to ongoing clinical trial obligations and obligations to use commercially reasonable efforts to complete dispositions for which a sale agreement has been entered into, we will not have any obligation to develop the non-renal assets, or to expend any effort or resources to divest or otherwise monetize the non-renal assets.

Furthermore, the CVRs are unsecured obligations of us and all payments under the CVRs, all other obligations under the CVR Agreement and the CVRs and any rights or claims relating thereto may be subordinated in right of payment to the prior payment in full of all current or future senior obligations of us.

For example, Aduro did 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 market price of our common stock is expected to be volatile, and the market price of the common stock may drop in the future.

The market price of our common stock is subject to significant fluctuations. Some of the factors that may cause the market price of our common stock to fluctuate include:

~~If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and products could be adversely affected.~~

In addition to patent protection, we also rely on other proprietary rights, 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 to the individual by us during the course 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 and adversely affect our business, financial condition and results of operations.

~~Our operating results 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 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 Novartis, Merck and Lilly, 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 source of our revenue. Accordingly, our revenue may depend on development funding and the achievement of development and clinical milestones under current and any potential future license and collaboration agreements and sales of our products, if approved. These upfront and milestone payments may vary significantly from period to period and any such variance could cause a significant fluctuation in our operating 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, including our underlying stock price and stock price volatility, the magnitude 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:~~

Moreover, the stock markets 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 failing to meet the expectations of industry or 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 we may providegeneral have experienced substantial volatility that has often been unrelated to the operating performance of individual companies. These broad market ~~or if~~fluctuations may also adversely affect the ~~forecasts we provide to the market are below the expectations of analysts or investors, the~~trading price of our common ~~stock~~stock. In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 or otherwise 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.~~

~~Impairment of goodwill~~materially and ~~other intangible assets may result in significant impairment charges, which would~~ adversely affect our ~~financial condition~~business and ~~results of operations.~~

Goodwill and other intangible assets represent a significant portion of our assets. Goodwill is the excess of cost over the fair market value of net assets acquired in business combinations. We review our goodwill and acquired IPR&D intangible assets at least annually for impairment. Impairment may result from, among other things, failure to realize the anticipated benefits of past or any future acquisitions or strategic transactions, decisions to discontinue acquired businesses or assets, deterioration in our stock price, adverse market conditions and adverse changes in applicable laws or regulations. For example, in 2018 and 2019, we have incurred IPR&D intangible impairment charges related to our acquired entity, Aduro Biotech Europe. Any impairment of goodwill or other intangible assets would result in a non-cash charge against earnings, which would adversely affect our results of operations.

~~Our portfolio of marketable securities is subject to market, interest and credit risk that may reduce its value.~~

~~We maintain a portfolio of marketable securities for investment of our cash, and securities included in our portfolio have recently been downgraded. Changes in~~ the value of our ~~portfolio of marketable securities could adversely affect our earnings. In particular,~~common stock. Furthermore, the value of our investments may decline due to additional downgrades of securities included in our portfolio, increases in interest rates, instability in the global financial markets that reduces the liquidity of securities included in our portfolio, declines in the value of collateral underlying the securities included in our portfolio and other factors. In addition, the COVID-19 pandemic could adversely affect the financial markets in some or all countries worldwide. Each of these events may cause us to record charges to reduce the carrying value of our investment portfolio or sell investments for less than our acquisition cost. Although we attempt to mitigate these risks through diversification of our investments and continuous monitoring of our portfolio's overall risk profile, the value of our investments may nevertheless decline.

~~The~~trading price of our common stock may be ~~volatile,~~adversely affected by third-parties trying to drive down the market price. Short sellers 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,~~others, some of ~~which are beyond~~whom post anonymously on social media, may be positioned to profit if our ~~control, including limited trading volume~~stock declines and ~~as a result of the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-K among others.~~

In addition, the stock market in general, and the Nasdaq Global Select Market and biopharmaceutical companies in particular, have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industry factors, such as the current COVID-19 global pandemic and resulting market volatility, maytheir activities can negatively affect ~~the market price of~~ our ~~common~~ stock ~~regardless of our actual operating performance.~~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 could materially~~regulations affecting public companies.

