10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2019

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: 001-37519

AIMMUNE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware	45-2748244
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

8000 Marina Blvd., Suite 300

Brisbane, California 94005

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (650) 614-5220

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.0001 per share	AIMT	NASDAQ Global Market

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  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐   

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of July 31, 2019, the registrant had 62,668,957 shares of common stock, $0.0001 par value per share, outstanding.

AIMMUNE THERAPEUTICS, INC.

TABLE OF CONTENTS

		Page
PART I. – FINANCIAL INFORMATION		3
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets as of June 30, 2019 and December 31, 2018	3
	Condensed Consolidated Statements of Comprehensive Loss for the Quarters and Six Months Ended June 30, 2019 and 2018	4
	Condensed Consolidated Statements of Stockholders’ Equity as of June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2019 and 2018	7
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	26
Item 4.	Controls and Procedures	26
PART II. – OTHER INFORMATION		27
Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	66
Item 5.	Other Information	66
Item 6.	Exhibits	67
SIGNATURES		69

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

(Unaudited)

	June 30,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	72,564		$	107,511
Short-term investments		171,108			196,421
Prepaid expenses and other current assets		6,859			8,687
Total current assets		250,531			312,619
Long-term investments		6,584			—
Property and equipment, net		29,414			26,328
Operating lease right-of-use assets		11,736			—
Prepaid expenses and other assets		511			608
Total assets	$	298,776		$	339,555
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	14,086		$	8,833
Accrued liabilities		27,083			29,144
Operating lease liabilities, current		2,022			—
Other current liabilities		20			35
Total current liabilities		43,211			38,012
Long term debt, net of discount		38,526			—
Operating lease liabilities, non-current		11,036			—
Other liabilities		1,029			2,596
Total liabilities		93,802			40,608
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, par value $0.0001 per share— 10,000 shares authorized at      June 30, 2019 and December 31, 2018; 0 shares issued and outstanding at      June 30, 2019 and December 31, 2018		—			—
Common stock, par value $0.0001 per share—290,000 shares authorized as of   June 30, 2019, and December 31, 2018; 62,660 and 62,142 shares issued and   outstanding as of June 30, 2019, and December 31, 2018, respectively		6			6
Additional paid-in capital		798,058			775,283
Accumulated other comprehensive gain(loss)		236			(108	)
Accumulated deficit		(593,326	)		(476,234	)
Total stockholders’ equity		204,974			298,947
Total liabilities and stockholders’ equity	$	298,776		$	339,555

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

3

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(In thousands, except per share amounts)

(Unaudited)

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Operating expenses
Research and development	$	31,988		$	35,254		$	63,304		$	68,700
General and administrative		31,200		$	18,559			54,912			35,232
Total operating expenses		63,188			53,813			118,216			103,932
Loss from operations		(63,188	)		(53,813	)		(118,216	)		(103,932	)
Interest income, net		358			1,294			1,149			1,930
Loss before provision for income taxes		(62,830	)		(52,519	)		(117,067	)		(102,002	)
Provision for income taxes		48			33			77			50
Net loss	$	(62,878	)	$	(52,552	)	$	(117,144	)	$	(102,052	)
Other comprehensive loss, net of tax:
Unrealized gains (losses) on investments		174			2			345			(15	)
Comprehensive loss	$	(62,704	)	$	(52,550	)	$	(116,799	)	$	(102,067	)
Net loss per common share, basic and diluted	$	(1.01	)	$	(0.91	)	$	(1.88	)	$	(1.83	)
Weighted average shares used in computing net loss per common    share, basic and diluted		62,332			57,903			62,178			55,752

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

4

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

							Accumulated
					Additional		Other						Total
	Common Stock				Paid-In		Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital		(Loss)/Gain			deficit			Equity
Balance as of December 31, 2018		62,142	$	6	$	775,283	$	(108	)	$	(476,234	)	$	298,947
Issuance of common stock    upon exercise of vested    options		328		—		3,633		—			—			3,633
Stock-based compensation expense		—		—		7,765		—			—			7,765
Other comprehensive gain		—		—		—		171			—			171
Accumulated depreciation upon adoption of ASU Topic 842		—		—		—		—			51			51
Net loss		—		—		—		—			(54,266	)		(54,266	)
Balance as of March 31, 2019		62,470	$	6	$	786,681	$	63		$	(530,449	)	$	256,301
Issuance of common stock    upon exercise of vested    options and vesting of    restricted stock units		189		—		2,637		—			—			2,637
Stock-based compensation expense		—		—		8,740		—			—			8,740
Other comprehensive loss		—		—		—		173			1			174
Net loss		—		—		—		—			(62,878	)		(62,878	)
Balance as of June 30, 2019		62,659	$	6	$	798,058	$	236		$	(593,326	)	$	204,974

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

5

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

								Accumulated
					Additional			Other						Total
	Common Stock				Paid-In			Comprehensive			Accumulated			Stockholders’
	Shares		Amount		Capital			Loss			deficit			Equity
Balance as of December 31, 2017		51,091	$	5	$	443,390		$	(108	)	$	(265,482	)	$	177,805
Issuance of common stock    upon exercise of vested    options		308		—		2,743			—			—			2,743
Issuance of common stock    upon securities agreement		300		—		—			—			—			—
Issuance of common stock    upon public offering		6,325		1		190,453			—			—			190,454
Stock-based compensation expense		—		—		7,607			—			—			7,607
Other comprehensive loss		—		—		—			(17	)		—			(17	)
Net loss		—		—		—			—			(49,500	)		(49,500	)
Balance as of March 31, 2018		58,024	$	6	$	644,193		$	(125	)	$	(314,982	)	$	329,092
Issuance of common stock    upon exercise of vested    options and vesting of    restricted stock units		437		—		2,641			—			—			2,641
Issuance of common stock    upon public offering		—		—		(18	)		—			(1	)		(19	)
Stock-based compensation expense		—		—		8,674			—			—			8,674
Other comprehensive gain		—		—		—			2			—			2
Net loss		—		—		—			—			(52,552	)		(52,552	)
Balance as of June 30, 2018		58,461	$	6	$	655,490		$	(123	)	$	(367,535	)	$	287,838

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

6

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net loss	$	(117,144	)	$	(102,052	)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense		1,751			738
Stock-based compensation expense		16,505			16,281
Non-cash interest expense		2,259			—
Amortization of premium on investment securities		(1,094	)		(225	)
Changes in operating assets and liabilities:
Prepaid expenses and other assets		2,596			(191	)
Accounts payable		5,466			2,559
Accrued liabilities		(2,887	)		6,366
Other liabilities		553			207
Net cash used in operating activities		(91,995	)		(76,317	)
Cash flows from investing activities:
Purchase of property and equipment		(4,860	)		(6,243	)
Purchase of investments		(106,980	)		(133,208	)
Maturities of investments		127,146			88,618
Net cash provided by (used in) investing activities		15,306			(50,833	)
Cash flows from financing activities:
Borrowings under debt agreement		40,000			—
Debt issuance costs		(3,856	)		—
Proceeds from underwritten public offering, net of offering costs		—			190,435
Net cash proceeds from exercise of stock options, including early exercise		6,270			5,385
Tax withholdings related to net share settlements of restricted stock units		(672	)		—
Net cash provided by financing activities		41,742			195,820
Net increase (decrease) in cash and cash equivalents		(34,947	)		68,670
Cash and cash equivalents at the beginning of the period		107,511			73,487
Cash and cash equivalents at the end of the period	$	72,564		$	142,157
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable and accrued liabilities	$	1,916		$	556
Debt issuance costs, discount and interest payable	$	2,259		$	—

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

7

AIMMUNE THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2019

(Unaudited)

1. Formation and Business of the Company

Aimmune Therapeutics, Inc., is a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary product candidates, to reduce the frequency and severity of allergic reactions, including anaphylaxis, upon exposure to peanut and other food allergens. Our therapeutic approach, which we refer to as Characterized Oral Desensitization Immunotherapy, or CODIT^TM, is designed to desensitize patients to food allergens using rigorously characterized biologic products, defined treatment protocols and tailored support services. We are headquartered in Brisbane, California, and were incorporated in the state of Delaware on June 24, 2011.

Since inception, we have incurred net losses and negative cash flows from operations. During the quarter and six months ended June 30, 2019, we incurred a net loss of $62.9 million and $117.1 million, respectively, and we used $92.0 million of cash in operations. As of June 30, 2019, we had an accumulated deficit of $593.3 million, and we do not expect to experience positive cash flows in the near future. As of June 30, 2019, we had cash, cash equivalents and investments of $250.3 million. We believe that our existing capital resources will be sufficient to fund our planned operations for at least the next 12 months and through expected regulatory approval and potential commercial launch in the United States and Europe for AR101, our lead CODIT^TM product candidate. We have financed our operations to date primarily through private placements of our equity securities, our initial public offering, or IPO, of common stock in August 2015, an underwritten public offering of common stock in February and March 2018 and our loan agreement entered into in January 2019. Our ability to continue to meet our obligations and to achieve our business objectives is dependent upon a number of factors, which include obtaining U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA, approval, raising additional capital, the successful and timely completion of our clinical trials, our ability to control expenses and generating sufficient revenue in the United States and Europe. Failure to obtain FDA and EMA approval, commercialize our lead product candidate, manage discretionary expenditures, or raise additional financing, as required, may adversely impact our ability to achieve our intended business objectives.

2. Summary of Significant Accounting Policies

Basis of Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial 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, 2018, 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 condensed consolidated 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 quarter and six months ended June 30, 2019, are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other interim period or for any other future year. We operate in one reportable segment.

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, 2018, included in our Annual Report on Form 10-K filed with the SEC.

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of our wholly-owned subsidiaries. All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of costs and expenses during the reporting period. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.

8

Significant Accounting Policies

There have been no significant changes to the accounting policies during the six months ended June 30, 2019, as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, except as noted below.

Recently Adopted Accounting Pronouncements

We adopted Accounting Standards Update, or ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019 using the alternative modified retrospective approach provided in ASU No. 2018-11, Lease (Topic 841): Targeted Improvements. In doing so, we have continued to apply Accounting Standards Codification, or ASC 840 in the comparative periods and recognized the cumulative effect of applying Topic 842 to retained earnings on January 1, 2019. We elected a package of practical expedients for leases that commenced prior to January 1, 2019, which among other things, allowed us to carry forward the historical lease assessment for: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. We have also elected a practical expedient, by class of underlying asset, not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. We have made an accounting policy election to not apply the recognition requirements to leases with a lease term of 12 months or less. We have recognized those lease payments in the consolidated statements of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Adoption of this standard has resulted in the recognition of operating lease right-of-use assets of $11.7 million and lease liabilities of $13.1 million as of June 30, 2019. The standard did not materially impact our consolidated statement of operations or our consolidated statements of cash flows.

We adopted ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (Topic 718), as of January 1, 2019, which amends ASC Topic 718, “Compensation—Stock Compensation”. The ASU simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. Upon adoption of this standard, share-based awards issued to non-employees are measured at the grant date and are not subject to remeasurement. We have elected to continue to use the contractual term as the estimated expected term. The adoption of ASU No. 2018-07 did not have a material impact on our financial statements and is expected to reduce the volatility in stock-based compensation expense for non-employees recognized from period to period.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the Financial Accounting Standards Board, or the FASB, issued ASU 2018-13, Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which adds and modifies certain disclosure requirements for fair value measurements. Under the new guidance, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, or valuation processes for Level 3 fair value measurements. However, public companies will be required to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and related changes in unrealized gains and losses included in other comprehensive income. ASU 2018-13 is effective for fiscal periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact that the adoption of ASU 2018-13 will have on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 modifies the other-than-temporary impairment model for available-for-sale debt securities and requires an estimate of expected credit losses when the fair value is below the amortized cost of the asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-13 will have on our consolidated financial statements and related disclosures.

3. Available-for-Sale Securities and Fair Value Measurements

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

9

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

• 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 following tables set forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	June 30, 2019
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash and money market funds	$	72,564	$	—	$	—	$	72,564
Total cash and cash equivalents	$	72,564	$	—	$	—	$	72,564
Investments:
Agency securities	$	—	$	21,256	$	—	$	21,256
Corporate securities		—		44,153		—		44,153
Commercial paper		—		11,033		—		11,033
U.S. government securities		—		101,250		—		101,250
Total investments	$	—	$	177,692	$	—	$	177,692

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash and money market funds	$	107,511	$	—	$	—	$	107,511
Total cash and cash equivalents	$	107,511	$	—	$	—	$	107,511
Investments:
Agency securities		—		17,352		—		17,352
Corporate securities		—		54,474		—		54,474
Commercial paper		—		5,965		—		5,965
U.S. government securities		—		118,630		—		118,630
Total investments	$	—	$	196,421	$	—	$	196,421

Our valuation techniques used to measure the fair value of money market funds were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of investments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. Investments are carried at fair value. During the quarters and six months ended June 30, 2019 and 2018, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

Available-for-sale investments are carried at fair value and are included in the tables above. The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in cash equivalents and investments, as of June 30, 2019 and December 31, 2018, are as follows (in thousands):

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities	$	21,243	$	13	$	—	$	21,256
Corporate securities		44,051		102		—		44,153
Commercial paper		11,033		—		—		11,033
U.S. government securities		101,129		121		—		101,250
Total available-for-sale investments	$	177,456	$	236	$	—	$	177,692

10

	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Fair Value
Agency securities	$	17,361	$	—	$	(9	)	$	17,352
Corporate securities		54,536		—		(62	)		54,474
Commercial paper		5,965		—		—			5,965
U.S. government securities		118,667		14		(51	)		118,630
Total available-for-sale investments	$	196,529	$	14	$	(122	)	$	196,421

At June 30, 2019, all of the available-for-sale securities have contractual maturities within eighteen months. We periodically review our available-for-sale investments for other-than-temporary impairment loss. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. For debt securities, we also consider whether (i) it is more likely than not that we will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. During the quarters and six months ended June 30, 2019 and 2018, we did not recognize any other-than-temporary impairment losses. All marketable securities with unrealized losses have been in a loss position for less than twelve months.

The carrying value of our long-term debt approximates its fair value at each balance sheet date due to its variable interest rate, which approximates a market interest rate.

4. Balance Sheet Components

Property and Equipment, Net

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

	June 30, 2019			December 31, 2018
Furniture and equipment	$	2,642		$	2,221
Computer equipment		2,603			2,073
Manufacturing equipment		6,473			1,733
Leased equipment		100			100
Leasehold improvements		14,506			4,469
Buildings		—			688
Construction in progress		7,918			18,295
Property and equipment, gross		34,242			29,579
Less: accumulated depreciation		(4,828	)		(3,251	)
Property and equipment, net	$	29,414		$	26,328

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2019		December 31, 2018
Compensation and benefits	$	7,054	$	8,912
Research and development		8,721		15,504
Professional and consulting		10,829		4,691
Other		479		37
Total accrued liabilities	$	27,083	$	29,144

5. Long-term Debt, Net of Discounts

In January 2019, we entered into a loan agreement with an affiliate of KKR for up to $170.0 million in three tranches, or the KKR Loans. Of the total loan amount, $40.0 million was funded upon closing of the transaction, with $85.0 million to be funded upon FDA approval of AR101, or the Regulatory Approval and satisfaction of other customary borrowing conditions, and $45.0 million to be made available at our option in 2020 upon the satisfaction of certain borrowing conditions. The KKR Loans have a maturity date being the earliest of (a) January 3, 2025, or if Regulatory Approval has not occurred on or before December 31, 2020, January 15,

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2021 and (b) the date that is 91 days prior to the earliest current maturity date of any other loans we might have in excess of $15.0 million prior to the funding of the third tranche of the KKR Loans or $25.0 million following the funding of the third tranche of the KKR Loans. The KKR Loans bear interest through maturity, at our election with respect to (a) Alternate Base Rate, or ABR Loans, ABR plus 6.50% per annum and (b) London Interbank Offered Rate, or LIBOR Loans, 30-day LIBOR plus 7.50% per annum. We have the option to elect to make interest payments from available funds or make interest payments in kind by capitalizing such interest amounts on the applicable interest payment date by adding the amounts to the outstanding principal amount of the loan. Any capitalized amounts also bear interest. To date, we have selected to pay in kind and capitalized the interest for the six months ending June 30, 2019. We will begin paying accrued interest on outstanding KKR Loans on the last business day of each March, June, September and December thereafter while any KKR Loans are outstanding, as well as on the final maturity date of the KKR Loans, with each such date being referred to herein as an Interest Payment Date.

Principal payments on the KKR Loans are paid according to the following schedule: (i) on December 31, 2023, 50.0% of the outstanding principal amount of the loans as of such date, including any capitalized interest, (ii) on each Interest Payment Date thereafter, 12.5% of the outstanding principal amount of the KKR Loans as of December 31, 2023 and (iii) on January 3, 2025, or the Maturity Date, any remaining outstanding balance of the KKR Loans. We are also required to make mandatory prepayments of the KKR Loans under the Agreement, subject to specified exceptions, with the proceeds of asset sales, debt issuances, royalty transactions, collaboration transactions, and specified other events. In addition, upon the occurrence of a change of control, we must prepay, the outstanding amount of the KKR Loans.

The KKR Loans can be prepaid at our discretion, at any time, subject to prepayment fees. If all or any of the KKR Loans are prepaid or required to be prepaid, then we must pay, in addition to such prepayment, a prepayment premium (the “Prepayment Premium”) equal to (i) with respect to any such prepayment paid on or prior to January 3, 2021, the amount, if any, by which (a) the present value as of such date of determination of (x) 105.00% of the principal amount of the KKR Loans prepaid plus (y) all required interest payments that would have been due on the principal amount of the KKR Loans prepaid through and including January 3, 2021, computed using a discount rate equal to the treasury rate most nearly equal to the period from such date of prepayment to January 3, 2021 plus 50 basis points exceeds (b) the principal amount of the KKR Loans prepaid, (ii) with respect to any prepayment paid or required to be paid after January 3, 2021 but on or prior to January 3, 2022, 5.00% of the principal amount of the KKR Loans prepaid, (iii) with respect to any prepayment paid or required to be paid after January 3, 2022 but on or prior to January 3, 2023, 2.00% of the principal amount of the KKR Loans prepaid and (iv) with respect to any prepayment paid or required to be prepaid thereafter, 0.00% of the principal amount of the KKR Loans prepaid. If we receive Regulatory Approval and do not draw the $85 million, then we would have to pay on the earlier of (i) the date on which commitments have been terminated and no KKR Loans are outstanding and (ii) the Interest Payment Date falling in the first full fiscal quarter after receipt of Regulatory Approval, a premium in an amount equal to $3.4 million and the Prepayment Premium for such date on a principal amount equal to $85.0 million. The premium with respect to the Regulatory Approval described in the immediately preceding sentence is not due if we draw the additional (after the first $40.00 million on the closing date) $85.0 million of the KKR Loans. In addition, upon the occurrence of a change of control, we must prepay, the outstanding amount of the KKR Loans. Upon the prepayment or repayment of all or any of the KKR Loans, we must pay an additional (in addition to the Prepayment Premium) exit fee in an amount equal to 4.00% of the principal amount of the KKR Loans prepaid or repaid.

In connection with the KKR Loans, we paid direct fees of $3.9 million, including debt issuance costs. The fees are being amortized as interest expense over the term of the debt.  As of June 30, 2019 and December 31, 2018, $41.9 million and $0, respectively, was outstanding under the KKR Loans. As of June 30, 2019, the interest rate on the KKR Loans was 9.94%.

The following table represents our short-term and long-term debt obligations (in thousands):

	June 30, 2019
Principal amount of long-term debt	$	41,961
Less: Current portion of long-term debt		-
Long-term debt, net of current portion		41,961
Unamortized discount relating to deferred financing costs, net		(3,559	)
Accrued exit fee payment		124
Long-term debt, net of discount and current portion	$	38,526

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Future principal payments of our long-term debt as of June 30, 2019 are as follows:

Fiscal year ending December 31:
2019	$	-
2020		-
2021		-
2022		-
2023		20,981
Thereafter		20,980
Total	$	41,961

6. Commitments and Contingencies

Leases

We lease facilities for office and manufacturing space under various operating leases and a security system under a financing lease. Our leases have remaining lease terms of approximately 1 year to 6 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases.

Operating lease right-of-use assets and liabilities on our condensed consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms. We do not allocate lease payments to non-lease components. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable.

As of June 30, 2019, the maturities of our operating lease liabilities were as follows (in thousands):

	Remaining Lease Payments June 30, 2019
	Operating			Financing			Total
2019	$	1,567		$	17		$	1,584
2020		3,330			34			3,364
2021		3,413			35			3,448
2022		3,497			9			3,506
2023		3,378			-			3,378
Thereafter		1,744			-			1,744
Total lease payments	$	16,929		$	95		$	17,024
Less: Effects of discounting		(3,871	)		(29	)		(3,900	)
Present value of lease liabilities	$	13,058		$	66		$	13,124
Less: current portion		(2,022	)		(19	)		(2,041	)
Long-term lease liabilities	$	11,036		$	47		$	11,083
Weighted-average remaining lease term	5 years			2.8 years
Weighted-average incremental borrowing rate		11	%		23	%

As of June 30, 2019, we have additional operating leases, primarily for our manufacturing facility, that have not yet commenced of $0.7 million. These operating leases will commence in the third quarter of 2019 with a lease term of 6.25 years.

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The component of our lease costs included in our condensed consolidated statements of income were as follows (in thousands):

	Quarter Ended		Six Months Ended
Lease Cost	June 30, 2019
Operating lease cost	$	914	$	1,879
Finance lease cost
Amortization of leased assets		8		16
Interest on lease liabilities		4		8
Net lease cost	$	926	$	1,903

Other information related to our operating lease was as follows (in thousands):

Other Information	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,879
Operating cash flows from finance leases	$	24

Total future aggregate minimum lease payments calculated under ASC 840 at December 31, 2018 were as follows (in thousands):

	Remaining Lease Payments December 31, 2018
	Operating			Financing			Total
2019	$	3,133		$	33		$	3,166
2020		3,330			34			3,364
2021		3,413			35			3,448
2022		3,497			9			3,506
2023		3,378			-			3,378
Thereafter		1,744			-			1,744
Total lease payments	$	18,495		$	111		$	18,606
Less: amount representing interest		-			(33	)		(33	)
Value of lease liabilities under ASC 840	$	18,495		$	78		$	18,573
Less: current portion		(3,133	)		(17	)		(3,150	)
Long-term lease liabilities	$	15,362		$	61		$	15,423

Purchase Commitments

We purchase food-grade peanut flour from Golden Peanut Company, or GPC, pursuant to a long-term exclusive commercial supply agreement, which was expanded and extended in January 2018. GPC is precluded from selling several peanut flour products to any third party worldwide for use in oral immunotherapy, or OIT, for the treatment or cure of peanut allergy, provided that we are in compliance with our exclusive purchase obligation and meet specified annual purchase commitments. The restated agreement remains in effect until ten years after the first delivery to us of peanut flour for commercial use and includes an option for us to extend the term for an additional five years.

In connection with the expansion and extension of the agreement, we issued Archer Daniels Midland Company 300,000 shares of restricted common stock, vesting in four tranches over a 3.5 year period. Expense related to these shares will be measured as each tranche vests and recognized over the vesting period. At issuance, these shares had a fair value of $11.7 million, which will be remeasured as each tranche vests and recognized as general and administrative expense over the vesting period. Subject to certain exceptions, in the event that the price per share of our common stock were to fall below a specified level, the restated agreement provides that GPC would only be prohibited from selling one peanut flour product to any third party in the United States, Mexico, Canada, the European Union or Japan for use in OIT for the treatment or cure of peanut allergy.

Pursuant with the restated agreement, our purchase obligation commences with the first delivery of peanut flour for commercial use, which we currently anticipate will occur in 2019, and the aggregate purchase commitment under this agreement would be $3.3 million over a term of ten years.

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In December 2018, we entered into an exclusive supply agreement for egg protein with Michael Foods, Inc. Pursuant to the agreement, we have exclusive access to the clinical and commercial use of Michael Foods’ egg products for any egg allergy treatment, prevention or cure for a period of up to 15 years beyond the potential approval of AR201.

In May 2019, we entered into a Commercial Supply Agreement, or the Commercial Supply Agreement, pursuant to which CoreRx, Inc. agreed to manufacture commercial supply of AR101, if approved. Under the Commercial Supply Agreement, we are required to purchase a minimum percentage of our AR101 commercial supply requirements in each of the first six years of the Commercial Supply Agreement, subject to certain conditions and restrictions, ranging from 100% in 2019 and decreasing to a majority in 2024. We are also required to purchase a minimum percentage of our AR101 supply requirements for release testing in each of the first six years of the Commercial Supply Agreement, ranging from 100% in 2019 and decreasing to a significant majority in 2024. As of June 30, 2019, the minimum aggregate purchase commitment under this agreement would be $4.3 million. The initial term of the Commercial Supply Agreement began upon execution of the Commercial Supply Agreement and will continue until December 31, 2024. The Commercial Supply Agreement then automatically renews for successive two-year terms, unless earlier terminated pursuant to its terms, or upon either party’s notice of termination to the other.

Indemnifications

We indemnify each of our officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at our request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, we currently hold director and officer liability insurance. This insurance allows the transfer of risk associated with our exposure and may enable us to recover a portion of any future amounts paid. We believe that the fair value of these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations for any period.

Legal

We are currently not a party to any material legal proceedings. During the normal course of business, we may be a party to legal claims that may not be covered by insurance. We do not believe that any such claims would have a material impact on our consolidated financial statements.

7. Stock-Based Compensation

Equity Incentive Plan

In July 2015, we adopted the 2015 Stock Plan, or the 2015 Plan. Under the 2015 Plan, 4,681,544 shares of our common stock were initially reserved for the issuance of stock options and restricted stock to employees, directors, and consultants under terms and provisions established by the Board of Directors, or the Board, and approved by our stockholders. As of June 30, 2019 and December 31, 2018, there were 4,625,878 and 4,364,963 shares available for future grant, respectively.

Under the terms of the 2015 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive stock options may not be less than 110% of fair market value, as determined by the Board. The terms of options granted under the 2015 Plan may not exceed ten years. All options issued to date have had a ten-year life. To date, options granted generally vest in three ways: 1) over four years at a rate of 25% upon the first anniversary of the issuance date and 1/48^th per month thereafter, 2) over two years at a rate of 1/24^th per month, or 3) over four years at a rate of 1/48^th per month. The 2015 Plan contains certain change of control provisions and the employment offer letters of certain employees provide for varied acceleration of vesting in the event of a change of control and/or termination without cause. It also contains a net exercise provision and allows for cashless exercise upon the class of shares subject to the option becoming publicly traded in an established securities market.

In August 2015, we adopted the 2015 ESPP, which commenced on January 1, 2018. Under the 2015 ESPP our employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The 2015 ESPP generally provides for offering periods of six months in duration with purchase periods ending on either May 15 or November 15. Contributions under the 2015 ESPP are limited to a maximum of 15% of an employee’s eligible compensation. ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares. We issued 41,030 shares at a weighted average price of $25.28 per share during the year ended December 31, 2018. As of June 30, 2019, we had issued 59,722 shares under the ESPP at a weighted average price of $17.75 per share and 2,346,064 shares under the ESPP remain available for purchase.

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Our 2013 Stock Plan, or the 2013 Plan, which was originally adopted during January 2013, was terminated upon consummation of our IPO in August 2015. As a terminated plan, no further options can be granted from the 2013 Plan, and no further shares are reserved for issuance under the 2013 Plan.

Option activity under the 2015 Plan and 2013 Plan is set forth below:

	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Balance, December 31, 2018		7,133,113		$	20.08		7.6	$	27,413
Options granted		2,318,442			22.52
Options exercised and shares vested		(366,221	)		14.23
Options cancelled		(515,002	)		28.19
Balance, June 30, 2019		8,570,332			20.50		7.6	$	28,934
Options vested and expected to vest as of    June 30, 2019		8,017,038			20.22		7.5	$	28,771
Options exercisable as of June 30, 2019		3,891,087		$	15.93		6.3	$	26,175

The aggregate intrinsic values of options outstanding, exercisable, and vested and expected to vest were calculated as the difference between the exercise price of the options and the market price for shares of our common stock as of June 30, 2019. The 2013 Plan provided for early exercise, therefore, all our outstanding stock options issued under that plan are exercisable.

Restricted stock unit, or RSU, activity under the 2015 Plan is set forth below:

	Shares			Weighted Average Grant Date Fair Value
Unvested Balance, December 31, 2018		309,847		$	33.37
Awarded		476,127			23.06
Released		(91,354	)		33.28
Forfeited		(54,791	)		29.72
Unvested Balance, June 30, 2019		639,829		$	26.02

RSUs are measured based on the fair market value of the underlying stock on the date of grant and recognized as expense on a straight-line basis over the employee’s requisite service period (generally the vesting period).

In connection with the expansion and extension of our long-term exclusive commercial supply agreement with GPC, we issued 300,000 shares of restricted common stock in January 2018. The restricted common stock vests in four tranches over a 3.5 year period and is measured based on the fair market value of the underlying stock as the shares vest. As of June 30, 2019, 75,000 shares had vested, and the remaining shares were restricted. As of June 30, 2019, total estimated unrecognized expense related to these restricted shares was $3.6 million based upon the fair market value of our common stock on December 31, 2018, which is expected to be recognized over the remaining vesting period of 2.03 years as general and administrative expense. Stock-based compensation expense recognized during the quarters and six months ended June 30, 2019 and 2018 related to these shares was as follows (in thousands):

	2019		2018
Quarter ended June 30	$	532	$	830
Six months ended June 30		890		1,907

In February 2019, we issued 52,000 RSUs with a grant date fair value of approximately $1.3 million, to certain key employees that include service and performance vesting conditions related to the achievement of certain regulatory approvals for AR101.  Stock-based compensation expense will be recognized when we conclude that it is probable that the performance conditions will be achieved. We will reassess the probability of vesting at each reporting period and adjust stock-based compensation expense based on this probability assessment.  As the vesting is contingent upon specific performance conditions, stock-based compensation expense related to the grant will not be recognized until the specified conditions are determined to be probable of achievement. As none of the performance criteria were met during the six months ended June 30, 2019, we have not recognized any stock-based compensation related to these RSUs.

