10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2016

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37345

ADURO BIOTECH, INC.

(Exact name of Registrant as specified in its Charter)

Delaware	94-3348934
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

626 Bancroft Way, 3C

Berkeley, California  94710

(Address of principal executive offices including zip code)

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

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  x    NO  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a small reporting company)	Small reporting company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The number of shares of Registrant’s Common Stock outstanding as of July 31, 2016 was 64,754,256.

Table of Contents

		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2016 and December 31, 2015	3
	Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2016 and 2015	4
	Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2016 and 2015	5
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2016 and 2015	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27
	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60
Item 3.	Defaults Upon Senior Securities	60
Item 4.	Mine Safety Disclosures	60
Item 5.	Other Information	60
Item 6.	Exhibits	60
SIGNATURES		61
EXHIBIT INDEX		62

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

2

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ADURO BIOTECH, INC.

Condensed Consolidated Balance Sheets

(In thousands, except share and per share amounts)

(Unaudited)

	June 30,			December 31,
	2016			2015
Assets
Current assets:
Cash and cash equivalents	$	105,938		$	150,456
Short-term marketable securities		287,415			265,198
Accounts receivable		1,384			4,846
Prepaid expenses and other current assets		13,078			4,004
Total current assets		407,815			424,504
Long-term marketable securities		3,566			15,391
Property and equipment, net		17,227			3,986
Goodwill		8,572			8,469
Intangible assets, net		29,659			29,400
Restricted cash		468			—
Other assets		2,747			75
Total assets	$	470,054		$	481,825
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	2,398		$	5,086
Accrued clinical trial and manufacturing expenses		13,878			5,522
Accrued expenses and other liabilities		8,459			5,412
Deferred revenue		15,171			15,046
Total current liabilities		39,906			31,066
Deferred rent		2,952			—
Contingent consideration		3,508			3,750
Deferred revenue		170,370			178,037
Deferred tax liabilities		7,379			7,350
Total liabilities		224,115			220,203
Stockholders’ equity:
Commitments and contingencies
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at    June 30, 2016 and December 31, 2015; and zero shares issued    and outstanding at June 30, 2016 and December 31, 2015		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized    June 30, 2016 and December 31, 2015; and 64,690,718    and 63,587,833 shares issued and outstanding at June 30, 2016    and December 31, 2015		6			6
Additional paid-in capital		372,924			362,807
Accumulated other comprehensive income (loss)		392			(339	)
Accumulated deficit		(127,383	)		(100,852	)
Total stockholders’ equity		245,939			261,622
Total liabilities and stockholders’ equity	$	470,054		$	481,825

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

3

ADURO BIOTECH, INC.

Condensed Consolidated Statements of Operations

(In thousands, except share and per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Revenue:
Collaboration and license revenue	$	38,938		$	9,623		$	42,921		$	18,861
Grant revenue		41			260			88			596
Total revenue		38,979			9,883			43,009			19,457
Operating expenses:
Research and development		26,882			13,533			47,809			24,179
General and administrative		8,700			5,882			17,699			12,092
Amortization of intangible assets		140			—			277			—
Total operating expenses		35,722			19,415			65,785			36,271
Income (loss) from operations		3,257			(9,532	)		(22,776	)		(16,814	)
Loss from remeasurement of fair value of warrants		—			(16,735	)		—			(26,077	)
Interest income		520			—			974			—
Other (loss) income, net		(9	)		7			(31	)		15
Income (loss) before income tax		3,768			(26,260	)		(21,833	)		(42,876	)
Provision for income taxes		1,472			—			4,698			—
Net income (loss)	$	2,296		$	(26,260	)	$	(26,531	)	$	(42,876	)
Net income (loss) per common share, basic	$	0.04		$	(0.50	)	$	(0.41	)	$	(1.61	)
Net income (loss) per common share, diluted	$	0.03		$	(0.50	)	$	(0.41	)	$	(1.61	)
Shares used in computing net loss per common share, basic		64,434,903			52,653,344			64,138,737			26,678,848
Shares used in computing net loss per common share, diluted		71,473,807			52,653,344			64,138,737			26,678,848

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

4

ADURO BIOTECH, INC.

Condensed Consolidated Statements of Comprehensive Loss

(In thousands)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2016			2015			2016			2015
Net income (loss)	$	2,296		$	(26,260	)	$	(26,531	)	$	(42,876	)
Other comprehensive income (loss), net of tax:
Unrealized gain on marketable securities		69			—			220			—
Foreign currency translation adjustments		(619	)		—			511			—
Comprehensive income (loss)	$	1,746		$	(26,260	)	$	(25,800	)	$	(42,876	)

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

5

ADURO BIOTECH, INC.

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2016			2015
Cash Flows from Operating Activities
Net loss	$	(26,531	)	$	(42,876	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		739			219
Amortization of intangible assets		277			—
Accretion of discounts and amortization of premiums on marketable securities		1,045			—
Stock-based compensation		7,068			3,345
Excess tax benefit from stock-based compensation		(2,185	)		—
Gain from remeasurement of fair value of contingent consideration		(317	)		—
Loss from remeasurement of fair value of warrants		—			26,077
Changes in operating assets and liabilities:
Accounts receivable		3,462			2,092
Prepaid expenses and other assets		(9,074	)		(1,962	)
Restricted cash		(468	)		—
Accounts payable		(2,814	)		893
Deferred consideration from Novartis collaboration		—			200,000
Deferred revenue		(7,542	)		(18,264	)
Accrued clinical trial and manufacturing expenses		8,356			831
Accrued expenses and other liabilities		2,094			3,370
Net cash (used in) provided by operating activities		(25,890	)		173,725
Cash Flows from Investing Activities
Purchase of marketable securities		(244,250	)		—
Proceeds from maturities of marketable securities		233,108			—
Purchase of property and equipment		(10,536	)		(1,165	)
Net cash used in investing activities		(21,678	)		(1,165	)
Cash Flows from Financing Activities
Proceeds from issuance of common stock, net of offering costs		—			151,027
Proceeds from issuance of convertible preferred stock, net of issuance costs		—			22,522
Excess tax benefit from stock-based compensation		2,185			—
Proceeds from exercise of stock options and warrants		351			302
Proceeds from employee stock purchase plan		514			—
Net cash provided by financing activities		3,050			173,851
Net (decrease) increase in cash and cash equivalents		(44,518	)		346,411
Cash and cash equivalents at beginning of period		150,456			119,456
Cash and cash equivalents at end of period	$	105,938		$	465,867
Supplemental Disclosure of Cash Flow Information
Cash paid for taxes	$	8,600			—
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Conversion of convertible preferred stock to common stock	$	—		$	164,964
Reclassification of warrant liabilities to additional paid-in capital	$	—		$	27,066
Accrued offering costs	$	—		$	742
Purchase of property and equipment in accounts payable and accrued liabilities	$	4,135		$	123

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

6

ADURO BIOTECH, INC.

Notes to Condensed Consolidated Financial Statements

1. Organization and Nature of Business

Aduro Biotech, Inc., or the Company, is an immunotherapy company focused on the discovery, development and commercialization of therapies that transform the treatment of challenging diseases. The Company’s technology platforms, which are designed to harness the body's natural immune system, are being investigated in cancer indications and have the potential to expand into autoimmune and infectious diseases. The Company operates in one business segment.

The Company has developed three technology platforms, Live, Attenuated, Double-Deleted or LADD, STING Pathway Activator and B-select monoclonal antibodies. The Company’s LADD technology platform is based on proprietary attenuated strains of Listeria that have been engineered to express tumor-associated antigens to induce specific and targeted immune responses. This platform is being developed as a treatment for multiple indications, including mesothelioma, ovarian, pancreatic, lung and prostate cancers, and glioblastoma. The Company’s STING Pathway Activator platform is designed to activate the intracellular Stimulator of Interferon Genes, or STING, receptor, resulting in a potent tumor-specific immune response. The Company’s B-select monoclonal antibody platform includes a number of immune modulating assets in research and preclinical development and is led by the Company’s wholly-owned subsidiary based in the Netherlands, Aduro Biotech Holdings, Europe B.V. (fka BioNovion Holding B.V.), or Aduro Biotech Europe. The Company is also collaborating with leading global pharmaceutical companies to expand its products and technology platforms.

Initial Public Offering and Concurrent Private Placement

On April 20, 2015, the Company closed its initial public offering, or IPO, and sold 8,050,000 shares of its common stock (inclusive of 1,050,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $17.00 per share. The Company received aggregate net proceeds of $124.2 million, net of underwriting discounts and offering expenses. The Company also sold to Novartis Institutes for BioMedical Research, Inc., or NIBR, in a concurrent private placement 1,470,588 shares of common stock at a price of $17.00 per share for proceeds of $25.0 million. Upon the closing of the IPO, all then-outstanding shares of convertible preferred stock converted by their terms into 51,822,659 shares of common stock. Additionally, the Company amended and restated its certificate of incorporation effective April 20, 2015 to, among other things, change the authorized number of shares of common stock to 300,000,000 shares and the authorized number of shares of preferred stock to 10,000,000 shares.

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

Basis of Presentation

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 balance sheet as of December 31, 2015 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These financial statements have been prepared on the same basis as 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 our financial information. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 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, 2015 included in our Annual Report on Form 10-K filed with the SEC.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. 

7

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenue 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, contingent consideration, income taxes and stock-based compensation. 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. Actual results could differ from these estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued Auditing Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB voted to defer the effective date of the ASU by one year to December 15, 2017 for fiscal years, and interim periods within those years, beginning after that date. Entities are permitted to adopt ASU 2014-09 in accordance with the original effective date of December 15, 2016 if they choose. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018 and requires modified retrospective application. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeitures. The standard is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

In June 2016, the FASB issued 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. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

8

3. Fair Value Measurements

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

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

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

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

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

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

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

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	79,037	$	—	$	—	$	79,037
U.S. government and agency securities		—		184,541		—		184,541
Corporate debt securities		—		71,930		—		71,930
Commercial paper		—		52,141		—		52,141
Total	$	79,037	$	308,612	$	—	$	387,649
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	3,508	$	3,508
Total	$	—	$	—	$	3,508	$	3,508

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	104,602	$	—	$	—	$	104,602
U.S. government and agency securities		—		194,055		—		194,055
Corporate debt securities		—		74,918		—		74,918
Commercial paper		—		42,295		—		42,295
Total	$	104,602	$	311,268	$	—	$	415,870
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	3,750	$	3,750
Total	$	—	$	—	$	3,750	$	3,750

9

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

The Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2016 and December 31, 2015. There were no transfers between the fair value measurement category levels during any of the periods presented.

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

	Contingent Consideration
Balance at December 31, 2015	$	3,750
Net decrease in fair value upon remeasurement		(317	)
Foreign currency impact on contingent consideration		75
Balance at June 30, 2016	$	3,508

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, 2016
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	9,157	$	—	$	—		$	9,157
Money market funds		79,037		—		—			79,037
Commercial paper		17,744		—		—			17,744
Total cash and cash equivalents	$	105,938	$	—	$	—		$	105,938
Marketable securities:
U.S. government and agency securities	$	184,541	$	105	$	(5	)	$	184,641
Corporate debt securities		71,930		25		(11	)		71,944
Commercial paper		34,396		—		—			34,396
Total marketable securities	$	290,867	$	130	$	(16	)	$	290,981

	December 31, 2015
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	15,175	$	—	$	—		$	15,175
Money market funds		104,602		—		—			104,602
Commercial paper		7,899		—		—			7,899
U.S. government and agency securities		22,780		—		—			22,780
Total cash and cash equivalents	$	150,456	$	—	$	—		$	150,456
Marketable securities:
U.S. government and agency securities	$	171,416	$	3	$	(144	)	$	171,275
Corporate debt securities		74,958		38		(78	)		74,918
Commercial paper		34,396		—		—			34,396
Total marketable securities	$	280,770	$	41	$	(222	)	$	280,589

10

The amortized cost and estimated fair value of the Company’s available-for-sale marketable securities by contractual maturity are summarized below as of June 30, 2016 (in thousands):

	Amortized cost		Estimated Fair Value
Mature in one year or less	$	287,303	$	287,415
Mature after one year through two years		3,564		3,566
Total available-for-sale marketable securities	$	290,867	$	290,981

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	June 30,			December 31,
	2016			2015
Lab equipment	$	3,433		$	3,011
Computer and office equipment		1,264			959
Furniture and fixtures		313			306
Leasehold improvements		703			669
Construction in progress		13,910			698
Total property and equipment		19,623			5,643
Less: accumulated depreciation and amortization		(2,396	)		(1,657	)
Property and equipment, net	$	17,227		$	3,986

Depreciation and amortization expense was $382,000 and $126,000 for the three months ended June 30, 2016 and 2015, respectively, and $739,000 and $219,000 for the six months ended June 30, 2016 and 2015, respectively.

Accrued Expenses and Other Liabilities

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

	June 30,		December 31,
	2016		2015
Accrued construction in progress	$	3,971	$	-
Compensation and related benefits		2,310		2,765
Professional and consulting services		1,118		1,650
Other		1,060		997
Total accrued expenses and other liabilities	$	8,459	$	5,412

5. Goodwill and Intangible Assets

Goodwill

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

Balance at December 31, 2015	$	8,469
Foreign currency translation adjustment		103
Balance at June 30, 2016	$	8,572

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Intangible assets

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

	June 30, 2016
	GrossCarrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	10,982	$	366	$	10,616
Total intangible assets with finite lives		10,982		366		10,616
Acquired IPR&D assets		19,043		—		19,043
Total intangible assets	$	30,025	$	366	$	29,659

	December 31, 2015
	GrossCarrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	10,786	$	89	$	10,697
Total intangible assets with finite lives		10,786		89		10,697
Acquired IPR&D assets		18,703		—		18,703
Total intangible assets	$	29,489	$	89	$	29,400

Intangible assets are carried at cost less accumulated amortization. The license agreement is being amortized over a period of 20 years and the amortization expense is recorded in operating expenses. The increase in the gross carrying amount of intangible assets as of June 30, 2016 compared to December 31, 2015 reflected a positive impact of foreign currency exchange which was primarily due to the strengthening of the Euro against the U.S. dollar.

Amortization expense was $140,000 and $277,000 for the three and six months ended June 30, 2016, respectively. There was no amortization expense for the comparable periods in 2015. Based on finite-lived intangible assets recorded as of June 30, 2016, the estimated future amortization expense is as follows (in thousands):

Year Ending December 31,	Estimated Amortization Expense
2016 (remaining six months)	$	275
2017		549
2018		549
2019		549
2020		549

6. Collaboration Agreements

Novartis Agreement

In March 2015, the Company entered into a collaboration and license agreement with Novartis Pharmaceuticals Corporation, or Novartis, pursuant to 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, an exclusive license to commercialize such products outside the United States and a non-exclusive license to support the Company in commercializing such products in the United States if it requests such support. The collaboration is guided by a joint steering committee with each party having final decision making authority regarding specified areas of development or commercialization.

Under the Novartis Agreement, the Company received 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.

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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.

The Company recognizes revenue from collaboration, license or research arrangements when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collection is reasonably assured. The Company has determined that the license does not have stand-alone value separable from the co-development services to be performed under the agreement, with the Company participating in the research and development services. As a result, the Company recognizes revenue from the $200.0 million upfront fee received on a straight-line basis over its estimated performance period of 13.5 years, commencing in July 2015, the date of the Joint Steering Committee’s approval of the research and development plan. Changes in the estimated period of performance will be accounted for prospectively as a change in estimate. The Company will recognize substantive milestone payments in their entirety in the period in which the milestone is achieved. Non-substantive milestone payments will be recognized on a straight-line basis over the remaining performance period. Costs associated with co-development activities performed under the agreement are included in research and development expenses in the accompanying condensed consolidated statements of operations. Reimbursement of research and development costs by Novartis is included in collaboration and license revenue. The Company will recognize revenue from the sale of any products commercialized pursuant to this collaboration in the United States, will retain 50% of the gross profits from such sales, and will pay the remaining 50% of the gross profits to Novartis. The Company will receive from Novartis 45% of gross profits for specified European countries and Japan. Profit sharing payments made to or received from Novartis are aggregated by product by territory and are reported as expenses or revenues, as applicable.

For the three and six months ended June 30, 2016, the Company recognized revenue from its collaboration with Novartis totaling $3.7 million and $7.4 million, respectively, related to amortization of the upfront fee. The remaining balance of the upfront fees of $185.2 million is included in deferred revenue at June 30, 2016.  

Janssen ADU-214 Agreement

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

Since the inception of the Janssen ADU-214 Agreement through June 30, 2016, the Company received an upfront license fee of $30.0 million and substantive and non-substantive milestone payments of $21.0 million upon completion of various development activities. Under the terms of the Janssen ADU-214 Agreement, the Company is eligible to receive future contingent payments up to a total of $766.0 million composed of development milestones through completion of all Phase 3 clinical trials, as well as regulatory and commercial milestones. The contingent payments are triggered upon the activities expected to be undertaken by Janssen. The Company is eligible to receive royalties on any net sales of licensed products by Janssen, its affiliates and sublicensees at a rate ranging from high-single digits to low teens based on the aggregate annual net sales of licensed products worldwide and based on the country of sale.

The upfront license fee of $30.0 million was recognized on a straight-line basis from the effective date of the agreement through October 2015. In addition the Company recognized milestone payments of $21.0 million in 2015 as all performance obligations were achieved.

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Janssen ADU-741 and GVAX Prostate Agreements

In May 2014, the Company entered into a Research and License Agreement, or Janssen ADU-741 Agreement, and a GVAX Prostate License Agreement, or Janssen GVAX Prostate Agreement, with Janssen Biotech, Inc., or Janssen, a wholly-owned subsidiary of Johnson & Johnson Development Corporation, to collaborate on the development of a drug for the treatment of prostate cancer. Under the terms of the Janssen ADU-741 Agreement, the Company granted Janssen an exclusive, worldwide license to research, develop, manufacture, use, sell and otherwise exploit products containing ADU-741 for any and all uses. The Company was responsible for certain research and development activities from the effective date of the agreement until IND approval which occurred in the fourth quarter of 2015.

Since the inception of the Janssen ADU-741 Agreement through June 30, 2016, the Company received an upfront payment of $12.0 million and substantive and non-substantive milestone payments of $10.0 million upon completion of certain development activities. Under the terms of the Janssen ADU-741 Agreement, the Company is eligible to receive future contingent payments up to a total of $343.0 million composed of development milestones through completion of all Phase 3 clinical trials, as well as regulatory and commercial milestones. The contingent payments are triggered upon the activities expected to be undertaken by Janssen. The Company is eligible to receive royalties on net sales of licensed products by Janssen, its affiliates and sublicensees at a rate ranging from mid-single digits to low teens based on aggregate annual net sales and based on the country of sale.