We will incur significant legal, accounting and ~~adversely affect our business, financial condition~~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 of the executive officers of Private Chinook prior to the merger, some of whom have not previously managed and ~~results of operations.~~

~~If our stock price trades below $1.00 for 30 consecutive trading days, our common stock may be subject~~operated a public company. These executive officers and other personnel will need to ~~delisting from the Nasdaq Global Select Market.~~

~~If at any~~devote substantial time ~~the bid price of our common stock closes at below $1.00 per share for more than 30 consecutive trading days, we may be subject~~ to ~~delisting from the Nasdaq Global Select Market. If we receive a delisting notice, we would have 180 calendar days~~gaining expertise related to regain compliance, which would mean having a bid price above the minimum of $1.00 for at least 10 consecutive days in the 180-day period. During this 180-day period, we would anticipate reviewing our options to regainpublic company reporting requirements and compliance with ~~the minimum bid requirements, including conducting a reverse stock split. To the extent~~applicable laws and regulations to ensure that we ~~are unable~~comply with all of these requirements. Any changes we make to resolve any listing deficiency, there is a risk that our common stock may be delisted from Nasdaq, which would adversely impact liquidity of our common stock and potentially result in even lower bid prices for our common stock. As of June 30, 2020, our stock had traded at a 52-week low of $0.94 per share, and a 52-week high of $3.87 per share. Our closing share price on June 30, 2020 was $2.31.

~~An active trading market for our common stock~~comply with these obligations may not be ~~maintained.~~

~~Our common stock is currently traded~~sufficient to allow it 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 ~~Nasdaq Global Select Market, but we can provide no assurance that we will be able~~board of directors or on board committees or 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 depressing the market price for the shares or at all.

~~We do not intend to pay dividends on our common stock so any returns will be limited to the value of our common stock.~~

We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipate declaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation, if any, of their common stock.

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

~~Our~~serve as executive officers, ~~directors~~or to obtain certain types of insurance, including 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 other stockholders believe are in their best interests.officers’ insurance, on acceptable terms.

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

We prepare our financial statements in conformity with accounting principles generally accepted in the United States. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, or FASB, and the SEC. A change in these policies or interpretations could have a significant effect on our reported financial results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations, and may require us to make costly changes to our operational processes and accounting systems.

Our revenue to date has been primarily derived from research and license agreements, which can result in significant fluctuation in our revenue from period to period, and our past revenue is therefore not necessarily indicative of our future revenue.

Our revenue is primarily derived from our research and license agreements, from which we receive upfront fees, contract research payments, milestone and other contingent payments based on clinical progress, regulatory progress or net sales achievements and royalties. Significant variations in the timing of receipt of cash payments and our recognition of revenue can result from significant payments based on the execution of new research and license agreements, the timing of clinical outcomes, regulatory approval, commercial launch or the achievement of certain annual sales thresholds. The amount of our revenue derived from research and license agreements in any given period will depend on a number of unpredictable factors, including our ability to find and maintain suitable collaboration partners, the timing of the negotiation and conclusion of collaboration agreements with such partners, whether and when we or our collaboration partners achieve clinical, regulatory and sales milestones, the timing of regulatory approvals in one or more major markets, reimbursement levels by private and government payers, and the market introduction of new drugs or generic versions of the approved drug, as well as other factors. Our past revenue generated from these agreements is not necessarily indicative of our future revenue. If any of our existing or future collaboration partners terminates our collaboration, fails to develop, obtain regulatory approval for, manufacture or ultimately commercialize any product candidate under our collaboration agreement, our business, financial condition, and results of operations could be materially and adversely affected.