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Valuation Assumptions

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model and the resulting weighted average fair value of stock options granted were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected term (in years)		6.0			6.0			6.0			6.0
Expected volatility		62.2	%		68.3	%		63.2	%		68.4	%
Risk free interest rate		2.3	%		2.6	%		2.5	%		2.4	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average estimated fair value	$	11.93		$	19.10		$	13.38		$	20.51

The weighted-average assumptions used to estimate the fair value of ESPP using the Black-Scholes option valuation model were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected term (in years)		0.5			0.5			0.5			0.9
Expected volatility		50.7	%		47.0	%		50.7	%		50.4	%
Risk free interest rate		2.4	%		2.1	%		2.4	%		1.8	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average estimated fair value	$	6.00		$	8.41		$	6.00		$	12.42

Stock-Based Compensation Expense

Stock-based compensation expense, net of estimated forfeitures, reflected in the condensed consolidated statements of comprehensive loss is as follows (in thousands):

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development	$	2,957	$	2,923	$	5,700	$	4,970
General and administrative		5,783		5,751		10,805		11,311
Total stock-based compensation expense	$	8,740	$	8,674	$	16,505	$	16,281

During the quarter and six months ended June 30, 2019, we recorded approximately $0.5 million and $1.0 million, respectively, of stock-based compensation expense related to the acceleration of certain former executives’ stock options. Such expense was approximately $0.9 million and $2.1 million for the quarter and six months ended June 30, 2018, respectively.

As of June 30, 2019, total unrecognized stock-based compensation expense and expected period over which such compensation will be recognized were as follows ($ in thousands):

	As of  June 30, 2019
Stock-option
Unrecognized stock compensation expense	$	60,246
Weighted-average remaining vesting period (years)	2.8
RSU
Unrecognized stock compensation expense	$	11,753
Weighted-average remaining vesting period (years)	2.94
ESPP
Unrecognized stock compensation expense	$	237
Weighted-average remaining vesting period (years)		0.38

8. Net Loss per Share

Basic net loss per share is calculated based on the weighted-average number of common shares outstanding during the periods presented. For periods in which we have generated a net loss, basic and diluted net loss per share are the same due to the requirement

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to exclude potentially dilutive securities, consisting of common shares underlying outstanding stock options and restricted stock units, which would have an anti-dilutive effect on net loss per share.

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their inclusion would have been antidilutive:

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options		8,570,332		7,516,362		8,570,332		7,516,362
RSUs		639,829		360,574		639,829		360,574

9. Related Party Transaction

In June 2017, Mark McDade, a member of our Board of Directors, joined the Board of Directors of MyHealthTeams, a private company that creates social networks for people living with chronic conditions by partnering with pharmaceutical and healthcare companies. We entered into an agreement with MyHealthTeams in 2015 under which they provide services to us. During the quarters and six months ended June 30, 2019 and 2018, there were payments of $0.1 million in each period to MyHealthTeams pursuant to such agreement At June 30, 2019 and December 31, 2018, there were no accrued liabilities due under the MyHealthTeams agreement.

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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 in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part 1, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto for the year ended December 31, 2018, included in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission on February 28, 2019. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled “Risk Factors.” Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary product candidates, to reduce the incidence and severity of allergic reactions, including anaphylaxis, upon exposure to peanut and other food allergens. It is estimated that over 30 million people in the United States and Europe have a food allergy, with peanut allergy being the most prevalent and most commonly associated with severe outcomes and life-threatening events. There are currently no approved medical therapies to cure food allergies or prevent their symptoms. Patients with food allergies are typically counseled to practice strict dietary avoidance. When accidental exposure to food allergens invokes a serious allergic reaction, rescue therapies, such as antihistamines or injectable epinephrine, are the only recourse available. Our therapeutic approach, which we refer to as Characterized Oral Desensitization ImmunoTherapy, or CODIT^TM, is designed to desensitize patients to food allergens and thereby reduce the risk of having an allergic reaction upon allergen exposure or reduce symptom severity should an allergic reaction occur. CODIT is intended to reduce meaningfully the burden and anxiety experienced by food-allergic patients and their families.

Our lead CODIT product candidate, AR101, is an investigational biologic to reduce the frequency and severity of allergic reactions of patients with peanut allergy, which affects approximately three million patients in the United States and three million patients in Europe.  AR101 has received Fast Track and Breakthrough Therapy Designations for the treatment of patients 4-17 years of age from the United States Food and Drug Administration, or FDA. In February 2018, we announced positive data from our Phase 3 efficacy trial of AR101 in the United States, Canada and Europe, which we refer to as the PALISADE (Peanut Allergy Oral Immunotherapy Study of AR101 for Desensitization in Children and Adults) trial. In November 2018, we announced positive topline results real-world experience safety trial of AR101 in the United States and Canada in patients ages 4-17, which we refer to as the RAMSES (Real-World AR101 Market-Supporting Experience Study in Peanut Allergic Children Ages 4-17 Years) trial.  In addition, we have three ongoing roll-over studies relating to the PALISADE, RAMSES and ARTEMIS trials.

We submitted a Biologics License Application, or BLA, for AR101 to the FDA in December 2018. The FDA initiated review of the BLA for AR101 in January 2019 and accepted the BLA for filing on March 18, 2019. The FDA has determined that AR101, as an allergenic product candidate, is exempt from the Prescription Drug User Fee Act, as amended, or PDUFA, and has informed us that the BLA will be reviewed under a twelve-month target review period as measured from the January 2019 start date.  Our BLA for AR101 is scheduled to be reviewed by the Allergenic Products Advisory Committee in September 2019.  In addition, the FDA has completed all clinical and manufacturing site inspections scheduled to date. Our initial target patient population for AR101 is children and adolescents in the 4-17 age group with a diagnosed peanut allergy, which we estimate applied to approximately 1.6 million patients in the United States alone during 2018.

In February 2018, we completed enrollment of 175 patients in our European Phase 3 efficacy trial designed with a higher efficacy bar of tolerating 1,000 mg of peanut protein in an exit food-challenge without anything more than mild, transient symptoms, which we refer to as the ARTEMIS (AR101 Trial in Europe Measuring Oral Immunotherapy Success) trial. In March 2019, we announced that the ARTEMIS trial met its primary efficacy endpoint, the ability of patients to tolerate a 1,000 mg single dose of peanut protein. We submitted a Marketing Authorization Application, or MAA, to the European Medicines Agency, or EMA, in June 2019, and we expect a standard review time of 12 to 15 months.

We maintain worldwide commercial rights to all of our product candidates, including AR101 and, if approved, currently intend to commercialize in the United States and Europe by developing a specialty commercial field team targeting a subset of the approximately 5,000 practicing allergists in the United States and allergy-focused clinicians in major European markets, as well as a medical science liaison organization.

We are in the process of developing formulations for additional CODIT product candidates beyond peanut allergy and have formulation and manufacturing activities ongoing for a product candidate designed to treat hen’s egg allergy, AR201. Review of our investigational new drug application, or IND, for AR201 was completed by the FDA in February 2019. As such, we initiated enrollment of a Phase 2 clinical trial of AR201 for egg allergy. We are also exploring a product candidate designed to treat multi-tree nut allergy. In addition, we are also conducting research and development activities for potential CODIT product candidates targeting other food allergies, including cow’s milk allergy.

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Since commencing our operations in 2011, substantially all of our efforts have been focused on research, development and the advancement of our lead CODIT product candidate, AR101. We have not generated any revenue from product sales and, as a result, we have incurred significant losses. We incurred a net loss of $ 117.1 million for the six months ended June 30, 2019 and used $92.0 million of cash in operations. As of June 30, 2019, our accumulated deficit was $593.3 million. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for, and begin to commercialize AR101, and as we develop other product candidates

In January 2019, we entered into a loan agreement with an affiliate of KKR for up to $170.0 million in three tranches. Of the total loan amount, $40.0 million was funded upon the closing of the transaction, with $85.0 million to be funded upon FDA approval of AR101 and satisfaction of other customary borrowing conditions, and $45.0 million to be made available at our option in 2020, upon the satisfaction of certain borrowing conditions.

We currently utilize contract manufacturers for all our manufacturing activities. In June 2015, we entered into a lease for a manufacturing facility in Clearwater, Florida. In June 2017, we completed the construction of the manufacturing facility within the leased building, which we intend to handle full-scale cGMP (current Good Manufacturing Practices) commercial production of AR101, if approved, and supply future clinical trials of AR101. This manufacturing facility became operational in November 2018 and is operated by our contract manufacturing partner CoreRx, Inc., or CoreRx. In May 2019, we entered into a commercial supply agreement with CoreRx, and we plan to continue to rely on CoreRx to manage the operations of this manufacturing facility. Additionally, we currently utilize specialized clinical vendors, clinical trial sites, consultants, and clinical research organizations, or CROs, to ensure the proper and timely conduct of our clinical trials, and we do not yet have a sales organization. We expect to continue to significantly increase our investment in our manufacturing process and commercial organization as we prepare for the potential approval and commercial launch of AR101.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles, or GAAP, in the United States. 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 consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no new policies or significant changes to our critical accounting policies as disclosed in the critical accounting policies described in our Annual Report on Form 10-K for the year ended December 31, 2018, except as noted in Note 2, Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies of the Notes to Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information.

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Components of Results of Operations

Research and Development Expenses

The largest component of our total operating expenses has historically been our investment in research and development activities. Research and development expenses consist primarily of external clinical-related expenses, employee-related costs, stock-based compensation expense, and facilities and other costs, which include the following:

• External costs include costs incurred to conduct research, such as the discovery and development of our product candidates; costs related to the production of clinical supplies and pre-approval inventory, including fees paid to contract manufacturers; fees paid to consultants and vendors, including clinical research organizations in conjunction with implementing and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as for investigator grants, patient screening fees, laboratory work and statistical compilation and analysis; costs for scientific conferences and meetings; and costs related to compliance with drug development regulatory requirements.

• Employee-related costs include salaries, bonuses, severance and benefits for personnel in our research and development functions.

• Stock-based compensation expense is expense associated with our equity plans for awards to personnel in our research and development functions.

• Facilities and other costs include facilities-related rent, depreciation and other allocable expenses, which include general and administrative support functions and general supplies for our research and development activities.

We recognize all research and development expenses as they are incurred. Clinical trial, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.

General and Administrative Expenses

General and administrative expenses include employee-related costs, stock-based compensation expense, external professional services expenses, and facilities and other costs. Employee-related costs include salaries, bonuses, severance and benefits for personnel in our general and administrative functions, including medical affairs. Stock-based compensation expense is expense associated with our equity plans for awards to personnel in our general and administrative functions. External professional services expenses consist of legal, accounting, and audit services, certain medical affairs related-expenses and other consulting fees. Facilities and other costs consist of allocable expenses, including facilities-related rent and depreciation, from our facilities and information technology departments, which are allocated between research and development and general and administrative functions based on headcount.

Results of Operations

Comparison of the Quarters Ended June 30, 2019 and 2018

	Quarter Ended June 30,
	2019			2018			$ Change			% Change
	(In thousands)
Operating expenses:
Research and development	$	31,988		$	35,254		$	(3,266	)		(9	)%
General and administrative		31,200			18,559			12,641			68	%
Total operating expenses		63,188			53,813			9,375			17	%
Loss from operations		(63,188	)		(53,813	)		(9,375	)		17	%
Interest income, net		358			1,294			(936	)		(72	)%
Loss before provision for income taxes		(62,830	)		(52,519	)		(10,311	)		20	%
Provision for income taxes		48			33			15			45	%
Net loss	$	(62,878	)	$	(52,552	)	$	(10,326	)		20	%

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Research and Development Expenses

The following table summarizes our research and development expenses incurred during the quarters ended June 30, 2019 and 2018: 

	Quarter Ended June 30,
	2019		2018		$ Change			% Change
	(In thousands)
External costs	$	17,750	$	22,666	$	(4,916	)		(22	)%
Employee-related costs		7,621		7,229		392			5	%
Stock-based compensation expense		2,957		2,923		34			1	%
Facilities and other costs		3,660		2,436		1,224			50	%
Total research and development expenses	$	31,988	$	35,254	$	(3,266	)		(9	)%

Research and development expenses decreased by $3.3 million for the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018, primarily due to decreased external costs, partially offset by increased employee-related costs and facilities and other costs. External costs decreased primarily due to the close-out of certain AR101 clinical trials, including RAMSES, ARC009, ARTEMIS and ARC011, partially offset by an increase in manufacturing costs for the production of pre-approval inventory. Employee-related costs increased primarily due to increased headcount to support continued development of AR101. Facilities and other costs increased primarily due to the allocation of higher facilities and information technology costs, which are allocable from general and administrative to research and development expenses based on headcount. 

We expect research and development expenses to increase in the near-term as we develop additional CODIT product candidates, including for the treatment of egg allergy and multi-tree nut allergy, and continue manufacturing commercial inventory for the potential approval and commercial launch of AR101. If we receive regulatory approval of AR101, future manufacturing costs may qualify for capitalization as inventory and would subsequently be expensed as costs of goods sold when such inventory is sold.

General and Administrative Expenses

The following table summarizes our general and administrative expenses incurred during the quarters ended June 30, 2019 and 2018: 

	Quarter Ended June 30,
	2019		2018		$ Change		% Change
	(In thousands)
Employee-related costs	$	10,975	$	4,945	$	6,030		122	%
Stock-based compensation expense		5,783		5,751		32		1	%
External professional services		14,090		7,668		6,422		84	%
Facilities and other costs		352		195		157		81	%
Total general and administrative expenses	$	31,200	$	18,559	$	12,641		68	%

General and administrative expenses increased by $12.6 million for the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018, primarily due to increased external professional services costs and employee-related costs. External professional services increased primarily due to consulting services for commercial planning, medical education and grants, and support for AR101.  The increased headcount was for additional administrative support for the continued buildout of our infrastructure to support the potential commercialization of AR101, including the establishment of key commercial functions such as marketing, market access and our field teams and a medical science liaison organization.  

We expect our general and administrative expenses to continue to increase as we continue to build our commercial infrastructure, including the hiring of additional personnel, and incur expenses related to commercial planning for AR101.

Interest Income, net

Interest income, net, decreased by $0.9 million for the quarter ended June 30, 2019, compared to the quarter ended June 30, 2018, primarily due to interest expense on long-term debt issued in January 2019. The interest expense was partially offset by higher interest income resulting from higher average cash, cash equivalents, and investment balances.

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Comparison of the Six Months Ended June 30, 2019 and 2018

	Six Months Ended June 30,
	2019			2018			$ Change			% Change
	(In thousands)
Operating expenses:
Research and development	$	63,304		$	68,700		$	(5,396	)		(8	)%
General and administrative		54,912			35,232			19,680			56	%
Total operating expenses		118,216			103,932			14,284			14	%
Loss from operations		(118,216	)		(103,932	)		(14,284	)		14	%
Interest income, net		1,149			1,930			(781	)		(40	)%
Loss before provision for income taxes		(117,067	)		(102,002	)		(15,065	)		15	%
Provision for income taxes		77			50			27			54	%
Net loss	$	(117,144	)	$	(102,052	)	$	(15,092	)		15	%

Research and Development Expenses

The following table summarizes our research and development expenses incurred during the six months ended June 30, 2019 and 2018: 

	Six Months Ended June 30,
	2019		2018		$ Change			% Change
	(In thousands)
External costs	$	35,514	$	45,279	$	(9,765	)		(22	)%
Employee-related costs		15,896		13,906		1,990			14	%
Stock-based compensation expense		5,700		4,970		730			15	%
Facilities and other costs		6,194		4,545		1,649			36	%
Total research and development expenses	$	63,304	$	68,700	$	(5,396	)		(8	)%

Research and development expenses decreased by $5.4 million for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, primarily due to decreased external costs, partially offset by increased employee-related costs, stock-based compensation expense, and facilities and other costs. External costs decreased primarily due to the close-out of certain AR101 clinical trials, including RAMSES, ARC009, ARTEMIS and ARC011, partially offset by manufacturing costs for the production of pre-approval inventory. Employee-related costs and stock-based compensation expense increased primarily due to increased headcount to support continued development of AR101. Facilities and other costs increased primarily due to the allocation of higher facilities and information technology costs, which are allocable from general and administrative to research and development expenses based on headcount. 

We expect research and development expenses to continue to increase in the near-term as we develop additional CODIT product candidates, including for the treatment of egg allergy and multi-tree nut allergy, and continue manufacturing commercial inventory for the potential approval of AR101. If we receive regulatory approval of AR101, future manufacturing costs may qualify for capitalization as inventory and would subsequently be expensed as costs of goods sold when such inventory is sold.

General and Administrative Expenses

The following table summarizes our general and administrative expenses incurred during the six months ended June 30, 2019 and 2018: 

	Six Months Ended June 30,
	2019		2018		$ Change			% Change
	(In thousands)
Employee-related costs	$	19,859	$	9,495	$	10,364			109	%
Stock-based compensation expense		10,805		11,311		(506	)		(4	)%
External professional services		23,417		13,987		9,430			67	%
Facilities and other costs		831		439		392			89	%
Total general and administrative expenses	$	54,912	$	35,232	$	19,680			56	%

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General and administrative expenses increased by $19.7 million for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, primarily due to increased external professional services costs and employee-related costs, partially offset by lower stock-based compensation expense. External professional services increased primarily due to consulting services for commercial planning, medical education and grants, and support for AR101.  The increased headcount was for additional administrative support for the continued buildout of our infrastructure to support the potential commercialization of AR101, including the establishment of key commercial functions such as marketing, market access and our field teams and a medical science liaison organization. Stock-based compensation expense decreased primarily due to lower expense from our stock issuance to an affiliate of Golden Peanut Company, or GPC, as a result of the first tranche of the 300,000 shares of restricted common stock we issued to an affiliate of GPC in January 2018 vesting over a shorter period than the second tranche and lower stock option modification expense.

We expect our general and administrative expenses to continue to increase as we continue to build our infrastructure, including the hiring of additional personnel, and incur expenses related to commercial planning for AR101.

Interest Income, net

Interest income, net, decreased by $0.8 million for the six months ended June 30, 2019, compared to the six months ended June 30, 2018, primarily due to interest expense on long-term debt issued in January 2019. The interest expense was partially offset by higher interest income resulting from higher average cash, cash equivalents, and investment balances.

Liquidity and Capital Resources

As of June 30, 2019, we had cash, cash equivalents and investments of $250.3 million. We believe that our existing capital resources will be sufficient to fund our planned operations for at least the next 12 months and through expected regulatory approval and potential commercial launch in the United States and Europe for AR101, our lead CODIT^TM product candidate.

In January 2019, we entered into a loan agreement with an affiliate of KKR for up to $170.0 million in three tranches. Of the total loan amount, $40.0 million was funded upon the closing of the transaction, with $85.0 million to be funded upon FDA approval of AR101 and satisfaction of other customary borrowing conditions, and $45.0 million to be made available at our option in 2020 upon the satisfaction of certain borrowing conditions.

In February and March 2018, we issued and sold 6,325,000 shares of our common stock, par value $0.0001 per share, during our public offering for total proceeds of $190.4 million, net of offering costs.

In November 2016, we and Nestlé Health Science entered into the Purchase Agreement, pursuant to which we issued and sold 7,552,084 shares of our common stock, par value $0.0001 per share, to Nestlé Health Science for an aggregate cash purchase price of $145.0 million. In addition, in November 2018, we sold an additional 3,237,529 shares of our common stock to Nestlé Health Science at a price of $30.27 per share, for aggregate proceeds of $98.0 million.  

We do not expect to generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for, and begin to commercialize one or more of our product candidates, which is subject to significant uncertainty. If we complete clinical testing and receive approval of a BLA for AR101 in-line with our current expected timing, we would expect to be able to commence commercial sales of AR101 in the first half of 2020. Even if we are able to commence commercial sales in 2020, we may need to raise additional capital to fund our future operations. Until such time that we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings, and we may seek to raise additional capital through strategic collaborations. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant to others rights to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

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Our future funding requirements will depend on many factors, including the following:

• the number, size and type of additional clinical trials or studies that we choose to initiate or the FDA or a foreign regulatory authority requires us to complete as well as the cost and time of such trials and studies;

• our ability to obtain regulatory approval for and subsequently commercialize AR101 or any other product candidates we develop;

• the time and cost necessary to continue to develop a commercial-scale manufacturing process and establish commercial-scale manufacturing capacity for AR101 and the time and cost necessary to supply clinical trial materials for our clinical trials;

• commercialization costs associated with AR101, or any other product candidate we develop, if approved, including the cost and timing of developing our sales and marketing capabilities;

• the time and cost necessary to complete our roll-over studies related to our PALISADE trial (ARC004), RAMSES trial (ARC011) and ARTEMIS trial (ARC008);

• the amount of sales and other revenue from AR101 or any other product candidates we develop, if approved;

• our ability to achieve sufficient market acceptance, coverage and reimbursement from third-party payors and adequate market share for our product candidates;

• the time and cost associated with designing and implementing quality systems for our product candidates in the United States and Europe;

• the time and cost associated with clinical trials and pre-clinical development of other product candidates;

• the availability of term loans under our credit agreement;

• the cash requirements of any future acquisitions or discovery of product candidates;

• the time and cost necessary to respond to technological and market developments;

• our ability to attract, hire and retain qualified personnel; and

• our ability to obtain and maintain intellectual property protection for AR101 or any additional product candidate and the associated costs of such activities, including for filing, prosecuting, defending and enforcing any patents for AR101 or any additional product candidate.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate:

• clinical trials or other development activities for our product candidates;

• our research and development activities; or

• our establishment of commercial capabilities or other activities that may be necessary to commercialize AR101 or any future product candidate.

Summary Statement of Cash Flows

	Six Months Ended June 30,
	2019			2018			$ Change
	(In thousands)
Net cash provided by (used in):
Operating activities	$	(91,995	)	$	(76,317	)	$	(15,678	)
Investing activities		15,306			(50,833	)		66,139
Financing activities		41,742			195,820			(154,078	)
Net change in cash and cash equivalents	$	(34,947	)	$	68,670		$	(103,617	)

Net Cash Used In Operating Activities

Net cash used in operating activities was $92.0 million for the six months ended June 30, 2019, an increase of $15.7 million from $76.3 million for the six months ended June 30, 2018. This increase was primarily due to higher net loss from operations resulting from increased operating expenses.

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Net Cash Provided By Investing Activities

Net cash provided by investing activities was $15.3 million for the, six months ended June 30, 2019, an increase of $66.1 million from net cash used in investing activities of $50.8 million for the six months ended  June 30, 2018. The increase was primarily due to the timing of net maturities of various investments as we monitor the balance of our portfolio’s investments while managing our cash requirements.

Net Cash Provided By Financing Activities

Net cash provided by financing activities was $41.7 million for the six months ended June 30, 2019, a decrease of $154.1 million from $195.8 million for the six months ended June 30, 2018. The decrease was primarily due to 6,325,000 shares issued and sold during our public offering in February 2018, which was partially offset by our net debt borrowing under the KKR agreement of $36.1 million in January 2019.

As of June 30, 2019, we had cash, cash equivalents and investments of $250.3 million.

Contractual Obligations and Other Commitments

There have been no material changes in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2018, except as noted below.

In January 2019, we entered into a loan agreement with an affiliate of KKR for up to $170.0 million in three tranches, or the KKR Loans. Of the total loan amount, $40.0 million was funded upon closing of the transaction, with $85.0 million to be funded upon FDA approval of AR101, or the Regulatory Approval and satisfaction of other customary borrowing conditions, and $45.0 million to be made available at our option in 2020 upon the satisfaction of certain borrowing conditions. The KKR Loans have a maturity date being the earliest of (a) January 3, 2025, or if Regulatory Approval has not occurred on or before December 31, 2020, January 15, 2021 and (b) the date that is 91 days prior to the earliest current maturity date of any other loans we might have in excess of $15.0 million prior to the funding of the third tranche of the KKR Loans or $25.0 million following the funding of the third tranche of the KKR Loans.

In May 2019, we entered into a Commercial Supply Agreement, or the Commercial Supply Agreement, pursuant to which CoreRx, Inc. agreed to manufacture commercial supply of AR101, if approved. Under the Commercial Supply Agreement, we are required to purchase a minimum percentage of our AR101 commercial supply requirements in each of the first six years of the Commercial Supply Agreement, subject to certain conditions and restrictions, ranging from 100% in 2019 and decreasing to a majority in 2024. We are also required to purchase a minimum percentage of our AR101 supply requirements for release testing in each of the first six years of the Commercial Supply Agreement, ranging from 100% in 2019 and decreasing to a significant majority in 2024. As of June 30, 2019, the minimum aggregate purchase commitment under this agreement would be $ 4.3 million. The initial term of the Commercial Supply Agreement began upon execution of the Commercial Supply Agreement and will continue until December 31, 2024. The Commercial Supply Agreement then automatically renews for successive two-year terms, unless earlier terminated pursuant to its terms, or upon either party’s notice of termination to the other.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have variable interests in variable interest entities.

Segment Information

We have one primary business activity and operate as one reportable segment.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Our market risks have not changed materially from those disclosed in Item 7A of our Annual Report on Form 10-K for the year ended December 31, 2018, except as follows. As of June 30, 2019, we had approximately $42.0 million in long-term debt with variable interest rate components. Assuming constant debt levels, a theoretical change of 100 basis points (1%) on our current interest rate of 9.94% on our long term debt as of June 30, 2019, would result in a change in our annual interest expense that would not have a material impact to the financial statements.  This hypothetical increase or decrease will likely be different from what actually occurs in the future, and the impact may differ from that quantified herein.

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Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

As required by Rule 13a-15(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), our management, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of June 30, 2019. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that, as of June 30, 2019, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended June 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Controls

Internal control over financial reporting may not prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Also, projections of any evaluation of effectiveness of internal control 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. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are not currently a party to any material litigation or other material legal proceedings.

Item 1A. Risk Factors.

Our business involves significant risks, some of which are described below. You should carefully consider these risks, as well as the other information in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The occurrence of any of the events or developments described below could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also impair our business operations.

Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements

We have a limited operating history, have incurred significant losses since our inception and anticipate that we will continue to incur losses for the foreseeable future. We have only one product candidate in clinical development and no product sales, which, together with our limited operating history, make it difficult to assess our future viability.

We are a clinical-stage biopharmaceutical company with a limited operating history. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of risk. To date, we have focused primarily on developing our Characterized Oral Desensitization Immunotherapy, or CODIT^TM, therapeutic approach and our lead product candidate, AR101, which is currently our only product in clinical development, and researching additional product candidates. We are not profitable and have incurred losses each year since our inception in June 2011. We have only a limited operating history upon which you can evaluate our business and prospects. In addition, we have limited experience and have not yet demonstrated an ability to successfully overcome many of the risks and uncertainties frequently encountered by companies in new and rapidly evolving fields, particularly in the pharmaceutical industry. We have not generated any revenue from product sales and, as a result, we have incurred significant losses. We incurred a net loss of $62.9 million for the quarter ended June 30, 2019 and a net loss of $210.8 million, $131.3 million, and $80.8 million for the years ended December 31, 2018, 2017 and 2016, respectively. At June 30, 2019, our accumulated deficit was $ 593.3 million. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue to seek regulatory approval for and begin to commercialize AR101, and as we develop other product candidates. Even if AR101 is approved and we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods. Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

  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, which makes it difficult for us to predict our future operating results. These fluctuations may occur due to a variety of factors, many of which are outside of our control and may be difficult to predict, including:

• the timing and cost of, and level of investment in, research, development and commercialization activities relating to our product candidates, which may change from time to time;

• coverage and reimbursement policies with respect to our product candidates, if approved, and potential future drugs that compete with our product candidates;

• the timing and cost of our clinical trials, including the ability to initiate sites, enroll patients in a timely manner and submit or obtain approval of regulatory filings;

• the cost of manufacturing our product candidates and our ongoing establishment of commercial manufacturing capacity for AR101, which may vary depending on the quantity of production and the terms of our agreements with manufacturers;

• expenditures that we may incur to acquire, develop or commercialize additional product candidates and technologies;

• the level of demand for our products, if approved, which may vary significantly;

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

• the timing and success or failure of clinical trials for our product candidates or competing product candidates, or any other change in the competitive landscape of our industry, including consolidation among our competitors or partners.

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The cumulative effects 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.

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

Since commencing our operations in 2011, substantially all of our efforts have been focused on research, development and the advancement of our CODIT therapeutic approach and AR101. At June 30, 2019, we had capital resources consisting of cash, cash equivalents and investments of $ 250.3 million. We believe that we will continue to expend substantial resources for the foreseeable future as we continue to seek regulatory approval for and prepare for the commercialization of AR101, and as we develop other product candidates.

These expenditures will include costs associated with obtaining regulatory approvals, commercialization of our product candidates, manufacturing and supply, conducting clinical trials, pursuing research and development activities and conducting non-clinical studies and general operations. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial and/or regulatory approval process is highly uncertain, we may not be able to accurately estimate the actual amounts necessary to successfully complete the development, regulatory approval process and commercialization of AR101 or any other product candidates.

We believe that our existing capital resources will be sufficient to fund our planned operations for at least the next 12 months and through expected regulatory approval and potential commercial launch in the United States and Europe for AR101, our lead CODIT^TM product candidate. However, our operating plan may change as a result of many factors, including factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, debt financings or other sources, such as strategic collaborations. Such financing may result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business. If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates including possible future revenue streams. In addition, any fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

Our future funding requirements will depend on many factors, including, but not limited to:

• the number, size and type of additional clinical trials or studies that we choose to initiate or the U.S. Food and Drug Administration, or FDA or a foreign regulatory authority requires us to complete for AR101 as well as the cost and time of such trials and studies;

• our ability to obtain regulatory approval for and subsequently commercialize AR101 or any other product candidates we develop;

• the time and cost necessary to continue to develop a commercial-scale manufacturing process and establish commercial-scale manufacturing capacity for AR101 and the time and cost necessary to supply clinical trial materials for our clinical trials;

• commercialization costs associated with AR101 or any other product candidates we develop, if approved, including the cost and timing of developing our commercialization capabilities;

• the time and cost necessary to complete our roll-over studies related to our PALISADE trial (ARC004), RAMSES trial (ARC011) and ARTEMIS trial (ARC008);

• the amount of sales and other revenue from AR101 or any other product candidates we develop, if approved;

• our ability to achieve sufficient market acceptance, coverage and reimbursement from third-party payors and adequate market share for our product candidates;

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• the time and cost associated with designing and implementing quality systems for our product candidates in the United States and Europe;

• the time and cost associated with clinical trials and pre-clinical development of other product candidates;

• the availability of term loans under our credit agreement;

• the cash requirements of any future acquisitions or discovery of product candidates;

• the time and cost necessary to respond to technological and market developments;

• our ability to attract, hire and retain qualified personnel; and

• our ability to obtain and maintain intellectual property protection for AR101 or any additional product candidate and the associated costs of such activities, including for filing, prosecuting, defending and enforcing any patents for AR101 or any additional product candidate.

Additional funds may not be available when we need them, on terms that are acceptable to us, or at all. If adequate funds are not available to us on a timely basis, we may be required to delay, limit, reduce or terminate:

• clinical trials or other development activities for our product candidates;

• our research and development activities; or

• our establishment of commercial capabilities or other activities that may be necessary to commercialize AR101 or any additional product candidate.

The terms of our credit agreement require us to meet certain operating covenants and place restrictions on our operating and financial flexibility. If we raise additional capital through debt financing, the terms of any new debt could further restrict our ability to operate our business.