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

The upfront fees received totaling $12.5 million were recognized on a straight-line basis from the effective date of the agreements through October 2015. In addition, the Company recognized milestone payments of $10 million in 2015 as all performance obligations were achieved.

Pharma License Agreement

In connection with the acquisition of Aduro Biotech Europe in October 2015, the Company became party to an agreement with a third-party pharmaceutical company, or Pharma. The agreement sets forth the parties’ respective obligations for development, commercialization, regulatory and manufacturing and supply activities for antibody product candidates. The Company identified the following performance deliverables under the agreement: 1) the license, 2) the obligation to provide research activities and 3) the obligation to participate on a Joint Research Committee.

The Company is eligible to receive future contingent payments, including up to $312.0 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 eligible to receive royalties in the mid-single digits to low teens based on net sales of the product.

The Company considered the provisions of the multiple-element arrangement guidance in determining how to recognize the total consideration of the agreement. The Company determined that none of the deliverables have standalone value; all of these obligations will be delivered throughout the estimated period of performance and therefore are accounted for as a single unit of accounting.

The Company determined that all of the future contingent payments meet the definition of a milestone. Accordingly, revenue for the achievement of these milestones will be recognized in the period when the milestone is achieved and collectability is reasonably assured. No amounts had been recognized as revenue for any of these milestones for the three and six months ended June 30, 2016.

7. Commitments and Contingencies

Leases

The Company leases its office and research and development facility in Berkeley, California, under a non-cancelable operating lease. In February 2015, the Company amended its office lease agreement to increase the total square footage to approximately 25,000 square feet and extended the term of the lease to expire on December 31, 2018. The lease also contains an option to extend the lease for an additional two years.

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

During 2016, we established a letter of credit with Bank of America Merrill Lynch as security for the lease in the amount of $0.5 million. The letter of credit is collateralized by a certificate of deposit for $0.5 million which has been included in restricted cash in the consolidated balance sheet as of June 30, 2016.

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

Rent expense was $1.0 million and $0.2 million for the three months ended June 30, 2016 and 2015, respectively, and $1.2 million and $0.3 million for the six months ended June 30, 2016 and 2015. Under the terms of the lease agreements, the Company is also responsible for certain insurance, property tax and maintenance expenses. Future minimum payments under the Company’s office leases at June 30, 2016 are as follows (in thousands):

Year Ending December 31,	Amounts
2016 (remaining six months)	$	1,771
2017		3,652
2018		4,872
2019		4,647
2020		4,786
Thereafter		48,457
Total	$	68,185

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company 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 could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against 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 currently has directors’ and officers’ insurance.

Legal

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.

Other Commitments

The Company has 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 would only be obligated for the products or services that the Company had received at the time the termination became effective as well as non-cancelable and non-refundable payment obligations 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 would also be obligated to provide continued support for appropriate medical procedures at that site until completion or termination.

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8. Equity Incentive Plans

2015 Plan

In March 2015, the Company’s board of directors adopted and in April 2015 the Company’s stockholders approved the 2015 Equity Incentive Plan, or the 2015 Plan, which became effective upon the 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, 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.

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, 2016 the shares issuable under the 2015 Plan increased by 2,543,513. The Company had 6,483,623 shares available for future grant under the 2015 Plan as of June 30, 2016.

Stock option activity under the Company’s stock option plan was as follows:

	Options Outstanding
	Shares Available for Grant				Number of Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
										(In thousands)
Balance—December 31, 2015		4,810,271				9,931,229		$	5.29	$	229,591
Authorized		2,543,513				—
Granted		(878,160	)			878,160			12.36
Exercised		—				(214,828	)		1.14
Canceled		7,999		(1)		(42,161	)		6.72
Balance—June 30, 2016		6,483,623				10,552,400		$	5.96	$	81,122
Options exercisable—June 30, 2016						5,258,844		$	2.53	$	50,394
Options vested and expected to vest—June 30, 2016						10,457,538		$	5.84	$	81,122

⁽¹⁾ This excludes 34,162 canceled options for the six months ended June 30, 2016 initially granted from the legacy stock option plans. As these plans have been terminated, any options canceled are not added back to the existing option plan pool.

The aggregate intrinsic value represents the difference between the exercise price of the options and the closing price of the Company’s common stock. The Company’s closing stock price as reported on the NASDAQ as of June 30, 2016 was $11.31. The aggregate intrinsic value of options exercised for the three and six months ended June 30, 2016 was $0.4 million and $3.9 million, respectively.

2015 Employee Stock Purchase Plan

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

The number of shares of common stock initially reserved for issuance under the 2015 ESPP was 720,000 shares with an automatic annual increase to the shares issuable under the 2015 ESPP to the lower of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (ii) a lower number determined by the board of directors. On January 1, 2016 the shares issuable under the 2015 ESPP increased by 635,878. The Company had 1,259,761 shares available for future issuance under the 2015 ESPP as of June 30, 2016.

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Stock-based Compensation Expense

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Research and development	$	1,971	$	606	$	3,969	$	751
General and administrative		1,354		2,159		3,099		2,594
Total stock-based compensation expense	$	3,325	$	2,765	$	7,068	$	3,345

As of June 30, 2016, the total unrecognized compensation expense related to unvested options, net of estimated forfeitures, was $33.8 million, which the Company expects to recognize over an estimated weighted-average period of 2.5 years.

In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model. The fair value of stock option awards granted to employees was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the six months ended June 30, 2016:

	2015 Plan		2015 ESPP
	Six Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016		2015
Expected term (in years)	2.00 - 6.05	5.30 - 6.20	0.5		0.5
Volatility	73.0 - 75.0%	70.2 - 85.2%		73.8%		71.7%
Risk-free interest rate	1.25 - 1.72%	0.80 - 2.05%		0.36%		0.10%
Dividend yield	—%	—%	—%		—%

9. Income Taxes

Income tax expense for the three months ended June 30, 2016 and 2015 was approximately $1.5 million and zero, respectively, and $4.7 million and zero for the six months ended June 30, 2016 and 2015, respectively. The income tax expense recorded for the first half of 2016 primarily related to current and deferred federal income taxes.

The Company accounts for uncertain tax positions in accordance with ASC 740, Accounting for Income Taxes. As of June 30, 2016 and 2015, the total amount of unrecognized tax benefits was $1.4 million and $0.7 million, respectively. As of June 30, 2016 and 2015, $0.2 million and zero of unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate because the majority of benefits are in the form of deferred tax assets for which a full valuation allowance has been recorded.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2016 and 2015, the Company accrued no interest and penalties in the condensed consolidated balance sheets. There were no interest and penalties included in the condensed consolidated statements of operations for the three and six months ended June 30, 2016 and 2015. The Company does not expect the amount of existing unrecognized tax benefits to change significantly within the next 12 months.

The Company files income tax returns in the United States and the Netherlands. The federal and state income tax returns are open under the statute of limitations subject to tax examinations for the tax years ended December 31, 2010 through December 31, 2015. 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.   

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10. Net Income (Loss) per Common Share

Basic net income (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to dilutive stock options and warrants. The Company uses the treasury-stock method to compute diluted earnings per share with respect to its stock options and warrants. The following table sets forth a reconciliation of basic and diluted net income (loss) per share (in thousands except share and per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
Net income (loss)	$	2,296	$	(26,260	)	$	(26,531	)	$	(42,876	)
Shares used in computing basic net income (loss) per    common share		64,434,903		52,653,344			64,138,737			26,678,848
Add effect of dilutive securities:
Stock options		6,949,706		—			—			—
Common stock warrants		89,198		—			—			—
Shares used in computing diluted net income (loss) per    common share		71,473,807		52,653,344			64,138,737			26,678,848
Net income (loss) per common share, basic	$	0.04	$	(0.50	)	$	(0.41	)	$	(1.61	)
Net income (loss) per common share, diluted	$	0.03	$	(0.50	)	$	(0.41	)	$	(1.61	)

The following securities were excluded from diluted net income (loss) per common share because their inclusion would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Options to purchase common stock		2,061,539		9,581,168		10,552,400		9,581,168
Common stock warrants		2,664		968,541		97,621		968,541
Total		2,064,203		10,549,709		10,650,021		10,549,709

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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 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, 2015, 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 that involve risk and uncertainties, such as statements of our plans, objectives, expectations and intentions. As a result of many factors, including those factors set forth in the “Risk Factors” section of this report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Forward-Looking Statements

This discussion contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, strategies, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — “Risk Factors,” 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.

Overview

We are an immunotherapy company focused on the discovery, development and commercialization of therapies that transform the treatment of challenging diseases. Our technology platforms, which are designed to harness the body's natural immune system, are being investigated in cancer indications and have the potential to expand into autoimmune and infectious diseases. Immuno-oncology is an emerging field of cancer therapy that aims to activate the immune system in the tumor microenvironment to create and enhance anti-tumor immune responses, as well as to overcome the immuno-suppressive mechanisms that cancer cells have developed against the immune system. Recent developments in the field of immuno-oncology, including checkpoint inhibitors—therapies that have mechanisms focused on unmasking hidden cancer cells—have shown the potential to provide efficacy and extended survival, even in cancers where conventional therapies, such as surgery, chemotherapy and radiotherapy, have failed. The immunotherapy field is rapidly advancing with new immuno-oncology combinations that focus on strengthening therapeutic efficacy in a wide range of cancers. We intend to pursue a broad strategy of combining our technology platforms with conventional and novel immuno-oncology therapies, based on their mechanisms of action, safety profiles and versatility.

Our LADD (Live, Attenuated, Double-Deleted) technology platform is based on proprietary attenuated strains of Listeria that have been engineered to express tumor-associated antigens to induce specific and targeted immune responses. One of our LADD product candidates, CRS-207, expresses the antigen mesothelin and is currently being developed in unresectable malignant pleural mesothelioma, ovarian cancer, and pancreatic cancer. A second LADD agent is being evaluated in glioblastoma. We have also developed two LADD product candidates in collaboration with Janssen Biotech, Inc., or Janssen, targeting prostate and lung cancers.

Our STING Pathway Activator platform is designed to activate the intracellular Stimulator of Interferon Genes, or STING receptor, resulting in a potent tumor-specific immune response. Product candidates being developed through this platform to stimulate anti-tumor immunity are being advanced under our worldwide collaboration with Novartis Pharmaceuticals Corporation, or Novartis. The lead STING product candidate, ADU-S100, has entered into Phase 1 clinical testing in patients with cutaneously accessible metastatic solid tumors or lymphomas.

Our B-select monoclonal antibody platform includes a number of immune modulating assets in research and preclinical development. Agents from this platform, such as our anti-APRIL, anti-CTLA4 and anti-PD1, have the potential to yield novel immunotherapy combinations. We have intellectual property protection on our LADD and STING Pathway Activator technology platforms and each of our product candidates, which we believe we will maintain into the 2030s.

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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 convertible preferred stock, the issuance of convertible promissory notes, licensing agreements with pharmaceutical partners and revenue from government grants. We incurred net income of $2.3 million and a net loss of $26.3 million for the three months ended June 30, 2016 and 2015, respectively, and a net loss of $26.5 million and $42.9 million for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, our accumulated deficit was $127.4 million.

Financial Operations Overview

Revenue

We have not generated any revenue from product sales. Our revenue to date has been primarily derived from two research and license agreements we entered into with Janssen, a collaboration and license agreement we entered into with Novartis in March 2015, as well as research and development grants from the U.S. government. We recognize revenue from upfront payments under our Janssen and Novartis agreements ratably over the term of our estimated period of performance under the agreement. In addition to receiving upfront payments, we may also be entitled to milestone and other contingent payments upon achieving predefined objectives. Revenue from milestones, if they are nonrefundable and deemed substantive, are recognized upon successful accomplishment of the milestones. To the extent that non-substantive milestones are achieved and we have remaining performance obligations, milestones are deferred and recognized as revenue over the estimated remaining period of performance. We recognize revenue related to research and development grants when the related research expenses are incurred and our specific performance obligations under the terms of the respective contracts are satisfied.

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

Research and Development Expenses

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 our research and license agreement with Janssen. 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 absolute dollars in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates and technology platforms may be affected by a variety of factors including: the quality of our product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in achieving 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

General and administrative expenses include personnel costs, expenses for outside professional services and other allocated expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation. Outside professional 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 office and research and development facility.

Loss from Remeasurement of Fair Value of Warrants

Loss from remeasurement of fair value of warrants consists of losses from the remeasurement of the fair value of our liabilities related to our convertible preferred stock warrants and common stock warrants.

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Prior to the completion of our IPO in April 2015, our convertible preferred stock warrants were exercisable into shares that were contingently redeemable. Our common stock warrants were subject to performance conditions that could have resulted in the issuance of a variable number of shares. As such, these warrants were classified as liabilities in the condensed consolidated balance sheets at their estimated fair values, and we recorded the change in the estimated fair values each reporting period as loss from remeasurement of fair value of warrants. We continued to record adjustments to the estimated fair values of the convertible preferred stock warrants until they converted into common stock warrants upon the closing of the IPO. We also continued to record adjustments to the estimated fair value of our common stock warrants until the performance conditions lapsed in April 2015, at which time they were reclassified to additional paid-in capital.

Interest Income

Interest income consists of interest income from our cash equivalents and marketable securities.

Other (Loss) Income, Net

Other (loss) income, net, consists of foreign currency transaction gains and losses.

Provision for Income Taxes

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 U.S. Internal Revenue Service, or IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.

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Results of Operations

Comparison of the Three Months Ended June 30, 2016 and 2015

	Three Months Ended June 30,
	2016			2015			Change
	(in thousands)
Revenue:
Collaboration and license revenue	$	38,938		$	9,623		$	29,315
Grant revenue		41			260			(219	)
Total revenue		38,979			9,883			29,096
Operating expenses:
Research and development		26,882			13,533			13,349
General and administrative		8,700			5,882			2,818
Amortization of intangibles		140			—			140
Total operating expenses		35,722			19,415			16,307
Income (loss) from operations		3,257			(9,532	)		12,789
Loss from remeasurement of fair value of warrants		—			(16,735	)		16,735
Interest income		520			—			520
Other (loss) income, net		(9	)		7			(16	)
Income (loss) before income tax		3,768			(26,260	)		30,028
Provision for income taxes		1,472			—			1,472
Net income (loss)	$	2,296		$	(26,260	)	$	28,556

Revenue

Collaboration and license revenue was $38.9 million for the three months ended June 30, 2016, an increase of $29.3 million compared to the three months ended June 30, 2015. The increase was primarily due to the receipt of $35.0 million in connection with the achievement of a milestone under our agreement with Novartis in the second quarter of 2016.

Grant revenue was $41,000 for the three months ended June 30, 2016, a decrease of $0.2 million compared to the three months ended June 30, 2015, primarily due to grants expiring in 2015.

Research and Development Expenses

The following table summarizes our research and development expenses incurred during the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30,
	2016		2015		Change
	(in thousands)
Contract manufacturing	$	11,062	$	2,834	$	8,228
Compensation and related personnel costs		3,860		2,013		1,847
Contract research		3,166		306		2,860
Clinical development		2,969		2,546		423
Stock-based compensation expense		1,971		606		1,365
Outside professional services		1,566		843		723
Other research and development costs		1,264		833		431
Facility costs		826		123		703
Licensing fees		198		3,429		(3,231	)
Total research and development	$	26,882	$	13,533	$	13,349

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Research and development expenses were $27.0 million for the three months ended June 30, 2016, an increase of $13.3 million compared to the three months ended June 30, 2015. The increase was attributed to an $8.3 million increase in contract manufacturing expense primarily for GVAX Pancreas manufacturing activities. In addition, there was a $2.9 million increase in contract research expense primarily related to sponsored research grants made to UC Berkeley and a $1.8 million increase in personnel related expenses and a $1.4 million increase in stock-based compensation expense due to increased headcount. This was partially offset by a $3.2 million decrease in licensing fees paid in 2015.

General and Administrative Expenses

The following table summarizes our general and administrative expenses incurred during the three months ended June 30, 2016 and 2015:

	Three Months Ended June 30,
	2016		2015		Change
	(in thousands)
Compensation and related personnel costs	$	2,934	$	1,425	$	1,509
Outside professional services		2,674		1,341		1,333
Stock-based compensation expense		1,354		2,159		(805	)
Facility costs		968		319		649
Other general and administrative		770		638		132
Total general and administrative	$	8,700	$	5,882	$	2,818

General and administrative expenses were $8.7 million for the three months ended June 30, 2016, an increase of $2.8 million compared to the three months ended June 30, 2015. The increase was primarily due to growth of the company and the associated increased expenses of $1.5 million in personnel costs and $1.3 million in outside professional services including legal, audit and tax services.

Loss from Remeasurement of Fair Value of Warrants

There was no loss from remeasurement of fair value of warrants for the three months ended June 30, 2016, compared to $16.7 million for the three months ended June 30, 2015. In April 2015, all of the convertible preferred stock warrants and common stock warrants were no longer subject to remeasurement due to the completion of our IPO or expiration of the performance condition and the total fair value was expensed on the statement of operations and reclassified to additional paid in capital.

Interest Income

Interest income was $0.5 million for the three months ended June 30, 2016, an increase of $0.5 million compared to the three months ended June 30, 2015. Interest income earned in 2016 relates to interest earned from our funds invested in cash equivalents and marketable securities.

Provision for Income Taxes

Provision for income taxes was $1.5 million for the three months ended June 30, 2016, primarily related to current and deferred federal income taxes. There was no provision for income taxes in the second quarter of 2015.

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Comparison of the Six Months Ended June 30, 2016 and 2015

	Six Months Ended June 30,
	2016			2015			Change
	(in thousands)
Revenue:
Collaboration and license revenue	$	42,921		$	18,861		$	24,060
Grant revenue		88			596			(508	)
Total revenue		43,009			19,457			23,552
Operating expenses:
Research and development		47,809			24,179			23,630
General and administrative		17,699			12,092			5,607
Amortization of intangibles		277			—			277
Total operating expenses		65,785			36,271			29,514
Loss from operations		(22,776	)		(16,814	)		(5,962	)
Loss from remeasurement of fair value of warrants		—			(26,077	)		26,077
Interest income		974			—			974
Other (loss) income, net		(31	)		15			(46	)
Loss before income tax		(21,833	)		(42,876	)		21,043
Provision for income taxes		4,698			—			4,698
Net loss	$	(26,531	)	$	(42,876	)	$	16,345

Revenue

Collaboration and license revenue was $42.9 million for the six months ended June 30, 2016, an increase of $24.1 million compared to the six months ended June 30, 2015. The increase was primarily due to the receipt of $35.0 million in connection with the achievement of a milestone under our agreement with Novartis in the second quarter of 2016. This increase was partially offset by the decrease in amortization of upfront license revenue from Janssen collaborations in 2015.

Grant revenue was $88,000 for the six months ended June 30, 2016, a decrease of $0.5 million compared to the six months ended June 30, 2015, primarily due to grants expiring in 2015.