Once we are no longer ~~an emerging growth~~a smaller reporting company or otherwise no longer qualify for applicable exemptions, we will be subject to additional laws and regulations affecting public companies that will increase our costs and the demands on management and could harm our operating results.

~~As a public company we~~We are subject to the reporting requirements of the ~~Securities~~ Exchange Act, ~~of 1934, as amended,~~ which requires, among other things, that we file with ~~the Securities and Exchange Commission, or~~ the SEC, annual, quarterly and current reports with respect to our business and financial condition as well as other disclosure and corporate governance requirements. ~~However,~~We currently qualify as ~~an emerging growth~~a “smaller reporting company, ~~we may~~” as such term is defined in Rule 12b-2 under the Exchange Act, which allows us to take advantage of many exemptions from ~~various~~disclosure requirements ~~such as an exemption from the requirement~~applicable to smaller reporting companies and non-accelerated filers, including not being required to have our independent auditors attest to ~~our~~its internal control over financial reporting under Section ~~404~~404(a) of the Sarbanes-Oxley Act of 2002 as well as an exemption from the “say on pay” voting requirements pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. After we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which may allow us to take advantage of some 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. Once we are no longer, ~~an emerging growth~~a smaller reporting company or otherwise qualify for these exemptions, we will be required to comply with these additional legal and regulatory requirements applicable to public companies and ~~will~~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 or the market price of our common stock may be harmed. For example, if we or our independent auditor identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we could face additional costs to remedy 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.

~~We will remain an emerging growth company until the earliest of (1) December 31, 2020, (2) the last day of the fiscal year (a)~~Provisions 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.

~~Sales of a substantial number of shares of our common stock by our existing stockholders 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, or the perception in the market that the holders of a large number of shares intend 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, on August 2, 2017, 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 14,908,031 shares of our common stock. We have registered all currently reserved shares of common stock that we may issue under our equity compensation plans and intend 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, 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, nonemployee directors and consultants. Future grants of restricted stock units, options and other equity awards and issuances of common stock under our equity incentive plans will result in dilution and may have an adverse effect on the market price of our common stock.

Additionally, the number of shares of our common stock reserved for issuance under our 2015 Plan will automatically increase on January 1 of each year, beginning on January 1, 2016 and continuing through and including January 1, 2025, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year or a lesser number of shares determined by our board of directors. Further, the number of shares of our common stock reserved for issuance under our 2015 ESPP will automatically increase on January 1 of each year, beginning on January 1, 2016 and continuing through and including January 1, 2025, by 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year or 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 under Delaware law could ~~delay or prevent a change of control which could limit the market price of our common stock~~make an acquisition more difficult and may ~~prevent or frustrate~~discourage any takeover attempts ~~by our~~the company stockholders may consider favorable, and may lead to ~~replace or remove our current~~entrenchment of management.

~~Our~~Provisions of our amended and restated certificate of incorporation and amended and restated bylaws ~~contain provisions that~~ could delay or prevent ~~a change of~~changes in control ~~of our company~~ or changes in ~~our~~management without the consent of the board of ~~directors that our stockholders might consider favorable. Some of these~~directors. These provisions ~~include:~~include the following:

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

We are ~~incorporated~~also subject to the anti-takeover provisions contained in ~~Delaware, we are governed by the provisions of~~ Section 203 of the ~~Delaware General Corporate Law, which~~DGCL, or Section 203. Under Section 203, a corporation may ~~prohibit certain~~not, in general, engage in a business ~~combinations~~combination with ~~stockholders owning 15%~~any holder of 15 percent or more of ~~our outstanding voting stock. These anti-takeover provisions and~~its capital stock unless the holder has held the stock for three years or, among other ~~provisions in our amended and restated~~exceptions, the board of directors has approved the transaction.