In January 2019, we entered into a credit agreement with an affiliate of KKR LLC, that is secured by a lien covering all of our tangible and intangible property. As of June 30, 2019, there was $40.9 million of principal balance outstanding under the loan, which was funded in January 2019.  An additional $85.0 million term loan must be drawn by us following the fulfillment of certain customary conditions precedent, including the issuance of an approval letter from the FDA with respect to our Biologics License Application or BLA on or prior December 31, 2020.  While our BLA for AR101 was accepted for review in March 2019, if we do not receive approval prior to December 31, 2020, the $40.0 million initial term loan will terminate, which could restrict our operating and financial flexibility.  Further, any delay or rejection of our AR101 could affect our ability to make scheduled interest payments on outstanding term loans under the credit agreement, which began on March 31, 2019, and could accelerate the maturity date of the term loans to January 15, 2021, which could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.  The credit agreement contains customary affirmative and negative covenants and events of default, including, covenants and restrictions that among other things, require us and our subsidiary guarantors to satisfy a minimum cash balance covenant and restricts our ability and our subsidiaries’ ability to, incur liens, incur additional indebtedness, make loans and investments, engage in mergers and acquisitions, engage in asset sales or sale and leaseback transactions, and declare dividends or redeem or repurchase capital stock.  A failure to comply with these covenants could permit the lends under the credit agreement to declare the term Loans, together with accrued interest and fees, to be immediately due and payable.  In addition, if we default under the terms of the credit agreement, including failure to satisfy our operating covenants, the lenders may accelerate all of our repayment obligations and take control of our pledged assets, potentially requiring us to renegotiate our agreement on terms less favorable to us or to immediately cease operations. Further, if we are liquidated, the lender’s right to repayment would be senior to the rights of the holders of our common stock. Any declaration by the lenders of an event of default could significantly harm our business and prospects and could cause the price of our common stock to decline. If we raise any additional debt financing, the terms of such additional debt could further restrict our operating and financial flexibility.

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Risks Related to Our Business

We are substantially dependent on the success of AR101 which may not be successful in clinical trials, receive regulatory approval or be successfully commercialized, even if approved.

We currently have no products approved for sale. To date, we have invested substantially all of our efforts and financial resources in the research and development of our CODIT therapeutic approach and AR101, which is currently our only product candidate in clinical development. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA, the European Medicines Agency, or EMA, or other comparable foreign regulatory authorities. In order to obtain regulatory approval for the sale of AR101 from the FDA, EMA or other comparable foreign regulatory authorities, we must demonstrate the safety and efficacy of the product in humans. While we submitted our BLA for AR101 in December 2018 and our Marketing Authorization Application, or MAA, for AR101 in June 2019 based upon the safety and efficacy findings in our completed and ongoing clinical trials, there can be no assurances that we will receive regulatory approval from the FDA, or EMA, or that AR101 will successfully demonstrate safety and efficacy in any ongoing or future clinical trials we may be required to initiate.  In addition, we cannot be certain AR101 will successfully demonstrate safety and efficacy in any clinical trials utilized for purposes of obtaining regulatory approval from any foreign regulatory authorities, including the EMA.  Furthermore, even if we obtain approval for AR101, it may only be for a limited patient population, or may be received after significant delays. If we do not receive regulatory approval for AR101, we may not be able to continue our operations.

As a result, our prospects, including our ability to finance our operations and generate revenue, will depend largely on the successful development, regulatory approval and commercialization of AR101. The clinical and commercial success of AR101 will depend on a number of factors, many of which are out of our control, including the following:

• the results from our ongoing clinical trials, including ARC004, ARC005 and ARC011, and planned clinical trials, including ARC008;

• the frequency and severity of adverse effects experienced by patients treated with AR101, including in any clinical trials we may pursue with collaborators such as our Phase 2 trial sponsored by Regeneron evaluating AR101 treatment with adjunctive dupilumab; or in which we may pair AR101 with another therapeutic;

• the availability, perceived advantages, relative cost, relative safety and relative efficacy of alternative and competing treatments;

• the ability of our third-party manufacturers to manufacture supplies of AR101, including their ability to provide adequate and timely supplies of our clinical trial materials and to develop, validate and maintain a commercial-scale manufacturing process that is compliant with current good manufacturing practices, or cGMP;

• our ability to maintain our exclusive supply relationship with the Golden Peanut Company, or GPC;

• our ability to demonstrate AR101’s safety and efficacy to the satisfaction of the FDA, EMA or other foreign regulatory authorities;

• whether we are required by the FDA, the EMA or other foreign regulatory authorities, or choose, to conduct additional clinical trials prior to the approval to market AR101, as well as the cost and time of such trials;

• whether the FDA, the EMA or other foreign regulatory authorities may disagree with the number, design, size, conduct or implementation of our clinical trials;

• the receipt of necessary regulatory approvals from the FDA, the EMA or other foreign regulatory authorities;

• the extent and nature of any Risk Evaluation and Mitigation Strategy, or REMS, or foreign equivalent, that may be required in connection with regulatory approval or following regulatory approval;

• whether the FDA may restrict the use of our products to a narrow population;

• our ability to successfully commercialize AR101, if approved for marketing and sale by the FDA or comparable foreign regulatory authorities, whether alone or in collaboration with others;

• our success in educating physicians and patients about the benefits, administration and use of AR101;

• acceptance of AR101 as safe and effective by patients and the medical community;

• the continued prevalence of peanut allergy;

• achieving and maintaining compliance with all regulatory requirements applicable to AR101;

• the effectiveness of our own or any future collaborators’ marketing, pricing, coverage and reimbursement, sales and distribution strategies and operations;

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• our ability to obtain issued patents that cover AR101 and to enforce such patents and other intellectual property rights to AR101;

• our ability to avoid third-party intellectual property claims; and

• a continued acceptable safety profile of AR101 following approval.

Accordingly, we cannot assure our stockholders that we will ever be able to generate revenue through the sale of AR101 or become profitable as a result of such sales. If we are not able to successfully demonstrate the safety and efficacy of AR101 in humans in our clinical trials, obtain regulatory approval for AR101 for the indications we seek and successfully commercialize AR101, or if we are significantly delayed in doing so, our business will be materially harmed. In addition, if we are delayed in receiving or do not receive approval of our BLA for AR101, the availability of term loans under our credit agreement could be reduced, and the maturity of such term loans could be accelerated to January 15, 2021, any of which could further restrict our operating and financial flexibility as well as have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

The regulatory approval process is lengthy, time-consuming and inherently unpredictable, and we may experience significant delays in obtaining regulatory approval of AR101, which would delay the commercialization of AR101, adversely impact our ability to generate revenue, and harm our business and our results of operations.

We currently have no products approved for sale, and we may never obtain regulatory approval to commercialize AR101. To gain approval to market a biologic product candidate, such as AR101, a BLA, MAA or other comparable foreign regulatory filing must be submitted to the FDA, the EMA or other comparable foreign regulatory authority.  Such applications must include extensive clinical, non-clinical and manufacturing data that adequately demonstrate to the satisfaction of the FDA, the EMA or other comparable foreign regulatory authority the safety, purity, potency and effectiveness of the product for the intended indication applied for in the BLA, the MAA or other relevant regulatory filing. A BLA, MAA or other comparable foreign regulatory filing must also include significant information regarding the chemistry, manufacturing and controls for the product. Our AR101 BLA, which we submitted in December 2018, was accepted for review in March 2019 and is scheduled to be reviewed by the Allergenic Products Advisory Committee in September 2019.  In addition, we submitted our AR101 MAA to the EMA in June 2019.

The FDA, the EMA or any other comparable foreign regulatory bodies can delay, limit or deny approval to market AR101 for many reasons, including:

• our inability to demonstrate to the satisfaction of the FDA that AR101 is safe, pure, potent and effective for the proposed indication or meets similar standards set by the EMA or other foreign authorities;

• the FDA, the EMA or other applicable foreign regulatory authority may disagree with the interpretation of data from clinical trials;

• our inability to demonstrate that the clinical and other benefits of AR101 outweigh any safety or other perceived risks;

• the FDA, the EMA or other applicable foreign regulatory authority may require additional nonclinical studies or clinical trials, including trials with additional patients in one or more subgroups or populations who have been administered AR101;

• the CROs that we retain to conduct our clinical trials may take actions outside of our control that materially adversely impact our clinical trials;

• the FDA, the EMA or other applicable foreign regulatory authority may not approve or may disagree with the formulation, packaging, labeling and/or the specifications of AR101;

• our AR101 BLA is scheduled to be reviewed by an advisory committee in September 2019 and the advisory committee may recommend against approval of our application or may recommend that the FDA require, as a condition of approval, additional nonclinical studies or clinical trials, limitations on approved labeling or distribution and use restrictions;

• the FDA, the EMA or other applicable foreign regulatory authority may require development of a REMS as a condition of approval or post-approval that is more extensive than proposed by us;

• our inability to demonstrate that the manufacturing process for AR101 is adequately controlled to ensure that all product produced meets required quality standards;

• disruptions at the FDA, the EMA or other regulatory agencies that are unrelated to our products, such as government shutdowns, that cause delays in the regulatory approval process;

• the FDA, the EMA or other applicable foreign regulatory authority may fail to approve the manufacturing facilities or testing laboratories that we use; or

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• the potential for approval policies or regulations of the FDA, the EMA or other applicable foreign regulatory authorities to significantly change in a manner rendering our clinical data insufficient for approval.

Of the large number of drugs and biologics in development, only a small percentage successfully complete the approval processes of the FDA, the EMA or other foreign regulatory authorities and are commercialized. In addition, the FDA has never approved a drug for treating food allergy through desensitization and, in particular, has never approved a drug based on efficacy as measured by a DBPCFC, which is the testing mechanism for determining the desensitization efficacy of AR101.

In addition, even though AR101 was granted Breakthrough Therapy designation by the FDA for oral immunotherapy of peanut allergic children and adolescents (ages 4 through 17), we may not experience a faster development, review or approval process compared to standard FDA procedures. Generally, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product 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 Breakthrough Therapy designation for AR101 has enabled us to hold additional meetings with the FDA during the development process and to receive advice from the FDA regarding development and approval for AR101. However, while our AR101 BLA, which we submitted in December 2018, was accepted for review in March 2019, the FDA has determined that our application will be reviewed under a twelve-month target review period applicable to Prescription Drug User Fee Act, as amended, or PDUFA, exempt applications, as measured from the date the FDA commenced review of our AR101 BLA in January 2019. Our AR101 BLA is scheduled to be reviewed by an advisory committee in September 2019 and the FDA’s review of the BLA may take until late January 2020.  

However, we may not receive approval on this timeline or at all, in which case our ability to commence commercial sales of AR101 in the United States would be delayed. A significant delay could materially harm our business and we may need to curtail or cease operations. We currently have no products approved for sale, and we may never obtain regulatory approval to commercialize AR101.

Even if we receive approval of a BLA, MAA or other comparable foreign regulatory approval, the FDA, the EMA or other applicable foreign regulatory authority may grant approval contingent on the performance of costly additional clinical trials. The FDA, the EMA or other applicable foreign regulatory authority may also approve AR101 for a more limited indication and/or a narrower patient population than we originally request, and the FDA, the EMA or other applicable foreign regulatory authority may not approve the labeling that we believe is necessary or desirable for the successful commercialization of AR101. Any delay in obtaining, or inability to obtain, applicable regulatory approval or a regulatory approval for a more limited indication and/or narrower patient population would delay, prevent, or limit commercialization of AR101 and would materially adversely impact our business and prospects.

If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of AR101 or any additional product candidates may be delayed, and our business will be harmed.

For planning purposes, we sometimes estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product development objectives. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, the submission of regulatory filings, or commercialization objectives. From time to time, we may publicly announce the expected timing of some of these milestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of regulatory approval, or a commercial launch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety of assumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates, including:

• our available capital resources or capital constraints we experience;

• the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflicts with participating clinicians and collaborators;

• our ability to identify and enroll patients who meet clinical trial eligibility criteria;

• the classifications of our product candidates by the FDA, the EMA or other regulatory authorities;

• our receipt of approvals by the FDA, the EMA or other regulatory authorities and the timing thereof;

• other actions, decisions or rules issued by regulators;

• our ability to access sufficient, reliable and affordable supplies of materials used in the manufacture of our product candidates;

• our ability to manufacture and supply clinical trial materials to our clinical sites on a timely basis;

• the efforts of our collaborators with respect to the commercialization of our products; and

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• the securing of, costs related to, and timing issues associated with, product manufacturing as well as sales and marketing activities.

If we fail to achieve announced milestones in the timeframes we expect, the commercialization of AR101 and any additional product candidates may be delayed, and our business and results of operations may be harmed.

We are in the early stages of building a commercial field organization and distribution network, and we only recently deployed medical science liaison personnel. If we are unable to complete the build out of a commercial field organization and a distribution network on our own or through third parties, we may not be able to market, sell and distribute AR101, if approved, or any additional product candidates or generate product revenue.

We are in the early stages of building a commercial field organization. In order to commercialize AR101, we will need to build our marketing, commercial field, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. If AR101 receives regulatory approval, we expect to complete deployment of a specialty commercial field organization with technical expertise and supporting distribution capabilities to commercialize AR101 and any of our other product candidates that receive regulatory approval, which will be expensive and time-consuming.

We have no prior experience in the commercialization of pharmaceutical products and there are significant risks involved in building and managing a commercial field organization, including our ability to hire, retain, and incentivize qualified individuals, generate sufficient customer leads, provide adequate training to commercial field and marketing personnel, and effectively manage a geographically dispersed commercialization team. Any failure or delay in the development of our internal commercial field, marketing and distribution capabilities would adversely impact the commercialization of these products. Further, given our lack of prior experience in commercializing pharmaceutical products, our estimates of the number of commercial field employees needed to commercialize AR101 may be materially less than the actual number of commercial field employees required. As such, we may be required to hire substantially more commercial field employees to adequately support the commercialization of AR101, which could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

We began deployment of our medical science liaison, or MSL, organization in the third quarter of 2018, and this team continues to grow.  The MSL team is a field-based part of our medical affairs group.  The role of MSLs is to serve as a liaison to members of the medical, scientific and patient advocate communities and to provide scientific expertise and clinical insights from health care practitioners to internal colleagues.  The activities of MSLs are subject to extensive statutory and regulatory requirements and enforcement, in the United States, by the federal government and the states and, outside the United States, by the governments of the countries where we deploy MSLs.  Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our MSL activities could be subject to challenge under one or more of such laws or regulations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs and imprisonment, any of which could adversely affect our ability to market our products and adversely impact our financial results.

We may also choose to collaborate with third parties that have direct commercial field forces or established distribution systems, either to augment our own commercial field force and distribution systems or in lieu of our own commercial field force and distribution systems. If we are unable to enter into such arrangements on acceptable terms or at all, we may not be able to successfully commercialize AR101. If we are not successful in commercializing AR101 or any additional product candidates, either on our own or through collaborations with one or more third parties, our additional product revenue will suffer and we would incur significant additional losses.

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Even if AR101 or any additional product candidates obtain regulatory approval, they may never achieve market acceptance or commercial success, which will depend, in part, upon the degree of acceptance among clinicians, patients, patient advocacy groups, healthcare payors and the general medical community.

Even if we obtain FDA, EMA or other foreign regulatory approvals, AR101 or any additional product candidates may not achieve market acceptance among clinicians, patients, patient advocacy groups, healthcare payors and the general medical community. With respect to AR101, which we intend to market as a means of obtaining protection from accidental exposure to peanut protein and not as a cure for peanut allergy, we anticipate that clinicians will continue to recommend that their patients strictly avoid foods that may contain any amount of peanut protein and continue to carry epinephrine auto-injectors even if the patients have been successfully desensitized with AR101. As a result, if we are unable to persuade clinicians, patients, caregivers and payors that AR101 has therapeutic value when used in conjunction with the practice of avoidance, our sales will be adversely affected.

In addition, we may face challenges in gaining market acceptance as a result of our therapeutic approach, which exposes patients to the exact allergen that poses a risk of causing a severe allergic reaction.  Many clinicians believe that previous oral immunotherapy approaches to the treatment of peanut allergy are too unsafe or unreliable to use in clinical practice. We are also susceptible to changes in the public perception of the safety and efficacy of desensitization treatments. For example, if a competitor’s desensitization treatment similar to our own had significant safety issues, perceptions of our products could also be negatively impacted even if our product did not have similar safety issues. If we are unable to convince clinicians and their patients that AR101 is safe and reliable, our sales will be adversely affected.

Furthermore, market acceptance of AR101 or any additional product candidates for which we receive approval depends on a number of factors, including:

• the efficacy of the product as demonstrated in clinical trials;

• the frequency and severity of any adverse effects and overall safety profile of the product;

• the clinical indication for which the product is approved including any limitations on the patient population for which it is indicated;

• acceptance by clinicians and patients of the product as a safe and effective treatment and their perceptions of the benefit of the product;

• the evaluation of our products by governmental health technology assessment organizations;

• the relative convenience and ease of administration of our products, including patients’ acceptance of the need to take our product candidates mixed with food;

• patient and parent acceptance of our product’s formulation and packaging;

• the willingness of patients to comply with a treatment regimen that requires daily administration of our product candidates on a chronic basis;

• the potential and perceived advantages of our product candidates over current treatment options or alternative treatments, including future alternative treatments;

• the cost of treatment in relation to alternative treatments and willingness to pay for our products, if approved, on the part of clinicians and patients;

• the availability of products and their ability to meet market demand, including a reliable supply for long-term daily treatment;

• the strength of our marketing and distribution organizations;

• the quality of our relationships with patient advocacy groups; sufficient third-party coverage or reimbursement for our product candidates; and

• sufficient third-party payments to clinicians for the procedures necessary to administer product candidates.

Any failure by our product candidates that obtain regulatory approval to achieve market acceptance or commercial success would adversely affect the results of our operations.

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In September 2017, the FDA announced that it would permit the labeling of conventional food products containing ground peanuts to bear a qualified health claim stating that for certain infants and under certain conditions, the consumption of such products may reduce the risk of developing peanut allergy. This qualified health claim speaks to risk reduction rather than treatment of peanut allergy. AR101 is an investigational biologic for the treatment of peanut allergy. Significant and successful use of such food products or dietary supplements to reduce the risk of peanut allergy may impact the prevalence of peanut allergy and the level of demand for AR101, which may adversely impact our business and results of operations.

We rely exclusively on the Golden Peanut Company to provide the source material for AR101 and are exposed to a number of sole supplier risks.

The source material for AR101 is a specific type of peanut flour, which we purchase from GPC pursuant to a long-term exclusive commercial supply agreement, which was expanded and extended in January 2018. In order to develop AR101 as an FDA-approvable biological product we were required to characterize the protein signature of the flour. We believe the flour produced by GPC has a distinct protein signature that is significantly different from the protein signatures of other commercially available peanut flours and, as a result, it is unlikely that we could use any other peanut flours as the source material for AR101. If GPC became unwilling or unable to supply us with peanut flour, our business and operating results would be materially adversely affected.

In addition, our restated agreement with GPC does not require GPC to provide us with peanut flour that has a specific protein signature or that meets other potentially relevant pharmaceutical standards. We have tested multiple lots of GPC peanut flour produced in several different years and generally have not identified significant variations in the protein signature between lots. We can provide no assurance that natural variations in the peanuts sourced by GPC, changes in the agricultural practices used to produce the peanuts sourced by GPC, or variations in GPC’s manufacturing process will not result in alterations in the protein signature or other characteristics of GPC’s peanut flour that would make it unsuitable for use in AR101. If such alterations occurred, we would not be able to manufacture AR101 and our business and operating results would be materially adversely affected. In addition, as our purchases of peanut flour from GPC represent an insignificant portion of GPC’s total peanut flour sales, we have only a limited ability to influence GPC’s decisions regarding its sourcing of peanuts or methods of producing peanut flour.

Our restated agreement with GPC restricts it from selling peanut flour products to any third party worldwide for use in oral immunotherapy, or OIT, for peanut allergy. The restated agreement remains in effect until ten years after the first delivery to us of peanut flour for commercial use and includes an option for us to extend the term for an additional five years. GPC may terminate the restated agreement if we fail to cure a material breach within 30 days of receiving notice of such breach from GPC or if we fail to perform our obligations under the agreement for a continuous period of 120 days due to a force majeure event or an insolvency or bankruptcy-related events. If GPC were to make sales despite the restrictions set forth in the agreement, or terminate the agreement as a result of any of the foregoing or if we were to otherwise lose exclusivity, we could face additional competition from pharmaceutical and biotechnology companies, with considerably more resources and experience than we have, that are researching and selling products designed to treat food allergies or allergies in general.

The potential efficacy of AR101, if approved, is dependent upon patient compliance with the prescribed dosing regimen, and failure to adhere to the dosing regimen could increase the potential of a patient experiencing an adverse allergic reaction.

The AR101 treatment regimen, if approved, would require that patients start with a very low dose of AR101 and gradually increase their dose over time. Based on our existing clinical data, we anticipate it will take patients approximately six months to reach a daily dose level of 300 mg of peanut protein. Patients would then continue on a daily therapeutic dose.

In order to maintain desensitization, patients would need to continue to take a daily therapeutic dose. The potential efficacy of AR101, if approved, is dependent upon patients complying with the prescribed dosing regimen, including the continued maintenance dosing. Based on our studies and independent studies, we do not believe that the occasional failure to take a dose will affect desensitization. However, in the event a patient fails to follow the prescribed dosing regimen, halts or skips treatment and then restarts the dosing regimen, the likelihood of an adverse allergic reaction to the allergen is greatly increased, as any level of desensitization previously achieved may have dissipated. Further, patients will be required to continue to practice avoidance to peanut exposure and if patients begin to achieve desensitization, it is possible that they may become less vigilant in practicing avoidance and further increase their risk of an accidental exposure. As a result, a lack of patient compliance and the resulting increased likelihood for adverse safety events could have a material adverse effect on our ability to obtain or maintain the regulatory approval necessary to commercialize AR101.

Failure to do so would significantly harm our business, results of operations, financial condition, prospects and stock price. In addition, if patients drop out of our clinical trial due to the strict dosing regimen, the likelihood that we will be able to demonstrate clinically meaningful desensitization will be decreased.

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We currently rely on single-source third-party manufacturers for our clinical trial materials and intend to rely on single-source third-party manufacturers for our commercial drug supply of AR101 and to manufacture nonclinical, clinical and commercial supplies of any additional product candidate.   If any of these manufacturers fails to provide us or our collaborators with adequate supplies of materials for clinical trials or commercial product or fail to comply with the requirements of regulatory authorities, we may be unable to develop or commercialize AR101 or other product candidates.

We do not currently have the internal capability to produce our clinical or commercial supply of AR101, and we lack the internal resources and the capability to manufacture any other product candidates on a nonclinical, clinical or commercial scale.  As a result, we currently rely and intend to continue to rely on a single manufacturer for the production of the drug product used in AR101, and a single contract manufacturer for the commercial packaging of AR101 for the foreseeable future. We have agreements in place with both contract manufacturers of AR101.  In addition, in May 2019 we entered into a commercial sale supply agreement with CoreRx, Inc., the contract manufacturer utilized for our clinical supply of AR101, for the commercial supply of AR101 in bulk capsule and sachet dosage forms according to agreed-upon specifications in sufficient quantities to meet our projected supply requirements in the United States and Canada. We have not yet entered into an agreement with any third-party manufacturers to produce commercial quantities of the packaging of AR101, and any failure to reach such an agreement and commence the development process for AR101 in a timely manner would delay commercialization of AR101.  In addition, even if we are able to reach such agreements, aspects of our manufacturing process for AR101 are complex and the existing manufacturing process of our contract manufacturer will need to be scaled up to meet our anticipated commercial requirements. If we and our third-party manufacturers are not able to develop successfully a commercial manufacturing process or do so in a timely manner, we will not be able to initiate commercialization of AR101 within our estimated timeline, if at all. Similarly, we currently rely and may continue to rely on a single contract manufacturer for the clinical supply of each of our other product candidates and face similar risks with respect to the supply and manufacturing processes for such product candidates.

Our dependence on single source suppliers with respect to our supply chain for AR101 exposes us to certain risks, including the following:

• our suppliers may cease or reduce production or deliveries, raise prices or renegotiate terms;

• we may be unable to locate a suitable replacement on acceptable terms or on a timely basis, if at all;

• delays caused by supply issues may harm our reputation; and

• our ability to progress our business could be materially and adversely impacted if our single-source supplier upon which we rely were to experience a significant business challenge, disruption or failure due to issues such as financial difficulties or bankruptcy, issues relating regulatory or quality compliance issues, or other legal or reputational issues.

The FDA and other comparable foreign regulatory authorities must, pursuant to inspections that will be conducted prior to any approval of our AR101 BLA or relevant foreign regulatory submission, approve our contract manufacturers to manufacture AR101.  While we completed construction of a manufacturing facility in a leased building in Clearwater, Florida, at the site of our primary contract manufacturer; however, we do not directly control the manufacturing operations of our contract manufacturers, and we are completely dependent on them for operating that facility and for compliance with cGMP for the manufacture of AR101. If the contract manufacturer operating that facility or our other contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirements of the FDA or foreign regulatory authorities, they will not be able to secure and/or maintain regulatory approval for our or their manufacturing facilities. In addition, we have no direct control over the ability of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. Furthermore, all of our contract manufacturers are engaged with other companies to supply and/or manufacture materials or products for such companies, which exposes our manufacturers to regulatory risks for the production of such materials and products. As a result, failure to meet the regulatory requirements for the production of those materials and products may generally affect the regulatory clearance of our contract manufacturers’ facilities. 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 its approval in the future, we may need to find alternative manufacturing facilities, which would negatively impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.

Further, we plan on using blister packs and sachets as the final packaging configuration for our potential commercial launch of AR101. Stability testing of AR101 in the blister pack and sachet configurations is ongoing. Any complications with the stability testing in the blister pack or sachet configurations could extend the timelines for our regulatory filings for AR101 and could limit the shelf life of the commercial product at the time of launch. In addition, regulatory authorities may not find our proposed packing configuration acceptable, which would also delay the timing of our foreign regulatory filings or potential approval of AR101.

Failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay or impede commercialization of AR101, if approved, and the development of any additional product candidates, and could have a material adverse effect on our business, results of operations, financial conditions and prospects.

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Supplying our ongoing clinical trials and planned clinical trials is a complex operation, and delays in the supply chain could harm our clinical trials and our ability to commercialize AR101, if approved.

Supplying appropriate clinical trial materials for our ongoing and planned clinical trials on a timely basis is a complex operation. There are multiple doses in the dose escalation phase of our AR101 clinical trials. In addition, each subject can proceed through the dose escalation phase at a different rate depending on how the subject responds to each new dose. For example, a subject can move up to the next dose, remain on the current dose or move down to the prior lower dose during the dose escalation phase of our trials. We believe that this dosing flexibility improves outcomes for clinical trial subjects. But this dosing flexibility also increases the complexity of supplying the appropriate doses to each clinical site on a timely basis. The complexity of our logistics operations for our clinical trial materials increased significantly throughout 2017 and 2018, and we expect such complexity to increase further as we continue to operate multiple large trials concurrently, including trials in Europe, and in connection with the potential commercialization of AR101, if approved. EU regulations require that each lot of clinical trial material be certified and released by a designated qualified person. This certification and release process in the EU can cause delays in supplying clinical trial materials to clinical sites. Any delays or errors in our AR101 supply chain logistics could delay or adversely affect our clinical trials or our ability to commercialize AR101, if approved.

Clinical drug development involves a lengthy and expensive process with an uncertain outcome, and we may encounter substantial delays in our clinical trials. Furthermore, results of earlier studies may not be predictive of future studies’ results.

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 early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials and of similar academic research studies.

For example, the positive top-line results generated in our PALISADE, RAMSES and ARTEMIS trials for AR101, as well as our prior clinical trials, do not ensure that our roll-over studies for such trials or any future clinical trials will demonstrate similar results. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy despite having progressed through initial clinical trials. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier studies, and we cannot be certain that we will not face similar setbacks. Even if our clinical trials are completed, the results may not be sufficient to obtain regulatory approval or commercial acceptance for our product candidates in the indications that we are seeking or at all. For example, while the majority of adults who completed the PALISADE trial in the AR101 arm successfully tolerated the 600 mg dosage (85%), the percentage of dropouts in the 18-49 age range was substantially higher than in our 4-17 year old study population thereby reducing the number of our Intent to Treat, or ITT population in the 18-49 year old age range who successfully completed the DBPCFC. As a result, in the exploratory subpopulation ages 18-49, the ITT analysis did not show statistical significance at the 600 mg dose level.

In addition, we do not know whether our planned or future clinical trials will need to be redesigned, enroll an adequate number of patients on time or be conducted on schedule, if at all. Clinical trials can be delayed or terminated for a variety of reasons, including delay or failure to:

• obtain regulatory approval to commence a clinical trial;

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

• obtain institutional review board, or IRB, or foreign equivalent approval at each site;

• recruit suitable patients to participate in a clinical trial, including, in particular, a sufficient number of adult patients to support approval in that patient population;

• have patients complete a clinical trial or return for post-treatment follow-up;

• ensure that clinical sites observe clinical trial protocols, operate in accordance with good clinical practice standards, or continue to participate in a clinical trial;

• address any patient safety concerns that arise during the course of a clinical trial, particularly with respect to the DBPCFCs;

• address any conflicts with new or existing laws or regulations;

• initiate or add a sufficient number of clinical trial sites;

• demonstrate that the manufacturing process for AR101 is adequately controlled to ensure that all product produced meets required quality and regulatory standards;

• manufacture sufficient quantities of product candidate for use in clinical trials; or

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• provide clinical trial materials to our clinical sites on a timely basis.

We rely on CROs, specialized clinical vendors, clinical trial sites and consultants 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 and, as a result, may be subject to unanticipated delays. We are conducting our clinical trials at leading academic allergy research centers in the United States and Europe, as well as at community allergy practices. The number and capacity of such sites is limited and our ability to access the sites may be affected by the number and size of other trials occurring at the same time, including trials sponsored by our competitors. If adequate capacity at these sites is not available, the initiation and pace of our clinical trials may be adversely affected.

Conducting clinical trials in foreign countries, as we have done for our ARTEMIS trial, and are doing or plan to do for our ARC004, ARC005 and ARC008 trials, presents additional risks that may delay completion of our clinical trials. These risks include a foreign regulatory authority imposing additional requirements prior to the commencement of clinical trials in a foreign country, the failure of physicians or enrolled patients in foreign countries to adhere to clinical protocol as a result of differences in healthcare services or cultural customs, complying with data privacy regulations in the European Union and Canada, managing additional administrative burdens associated with foreign regulatory schemes, and political and economic risks relevant to such foreign countries. For example, clinical trial materials in the European Union must be certified and released by a designated qualified person, which can delay the release of clinical trial materials to clinical sites in the European Union.