Research and Development Expenses

The following table summarizes our research and development expenses incurred during the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30,
	2016		2015		Change
	(in thousands)
Contract manufacturing	$	18,925	$	4,430	$	14,495
Compensation and related personnel costs		7,423		5,764		1,659
Clinical development		6,706		5,138		1,568
Stock-based compensation expense		3,969		751		3,218
Contract research		3,902		486		3,416
Outside professional services		2,941		1,377		1,564
Other research and development costs		2,248		2,423		(175	)
Facility costs		1,122		215		907
Licensing fees		573		3,595		(3,022	)
Total research and development	$	47,809	$	24,179	$	23,630

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Research and development expenses were $47.8 million for the six months ended June 30, 2016, an increase of $23.6 million compared to the six months ended June 30, 2015. The increase was primarily attributed to a $14.5 million increase in contract manufacturing expense primarily for GVAX Pancreas manufacturing activities. The increase was also attributable to a $3.4 million increase in contract research expense primarily related to sponsored research grants made to UC Berkeley, a $3.2 million increase in stock-based compensation expense, a $1.7 million increase in personnel related expenses due to increased headcount and a $1.6 million increase in clinical development expense associated with our ongoing trials in pancreatic cancer, ovarian cancer and mesothelioma. These increases were partially offset by a $3.0 million decrease in licensing fees paid in 2015.

General and Administrative Expenses

The following table summarizes our general and administrative expenses incurred during the six months ended June 30, 2016 and 2015:

	Six Months Ended June 30,
	2016		2015		Change
	(in thousands)
Compensation and related personnel costs	$	5,971	$	4,053	$	1,918
Outside professional services		5,444		4,018		1,426
Stock-based compensation expense		3,099		2,594		505
Facility costs		1,604		546		1,058
Other general and administrative		1,581		881		700
Total general and administrative	$	17,699	$	12,092	$	5,607

General and administrative expenses were $17.7 million for the six months ended June 30, 2016, an increase of $5.6 million compared to the six months ended June 30, 2015. The increase was primarily due to continued growth of the company and the associated increased expenses of $1.9 million in personnel costs, $1.4 million in outside professional services including legal, audit and tax services and $1.1 million for the expansion of our facilities.

Loss from Remeasurement of Fair Value of Warrants

There was no loss from remeasurement of fair value of warrants for the six months ended June 30, 2016, compared to $26.1 million for the six months ended June 30, 2015. In April 2015, all of the convertible preferred stock warrants and common stock warrants were no longer subject to remeasurement due to the IPO or expiration of the performance condition and the total fair value was expensed on the statement of operations and reclassified to additional paid in capital.

Interest Income

Interest income was $1.0 million for the six months ended June 30, 2016, an increase of $1.0 million compared to the six months ended June 30, 2015. The interest income earned in 2016 relates to interest earned from our funds invested in cash equivalents and marketable securities.

Provision for Income Taxes

Provision for income taxes was $4.7 million for the six months ended June 30, 2016, primarily related to current and deferred federal income taxes. There was no provision for income taxes for the six months ended June 30, 2015.

Liquidity and Capital Resources

As of June 30, 2016, we had cash and cash equivalents and marketable securities of $396.9 million. We believe that our available cash and cash equivalents and marketable securities and anticipated funding from our collaboration agreements will be sufficient to fund our planned operations through 2018. We have based our cash sufficiency estimate on assumptions that may prove to be incorrect. If our assumptions prove to be incorrect, we could consume our available capital resources sooner than we currently expect or in excess of amounts that we currently expect, which could adversely affect our development activities.

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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. We may also consider entering into additional collaboration arrangements or selectively partnering for clinical development and commercialization. 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, results of operations, financial condition and future prospects.

Cash Flows

The following table summarizes our cash flows for the periods indicated:

	Six Months Ended June 30,
	2016			2015
	(in thousands)
Net cash provided by (used in):
Operating activities	$	(25,890	)	$	173,725
Investing activities		(21,678	)		(1,165	)
Financing activities		3,050			173,851
Net change in cash and cash equivalents	$	(44,518	)	$	346,411

Operating Activities

Net cash used in operating activities was $25.9 million for the six months ended June 30, 2016, compared to net cash provided by operating activities of $173.7 million for the six months ended June 30, 2015. The decrease in net cash provided by operating activities was primarily due to the upfront payment of $200.0 million received from Novartis in the first half of 2015.

Investing Activities

Net cash used in investing activities was $21.7 million for the six months ended June 30, 2016, compared to $1.2 million for the six months ended June 30, 2015. The increase in net cash used in investing activities was primarily due to increase in purchase of $11.1 million of marketable securities and purchase of $10.5 million of property and equipment primarily related to leasehold improvements.

Financing Activities

Net cash provided by financing activities was $3.0 million for the six months ended June 30, 2016, compared to $173.9 million for the six months ended June 30, 2015. The decrease was primarily related to $174.0 million net proceeds from the issuance of our convertible preferred stock and the IPO and private placement during the six months ended June 30, 2015.

Critical Accounting Policies and Significant Judgments and Estimates

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 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.

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There have been no material changes to our critical accounting policies during the three months ended June 30, 2016 as compared to the critical accounting policies disclosed in our Annual Report on Form 10-K for the year ended December 31, 2015.

Off-Balance Sheet Arrangements

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

Contractual Obligations and Other Commitments

During the six months ended June 30, 2016, we exercised our option to lease additional space under our new lease agreement for office/laboratory space in Berkeley, California. Refer to Note 7 of the Condensed Consolidated Notes to the Financial Statements for more information. The following table summarizes our contractual obligations as of June 30, 2016:

	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	$	3,518	$	8,802	$	9,854	$	46,011	$	68,185
Total contractual obligations	$	3,518	$	8,802	$	9,854	$	46,011	$	68,185

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Management believes there have been no material changes to our quantitative and qualitative disclosures about market risks during the three months ended June 30, 2016 compared to those discussed in our Annual Report on Form 10-K for the year ended December 31, 2015.

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

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

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting during the quarter ended June 30, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent limitation on the effectiveness of internal control.

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 improvements will be sufficient to provide us with effective internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

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.

Item 1A. Risk Factors.

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information contained in this Quarterly Report on Form 10-Q, including our 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.

Risks Related to Our Business

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

We are a clinical-stage biopharmaceutical 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 adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have financed our operations primarily through the sale of equity securities and convertible debt securities. 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 reported net income of $2.3 million and a net loss of $26.3 million for the three months ended June 30, 2016 and 2015, respectively, and a net loss of $26.5 million and $42.9 million for the six months ended June 30, 2016 and 2015, respectively. As of June 30, 2016, we had an accumulated deficit of $127.4 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates.

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

We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed could force us to delay, limit, reduce or terminate our product development or commercialization efforts.

Our operations have consumed substantial amounts of cash since inception. As of June 30, 2016, our cash and cash equivalents and marketable securities were $396.9 million. We expect to continue to spend substantial amounts to continue the development of our product candidates. If we are able to gain regulatory approval for any of our product candidates, we will require significant additional amounts of cash in order to launch and commercialize any such product candidates. In addition, other unanticipated costs may arise. Because the design and outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates.

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Our future capital requirements depend on many factors, including:

· the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies and clinical trials;

· the timing of, and costs associated with, obtaining regulatory approvals for our product candidates if clinical trials are successful;

· the cost of commercialization activities for our product candidates, if any of our product candidates is approved for sale, including marketing, sales and distribution costs;

· the cost of manufacturing our product candidates for clinical trials in preparation for regulatory approval and in preparation for commercialization and product launch;

· our ability to establish and maintain, strategic licensing or other arrangements and the financial terms of such agreements;

· the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

· the timing, receipt and amount of sales of, or royalties on, our future products, if any;

· the emergence of competing cancer therapies and combinations; and

· other adverse market developments.

We do not have any committed external source of funds or other support for our development efforts other than our license agreements, including our license agreements with Janssen, which may be terminated by Janssen upon delivery of notice, and our collaboration and license agreement with Novartis, which may be terminated by Novartis at any time after March 19, 2018 upon 180 days’ notice. 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, 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.

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

Our product candidates, including CRS-207, are based on novel technologies and the development and regulatory approval pathway for such product candidates is unproven and may never lead to marketable products.

We do not have any products that have gained regulatory approval. Our immuno-oncology technology platforms are designed to leverage the patient’s immune system to slow the growth and spread of, or eliminate, tumor cells. Any products we develop may not effectively modulate the immune response to slow the spread of or eliminate cancer cells. The scientific evidence to support the feasibility of immuno-oncology product candidates is preliminary and limited.  Our business and future success depend on our ability to obtain regulatory approval of and then successfully commercialize our product candidates, including CRS-207.  Advancing these novel therapies creates significant challenges for us, including, among others:

· obtaining approval from regulatory authorities to conduct clinical trials with our product candidates;

· successful completion of preclinical studies and successful enrollment of clinical trials;

· successful completion of our clinical trials, including a favorable risk-benefit outcome;

· receipt of marketing approvals from the U.S. Food and Drug Administration, or FDA, and similar regulatory authorities outside the United States;

· obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our product candidates;

· establishing commercial manufacturing, supply and distribution arrangements;

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· establishing a commercial infrastructure;

· acceptance of our products by patients, the medical community and third-party payors;

· establishing market share while competing with other therapies;

· successfully executing our pricing and reimbursement strategy;

· a continued acceptable safety and adverse event profile of our products following regulatory approval; and

· qualifying for, identifying, registering, maintaining, enforcing and defending intellectual property rights and claims covering our products.

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 such regulatory approval for any of our product candidates. If we are unable to develop or receive marketing approval for CRS-207 or our product candidates in a timely manner or at all, our business, financial condition and results of operations may be materially adversely affected.

We may not be successful in our efforts to use and expand our technology platforms to build a pipeline of product candidates.

A key element of our strategy is to use and expand our technology platforms to build a pipeline of product candidates, combine our product candidates with existing and novel therapies, and progress these product candidates and combinations through clinical development for the treatment of various diseases. Although our research and development efforts to date have resulted in a pipeline of product candidates directed at various cancers, we may not be able to develop product candidates that are safe and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify may not be suitable for clinical development, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not continue to successfully develop and begin to commercialize product candidates, we will face difficulty in obtaining product revenues in future periods.

Previously reported clinical trial results with CRS-207 and GVAX Pancreas in pancreatic cancer may make it more challenging for us to advance our pancreatic cancer program.

We have completed two Phase 2 trials with CRS-207 and GVAX Pancreas, a cellular vaccine product candidate, in pancreatic cancer.  In a randomized, controlled 93-patient 2-arm Phase 2a clinical trial in metastatic pancreatic cancer patients, CRS-207 and GVAX Pancreas demonstrated a statistically significant improvement in overall survival versus GVAX Pancreas alone. The trial met the primary efficacy endpoint of overall survival at an interim analysis and was stopped upon recommendation from the Data Monitoring Committee. During the second quarter of 2016, we completed the Phase 2b ECLIPSE trial for patients with metastatic pancreatic cancer who had failed two or more prior therapies in the metastatic setting (third line plus). The trial did not meet its primary endpoint of an improvement in overall survival of patients receiving CRS-207 in combination with GVAX Pancreas compared to patients receiving chemotherapy. The open-label randomized, controlled 3-arm trial evaluated the safety, immune response and efficacy of the combination immunotherapy of CRS-207 with GVAX Pancreas, compared to chemotherapy. CRS-207 alone was also evaluated.

An investigator-sponsored Phase 2 trial in pancreatic cancer called STELLAR is ongoing. This randomized, controlled trial is expected to enroll 102 adults with metastatic pancreatic cancer who had received one prior chemotherapy to treat metastatic disease (2^nd line).  The trial includes two arms: Arm A with CRS-207 and GVAX Pancreas as well as the anti-PD-1 checkpoint inhibitor, nivolumab, and Arm B with CRS-207 and GVAX Pancreas. Based on the results of the ECLIPSE study and in consultation with the Data Monitoring Committee, enrollment in Arm B stopped prior to full enrollment, but enrollment in Arm A continues until completion. Patients on both study arms are eligible to continue to receive treatment through completion of study.

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 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. The results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials. For example, although CRS-207 and GVAX Pancreas

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generated positive results in our Phase 2a metastatic pancreatic cancer study when compared to GVAX Pancreas alone and evaluated in 2^nd line or greater; however, CRS-207 and GVAX Pancreas failed to meet the primary endpoint of an improvement in overall survival for patients with metastatic pancreatic cancer (3^rd line and greater) in our Phase 2b ECLIPSE trial when compared to chemotherapy. There is typically an extremely high rate of attrition from the failure of product candidates proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy profile despite having progressed through preclinical studies and initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials. We cannot be certain that we will not face similar setbacks. Most product candidates that commence clinical trials are never approved as commercial products.

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. Clinical trials can be delayed for a variety of reasons, including delays related to:

· obtaining regulatory approval to commence a trial;

· reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and clinical trial sites, the terms of which can be subject to extensive negotiation and may vary significantly among different CROs and trial sites;

· obtaining institutional review board, or IRB, approval at each site;

· recruiting suitable patients to participate in a trial and achieving an acceptable distribution of such patients based on treating institution and geography;

· patients not completing a trial or not completing post-treatment follow-up;

· clinical sites deviating from trial protocol, instructions or dropping out of a trial;

· adding new clinical trial sites; or

· manufacturing sufficient quantities of product candidate for use in clinical trials.

We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other regulatory authorities. Such authorities may impose such a suspension or termination due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, 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.

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

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

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

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Our product candidates may cause undesirable side effects or may have other properties that could halt their clinical development, prevent their regulatory approval, limit their commercial potential, if approved, or result in significant negative consequences.

Undesirable side effects caused by our product candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities. 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 CRS-207 have experienced drug-related side effects including Grade 3 adverse events, or AEs, which are considered moderate, and Grade 4 AEs which are considered severe. In our clinical trials of CRS-207 and GVAX Pancreas to date, the most frequent drug-related Grade 3 or 4 AE was transient lymphopenia (an abnormally low level of white blood cells), with 6.1% (15/245) of patients experiencing Grade 3 or higher lymphopenia. Transient lymphopenia is expected based on prior nonclinical studies and CRS-207’s mechanism of action, and the AEs of lymphopenia were self-correcting or did not reveal an unexpected pattern of toxicity. We currently do not plan to alter our development plan for CRS-207 based on these observed AEs of lymphopenia. There were no, other Grade 3 or Grade 4 AEs with frequencies higher than three percent in 245 patients with pancreatic cancer. The most common Grade 3/4 AEs were transient lymphopenia, hypertension, hypotension, chills, fevers, and elevated liver enzymes. One Grade 3 serious, unexpected AE of listeriosis was reported. At the request of the patient and the investigator, this patient continued to receive study treatment.

If unacceptable side effects arise in the development of our product candidates, we could suspend or terminate our clinical trials or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials or deny approval of our product candidates for any or all targeted indications. Treatment-related side effects could also affect patient recruitment or the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, these side effects may not be appropriately recognized or managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our clinical trials and upon any commercialization of any of our product candidates. Inadequate training in recognizing or managing the potential side effects of our product candidates could result in patient injury or death. In addition, if side effects are observed in competing product candidates that are perceived to have similarities to ours, such as competing listeria-based vaccines or other more general approaches to immuno-oncology, regulators or patients may infer that our product candidates could cause similar side effects. Any of these occurrences may harm our business, financial condition and prospects significantly.

Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by such products, a number of potentially significant negative consequences could result, including:

· regulatory authorities may withdraw approvals of such product;

· regulatory authorities may require additional warnings on the label;

· FDA could require a Risk and Evaluation Medication Strategy or REMS which could require the creation and management of a medication guide, communication plan or other elements to ensure safe use;

· we may be required to create a medication guide outlining the risks of such side effects for distribution to patients;

· we could be sued and held liable for harm caused to patients; and

· our reputation may suffer.

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

If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise adversely affected.

The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The enrollment of patients depends on many factors, including:

· the patient eligibility criteria defined in the protocol;

· the size of the patient population required for analysis of the trial’s primary endpoints;

· the proximity of patients to study sites;

· the design of the trial;

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· our ability to recruit clinical trial investigators with the appropriate competencies and experience;

· clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating or clinical trial results;

· our ability to obtain and maintain patient consents; and

· the risk that patients enrolled in clinical trials will drop out of the trials before completion.

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

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.

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

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

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

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

Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers who have received one or more prior treatments, and 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 market research, and may prove to be incorrect. Further, new studies may change the estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, the potentially addressable patient population for our product candidates may be limited or may not be amenable to treatment with our product candidates. Even if we obtain significant market share for our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including to be used as first or second line therapy.

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

Under the Orphan Drug Act, the FDA may grant orphan drug designation to a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has

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orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full Biologics License Application, or BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.

In the European Union, orphan drug designation may be granted to products that are intended to treat life-threatening or debilitating conditions that affect less than 5 out of 10,000 people (or if there is no reasonable expectation that returns on a marketed product justify the expenses required to develop the product) and, if treatment exists, the new product must provide significant benefit over existing therapies; these conditions must be met at the time of a marketing authorization application in order to receive the orphan designation benefits conferred to an approved product.  In the European Union, orphan designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following drug or biological product approval. This period may be reduced to 6 years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.

Even though we have received orphan drug designation for both CRS-207 and GVAX Pancreas for the treatment of pancreatic cancer and for CRS-207 for the treatment of mesothelioma, in the European Union the conditions under which it was granted may not be applicable at the time of a marketing authorization application or we may not be the first to obtain marketing approval of either product candidate for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we intend to seek orphan drug designation for other product candidates, we may never receive such designations.

We have obtained Breakthrough Therapy designation from the FDA for the combination of CRS-207 and GVAX Pancreas in pancreatic cancer, but we may be unable to maintain the benefits associated with this designation.

In 2012, the FDA established a new Breakthrough Therapy designation, which is intended to expedite the development and review of products that treat serious or life-threatening conditions where “preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.” The designation of a product candidate as a Breakthrough Therapy provides potential benefits that include but are not limited to more frequent meetings with the FDA to discuss the development plan for the product candidate and ensure collection of appropriate data needed to support approval; more frequent written correspondence from FDA about such things as the design of the proposed clinical trials and use of biomarkers; intensive guidance on an efficient drug development program; organizational commitment involving senior managers; and eligibility for rolling review and priority review. Breakthrough Therapy designation does not change the standards for product approval. The FDA can also rescind Breakthrough Therapy designation if the designation is no longer supported by subsequent data. We have obtained Breakthrough Therapy designation for our CRS-207 and GVAX Pancreas combination, but we may fail to maintain the designation. In addition, while we intend to seek Breakthrough Therapy designation for other product candidates, we may never receive such designation.