Our 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 stockholders to elect directors of their choosing or cause us to take other corporate actions stockholders may 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~~ ~~amended and restated~~ ~~certificate of incorporation~~ provides that the Court of Chancery of the State of Delaware ~~will be~~is the exclusive forum for substantially all disputes between us and our stockholders, and ~~our amended and restated bylaws provide~~ that federal district ~~courts of the United States of America will be~~court is the exclusive forum for ~~the resolution of~~ any ~~complaint asserting a cause of action~~actions arising under the ~~Securities~~Exchange Act, ~~either of these provisions~~which could limit ~~our stockholders’~~your ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our ~~amended and restated~~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 ~~our~~the Company’s behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against usit arising pursuant to any provisions of the ~~Delaware General Corporation Law, our~~ ~~amended and restated~~DGCL, its certificate of incorporation or ~~our~~ ~~amended and restated~~its bylaws, or any action asserting a claim against usit that is governed by the internal affairs doctrine. ~~Our~~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 resolution of any complaint asserting a cause of action under the Securities Act. ~~These provisions~~The provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with usthe Company or ~~our~~its directors, officers or other employees, which may discourage such lawsuits against usthe Company and ~~our~~its directors, officers and other employees. Alternatively, if a court were to find the ~~provisions~~choice of forum provision contained in ~~our~~ ~~amended and restated~~the certificate of incorporation ~~or amended~~ and ~~restated~~ bylaws to be inapplicable or unenforceable in an action, we may 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.

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 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 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.

Unfavorable global 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. For example, a global economic downturn that could result from the COVID-19 pandemic could cause extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn could result in a variety of risks to our business, 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 declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. If ~~securities~~the current equity and credit markets deteriorate, 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 such difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business. Furthermore, our stock price may decline due in part to the volatility of the stock market and 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, 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, 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. In addition, the impact of COVID-19 is likely to cause substantial changes in consumer behavior and has caused restrictions on business and individual activities, which are likely to lead to reduced economic activity. Extraordinary actions taken by international, federal, state and local public health and governmental authorities to contain and combat the outbreak and spread of COVID-19 in regions throughout the world, including travel bans, quarantines, “stay-at-home” orders and similar mandates for many individuals and businesses to substantially restrict daily activities could have an adverse effect on our financial condition and ability to raise financing.

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. As a result of the COVID-19 pandemic, we may experience reduction in research and development, clinical testing, regulatory compliance activities, and manufacturing activities, and is unable at this time to estimate the extent of the effect of COVID-19 on our business. The extent and duration of the economic slowdown attributable to COVID-19 remains 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 agree and in ways that may not increase the value of your investment.

We have broad discretion over the use of our 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.

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 may be unable to continue to attract and retain qualified personnel necessary for the development 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 publish ~~inaccurate~~research or reports, or publish unfavorable research or reports, about ~~our~~the company, its business ~~our~~or its market, its stock price and trading volume could decline.

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

~~Regardless of accuracy, unfavorable interpretations~~Our internal computer and information systems, or those used by our CROs, CMOs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our development programs.

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 computer viruses, 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 harmed and the further development and commercialization of our product candidates could be significantly delayed. Our internal information technology systems and infrastructure are also vulnerable to damage from

natural disasters, terrorism, war, telecommunication and electrical failures. System failures or outages, including any potential disruptions due to significantly increased global demand on certain cloud-based systems during the 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.

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 studies, and are subject to laws and regulations governing the privacy and security of such information. 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. Each of these laws is subject to varying interpretations and constantly evolving. In addition, 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. Depending on the facts and circumstances, the Company could be subject to criminal penalties if it knowingly obtains, uses or discloses individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA.

Certain states have also adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. For example, California enacted the California Consumer Privacy Act, or the CCPA, which took effect on January 1, 2020. The CCPA gives California residents expanded rights to access and delete their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used. The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation. The CCPA may increase our compliance costs and potential liability. Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the United States, which could increase our potential liability and adversely affect our business.