Patient enrollment is a significant factor in the timing of clinical trials and is affected by many factors, including the size and nature of the patient population, the proximity of patients to clinical sites, the eligibility criteria for the clinical trial, the design of the clinical trial, safety, competing clinical trials, and clinicians’ and patients’ perceptions as to the potential advantages of the drug being studied in relation to other available therapies, including any new drugs or treatments that may be approved for the indications we are investigating.

In addition, certain sub-groups of patients may be more difficult to recruit than others. For example, to date, we have enrolled 57 patients above the age of 17, and we believe the adult patient population is more difficult to recruit than younger patients. The FDA has concluded that additional safety and efficacy data is required for the adult patient subgroup and any initial approval that we may obtain will not include an indication for patients of such subgroup. If we are not able to recruit patients to participate in our clinical trials in a timely manner, our business and results of operations could be adversely affected.

We could also encounter delays if a clinical trial is suspended or terminated by us, by the IRBs or foreign equivalents of the institutions in which such studies are being conducted, by an independent Safety Review Board for such clinical trial, or by the FDA or other regulatory authorities. Such authorities may suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, failure to pass inspections of the clinical trial operations or trial site by the FDA or other regulatory authorities, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using the product, changes in governmental regulations or administrative actions, issues with the quality of or the manufacturing process used to produce our clinical trial materials or lack of adequate funding to continue the clinical trial. For example, the protocols for certain of our clinical trials require that patients participate in food challenges where they receive increasing amounts of the food to which they are allergic. In our clinical trials, participation in these food challenges has resulted in allergic reactions severe enough to require treatment with epinephrine. It is possible that patients could have allergic reactions severe enough to require hospitalization or even cause death. In such an event, we could be required to suspend or terminate our clinical trials.

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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 may 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 could have a material adverse effect on our business, results of operations, financial condition, prospects, and stock price. In addition, 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 certain of our clinical trials, we utilize an oral food challenge procedure designed to trigger an allergic reaction, which could be severe or life threatening.

In accordance with our food allergy clinical trial protocols, in certain clinical trials we utilize a DBPCFC procedure. This consists of giving the offending food protein to patients in order to assess the sensitivity of their food allergy, and thus to assess the safety and efficacy of our product candidates versus placebo. The food challenge protocol is meant to induce objective symptoms of an allergic reaction. These oral food challenge procedures can potentially trigger anaphylaxis, a potentially life-threatening systemic allergic reaction. Even though these procedures are well-controlled, standardized, and performed in highly specialized centers with or near intensive care units, there are inherent risks in conducting a clinical trial of this nature. Such risks may dissuade patients or parents of patients from electing to participate in our clinical trials. In addition, an uncontrolled allergic reaction could potentially lead to a serious or even fatal reaction and any such serious clinical event could potentially adversely affect our clinical development timelines, including a complete clinical hold on our food allergy clinical trials. For instance, we are aware of one clinical trial for a peanut allergy treatment that was terminated by its safety monitoring committee because of severe adverse events arising from the administration of food challenges. We may also become liable to subjects who participate in our clinical trials and experience any such serious or fatal reactions. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition, prospects, and stock price.

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

From time to time, we may publish interim or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Preliminary data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim and preliminary data should be viewed with caution until the final data are available. Adverse changes between preliminary or interim data and final data could significantly harm our business prospects.

We 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 be unable to obtain regulatory approval for or commercialize AR101 or any additional product candidates.

We do not have the ability to conduct clinical trials independently. We rely and plan to continue to rely on medical institutions, clinical investigators, contract laboratories, collaborative partners and other third parties, such as CROs, specialized clinical vendors and consultants to conduct clinical trials on our product candidates. The third parties with whom we contract for execution of our clinical trials play a significant role in the conduct of these studies and the subsequent collection and analysis of data. However, these third parties are not our employees, and except for contractual duties and obligations, we have limited ability to control the amount or timing of resources that they devote to our programs. Although we rely on these third parties to conduct our clinical trials, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on these third parties does not relieve us of our regulatory responsibilities.

The FDA and foreign regulatory authorities require us and our third-party contractors to comply with regulations and standards, including regulations commonly referred to as good clinical practices, or GCPs, which are regulations and guidelines enforced by the FDA and foreign regulatory authorities for conducting, monitoring, recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the clinical trial subjects are adequately informed of the potential risks of participating in clinical trials. Regulatory authorities enforce these GCPs through periodic inspections of clinical trial sponsors, principal investigators and clinical trial sites. If we or any of our third-party contractors fail to comply with applicable GCPs or data privacy requirements, 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 our stockholders that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials complies with GCP regulations.

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In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time to time and may receive compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, or regulatory authorities conclude that the financial relationship may have affected the interpretation of the trial, 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 or rejection by the regulatory authority of any marketing application we submit. Any such delay or rejection could prevent us from commercializing AR101 or our other future product candidates.

Furthermore, certain of our clinical trials must be conducted with product produced under current good manufacturing practice, or cGMP, regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. In addition, the execution of clinical trials, and the subsequent compilation and analysis of the data produced, requires coordination among various parties. In order for these functions to be carried out effectively and efficiently, it is imperative that these parties communicate and coordinate with one another. The collection and use of clinical data by us and our clinical sites, CROs, clinical vendors, clinical labs and collaborators is governed by strict data privacy laws in the United States, Canada and, especially, the EU.  Failure to comply with these data privacy regulations could prevent us from using clinical data, and subject us to penalties and fines, which could delay or impair review and potential approval of marketing approval applications for our product candidates. Moreover, these third parties may also have relationships with other commercial entities, some of which may compete with us. In addition, our agreements with third parties may typically be terminated by such third parties upon as little as 30 days’ prior written notice or, in certain cases, under certain other circumstances, including our insolvency. If the third parties conducting our clinical trials do not perform their contractual duties or obligations, experience work stoppages, do not meet expected deadlines, terminate their agreements with us or 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 trial protocols, GCPs or data privacy requirements, we may need to enter into new arrangements with alternative third parties, which could be difficult, costly or impossible, and our clinical trials may be extended, delayed or terminated or may need to be repeated. If any of the foregoing were to occur, we may not be able to obtain regulatory approval for or commercialize the product candidate being tested in such studies.

AR101 may cause undesirable side effects or have other properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in significant negative consequences following any regulatory approvals.

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 other comparable foreign regulatory authorities. To date, patients treated with AR101 have experienced drug-related side effects, which mainly include gastrointestinal issues ranging from itching of the lips to vomiting. Results of our trials could reveal a high and unacceptable severity and prevalence of these or other side effects. In such an event, our clinical trials could be suspended or terminated and the FDA or comparable foreign regulatory authorities could order us to cease further development of or deny approval of our product candidates for any or all targeted indications. The drug-related side effects could affect patient recruitment or the ability of enrolled patients to complete the clinical trial or result in potential product liability claims.

In addition, clinical trials by their nature utilize a sample of the potential patient population. With a limited number of subjects and limited duration of exposure in our clinical trials, we cannot be assured that rare and severe adverse effects of AR101 will not be uncovered when a significantly larger number of patients are exposed to the drug. Further, we have not designed our clinical trials to determine the effect and safety consequences of taking AR101 over a multi-year period.

Although we have monitored the subjects in our studies for certain safety concerns and we have not seen evidence of significant safety concerns in our clinical trials, patients treated with AR101 have and may in the future experience adverse reactions. For instance, in independent research studies, patients receiving OIT for peanut allergy have suffered severe anaphylactic reactions. While we have developed AR101 and its associated treatment regimen in a manner which we believe reduces the risk of adverse reactions, we can provide no assurance that patients administered AR101 will not also suffer severe anaphylactic reactions, including reactions leading to death. For example, in our PALISADE clinical trial, one patient had a severe allergic hypersensitivity reaction that was attributed to AR101 compared to none of the placebo-treated patients and 12.4% of patients ages 4-17 who received AR101 dropped out of the clinical trial due to gastrointestinal side effects, compared to 2.4% of placebo-treated patients. It is possible that the FDA may ask for additional data regarding such matters.

If safety problems relating to AR101 are identified in our clinical trials or in any clinical trials conducted by collaborators prior to approval of AR101, the FDA or other regulatory agencies may not approve AR101, may limit the population it is used in or may require warnings on the label. If AR101 is ultimately approved and we or others later identify undesirable side effects caused by AR101, the FDA or other regulatory agencies may require that we amend the labeling of AR101, require additional warnings, create a medication guide outlining the risks of such side effects for distribution to patients, order us to recall AR101 or even withdraw regulatory approval for AR101. In addition, we could be sued and held liable for harm caused to patients and our reputation may suffer. Each of these events could prevent us from achieving or maintaining market acceptance of AR101, if approved, and could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

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AR101, if approved, or any additional product candidates may face significant competition and our failure to effectively compete may prevent us from achieving significant market penetration.

The pharmaceutical market is highly competitive and dynamic and is characterized by rapid and substantial technological development and product innovations. In particular, we compete in the segments of the pharmaceutical, biotechnology and other related markets that address the treatment of food allergies. As a result, we may face competition from many pharmaceutical and biotechnology companies, with considerably more resources and experience than we have, that are researching and selling products designed to treat food allergies or allergies in general. For example, in October 2017, DBV Technologies S.A. announced results from its completed Phase 3 clinical trial evaluating Viaskin Peanut, a patch technology that epicutaneously delivers food allergens to the patient with the goal of desensitizing the patient to the allergens, in peanut-allergic patients (4 to 11 years of age). DBV submitted, and then subsequently withdrew, a BLA for this product. In August 2019, DBV announced that it had resubmitted a BLA for Viaskin Peanut. AnaptysBio, Inc. is developing an anti-IL-33 antibody, ANB020, for the treatment of atopic diseases including atopic dermatitis, eosinophilic asthma and peanut allergy. ANB020 is under investigation in a Phase 2a trial of approximately 20 adults with peanut allergy.

Many of our competitors have materially greater financial, manufacturing, marketing, research and drug development resources than we do. Large pharmaceutical and biotechnology companies in particular have extensive expertise in nonclinical and clinical testing and in obtaining regulatory approvals for drugs. In addition, academic institutions, government agencies and other public and private organizations conducting research may seek patent protection with respect to potentially competitive products or technologies. These organizations may also establish exclusive collaborative or licensing relationships with our competitors. Failure to effectively compete against additional products approved for the treatment of peanut allergy could harm our business and results of operations.

We may also face competition from clinicians who provide oral immunotherapy to patients using commercially available source material. In addition, peanut allergic patients may attempt to use food products as a substitute for AR101 in the maintenance portion of our AR101 treatment program. If we are unable to convince clinicians, patients and caregivers, that our products have advantages over these self-developed approaches to oral immunotherapy, our business and results of operation could be materially adversely affected.

AR101 and any additional product candidates are regulated as biological products, or biologics, which may subject them to competition sooner than anticipated.

With the enactment of the Biologics Price Competition and Innovation Act of 2009, or BPCIA, as part of the Affordable Care Act, an abbreviated pathway for the approval of biosimilar and interchangeable biological products was created. The abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. To be considered biosimilar, a product candidate must be highly similar to the reference product notwithstanding minor differences in clinically inactive components. In addition, there can be no clinically meaningful differences between the product candidate and the reference product in terms of the safety, purity and potency of the product. 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) that the biologic 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. We believe that the concentrations of relevant proteins in the peanut flour we source pursuant to our exclusive contract with GPC are significantly different from the concentrations of proteins found in other commercially available sources of peanut flour, and that a product candidate using different concentrations of such proteins or different proteins might not be considered “highly similar” to AR101 by the FDA. In that case, such a product candidate would not be eligible for the biosimilar approval pathway. However, there can be no guarantee that the FDA would agree with this interpretation. Indeed, the BPCIA is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological product candidates.

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Under the BPCIA, no approval of an application for a biosimilar product may be made effective until 12 years after the original branded product is first licensed by the FDA pursuant to the approval of a BLA. We believe that if the FDA approves a BLA for AR101, AR101 should qualify for this 12-year period of market exclusivity, known as reference product exclusivity, such that no approval of a biosimilar version of our product could become effective prior to the expiration of that 12-year period. However, these exclusivity provisions have been subject to various interpretations that have not yet been fully addressed by the FDA, and there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider AR101 to be eligible for reference product exclusivity, potentially creating the opportunity for competition sooner than anticipated. In addition, even if AR101 were to receive reference product exclusivity, a competitor may seek approval of a product candidate under a full BLA rather than a biosimilar product application. In such a case, although the competitor would not enjoy the benefits of the abbreviated pathway for biosimilar approval created under the BPCIA, the FDA would not be precluded from making effective an approval of the competitor product pursuant to a BLA prior to the expiration of our 12-year period of marketing exclusivity.

In addition, 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. In particular, it is unclear at this juncture whether products deemed “interchangeable” by the FDA will, in fact, be readily substituted by pharmacies. Such substitution will depend on a number of marketplace and regulatory factors that are still developing.

Any product candidate that we are able to commercialize may become subject to unfavorable pricing regulations, third-party coverage or reimbursement policies.

Significant uncertainty exists as to the coverage and reimbursement status of any drug candidates for which we obtain regulatory approval. Our ability to commercialize any products successfully in the United States will depend in part on the extent to which adequate coverage and reimbursement for these products becomes available from third-party payors, including government health administration authorities, such as those that administer the Medicare and Medicaid programs, and private health insurers. Third-party payors are generally able to affect the utilization of drugs by a variety of mechanisms, including deciding which medications they will cover, determining the amount they will pay for a product, establishing which formulary tier to place the drug on that may result in, among other things, greater out-of-pocket costs to patients, and creating pre-authorization procedures. A primary trend in the U.S. healthcare industry is cost containment. Coverage, reimbursement, out-of-pocket costs to patients, and pre-authorization requirements may impact the demand for any product for which we obtain regulatory approval. Increasingly, third-party payors are requiring that companies provide them with predetermined discounts from list prices and are challenging the prices charged for medical products. If coverage and reimbursement are not available or are available only at limited levels, we may not be able to successfully commercialize any product candidate that we successfully develop.

There may be significant delays in obtaining coverage and reimbursement for approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA. Moreover, eligibility for reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Payment rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for lower cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices for products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the United States. In the United States, private third-party payors often rely upon Medicare coverage and reimbursement policies and payment limitations in setting their own coverage and reimbursement policies. Our inability to promptly obtain adequate coverage, reimbursement and profitable payment rates from both government funded and private payors for new products that we develop could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

In addition, the anticipated treatment regimen for AR101 and our other products candidates requires a clinician to see the patient every two weeks during the dose escalation portion of the regimen. These appointments may take significant time as the patient has to be monitored for two hours after receiving an increased dose. It is not certain whether the existing reimbursement codes that can be appropriately used for these visits adequately compensate clinicians for the time spent on the visits. We may decide to seek the creation of new codes and associated reimbursement rates to ensure that clinicians are adequately compensated; however, creation of new codes is a complicated and lengthy process and we may not be successful in any such efforts. If appropriate codes and compensation are not available, clinicians may be deterred from offering AR101 to their patients and our business and operating results would be adversely affected.

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In the past, under the Medicare program, physician payments were updated on an annual basis according to a statutory formula. When the application of the statutory formula for the update factor would have resulted in a decrease in total physician payments, Congress would intervene with interim legislation to prevent the reductions. In April 2015, however, the Medicare Access and CHIP Reauthorization Act of 2015, or MACRA, was signed into law, which repealed and replaced the statutory formula for Medicare payment adjustments to physicians. MACRA provided a permanent end to the annual interim legislative updates that had previously been necessary to delay or prevent significant reductions to payments under the Medicare Physician Fee Schedule. MACRA provides for a 0.25% update through 2019, and a 0% annual update each year through 2025. In addition, MACRA required the establishment of the Merit-Based Incentive Payment System, or MIPS, beginning in 2019, under which physicians may receive performance-based payment incentives or payment reductions based on their performance with respect to clinical quality, resource use, clinical improvement activities and meaningful use of electronic health records. MACRA also required the Centers for Medicare & Medicaid Services, or CMS, beginning in 2019, to provide incentive payments for physicians and other eligible professionals that participate in alternative payment models, such as accountable care organizations, that emphasize quality and value over the traditional volume-based fee-for-service model. It is unclear what impact, if any, MACRA will have on our business and operating results, but any resulting decrease in payment may result in reduced demand for our product candidates or additional pricing pressures.

Outside of the United States, the regulations that govern regulatory approvals, pricing, coverage and reimbursement for new therapeutic products vary widely from country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject to price regulations that delay or prevent our commercial launch of the product and negatively impact the revenue we are able to generate from the sale of the product in that country. We will need to evaluate clinician compensation mechanisms in each market outside of the United States to determine whether any action needs to be taken to allow for payment of physicians for administration of the treatment regimens.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of AR101 or any additional product candidates, and our existing insurance coverage may not be sufficient to satisfy any liability that may arise.

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 any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. In addition, we may be sued if our product fails to protect a patient from exposure to a food allergen. 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 and 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 AR101 or any additional product candidates;

• injury to our reputation;

• withdrawal of clinical trial participants;

• costs to defend the related litigation;

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

• substantial monetary awards to clinical trial participants or patients;

• regulatory investigations, product recalls or withdrawals, or labeling, marketing or promotional restrictions;

• loss of revenue; and

• the inability to commercialize AR101 or any additional product candidates.

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Our inability to obtain and maintain sufficient product liability insurance at an acceptable cost and scope of coverage to protect against potential product liability claims could prevent or inhibit the commercialization of AR101 or any additional products we develop. Although we maintain product liability insurance covering the use of our product candidates in clinical trials, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions and deductibles, and we may be subject to a product liability claim for which we have no coverage. We will 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. Moreover, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses.

If and when we obtain approval for marketing AR101, we intend to expand our insurance coverage to include the sale of AR101. However, we may be unable to obtain this liability insurance on commercially reasonable terms, if at all.

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

As of June 30, 2019, we had 258 full-time employees. We will need to continue to expand our managerial, operational, finance, clinical, manufacturing, commercial and other resources in order to manage our operations, regulatory filings, manufacturing and supply activities, marketing and commercialization activities, clinical trials and develop and commercialize AR101 or any additional product candidates. Our management, personnel, systems and facilities currently in place may not be adequate to support this future growth. Our need to effectively execute our growth strategy requires that we:

• expand our general and administrative, manufacturing, commercialization and clinical development organizations;

• identify, recruit, retain, incentivize and integrate additional employees;

• establish the infrastructure necessary to support international operations;

• manage our internal development efforts effectively while carrying out our contractual obligations to third parties; and

• continue to improve our operational, legal, financial and management controls, reporting systems and procedures.

We may be unable to successfully implement these tasks, which could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

If we fail to attract and retain senior management, we may be unable to successfully develop AR101 or any additional product candidates, conduct our clinical trials and commercialize AR101 or any additional product candidates.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified personnel. In particular, we are highly dependent upon our senior management. The loss of services of any of these individuals could delay or prevent the successful development of our product pipeline, completion of our planned clinical trial or the commercialization of AR101 or any additional product candidates. Although we have entered into employment agreements with our senior management team, these agreements do not provide for a fixed term of service. In addition, certain members of our senior management team, including our President and Chief Executive Officer, who joined us in June 2018, have worked together for only a relatively short period of time and it may be difficult to evaluate their effectiveness, on an individual or collective basis, and ability to address future challenges to our business.

Although we have not historically experienced unique difficulties attracting and retaining qualified employees, we could experience such problems in the future. For example, competition for qualified personnel in the biotechnology and pharmaceuticals field is intense due to the limited number of individuals who possess the skills and experience required by our industry. We will need to hire additional personnel as we expand our clinical development and manufacturing activities. We may not be able to attract and retain quality personnel on acceptable terms or at all. In addition, to the extent we hire personnel from competitors, we may be subject to allegations that they have been improperly solicited or that they have divulged proprietary or other confidential information, or that their former employers own their research output.

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We incur significant costs as a result of operating as a public company, and our management devotes substantial time to new compliance initiatives. We may fail to comply with the rules that apply to public companies, including Section 404 of the Sarbanes-Oxley Act of 2002, which could result in sanctions or other penalties that would harm our business.

We incur significant legal, accounting and other expenses as a public company, including costs resulting from public company reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and regulations regarding corporate governance practices. We are subject to Section 404 of The Sarbanes-Oxley Act of 2002, or Section 404, and the related rules of the Securities and Exchange Commission, or SEC, which generally require our management and independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting. In addition, the listing requirements of The Nasdaq Global Select Market require that we satisfy certain corporate governance requirements relating to director independence, distributing annual and interim reports, stockholder meetings, approvals and voting, soliciting proxies, conflicts of interest and a code of conduct. Our management and other personnel will need to devote a substantial amount of time to ensure that we comply with all of these requirements. Moreover, the reporting requirements, rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms. In addition, as a public company we are required to file accurate and timely quarterly and annual reports with the SEC under the Exchange Act. Any failure to report our financial results on an accurate and timely basis could result in sanctions, lawsuits, delisting of our shares from The Nasdaq Global Select Market or other adverse consequences that would materially affect our business.

We implemented an enterprise resource planning, or ERP, system for our company during the third quarter of 2018. Our ERP system is intended to combine and streamline the management of our financial, accounting, human resources, sales and marketing and other functions, enabling us to manage operations and track performance more effectively. However, our ERP system will require us to complete many processes and procedures for the effective use of the system and to run our business using the system. As a result, we expect to incur substantial costs in order to utilize the system going forward. Additionally, in the future, we may be limited in our ability to convert any business that we acquire to the ERP. Any disruptions or difficulties in implementing or using our ERP system could adversely affect our controls and harm our business, including our ability to forecast or make sales and collect our receivables. Moreover, such disruption or difficulties could result in unanticipated costs and diversion of management attention.

If we are not successful in identifying, acquiring or commercializing additional product candidates, our ability to expand our business and achieve our strategic objectives would be impaired.

Although a substantial amount of our effort will focus on the continued clinical testing, potential approval and commercialization of AR101, an important element of our strategy is to expand our product portfolio by identifying, developing and commercializing additional therapies including additional therapies using our CODIT therapeutic approach, such as product candidates for the treatment of egg allergy and multi-nut allergy. A key component of our CODIT approach is utilizing defined dosages of well-characterized food proteins in order to allow for gradual up dosing. This requires manufacturing stable and standardized drug product, which, for naturally occurring food-based drug products, can be complex and difficult especially in low doses. Other than AR101, none of our product candidates have been tested in human clinical trials. In addition, we intend to evaluate third-party product candidates and technologies for the treatment of food allergies separately as well as in combination with any of our CODIT product candidates. Our efforts to develop, acquire or in-license product candidates may be unsuccessful for many reasons, including:

• we may not be successful in identifying potential product candidates;

• we may not accurately assess the relative technical feasibility or commercial potential of potential product candidates and may not select the most promising product candidates for development, acquisition or in-licensing;

• competitors may develop alternatives that render our product candidates obsolete or less attractive;

• product candidates we develop, acquire or in-license may nevertheless be covered by third-parties’ patents or other exclusive rights;

• the market for a product candidate may change over time so that such a product may become unreasonable to continue to develop;

• a product candidate may on further study be shown to have harmful side effects or other characteristics that indicate it is unlikely to be effective or otherwise does not meet applicable regulatory criteria;

• we may have difficulties finding contract manufacturers willing to manufacture our product candidates, which include food allergens;

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• a product candidate may not be capable of being produced in clinical or commercial quantities at an acceptable cost, or at all; and

• a product candidate may not be accepted as safe and effective by clinicians, patients, patient advocacy groups, healthcare payors or the general medical community.

If we fail to develop and successfully commercialize other product candidates, our business and future prospects may be harmed and our business will be more vulnerable to any problems that we encounter in developing and commercializing AR101.

Our existing and any future collaboration arrangements that we may enter into in the future may not be successful, which could adversely affect our ability to develop and commercialize AR101 and potential additional product candidates.

In October 2017, we entered into a clinical collaboration agreement with Regeneron Ireland Unlimited Company and Sanofi Biotechnology SAS to study AR101 with adjunctive dupilumab in peanut-allergic patients in a Phase 2 trial sponsored by Regeneron, which was initiated in October 2018. In the future we may seek additional collaboration arrangements with pharmaceutical or biotechnology companies for the development or commercialization of AR101 and other product candidates depending on the merits of retaining commercialization rights for ourselves as compared to entering into collaboration arrangements. We face significant competition in seeking appropriate collaborators. Moreover, collaboration arrangements are complex and time-consuming to negotiate, document, implement and maintain. We may also not be successful in our efforts to establish and implement collaborations or other alternative arrangements that we have entered into or that we may choose to enter into in the future. The terms of any such collaborations or other arrangements may also not be favorable to us.

Our existing and any future collaborations that we may enter into may not be successful. The success of such collaboration arrangements will depend heavily on the efforts and activities of our collaborators and any such collaboration agreement may not result in the realization of the benefits we expected to achieve upon our entry into such arrangements. Collaborations are subject to numerous risks, which may include that:

• collaborators have significant discretion in determining the efforts and resources that they will apply to collaborations;

• collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors, such as a business combination that diverts resources or creates competing priorities;

• any of our product candidates that are administered in combination with a collaborator’s product or product candidate could result in previously unforeseen adverse events or adverse events that are primarily related to the adjunctive therapy but cause higher rates or more severe events of treatment related adverse events;

• collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

• collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products or product candidates;

• a collaborator with marketing, manufacturing and distribution rights to one or more products may not commit sufficient resources to or otherwise not perform satisfactorily in carrying out these activities;

• we could grant exclusive rights to our collaborators that would prevent us from collaborating with others;

• collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to potential liability;

• disputes may arise between us and a collaborator that causes the delay or termination of the research, development or commercialization of our current or additional products or that results in costly litigation or arbitration that diverts management attention and resources;

• collaborations may be terminated, and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable current or additional products;

• collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in such cases, we would not have the exclusive right to develop or commercialize such intellectual property; and

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• a collaborator’s sales and marketing activities or other operations may not be in compliance with applicable laws resulting in civil or criminal proceedings.

If we engage in acquisitions, we will incur a variety of costs and we may never realize the anticipated benefits of such acquisitions.

We may attempt to acquire businesses, technologies, services, products or product candidates that we believe are a strategic fit with our business. If we do undertake any acquisitions, the process of integrating an acquired business, technology, service, products or product candidates into our business may result in unforeseen operating difficulties and expenditures, including diversion of resources and management’s attention from our core business. In addition, we may fail to retain key executives and employees of the companies we acquire, which may reduce the value of the acquisition or give rise to additional integration costs. Future acquisitions could result in additional issuances of equity securities that would dilute the ownership of existing stockholders. Future acquisitions could also result in the incurrence of debt, contingent liabilities or the amortization of expenses related to other intangible assets, any of which could adversely affect our operating results. In addition, we may fail to realize the anticipated benefits of any acquisition.

Recent U.S. tax legislation and future changes to applicable U.S. or foreign tax laws and regulations may have a material adverse effect on our business, financial condition and results of operations.

We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in laws and policy relating to taxes or trade may have an adverse effect on our business, financial condition and results of operations. For example, the U.S. government recently enacted significant tax reform, and certain provisions of the new law may adversely affect us. Changes include, but are not limited to, a federal corporate tax rate decrease from 34% to 21% for tax years beginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a more generally territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The legislation is unclear in many respects and could be subject to potential amendments and technical corrections and will be subject to interpretations and implementing regulations by the Treasury and Internal Revenue Service, any of which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affect state and local taxation. Generally, future changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application could have an adverse effect on our business, financial conditions and results of operations.  

If we obtain approval to commercialize AR101 outside of the United States, a variety of risks associated with international operations could materially adversely affect our business.

We submitted our AR101 MAA to the EMA in June 2019. If we or a collaborator seek to commercialize AR101 outside the United States, we expect that we will be subject to additional risks related to entering into these international markets or business relationships, including:

• different regulatory requirements for drug approvals in foreign countries;

• different approaches by reimbursement agencies regarding the assessment of the cost effectiveness of AR101;

• differing U.S. and foreign drug import and export rules;

• reduced protection for intellectual property rights in certain foreign countries;

• unexpected changes in tariffs, trade barriers and regulatory requirements;

• different reimbursement systems for food allergy medications and for clinicians treating food allergy patients;

• different data privacy regulations, especially in the European Union;

• 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 revenues, and other obligations incident to doing business in another country;

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

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

• potential liability resulting from activities conducted on our behalf by distributors or other vendors we engage; and

• business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters.

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The results of the United Kingdom’s referendum on withdrawal from the European Union may have a negative effect on global economic conditions, financial markets and our business.

In June 2016, a majority of voters in the United Kingdom elected to withdraw from the European Union in a national referendum, which is commonly referred to as Brexit. In March 2017, the U.K. government delivered to the European Council notice of its intention to leave the European Union. In the absence of an executed withdrawal agreement with the European Union, the effective date of the United Kingdom’s withdrawal from the European Union will, unless extended by the European Council in agreement with the United Kingdom, be October 31, 2019.  There are many ways in which our business could be affected by this event, only some of which we can identify at this time. The negotiation of the withdrawal agreement has been, to date, a lengthy and contentious process, and we do not, as at the date of this Quarterly Report, have certainty as to the terms of the United Kingdom’s future relationship with the European Union. Indeed, the negotiations may, ultimately, be unsuccessful and the United Kingdom may not reach agreement with the European Union on the future terms of the United Kingdom’s relationship with the European Union. If no agreement is reached, there will be a period of considerable uncertainty particularly in relation to United Kingdom financial and banking markets as well as on the regulatory process in Europe. These developments, or the perception that any of them could occur, have had and may continue to have a material adverse effect on global economic conditions and the stability of global financial markets, and may significantly reduce global market liquidity and restrict the ability of key market participants to operate in certain financial markets.

We submitted our AR101 MAA to the EMA in June 2019 and we have ongoing business in the United Kingdom and the European Union, including employees in the United Kingdom. Further, our ARTEMIS study was conducted solely in Europe. Our MAA for AR101 was filed and any other product candidate that we may file in the future must be filed by an entity located in a European Union member nation. While we are already in the process of establishing a network of subsidiary undertakings in continental Europe and  that our MAA for AR101 has been filed by our subsidiary, Aimmune Therapeutics Netherlands B.V., we may face new regulatory costs and challenges that could have a material adverse effect on our operations. In addition, the lack of clarity about future United Kingdom laws and regulations, as the United Kingdom determines which European Union laws to replace or replicate in the event of a withdrawal, includes regulations related to clinical trials, marketing authorization for drug products, intellectual property rights and employment and labor matters. A lack of clarity in these areas, which are central to the development of our product candidates in the United Kingdom and the European Union and our ongoing business activities in the United Kingdom, may cause operational and strategic uncertainty for us as we consider the timing of and requirements for approval in the United Kingdom for AR101 and the effect of a potential withdrawal on our employees located in the United Kingdom, including those employees who are non-UK citizens and whose rights to live and work in the UK may change following Brexit.

Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with environmental laws and regulations, which can be expensive and restrict how we do business.