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

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

· The manufacturing of drug products is susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment or vendor or operator error. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If foreign microbial, viral or other contaminations are discovered in our product candidates or in the manufacturing facilities in which our products are made, these manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination;

· The manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor shortages, natural disasters, power failures and numerous other factors;

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· We and our contract manufacturers must comply with the FDA’s current good manufacturing practices, or cGMP, regulations and guidelines. Any failure to follow cGMP or other regulatory requirements or any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our products as a result of a failure of our facilities or the facilities or operations of third parties to comply with regulatory requirements or pass any regulatory authority inspection could significantly impair our ability to develop and commercialize our products, including leading to significant delays in the availability of products for our clinical studies or the termination or hold on a clinical study, or the delay or prevention of a filing or approval of marketing applications for our product candidates. Significant noncompliance could also result in the imposition of sanctions, including fines, injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain regulatory compliance, we may not be permitted to market our products and/or may be subject to product recalls, seizures, injunctions, or criminal prosecution; and

· Our LADD product candidates, GVAX, ADU-S100 and antibody product candidates are temperature sensitive and must be frozen during storage and transportation, which adds complexity and expense. We rely on third parties to provide controlled temperature storage and shipping. If any third-party provider fails to maintain proper temperature control or if a shipment is delayed in transit for a prolonged period of time, the product could become unsuitable for use.

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 adversely affect our ability to operate our business and our 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 sales, marketing or distribution capabilities and have no experience in marketing products. We intend to develop an in-house marketing 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 marketing our product candidates internationally could materially adversely affect our business.

We plan to seek regulatory approval of our product candidates outside of the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:

· differing regulatory requirements in foreign countries;

· unexpected changes in tariffs, trade barriers, price and exchange controls and other regulatory requirements;

· economic weakness, including inflation, or political instability in particular foreign economies and markets;

· compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

· foreign taxes, including withholding of payroll taxes;

· foreign currency fluctuations, which could result in increased operating expenses and reduced revenue, and other obligations incident to doing business in another country;

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· difficulties staffing and managing foreign operations;

· workforce uncertainty in countries where labor unrest is more common than in the United States;

· potential liability under the Foreign Corrupt Practices Act of 1977 or comparable foreign regulations;

· challenges to and protecting our contractual and intellectual property rights, including in those foreign countries that do not respect and protect intellectual property rights to the same extent as the United States;

· production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

· business interruptions resulting from geo-political actions, including war and terrorism.

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

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

The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Many major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions continue to invest time and resources in developing novel approaches to immuno-oncology. Promising results have spurred significant competition from major pharmaceutical and biotechnology companies alike. Our competitors in the field of immuno-oncology and cancer vaccines include AdaptImmune Therapeutics, PLC, Advaxis, Inc., AstraZeneca PLC, Bristol Myers-Squibb Company, Celgene Corporation, GlaxoSmithKline plc, Idera Pharmaceuticals, Inc., Immune Design Corp., Incyte Corporation, Merck & Co., Inc., Merrimack Pharmaceuticals, Inc., , Novartis AG, Pfizer Inc., Roche Holding AG, Sanofi SA, and Bayer Healthcare, 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 price of our competitors’ products could limit the demand and the price we are able to charge for our product candidates. We may not be able to implement our business plan if 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 Scientific Officer and our Chief Operating Officer. 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 man” insurance policies on the lives of these individuals or the lives of any of our other employees.

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

As of June 30, 2016, we had 131 full-time employees, including 97 employees engaged in research and development. As our development and commercialization plans and strategies develop, and as we transition into operating as a public company, 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:

· identifying, recruiting, integrating, maintaining and motivating additional employees;

· managing our internal development efforts effectively, including the clinical and FDA review process for our product candidates, while complying with our contractual obligations to contractors and other third parties; and

· improving our operational, financial and management controls, reporting systems and procedures.

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

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including substantially all aspects of regulatory approval, clinical management, and manufacturing. We cannot assure you that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis or reasonable economic terms when needed, or at all. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be extended, delayed or terminated, 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 or consultants, may fail or suffer security breaches.

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

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

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

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

We are exposed to the risk that our employees, independent contractors, consultants, commercial partners and vendors may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (1) the laws of the FDA and other similar foreign regulatory bodies, including those laws requiring the reporting of true, complete and accurate information to such regulators; (2) manufacturing standards; (3) healthcare fraud and abuse laws in the United States and similar foreign fraudulent misconduct laws; or (4) laws that require the true, complete and accurate reporting of financial information or data. If we obtain FDA approval of any of our product candidates and begin commercializing those products in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commissions, certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.

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

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

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

· the clinical indications for which our product candidates are approved;

· physicians, hospitals, cancer treatment centers and patients considering our product candidates as a safe and effective treatment;

· the potential and perceived advantages of our product candidates over alternative treatments;

· the prevalence and severity of any side effects;

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

· product labeling or product insert requirements of the FDA or other regulatory authorities, including limitations or warnings;

· the timing of market introduction of our product candidates as well as competitive products;

· the cost of treatment in relation to alternative treatments;

· the availability of adequate coverage, reimbursement and pricing by third-party payors and government authorities;

· the willingness of patients to pay out-of-pocket in the absence of coverage by third-party payors and government authorities;

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· adverse publicity or ethical or social controversies related to the use of our technologies or similar technologies;

· relative convenience and ease of administration, including as compared to alternative treatments and competitive therapies; and

· the effectiveness of our sales and marketing efforts.

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

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

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

· decreased demand for our product candidates;

· injury to our reputation;

· withdrawal of clinical trial participants;

· initiation of investigations by regulators;

· costs to defend the related litigation;

· a diversion of management’s time and our resources;

· substantial monetary awards to trial participants or patients;

· product recalls, withdrawals or labeling, marketing or promotional restrictions;

· loss of revenue;

· exhaustion of any available insurance and our capital resources;

· the inability to commercialize any product candidate; and

· a decline in our share price.

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

We currently hold $5.0 million in product liability insurance in the aggregate, which we believe is customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance at a reasonable cost or in an amount adequate to satisfy any liability that may arise, if at all. Our insurance policy contains various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise. In addition, if we are unable to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, the commercialization of products we develop, alone or with corporate collaborators could be delayed or inhibited.

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Risks Related to Our Reliance on Third Parties

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

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

Our commercialization strategy for our product candidates may depend on our ability to enter into agreements with collaborators to obtain assistance and funding for the development and potential commercialization of our product candidates in the territories in which we seek to partner. Despite our efforts, we may be unable to secure additional collaborative licensing or other arrangements that are necessary for us to further develop and commercialize our product candidates. Supporting diligence activities conducted by potential collaborators and negotiating the financial and other terms of a collaboration agreement are long and complex processes with uncertain results. Even if we are successful in entering into one or more collaboration agreements, collaborations may involve greater uncertainty for us, as we have less control over certain aspects of our collaborative programs than we do over our proprietary development and commercialization programs. For example, under our collaboration and license agreement with Novartis, we are responsible for a share of the worldwide joint development costs, which may be significant. If we elect to reduce our share of development funding as provided for under the agreement, our share in profits would decrease or convert to a royalty. We may determine that continuing a collaboration under the terms provided is not in our best interest, and we may terminate the collaboration. Our potential future collaborators could delay or terminate their agreements, and as a result our product candidates may never be successfully commercialized.

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

We rely and will rely on third parties to conduct our clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

We depend and plan to continue to depend upon independent investigators, other third parties and collaborators, such as universities, medical institutions, CROs and strategic partners, to conduct our preclinical and clinical trials under agreements with us. We have to negotiate budgets and contracts with CROs and study sites, which may result in delays to our development timelines and increased costs. We rely and plan to continue relying heavily on these third parties over the course of our clinical trials, and we control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities. We and these third parties are required to comply with good clinical practices, or GCPs, which are regulations and guidelines enforced by the FDA and comparable foreign regulatory authorities for product candidates in clinical development. Regulatory authorities enforce these GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If we or any of these third parties fail to comply with applicable GCP regulations, 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, such regulatory authorities

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will determine that any of our clinical trials comply with the GCP regulations. In addition, our clinical trials must be conducted with biologic product produced under cGMPs regulations and will require a large number of test patients. Our failure or any failure by these third parties to comply with these regulations or to recruit a sufficient number of patients may require us to repeat clinical trials, which would delay the 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.

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 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.

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 adverse impact on our business, financial condition and prospects.

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

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

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

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

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

· We may be unable to identify manufacturers on acceptable terms or at all.

· Our third-party manufacturers might be unable to timely formulate and manufacture our product or produce the quantity and quality required to meet our clinical and commercial needs, if any.

· Contract manufacturers may not be able to execute our manufacturing procedures appropriately.

· Our future contract manufacturers may not perform as agreed or may not remain in the contract manufacturing business for the time required to supply our clinical trials or to successfully produce, store and distribute our products.

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· Manufacturers are subject to ongoing periodic unannounced inspection by the FDA and corresponding state agencies to ensure strict compliance with cGMP and other government regulations and corresponding foreign standards. We do not have control over third-party manufacturers’ compliance with these regulations and standards.

· We may not own, or may have to share, the intellectual property rights to any improvements made by our third-party manufacturers in the manufacturing process for our products.

· Our third-party manufacturers could breach or terminate their agreement with us.

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

The manufacture of medical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biologic products often encounter difficulties in production, particularly in scaling up and validating initial production and absence of contamination. These problems include difficulties with production costs and yields, quality control, including stability of the product, quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered in our supply of our product candidates or in the manufacturing facilities, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We cannot assure you that any stability or other issues relating to the manufacture of our product candidates will not occur in the future. Additionally, our manufacturers may experience manufacturing difficulties due to resource constraints or as a result of labor disputes or unstable political environments. If our manufacturers were to encounter any of these difficulties, or otherwise fail to comply with their contractual obligations, our ability to provide our product candidates to patients in clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated with maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.

We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and we may not realize the benefits of such alliances or licensing arrangements.

We may form or seek strategic alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third parties that we believe will complement or augment our development and commercialization efforts with respect to our product candidates and any future product candidates that we may develop. Any of these relationships may require us to incur non-recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we face significant competition in seeking appropriate strategic partners and the negotiation process is time-consuming and complex. Moreover, we may not be successful in our efforts to establish a strategic partnership or other alternative arrangements for our product candidates because they may be deemed to be at too early of a stage of development for collaborative effort and third parties may not view our product candidates as having the requisite potential to demonstrate safety and efficacy. If we license products or businesses, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new strategic partnership agreements related to our product candidates could delay the development and commercialization of our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results of operations.

We may not realize the benefits of acquisitions, including our acquisition of Aduro Biotech Europe, or other strategic transactions.

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

· unanticipated liabilities related to acquired companies;

· difficulties integrating acquired personnel, technologies and operations into our existing business;

· retention of key employees;

· diversion of management time and focus from operating our business to management of strategic alliances or joint ventures or acquisition integration challenges;

· increases in expenses and reductions in our cash available for operations and other uses;

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· disruption in our relationships with collaborators or suppliers as a result of such a transaction; and

· possible write-offs or impairment charges relating to acquired businesses.

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

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

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

Risks Related to Government Regulation

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

The time required to obtain approval by the FDA and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not previously submitted a BLA or NDA to the FDA, or similar marketing applications filings to comparable foreign authorities. A BLA or NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety, purity and potency, or safety and effectiveness 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 product candidates regardless of cancer type or origin, which the FDA may have difficulty accepting if our clinical trials only involved cancers of certain origins. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive and lengthy, and approval may not be obtained.

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

· the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;

· we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication;

· the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

· we may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

· the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from preclinical studies or clinical trials;

· the data collected from clinical trials of our product candidates may not be sufficient to support the submission of a BLA or other submission or to obtain regulatory approval in the United States or elsewhere;

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· the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; or

· 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.

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.

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 and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our product candidates.

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or the conditions of approval, or contain requirements for potentially costly post-market testing and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a 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, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

· restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or voluntary or mandatory product recalls;

· fines, warning letters or holds on clinical trials;

· refusal by the FDA to approve pending applications or supplements to approved applications filed by us or suspension or revocation of license approvals;

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· product seizure or detention, or refusal to permit the import or export of our product candidates; and

· injunctions or the imposition of civil or criminal penalties.

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

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

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

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

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

· a covered benefit under its health plan;

· safe, effective and medically necessary;

· appropriate for the specific patient;

· cost-effective; and

· neither experimental nor investigational.

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

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

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

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to health care systems that could impact our ability to sell our products profitably. In particular, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the Affordable Care Act, was enacted. The Affordable Care Act and its implementing regulations, among other things,

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subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, provided incentives to programs that increase the federal government’s comparative effectiveness research and established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2024 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

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

· the demand for our product candidates, if we obtain regulatory approval;

· our ability to set a price that we believe is fair for our products;

· our ability to generate revenue and achieve or maintain profitability;

· the level of taxes that we are required to pay; and

· the availability of capital.

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.

Our current and future relationships with customers and third-party payors in the United States and elsewhere may 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 criminal sanctions, civil penalties, contractual damages, reputational harm, administrative burdens and diminished profits and future earnings.

Healthcare providers, physicians and third-party payors in the United States and elsewhere will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose 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 may constrain the business or financial arrangements and relationships through which we sell, market and distribute any drugs for which we obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by the 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:

· the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act;

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· federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment or approval from Medicare, Medicaid, or other third-party payors that are false or fraudulent or knowingly making a false statement to improperly avoid, decrease or conceal an obligation to pay money to the federal government;

· the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created federal criminal statutes that prohibit knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements in connection with the delivery of, or payment for, healthcare benefits, items or services relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity can be found guilty of violating these statutes without actual knowledge of the statutes or specific intent to violate them;

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

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

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

· analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and state and foreign laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it is possible that some of our business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, disgorgement, imprisonment, exclusion from participation in federal and state healthcare programs and the curtailment or restricting of our operations, any of which could harm our ability to operate our 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 to foreign equivalents of the healthcare laws mentioned above, among other foreign laws.

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Risks Related to Our Intellectual Property

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

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

The patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. The steps we or our licensors have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary information or infringement of our intellectual property rights, both inside 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 issued patents or those licensed to us and those that may be granted under future issued patents may not provide us with the proprietary protection or competitive advantages we are seeking. If we or our licensors are unable to obtain and maintain patent protection for our technology and products, or if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize technology and products similar or superior to ours, and our ability to successfully commercialize our technology and products may be adversely affected. It is also possible that we or our licensors will fail to identify patentable aspects of inventions made in the course of our development and commercialization activities before it is too late to obtain patent protection on them.

With respect to patent rights, we do not know whether any of the pending patent applications for any of our compounds or biologic products will result in the issuance of patents that effectively protect our technology or products, or if any of our issued patents or if any of our or our licensors’ issued patents will effectively prevent others from commercializing competitive technologies and products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until 18 months after filing or in some cases not at all, until they are issued as a patent. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned or licensed patents or pending patent applications, 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 the technology claimed in such 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 may be challenged in the courts or patent offices in the United States and abroad. Such challenges may result in the loss of patent protection, the narrowing of claims in such patents or the invalidity or unenforceability of such patents, 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 our technology and products. Protecting against the unauthorized use of our or our licensor’s patented technology, trademarks and other intellectual property rights is expensive, difficult and may in some cases not be possible. In some cases, it may be difficult or impossible to detect third-party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, and proving any such infringement may be even more difficult. For example, two of our patents, U.S. Patent Nos. 7,842,289 and 7,935,804, have previously been subject to reexamination proceedings in the U.S. Patent and Trademark office at the request of a third party.

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

Our commercial success depends upon our ability to develop, manufacture, market and sell our product candidates, and to use our related proprietary technologies without infringing the intellectual property rights of third parties. We may become party to, or threatened with, future adversarial proceedings or litigation regarding intellectual property rights with respect to our product candidates, including interference or derivation proceedings before the U.S. Patent and Trademark Office, or USPTO. Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future. If we are found to infringe a third party’s intellectual property rights, we could be required to obtain a license from such third party to continue commercializing our product candidates. However, we may not be able to obtain any required license on commercially reasonable terms or at all. Under certain circumstances, we could be forced, including by court order, to cease commercializing our product candidates. In addition, in any such proceeding or 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 harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets could have a similar negative impact on our business.

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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 other parties may assert that we infringe their proprietary rights in any event.

In addition, we are testing our product candidates administered with other product candidates or products that are covered by patents held by other companies or institutions. In the event that a labeling instruction is required in product packaging recommending that combination, we could be accused of, or held liable for, infringement of the third-party patents covering the product candidate or product recommended for administration with our product candidates. In such a case, we could be required to obtain a license from the other company or institution to use the required or desired package labeling, which may not be available on commercially reasonable terms, or at all.

We are aware of certain U.S. and foreign patents owned by a certain third party with claims that are broadly directed to a Listeria vaccine strain that contains certain proteins, some of these patents expire as late as 2021. These patents could be construed to cover CRS-207. In addition, we are aware of certain U.S. and foreign patents owned by a certain third party with claims that are broadly directed methods of using Listeria-based vaccines to treat certain cancers, which patents expire in 2017. The patents expiring in 2017 may be construed to cover our LADD product candidate, CRS-207, as well as the product candidates licensed to Janssen, ADU-214 and ADU-741. Notwithstanding, we do not currently expect a product launch of an Aduro product prior to expiration of the above patents and, therefore, the patents would not appear relevant to our commercialization plans unless our approval was accelerated or the patents somehow were extended. 

If we breach any of our license agreements, it could have a material adverse effect on our commercialization efforts for our product candidates.

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

We have granted Janssen certain rights to file, prosecute, maintain and enforce specific patents that relate to ADU-214 or ADU-741. Our inability to control the filing, prosecution, maintenance and enforcement of such patents could materially harm our business.

As part of the agreements with Janssen related to ADU-214 or ADU-741, we have granted Janssen the initial right and responsibility to file, prosecute, maintain and enforce any patents and patent applications that contain pending or issued claims that are specifically directed to the antigens contained in ADU-214 or ADU-741. For example, if a third party is infringing one of the antigen-specific patents by marketing a product that is identical or similar to ADU-214 for the treatment of lung cancer (such as a biosimilar of ADU-214), Janssen would have the initial right to enforce the antigen-specific patents against the third party. If we do not have the ability to control the enforcement of the antigen-specific patents against a third party that is marketing a product that is identical or similar to ADU-214 or ADU-741, our business may be materially harmed.

We have granted Janssen the right to determine patent term extension strategy for specific patents that relate to ADU-214 or ADU-741. Our inability to control the patent term extension strategy could materially harm our business.

As part of the license agreements with Janssen related to ADU-214 or ADU-741, we have granted Janssen the right and responsibility to determine the strategy to apply for the extension of the term of any licensed patents that are specifically directed to the antigens contained in ADU-214 or the antigens contained in ADU-741. Janssen 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 received from Janssen for the sale of ADU-214 or ADU-741. If we allow Janssen to also apply for extension of a licensed patent for ADU-214 or ADU-714 that may

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also be relevant to another product candidates that we may be developing and commercializing, we could be prevented from seeking extension of the same patent for our product. If we do not have the ability to control the strategy for patent term extension of any of our licensed patents, our business may be materially harmed.