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. In addition, the GDPR increases the scrutiny of transfers of personal data from clinical trial sites located in the EEA to the United States and other jurisdictions that the European Commission does not recognize as having “adequate” data protection laws, and imposes substantial fines for breaches and violations (up to the greater of €20 million or 4 percent of our consolidated annual worldwide gross revenue). Further, recent legal developments in Europe have created complexity and compliance uncertainty regarding certain transfers of information from the EEA to the United States. For example, on June 16, 2020, the Court of Justice of the European Union, or the CJEU, declared the EU-U.S. Privacy Shield framework, or the Privacy Shield, to be invalid. As a result, Privacy Shield is no longer a valid mechanism for transferring personal data from the EEA to the United States. Moreover, it is uncertain whether the standard contractual clauses will also be invalidated by the European courts or legislature, which seems possible given the rationale behind the CJEU’s concerns about U.S. law and practice on government surveillance. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies and obtain compensation for damages resulting from violations of the GDPR.

Compliance with these and any other applicable privacy and data security laws and regulations is a rigorous and time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules. If we fail to comply with any such laws or regulations, we may face significant fines and penalties that could adversely affect our business, financial condition and results of operations.

We may be unable to adequately protect our information systems from cyberattacks, which could result in the disclosure of confidential information, damage our reputation, and subject us to significant financial and legal exposure.

Cyberattacks are increasing in their frequency, sophistication and intensity, and have become increasingly difficult to detect. Cyberattacks could include wrongful conduct by hostile foreign governments, industrial espionage, wire fraud and other forms of cyber fraud, the deployment of harmful malware, denial-of-service, social engineering fraud or other means to threaten data confidentiality, integrity and availability. A successful cyberattack could cause serious negative consequences for us, including, without limitation, the disruption of operations, the misappropriation of confidential business information, including financial 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. For example, there has been an increase in phishing and spam emails as well as social engineering attempts from “hackers” hoping to use the recent COVID-19 pandemic to their advantage.

Although we devote resources to protect our information systems, we realize that cyberattacks are a threat, and there can be no assurance of our efforts will prevent information security breaches that would result in business, legal, financial or reputational harm to the Company, or would have a material adverse effect on our results of operations and financial condition.

In addition, the computer systems of various third parties on which we rely, including our CROs, CMOs and other ~~public disclosures~~contractors, consultants and law and accounting firms, may sustain damage from computer viruses, unauthorized access, data breaches, phishing attacks, cybercriminals, natural disasters (including hurricanes and earthquakes), terrorism, war and telecommunication and electrical failures. We rely on our third-party providers to implement effective security measures and identify and correct for any such failures, deficiencies or breaches.

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

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.

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 ~~stock price. If~~financial 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 business, results of operations or financial performance fails to meet analyst estimates, for any of the reasons discussed above or otherwise, or one or more of the analysts who cover us downgrade our common stock or change their opinion of our common stock, our stock price would likely decline.condition.

Exhibit No

Description of Exhibit

Incorporated by Reference

Form

File No.

Exhibit

Filing Date

Filed

Herewith

10.24

Sublease between the Registrant and Wireless Advocates LLC dated May 24, 2021.

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 to Section 906 of the Sarbanes-Oxley Act of 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 contained in Exhibit 101)

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.

Large accelerated filer	☐	Accelerated filer	☒☐

Non-accelerated filer	☐☒	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 June 30, ~~2020~~2021 and December 31, ~~2019~~2020	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020	4
	Condensed Consolidated Statements of ~~Comprehensive Loss~~Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit) for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020	5
	~~Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2020 and 2019~~	6
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020	76
	Notes to the Condensed Consolidated Financial Statements	87
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2321
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3332
Item 4.	Controls and Procedures	3432

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	3534
Item 1A.	Risk Factors	3534
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	7555
Item 3.	Defaults Upon Senior Securities	7572
Item 4.	Mine Safety Disclosures	7572
Item 5.	Other Information	7572
Item 6.	Exhibits	7572
EXHIBIT INDEX		7673
SIGNATURES		7874