Our research and development activities and our third-party manufacturers’ and suppliers’ activities involve the controlled storage, use and disposal of hazardous materials. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various wastes resulting from their use are stored at our and our manufacturers’ facilities pending their use and disposal. We cannot eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research and development efforts and business operations, environmental damage resulting in costly clean up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources and governmental authorities may curtail our use of certain materials and/or interrupt our business operations. Furthermore, environmental laws and regulations are complex, change frequently and have tended to become more stringent. We cannot predict the impact of such changes and cannot be certain of our future compliance. We do not currently carry biological or hazardous waste insurance coverage. Any of the foregoing risks could have a material adverse impact on our business.

Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the most recent global financial crisis, could result in a variety of risks to our business, including reduced ability to raise additional capital when needed on acceptable terms, if at all. A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption. Any of the foregoing could have a materially adverse impact on our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

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We or the third parties upon whom we depend may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Our corporate headquarters is located in the San Francisco Bay Area, which in the past has experienced severe earthquakes. We do not carry earthquake insurance. Earthquakes or other natural disasters could severely disrupt our operations and could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

Furthermore, our contract manufacturer and integral parties in our supply chain, are operating from single sites, increasing their vulnerability to natural disasters or other sudden, unforeseen and severe adverse events. In particular, our manufacturing facility for AR101 is located in Florida, which has historically and very recently experienced severe hurricanes. In addition, the source material for AR101 is a specific type of peanut flour that is grown and processed in Georgia, which has historically experienced tornadoes and hurricanes. If hurricanes or other natural disasters were to affect our contract manufacturer or our supply chain, it could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

A failure in our operational systems or infrastructure or those of third parties, including those caused by security breaches, cyber-attacks or data protection failures, could disrupt our business, damage our reputation and causes losses.

Our operations rely on the secure processing, storage, and transmission of confidential and other information and assets, including in our computer systems and networks. Our business, including our ability to report our financial results in a timely and accurate manner and our ability to collect and analyze clinical data to support regulatory filings for our product candidates, depends significantly on the integrity, availability and timeliness of the data we maintain, as well as the data and assets held through third party outsourcers, such as clinical vendors and clinical research organizations, service providers and systems.

Although we have implemented administrative and technical controls and take protective actions to reduce the risk of cyber incidents and to protect our information technology and assets, and we endeavor to modify such procedures as circumstances warrant and negotiate agreements with third party providers to protect our assets, such measures may be insufficient to prevent, among other things, unauthorized access, computer viruses, malware or other malicious code or cyber-attack, catastrophic events, system failures and disruptions (including in relation to new security measures and systems), employee errors or malfeasance, third party (including outsourced service providers) errors or malfeasance, loss of assets and other security events (each, a “Security Event”). We may be subject to Security Events, which could have a material adverse impact on our business, results of operations or financial condition. As the breadth and complexity of our security infrastructure continues to grow, the potential risk of a Security Event increases. If Security Events occur, these events may jeopardize our or our clinical vendors’ or collaborators’ or counterparties’ confidential and other information processed and stored with us, and transmitted through our computer systems and networks, or otherwise cause interruptions, delays, or malfunctions in our, counterparties’ or third parties’ operations, or result in data loss or loss of assets which could result in significant losses and/or fines, reputational damage or a material adverse effect on our business, financial condition or operating results. We may be required to expend significant additional resources to modify our protective measures or to investigate and remediate vulnerabilities or other exposures and to pursue recovery of lost data or assets and we may be subject to litigation and financial losses. We currently maintain cyber liability insurance that provides third party or first party liability coverages to protect us, subject to policy limits and coverages, against certain events that could be a Security Event. However, a Security Event could nonetheless have a material adverse effect on our operating results or financial condition.

We outsource certain technology and business process functions to third parties and may increasingly do so in the future. For example, we outsource certain data management and analysis functions for our clinical trials and use cloud-based systems for financial and human resources data. If we do not effectively develop, implement and monitor our outsourcing strategy, third party providers do not perform as anticipated or we experience technological or other problems with a transition, we may not realize productivity improvements or cost efficiencies and may experience operational difficulties, increased costs and loss of business. Our outsourcing of certain technology and business processes functions to third parties may expose us to enhanced risks related to data security, which could result in monetary and reputational damages. In addition, our ability to receive services from third party providers may be impacted by cultural differences, political instability, unanticipated regulatory requirements or policies. As a result, our ability to conduct our business may be adversely affected.

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Our product development programs for candidates may require substantial financial resources and may ultimately be unsuccessful.

In addition to the development of AR101, we are pursuing development of our additional product candidates. Our current development programs for such additional product candidates are in the pre-clinical formulation and process development phase and may not result in product candidates we can advance to the clinical development phase. None of our other potential product candidates have commenced clinical trials, and there are a number of FDA and foreign regulatory requirements that we must satisfy before we can commence these clinical trials. Satisfaction of these requirements will entail substantial time, effort and financial resources, and we may never satisfy these requirements. We filed an IND application for a product candidate for the treatment of egg allergy, AR201, in December 2018, and the FDA completed its review in February 2019. As such, we initiated enrollment of a Phase 2 clinical trial of AR201 for egg allergy. In addition, we are exploring and expect to continue to explore activities to support filing of an IND for a product candidate for the treatment of multi-nut allergy. Any time, effort and financial resources we expend on our other early-stage development programs may adversely affect our ability to continue development and commercialization of AR101, and we may never commence clinical trials of such development programs despite expending significant resources in pursuit of their development. Even if we do commence clinical trials of our other potential product candidates, such product candidates may never be approved by the FDA or the foreign regulatory authorities.

Risks Related to Government Regulation

The regulatory approval process is highly uncertain and we may not obtain regulatory approval for the commercialization of AR101 or any additional product candidates.

The research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution of biologics are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries, which regulations differ from country to country.

Neither we nor any future collaboration partner will be permitted to market AR101 or any additional product candidate in the United States until we receive approval of a BLA from the FDA, and we will not be permitted to market AR101 in other countries until similar regulatory approvals are obtained in those countries. We have submitted our AR101 BLA but have not yet obtained regulatory approval for AR101 anywhere in the world and may not be able to do so until we complete additional clinical trials. Obtaining regulatory approval of a BLA in the United States and similar applications in other countries can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other applicable United States and foreign regulatory requirements may subject us to administrative or judicially imposed sanctions or other actions, including:

• warning letters;

• civil and criminal penalties;

• injunctions;

• withdrawal of regulatory approval of products;

• product seizure or detention;

• product recalls;

• total or partial suspension of production; and

• refusal to approve pending BLAs or supplements to approved BLAs.

Prior to obtaining approval to commercialize a product candidate in the United States or abroad, we or our collaborators must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA or other foreign regulatory authorities, that such product candidates are safe, pure, potent and effective for their intended uses. The number of nonclinical studies and clinical trials that will be required for FDA approval varies depending on the product candidate, the disease or condition that the product candidate is designed to address, and the regulations applicable to any particular product candidate. Results from nonclinical studies and clinical trials can be interpreted in different ways. Even if we believe the nonclinical or clinical data for our product candidates are promising, regulatory authorities may not agree that such data are sufficient to support approval. Administering product candidates to humans may produce undesirable side effects, which could interrupt, delay or halt clinical trials and result in the FDA or other regulatory authorities denying approval of a product candidate for any or all targeted indications.

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Regulatory approval of a BLA or equivalent application in other territories is not guaranteed, and the approval process is expensive and may take several years. The FDA and foreign regulatory authorities also have substantial discretion in the approval process, we may be required to expend additional time and resources to obtain an approval, if any, and any approval we may seek may be delayed or prevented. For example, the FDA or other regulatory authorities may require us to conduct additional clinical trials for AR101 either prior to or post-approval, such as additional trials in specific patient subpopulations or to establish a larger safety database of patients who have been administered AR101. The FDA or other regulatory authority may also object to elements of our clinical development program. Despite the time and expense exerted, failure can occur at any stage.

Regulatory authorities can delay, limit or deny approval of a drug candidate for many reasons, including, but not limited to, the following:

• a drug candidate may not be deemed safe or effective;

• the characterization of the active pharmaceutical ingredient and the data to demonstrate adequate control of the manufacturing process may be deemed insufficient;

• regulatory officials may not find the data from nonclinical studies and clinical trials sufficient;

• the regulatory authorities might not approve our third-party manufacturers’ processes or facilities; or

• the regulatory authorities may change its approval policies or adopt new regulations.

If AR101 or any additional product candidate fails to demonstrate safety and efficacy in clinical trials or does not gain regulatory approval, our business and results of operations will be materially and adversely harmed. Additionally, if the FDA or other regulatory authorities require that we conduct additional clinical trials, place limitations on AR101 in our label, delay approval to market AR101 or limit the use of AR101, our business and results of operations may be harmed.

Neither a Fast-Track designation nor a Breakthrough Therapy designation by the FDA may actually lead to a faster development or regulatory review or approval process.

Even though we have received Fast-Track designation for AR101 for oral immunotherapy of peanut sensitive adults and children and Breakthrough Therapy designation for AR101 for oral immunotherapy of peanut sensitive children and adolescents (ages 4-17), we may not experience a faster development process, review or approval compared to conventional FDA procedures. Both the Fast-Track designation and the Breakthrough Therapy designation support expedited review of new drugs and biologics. However, the FDA has determined that AR101, as an allergenic product candidate, is exempt from PDUFA, and has informed us that the BLA will be reviewed under a twelve-month target review period, as measured from the January 2019 start date. Moreover, the review period for PDUFA-exempt applications is subject to uncertainty, and, as a result, the FDA may take longer than twelve months to review the BLA for AR101.  

Even if we receive regulatory approval for AR101 or any additional product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense. Additionally, any product candidates, if approved, could be subject to labeling and other restrictions and market withdrawal, and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipated problems with our products.

Even if a drug is approved, regulatory authorities may still impose significant restrictions on a product’s indicated uses or marketing or impose ongoing requirements for potentially costly post-marketing studies. Furthermore, any new legislation addressing drug safety issues could result in delays or increased costs to assure compliance.

If AR101 is approved it will be subject to ongoing regulatory requirements for labeling, packaging, storage, advertising, promotion, sampling, record-keeping and submission of safety and other post-marketing information, including both federal and state requirements in the United States and the requirements of the regulatory agencies in other countries. In addition, manufacturers and manufacturers’ facilities are required to comply with extensive regulatory requirements, including ensuring that quality control and manufacturing procedures conform to current cGMP requirements. As such, we and our contract manufacturers are subject to continual review and periodic inspections to assess compliance with cGMP. Accordingly, we and others with whom we work must continue to expend time, money, and effort in all areas of regulatory compliance, including manufacturing, quality control, and quality assurance. We will also be required to report certain adverse reactions and production problems, if any, to regulatory authorities, and to comply with requirements concerning advertising and promotion for our products. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the product’s approved label. As such, we may not promote our products for indications or uses for which they do not have regulatory approval.

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If a regulatory authority discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where the product is manufactured, or disagrees with the promotion, marketing or labeling of a product, a regulatory authority may impose restrictions on that product or us, including requiring withdrawal of the product from the market. If we fail to comply with applicable regulatory requirements, a regulatory authority or enforcement authority may:

• issue warning letters;

• impose civil or criminal penalties;

• suspend or withdraw regulatory approval;

• suspend any of our ongoing clinical trials;

• refuse to approve pending applications or supplements to approved applications submitted by us;

• impose restrictions on our operations, including closing our contract manufacturers’ facilities; or

• seize or detain products or require a product recall.

Any government investigation of alleged violations of law could require us to expend significant time and resources in response and could generate negative publicity. Any failure to comply with ongoing regulatory requirements may significantly and adversely affect our ability to commercialize and generate revenues from AR101. If regulatory sanctions are applied or if regulatory approval is withdrawn, the value of our company and our operating results will be adversely affected. Additionally, if we are unable to generate revenues from the sale of AR101 our potential for achieving profitability will be diminished and the capital necessary to fund our operations will be increased.

We are subject to governmental regulation and other legal obligations, particularly related to privacy, data protection and information security. Our actual or perceived failure to comply with such obligations could harm our business.

The regulatory environment surrounding information security, confidentiality and privacy is increasingly demanding. We are subject to numerous U.S. federal and state laws both generally and specifically in relation to protected health information, including the U.S. federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”) and related laws, and European laws and regulations, including the General Data Protection Regulation, or GDPR, and the e-Privacy Directive (2002/58/EC), soon to be replaced by an e-Privacy Regulation, and the EU national laws implementing or supplementing the GDPR or e-Privacy Directive, as well as upcoming US laws such as the California Consumer Privacy Act. Compliance with these data privacy and security requirements is rigorous and time-intensive and may increase our cost of doing business, and despite those efforts, there is a risk, particularly given uncertainty that sometimes exists surrounding how to comply, that we may be subject to fines and penalties, regulatory investigations, litigation and reputational harm, which could materially and adversely affect our clinical trials, business, financial condition and operations.

In addition, the legal and regulatory framework for the receipt, collection, processing, use, safeguarding, sharing and transfer of personal and confidential data is evolving as new global privacy laws are being enacted and existing ones are being updated and strengthened. For example, the GDPR repealed the Data Protection Directive (95/46/EC) and is directly applicable in all EU member states since its effective date of May 25, 2018. The GDPR applies to companies established (for data processing purposes) in the EU or EEA as well as companies that are not so established in the EU or EEA and which collect and use personal data in relation to offering goods or services to, or monitoring the behavior of, individuals located in the EU or EEA, including, for example, through the conduct of clinical trials (whether the trials are conducted directly by us or through a clinical vendor or collaborator). The GDPR sets out requirements that must be complied with when handling personal data including: providing detailed disclosures about how data subjects’ personal data will be used; demonstrating that they have an appropriate legal basis in place to justify their data processing activities; appointing data protection officers in certain circumstances; enhancing existing rights and granting rights for data subjects in regard to their personal data (including the right to be “forgotten”, to data access and to data portability); strengthening the obligation to notify data protection regulators or supervisory authorities (and in certain cases, affected individuals)  of data security breaches; and complying with principal of accountability and complying with the obligation to demonstrate compliance through policies, procedures, training and audit.

In addition, the GDPR permits EU and EEA Member States the ability to introduce derogations for certain matters and, accordingly we are also subject to national legislation in the EU and EEA which implements or supplements the GDPR, including in relation to the processing of genetic, biometric and health data. We will need to monitor compliance with such EU and EEA  Member State laws and regulations, including in relation to these permitted derogations from the GDPR, all of which will increase our compliance obligations and may necessitate the review and implementation of policies and processes relating to our collection and use of data, which may also lead to an increase in compliance costs, ultimately having an adverse impact on our business, financial condition or operations.

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If any person, including any of our employees, contractors, clinical vendors, service providers, partners or collaborators or those with whom we share such information, fails to comply with applicable data privacy or security laws, or breaches our established controls with respect to personal or confidential data, or otherwise mismanages or misappropriates that data including where that results in the unauthorized access to or transfer of personal data, we may be subject to significant monetary damages, regulatory enforcement actions, assessment notices (for a compulsory audit), orders to cease/change our processing of our data, adverse publicity, fines and/or criminal prosecution in one or more jurisdictions. For example, certain breaches under the GDPR may result in a penalty of up to 4% of an organization’s total global annual revenue or 20 million Euros (whichever is higher). In addition, a data breach could result in negative publicity which could damage our reputation and have an adverse effect on our clinical trials, business, financial condition or operations.

We are also subject to EU and EEA laws on data export, where we transfer personal data outside the E.E.A. to group companies or third parties. The GDPR only permits exports of personal data outside EEA where there is a suitable data transfer solution in place to safeguard the personal data (e.g., the EU Commission approved Standard Contractual Clauses or, in relation to exports of personal data to the US, the EU-US- Privacy Shield) or where the country receiving such data is approved by the EU Commission as providing adequate protection for personal data. Where we transfer personal data out of the EU or EEA, we rely on a number of data transfer solutions including in regard to transfers of personal data (HR data and non-HR data) to the US (and Switzerland), we are certified under the EU-US (and Switzerland-US) Privacy Shield. In addition, if it were to be determined that we were not complying with our obligations under the Privacy Shield framework and we were to lose our Privacy Shield certification from the Department of Commerce, we will need to find an alternative solution for transferring data out of the EEA to the U.S. Also, Brexit will mean that at some point the United Kingdom, or UK, will become a “third party” for the purposes of data transfers under the GDPR.

Unless a withdrawal agreement and political declaration (the “Proposed Deal”) or another agreement is agreed to and approved by the EU and the UK prior to October 31, 2019 (the “Exit Date”), the UK will become a third party on the Exit Date and standard contractual clauses approved by the European Commission or other safeguards will need to be put in place to facilitate data transfers from the EU/EEA to the UK. If the Proposed Deal is agreed and approved prior to October 31, 2019, the GDPR will continue to apply during the transition period (which is currently due to end on December 31 2020, but may be extended) meaning that data transfers from the EU / EEA to the UK can continue in the same manner until the end of the transition period (upon which compliant data transfer solutions will need to be put in place in regard to transfers from the EU / EEA to the UK). These changes introduced by Brexit may require us to find alternative solutions for the compliant transfer of personal data into (and possibly from) the UK.

Where we are a data controller, we will be accountable for any service providers (including clinical research organizations) we engage to process personal data on our behalf. We attempt to mitigate the associated risks of using service providers by entering into contractual arrangements to ensure that they only process personal data according to our instructions, and that they have sufficient technical and organizational security measures in place. Where we transfer personal data from the EEA to such third parties, we do so in compliance with the relevant data export requirements as described above. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the service provider’s processing, storage and transmission of such data. Any violation of data or security laws by our processors could have a material adverse effect on our business and result in the fines and penalties outlined above.

We are also subject to evolving EU privacy laws on cookies and e-marketing. The EU is in the process of replacing the e-Privacy Directive (2002/58/EC) with a new set of rules taking the form of a regulation, which will be directly implemented in the laws of each EU Member State. The draft e-Privacy Regulation imposes strict opt-in marketing rules with limited exceptions for business-to-business communications, alters rules on third-party cookies, web beacons and similar technology and significantly increases fining powers to the same levels as the GDPR (i.e. the greater of 20 million Euros or 4% of total global annual revenue). While the e-Privacy Regulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is still going through the European legislative process and commentators now expect it to be adopted during the second half of 2020 or during 2021 following a transition period.

We strive to comply with all applicable laws, including privacy laws, but they may conflict with each other. Despite our efforts, we may not have fully complied in the past and may not in the future. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties as outlined above, our reputation may be harmed and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services (including clinical trials) and/or processing of personal data (including health data), which could negatively affect our business.

If approved, AR101 or any additional products may cause or contribute to adverse medical events that we are required to report to regulatory authorities and if we fail to do so we could be subject to sanctions that would materially harm our business.

Some participants in our clinical trials have reported adverse effects after being treated with AR101. For example, in our PALISADE clinical trial, of patients ages 4-17, 12.4% of patients from the AR101 treatment arm and 2.4% of patients from the placebo-treatment arm discontinued due to investigator-reported adverse events. Additionally, eight AR101-treated patients in the

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PALISADE trial experienced a total of ten severe adverse events, and four of these patients discontinued treatment. If we are successful in completing the development of, obtaining approval for, and commercializing AR101 or any other products, FDA and foreign regulatory authority regulations require that we report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event as well as the nature of the event. We may fail to report adverse events we become aware of within the prescribed timeframe. We may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we fail to comply with our reporting obligations, the FDA or a foreign regulatory authority could take action, including criminal prosecution, the imposition of civil monetary penalties, seizure of our products or delay in approval or clearance of additional products.

Changes in funding for the FDA and other government agencies could hinder their ability to hire and retain key leadership and other personnel, or otherwise prevent new products and services from being developed or commercialized in a timely manner, which could negatively impact our business.

            The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.

            Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business.  For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA employees and stop critical activities. If a prolonged government shutdown occurs, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business.

Our failure to obtain regulatory approvals in foreign jurisdictions for AR101 would prevent us from marketing AR101 internationally.

In order to market any product in the European Economic Area, or EEA (which is composed of the 28 Member States of the European Union plus Norway, Iceland and Liechtenstein), and many other foreign jurisdictions, separate regulatory approvals are required. In the EEA, medicinal products can only be commercialized after obtaining a MAA. Before granting the MAA, the EMA or the competent authorities of the Member States of the EEA make an assessment of the risk benefit balance of the product on the basis of scientific criteria concerning its quality, safety and efficacy. We submitted our AR101 MAA to the EMA in June 2019.

The approval procedures vary among countries and can involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval. A foreign regulatory authority may impose additional requirements prior to the commencement of clinical trials in one country that were not required in other countries, including the United States. Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. For example, a foreign regulatory authority may determine that our clinical trial results obtained in U.S. subjects are not representative of foreign patient populations and are thus not supportive of an approval outside of the United States. Approval by the FDA does not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others. The foreign regulatory approval process may include all of the risks associated with obtaining FDA approval. We may not be able to file for foreign regulatory approvals or do so on a timely basis, and even if we do file we may not receive necessary approvals to commercialize our products in any market.

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We may be subject to healthcare laws, regulation and enforcement.

Although we do not currently have any products on the market, once we begin commercializing our products, we will be subject to additional healthcare statutory and regulatory requirements and enforcement in the U.S. by the federal government and the states and by the governments of other countries where we conduct our business. The laws that will affect our ability to operate as a commercial organization include:

• the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. A person or entity does not need to have actual knowledge of this statute or specific intent to violate it to have committed a violation. 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 false claims laws;

• U.S. federal false claims laws which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent;

• U.S. federal criminal laws that prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters. Similar to the federal Anti- Kickback Statute, a person or entity does not need to have actual knowledge of these statutes or specific intent to violate them to have committed a violation;

• U.S. federal civil monetary penalties laws, which impose civil fines for, among other things, the offering or transfer of remuneration to a Medicare or state healthcare program beneficiary if the person knows or should know it is likely to influence the beneficiary’s selection of a particular provider, practitioner, or supplier of services reimbursable by Medicare or a state healthcare program, unless an exception applies;

• U.S. federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers;

• the U.S. federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects the security and privacy of protected health information;

• the U.S. federal physician sunshine requirements under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, the Affordable Care Act, which requires certain manufacturers of drugs, devices, biologics, and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, information related to payments and other transfers of value to physicians, other healthcare providers, and teaching hospitals, and ownership and investment interests held by physicians and other healthcare providers and their immediate family members;

• state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers;

• state laws that require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the applicable compliance guidance promulgated by the federal government, or otherwise restrict payments that may be made to healthcare providers and other potential referral sources;

• state 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 pricing information; and state laws governing the privacy and security of health information (or personal information generally) in certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts;

• state laws that require drug manufacturers to obtain licenses prior to distribution or sale of pharmaceutical products in that state; and

• European and other foreign law equivalents of each of the laws, including reporting requirements detailing interactions with and payments to healthcare providers.

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Because of the breadth of these laws and the narrowness of the statutory exceptions and safe harbors available, it is possible that some of our business activities could be subject to challenge under one or more of such laws. The risk of our being found in violation of these laws is increased by the fact that many of them have not been fully interpreted by the regulatory authorities or the courts, and their provisions are open to a variety of interpretations. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that apply to us, we may be subject to penalties, including civil and criminal penalties, damages, fines, the curtailment or restructuring of our operations, the exclusion from participation in federal and state healthcare programs, additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve allegations of non-compliance with these laws, and imprisonment, any of which could adversely affect our ability to market our products and adversely impact our financial results.

Further, regulations may change, and any additional regulation could prevent, limit or delay regulatory approval of our product candidates, which could harm our business. For example, in December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of biologics and spur innovation, but its ultimate implementation remains unclear. We could also be subject to new international, federal, state or local regulations that could affect our R&D programs and harm our business in unforeseen ways. If this happens, we may have to incur significant costs to comply with such laws and regulations, which will harm our results of operations.

We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trump administration has taken several executive actions, including shutting down the government, and the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these Executive Orders will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

If we participate in and then fail to comply with our reporting and payment obligations under governmental pricing programs in the U.S., we could be subject to additional reimbursement requirements, penalties, sanctions and fines which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.

With the approval of any product candidate, we anticipate that we will participate in a number of federal and state government pricing programs in the U.S. in order to obtain coverage for the product by certain government healthcare programs. These programs would generally require us to pay rebates or provide discounts to certain private purchasers or government payers in connection with our products when dispensed to beneficiaries of these programs. In some cases, such as with the Medicaid Drug Rebate Program, the rebates are based on pricing and rebate calculations that we report on a monthly and quarterly basis to the government agencies that administer the programs. The terms, scope and complexity of these government pricing programs change frequently. We may also have reimbursement obligations or be subject to penalties if we fail to provide timely and accurate information to the government, pay the correct rebates or offer the correct discounted pricing. Changes to the price reporting or rebate requirements of these programs would affect our obligations to pay rebates or offer discounts. Responding to current and future changes may increase our costs and the complexity of compliance, will be time-consuming, and could have a material adverse effect on our results of operations.

Legislative or regulatory healthcare reforms in the United States may make it more difficult and costly for us to obtain regulatory clearance or approval of our product candidates and to produce, market and distribute our products after clearance or approval is obtained.

From time to time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

• additional clinical trials to be conducted prior to obtaining approval;

• changes to manufacturing methods;

• recall, replacement or discontinuance of one or more of our products; and

• additional record keeping.

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Each of these would likely entail substantial time and cost and could materially harm our business and our financial results. In addition, delays in receipt of or failure to receive regulatory clearances or approvals for any additional products could have a material adverse effect on our business, results of operations, financial condition, prospects and stock price.

In addition, the full impact of recent healthcare reform and other changes in the healthcare industry and in healthcare spending is currently unknown and may adversely affect our business model. In the United States, the Affordable Care Act was enacted in 2010 with a goal of reducing the cost of healthcare and substantially changing the way healthcare is financed by both government and private insurers. The Affordable Care Act, among other things, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed care organizations and established annual fees and taxes on manufacturers of certain branded prescription drugs. Since its enactment, there have been judicial and Congressional challenges to certain aspects of the Affordable Care Act, and we expect there will be additional challenges and amendments to the Affordable Care Act in the future. The current Presidential Administration and U.S. Congress will likely continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the Affordable Care Act. For example, the Tax Act was enacted, which, among other things, removes penalties for not complying with the Affordable Care Act’s individual mandate to carry health insurance. On December 14, 2018, a U.S. District Court Judge in the Northern District of Texas, ruled that the individual mandate is a critical and inseverable feature of the Affordable Care Act, and therefore, because it was repealed as part of the Tax Act, the remaining provisions of the Affordable Care Act are invalid as well. While the Trump Administration and the Centers for Medicare & Medicaid Services have both stated that the ruling will have no immediate effect, it is unclear how this decision, subsequent appeals, if any, will impact the law. Any changes will likely take time to unfold and it is uncertain the extent to which any such changes may impact our business or financial condition.

In addition, other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. These changes include the Budget Control Act of 2011, which resulted in aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unless additional Congressional action is taken, as well as the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several types of providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. Recently, there has also been heightened government scrutiny over the manner in which manufacturers set prices for their marketed products, which has resulted in several Congressional inquiries and proposed and enacted legislation designed to, among other things, reform government program reimbursement methodologies. Individual states in the United States have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Furthermore, there has been increased interest by third party payors and governmental authorities in reference pricing systems and publication of discounts and list prices.

It is likely that federal and state legislatures within the United States and foreign governments will continue to consider changes to existing healthcare legislation. We cannot predict the reform initiatives that may be adopted in the future or whether initiatives that have been adopted will be repealed or modified. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare may adversely affect the demand for any drug products for which we may obtain regulatory approval, our ability to set a price that we believe is fair for our products, our ability to obtain adequate coverage and reimbursement approval for a product, our ability to generate revenues and achieve or maintain profitability, and the level of taxes that we are required to pay.

Risks Related to Intellectual Property

If we are unable to obtain and maintain adequate intellectual property protection for AR101 or any additional product candidates, we may not be able to compete effectively in our market.

Our commercial success depends in part on our ability to obtain and maintain proprietary or intellectual property protection in the United States and other countries for AR101 and any additional product candidates. We intend to rely upon a combination of patents, trademarks, trade secrets and confidentiality agreements to protect our product candidates. Evaluating the strength of patents in the biotechnology and pharmaceutical fields involves complex legal and scientific questions and, as a result, the patent position of biopharmaceutical companies can generally be highly uncertain. Further, any disclosure to or misappropriation by third parties of our confidential or proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

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The degree of patent protection we require to successfully commercialize our product candidates may be unavailable or severely limited in some cases and may not adequately protect our rights or permit us to gain or maintain any competitive advantage. Though we currently own three issued patents in the United States covering certain of our manufacturing methods and the formulation for AR101, we do not anticipate that we will be able to obtain a composition of matter patent over the active pharmaceutical ingredient in AR101 or for any other product candidates that are based on widely or readily available food products. We have filed additional patent applications that relate to the manufacture, formulation, use and other aspects of AR101 and certain of our other product candidates. We cannot assure our stockholders that these applications will result in any additional issued patents in the U.S. or foreign countries. Even if any such additional patents issue, we cannot assure our stockholders that they or any other patents we obtain will include any claims with a scope sufficient to protect AR101 or any other additional product candidate or otherwise provide us with meaningful protection or competitive advantage.

The patent prosecution process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. In addition, the laws of foreign countries may not protect our rights to the same extent as the laws of the United States.  Similarly, laws of the United States may not protect our rights to the same extent as the laws of foreign countries.   Furthermore, patents have a limited lifespan. In the United States, the natural expiration of a patent is generally twenty years after it is filed as a regular, non-provisional application. Various extensions may be available; however, the life of a patent, and the protection it affords, is limited. Given the amount of time required for the development, testing and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. If we encounter delays in our clinical trials or other delays during the regulatory approval process, even if we obtain patents covering AR101 or other product candidates, the period of time during which we could exclusively market AR101 or such other product candidates under such patents would be reduced, even if we are able to obtain an extension of patent term due to regulatory delay. As a result, any patents we obtain may not provide us with adequate and continuing patent protection sufficient to exclude others from commercializing products similar or identical to AR101 or our other product candidates, including generic versions of such products.

The issuance of a patent is not conclusive as to its inventorship, ownership, scope, validity or enforceability, and therefore, to the extent that we acquire patent protection with respect to AR101 or other product candidates, third parties may still challenge our patents in the courts or patent offices in the United States and abroad. Any issued patents we obtain could be narrowed, invalidated, held unenforceable or circumvented, any of which could limit our ability to prevent competitors and other third parties from developing and marketing the same or similar products or limit the length of terms of patent protection we may obtain for our product candidates. Competitors or other third parties may also claim that they invented the inventions claimed in our patent applications, or any patents that may issue in the future, prior to us, or may file patent applications before we do. Further, our competitors might conduct research and development activities 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. Our competitors might commercialize products in countries where we do not have patent rights. Such challenges may also result in our inability to manufacture or commercialize our products, including AR101, without infringing third-party patent rights. If the breadth or strength of protection provided by any patents we obtain with respect to AR101 or any additional product candidates is successfully challenged, then our ability to commercialize AR101 or any additional product candidates could be negatively affected, and we may face unexpected competition that could have a material adverse impact on our business.