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

Filing, prosecuting and defending patents on all of our product candidates 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. 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 have not obtained patent protection to develop their own products, and 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 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 and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our or our licensor’s patents or marketing of competing products in violation of our proprietary rights generally in those countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost 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. We or our licensors may not prevail in any lawsuits that we or our licensors initiate and the damages or other remedies awarded, if any, may not be commercially meaningful.

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

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

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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 intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we own or license.

Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time, and our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.

Given the amount of time required for the development, testing and regulatory review of new product candidates, such as our product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Currently, we own or license patent families that cover our LADD technology platform, which expire between 2022 and 2027, subject to any extensions, and we own or license patent families that cover Listeria strains engineered to express particular antigens, which expire between 2031 and 2033. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

The BPCIA established legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

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

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

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

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

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the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our and our licensors’ ability to obtain new patents or to enforce existing patents and patents we and our licensors may obtain in the future. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents.

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

The USPTO is currently developing regulations and procedures to govern administration of the Leahy-Smith Act, and many of the substantive changes to patent law associated with the Leahy-Smith Act, and in particular, the first to file provisions, did not become effective until March 16, 2013. Accordingly, it is not clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents and those licensed to us.

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

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

We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful and have a material adverse effect on the success of our business.

Competitors may infringe our patents or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary in the future to enforce or defend our intellectual property rights, to protect our trade secrets or to determine the validity and scope of our own intellectual property rights or the proprietary rights 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. There could also be public announcements of the results of hearings, motions or other interim proceedings or developments in any such proceedings. If securities analysts or investors perceive these results to be negative, it could have a material adverse effect on the price of shares of our common stock.

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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, and we could be required to obtain a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

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

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

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

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

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

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

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

· Issued patents that we own or have licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable as a result of legal challenges.

· Our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights and then use the information learned from such activities to develop competitive products for sale in our major commercial markets.

· We may not develop additional proprietary technologies that are patentable.

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

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 will 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 harm our business, financial condition and results of operations.

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Risks Related to our Financial Results

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 Janssen and Novartis, 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:

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

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

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

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

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

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

· any delays in regulatory review or approval of CRS-207 or any of our other product candidates;

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

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

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

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

· our ability to adequately support future growth;

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

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

· the changing and volatile global economic environment.

The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our 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 provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue and/or earnings guidance we may provide.

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

Our ability to use our federal and state net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income before the expiration 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 Internal Revenue Code of 1986, as amended, or the Code, is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income and its ability to utilize tax credit carryforwards. As of December 31, 2015, we reported U.S. federal and state NOLs of approximately $66.8 million and $7.7 million, respectively.

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

Risks Related to Ownership of our Common Stock

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

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

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

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

· adverse results or delays in clinical trials;

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

· adverse regulatory decisions, including failure to receive regulatory approval of our product candidates;

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

· adverse developments concerning our manufacturers;

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

· our inability to establish collaborations if needed;

· our failure to commercialize our product candidates;

· additions or departures of key scientific or management personnel;

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

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

· introduction of new products or services offered by us or our competitors;

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

· our ability to effectively manage our growth;

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

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

· actual or anticipated variations in quarterly operating results;

· our cash position;

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

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

· changes in the market valuations of similar companies;

· overall performance of the equity markets;

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

· trading volume of our common stock;

· changes in accounting practices;

· ineffectiveness of our internal controls;

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

· significant lawsuits, including patent or stockholder litigation;

· general political and economic conditions; and

· other events or factors, many of which are beyond our control.

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 may negatively affect the market price of our common stock, regardless of our actual operating performance. 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 of litigation, if instituted, could result in substantial costs and a diversion of management’s attention and resources, which would harm our business, operating results or financial condition.

An active trading market for our common stock may not be maintained.

Our common stock is currently traded on the NASDAQ Global Select Market, but we can provide no assurance that we will be able 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.

Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stock price.

As widely reported, global credit and financial markets have experienced extreme volatility and disruptions in the past several years, including severely diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. We cannot assure you that further deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

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As of June 30, 2016, we had $396.9 million of cash and cash equivalents and marketable securities. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents and marketable securities since June 30, 2016, we cannot assure you that further deterioration of the global credit and financial markets would not negatively impact our current portfolio of cash equivalents or our ability to meet our financing objectives. Furthermore, our stock price may decline due in part to the volatility of the stock market and the general economic downturn.

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

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

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

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

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

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.

Complying with the laws and regulations affecting public companies has increased and will increase our costs and the demands on management and could harm our operating results.

As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses. 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. In addition, the Sarbanes-Oxley Act, as well as rules subsequently adopted by the SEC and the NASDAQ Global Select Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. Further, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted and will adopt additional rules and regulations, such as mandatory “say on pay” voting requirements, that will apply to us when we cease to be an

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emerging growth company. Stockholder activism, the current political environment and the current high level of government intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additional compliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.

We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. To the extent these requirements divert the attention of our management and personnel from other business concerns, they could have a material adverse effect on our business, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similar coverage. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors, our board committees or as executive officers.

In the future, when we may not be exempt from various reporting requirements. For example, the Sarbanes-Oxley Act requires us, among other things, to assess the effectiveness of our internal control over financial reporting annually and to assess the effectiveness of our disclosure controls and procedures quarterly. Section 404 of the Sarbanes-Oxley Act (“Section 404”) would require us to perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.

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. 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, non-employee 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.

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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. Unless our board of directors elects not to increase the number of shares available for future grant each year, our stockholders may experience additional dilution, which could cause our stock price to fall.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

From April 1, 2016 to June 30, 2016, we issued 36,987 shares of common stock pursuant to the cash exercise of warrants to purchase our common stock at an exercise prices ranging from $0.0001 to $1.6580 per share. We received cash proceeds of approximately $7,000 from the exercise of such warrants. These warrants were issued to five accredited investors.

The offer, sale, and issuance of the securities described above was deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act and/or Regulation S or Regulation D promulgated thereunder as a transaction by an issuer not involving a public offering. The recipients of securities in these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in this transaction. The recipients of securities in these transactions were accredited investors and had adequate access, through employment, business or other relationships, to information about us.

On April 14, 2015, our registration statement on Form S-1 (File No. 333-202667) relating to our initial public offering, or the IPO, of common stock became effective. The IPO closed on April 20, 2015 at which time we issued 8,050,000 shares of our common stock at an initial offering price of $17.00 per share. We received net proceeds from the IPO of $124.2 million, after deducting the underwriting discount of $9.6 million and offering related expenses paid by us of $3.0 million. None of the expenses associated with the IPO were paid to directors, officers, persons owning 10% or more of any class of equity securities, or to their associates, or to our affiliates. Merrill, Lynch, Pierce, Fenner & Smith Incorporated and Leerink Partners LLC acted as joint book-running managers and William Blair & Company, L.L.C. and Canaccord Genuity Inc. acted as co-managers for the offering.

Shares of our common stock began trading on the NASDAQ Global Select Market on April 15, 2015. The shares were registered under the Securities Act on registration statement on Form S-1 (Registration No. 333-202667).

There has been no material change in the planned use of proceeds from the IPO from that described in the prospectus filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on April 15, 2015. As of June 30, 2016, we had used all of the proceeds from our IPO.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits

The exhibits listed in the accompanying Exhibit Index are incorporated by reference as part of this QuarterlyReport.

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SIGNATURES

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

	Aduro Biotech, Inc.
Date: August 3, 2016	By:	/s/ Stephen T. Isaacs
		Stephen T. Isaacs
		Chairman, President and Chief Executive Officer
		(Principal Executive Officer)
	Aduro Biotech, Inc.
Date: August 3, 2016	By:	/s/ Gregory W. Schafer
		Gregory W. Schafer
		Chief Operating Officer
		(Principal Financial Officer)

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EXHIBIT INDEX

Exhibit No.	Description of Exhibit	Incorporated by Reference
		Form	File No.	Exhibit	Filing Date	Filed Herewith
3.1	Restated Certificate of Incorporation of Aduro Biotech, Inc.	8-K	001-37345	3.1	04/20/2015
3.2	Amended and Restated Bylaws of Aduro Biotech, Inc.	S-1/A	333-202667	3.5	04/06/2015
4.1	Form of common stock certificate.	S-1/A	333-202667	4.1	04/06/2015
4.2	Amended and Restated Investor Rights Agreement, by and among Aduro Biotech, Inc. and the stockholders named therein, dated December 19, 2014.	S-1	333-202667	4.2	03/11/2015
10.2	First Amendment to Lease, dated April 26, 2016					X
31.1	Certification of Principal Executive Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.					X
31.2	Certification of Principal Financial Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.					X
32.1*	Certification of Principal Executive Officer and Principal Financial Officer, as required by rules 13a-14(a) and 15d-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).					X
101.INS	XBRL Instance Document					X
101.SCH	XBRL Taxonomy Extension Schema Document					X
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document					X
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document					X
101.LAB	XBRL Taxonomy Extension Label Linkbase Document					X
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document					X

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

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EX-10.2

Exhibit 10.2

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE ("Amendment") is entered into as of April 26, 2016 (the "Effective Date"), by and between SEVENTH STREET PROPERTIES VII, LLC, a California limited liability company ("Landlord") and ADURO BIOTECH, INC., a Delaware corporation ("Tenant"), with reference to the following facts:

A.Landlord and Tenant are parties to that certain Office/Laboratory Lease dated September 10, 2015 (the "Existing Lease"), pursuant to which Landlord leases to Tenant certain space located within that certain building with an address of 740 Heinz Avenue, Berkeley, California (the "Building"), which leased space is described therein as (i) a portion of the first floor containing approximately 4,181 square feet of Rentable Area, (ii) the entire leasable area located on the third (3rd) floor containing approximately 27,010 square feet of Rentable Area, and (iii) the entire leasable area on the fourth (4th) floor containing approximately 25,261 square feet of Rentable Area (collectively the "Phase I Premises").

B.Pursuant to Section 4 of Rider 2 to the Existing Lease, Tenant has an Expansion Option to lease the remainder of the rentable square footage within the Building, which shall include the remainder of the first (1st) floor (the "Phase II Premises"), and the entire second (2nd) floor (the "Phase III Premises"). As of the Effective Date, Tenant has not exercised the Expansion Option.

C.The Landlord Work has been Substantially Completed and possession of the Premises has been delivered to Tenant. Tenant has informed Landlord that Tenant anticipates that it will not complete the Tenant Improvements respecting the Phase II Premises (the "Phase II Improvements") prior to June 1, 2016 as required by the Existing Lease, and has also requested that the Phase I Premises be expanded.

D.Accordingly, Landlord and Tenant now desire to amend the Existing Lease to, among other things, expand the Phase I Premises and provide for additional terms in the event the Phase II Improvements are not timely completed, all upon and subject to the terms, covenants and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:

1.Recitals.  Landlord and Tenant agree the above recitals are true and correct and are hereby incorporated herein as though set forth in full.

2.Definitions.  As of the date hereof, unless context clearly indicates otherwise, all references to "the Lease" or "this Lease" in the Existing Lease or in this Amendment shall be deemed to refer to the Existing Lease, as amended by this Amendment. Capitalized terms used but not defined herein shall have the meanings ascribed to them in the Existing Lease unless context clearly indicates otherwise.

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3.Modification to Phase I Premises and Phase II Premises.  The Existing Lease is hereby revised such that the first floor portion of the Phase I Premises shall be deemed to contain 11,018 square feet of Rentable Area as more particularly shown on Exhibit A hereto (which Exhibit hereby replaces page A-1 of Exhibit A to the Existing Lease), and the Phase II Premises are deemed to contain 18,763 square feet of Rentable Area, subject in each instance to re-measurement and adjustment in accordance with the definition of Rentable Area as set forth in Section 1.1(9) of the Existing Lease. 

4.Construction of Phase II Improvements.  In the event Tenant does not timely exercise the Expansion Option (as provided in Section 4 of Rider 2 to the Existing Lease) and the Phase II Improvements are not completed by June 1, 2016, then effective as of June 1, 2016 and continuing until the date the Phase II Improvements are complete, Tenant shall pay Monthly Base Rent for the Phase II Premises at the rate of $4.00 for each square foot of Rentable Area of the Phase II Premises, prorated for any partial months, and Tenant's Share shall be adjusted to include the Rentable Area of the Phase II Premises. In addition to the foregoing, Landlord and Tenant acknowledge and agree that the failure to timely complete the Phase II Improvements will impair Landlord's ability to market and enter into a long term lease with a third party for both of the Phase II Premises and the Phase III Premises, which impairment will cause Landlord to incur losses, costs and damages which are impractical to determine. Accordingly, in the event Tenant does not timely exercise the Expansion Option and the Phase II Improvements are not completed by September 1, 2016, then without limiting any of Landlord's other remedies, Tenant shall immediately pay to Landlord in good and sufficient funds (or at Landlord's option, Landlord may deduct from the aggregate Tenant Improvement Allowance) an amount equal to Five Hundred Thousand Dollars ($500,000.00), as liquidated damages, which amount the parties acknowledge to be a fair and reasonable estimate of such losses, costs and damages for the period through September 1, 2016. For the avoidance of doubt, failure by Tenant to complete the Phase II Improvements by September 1, 2016 will not constitute a Default under the Existing Lease and the foregoing payment of Monthly Base Rent and liquidated damages will be Landlord's sole remedy sole remedy for such failure to complete the Phase II Improvements by September 1, 2016, but will not limit any remedies available to Landlord for Tenant's continuing failure to complete the Phase II Improvements beyond September 1, 2016. For purposes of this Section 4, the Phase II Improvements shall be deemed "completed" upon written confirmation from the City of Berkeley that the Phase II Premises can be legally occupied.

5.Limitation on Overtime.  Tenant agrees that in connection with the construction of the Tenant Improvements, construction work within the Premises shall be limited to no more than ten (10) hours per worker each day, Monday through Saturday, and no construction work shall be performed within the Premises on Sundays.

6.Miscellaneous.

(a)This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein. There have been no additional oral or written representations or agreements.

(b)Except as herein modified or amended, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in full force and effect.

(c)In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.

(d)Submission of this Amendment by Landlord is not an offer to enter into this Amendment.  Landlord and Tenant shall not be bound by this Amendment until Landlord and Tenant have executed and delivered the same to each other.

(e)Tenant hereby represents to Landlord that Tenant has dealt with no broker in connection with this Amendment. Tenant agrees to defend, indemnify and hold Landlord harmless from all claims of any brokers claiming to have represented Tenant in connection with this Amendment. Landlord agrees to defend, indemnify, and hold Tenant harmless from all claims of any brokers claiming to have represented Landlord in connection with this Amendment.

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(f)Landlord and Tenant represent to each other that each signatory of this Amendment has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting. 

(g)Landlord and Tenant each represents and warrants to the other party that it is currently in compliance with and shall at all times during the Extended Term (including any extension thereof) remain in compliance with the regulations of the Office of Foreign Asset Control ("OFAC") of the Department of the Treasury and any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action relating thereto.

(h)This Amendment may be executed in multiple counterparts each of which is deemed an original but together constitute one and the same instrument.  This Amendment may be executed in so-called "pdf' format and each party has the right to rely upon a pdf counterpart of this Amendment signed by the other party to the same extent as if such party had received an original counterpart.

[SIGNATURES ARE ON FOLLOWING PAGE]

3

IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Amendment as of the Effective Date.

TENANT:		LANDLORD:
Aduro Biotech, Inc., a Delaware Corporation		Seventh Street Properties VII, LLC, a California limited liability company
By:	/s/ Stephen Isaacs	By:	Seventh Street Properties VII Associates, LLC
Print Name:	Stephen Isaacs	Its:	Managing Member
Its:	C.E.O.
			By:	Wareham-NZL, LLC
By:				a California limited liability company,
Print Name:				its Manager
Its:
				By:	/s/ Richard K. Robbins
					Richard K. Robbins Manager

4

Exhibit A

Phase I Premises

A-1

EX-31.1

Exhibit 31.1

Certification of the Principal Executive Officer

Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a)

I, Stephen T. Isaacs, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Aduro Biotech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2016

/s/ Stephen T. Isaacs

Stephen T. Isaacs

Chairman, President and Principal Executive Officer

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to

Securities Exchange Act Rules 13a-14(a) and 15d-14(a)

I, Gregory W. Schafer, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Aduro Biotech, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

(c) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: August 3, 2016

/s/ Gregory W. Schafer

Gregory W. Schafer

Chief Operating Officer and Principal Financial Officer

EX-32.1

Exhibit 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of Aduro Biotech, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2016 (the “Report”), Stephen T. Isaacs, Chairman, President and Principal Executive Officer of the Company, and Gregory W. Schafer, Chief Operating Officer and Principal Financial Officer of the Company, each hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: August 3, 2016

/s/ Stephen T. Isaacs

Stephen T. Isaacs

Chairman, President and Principal Executive Officer

/s/ Gregory W. Schafer

Gregory W. Schafer

Chief Operating Officer and Principal Financial Officer

This certification accompanies the Form 10-Q to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Aduro Biotech, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2016	Jul. 31, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q2
Trading Symbol	ADRO
Entity Registrant Name	ADURO BIOTECH, INC.
Entity Central Index Key	0001435049
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		64,754,256

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 105,938	$ 150,456
Short-term marketable securities	287,415	265,198
Accounts receivable	1,384	4,846
Prepaid expenses and other current assets	13,078	4,004
Total current assets	407,815	424,504
Long-term marketable securities	3,566	15,391
Property and equipment, net	17,227	3,986
Goodwill	8,572	8,469
Intangible assets, net	29,659	29,400
Restricted cash	468
Other assets	2,747	75
Total assets	470,054	481,825
Current liabilities:
Accounts payable	2,398	5,086
Accrued clinical trial and manufacturing expenses	13,878	5,522
Accrued expenses and other liabilities	8,459	5,412
Deferred revenue	15,171	15,046
Total current liabilities	39,906	31,066
Deferred rent	2,952
Contingent consideration	3,508	3,750
Deferred revenue	170,370	178,037
Deferred tax liabilities	7,379	7,350
Total liabilities	224,115	220,203
Stockholders’ equity:
Commitments and contingencies
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at June 30, 2016 and December 31, 2015; and zero shares issued and outstanding at June 30, 2016 and December 31, 2015
Common stock, $0.0001 par value; 300,000,000 shares authorized June 30, 2016 and December 31, 2015; and 64,690,718 and 63,587,833 shares issued and outstanding at June 30, 2016 and December 31, 2015	6	6
Additional paid-in capital	372,924	362,807
Accumulated other comprehensive income (loss)	392	(339)
Accumulated deficit	(127,383)	(100,852)
Total stockholders’ equity	245,939	261,622
Total liabilities and stockholders’ equity	$ 470,054	$ 481,825