	~~Unobservable~~ ~~Input~~
~~Probability of attaining milestone~~		~~18.8~~	%
~~Period of time to achieve milestone (in years)~~	~~7.5~~
~~Discount rate~~		~~10.0~~	%

Year Ending December 31,	Estimated Amortization Expense		Estimated Amortization Expense
2020 (remaining six months)	$	278
2021		555
2021 (remaining six months)			$	845
2022		555		1,722
2023		555		1,733
2024		555		1,733
2025		555		1,733
Thereafter				19,088

	June 30		December 31,
	2021		2020
Research and development costs	$	5,426	$	8,135
Compensation and benefits		3,489		4,530
Sublease rent and security deposit		675		1,400
Business taxes and licensing fees		1,052		898
Consulting and outside services		306		499
Other		321		212
Total accrued expenses and other liabilities	$	11,269	$	15,674

	June 30, 2020
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	30,913	$	—	$	—	$	30,913
U.S. government and agency securities		—		66,209		—		66,209
Corporate debt securities		—		17,702		—		17,702
Commercial paper		—		67,304		—		67,304
Total	$	30,913	$	151,215	$	—	$	182,128
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	2,013	$	2,013
Total	$	—	$	—	$	2,013	$	2,013

	Contingent Consideration
Balance at December 31, 2019	$	1,051
Net change in fair value upon remeasurement		943
Foreign currency impact on contingent consideration		19
Balance at June 30, 2020	$	2,013

	Contingent Value Rights Liability		Contingent Consideration Liability
Balance at December 31, 2020	$	13,780	$	1,800
Net change in fair value upon remeasurement		15,270		2,980
Balance at June 30, 2021	$	29,050	$	4,780

Balance at December 31, 2019	$	8,167
Foreign currency translation adjustment		10
Balance at June 30, 2020	$	8,177

	December 31, 2019
	Gross Carrying Amount		Impairment⁽¹⁾		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	11,091	$	—	$	2,311	$	8,780
Total intangible assets with finite lives		11,091		—		2,311		8,780
Acquired IPR&D assets		15,297		5,099		—		10,198
Total intangible assets	$	26,388	$	5,099	$	2,311	$	18,978

Undiscounted Lease Payments	Amounts		Amounts
2020 (remaining six months)	$	2,862
2021		5,332
2021 (remaining six months)			$	2,980
2022		5,460		6,124
2023		5,569		6,250
2024		5,681		6,361
2025				6,475
Thereafter		30,155		25,538
Total undiscounted lease payments		55,059
Total undiscounted lease payments ¹⁾				53,728
Present value adjustment		22,463		13,301
Total net lease liability	$	32,596	$	40,427
Net lease liability - current	$	1,741	$	3,280
Net lease liability - non-current		30,855		37,147
Total net lease liability	$	32,596	$	40,427

	June 30, 2020		June 30, 2019		June 30, 2021		December 31, 2020
Weighted-average remaining lease terms (in years)
Operating leases		9.4		10.3		8.3		8.8
Weighted-average discount rate
Operating leases	12%		12%		7.1%		7.1%

	~~June 30,~~ ~~2020~~
~~Options issued and outstanding~~		~~11,317,276~~
~~Shares available for future stock option grants~~		~~10,941,502~~
~~Restricted stock units~~		~~526,995~~
~~Common stock warrants~~		~~50,162~~
~~Total~~		~~22,835,935~~

	RSAs Outstanding
	Number of RSAs (in thousands)			Weighted- Average Grant Date Fair Value Per Share

Balance—December 31, 2020		196		$	0.00034
Vested		(48	)		0.00034
Balance—June 30, 2021		148		$	0.00034