Even if they are unchallenged, any patents issuing from our pending patent applications may not adequately protect our intellectual property or prevent others from designing around our claims to circumvent those patents by developing similar or alternative technologies or products in a non-infringing manner. For example, a third party may develop a competitive product that provides benefits similar to AR101 or an additional product candidate but falls outside the scope of our patent protection. If the patent protection covering our product candidates is not sufficiently broad to impede such competition, our ability to successfully commercialize our product candidates could be negatively affected, which would harm our business.

In addition, we may in the future be subject to claims by our former employees or consultants asserting an ownership right in our patents or patent applications, as a result of the work they performed on our behalf. Although we generally require all of our employees, consultants and advisors and any other third parties who have access to our proprietary know-how, information or technology to assign their inventions to us, we cannot be certain that we have executed such agreements with all parties who may have contributed to our intellectual property, nor can we be certain that our agreements with such parties will be upheld in the face of a potential challenge, or that they will not be breached, for which we may not have an adequate remedy.

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We may become subject to claims alleging infringement of third-party patents or proprietary rights, the outcome of which could result in delay or prevent the development and commercialization of AR101 or any additional product candidates or otherwise prevent us from competing effectively in our market.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our product candidates and use our proprietary technologies without infringing or otherwise violating the proprietary rights and intellectual property of third parties. The biotechnology and pharmaceutical industries are characterized by extensive and frequent litigation regarding patents and other intellectual property rights. Third parties, including our competitors, may initiate legal proceedings against us or our collaborators alleging that we are infringing or otherwise violating their patent or other intellectual property rights. Given the significant number of patents in our field of technology, we cannot assure our stockholders that AR101 or any additional product candidates we develop will not infringe existing patents or patents that may be granted in the future. Because patent applications can take many years to issue and may be confidential for 18 months or more after filing, and because pending patent claims can be revised before issuance, or even after issuance, there may be applications now pending of which we are unaware that may later result in issued patents that may be infringed by the manufacture, use or sale of AR101 or any additional product candidates. If a patent holder believes AR101 or any of our product candidates infringes on its patent, the patent holder may sue us even if we have received patent protection for our technology.

If a patent infringement suit were brought against us or any of our collaborators, we or they could be forced to stop or delay the research, development, manufacturing or sales of AR101 or the product candidate that is the subject of the suit. Defending any such claims would cause us to incur substantial expenses of financial and other resources and, if unsuccessful, we could be forced to pay substantial damages, including treble damages and attorney’s fees if we are found to have willfully infringed a third-party patent. Furthermore, we may be required to indemnify our collaborators against such claims. Similarly, laws of the United States may not protect our rights to the same extent as the laws of foreign countries.

We may choose to seek, or may be required to seek, a license from the third-party patent holder and would most likely be required to pay license fees or royalties or both, each of which could be substantial. These licenses may not be available on commercially reasonable terms, however, or at all. Even if we were able to obtain a license, the rights we obtain may be nonexclusive, which would provide our competitors access to the same intellectual property rights upon which we are forced to rely. Ultimately, we could be prevented from commercializing a product, or forced to redesign it, or to cease aspects of our business operations if, as a result of actual or threatened patent infringement claims, we or our collaborators are unable to enter into licenses on acceptable terms. Even if we are successful in defending against any infringement claims, litigation is expensive and time-consuming and is likely to divert management’s attention and substantial resources from our core business, which could harm our business.

We may become involved in lawsuits or other proceedings to protect or enforce our patents and other intellectual property rights, the outcome of which would be uncertain and could have a material adverse effect on the success of our business.

Competitors and other third parties may infringe, misappropriate or otherwise violate any patents we obtain or other intellectual property rights. To counter infringement or unauthorized use, we may be required to initiate litigation, which can be expensive and time-consuming. A court may disagree with our allegations, however, and may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the third-party technology in question. Further, such third parties could counterclaim that we infringe their intellectual property or that a patent we have asserted against them is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims challenging the validity, enforceability or scope of asserted patents are commonplace.

In addition, third parties may initiate their own legal proceedings against us to assert such challenges to our intellectual property rights. For example, we may be subject to a third-party submission of prior art to the United States Patent and Trademark Office, or USPTO, challenging the invention claimed within any patent we may obtain, such as in an inter partes review proceeding. Such third-party prior art submissions may also be made prior to a patent’s issuance, precluding such issuance at all. We may become involved in opposition, derivation, reexamination, inter partes review, post-grant review or interference proceedings challenging our patent rights or the patent rights of others from whom we have obtained licenses to such rights. We may also become involved in similar opposition proceedings in the European Patent Office or similar offices in other jurisdictions regarding our intellectual property rights.

The outcome of any such proceeding is generally unpredictable. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, including lack of novelty, obviousness or non-enablement. Patents may be unenforceable if someone connected with prosecution of the patent withheld relevant information from the USPTO or made a misleading statement during prosecution. It is possible that prior art of which we and the patent examiner were unaware during prosecution exists, which could render any patents we obtain invalid. Moreover, it is also possible that prior art may exist that we are aware of but do not believe is relevant to patents we may obtain, but that could nevertheless be determined to render such patents invalid. An adverse result in any litigation or other proceeding to defend or enforce any patents we may obtain could put one or more of such patents at risk of being invalidated, held unenforceable, or interpreted narrowly. If a defendant were to prevail on a legal assertion of invalidity or unenforceability of any patents we obtain covering AR101 or additional product candidates, we would lose at least part, and perhaps all, of any patent protection covering such product candidate, which would materially impair our competitive position.

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Intellectual property litigation could cause us to spend considerable resources and would be likely to distract our personnel from their normal responsibilities.

Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and time-consuming and is likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. 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. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase our operating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.

We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Changes in U.S. or foreign patent law could diminish the value of patents in general, thereby impairing our ability to protect our products.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, including patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity. Therefore, obtaining and enforcing biopharmaceutical patents is costly, time consuming and inherently uncertain. For example, patent reform legislation in the United States and other countries, including the Leahy-Smith America Invents Act, or Leahy-Smith Act, signed into law on September 16, 2011, could increase those uncertainties and costs. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications are prosecuted, redefine prior art and provide more efficient and cost-effective avenues for competitors to challenge the validity of patents. In addition, the Leahy-Smith Act has transformed the U.S. patent system into a “first-to-file” system. The first-to-file provisions became effective on March 16, 2013. Thus, it is possible that another party will have filed on the same technology for which we are seeking patent protection before we have or will have filed and thus be able to obtain competing patent coverage or even preclude our ability to obtain such coverage. Accordingly, it is not yet clear what, if any, impact the Leahy-Smith Act will have on the operation of our business. The Leahy-Smith Act and its implementation could make it more difficult to obtain patent protection for our technology and could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of any patents we obtain, all of which could harm our business, results of operations and financial condition.

Court decisions can also have an impact on our intellectual property rights, including patent rights. The United States 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 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 future actions by the U.S. Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce any patents that we might obtain in the future.

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

The USPTO and various foreign patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions to maintain patent applications and issued patents. In addition, periodic maintenance fees and various other governmental fees on patents and patent applications often must be paid to the USPTO and foreign patent agencies over the lifetime of the patents or for the prosecution of patent applications. While an unintentional 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. Non-compliance 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 fail to maintain the patents and patent applications covering our products or procedures, we may not be able to stop a competitor from marketing products that are the same as or similar to our products, which would have a material adverse effect on our business.

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We may not be able to obtain or effectively enforce our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on AR101 or any of our product candidates in all countries throughout the world would be prohibitively expensive. Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. The requirements for patentability differ, in varying degrees, from country to country. The legal systems of some countries, particularly developing countries, do or may not favor the enforcement of patent and other intellectual property rights, especially those relating to life sciences. This could make it difficult for us to stop the infringement of any patents we obtain or the misappropriation of our other intellectual property rights. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Moreover, our ability to protect and enforce our intellectual property rights may be adversely affected by unforeseen changes in foreign intellectual property laws.

Proceedings to enforce our patent rights in foreign jurisdictions, regardless of whether successful, would result in substantial costs and divert our efforts and attention from other aspects of our business. Furthermore, while we intend to protect our intellectual property rights in our expected significant markets, we cannot ensure that we will be able to initiate or maintain similar efforts in all jurisdictions in which we may wish to market AR101 or any additional products. Accordingly, our efforts to protect our intellectual property rights in such countries may be inadequate, which may have an adverse effect on our ability to successfully commercialize our products in all of our expected significant foreign markets.

If we are unable to protect the confidentiality of our trade secrets and proprietary know-how or if competitors independently develop viable competing products, our business and competitive position may be harmed.

We rely on trade secrets and confidentiality agreements to protect our proprietary know-how and other confidential information related to our development processes and other elements of our technology for which patent protection may not be available or may be difficult to obtain or enforce. Although we require all of our employees to assign their inventions to us, and endeavor to execute confidentiality agreements with all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how and other confidential information related to such technology, we cannot be certain that we have executed such agreements with all parties who may have helped to develop our intellectual property or who had access to our proprietary information, nor can we be certain that our agreements will not be breached.

Monitoring unauthorized uses and disclosures is difficult, and we do not know whether the steps we have taken to protect our proprietary technologies will be effective. We cannot guarantee that our trade secrets and other proprietary and confidential information will not be disclosed or that competitors will not otherwise gain access to our trade secrets or other confidential or proprietary information. If any of the parties to these confidentiality agreements breaches or violates the terms of such agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result. Enforcing a claim that a third party illegally obtained and is using our trade secrets, like patent litigation, is expensive and time-consuming, and the outcome is unpredictable. Further, the laws of some foreign countries do not protect proprietary rights to the same extent or in the same manner as the laws of the United States. As a result, we may encounter significant problems in protecting and defending our intellectual property both in the United States and abroad.

Even if we are able to adequately protect our trade secrets and proprietary information, our trade secrets could otherwise become known or could be independently discovered by our competitors. Competitors could purchase our products and attempt to replicate some or all of the competitive advantages we derive from our development efforts, willfully infringe our intellectual property rights, design around our protected technology or develop their own competitive technologies that fall outside of our intellectual property rights. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, in the absence of patent protection, we would have no right to prevent them, or those to whom they communicate, from using that technology or information to compete with us. If our trade secrets are not adequately protected so as to protect our market against competitors’ products, our competitive position could be adversely affected, as could our business.

Risks Related to Our Common Stock

Our stock price may be volatile, and investors in our common stock could incur substantial losses.

The trading price of our common stock has been highly volatile and could be subject to wide fluctuations in response to various factors, including the following:

• results of, or delays in, our clinical trials;

• delays in our product development timelines;

• the number, size and type of additional clinical trials or studies that we choose to conduct or the FDA requires us to complete for AR101 and the cost and time of such trials and studies;

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• regulatory approval or our receipt of a complete response letter to AR101 and our other product candidates, or limitations to specific label indications or patient populations for its use, or changes or delays in the regulatory review process;

• severe adverse events in our trials, in any clinical trials with AR101 sponsored by collaborators or in our competitors’ trials as a result of exposure to the peanut allergen;

• announcements concerning our competitors or the pharmaceutical industry in general;

• therapeutic innovations or new products developed by us or our competitors;

• adverse actions taken by regulatory authorities with respect to our clinical trials, manufacturing supply chain or sales and marketing activities;

• changes or developments in laws or regulations applicable to AR101 and our other product candidates;

• any changes to our relationship with any manufacturers or suppliers;

• the success or failure of our efforts to acquire, license or develop additional product candidates;

• any intellectual property infringement actions in which we may become involved;

• achievement of expected product sales and profitability;

• manufacturing, supply or distribution delays or shortages;

• acquisitions or significant partnerships by us or our competitors;

• actual or anticipated fluctuations in our operating results;

• changes in financial estimates or recommendations by securities analysts;

• failure to meet financial projections that we or the investment community may provide;

• trading volume of our common stock;

• an inability to obtain additional funding;

• sales of our common stock by us, our executive officers and directors or our stockholders in the future;

• general economic and market conditions and overall fluctuations in the United States equity markets; and

• additions or departures of any of our key scientific or management personnel.

As a result of this volatility, investors may experience losses on their investment in our stock.

In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that may have been unrelated to the operating performance of the issuer. These broad market fluctuations may adversely affect the trading price or liquidity of our common stock. In the past, when the market price of a stock has been volatile, holders of that stock have sometimes instituted securities class action litigation against the issuer. If any of our stockholders were to bring such a lawsuit against us, we could incur substantial costs defending the lawsuit and the attention of our management would be diverted from the operation of our business, which could seriously harm our financial position. Any adverse determination in litigation could also subject us to significant liabilities.

If securities or industry analysts issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.

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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.

As of June 30, 2019, our executive officers, directors, holders of 5% or more of our capital stock and their respective affiliates beneficially owned 58% of our outstanding common stock. Therefore, these stockholders have the ability to influence us through this ownership position. These stockholders may be able to determine all 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 our stockholders may feel are in their best interest.

Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider favorable and may lead to entrenchment of management.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could significantly reduce the value of our shares to a potential acquirer or delay or prevent changes in control or changes in our management without the consent of our board of directors. The provisions in our charter documents include the following:

• a classified board of directors with three-year staggered terms, which may delay the ability of stockholders to change the membership of a majority of our board of directors;

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

• the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of the board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

• the required approval of at least 66 ²⁄₃% of the shares entitled to vote to remove a director for cause, and the prohibition on removal of directors without cause;

• the ability of our board of directors to authorize the issuance of shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquiror;

• the ability of our board of directors to alter our bylaws without obtaining stockholder approval;

• the required approval of at least 66 ²⁄₃% of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylaws or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors;

• a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

• the requirement that a special meeting of stockholders may be called only by the chairman of the board of directors, the chief executive officer, the president or the board of directors, which may delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; and

• advance notice procedures that stockholders must comply with in order to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain control of us.

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

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

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Our amended and restated 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 amended and restated 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 amended and restated certificate of incorporation or our amended and restated 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.

As a California-domiciled public company, if we fail to attract and retain women to serve on our board of directors, we could incur penalties.

Our success depends in part on our continued ability to attract, retain and motivate highly qualified individuals to our board of directors. As a public company headquartered in California, we are required to have at least one woman on our board of directors by the end of 2019, and two or three women on our board by the end of 2021, depending on the size of our board at the time.  While we currently have two women on our board and intend to continue to comply with this California law, recruiting and retaining board members carries uncertainty, and failure to comply with this requirement could result in financial penalties.

We provide broad indemnity to our directors and officers. Claims for such indemnification may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of money available to us.

Our amended and restated certificate of incorporation and amended and restated bylaws provide that we will indemnify our directors and officers, in each case to the fullest extent permitted by Delaware law. In addition, as permitted by Section 145 of the Delaware General Corporation Law, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:

• We will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the registrant and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.

• We may, in our discretion, indemnify employees and agents in those circumstances where indemnification is permitted by applicable law.

• We are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.

• We will not be obligated pursuant to our amended and restated bylaws to indemnify a person with respect to proceedings initiated by that person against us or our other indemnitees, except with respect to proceedings authorized by our board of directors or brought to enforce a right to indemnification.

• The rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.

• We may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to directors, officers, employees and agents.

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Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a greater than 50 percentage point change (by value) in its equity ownership over a rolling three-year period, the corporation’s ability to use its pre-change net operating loss, or NOL, carryforwards to offset its post-change taxable income may be limited. Limitations may also apply to the utilization of other pre-change tax attributes as a result of an ownership change. As of December 31, 2018, we had generated NOL carryforwards for federal income tax purposes of $326.4 million and for California income tax purposes of $12.0 million. These federal and California NOL carryforwards will begin to expire in 2031, if not utilized. Following the equity investment by Nestlé Health Science in November 2016, we performed a Section 382 analysis and determined that we experienced multiple ownership changes under Section 382 of the Code prior to December 31, 2017. Such annual limitations could affect the utilization of NOL and tax credit carryforwards in the future. We experienced no significant permanent losses of tax attributes due to these ownership changes.

In addition, we may experience more ownership changes under Section 382 of the Code as a result of future changes in our stock ownership, some of which may be outside our control. As a result, our ability to utilize NOL carryforwards or other tax attributes, such as research tax credits, in any taxable year may be further limited.

We do not currently intend to pay dividends on our common stock, and, consequently, our stockholders’ ability to achieve a return on their investment will depend on appreciation in the price of our common stock.

We do not currently intend to pay any cash dividends on our common stock for the foreseeable future. We currently intend to invest our future earnings, if any, to fund our growth. Since we do not intend to pay dividends, our stockholders’ ability to receive a return on their investment in our common stock will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which our holders have purchased it.

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

a) Sales of Unregistered Securities

None.

b) Use of Proceeds

None.

c) Repurchases of Shares or of Company Equity Securities

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

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Item 6. Exhibits

a) Exhibits

			Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
3.1	Amended and Restated Certificate of Incorporation of Aimmune Therapeutics, Inc.	8-K	8/11/2015	3.1
3.2	Amended and Restated Bylaws of Aimmune Therapeutics, Inc.	8-K	8/11/2015	3.2
4.1	Reference is made to exhibits 3.1 through 3.2.
4.2	Form of Common Stock Certificate.	S-1/A	7/27/2015	4.2
4.3	Amended and Restated Investors’ Rights Agreement, dated January 20, 2015, by and among Aimmune Therapeutics, Inc. and the investors listed therein.	S-1	7/6/2015	10.1
4.4	Amended and Restated Registration Rights Agreement, dated November 11, 2018, by and between the Company and Nestle Health Science US Holdings, Inc.	10-K	2/28/2019	4.4
4.5	Amended and Restated Standstill Agreement, dated November 11, 2018, by and between the Company and Nestle Health Science US Holdings, Inc.	10-K	2/28/2019	4.5
10.1(a)#	2015 Equity Incentive Annual Plan.	S-8	8/11/2015	99.2(a)
10.1(b)#	Form of Stock Option Grant Notice and Stock Option Agreement under the 2015 Equity Incentive Annual Plan.	S-1/A	7/27/2015	10.6(b)
10.1(c)#	Form of Restricted Stock Award Agreement and Restricted Stock Unit Award Grant Notice under the 2015 Equity Incentive Annual Plan.	S-1/A	7/27/2015	10.6(c)
10.3#	Aimmune Therapeutics, Inc. Employee Stock Purchase Plan.	S-8	8/11/2015	99.3
10.3#	Non-Employee Director Compensation Program.	10-K	2/28/2019	10.18
10.4#	Aimmune Therapeutics, Inc. Corporate Bonus Plan.	8-K	2/25/2016	10.1
10.5†	Commercial Supply Agreement, dated May 10, 2019, by and between CoreRx, Inc. and Aimmune Therapeutics, Inc.				X
10.6#	Letter Agreement, dated June 13, 2019, by and between the Company and Stephen G. Dilly, M.B.B.S., Ph.D				X
10.7	Office Lease dated February 23, 2015, by and between, the Company, Diamond Marina LLC and Diamond Marina II LLC in June 2019				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 Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				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 Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.				X
32.1**	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.				X

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			Incorporated by Reference
Exhibit Number	Exhibit Description	Form	Date	Number	Filed Herewith
101.INS	XBRL Instance Document -the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	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

† Portions of this exhibit (indicated by asterisks) have been omitted pursuant to Regulation S-K, Item 601(b)(10). Such omitted information is not material and would likely cause competitive harm to the registrant if publicly disclosed. Additionally, schedules and attachments to this exhibit have been omitted pursuant to Regulation S-K, Item 601(a)(5).  

# Indicates management contract or compensatory plan.

** The certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the SEC and is not to be incorporated by reference into any filing of Aimmune Therapeutics, 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 this Form 10-Q, irrespective of any general incorporation language contained in such filing.

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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.

	Aimmune Therapeutics, Inc.
Date: August 8, 2019	By:	/s/ Jayson Dallas
		Jayson Dallas, M.D.
		President and Chief Executive Officer
		(Principal Executive Officer)
	Aimmune Therapeutics, Inc.
Date: August 8, 2019	By:	/s/ Eric H. Bjerkholt
		Eric H. Bjerkholt
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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EX-10.5

[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10).  Such excluded information is not material and would likely cause competitive harm to the registrant if publicly disclosed.

Exhibit 10.5

COMMERCIAL SUPPLY AGREEMENT

By and Between

CORERX, INC.

and

AIMMUNE THERAPEUTICS, INC.

May 10, 2019

Table of Contents

ARTICLE 1: DEFINITIONS			5
ARTICLE 2: PROCESSING; SALE AND PURCHASE OF PRODUCT			16
	2.1	Processing.	16
	2.2	CoreRx Responsibilities.	17
	2.3	Aimmune Responsibilities.	18
ARTICLE 3: COORDINATORS & MEETINGS			19
ARTICLE 4: EQUIPMENT; CORERX FACILITY; PEANUT FLOUR; RAW MATERIALS; ARTWORK			19
	4.1	Equipment.	19
	4.2	Facilities.	19
	4.3	Peanut Flour and Aimmune Materials.	20
	4.4	Raw Materials.	23
	4.5	Artwork.	23
ARTICLE 5: REPRESENTATIONS, WARRANTIES & COVENANTS; SPECIFICATION CHANGES; QUALITY AGREEMENT			23
	5.1	Representations, Warranties and Covenants of CoreRx.	23
	5.2	Representations and Warranties by Aimmune.	24
	5.3	Mutual Representations and Warranties.	25
	5.4	Limitations.	26
	5.5	Specification Changes.	26
	5.6	Quality Agreement.	26
	5.7	Duty of Cooperation.	27
ARTICLE 6: MINIMUM COMMITMENT PERCENTAGE; FORECASTS; FIRM COMMITMENTS			27
	6.1	Minimum Manufacturing Commitment Percentage.	27
	6.2	Minimum Testing Commitment Percentage.	28
	6.3	Forecast.	29

(i)

	6.4	Firm Manufacturing Commitment.	29
	6.5	Firm Testing Commitment.	30
	6.6	Second Source Supplier.	31
ARTICLE 7: PURCHASE OF PRODUCT; DELIVERIES; ADDITIONAL WORK			31
	7.1	Purchase Orders.	31
	7.2	Delivery Timing.	33
	7.3	Delivery Shortfall / Overage.	34
	7.4	Delivery Terms.	34
	7.5	Product Storage.	35
	7.6	Additional Work.	35
ARTICLE 8: RELEASE TESTING; ACCEPTANCE AND REJECTION; NON-CONFORMITY; LATENT DEFECT; DEFECTIVE PRODUCT			35
	8.1	Disposition for Release; Release Testing; Timely Delivery.	35
	8.2	Acceptance and Rejection; Non-conformity; Latent Defect; Defective Product.	36
ARTICLE 9: PRICE; TAXES; INVOICES; METHOD OF PAYMENT; ANNUAL RECONCILIATION			38
	9.1	Product Price Schedule; Release Testing Price Schedule.	38
	9.2	Taxes.	39
	9.3	Invoices.	39
	9.4	Payment Procedure.	40
	9.5	Monthly Reporting.	40
	9.6	Inventory and Physical Asset Counts.	40
ARTICLE 10: RECORDS; AUDITS; REGULATORY MATTERS; RECALLS			40
	10.1	Production Records.	40
	10.2	Recordkeeping.	40
	10.3	Quality Audits and Inspections.	41
	10.4	Representatives for Inspection of Processing and Release Testing.	41

(ii)

	10.5	Governmental Inspections and Requests.	42
	10.6	Quality Agreement.	43
	10.7	Recall.	43
ARTICLE 11: QUALIFICATION/VALIDATION; PLI READINESS			44
	11.1	Qualification.	44
	11.2	PLI Readiness.	44
ARTICLE 12: TERM; TERMINATION			44
	12.1	Initial Term.	44
	12.2	Renewal Term.	45
	12.3	Termination by Mutual Agreement.	45
	12.4	Termination for Default.	45
	12.5	Regulatory.	46
	12.6	Bankruptcy; Insolvency.	46
	12.7	Low Yield.	46
	12.8	Unilateral Termination by Aimmune.	47
	12.9	Expiration; Termination; Consequences.	47
ARTICLE 13: INDEMNIFICATION			49
	13.1	Indemnification by Aimmune.	49
	13.2	Indemnification by CoreRx.	50
	13.3	Indemnification Procedures.	50
	13.4	Survival of Indemnification Obligations.	51
	13.5	Limitation of Liability.	51
ARTICLE 14: CONFIDENTIALITY			52
	14.1	Confidentiality and Non-Use.	52
	14.2	Access to Confidential Information.	52
	14.3	Exceptions to Confidential Information.	52
	14.4	Return.	53

(iii)

	14.5	Enforcement.	53
	14.6	Permitted Disclosures.	53
	14.7	Confidentiality of Agreement.	54
ARTICLE 15: INTELLECTUAL PROPERTY			55
	15.1	Background IP.	55
	15.2	Work Product and Agreement Inventions.	55
	15.3	Licenses to Perform under this Agreement.	55
	15.4	No Third Party IP.	56
ARTICLE 16: FORCE MAJEURE			56
	16.1	Effects of Force Majeure.	56
ARTICLE 17: PRESS RELEASES; USE OF NAMES			56
			56
	17.1	Press Releases.	56
	17.2	Use of Names.	57
ARTICLE 18: DISPUTE RESOLUTION			57
	18.1	Dispute Resolution.	57
ARTICLE 19: MISCELLANEOUS			58
	19.1	Independent Contractors.	58
	19.2	Insurance.	58
	19.3	Further Actions.	60
	19.4	Assignment; Subcontractors.	60
	19.5	Waiver.	60
	19.6	Severability.	61
	19.7	Headings.	61
	19.8	Construction.	61
	19.9	Exhibits, Schedules and Attachments.	61
	19.10	Notices.	62
	19.11	Counterparts.	63

(iv)

19.12	Governing Law; Entire Agreement.	63
19.13	Schedules.	63

(v)

COMMERCIAL SUPPLY AGREEMENT

THIS COMMERCIAL SUPPLY AGREEMENT is made effective as of this 10th day of May, 2019 (the “Effective Date”), by and between AIMMUNE THERAPEUTICS, INC., a corporation organized under the laws of the State of Delaware and having a place of business at 8000 Marina Boulevard, Suite 300, Brisbane, CA 94005, and/or any of its Affiliates as may become a Party or a subsequent assignee to this Agreement (collectively, “Aimmune”) and CORERX, INC., a corporation organized under the laws of the State of Florida and having a place of business at 14205 Myerlake Circle, Clearwater, FL 33760 (“CoreRx”) (each individually a “Party” and collectively the “Parties”).

W I T N E S S:

WHEREAS, Aimmune wishes to distribute commercially its proprietary pharmaceutical product known as AR101 for human use; and

WHEREAS, CoreRx has the experience, expertise, facilities, personnel and capacity necessary to perform clinical phase and commercial drug product development, including but not limited to equipment/facility qualification, manufacturing, process validation, analytical development, analytical method validation, analytical testing, quality assurance and supply services for Aimmune to enable Aimmune to distribute AR101 for sale; and

WHEREAS, Aimmune desires CoreRx to perform such services and to manufacture and supply AR101 to Aimmune; and CoreRx desires to perform such services and to manufacture and supply AR101 to Aimmune, all on the terms and conditions set forth in this Agreement.

NOW, THEREFORE, in consideration of the mutual covenants and promises set forth herein, the Parties agree as follows:

ARTICLE 1:   DEFINITIONS

The following terms, whether used in the singular or plural, shall have the meanings assigned to them below for purposes of this Agreement:

1.1 “Acquisition Cost” shall mean the actual invoiced price paid by either Party to any Third Party for acquiring Peanut Flour or Raw Materials hereunder, including, but not limited to, shipping and handling costs and customs duties incurred and paid by such Party to any Third Party in connection with the acquisition of Peanut Flour or Raw Materials, as the case may be.

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1.2 “Affiliate” shall mean any entity that directly or indirectly controls, is controlled by, or is under common control with a Party where control means the direct or indirect ownership of voting securities entitled to cast at least fifty percent (50%) of the votes in the election of directors, or such other relationship as results in the power to control the management, business, assets and affairs of an entity.

1.3 “Agreement” shall mean this Commercial Supply Agreement.

1.4 “Agreement Inventions” shall mean all Inventions [***] related to the Product or the Processing and Release Testingof the Product conceived, reduced to practice, discovered or made by CoreRx, either alone or with Aimmune or with any other person, in each case solely under this Agreement, and all copies and tangible embodiments thereof (in whatever form or medium).

1.5 “Aimmune Background IP” shall mean all Background IP owned or controlled by Aimmune or its Affiliates.

1.6 “Aimmune Materials” shall mean any samples or other tangible materials, including without limitation Peanut Flour, provided by Aimmune or on behalf of Aimmune to CoreRx for Processing under this Agreement.

1.7 “Annual Lot Forecast” shall mean the total number of Lots for a Contract Year as set forth in the first Forecast of each Contract Year.

1.8 “Applicable Laws” shall mean all laws, rules, regulations, ordinances, guidance, guidelines, and standards, within the countries of the Territory applicable to the Processing, Release Testing and supply of Product, including, without limitation, (i) all applicable federal, state and local laws and regulations of each country of the Territory; (ii) the rules of and regulations of applicable Regulatory Authorities, (iii) cGMP; and (iv) Environmental Laws.

1.9 “Artwork” shall have the meaning set forth in Section 4.5 hereof.

1.10 “Background IP” shall mean any Intellectual Property owned or controlled by a Party or its Affiliates prior to the Effective Date or otherwise developed independently by a Party or its Affiliates outside the scope of the MSA or this Agreement without use of the other Party’s Confidential Information.

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1.11 “Batch Record” shall mean an accurate reproduction of the master batch record documenting and providing instructions for those parts of Processing comprising themanufacturing steps required to convert the Peanut Flour and Raw Materials into the Bulk Product, and/or holding of a particular Lot of Product.

1.12 “BLA” shall mean the biologics license application submitted to the FDA by Aimmune relating to Product, and any supplements or amendments to such BLA as may be filed during the Term hereof.

1.13 “Bulk Product” shall mean Product Lots packaged in bulk drums or containers.

1.14 “Bulk Yield” shall mean the yield of Acceptable Units of Bulk Product resulting from utilizing a quantity of Peanut Flour to produce such Bulk Product.

1.15 “cGMP” or “cGMP Regulations” shall mean the regulatory requirements for current good manufacturing practices with respect to the Processing, storage and Release Testingof Bulk Product under this Agreement, including (as applicable): the United States current Good Manufacturing Practices pursuant to the FDCA and pursuant to the relevant regulations found in Title 21 of the U.S. Code of Federal Regulations (including Parts 11, 210, 211, 610 and 611), the European Union’s current Good Manufacturing Practices pursuant to EC Directive 2003/94/EC of 8 October 2003, and the International Conference on Harmonisation Guidance for Industry, as applicable, including Q7 Good Manufacturing Practice Guidance for Active Pharmaceutical Ingredients, in the case of Q7 as applicable to the activities carried out by CoreRx under this Agreement, and any comparable regulatory requirements designated by the Parties in a Purchase Order, as such regulatory requirements may be amended from time to time.