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Jun. 30, 2016	Dec. 31, 2015
Statement Of Financial Position [Abstract]
Preferred stock par value per share	$ 0.0001	$ 0.0001
Preferred stock shares authorized	10,000,000	10,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0
Common stock par value per share	$ 0.0001	$ 0.0001
Common stock shares authorized	300,000,000	300,000,000
Common stock shares issued	64,690,718	63,587,833
Common stock shares outstanding	64,690,718	63,587,833

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Revenue:
Collaboration and license revenue	$ 38,938,000	$ 9,623,000	$ 42,921,000	$ 18,861,000
Grant revenue	41,000	260,000	88,000	596,000
Total revenue	38,979,000	9,883,000	43,009,000	19,457,000
Operating expenses:
Research and development	26,882,000	13,533,000	47,809,000	24,179,000
General and administrative	8,700,000	5,882,000	17,699,000	12,092,000
Amortization of intangible assets	140,000	0	277,000	0
Total operating expenses	35,722,000	19,415,000	65,785,000	36,271,000
Income (loss) from operations	3,257,000	(9,532,000)	(22,776,000)	(16,814,000)
Loss from remeasurement of fair value of warrants		(16,735,000)		(26,077,000)
Interest income	520,000		974,000
Other (loss) income, net	(9,000)	7,000	(31,000)	15,000
Income (loss) before income tax	3,768,000	(26,260,000)	(21,833,000)	(42,876,000)
Provision for income taxes	1,472,000	0	4,698,000	0
Net income (loss)	$ 2,296,000	$ (26,260,000)	$ (26,531,000)	$ (42,876,000)
Net income (loss) per common share, basic	$ 0.04	$ (0.50)	$ (0.41)	$ (1.61)
Net income (loss) per common share, diluted	$ 0.03	$ (0.50)	$ (0.41)	$ (1.61)
Shares used in computing net loss per common share, basic	64,434,903	52,653,344	64,138,737	26,678,848
Shares used in computing net loss per common share, diluted	71,473,807	52,653,344	64,138,737	26,678,848

XML

Condensed Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Statement Of Income And Comprehensive Income [Abstract]
Net income (loss)	$ 2,296	$ (26,260)	$ (26,531)	$ (42,876)
Other comprehensive income (loss), net of tax:
Unrealized gain on marketable securities	69	0	220	0
Foreign currency translation adjustments	(619)	0	511	0
Comprehensive income (loss)	$ 1,746	$ (26,260)	$ (25,800)	$ (42,876)

XML

Condensed Consolidated Statement of Cash Flows (Unaudited) - USD ($)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
Cash Flows from Operating Activities
Net loss	$ (26,531,000)	$ (42,876,000)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	739,000	219,000
Amortization of intangible assets	277,000	0
Accretion of discounts and amortization of premiums on marketable securities	1,045,000
Stock-based compensation	7,068,000	3,345,000
Excess tax benefit from stock-based compensation	(2,185,000)
Gain from remeasurement of fair value of contingent consideration	(317,000)
Loss from remeasurement of fair value of warrants		26,077,000
Changes in operating assets and liabilities:
Accounts receivable	3,462,000	2,092,000
Prepaid expenses and other assets	(9,074,000)	(1,962,000)
Restricted cash	(468,000)
Accounts payable	(2,814,000)	893,000
Deferred consideration from Novartis collaboration		200,000,000
Deferred revenue	(7,542,000)	(18,264,000)
Accrued clinical trial and manufacturing expenses	8,356,000	831,000
Accrued expenses and other liabilities	2,094,000	3,370,000
Net cash (used in) provided by operating activities	(25,890,000)	173,725,000
Cash Flows from Investing Activities
Purchase of marketable securities	(244,250,000)
Proceeds from maturities of marketable securities	233,108,000
Purchase of property and equipment	(10,536,000)	(1,165,000)
Net cash used in investing activities	(21,678,000)	(1,165,000)
Cash Flows from Financing Activities
Proceeds from issuance of common stock, net of offering costs		151,027,000
Proceeds from issuance of convertible preferred stock, net of issuance costs		22,522,000
Excess tax benefit from stock-based compensation	2,185,000
Proceeds from exercise of stock options and warrants	351,000	302,000
Proceeds from employee stock purchase plan	514,000
Net cash provided by financing activities	3,050,000	173,851,000
Net (decrease) increase in cash and cash equivalents	(44,518,000)	346,411,000
Cash and cash equivalents at beginning of period	150,456,000	119,456,000
Cash and cash equivalents at end of period	105,938,000	465,867,000
Supplemental Disclosure of Cash Flow Information
Cash paid for taxes	8,600,000
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Conversion of convertible preferred stock to common stock		164,964,000
Reclassification of warrant liabilities to additional paid-in capital		27,066,000
Accrued offering costs		742,000
Purchase of property and equipment in accounts payable and accrued liabilities	$ 4,135,000	$ 123,000

XML

Organization and Nature of Business

6 Months Ended

Jun. 30, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Nature of Business

1. Organization and Nature of Business

Aduro Biotech, Inc., or the Company, is an immunotherapy company focused on the discovery, development and commercialization of therapies that transform the treatment of challenging diseases. The Company’s technology platforms, which are designed to harness the body's natural immune system, are being investigated in cancer indications and have the potential to expand into autoimmune and infectious diseases. The Company operates in one business segment.

The Company has developed three technology platforms, Live, Attenuated, Double-Deleted or LADD, STING Pathway Activator and B-select monoclonal antibodies. The Company’s LADD technology platform is based on proprietary attenuated strains of Listeria that have been engineered to express tumor-associated antigens to induce specific and targeted immune responses. This platform is being developed as a treatment for multiple indications, including mesothelioma, ovarian, pancreatic, lung and prostate cancers, and glioblastoma. The Company’s STING Pathway Activator platform is designed to activate the intracellular Stimulator of Interferon Genes, or STING, receptor, resulting in a potent tumor-specific immune response. The Company’s B-select monoclonal antibody platform includes a number of immune modulating assets in research and preclinical development and is led by the Company’s wholly-owned subsidiary based in the Netherlands, Aduro Biotech Holdings, Europe B.V. (fka BioNovion Holding B.V.), or Aduro Biotech Europe. The Company is also collaborating with leading global pharmaceutical companies to expand its products and technology platforms.

Initial Public Offering and Concurrent Private Placement

On April 20, 2015, the Company closed its initial public offering, or IPO, and sold 8,050,000 shares of its common stock (inclusive of 1,050,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $17.00 per share. The Company received aggregate net proceeds of $124.2 million, net of underwriting discounts and offering expenses. The Company also sold to Novartis Institutes for BioMedical Research, Inc., or NIBR, in a concurrent private placement 1,470,588 shares of common stock at a price of $17.00 per share for proceeds of $25.0 million. Upon the closing of the IPO, all then-outstanding shares of convertible preferred stock converted by their terms into 51,822,659 shares of common stock. Additionally, the Company amended and restated its certificate of incorporation effective April 20, 2015 to, among other things, change the authorized number of shares of common stock to 300,000,000 shares and the authorized number of shares of preferred stock to 10,000,000 shares.

XML

Basis of Presentation, Use of Estimates and Recent Accounting Pronouncements

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Basis of Presentation, Use of Estimates and Recent Accounting Pronouncements

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

Basis of Presentation

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 balance sheet as of December 31, 2015 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These financial statements have been prepared on the same basis as 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 our financial information. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 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, 2015 included in our Annual Report on Form 10-K filed with the SEC.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. 

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenue 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, contingent consideration, income taxes and stock-based compensation. 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. Actual results could differ from these estimates.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued Auditing Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB voted to defer the effective date of the ASU by one year to December 15, 2017 for fiscal years, and interim periods within those years, beginning after that date. Entities are permitted to adopt ASU 2014-09 in accordance with the original effective date of December 15, 2016 if they choose. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018 and requires modified retrospective application. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeitures. The standard is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

In June 2016, the FASB issued 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. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

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Fair Value Measurements

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

3. Fair Value Measurements

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

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

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

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

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

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

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

	June 30, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	79,037	$	—	$	—	$	79,037
U.S. government and agency securities		—		184,541		—		184,541
Corporate debt securities		—		71,930		—		71,930
Commercial paper		—		52,141		—		52,141
Total	$	79,037	$	308,612	$	—	$	387,649
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	3,508	$	3,508
Total	$	—	$	—	$	3,508	$	3,508

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	104,602	$	—	$	—	$	104,602
U.S. government and agency securities		—		194,055		—		194,055
Corporate debt securities		—		74,918		—		74,918
Commercial paper		—		42,295		—		42,295
Total	$	104,602	$	311,268	$	—	$	415,870
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	3,750	$	3,750
Total	$	—	$	—	$	3,750	$	3,750

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

The Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of June 30, 2016 and December 31, 2015. There were no transfers between the fair value measurement category levels during any of the periods presented.

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

	Contingent Consideration
Balance at December 31, 2015	$	3,750
Net decrease in fair value upon remeasurement		(317	)
Foreign currency impact on contingent consideration		75
Balance at June 30, 2016	$	3,508

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, 2016
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	9,157	$	—	$	—		$	9,157
Money market funds		79,037		—		—			79,037
Commercial paper		17,744		—		—			17,744
Total cash and cash equivalents	$	105,938	$	—	$	—		$	105,938
Marketable securities:
U.S. government and agency securities	$	184,541	$	105	$	(5	)	$	184,641
Corporate debt securities		71,930		25		(11	)		71,944
Commercial paper		34,396		—		—			34,396
Total marketable securities	$	290,867	$	130	$	(16	)	$	290,981

	December 31, 2015
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	15,175	$	—	$	—		$	15,175
Money market funds		104,602		—		—			104,602
Commercial paper		7,899		—		—			7,899
U.S. government and agency securities		22,780		—		—			22,780
Total cash and cash equivalents	$	150,456	$	—	$	—		$	150,456
Marketable securities:
U.S. government and agency securities	$	171,416	$	3	$	(144	)	$	171,275
Corporate debt securities		74,958		38		(78	)		74,918
Commercial paper		34,396		—		—			34,396
Total marketable securities	$	280,770	$	41	$	(222	)	$	280,589

The amortized cost and estimated fair value of the Company’s available-for-sale marketable securities by contractual maturity are summarized below as of June 30, 2016 (in thousands):

	Amortized cost		Estimated Fair Value
Mature in one year or less	$	287,303	$	287,415
Mature after one year through two years		3,564		3,566
Total available-for-sale marketable securities	$	290,867	$	290,981

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Balance Sheet Components

6 Months Ended

Jun. 30, 2016

Balance Sheet Components [Abstract]

Balance Sheet Components

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	June 30,			December 31,
	2016			2015
Lab equipment	$	3,433		$	3,011
Computer and office equipment		1,264			959
Furniture and fixtures		313			306
Leasehold improvements		703			669
Construction in progress		13,910			698
Total property and equipment		19,623			5,643
Less: accumulated depreciation and amortization		(2,396	)		(1,657	)
Property and equipment, net	$	17,227		$	3,986

Depreciation and amortization expense was $382,000 and $126,000 for the three months ended June 30, 2016 and 2015, respectively, and $739,000 and $219,000 for the six months ended June 30, 2016 and 2015, respectively.

Accrued Expenses and Other Liabilities

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

	June 30,		December 31,
	2016		2015
Accrued construction in progress	$	3,971	$	-
Compensation and related benefits		2,310		2,765
Professional and consulting services		1,118		1,650
Other		1,060		997
Total accrued expenses and other liabilities	$	8,459	$	5,412

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

5. Goodwill and Intangible Assets

Goodwill

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

Balance at December 31, 2015	$	8,469
Foreign currency translation adjustment		103
Balance at June 30, 2016	$	8,572

Intangible assets

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

	June 30, 2016
	GrossCarrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	10,982	$	366	$	10,616
Total intangible assets with finite lives		10,982		366		10,616
Acquired IPR&D assets		19,043		—		19,043
Total intangible assets	$	30,025	$	366	$	29,659

	December 31, 2015
	GrossCarrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	10,786	$	89	$	10,697
Total intangible assets with finite lives		10,786		89		10,697
Acquired IPR&D assets		18,703		—		18,703
Total intangible assets	$	29,489	$	89	$	29,400

Intangible assets are carried at cost less accumulated amortization. The license agreement is being amortized over a period of 20 years and the amortization expense is recorded in operating expenses. The increase in the gross carrying amount of intangible assets as of June 30, 2016 compared to December 31, 2015 reflected a positive impact of foreign currency exchange which was primarily due to the strengthening of the Euro against the U.S. dollar.

Amortization expense was $140,000 and $277,000 for the three and six months ended June 30, 2016, respectively. There was no amortization expense for the comparable periods in 2015. Based on finite-lived intangible assets recorded as of June 30, 2016, the estimated future amortization expense is as follows (in thousands):

Year Ending December 31,	Estimated Amortization Expense
2016 (remaining six months)	$	275
2017		549
2018		549
2019		549
2020		549

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Collaboration Agreements

6 Months Ended

Jun. 30, 2016

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Collaboration Agreements

6. Collaboration Agreements

Novartis Agreement

In March 2015, the Company entered into a collaboration and license agreement with Novartis Pharmaceuticals Corporation, or Novartis, pursuant to 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, an exclusive license to commercialize such products outside the United States and a non-exclusive license to support the Company in commercializing such products in the United States if it requests such support. The collaboration is guided by a joint steering committee with each party having final decision making authority regarding specified areas of development or commercialization.

Under the Novartis Agreement, the Company received 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.

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.

The Company recognizes revenue from collaboration, license or research arrangements when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collection is reasonably assured. The Company has determined that the license does not have stand-alone value separable from the co-development services to be performed under the agreement, with the Company participating in the research and development services. As a result, the Company recognizes revenue from the $200.0 million upfront fee received on a straight-line basis over its estimated performance period of 13.5 years, commencing in July 2015, the date of the Joint Steering Committee’s approval of the research and development plan. Changes in the estimated period of performance will be accounted for prospectively as a change in estimate. The Company will recognize substantive milestone payments in their entirety in the period in which the milestone is achieved. Non-substantive milestone payments will be recognized on a straight-line basis over the remaining performance period. Costs associated with co-development activities performed under the agreement are included in research and development expenses in the accompanying condensed consolidated statements of operations. Reimbursement of research and development costs by Novartis is included in collaboration and license revenue. The Company will recognize revenue from the sale of any products commercialized pursuant to this collaboration in the United States, will retain 50% of the gross profits from such sales, and will pay the remaining 50% of the gross profits to Novartis. The Company will receive from Novartis 45% of gross profits for specified European countries and Japan. Profit sharing payments made to or received from Novartis are aggregated by product by territory and are reported as expenses or revenues, as applicable.

For the three and six months ended June 30, 2016, the Company recognized revenue from its collaboration with Novartis totaling $3.7 million and $7.4 million, respectively, related to amortization of the upfront fee. The remaining balance of the upfront fees of $185.2 million is included in deferred revenue at June 30, 2016.  

Janssen ADU-214 Agreement

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

Since the inception of the Janssen ADU-214 Agreement through June 30, 2016, the Company received an upfront license fee of $30.0 million and substantive and non-substantive milestone payments of $21.0 million upon completion of various development activities. Under the terms of the Janssen ADU-214 Agreement, the Company is eligible to receive future contingent payments up to a total of $766.0 million composed of development milestones through completion of all Phase 3 clinical trials, as well as regulatory and commercial milestones. The contingent payments are triggered upon the activities expected to be undertaken by Janssen. The Company is eligible to receive royalties on any net sales of licensed products by Janssen, its affiliates and sublicensees at a rate ranging from high-single digits to low teens based on the aggregate annual net sales of licensed products worldwide and based on the country of sale.

The upfront license fee of $30.0 million was recognized on a straight-line basis from the effective date of the agreement through October 2015. In addition the Company recognized milestone payments of $21.0 million in 2015 as all performance obligations were achieved.

Janssen ADU-741 and GVAX Prostate Agreements

In May 2014, the Company entered into a Research and License Agreement, or Janssen ADU-741 Agreement, and a GVAX Prostate License Agreement, or Janssen GVAX Prostate Agreement, with Janssen Biotech, Inc., or Janssen, a wholly-owned subsidiary of Johnson & Johnson Development Corporation, to collaborate on the development of a drug for the treatment of prostate cancer. Under the terms of the Janssen ADU-741 Agreement, the Company granted Janssen an exclusive, worldwide license to research, develop, manufacture, use, sell and otherwise exploit products containing ADU-741 for any and all uses. The Company was responsible for certain research and development activities from the effective date of the agreement until IND approval which occurred in the fourth quarter of 2015.

Since the inception of the Janssen ADU-741 Agreement through June 30, 2016, the Company received an upfront payment of $12.0 million and substantive and non-substantive milestone payments of $10.0 million upon completion of certain development activities. Under the terms of the Janssen ADU-741 Agreement, the Company is eligible to receive future contingent payments up to a total of $343.0 million composed of development milestones through completion of all Phase 3 clinical trials, as well as regulatory and commercial milestones. The contingent payments are triggered upon the activities expected to be undertaken by Janssen. The Company is eligible to receive royalties on net sales of licensed products by Janssen, its affiliates and sublicensees at a rate ranging from mid-single digits to low teens based on aggregate annual net sales and based on the country of sale.

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

The upfront fees received totaling $12.5 million were recognized on a straight-line basis from the effective date of the agreements through October 2015. In addition, the Company recognized milestone payments of $10 million in 2015 as all performance obligations were achieved.

Pharma License Agreement

In connection with the acquisition of Aduro Biotech Europe in October 2015, the Company became party to an agreement with a third-party pharmaceutical company, or Pharma. The agreement sets forth the parties’ respective obligations for development, commercialization, regulatory and manufacturing and supply activities for antibody product candidates. The Company identified the following performance deliverables under the agreement: 1) the license, 2) the obligation to provide research activities and 3) the obligation to participate on a Joint Research Committee.

The Company is eligible to receive future contingent payments, including up to $312.0 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 eligible to receive royalties in the mid-single digits to low teens based on net sales of the product.

The Company considered the provisions of the multiple-element arrangement guidance in determining how to recognize the total consideration of the agreement. The Company determined that none of the deliverables have standalone value; all of these obligations will be delivered throughout the estimated period of performance and therefore are accounted for as a single unit of accounting.

The Company determined that all of the future contingent payments meet the definition of a milestone. Accordingly, revenue for the achievement of these milestones will be recognized in the period when the milestone is achieved and collectability is reasonably assured. No amounts had been recognized as revenue for any of these milestones for the three and six months ended June 30, 2016.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

7. Commitments and Contingencies

Leases

The Company leases its office and research and development facility in Berkeley, California, under a non-cancelable operating lease. In February 2015, the Company amended its office lease agreement to increase the total square footage to approximately 25,000 square feet and extended the term of the lease to expire on December 31, 2018. The lease also contains an option to extend the lease for an additional two years.