	Options Outstanding
	Shares Available for Grant				Number of Shares Underlying Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
										(In thousands)
Balance—December 31, 2019		8,751,436				10,297,444		$	5.49	$	680
Authorized		3,229,427				—
RSUs forfeited, net		83,007				—
Granted		(3,136,000	)			3,136,000			3.14
Exercised		—				(91,460	)		0.91
Canceled		2,013,632		⁽¹⁾		(2,024,708	)		5.87
Balance—June 30, 2020		10,941,502				11,317,276		$	4.81	$	3,671
Options exercisable—June 30, 2020						6,264,788		$	5.82	$	3,369
Options vested and expected to vest—June 30, 2020						10,204,429		$	4.97	$	3,608


	Number of Shares Underlying Options (in thousands)			Weighted- Average Exercise Price		Aggregate Intrinsic Value
						(In thousands)
Balance—December 31, 2020		5,514		$	13.24	$	38,433
Granted		1,280			15.66
Exercised		(236	)		6.23	$	2,515
Canceled		(144	)		35.77
Balance—June 30, 2021		6,414		$	13.48	$	29,740
Options exercisable—June 30, 2021		2,385		$	17.91	$	13,672
Options vested and expected to vest—June 30, 2021		6,414		$	13.48	$	29,740

	RSUs Outstanding
	Number of RSUs (in thousands)			Weighted- Average Grant Date Fair Value Per Share
Balance—December 31, 2020		441		$	14.51
Granted		466			15.43
Vested		(15	)		14.74
Forfeited		(16	)		14.81
Balance—June 30, 2021		876		$	14.99

	RSUs Outstanding
	Number of Restricted Stock Units			Weighted- Average Grant Date Fair Value Per Share
Balance—December 31, 2019		798,943		$	7.40
Granted		109,124			3.37
Vested		(188,941	)		3.99
Forfeited		(192,131	)		8.34
Balance—June 30, 2020		526,995		$	7.45

	Three Months Ended		Six Months Ended
	June 30, 2020		June 30, 2020
Restructuring compensation	$	2,046	$	5,152
Impairment of property and equipment		—		1,202
Total restructuring and related expense	$	2,046	$	6,354

	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	$	2,862	$	10,792	$	11,250	$	30,155	$	55,059
Total contractual obligations	$	2,862	$	10,792	$	11,250	$	30,155	$	55,059


	(i)	In November 2020, we hired a permanent Chief Financial Officer with substantial experience in the biotechnology industry, whose responsibilities include working with existing employees and third-party consultants to improve the design, implementation, execution and supervision of the company’s internal control over financial reporting.
	(ii)	We have hired additional finance, accounting and information technology employees with appropriate experience, certification, education and training. This includes a senior information technology leader and additional accounting staff, who are already onboard, as well as a senior accounting leader who joined us in March 2021. This individual has significant experience in technical accounting matters and internal controls commensurate with public company reporting requirements. During the second quarter of 2021, we hired additional qualified personnel to critical accounting leadership roles, who we expect to significantly contribute to the remediation of our material weaknesses.


	(iii)	We integrated the accounting systems of Private Chinook and Aduro in 2021, and are updating our formal accounting policies, procedures and controls, including preparation and review of account reconciliations, review of journal entries and controls over period end financial reporting, as well as information technology general controls. During the second quarter of 2021, we implemented procedures for the preparation and review of reconciliations and journal entries, in addition to implementing procedures over several other areas that support our financial reporting. We will continue to enhance or modify these procedures and controls in future periods as needed. We also engaged third-party service providers, who we plan to utilize in the future to implement certain information technology general controls associated with our accounting general ledger.
	(iv)	We have assigned responsibilities among our expanded staff to enable improved segregation of duties. During the second quarter of 2021, we also began evaluating systems and processes for proper segregation of duties.

	~~Aduro Biotech,~~Chinook Therapeutics, Inc.
Date: August ~~3, 2020~~12, 2021	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: August ~~3, 2020~~12, 2021	By:	/s/ ~~William G. Kachioff~~Eric H. Bjerkholt
		~~William G. Kachioff~~Eric H. Bjerkholt
		~~Interim~~ Chief Financial Officer
		(~~Principal Financial Officer)~~principal financial and accounting officer)