1.16 “Commercial Facility” shall mean the portion of the Facility that is to be used to carry out the manufacturing steps required to convert the Peanut Flour and Raw Materials into the Bulk Product for Processing of the Bulk Product and is located at 5733 Myerlake Circle, Clearwater, Florida, as described in more detail in Schedule E.

1.17 “Confidential Information” shall mean any and all technical, business or other Information, of a Party or its Affiliates provided orally, visually, in writing, graphically, electronically, by observation or in another form by or on behalf of such Party or its Affiliates to the other Party or its Affiliates in connection with this Agreement, including the terms of this Agreement, the Product, any know-how with respect thereto developed by or on behalf of the Disclosing Party or its Affiliates, or the scientific, regulatory or business affairs or other activities of the Disclosing Party or its Affiliates.

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1.18 “Contract Year” shall, except in Contract Year one (1), mean each twelve (12) month period during the Term of this Agreement, commencing on January 1^st and ending on the following December 31^st. Contract Year one (1) shall mean that period, beginning on the Effective Date, and ending on December 31, 2019.

1.19 “Coordinators” shall have the meaning set forth in Article 3 hereof.

1.20 “Core Parameters” shall mean those “core” parameters for Peanut Flour set forth in Schedule F hereof, as may be revised from time to time by the mutual written agreement of the Parties.

1.21 “CoreRx Background IP” shall mean all Background IP owned or controlled by CoreRx or its Affiliates as of the Effective Date and during the Term, including but not limited to all Inventions developed by CoreRx in connection with other projects or its own process improvements or other Inventions independent of this Agreement that are not Agreement Inventions.

1.22 “CoreRx Maximum Capacity” shall mean CoreRx’s annual maximum commercial production capacity in the Commercial Facility set forth in Schedule G.

1.23 “Defective Product” shall mean Product that possesses a Non-conformity and/or a Latent Defect.

1.24 “Delivery Date” shall mean a date for which delivery of Product is stated in a Purchase Order.

1.25 “Disclosing Party” shall have the meaning set forth in Section 14.1 hereof.

1.26 “Discharge” shall mean any release, spill, emission, leaking, pumping, pouring, injection, escaping, deposit, disposal, discharge, dispersal, dumping, leaching or migration of any Hazardous Material into or through the indoor or outdoor environment (including the abandonment or disposal of any barrels, containers or other closed receptacles containing any Hazardous Material).

1.27 “Disposition(ed) for Release” shall mean formal approval indicating suitability of the Product for release to Aimmune, as evidenced by CoreRx or a designated Third Party performing Release Testing, CoreRx issuing a Certificate of Analysis and generating a Certificate of Compliance (as such terms are defined in the Quality Agreement) provided to Aimmune by CoreRx, all as provided in greater detail under the Quality Agreement.

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1.28 “Dosage Strength” shall means the amount of Peanut Flour expressed as mg peanut protein in a capsule or sachet of Product.

1.29 “Effective Date” shall have the meaning set forth in the first paragraph of this Agreement.

1.30 “Environmental Laws” shall mean all Applicable Laws that regulate or relate to the protection or clean-up of the environment, the use, treatment, storage, transportation, generation, Processing, Release Testing, processing, distribution, handling, labeling or disposal of, or emission, discharge or other Discharge or threatened Discharge of, or exposure to, Hazardous Materials or otherwise dangerous substances, wastes, pollution or materials (whether, gas, liquid or solid), the preservation or protection of waterways, groundwater, drinking water, air, wildlife, plants or other natural resources, or the health and safety of persons or property, including without limitation protection of the health and safety of employees. Environmental Laws shall include, without limitation, the Federal Insecticide, Fungicide, Rodenticide Act, Resource Conservation & Recovery Act, Clean Water Act, Safe Drinking Water Act, Atomic Energy Act, Occupational Safety and Health Act, Toxic Substances Control Act, Clean Air Act, Comprehensive Environmental Response, Compensation and Liability Act, Emergency Planning and Community Right-to-Know Act, Hazardous Materials Transportation Act and all analogous or related federal, state or local laws, each as amended.

1.31 “Equipment” shall have the meaning set forth in Section 4.1.1 hereof.

1.32 “Equipment Maintenance Schedule” shall have the meaning set forth in Section 4.1.1 hereof.

1.33 “EMA” shall mean the European Medicines Agency, or any successor agency.

1.34 “Executed Batch Record” shall mean the executed manufacturing instructions containing the complete documentation of all activities and measurements associated with production of a Lot of Bulk Product.

1.35 “Expected Bulk Yield” shall have the meaning set forth in Section 4.3.3 hereof.

1.36 “Facility” shall mean the manufacturing facility located at 5733 Myerlake Circle, Clearwater, Florida, which is [***] and which comprises the ML3 Facility (which includes the Warehouse) and the Commercial Facility.

1.37 “FDCA” shall mean the United States Federal Food, Drug, and Cosmetic Act, as amended (21 U.S.C. Sec. 301 et seq.), relevant regulations promulgated thereunder (including, without limitation, 21 C.F.R. parts 11, 210 and 211) and all applicable FDA guidelines, guidance documents and other administrative interpretations and rulings, as may be amended from time to time.

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1.38 “FDA” shall mean the United States Food and Drug Administration, or any successor entity.

1.39 “Firm Manufacturing Commitment” shall mean the binding Forecast defined in Section 6.4 hereinafter.

1.40 “Firm Testing Commitment” shall mean the binding Forecast defined in Section 6.5 hereinafter.

1.41 “Forecast” shall mean the forecast defined in Section 6.3.1 hereinafter.

1.42 “For Cause Audit” shall have the meaning set forth in Section 10.3 hereof.

1.43 “Hazardous Materials” shall mean any material, substance or waste that is listed, classified, regulated, characterized or otherwise defined as “hazardous,” “toxic,” “radioactive,” a “pollutant, or “contaminant” (or words of similar intent or meaning) under applicable Environmental Law.

1.44 “Information” shall mean all technical, scientific, business and other know-how and information, Inventions, discoveries, trade secrets, knowledge, technology, means, methods, processes, formulations, practices, formulae, instructions, skills, techniques, procedures, experiences, expressed ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results, materials (including biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical), pre-clinical, clinical, safety, manufacturing and quality control data and information (including study designs and protocols) and assays and biological methodology, in each case, whether or not confidential, proprietary or patentable and in written, oral, electronic or any other form now known or hereafter developed.

1.45 “Initial Term” shall have the meaning set forth in Section 12.1 hereof.

1.46 “Intellectual Property”shall mean (i) know-how and trade secrets, (ii) all Inventions (whether patentable or unpatentable and whether or not reduced to practice) and all Patent Rights thereof, (iii) all copyrightable works, all copyrights, and all applications, registrations and renewals in connection therewith, (iv) trademarks, service marks, trade dress, logos, trade names, and corporate names, together with all translations, adaptations, derivations, and combinations thereof and including all goodwill associated therewith, and (v) all other proprietary rights.

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1.47 “In-Process Materials” shall mean combinations of one or more Raw Materials with Peanut Flour that have not been completely processed to Bulk Product.

1.48 “In-Process Testing” shall mean all testing activities of In-Process Materials performed during the Processing to ensure that such In-Process Materials conform to in-process specifications.

1.49 “Invention”shallmean any composition of matter, device, process, method, technique, procedure, protocol, treatment, formulation, discovery, know-how, concept or idea, or any improvement thereof, whether patentable or not, or subject to copyright or not.

1.50 “Latent Defect” shall mean a Non-conformity that was (i) not reasonably discoverable within the period specified in Section 8.2.1 using the quality control procedures outlined in the Product Specifications or the Quality Agreement; (ii) are attributable to CoreRx’s Processing or Release Testing; and (iii) could not reasonably been deemed to have: (a) been caused by use of Peanut Flour that did not meet the Core Parameters, or (b) occurred after delivery of Product to the carrier.

1.51 “Losses” shall have the meaning set forth in Section 13.1 hereof.

1.52 “Lot” shall mean a single Lot of Bulk Product having uniform character and quality within specified limits, is Processed according to a single manufacturing order during the same cycle of manufacture and is of a specific quantity, all as specifically set forth in Schedule D.

1.53 “MAA” shall mean the marketing authorization application submitted to the EMA by Aimmune relating to Product, and any supplements or amendments to such MAA as may be filed during the Term hereof.

154 “Minimum Manufacturing Commitment Percentage” shall have the meaning set forth in Section 6.1 hereof.

1.55 “Minimum Testing Commitment Percentage” shall have the meaning set forth in Section 6.2 hereof.

1.56 “ML3 Facility” shall mean that portion of the Facility located at 5733 Myerlake Circle, Clearwater, Florida, which, [***] and which includes the Warehouse.

1.57 “[***] Manufacturing Firm Amount” shall have the meaning set forth in Section 6.4.1 hereof.

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1.58 “[***]Testing Firm Amount” shall have the meaning set forth in Section 6.5.1hereof.

1.59 “MSA” shall mean the Master Services Agreement between Aimmune and CoreRx dated November 29, 2016.

1.60 “Non-conformity” shall mean a defect or circumstance(s) that causes Bulk Product not to satisfy the warranties set forth in Section 5.1.2.

1.61 “Non-Routine Maintenance Activities” shall mean all non-routine maintenance activities necessary or useful to maintaining, pursuant to this Agreement, the Equipment and Commercial Facility and the Warehouse [***] in good working order, including without limitation the following activities: [***].

1.62 “Order Shortfall” shall have the meaning set forth in Section 9.3.2 hereof.

1.63 “Order Shortfall Amount” shall have the meaning set forth in Section 9.3.2 hereof.

1.64 “Order Shortfall Payment” shall have the meaning set forth in Section 9.3.2 hereof.

1.65 “Order Shortfall Penalty” shall mean $[***] per Lot.

1.66 “Patent Rights” shall mean (a) patents and patent applications anywhere in the world, (b) all divisionals, continuations, continuations in-part thereof or any other patent application claiming priority, or entitled to claim priority, directly or indirectly to (i) any such patents or patent applications, or (ii) any patent or patent application from which such patents or patent applications claim, or is entitled to claim, direct or indirect priority, and (c) all patents issuing on any of the foregoing anywhere in the world, together with all registrations, reissues, re-examinations, patents of addition, renewals, substitutions, validations, and re-validations, supplemental protection certificates or extensions of any of the foregoing anywhere in the world, and (d) all provisional and any other priority patent applications filed worldwide.

1.67 “PLI” shall mean any pre-licensing or pre-approval inspection by any Regulatory Authority.

1.68 “Peanut Flour” shall mean the peanut flour used to produce Product under this Agreement.

1.69 “Peanut Flour Specification” shall mean the specification for the Peanut Flour set forth in the Quality Agreement, as such specification may be revised from time to time by Aimmune with prior written notice to CoreRx.

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1.70 “Pricing Tier” shall have the meaning set forth in Schedule A of this Agreement.

1.71 “Process”, “Processed”, or “Processing” shall mean the conduct of the procedure(s) described in Schedule B.

1.72 “Process Requirements “shall have the meaning set forth in Section 5.7 hereof.

1.73 “Producer Price Index (PPI)” means the index known as the United States Bureau of Labor Statistics, Producer Price Index, Pharmaceutical Preparation Manufacturing (Series ID: PCU325412325412), not seasonally adjusted, as it appears in the periodical PPI Detailed Report as published for the region in which the Facility is located, or a comparable successor index. Any PPI adjustment to pricing under Section 9.1.2 will be capped at [***]% per year. Notwithstanding the foregoing, if CoreRx reasonably determines that its costs will exceed the [***]% cap per year, then CoreRx and Aimmune agree to negotiate in good faith to revise the cap for the relevant period.

1.74 “Product” shall mean AR101 in bulk, capsule or sachet dosage form resulting from Processing Peanut Flour and Raw Materials, in accordance with the Batch Record.

1.75 “Product Approval” shall mean the approval of Product by the FDA or the EMA.

1.76 “Product Price” shall mean the price for Processing of Bulk Product as set forth in Schedule A, as applicable, attached hereto and made a part hereof, as such price may be amended from time to time in accordance with this Agreement.

1.77 “Product Specification” shall mean the specifications for the Product set forth in the Quality Agreement, including any test methods and in-process specifications relating thereto, as such specifications may be amended from time to time by mutual written agreement of the Parties.

1.78 “Production Records” shall mean all documentation pertaining to the manufacture and testing of a completed Lot of Bulk Product, including but not limited to Executed Batch Records, sampling documentation, test results and raw data for all Raw Material testing, Peanut Flour testing, In-Process Materials testing, and Bulk Product Release Testing performed at CoreRx or its contract laboratories and related OOS results and other quality incidents, investigative reports, deviations reports, and all applicable manufacturing process data (including any pertinent output from instrumentation and all documentation of cleaning performed in association with manufacture of the previous product in the equipment to be used for manufacture of Product or performed following installation, maintenance, or cleaning expiration of equipment to be used for manufacture of Product.

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1.79 “Purchase Order” shall mean a firm purchase commitment detailing the Bulk Product quantity and required Delivery Dates, as further described in Section 7.1.

1.80 “Qualified Lot” shall mean a Lot produced by CoreRx that (a) will conform to the Product Specifications, as then in effect, and will have been Processed in accordance with the master Batch Record; (b) will have been Processed in accordance with cGMP Regulations and the Quality Agreement (c) is free from any deviation, special sampling requirement or other assignable cause that results in a lower than anticipated Bulk Yield for such Lot.

1.81 “Quality Agreement” shall mean the Quality Agreement of even date herewith (including all schedules and appendices attached thereto), as further defined in Section 5.6 and setting forth the guidelines and responsibilities of the Parties in connection with the Product as they are related to quality control, quality assurance, In-Process Testing, qualification, validation, and Disposition for Release, and authorization for shipment, as such Quality Agreement may be amended from time to time by the Parties in accordance with the terms thereof.

1.82 “Raw Materials” shall mean all the materials, supplies, components, and packaging, including empty capsule shells and sachet foil laminate, but excluding Peanut Flour, required to Process the Bulk Product in accordance with the Product Specifications and as listed on Aimmune’s Regulatory Applications for the Product.

1.83 “Raw Material Specifications” shall mean the specifications relating to the Raw Materials outlined in Aimmune’s Regulatory Applications for the Product, including any test methods relating thereto, as provided by CoreRx and approved in advance in writing by Aimmune.

1.84 “Recall” shall have the meaning set forth in Section 10.7.1 hereof.

1.85 “Receiving Party” shall have the meaning set forth in Section 14.1 hereof.

1.86 “Regulatory Application” shall mean, for a particular country or Regulatory Authority, an application or other submission by Aimmune or its Affiliate for Regulatory Approval, or for approval or permission to conduct human clinical trials (as applicable), by the applicable Regulatory Authority regarding the Product.

1.87 “Regulatory Approval” shall mean, for a particular country or Regulatory Authority, all approvals from the applicable Regulatory Authority required for the commercial marketing or sales of a pharmaceutical product in such country, along with satisfaction of any related applicable regulatory requirements.

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1.88 “Regulatory Authority” shall mean any governmental regulatory authority within a country of the Territory involved in regulating any aspect of the development, manufacture, market approval, sale, distribution, packaging or use of drug products, including, but not limited to, the FDA, Health Canada, the Medicines and Healthcare Products Regulatory Agency, Swissmedic, the Therapeutic Goods Administration and the EMA.

1.89 “Release Test”, “Release Tested”, “Release Testing” shall mean the conduct of the procedure(s) described in Schedule B, including, but not limited to, release testing and analysis of Bulk Product or the conduct of analytical testing of Peanut Flour in accordance with the Peanut Flour Specification, as applicable, all of the foregoing in accordance with the Quality Agreement, any Applicable Laws, and the Product Specifications.

1.90 “Renewal Term” shall have the meaning set forth in Section 12.2 hereof.

1.91 “[***]” shall have the meaning set forth in [***].

1.92 “Routine Maintenance Activities” shall mean all routine maintenance activities necessary or useful to maintaining the Equipment, Commercial Facility and the Warehouse (and those activities related to the ML3 Facility to the extent necessary or useful for the Processing and Testing of Bulk Product and usage of the Commercial Facility and the Warehouse) in good working order as further defined in section 4.1.3, including without limitation the following activities:  [***].

1.93 “Supplier Readiness Fee” shall mean [***] expenses reasonable and necessary for the storage, Processing and Testing of Bulk Product at the Commercial Facility for a single calendar quarter as required under this Agreement and the Quality Agreement, as set forth in Schedule A.

1.94 “Term” shall have the meaning set forth in Section 12.2 hereof.

1.95 “Territory” shall mean the United States, Canada, the European Union, including the United Kingdom (whether or not the United Kingdom is a member of the European Union), Norway, Switzerland and Australia, and any other country or countries identified by Aimmune in a written notice provided to CoreRx at least [***] ([***]) months prior to the date that Aimmune intends for such country or countries to be included within the Territory. Any reasonable costs for upgrades or licenses required to meet the requirements of any new Territory that CoreRx does not already supply to will be paid for in accordance with Section 4.2.3 hereof.

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1.96 “Testing” shall mean, collectively, all In-Process Testing and Release Testing activities.

1.97 “Testing Facility” shall have the meaning set forth in Section 4.2.3 hereof.

1.98 “Third Party” shall mean any Party other than Aimmune, CoreRx and their respective Affiliates.

1.99 “Unit” shall mean the specified quantity of Product expressed as a number of capsules or sachets, as the case may be.

1.100 “Unit Cost” for a Dosage Strength shall mean its Product Price as set forth in Schedule A.

1.101 “Warehouse” shall mean that portion of the ML3 Facility that is being used by the Parties to receive, sample, and store (separate from other Third-Party materials) incoming Raw Materials, ship Bulk Product, and store QA retain samples.

1.102 “Work Product” shall mean all deliverables (other than Product), Information, documents, Production Records (e.g., executed Batch Records, analytical raw data, environmental monitoring data, etc.) or materials, including without limitation any analytical methods, plans, works of authorship, techniques, manufacturing instructions  and processes, product formulations and operating procedures, test procedures, cleaning procedures, and all other scientific or technical information or materials whether in written, graphic, or electronic form, developed, edited or otherwise created by during the Term by CoreRx or its subcontractors, or jointly by CoreRx or its subcontractors and Aimmune and which is [***] related to Processing and Testing of the Product.

1.103 “[***]” shall have the meaning set forth in [***].

ARTICLE 2:   PROCESSING; SALE AND PURCHASE OF PRODUCT

2.1 Processing.

During the Term of this Agreement, CoreRx shall perform the Processing and provide the Product in accordance with the applicable Purchase Order, Product Specifications, the Applicable Laws and the terms and conditions of this Agreement and the Quality Agreement, including all Schedules hereto and thereto, subject to responsibilities of Aimmune outlined in Section 2.3.  Aimmune and its Affiliates shall purchase the Bulk Product from CoreRx in accordance with the terms and conditions of this Agreement for the Product Price as set forth in Schedule A. CoreRx shall Process the Bulk Product at the Commercial Facility and any other CoreRx manufacturing facility that is approved in advance in writing by Aimmune. The specific quantities that CoreRx is obligated to supply, and which Aimmune is obligated to purchase, shall be determined in accordance with Section 6.1 hereinafter.

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2.2 CoreRx Responsibilities.

CoreRx’s responsibilities include the following (without limitation), all to be performed in accordance with the terms and conditions of this Agreement and in accordance with Applicable Laws:

2.2.1 maintaining all required registrations or licenses with applicable Regulatory Authorities per Section 4.2.3, such as but not limited to, the FDA, and any other Federal, state or local agencies so that CoreRx can perform its obligations as set forth in this Agreement and CoreRx will promptly, within [***] ([***]) [***], notify Aimmune if any such registrations or licenses lapse or when it determines that it is not in compliance with the requirements for maintaining such registrations or licenses;

2.2.2 operating in accordance with the Quality Agreement and being responsible for all items designated as its responsibility on the Quality Agreement;

2.2.3 reasonably maintaining the Equipment, as set forth in more detail in Article 4 below;

2.2.4 unloading, handling, sampling, testing, dispositioning and storing Raw Materials in accordance with the Raw Material Specifications and Peanut Flour in accordance with the Peanut Flour Specification, Quality Agreement, Raw Material Specifications, and with the manufacturing instructions provided in the Batch Record(s) for In-Process Testing all at the Commercial Facility;

2.2.5 Processing the Bulk Product in accordance with Aimmune’s Regulatory Applications, the Quality Agreement, the Raw Material Specifications, the Peanut Flour Specification, and with the manufacturing instructions provided in the Batch Record(s) for In-Process Testing;

2.2.6 Release Testing of the Bulk Product in accordance with Aimmune’s Regulatory Applications, the Quality Agreement, and current versions of the analytical test methods listed in the Product Specifications;

2.2.7 collecting and retaining samples of the Raw Materials and Bulk Product as provided in greater detail in the Quality Agreement;

2.2.8 collecting and testing samples of In-Process Materials according to manufacturing instructions provided in the Batch Records and in accordance with the current version of the analytical test methods listed in the in-process specifications;

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2.2.9 collecting and submitting samples for Bulk Product Release Testing whether such testing is performed at CoreRx, at another pre-approved CoreRx facility, or at a Third-Party testing laboratory;

2.2.10 handling and storing In-Process Materials and Bulk Product;

2.2.11 preparing the Bulk Product for shipment;

2.2.12 making the Bulk Product available to a common carrier;

2.2.13 cooperating with Aimmune in the preparation and submission of the CMC section of the BLA or the MAA, and/or other manufacturing-related sections of other Regulatory Applications with foreign Regulatory Authorities in the Territory in which Aimmune may be seeking Foreign Regulatory Approval for the Product, as detailed to a greater extent in the Quality Agreement;

2.2.14 cooperating with Aimmune in the preparation for PLIs as detailed to a greater extent in the Quality Agreement;

2.2.15 keeping records and reporting to Aimmune and applicable governmental agencies as may be required by Applicable Laws;

2.2.16 handling, storing, treating, and disposing of Hazardous Materials generated by CoreRx in connection with CoreRx’s performance under this Agreement in accordance with Environmental Laws; and providing final Product Dispositioned for Release in accordance with the Quality Agreement.

2.3 Aimmune Responsibilities.

Aimmune’s responsibilities include the following (without limitation), all to be performed in accordance with the terms and conditions of this Agreement and in accordance with Applicable Laws:

2.3.1 providing the Aimmune Materials and Artwork in a timely manner as required for CoreRx to perform its obligations for Processing Bulk Product under this Agreement;

2.3.2 approving analytical test methods relating to In-Process Testing of In-Process Materials and Release Testing of Peanut Flour and Bulk Product in accordance with the Quality Agreement;

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2.3.3 providing Product Specifications and the Peanut Flour Specification, and providing Aimmune Materials in compliance with the applicable Specifications for such Aimmune Materials;

2.3.4 operating as set forth in the Quality Agreement and being responsible for all items designated as its responsibility in this Agreement or the Quality Agreement; and

2.3.5 providing CoreRx with authorization to ship Product that has been Dispositioned for Release by CoreRx.

ARTICLE 3:   COORDINATORS & MEETINGS

Within [***] ([***]) days after the Effective Date, Aimmune and CoreRx shall each appoint an authorized representative and a backup representative (collectively, the “Coordinators”) for the exchange of all communications, other than legal notices, related to the manufacturing of the Bulk Product.  Each Party shall provide notice to the other Party as to the name and title of the individuals so appointed.  Each Party may replace its Coordinators at any time for any reason by providing written notice to the other Party in accordance with Section 19.10 hereof.  The Parties shall meet from time to time as appropriate during the Term to discuss the Forecasts, as well as other matters relevant to the supply of Bulk Product, including any potential strategies for improving the productivity, efficiency and quality of the process by which the Bulk Product is Processed and supplied under this Agreement.

ARTICLE 4:   EQUIPMENT; CORERX FACILITY; PEANUT FLOUR; RAW MATERIALS; ARTWORK

4.1 Equipment.

4.1.1 CoreRx shall maintain the equipment listed on Schedule C hereto (“Equipment”) in accordance with the maintenance schedule for each piece of such Equipment, as set forth on Schedule C (“Equipment Maintenance Schedule”) and house the Equipment in the Commercial Facility, separate from equipment used for purposes other than performance of this Agreement.

4.1.2 Title to any Equipment purchased by Aimmune for use by CoreRx hereunder, including [***] shall be retained by Aimmune and CoreRx shall not obtain any ownership interest, legal or equitable, in the Equipment by virtue of its use of the Equipment as set forth herein. CoreRx shall [***] and will, if requested, [***].  

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Such Equipment shall be [***] hereunder except for [***] (e.g. [***]), which may be [***] so long as such Equipment [***] and [***].

4.1.3 [***] shall be responsible for, and bear the cost of, [***] and [***] such Equipment so long as it remains at the Commercial Facility, Testing Facility, or Warehouse. During the [***], Aimmune and CoreRx will [***] the costs of [***] for Equipment in the Warehouse. For [***], Aimmune shall bear or reimburse CoreRx [***] of [***] and [***] the Equipment (such as [***]), to the extent [***] and [***].  CoreRx shall notify Aimmune in writing (email acceptable) [***] the performance of any [***], and Aimmune shall directly pay or CoreRx shall invoice Aimmune and Aimmune shall promptly reimburse CoreRx for any such [***] costs actually incurred by CoreRx and which Aimmune has authorized in writing to be incurred or for which it is responsible.

4.2 Facilities.

4.2.1 During the Term of this Agreement, CoreRx agrees to maintain and operate its ML3 Facility, the Commercial Facility, the Testing Facility, and any other facilities and/or equipment necessary for CoreRx to perform its obligations under this Agreement and the Quality Agreement, (a) in a manner that complies with all Applicable Laws, including, without limitation, Environmental Laws, the FDCA and cGMP Regulations and (b) as necessary to perform its obligations under this Agreement and the Quality Agreement. The Commercial Facility shall be dedicated solely to Aimmune and shall not be used by CoreRx for any other purpose without the prior written consent of Aimmune.

4.2.2 [***] is solely responsible for, and bears the cost of, performing [***], with regard to [***]. During the [***], Aimmune and CoreRx will [***] the costs of [***] for the [***]. For [***], Aimmune shall bear or reimburse CoreRx [***] of [***] for [***], to the extent [***] and [***]. In addition, CoreRx shall engage a contractor [***] to [***] of, and [***] on, the [***]. CoreRx and Aimmune will share all [***] costs for [***] on a [***] basis, unless a different allocation shall be agreed to in the future by mutual written agreement. Notification and payment mechanisms shall be as set forth in Section 4.1.3 above.

4.2.3 CoreRx agrees to maintain a valid FDA Establishment Number for the ML3 Facility, the Commercial Facility, and any other CoreRx facility utilized for the testing of Raw Materials, Peanut Flour, In-Process Materials, or the Bulk Product (the “Testing Facility”).  CoreRx shall maintain such valid FDA license for the ML3 Facility, the Commercial Facility and the Testing Facility, together with all other permits and licenses required under all Applicable Laws in order to perform

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its obligations under this Agreement and the Quality Agreement.  CoreRx will keep and maintain all records as required by all Applicable Laws including, without limitation, Environmental Laws, the FDCA and cGMP Regulations.  At Aimmune’s request, CoreRx shall provide copies of such records and reports to Aimmune [***].[***] any registration fees for any licenses or permits that CoreRx is required to obtain as a [***] under this Agreement in [***].[***]any registration fees for any licenses or permits that CoreRx is required to obtain as a [***] under this Agreement in [***].  [***] any registration fees for any licenses or permits that CoreRx is required to obtain as a [***] under this Agreement in any country other than [***] as follows:  (a) if CoreRx does not supply to a specific [***] country, Aimmune will pay [***] registration fees for any licenses or permits that CoreRx is required to obtain in that country; (b) if CoreRx supplies to a specific country for [***], Aimmune and CoreRx will [***] the registration fees for any licenses or permits that CoreRx is required to obtain in that country; and (c) if CoreRx supplies to a specific country for [***], [***] will pay all registration fees for any licenses or permits that CoreRx is required to obtain in that country.CoreRx will promptly notify Aimmune when it is required to obtain or maintain an [***] license or permit for another CoreRx customer or any proprietary CoreRx product.  If a new country is added to the Territory after the Effective Date and CoreRx will be required under Applicable Law to upgrade or modify the Commercial Facility or the ML3 Facility, [***] the costs incurred to implement such upgrades or modifications.

4.2.4 CoreRx will notify Aimmune in writing within [***] ([***]) [***] if any Regulatory Authority or any other governmental entity issues a finding or order that CoreRx expects will materially and negatively impair CoreRx’s ability to perform its obligations, including without limitation any finding or order that causes or CoreRx expects will cause  (a) [***], (b) [***] or (c) [***].

4.2.5 CoreRx shall permit representatives of Aimmune to visit the Warehouse, the Commercial Facility and the Testing Facility (a) (with at least [***] advance notice) with representatives of any Regulatory Authorities or other governmental entities to inspect the Warehouse, the Commercial Facility and the Testing Facility, all in accordance with the Quality Agreement and (b) with at least [***] advance notice and at times that do not interfere with CoreRx’s ability to operate these facilities in accordance with the Agreement to observe Processing, Release Testing or Equipment.  CoreRx will also permit representatives of Aimmune [***] in the Commercial Facility; Aimmune agrees that any such representatives will be required to comply with all workplace rules and policies that apply to CoreRx employees who operate the Commercial Facility [***].

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4.3 Peanut Flour and Aimmune Materials.

4.3.1 Supply of Peanut Flour.  Aimmune shall supply Peanut Flour for use by CoreRx in the Processing of Bulk Product hereunder. Aimmune shall supply CoreRx with an inventory of Peanut Flour sufficient for at least [***] production of Product based on the then-current Forecast.

4.3.2 Peanut Flour Specifications; Core Parameters.  CoreRx will only use Peanut Flour that meets the Peanut Flour Specifications to Process Bulk Product under this Agreement.  If Peanut Flour meets the Peanut Flour Specifications but does not meet the Core Parameters, CoreRx will provide prompt written notice thereof to Aimmune.  CoreRx can only use Peanut Flour that meets the Peanut Flour Specifications but does not meet the Core Parameters to Process Bulk Product hereunder if Aimmune provides prior written approval to CoreRx of such use.  