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

During 2016, we established a letter of credit with Bank of America Merrill Lynch as security for the lease in the amount of $0.5 million. The letter of credit is collateralized by a certificate of deposit for $0.5 million which has been included in restricted cash in the consolidated balance sheet as of June 30, 2016.

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

Rent expense was $1.0 million and $0.2 million for the three months ended June 30, 2016 and 2015, respectively, and $1.2 million and $0.3 million for the six months ended June 30, 2016 and 2015. Under the terms of the lease agreements, the Company is also responsible for certain insurance, property tax and maintenance expenses. Future minimum payments under the Company’s office leases at June 30, 2016 are as follows (in thousands):

Year Ending December 31,	Amounts
2016 (remaining six months)	$	1,771
2017		3,652
2018		4,872
2019		4,647
2020		4,786
Thereafter		48,457
Total	$	68,185

Indemnification

In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company 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 could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against 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 currently has directors’ and officers’ insurance.

Legal

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.

Other Commitments

The Company has 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 would only be obligated for the products or services that the Company had received at the time the termination became effective as well as non-cancelable and non-refundable payment obligations 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 would also be obligated to provide continued support for appropriate medical procedures at that site until completion or termination.

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Equity Incentive Plans

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Equity Incentive Plans

8. Equity Incentive Plans

2015 Plan

In March 2015, the Company’s board of directors adopted and in April 2015 the Company’s stockholders approved the 2015 Equity Incentive Plan, or the 2015 Plan, which became effective upon the 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, 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.

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, 2016 the shares issuable under the 2015 Plan increased by 2,543,513. The Company had 6,483,623 shares available for future grant under the 2015 Plan as of June 30, 2016.

Stock option activity under the Company’s stock option plan was as follows:

	Options Outstanding
	Shares Available for Grant				Number of Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
										(In thousands)
Balance—December 31, 2015		4,810,271				9,931,229		$	5.29	$	229,591
Authorized		2,543,513				—
Granted		(878,160	)			878,160			12.36
Exercised		—				(214,828	)		1.14
Canceled		7,999		(1)		(42,161	)		6.72
Balance—June 30, 2016		6,483,623				10,552,400		$	5.96	$	81,122
Options exercisable—June 30, 2016						5,258,844		$	2.53	$	50,394
Options vested and expected to vest—June 30, 2016						10,457,538		$	5.84	$	81,122

⁽¹⁾ This excludes 34,162 canceled options for the six months ended June 30, 2016 initially granted from the legacy stock option plans. As these plans have been terminated, any options canceled are not added back to the existing option plan pool.

The aggregate intrinsic value represents the difference between the exercise price of the options and the closing price of the Company’s common stock. The Company’s closing stock price as reported on the NASDAQ as of June 30, 2016 was $11.31. The aggregate intrinsic value of options exercised for the three and six months ended June 30, 2016 was $0.4 million and $3.9 million, respectively.

2015 Employee Stock Purchase Plan

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

The number of shares of common stock initially reserved for issuance under the 2015 ESPP was 720,000 shares with an automatic annual increase to the shares issuable under the 2015 ESPP to the lower of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (ii) a lower number determined by the board of directors. On January 1, 2016 the shares issuable under the 2015 ESPP increased by 635,878. The Company had 1,259,761 shares available for future issuance under the 2015 ESPP as of June 30, 2016.

Stock-based Compensation Expense

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Research and development	$	1,971	$	606	$	3,969	$	751
General and administrative		1,354		2,159		3,099		2,594
Total stock-based compensation expense	$	3,325	$	2,765	$	7,068	$	3,345

As of June 30, 2016, the total unrecognized compensation expense related to unvested options, net of estimated forfeitures, was $33.8 million, which the Company expects to recognize over an estimated weighted-average period of 2.5 years.

In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model. The fair value of stock option awards granted to employees was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the six months ended June 30, 2016:

	2015 Plan		2015 ESPP
	Six Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016		2015
Expected term (in years)	2.00 - 6.05	5.30 - 6.20	0.5		0.5
Volatility	73.0 - 75.0%	70.2 - 85.2%		73.8%		71.7%
Risk-free interest rate	1.25 - 1.72%	0.80 - 2.05%		0.36%		0.10%
Dividend yield	—%	—%	—%		—%

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Income Taxes

6 Months Ended

Jun. 30, 2016

Income Tax Disclosure [Abstract]

Income Taxes

9. Income Taxes

Income tax expense for the three months ended June 30, 2016 and 2015 was approximately $1.5 million and zero, respectively, and $4.7 million and zero for the six months ended June 30, 2016 and 2015, respectively. The income tax expense recorded for the first half of 2016 primarily related to current and deferred federal income taxes.

The Company accounts for uncertain tax positions in accordance with ASC 740, Accounting for Income Taxes. As of June 30, 2016 and 2015, the total amount of unrecognized tax benefits was $1.4 million and $0.7 million, respectively. As of June 30, 2016 and 2015, $0.2 million and zero of unrecognized tax benefits, if recognized, would reduce the Company’s annual effective tax rate because the majority of benefits are in the form of deferred tax assets for which a full valuation allowance has been recorded.

The Company’s policy is to recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of June 30, 2016 and 2015, the Company accrued no interest and penalties in the condensed consolidated balance sheets. There were no interest and penalties included in the condensed consolidated statements of operations for the three and six months ended June 30, 2016 and 2015. The Company does not expect the amount of existing unrecognized tax benefits to change significantly within the next 12 months.

The Company files income tax returns in the United States and the Netherlands. The federal and state income tax returns are open under the statute of limitations subject to tax examinations for the tax years ended December 31, 2010 through December 31, 2015. 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.   

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Net Income (Loss) Per Common Share

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Net Income (Loss) Per Common Share

10. Net Income (Loss) per Common Share

Basic net income (loss) per share is calculated using the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share gives effect to dilutive stock options and warrants. The Company uses the treasury-stock method to compute diluted earnings per share with respect to its stock options and warrants. The following table sets forth a reconciliation of basic and diluted net income (loss) per share (in thousands except share and per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
Net income (loss)	$	2,296	$	(26,260	)	$	(26,531	)	$	(42,876	)
Shares used in computing basic net income (loss) per    common share		64,434,903		52,653,344			64,138,737			26,678,848
Add effect of dilutive securities:
Stock options		6,949,706		—			—			—
Common stock warrants		89,198		—			—			—
Shares used in computing diluted net income (loss) per    common share		71,473,807		52,653,344			64,138,737			26,678,848
Net income (loss) per common share, basic	$	0.04	$	(0.50	)	$	(0.41	)	$	(1.61	)
Net income (loss) per common share, diluted	$	0.03	$	(0.50	)	$	(0.41	)	$	(1.61	)

The following securities were excluded from diluted net income (loss) per common share because their inclusion would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Options to purchase common stock		2,061,539		9,581,168		10,552,400		9,581,168
Common stock warrants		2,664		968,541		97,621		968,541
Total		2,064,203		10,549,709		10,650,021		10,549,709

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2016

Accounting Policies [Abstract]

Initial Public Offering and Concurrent Private Placement

Initial Public Offering and Concurrent Private Placement

On April 20, 2015, the Company closed its initial public offering, or IPO, and sold 8,050,000 shares of its common stock (inclusive of 1,050,000 shares of common stock pursuant to the full exercise of the underwriters’ option to purchase additional shares) at a price to the public of $17.00 per share. The Company received aggregate net proceeds of $124.2 million, net of underwriting discounts and offering expenses. The Company also sold to Novartis Institutes for BioMedical Research, Inc., or NIBR, in a concurrent private placement 1,470,588 shares of common stock at a price of $17.00 per share for proceeds of $25.0 million. Upon the closing of the IPO, all then-outstanding shares of convertible preferred stock converted by their terms into 51,822,659 shares of common stock. Additionally, the Company amended and restated its certificate of incorporation effective April 20, 2015 to, among other things, change the authorized number of shares of common stock to 300,000,000 shares and the authorized number of shares of preferred stock to 10,000,000 shares.

Basis of Presentation

Basis of Presentation

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 balance sheet as of December 31, 2015 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These financial statements have been prepared on the same basis as 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 our financial information. The results of operations for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the year ending December 31, 2016 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, 2015 included in our Annual Report on Form 10-K filed with the SEC.

The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany transactions and balances have been eliminated. 

Use of Estimates

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities and reported amounts of revenue 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, contingent consideration, income taxes and stock-based compensation. 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. Actual results could differ from these estimates.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued Auditing Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606). This ASU affects any entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP when it becomes effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These may include identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation. In July 2015, the FASB voted to defer the effective date of the ASU by one year to December 15, 2017 for fiscal years, and interim periods within those years, beginning after that date. Entities are permitted to adopt ASU 2014-09 in accordance with the original effective date of December 15, 2016 if they choose. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligations and Licensing, which reduces the complexity when applying the guidance for identifying performance obligations and improves the operability and understandability of the license implementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and Practical Expedients, which amends the guidance on transition, collectability, noncash consideration and the presentation of sales and other similar taxes. The Company is currently evaluating the impact of this standard on its condensed consolidated financial statements.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which establishes a comprehensive new lease accounting model. The new standard: (a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and, (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding right-of-use asset for leases with a lease-term of more than twelve months. The new standard is effective for fiscal years and interim periods beginning after December 15, 2018 and requires modified retrospective application. Early adoption is permitted. The Company is currently evaluating the impact that the adoption of ASU 2016-02 will have on its condensed consolidated financial statements.

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeitures. The standard is effective for fiscal years and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

In June 2016, the FASB issued 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. The Company will recognize an allowance for credit losses on available-for-sale securities rather than deductions in amortized cost. The standard is effective for fiscal years and interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018. The Company is currently evaluating the impact that the standard will have on its condensed consolidated financial statements.

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Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2016

Fair Value Disclosures [Abstract]

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

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, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	79,037	$	—	$	—	$	79,037
U.S. government and agency securities		—		184,541		—		184,541
Corporate debt securities		—		71,930		—		71,930
Commercial paper		—		52,141		—		52,141
Total	$	79,037	$	308,612	$	—	$	387,649
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	3,508	$	3,508
Total	$	—	$	—	$	3,508	$	3,508

	December 31, 2015
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	104,602	$	—	$	—	$	104,602
U.S. government and agency securities		—		194,055		—		194,055
Corporate debt securities		—		74,918		—		74,918
Commercial paper		—		42,295		—		42,295
Total	$	104,602	$	311,268	$	—	$	415,870
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	3,750	$	3,750
Total	$	—	$	—	$	3,750	$	3,750

Summary of Changes in Fair Value of Level 3 Financial Liabilities

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

	Contingent Consideration
Balance at December 31, 2015	$	3,750
Net decrease in fair value upon remeasurement		(317	)
Foreign currency impact on contingent consideration		75
Balance at June 30, 2016	$	3,508

Summary of Estimated Value of Cash, Cash Equivalents and Marketable Securities and Gross Unrealized Holding Gains and Losses

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, 2016
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	9,157	$	—	$	—		$	9,157
Money market funds		79,037		—		—			79,037
Commercial paper		17,744		—		—			17,744
Total cash and cash equivalents	$	105,938	$	—	$	—		$	105,938
Marketable securities:
U.S. government and agency securities	$	184,541	$	105	$	(5	)	$	184,641
Corporate debt securities		71,930		25		(11	)		71,944
Commercial paper		34,396		—		—			34,396
Total marketable securities	$	290,867	$	130	$	(16	)	$	290,981

	December 31, 2015
	Amortized cost		Unrealized gains		Unrealized losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	15,175	$	—	$	—		$	15,175
Money market funds		104,602		—		—			104,602
Commercial paper		7,899		—		—			7,899
U.S. government and agency securities		22,780		—		—			22,780
Total cash and cash equivalents	$	150,456	$	—	$	—		$	150,456
Marketable securities:
U.S. government and agency securities	$	171,416	$	3	$	(144	)	$	171,275
Corporate debt securities		74,958		38		(78	)		74,918
Commercial paper		34,396		—		—			34,396
Total marketable securities	$	280,770	$	41	$	(222	)	$	280,589

Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Marketable Securities by Contractual Maturity

The amortized cost and estimated fair value of the Company’s available-for-sale marketable securities by contractual maturity are summarized below as of June 30, 2016 (in thousands):

	Amortized cost		Estimated Fair Value
Mature in one year or less	$	287,303	$	287,415
Mature after one year through two years		3,564		3,566
Total available-for-sale marketable securities	$	290,867	$	290,981

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2016

Balance Sheet Components [Abstract]

Summary of Property and Equipment, Net

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):

	June 30,			December 31,
	2016			2015
Lab equipment	$	3,433		$	3,011
Computer and office equipment		1,264			959
Furniture and fixtures		313			306
Leasehold improvements		703			669
Construction in progress		13,910			698
Total property and equipment		19,623			5,643
Less: accumulated depreciation and amortization		(2,396	)		(1,657	)
Property and equipment, net	$	17,227		$	3,986

Accrued Expenses and Other Liabilities

Accrued Expenses and Other Liabilities

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

	June 30,		December 31,
	2016		2015
Accrued construction in progress	$	3,971	$	-
Compensation and related benefits		2,310		2,765
Professional and consulting services		1,118		1,650
Other		1,060		997
Total accrued expenses and other liabilities	$	8,459	$	5,412

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Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2016

Goodwill And Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

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

Balance at December 31, 2015	$	8,469
Foreign currency translation adjustment		103
Balance at June 30, 2016	$	8,572

Schedule of Intangible Assets

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

	June 30, 2016
	GrossCarrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	10,982	$	366	$	10,616
Total intangible assets with finite lives		10,982		366		10,616
Acquired IPR&D assets		19,043		—		19,043
Total intangible assets	$	30,025	$	366	$	29,659

	December 31, 2015
	GrossCarrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
License agreement	$	10,786	$	89	$	10,697
Total intangible assets with finite lives		10,786		89		10,697
Acquired IPR&D assets		18,703		—		18,703
Total intangible assets	$	29,489	$	89	$	29,400

Schedule of Finite-Lived Intangible Assets Estimated Future Amortization Expense

Based on finite-lived intangible assets recorded as of June 30, 2016, the estimated future amortization expense is as follows (in thousands):

Year Ending December 31,	Estimated Amortization Expense
2016 (remaining six months)	$	275
2017		549
2018		549
2019		549
2020		549

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2016

Commitments And Contingencies Disclosure [Abstract]

Schedule of Future Minimum Payments under the Company’s Office Leases

Future minimum payments under the Company’s office leases at June 30, 2016 are as follows (in thousands):

Year Ending December 31,	Amounts
2016 (remaining six months)	$	1,771
2017		3,652
2018		4,872
2019		4,647
2020		4,786
Thereafter		48,457
Total	$	68,185

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Equity Incentive Plans (Tables)

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Schedule of Stock Option Plan Activity

Stock option activity under the Company’s stock option plan was as follows:

	Options Outstanding
	Shares Available for Grant				Number of Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
										(In thousands)
Balance—December 31, 2015		4,810,271				9,931,229		$	5.29	$	229,591
Authorized		2,543,513				—
Granted		(878,160	)			878,160			12.36
Exercised		—				(214,828	)		1.14
Canceled		7,999		(1)		(42,161	)		6.72
Balance—June 30, 2016		6,483,623				10,552,400		$	5.96	$	81,122
Options exercisable—June 30, 2016						5,258,844		$	2.53	$	50,394
Options vested and expected to vest—June 30, 2016						10,457,538		$	5.84	$	81,122

⁽¹⁾ This excludes 34,162 canceled options for the six months ended June 30, 2016 initially granted from the legacy stock option plans. As these plans have been terminated, any options canceled are not added back to the existing option plan pool.

Summary of Stock-Based Compensation

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Research and development	$	1,971	$	606	$	3,969	$	751
General and administrative		1,354		2,159		3,099		2,594
Total stock-based compensation expense	$	3,325	$	2,765	$	7,068	$	3,345

Schedule of Black-Scholes Option-Pricing Model

The fair value of stock option awards granted to employees was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions for the six months ended June 30, 2016:

	2015 Plan		2015 ESPP
	Six Months Ended June 30,		Six Months Ended June 30,
	2016	2015	2016		2015
Expected term (in years)	2.00 - 6.05	5.30 - 6.20	0.5		0.5
Volatility	73.0 - 75.0%	70.2 - 85.2%		73.8%		71.7%
Risk-free interest rate	1.25 - 1.72%	0.80 - 2.05%		0.36%		0.10%
Dividend yield	—%	—%	—%		—%

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Net Income (Loss) per Common Share (Tables)

6 Months Ended

Jun. 30, 2016

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Net Income (Loss) per Share

The following table sets forth a reconciliation of basic and diluted net income (loss) per share (in thousands except share and per share amounts):

	Three Months Ended June 30,					Six Months Ended June 30,
	2016		2015			2016			2015
Net income (loss)	$	2,296	$	(26,260	)	$	(26,531	)	$	(42,876	)
Shares used in computing basic net income (loss) per    common share		64,434,903		52,653,344			64,138,737			26,678,848
Add effect of dilutive securities:
Stock options		6,949,706		—			—			—
Common stock warrants		89,198		—			—			—
Shares used in computing diluted net income (loss) per    common share		71,473,807		52,653,344			64,138,737			26,678,848
Net income (loss) per common share, basic	$	0.04	$	(0.50	)	$	(0.41	)	$	(1.61	)
Net income (loss) per common share, diluted	$	0.03	$	(0.50	)	$	(0.41	)	$	(1.61	)

Schedule of Securities Excluded from Diluted Net Income (Loss) per Common Share

The following securities were excluded from diluted net income (loss) per common share because their inclusion would be anti-dilutive:

	Three Months Ended June 30,				Six Months Ended June 30,
	2016		2015		2016		2015
Options to purchase common stock		2,061,539		9,581,168		10,552,400		9,581,168
Common stock warrants		2,664		968,541		97,621		968,541
Total		2,064,203		10,549,709		10,650,021		10,549,709

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Organization and Nature of Business - Additional Information (Details) $ / shares in Units, $ in Millions		6 Months Ended
	Apr. 20, 2015 USD ($) $ / shares shares	Jun. 30, 2016 Segment Platform shares	Dec. 31, 2015 shares
Organization And Nature Of Business [Line Items]
Number of business segments | Segment		1
Number of technology platforms developed | Platform		3
Preferred stock shares authorized	10,000,000	10,000,000	10,000,000
Common stock shares authorized	300,000,000	300,000,000	300,000,000
Common Stock | IPO
Organization And Nature Of Business [Line Items]
Issuance of common stock (in shares)	8,050,000
Stock price per share | $ / shares	$ 17.00
Proceeds from IPO net of underwriting discount, commission and offering expenses | $	$ 124.2
Number of common stock issued on conversion of convertible preferred stock	51,822,659
Common Stock | Exercise of Underwriters
Organization And Nature Of Business [Line Items]
Issuance of common stock (in shares)	1,050,000
Novartis Agreement | Common Stock | Private Placement
Organization And Nature Of Business [Line Items]
Issuance of common stock (in shares)	1,470,588
Stock price per share | $ / shares	$ 17.00
Issuance of common stock | $	$ 25.0

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Fair Value Measurements - Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Financial Assets:
Financial Assets, fair value	$ 387,649	$ 415,870
Financial Liabilities:
Financial Liabilities, fair value	3,508	3,750
Contingent Consideration Related To Acquisition
Financial Liabilities:
Financial Liabilities, fair value	3,508	3,750
Level 1
Financial Assets:
Financial Assets, fair value	79,037	104,602
Level 2
Financial Assets:
Financial Assets, fair value	308,612	311,268
Level 3
Financial Liabilities:
Financial Liabilities, fair value	3,508	3,750
Level 3 | Contingent Consideration Related To Acquisition
Financial Liabilities:
Financial Liabilities, fair value	3,508	3,750
Money Market Funds
Financial Assets:
Financial Assets, fair value	79,037	104,602
Money Market Funds | Level 1
Financial Assets:
Financial Assets, fair value	79,037	104,602
U S Government Agencies Debt Securities
Financial Assets:
Financial Assets, fair value	184,541	194,055
U S Government Agencies Debt Securities | Level 2
Financial Assets:
Financial Assets, fair value	184,541	194,055
Corporate Debt Securities
Financial Assets:
Financial Assets, fair value	71,930	74,918
Corporate Debt Securities | Level 2
Financial Assets:
Financial Assets, fair value	71,930	74,918
Commercial Paper
Financial Assets:
Financial Assets, fair value	52,141	42,295
Commercial Paper | Level 2
Financial Assets:
Financial Assets, fair value	$ 52,141	$ 42,295

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Fair Value Measurements - Additional Information (Details) - USD ($)	Jun. 30, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Fair value measurements transfers between category levels	$ 0	$ 0
Financial assets measured at fair value on a nonrecurring basis	0	0
Financial liabilities measured at fair value on a nonrecurring basis	$ 0	$ 0

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Fair Value Measurements - Summary of Changes in Fair Value of Level 3 Financial Liabilities (Details) - Contingent Consideration $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Beginning balance	$ 3,750
Net decrease in fair value upon remeasurement	(317)
Foreign currency impact on contingent consideration	75
Ending balance	$ 3,508

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Fair Value Measurements - Summary of Estimated Value of Cash, Cash Equivalents and Marketable Securities and Gross Unrealized Holding Gains and Losses (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents, Amortized cost	$ 105,938	$ 150,456
Cash and cash equivalents, Estimated Fair Value	105,938	150,456
Marketable securities, Amortized cost	290,867	280,770
Unrealized gains	130	41
Unrealized losses	(16)	(222)
Marketable securities, Estimated Fair Value	290,981	280,589
Cash
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents, Amortized cost	9,157	15,175
Cash and cash equivalents, Estimated Fair Value	9,157	15,175
Money Market Funds
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents, Amortized cost	79,037	104,602
Cash and cash equivalents, Estimated Fair Value	79,037	104,602
Commercial Paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents, Amortized cost	17,744	7,899
Cash and cash equivalents, Estimated Fair Value	17,744	7,899
U.S. government and agency securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Cash and cash equivalents, Amortized cost		22,780
Cash and cash equivalents, Estimated Fair Value		22,780
U S Government Agencies Debt Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities, Amortized cost	184,541	171,416
Unrealized gains	105	3
Unrealized losses	(5)	(144)
Marketable securities, Estimated Fair Value	184,641	171,275
Corporate Debt Securities
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities, Amortized cost	71,930	74,958
Unrealized gains	25	38
Unrealized losses	(11)	(78)
Marketable securities, Estimated Fair Value	71,944	74,918
Commercial paper
Fair Value Assets And Liabilities Measured On Recurring And Nonrecurring Basis [Line Items]
Marketable securities, Amortized cost	34,396	34,396
Marketable securities, Estimated Fair Value	$ 34,396	$ 34,396

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Fair Value Measurements - Summary of Amortized Cost and Estimated Fair Value of Available-for-Sale Marketable Securities by Contractual Maturity (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Fair Value Disclosures [Abstract]
Mature in one year or less, Amortized cost	$ 287,303
Mature after one year through two years, Amortized cost	3,564
Marketable securities, Amortized cost	290,867	$ 280,770
Mature in one year or less, Estimated Fair Value	287,415
Mature after one year through two years, Estimated Fair Value	3,566
Marketable securities, Estimated Fair Value	$ 290,981	$ 280,589

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Balance Sheet Components - Summary of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 19,623	$ 5,643
Less: accumulated depreciation and amortization	(2,396)	(1,657)
Property and equipment, net	17,227	3,986
Lab Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	3,433	3,011
Computer and Office Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	1,264	959
Furniture and Fixtures
Property Plant And Equipment [Line Items]
Property and equipment, gross	313	306
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	703	669
Construction in Progress
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 13,910	$ 698

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Balance Sheet Components - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Balance Sheet Components [Abstract]
Depreciation and amortization	$ 382	$ 126	$ 739	$ 219

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Balance Sheet Components - Summary of Accrued Expenses and Other Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Payables And Accruals [Abstract]
Accrued construction in progress	$ 3,971
Compensation and related benefits	2,310	$ 2,765
Professional and consulting services	1,118	1,650
Other	1,060	997
Total accrued expenses and other liabilities	$ 8,459	$ 5,412

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Goodwill and Intangible Assets - Schedule of Goodwill (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2016 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
Balance at December 31, 2015	$ 8,469
Foreign currency translation adjustment	103
Balance at June 30, 2016	$ 8,572

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Goodwill and Intangible Assets - Schedule of Intangible Assets (Details) - USD ($) $ in Thousands	Jun. 30, 2016	Dec. 31, 2015
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets, Gross Carrying Amount	$ 10,982	$ 10,786
Finite Lived Intangible Assets, Accumulated Amortization	366	89
Finite Lived Intangible Assets, Net Book Value	10,616	10,697
Intangible Assets, Gross Carrying Amount	30,025	29,489
Intangible assets, Net Book Value	29,659	29,400
License agreement
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]
Finite Lived Intangible Assets, Gross Carrying Amount	10,982	10,786
Finite Lived Intangible Assets, Accumulated Amortization	366	89
Finite Lived Intangible Assets, Net Book Value	10,616	10,697
Acquired IPR&D assets
Schedule Of Finite And Indefinite Lived Intangible Assets [Line Items]
Indefinite-Lived Intangible Assets, Gross Carrying Amount	$ 19,043	$ 18,703

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Goodwill and Intangible Assets - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Goodwill And Intangible Assets Disclosure [Abstract]
Intangible assets, amortization period			20 years
Amortization of intangible assets	$ 140,000	$ 0	$ 277,000	$ 0

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Goodwill and Intangible Assets - Schedule of Finite-Lived Intangible Assets Estimated Future Amortization Expense (Details) $ in Thousands	Mar. 31, 2016 USD ($)
Goodwill And Intangible Assets Disclosure [Abstract]
2016 (remaining six months)	$ 275
2017	549
2018	549
2019	549
2020	$ 549

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Collaboration Agreements - Additional Information (Details) - USD ($)	1 Months Ended			3 Months Ended	6 Months Ended	12 Months Ended	20 Months Ended	26 Months Ended
	Jul. 31, 2015	Apr. 30, 2015	May 31, 2014	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015	Jun. 30, 2016	Jun. 30, 2016
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Deferred revenue				$ 15,171,000	$ 15,171,000	$ 15,046,000	$ 15,171,000	$ 15,171,000
Novartis Agreement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Novartis share of joint development costs					38.00%
Period after first commercial sale of product on which Novartis' royalty obligation run on a country to country basis					12 years
Estimated performance period of agreement	13 years 6 months
Revenue recognized				3,700,000	$ 7,400,000
Deferred revenue				185,200,000	$ 185,200,000		185,200,000	185,200,000
Novartis Agreement | United States
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Collaborative arrangement profit share percentage					50.00%
Novartis Agreement | European Countries and Japan
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Collaborative arrangement profit share percentage					45.00%
Novartis Agreement | United States, Specified European Countries and /or Japan
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Collaborative Agreement, Obligations					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.
Reduction percentage of development cost share					50.00%
Reduction percentage of profit share					50.00%
Novartis Agreement | Novartis
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Novartis share of joint development costs					62.00%
Collaborative arrangement profit share percentage					50.00%
Novartis Agreement | Up Front Payment Arrangement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement		$ 200,000,000
Novartis Agreement | Development Milestone
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized for milestones				35,000,000
Novartis Agreement | Maximum | Development Milestone
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive					$ 215,000,000
Novartis Agreement | Maximum | Regulatory Approval Milestone
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive					250,000,000
Janssen ADU-214 Agreement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized for milestones						21,000,000
Janssen ADU-214 Agreement | Up Front Payment Arrangement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement							30,000,000
Janssen ADU-214 Agreement | Non Substantive And Substantive Milestone
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement							$ 21,000,000
Janssen ADU-214 Agreement | Maximum | Contingent Payments
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive					766,000,000
Janssen ADU-741 Agreements | Up Front Payment Arrangement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement								12,000,000
Janssen ADU-741 Agreements | Non Substantive And Substantive Milestone
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement								$ 10,000,000
Janssen ADU-741 Agreements | Maximum | Contingent Payments
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive					343,000,000
Janssen GVAX Prostate Agreement | Up Front Payment Arrangement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement			$ 500,000
Janssen GVAX Prostate Agreement | Specified Commercial Milestone
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive					2,000,000
Janssen ADU-741 and Janssen GVAX Prostate Agreement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized for milestones						$ 10,000,000
Janssen ADU-741 and Janssen GVAX Prostate Agreement | Up Front Payment Arrangement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Payments received under collaboration agreement					12,500,000
Pharma License Agreement
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Revenue recognized for milestones				$ 0	0
Pharma License Agreement | Maximum | Development Milestone Contingent Payments | Product Candidate
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive for products or product candidates					312,000,000
Pharma License Agreement | Maximum | Commercial and Net Sales Contingent Milestone Payments | Product
Collaborative Arrangements And Noncollaborative Arrangement Transactions [Line Items]
Milestone amount eligible to receive for products or product candidates					$ 135,000,000

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Commitments and Contingencies - Additional Information (Details)	3 Months Ended		6 Months Ended
	Jun. 30, 2016 USD ($) ft²	Jun. 30, 2015 USD ($)	Jun. 30, 2016 USD ($) ft² LeaseTerm RenewalOption	Jun. 30, 2015 USD ($)	Mar. 31, 2016 ft²	Feb. 28, 2015 ft²
Operating Leased Assets [Line Items]
Total square footage of leased property | ft²						25,000
Lease expiration date			Dec. 31, 2018
Additional operating lease term			2 years
Security deposit	$ 500,000		$ 500,000
Restricted cash	468,000		468,000
Rent expense	1,000,000	$ 200,000	1,200,000	$ 300,000
Letter of Credit | Bank Of America Merrill Lynch
Operating Leased Assets [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	500,000		500,000
Collateral Pledged | Certificates of Deposit | Letter of Credit | Bank Of America Merrill Lynch
Operating Leased Assets [Line Items]
Restricted cash	$ 500,000		$ 500,000
Office Laboratory Lease
Operating Leased Assets [Line Items]
Total square footage of leased property | ft²					56,000
Additional operating lease term			5 years
Description of lease			The Company began incurring rent expense when the landlord delivered possession of the facility to the Company
Operating lease initial term			12 years
Operating lease extended term			13 years 6 months
Operating lease commencement date			2016-03
Operating lease, additional space | ft²	7,000
Additional lease option rights exercised | ft²	41,000		41,000
Number of additional renewal terms | LeaseTerm			2
Office Laboratory Lease | Netherlands
Operating Leased Assets [Line Items]
Operating leases term of expiration			2017-12
Number of renewal options for operating leases | RenewalOption			1

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Commitments and Contingencies - Schedule of Future Minimum Payments under the Company’s Office Leases (Details) $ in Thousands	Jun. 30, 2016 USD ($)
Commitments And Contingencies Disclosure [Abstract]
2016 (remaining six months)	$ 1,771
2017	3,652
2018	4,872
2019	4,647
2020	4,786
Thereafter	48,457
Total	$ 68,185

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Equity Incentive Plans - Additional Information (Details) - USD ($) $ / shares in Units, $ in Millions		3 Months Ended	6 Months Ended	12 Months Ended
	Dec. 31, 2015	Jun. 30, 2016	Jun. 30, 2016	Dec. 31, 2015
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Shares issuable increased during the period			2,543,513
Number of shares available for future grant	4,810,271	6,483,623	6,483,623	4,810,271
Closing stock price		$ 11.31	$ 11.31
Aggregate intrinsic value of options exercised		$ 0.4	$ 3.9
Total unrecognized compensation expense of unvested options		$ 33.8	$ 33.8
Weighted-average period of unrecognized compensation expense, unvested options			2 years 6 months
Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of exercise price to fair market value common stock on grant date.			100.00%
Stock option expiration period			10 years
2015 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares reserved for issuance	6,134,292			6,134,292
Percentage of shares issued on common stock outstanding				4.00%
Common Stock Issuance Description			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.
Shares issuable increased during the period	2,543,513
Number of shares available for future grant		6,483,623	6,483,623
2015 ESPP
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock shares reserved for issuance	720,000			720,000
Percentage of shares issued on common stock outstanding			1.00%
Common Stock Issuance Description			shares issuable under the 2015 ESPP to the lower of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (ii) a lower number determined by the board of directors.
Shares issuable increased during the period			635,878
Number of shares available for future grant		1,259,761	1,259,761
More Than 10% Voting Shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Stock option expiration period			5 years
More Than 10% Voting Shares | Minimum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of exercise price to fair market value common stock on grant date.			110.00%

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Equity Incentive Plans - Schedule of Stock Option Plan Activity (Details) - USD ($) $ / shares in Units, $ in Thousands		6 Months Ended
	Dec. 31, 2015	Jun. 30, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Shares Available for Grant, Beginning balance		4,810,271
Shares Available for Grant, Authorized		2,543,513
Shares Available for Grant, Granted		(878,160)
Shares Available for Grant, Canceled		7,999
Shares Available for Grant, Ending balance	4,810,271	6,483,623
Number of Options, Beginning balance		9,931,229
Number of Options, Granted		878,160
Number of Options, Exercised		(214,828)
Number of Options, Canceled		(42,161)
Number of Options, Ending balance	9,931,229	10,552,400
Number Options, Options exercisable		5,258,844
Number of Options, Options vested and expected to vest		10,457,538
Weighted-Average Exercise Price, Beginning balance		$ 5.29
Weighted-Average Exercise Price, Granted		12.36
Weighted-Average Exercise Price, Exercised		1.14
Weighted-Average Exercise Price, Canceled		6.72
Weighted-Average Exercise Price, Ending balance	$ 5.29	5.96
Weighted-Average Exercise Price, Options exercisable		2.53
Weighted-Average Exercise Price, Options vested and expected to vest		$ 5.84
Aggregate Intrinsic Value, Balance	$ 229,591	$ 81,122
Aggregate Intrinsic Value, Options exercisable		50,394
Aggregate Intrinsic Value, Options vested and expected to vest		$ 81,122

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Equity Incentive Plans - Schedule of Stock Option Plan Activity (Parenthetical) (Details)	6 Months Ended
	Jun. 30, 2016 shares
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]
Number of canceled options excluded	34,162

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Equity Incentive Plans - Summary of Stock-Based Compensation (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation	$ 3,325	$ 2,765	$ 7,068	$ 3,345
Research and Development Expense
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation	1,971	606	3,969	751
General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation	$ 1,354	$ 2,159	$ 3,099	$ 2,594

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Equity Incentive Plans - Schedule of Black-Scholes Option-Pricing Model (Details)	6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015
2015 ESPP
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	6 months	6 months
Volatility	73.80%	71.70%
Risk-free interest rate	0.36%	0.10%
Minimum | 2015 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	2 years	5 years 3 months 18 days
Volatility	73.00%	70.20%
Risk-free interest rate	1.25%	0.80%
Maximum | 2015 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	6 years 18 days	6 years 2 months 12 days
Volatility	75.00%	85.20%
Risk-free interest rate	1.72%	2.05%

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Income Taxes - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Income Tax Contingency [Line Items]
Income tax expense	$ 1,472,000	$ 0	$ 4,698,000	$ 0
Unrecognized tax benefits	1,400,000	700,000	1,400,000	700,000
Amount of unrecognized tax benefits that would, if recognized, reduce effective tax rate	200,000	0	200,000	0
Unrecognized tax benefits, income tax penalties and interest accrued	0	0	0	0
Unrecognized tax benefits, income tax penalties and interest expense	$ 0	$ 0	$ 0	$ 0
State and Local Jurisdiction | Earliest Tax Year
Income Tax Contingency [Line Items]
Open tax year			Dec. 31, 2010
State and Local Jurisdiction | Latest Tax Year
Income Tax Contingency [Line Items]
Open tax year			Dec. 31, 2015
U.S. Federal Tax Authority | Earliest Tax Year
Income Tax Contingency [Line Items]
Open tax year			Dec. 31, 2010
U.S. Federal Tax Authority | Latest Tax Year
Income Tax Contingency [Line Items]
Open tax year			Dec. 31, 2015
California Tax Authority
Income Tax Contingency [Line Items]
Tax assessment additional period			5 years

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Net Income (Loss) per Common Share - Reconciliation of Basic and Diluted Net Income (Loss) per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Earnings Per Share [Abstract]
Net income (loss)	$ 2,296	$ (26,260)	$ (26,531)	$ (42,876)
Shares used in computing basic net income (loss) per common share	64,434,903	52,653,344	64,138,737	26,678,848
Add effect of dilutive securities:
Stock options	6,949,706
Common stock warrants	89,198
Shares used in computing diluted net income (loss) per common share	71,473,807	52,653,344	64,138,737	26,678,848
Net income (loss) per common share, basic	$ 0.04	$ (0.50)	$ (0.41)	$ (1.61)
Net income (loss) per common share, diluted	$ 0.03	$ (0.50)	$ (0.41)	$ (1.61)

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Net Income (Loss) per Common Share - Schedule of Securities Excluded from Diluted Net Income (Loss) per Common Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2016	Jun. 30, 2015	Jun. 30, 2016	Jun. 30, 2015
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Securities excluded from diluted net income (loss) per common share	2,064,203	10,549,709	10,650,021	10,549,709
Options to Purchase Common Stock
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Securities excluded from diluted net income (loss) per common share	2,061,539	9,581,168	10,552,400	9,581,168
Common Stock Warrants
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Securities excluded from diluted net income (loss) per common share	2,664	968,541	97,621	968,541