4.3.3 Expected Bulk Yield.  CoreRx shall use the Peanut Flour solely for the Processing of Bulk Product hereunder.  The theoretical Bulk Yield shall be the number of Units of Bulk Product produced according to the formulae provided in the Batch Records as illustrated in Schedule D.  For each Dosage Strength, the expected yield of Bulk Product to be produced by CoreRx (the “Expected Bulk Yield”) shall equal the average actual Bulk Yield [***], determined as the [***] acceptable Units of Bulk Product produced [***] and expressed as a percentage. Between the Effective Date and the date that the Expected Bulk Yield is determined in accordance with the previous sentence, the Parties agree that the interim Expected Bulk Yield for each Dosage Strength shall be the percentage values listed in Schedule D.  The Expected Bulk Yield may be adjusted from time to time during the Term upon the mutual written agreement of the Parties. If after the Effective Date there is a material change to either the Equipment used in the Processing of Bulk Product or the methods used to Process the Bulk Product, the Parties will discuss in good faith whether to re-evaluate the Expected Bulk Yield.

4.3.4 Aimmune Materials.  Aimmune retains all right, title and interest in and to the Aimmune Materials. CoreRx shall not use the Aimmune Materials for any purpose other than performing its obligations under this Agreement, without Aimmune’s express prior written permission. In addition, CoreRx shall not take or send the Aimmune Materials to any Third Party, without Aimmune’s express prior written permission, except as otherwise required to perform Release Testing of Peanut Flour.

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4.4 Raw Materials.

CoreRx shall, as part of the Product Price, supply Raw Materials for the Product as well as all other materials (other than Peanut Flour, which will be provided by Aimmune to CoreRx) required to Processthe Bulk Product. For [***] of the Agreement, CoreRx must maintain inventories of Raw Materials sufficient for at least [***] production of Product based on the then-current Forecast. Thereafter, during the Term, this inventory requirement shall be reduced to [***]. At Aimmune’s request, CoreRx will provide Aimmune with specifications and information regarding all Raw Materials, including, though not limited to, the source or supplier of Raw Materials and traceability certifications for the Raw Materials.

4.5 Artwork.  

Aimmune shall provide or approve, prior to the procurement of applicable components, all artwork, advertising, sachet and capsule markings, labeling and packaging information (together “Artwork”) necessary to Process the Product. Such Artwork is and shall remain the exclusive property of Aimmune, and Aimmune shall be solely responsible for the content thereof and Aimmune shall ensure that all Artwork complies with Applicable Laws.  CoreRx will be notified, in writing, of changes to Artwork (on capsules and sachets). Any Artwork changes that result in costs or expenses related to obsolescence and destruction of materials by CoreRx shall be borne by Aimmune.

ARTICLE 5:   REPRESENTATIONS, WARRANTIES & COVENANTS; SPECIFICATION CHANGES; QUALITY AGREEMENT

5.1 Representations, Warranties and Covenants of CoreRx.  

CoreRx represents, warrants and covenants to Aimmune that:

5.1.1 CoreRx will perform the Processing, Release Testing of Peanut Flour, and any Aimmune-requested Release Testing of Bulk Product in conformance with all Applicable Laws, the Quality Agreement, the Batch Records, and the Product Specifications, and in accordance with the terms and conditions of this Agreement.

5.1.2 All Bulk Product, at the time of sale and shipment to Aimmune or its designee by CoreRx:  (a) will conform to the Product Specifications, as then in effect, and will have been Processed in accordance with the master Batch Record; (b) will have been Processed in accordance with cGMP Regulations, this Agreement and the Quality Agreement; (c) will be Processed, transported, stored, handled and disposed of in accordance with all Applicable Laws, including without limitation Environmental Laws; (d) will be conveyed with good title, free and clear from any

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security interest, lien or encumbrance; and (e) will not be (i) adulterated or misbranded by CoreRx (excluding any Artwork which is the responsibility of Aimmune, provided that any such Artwork used by CoreRx is consistent with Aimmune’s instructions) within the meaning of the FDCA or comparable Applicable Laws in any country in the Territory or (ii) an article that may not be introduced into interstate commerce under the provisions of Sections 404 or 505 of the FDCA or comparable Applicable Laws in any country in the Territory.

5.1.3 to CoreRx’s knowledge, it has all necessary authority and all right, title and interest in and to any technology related to the Release Testing of Peanut Flour, the In-Process Testing of In-Process Materials, and the Processing, Release Testing and supply of Bulk Product or that is otherwise required by CoreRx to perform its obligations as set forth under this Agreement.

5.1.4 to CoreRx’s knowledge, (x) any CoreRx Background IP utilized in the Release Testing of Peanut Flour, the In-Process Testing of In-Process Materials, and the Processing, Release Testing and supply of the Bulk Product by CoreRx under this Agreement will not infringe or misappropriate any Intellectual Property rights of any Third Party, (y) CoreRx’s performance of its obligations under this Agreement will not infringe or misappropriate any Intellectual Property rights of any Third Party and (z) CoreRx will comply with all Applicable Laws in its performance under this Agreement.

5.1.5 the Commercial Facility and Warehouse will remain in compliance with Applicable Laws during the Term.

5.1.6 CoreRx will not use or incorporate any Third Party technology, components or Intellectual Property in Processing, In-Process Testing, or Release Testing without obtaining Aimmune’s prior written consent.

5.2 Representations and Warranties by Aimmune.

Aimmune represents, warrants and covenants to CoreRx that:

5.2.1 (a) to Aimmune’s knowledge, Aimmune has all necessary authority (including rights under any Intellectual Property rights related to the Product) to provide the Peanut Flour to CoreRx under this Agreement and to authorize CoreRx to Process the Product in accordance with this Agreement; (b) all Artwork and the content thereof provided to CoreRx shall comply with Applicable Laws; (c) Aimmune will provide CoreRx with all material safety data sheets applicable to the Peanut Flour; (d) all Product provided to Aimmune by CoreRx under this Agreement will be held, used and/or disposed of by Aimmune or its designee in compliance with Applicable

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Laws;(e) Aimmune will comply with all Applicable Laws in its performance under this Agreement and (f) any Raw Material furnished by Aimmune will conform to the specifications for such Raw Material set out in all applicable marketing approval authorizations.

5.3 Mutual Representations and Warranties.

Each Party hereby represents and warrants to the other Party that as of the Effective Date:

5.3.1 It is duly organized and validly existing under the laws of the state or jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to carry out the provisions hereof.

5.3.2 It is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder.  The person executing this Agreement on its behalf has been duly authorized to do so by all requisite corporate action.

5.3.3 It has obtained all necessary consents, approvals and authorizations required to be obtained by it in connection with the execution of and performance under the Agreement.

5.3.4 This Agreement is a legal and valid obligation binding upon it and enforceable in accordance with its terms.  The execution, delivery and performance of this Agreement does not conflict with, or constitute a default under, any agreement, instrument or understanding, oral or written, to which it is a party or by which it may be bound, nor violate any Applicable Laws or order of any court, governmental body or administrative or other agency having jurisdiction over it.

5.3.5 None of its officers, directors, agents, Affiliates or employees (i) was or is presently debarred or disqualified under Section 306(a) or (b) of the FDCA (21 U.S.C. §§ 335(a) or (b)), (ii) has been debarred or excluded from participation in the Medicare program, any state Medicaid program or any federal health care program, (iii) has been charged with, indicted for, or convicted of a criminal offense that would lead to debarment or exclusion under the FDCA, or from participation in the Medicare program, any state Medicaid program or any other federal health care program, or (iv) has been or is under investigation by any government authority for debarment or exclusion action.  Each Party shall notify the other Party immediately upon any inquiry or the commencement of any investigation or proceeding or of any circumstance that would cause its representations under this Section 5.3.5 to become false or inaccurate.  The obligation to notify the other Party in accordance with the preceding sentence shall survive termination or expiration of this Agreement for [***] ([***]) years, unless a longer notification period is required by Applicable Laws.  

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5.4 Limitations.

THE REPRESENTATIONS AND WARRANTIES SET FORTH IN THIS AGREEMENT ARE THE SOLE AND EXCLUSIVE REPRESENTATIONS AND WARRANTIES MADE BY EACH PARTY TO THE OTHER AND NEITHER PARTY MAKES ANY OTHER REPRESENTATIONS, WARRANTIES OR GUARANTEES OF ANY KIND WHATSOEVER, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTIES OF MERCHANTABILITY, NON-INFRINGEMENT OR FITNESS FOR A PARTICULAR PURPOSE.

5.5 Specification Changes.  

In the event Aimmune changes the Product Specifications, Aimmune shall provide, when practicable, at least [***] ([***]) months prior written notice to CoreRx of such changes; and in the event that such changes directly impact CoreRx’s scheduling or costs, CoreRx shall, within [***] ([***]) days thereafter, advise Aimmune in writing as to any scheduling and/or price adjustments caused by such changes.  CoreRx will provide, upon request, supporting documentation to Aimmune for any scheduling or cost changes. Prior to implementation of such changes, the Parties agree to negotiate in good faith in an attempt to reach agreement on (a) the new price for any Bulk Product which embodies such changes, provided that the price shall not change more than [***], and (b) any other amendments to this Agreement which may be necessitated by such changes (i.e., an adjustment to the lead time for Purchase Orders).  Aimmune agrees to reimburse CoreRx for such reasonable costs as CoreRx has incurred to purchase up to [***] of Raw Materials in reliance on the most recent Forecast, to the extent that such costs represent CoreRx’s purchase of Raw Materials that [***] as a result of Aimmune’s change to the Product Specifications. The Parties agree to amend this Agreement, and/or the Quality Agreement as needed to reflect any changes to the Product Specifications or the Product Price.  CoreRx shall not make any change to the Product Specifications without Aimmune’s prior written consent.

5.6 Quality Agreement.

Concurrently with entering into this Agreement, the Parties will enter into the Quality Agreement, which will govern the quality assurance obligations and responsibilities of the Parties with respect to the Bulk Product.  The Quality Agreement shall in no way determine liability or financial responsibility of the Parties for the responsibilities set forth therein.  Notwithstanding anything to the contrary in this Agreement or in any other document or agreement, in the event of a conflict between this Agreement and the Quality Agreement in relation to issues of quality, the Quality Agreement shall control; in all other cases, the terms and conditions of this Agreement shall govern and control.

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5.7 Duty of Cooperation.

The Parties acknowledge that production of pharmaceutical products is inherently complex and requires close attention to all aspects of specifications, Raw Materials, Peanut Flour, production, storage, and shipment (collectively, “Process Requirements”).  In the event of the occurrence of problems with Process Requirements, the Parties agree to reasonably cooperate to notify each other promptly of any known problems and to resolve such problems in a prompt and efficient manner so as to permit continued production and shipment of conforming Bulk Product, in accordance with the Product Specifications, this Agreement, the Quality Agreement and Applicable Laws.  Costs for correction of any such Process Requirements shall be allocated between the Parties in a fair and equitable manner and in accordance with the respective obligations of the Parties hereunder and under any related agreements.  Nothing in this Section 5.7 shall relieve either Party from any of its obligations under this Agreement or the Quality Agreement.

ARTICLE 6:   MINIMUM COMMITMENT PERCENTAGE; FORECASTS; FIRM COMMITMENTS

6.1 Minimum Manufacturing Commitment Percentage.

During the first six (6) Contract Years of this Agreement, Aimmune shall purchase a minimum percentage of its overall commercial requirements of Bulk Product (“Minimum Manufacturing Commitment Percentage”) from CoreRx, as set forth below provided that: (i) [***], and (ii) [***].  In the event that CoreRx is unable to meet its obligations as set forth in (i) and (ii) above for more than [***] ([***]) Lots in a single Contract Year, Aimmune’s Minimum Manufacturing Commitment Percentage obligations shall be reduced by [***] percent ([***]%) for the remaining period of that applicable Contract Year where such uncured failures occurred. By way of example, should CoreRx fail to meet its obligations in Contract Year 3, the Minimum Manufacturing Commitment Percentage for Contract Year 3 would be reduced from [***] percent ([***]%) to [***] percent ([***]%). If the number of Lots of Product corresponding to the Minimum Manufacturing Commitment Percentage in a given Contract Year exceeds the CoreRx Maximum Capacity set forth in Schedule G, then CoreRx will have the right, at its own expense, to increase its capacity to supply that larger number of Lots of Product by providing Aimmune with a notice (such notice must be provided to Aimmune within [***] ([***]) days of the beginning of the applicable Contract Year) confirming CoreRx’s commitment to supply such larger number of Lots on a timely basis. If the number of Lots of Product corresponding to the Minimum Manufacturing Commitment Percentage in a given Contract Year exceeds the CoreRx Maximum Capacity where CoreRx has acknowledged that its capacity cannot be increased, the Minimum Manufacturing Commitment Percentage for that Contract Year shall be the percentage of Aimmune’s overall commercial requirements that can be satisfied by the applicable CoreRx Maximum

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Capacity in that Contract Year.Notwithstanding any minimum commitments under this Section 6.1, the Parties agree that Aimmune will not be required to purchase from CoreRx after [***] any volumes of Product that exceed Aimmune’s total annual volume requirements for the Product in the U.S. and Canada for that Contract Year.  The Minimum Manufacturing Commitment Percentage for each Contract Year is set forth below:

6.1.1 Minimum Manufacturing Commitment Percentage (Contract Year 1): 100%

6.1.2 Minimum Manufacturing Commitment Percentage (Contract Year 2): [***]%

6.1.3 Minimum Manufacturing Commitment Percentage (Contract Year 3): [***]%

6.1.4 Minimum Manufacturing Commitment Percentage (Contract Year 4): [***]%

6.1.5 Minimum Manufacturing Commitment Percentage (Contract Year 5): [***]%

6.1.6    Minimum Manufacturing Commitment Percentage (Contract Year 6): [***]%

6.2 Minimum Testing Commitment Percentage.

During the first six (6) Contract Years of this Agreement, Aimmune shall purchase a minimum percentage of its overall Release Testing for Bulk Product Processed at CoreRx (“Minimum Testing Commitment Percentage”), as set forth below:

6.2.1 Minimum Testing Commitment Percentage (Contract Year 1): 100%

6.2.2 Minimum Testing Commitment Percentage (Contract Year 2): [***]%

6.2.3 Minimum Testing Commitment Percentage (Contract Year 3): [***]%

6.2.4 Minimum Testing Commitment Percentage (Contract Year 4): [***]%

6.2.5 Minimum Testing Commitment Percentage (Contract Year 5): [***]%

6.2.6    Minimum Testing Commitment Percentage (Contract Year 6): [***]%

Notwithstanding any minimum commitments under this Section 6.2, the Parties agree that Aimmune will not be required to use CoreRx to perform Release Testing for Bulk Product that is intended [***].

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6.3 Forecast.

6.3.1 At least [***] ([***]) days prior to the first [***] during which Aimmune requires Bulk Product to be delivered by CoreRx hereunder, unless otherwise agreed to by the parties in writing, Aimmune shall submit to CoreRx the first written detailed forecast (the “Forecast”) of its [***] requirements for Bulk Product from CoreRx for each of the next succeeding [***].  The Forecast shall be updated [***] thereafter by the [***].  CoreRx will review each Forecast and inform Aimmune within [***] ([***]) days of receipt of the Forecast if CoreRx believes the Forecast does not comply with requirements of this Article 6.  Starting in [***], Aimmune shall also submit to CoreRx no later than [***] of the applicable Contract Year [***] for such Contract Year.  

6.3.2 As part of each Forecast, Aimmune shall submit to CoreRx for [***] ([***]) of the Forecast a detailed forecast of Aimmune’s Bulk Product requirements, further specified [***] as to the [***].  For [***] ([***]) of the Forecast, Aimmune shall submit only the [***]. For [***] ([***]), Aimmune shall be required to submit to CoreRx only a [***].

6.4 Firm Manufacturing Commitment.  

The first [***] of each Forecast shall become a firm commitment of Aimmune and CoreRx as follows (“Firm Manufacturing Commitment”):  

6.4.1 For [***] ([***]), Aimmune will be required to purchase from CoreRx, and CoreRx will be required to Process and supply to Aimmune (as long as [***] forecasted in the Forecast is consistent with Section 6.3), [***] percent ([***]%) of the forecasted amount(s) of the Bulk Product set forth in the forecast for each of the [***] ([***] [***]) of each Forecast delivered hereunder.  The forecasted amount(s) for each of the first [***] of each Forecast is hereinafter referred to as the “[***] Manufacturing Firm Amount”.

6.4.2 Aimmune shall have no obligation to purchase any forecasted amounts in any Forecast for [***] ([***]) of such Forecast, other than to the extent required to fulfill its Minimum Manufacturing Commitment Percentage for the Contract Year covered by that Forecast.  

6.4.3 Firm Commitments provided by Aimmune will order Bulk Product in number of Lots.  

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6.4.4 Aimmune may from time to time (a) request [***] that are [***] in any Firm Manufacturing Commitments or (b) [***] that are [***] to the Firm Manufacturing Commitments.  In each such case, CoreRx will [***] to honor such requests.

6.4.5 All Firm Manufacturing Commitments will be in writing and will be confirmed by CoreRx in writing at the latest [***] ([***]) days after receipt of each Firm Manufacturing Commitment.

6.4.6 CoreRx will be obligated to accept all Firm Manufacturing Commitments that are within the limits of the applicable Forecast provided to CoreRx.

6.4.7 In the event Aimmune cancels a Firm Manufacturing Commitment, Aimmune shall pay to CoreRx an amount [***].

6.4.8 For clarification, the amount of Aimmune’s overall commercial requirements under this Agreement for Bulk Product, as further described in Schedule G, in a Contract Year cannot exceed the CoreRx Maximum Capacity in effect for that Contract Year without CoreRx written approval CoreRx agrees that it will supply Bulk Product under this Agreement up to the CoreRx Maximum Capacity in effect for a given Contract Year if requested to do so by Aimmune in accordance with this Article 6 and Article 7.

6.5 Firm Testing Commitment.  

The first [***] of each Forecast shall become a firm commitment of Aimmune and CoreRx as follows (“Firm Testing Commitment”):  

6.5.1 For [***] ([***]), Aimmune will be required to purchase from CoreRx, and CoreRx will be required to perform Release Testing services for [***] percent ([***]%) of Lots of Bulk Product requested to be tested as set forth in the Forecast for each of the first [***] ([***]) of each Forecast delivered hereunder.  The forecasted amount of testing for each of the first [***] of each Forecast is hereinafter referred to as the “[***] Testing Firm Amount”.

6.5.2 Firm Testing Commitments provided by Aimmune for [***] ([***]) will specify the [***] that require Release Testing during [***] ([***]) of each Forecast delivered hereunder.  Firm Testing Commitments provided by Aimmune for [***] ([***]) will specify only the [***] that require Release Testing over [***] ([***]) of each Forecast delivered hereunder.

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6.5.3 Aimmune may from time to time place requests for testing Product that are separate from and in addition to the Firm Testing Commitments.  In each such case, CoreRx will use commercially reasonable efforts to honor such requests.

6.5.4 All Firm Testing Commitments will be in writing and will be confirmed by CoreRx in writing at the latest [***] ([***]) days after receipt of each Firm Testing Commitment.

6.5.5 CoreRx will be obligated to accept all Firm Testing Commitments that are within the limits of the applicable Forecast provided to CoreRx.

6.5.6 In the event Aimmune cancels a Firm Testing Commitment, Aimmune shall [***] or pay to CoreRx the initial batch testing price for each Lot of Product below the Minimum Testing Commitment Percentage.

6.6 Second Source Supplier.

Nothing in this Agreement shall preclude Aimmune from arranging for the Processing, Testing and supply of Bulk Product from one (1) or more third-party supplier(s) at any time, in Aimmune’s sole discretion; provided that [***]. In the event that Aimmune chooses to use a second source supplier for the Processing, Testing and supply, or solely Release Testing, of Bulk Product, CoreRx shall [***].

ARTICLE 7:   PURCHASE OF PRODUCT; DELIVERIES; ADDITIONAL WORK

7.1 Purchase Orders.  

7.1.1 Submitting Purchase Orders. Together with each Forecast submitted by Aimmune pursuant to Section 6.3 above, Aimmune shall submit to CoreRx one (1) or more Purchase Orders for [***] ([***]) of such Forecast (unless such Purchase Order(s) have previously been provided to CoreRx by Aimmune) such that the Purchase Orders submitted with the current Forecast, combined with all previously submitted Purchase Orders, constitute an aggregate firm order for the [***] Manufacturing Firm Amount and [***] Testing Firm Amount of Product for at least the first [***] of the accompanying Forecast.  Although [***] ([***]) of each Forecast are [***] percent ([***]%) firm for manufacturing pursuant to Section 6.4.1, Aimmune only has to submit Purchase Orders for [***] ([***]) of each Forecast.

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7.1.2 Details of Purchase Order. Any Purchase Order submitted by Aimmune to CoreRx under this Section 7.1 shall state (i) [***] and (ii) [***], and (iii) [***].  If a Purchase Order contains a quantity of Bulk Product that is greater than the [***]Manufacturing Firm Amount or [***]Testing Firm Amount set forth in the most recent Forecast or requests a Delivery Date that is earlier than the date set forth in the most recent Forecast, CoreRx will use commercially reasonable efforts to honor any such additional quantities and/or earlier Delivery Dates, subject to the terms outlined in Sections 6.4.4 and 6.5.3.

7.1.3 Late Purchase Orders.  If Aimmune submits any Purchase Order hereunder to CoreRx after the [***] ([***]) day of the [***] covered by such Purchase Order, such Purchase Order shall be considered late, and CoreRx may treat such late Purchase Order as an optional Purchase Order under Section 7.1.5 below.  

7.1.4 Purchase Order Confirmation.  Within [***] ([***]) days after the date of CoreRx’s receipt of any Purchase Order from Aimmune under this Section 7.1, CoreRx shall confirm to Aimmune, in writing, that CoreRx received such Purchase Order.  Notwithstanding the foregoing, irrespective of any such confirmation (or lack thereof), CoreRx shall be deemed to have accepted any and all Purchase Orders submitted by Aimmune to CoreRx on a timely basis under Section 7.1.1, so long as the amount of the Product ordered and Release Testing to be performed by CoreRx, requested by Aimmune for any [***], does not exceed the [***] Manufacturing Firm Amount or [***] Testing Firm Amount for such month in the Forecast.  

7.1.5 Additional Purchase Orders.  In addition to Purchase Orders submitted with a Forecast under Section 7.1.1 above, Aimmune may elect (but shall not be obligated) to submit to CoreRx one (1) or more additional Purchase Orders, at any time or from time to time during the Term of this Agreement.  Each such Purchase Order from Aimmune hereunder shall state (i) [***] and (ii) [***].  Within [***] ([***]) days after the date of CoreRx’s receipt of any Purchase Order (if any) from Aimmune under this Section 7.1.5, CoreRx shall confirm to Aimmune, in writing, that CoreRx received such Purchase Order and shall inform Aimmune, in writing, whether or not CoreRx accepts such Purchase Order. CoreRx shall use all commercially reasonable efforts to accept additional Purchase Orders and supply all amounts of the Product ordered by Aimmune and accepted by CoreRx under this Section 7.1.5 on a timely basis.

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7.2 Delivery Timing.

7.2.1 Supply on Timely Basis.  CoreRx shall use all commercially reasonable efforts to supply all amounts of the Bulk Product ordered by Aimmune under Section 7.1 on a timely basis. CoreRx shall provide Aimmune with as much advance notice as possible (and will [***] provide at least [***] ([***]) days advance notice where possible) if CoreRx determines that the delivery of any Bulk Product or the performance of any additional work will be delayed for any reason, stating the reasons for the delay.  In the event that the Parties cannot agree on a new Delivery Date, Aimmune may reschedule or [***], provided such delays were not due to CoreRx supporting additional Purchase Orders.  In the event that the late delivery by CoreRx results in an order change, including reschedules or cancellations by Aimmune not due to additional Purchase Orders, CoreRx [***] accommodate, [***], such schedule changes as required by Aimmune, and [***].  Further, in the event that [***] determines that performance of Release Testing of a Lot of Product by CoreRx will be delayed and if such delay in Release Testing [***] result in a late delivery by CoreRx, Aimmune shall have the option to [***]. For such delays [***] due to CoreRx, and which are not due to [***], CoreRx shall also be responsible for [***].  Bulk Product shipped to Aimmune [***] and without [***] and any [***] may be returned to CoreRx at [***] or held at Commercial Facility [***].  No shipment will be deemed complete until all ordered Units have been delivered and accepted.  No payment or other obligations of Aimmune will accrue on partial or incomplete shipments where CoreRx is the cause of such partial or incomplete shipment.

7.2.2 Failure to Supply by Delivery Date.  If CoreRx fails to supply all or part of any shipment of Bulk Products ordered by Aimmune under Section 7.1 by the Delivery Date for such shipment for reasons solely within the control of CoreRx and not due to any failure or delay of Aimmune or a Third Party lab performing Release Testing, then Aimmune will be entitled to receive a discount applied against the Purchase Price of such delayed Products, in accordance with the following schedule (which refund CoreRx acknowledges as liquidated damages reflecting a reasonable measure of actual damages and not a penalty): (a) if Bulk Product(s) are delivered anywhere from [***] ([***]) to [***] ([***]) days following the Delivery Date  for such shipment, then Aimmune will receive a [***] percent ([***]%) discount off of the Purchase Price for such Bulk Products; (b) if Bulk Product(s) are delivered anywhere from [***] ([***]) to [***] ([***]) days following the Delivery Date for such shipment, then Aimmune will receive a [***] percent ([***]%) discount off of the Purchase Price for such Bulk Products; or (c) if Bulk Product(s) are delivered more than [***] ([***]) days following the Delivery Date for such shipment, then Aimmune may elect either to (i) receive a [***] percent ([***]%) discount off of

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the Purchase Price for such Bulk Products or (ii) [***] and [***] and [***], with [***].  

7.3 Delivery Shortfall / Overage.

Subject to Section 4.3.3, quantities of Unit-based orders actually shipped by CoreRx pursuant to a given Purchase Order may vary up or down from the quantities reflected in such Purchase Order by not more than [***] percent ([***]%) and still be deemed to be in compliance with such Purchase Order and Aimmune shall accept any such limited shortfall or overage of up to [***]% of the original quantity requested in the Purchase Order; provided that CoreRx shall use reasonable commercial efforts to produce and deliver any shortfall quantity within [***] ([***]) days thereafter or, upon Aimmune’s prior written consent, within such longer period.  

7.4 Delivery Terms.  

7.4.1 CoreRx will only supply and deliver Product that it declares to be Dispositioned for Release in accordance with the procedures set forth in the Quality Agreement, including any required documentation.  

7.4.2 Each delivery will be accompanied by a certificate of compliance and a certificate of analysis (only in cases where CoreRx is performing Release Testing) and other Lot documentation showing the conformity of the delivered Lot as specified and defined in the Quality Agreement

7.4.3 All Bulk Products and other materials provided by CoreRx are delivered EXW (Incoterms 2010) at the Warehouse and title and risk of loss or damage shall pass to Aimmune upon such delivery to the common carrier at the Warehouse.

7.4.4 Aimmune may request that CoreRx warehouses Bulk Product in accordance with Section 7.5 below, in which case title and risk of loss or damage for such stored Bulk Product shall transfer upon CoreRx’s delivery of the Dispositioned for Release Bulk Product to Aimmune at the [***].

7.4.5 All Bulk Product that has been Dispositioned for Release by CoreRx shall be properly prepared for safe and lawful shipment by CoreRx; shall be shipped to Aimmune’s distribution center or other location designated by Aimmune (only after Aimmune has authorized CoreRx to ship Product that has been Dispositioned for Release by CoreRx), via the common carrier designated by Aimmune; and shall be accompanied by appropriate documentation.  No products of any Third Party shall be shipped with the Bulk Product. Only Bulk Product that has been Dispositioned

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for Release by CoreRx shall be delivered by CoreRx to the common carrier at the Warehouse under this Section 7.4.

7.5 Product Storage.

Upon Aimmune’s request, CoreRx shall warehouse Bulk Product at the Commercial Facility, up to the storage capacity of the Commercial Facility, or at any other CoreRx or third-party facility that is approved in advance in writing by Aimmune. The Product shall be warehoused in accordance with cGMP Regulations.  Aimmune will pay CoreRx $[***] per [***] (or such other fee that the Parties may mutually agree on and confirm in writing) for each Lot of Bulk Product that is stored by CoreRx at any other CoreRx or third-party facility that is approved in advance in writing by Aimmune.

7.6 Additional Work.

The Parties expect that additional work, [***], related to the subject matter of this Agreement will continue during the Term of this Agreement, as mutually agreed to by the parties in writing from time to time.  The terms and conditions of any such additional work, including without limitation [***], will be subject to the mutual written agreement of the Parties.  From time to time, Aimmune may, at its sole discretion, request that CoreRx perform such additional work by submitting a scope of services document to CoreRx.  CoreRx may, at its sole discretion, provide a written quote to Aimmune for the work requested by Aimmune.  If the quote is acceptable to Aimmune, Aimmune may, in its sole discretion, submit a Purchase Order to CoreRx describing the scope of work, pricing, timeframes and responsibilities of the Parties.  CoreRx may, at its sole discretion, accept such work by sending a written acceptance notice to Aimmune.  Other than the specific work requests and price of such work as set forth on such Purchase Order, cancellation penalties (if applicable), and invoicing/payment terms, the terms and conditions of this Agreement shall govern and control any and all such additional work, including, without limitation, Articles 13 (Indemnification; Limitation of Liability), 14 (Confidentiality) and 15 (Intellectual Property).

ARTICLE 8:   RELEASE TESTING;ACCEPTANCE AND REJECTION; NON-CONFORMITY; LATENT DEFECT; DEFECTIVE PRODUCT

8.1 Disposition for Release; Release Testing; Timely Delivery.

All Product shall be in conformance with the Quality Agreement, this Agreement, the Product Specifications and any Applicable Laws and Processed by CoreRx and/or a qualified third-party laboratory that has been approved in advance in writing by Aimmune. CoreRx or an Aimmune designee shall be responsible for Release Testing and such party

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shall maintain all records evidencing such Release Testing and analysis performed.   CoreRx shall be responsible for Disposition for Release of each Lot of Bulk Product Processed under the Agreement.  CoreRx shall not declare a Bulk Product Dispositioned for Release and ready for delivery to Aimmune until each Lot has satisfied the requirements under this Agreement and the Quality Agreement. If CoreRx performs Processing and Release Testing for a given Lot of Bulk Product, such Lot will be considered timely completed under this Agreement if CoreRx has Dispositioned for Release such Lot no later than [***] ([***]) months after the date that CoreRx first started Processing of such Lot.  If CoreRx performs Processing only(Release Testing will be performed by a Third Party lab, not CoreRx) for a given Lot of Bulk Product, such Lot will be considered timely completed under this Agreement if CoreRx has Dispositioned for Release such Lot no later than [***] ([***]) months after the date that CoreRx first started Processing of such Lot.  CoreRx will not be responsible for any delays in Dispositioning for Release a Lot that is Release Tested by a Third Party where the delay is due solely to the failure of the Third Party to perform Release Testing on a timely basis.

8.2 Acceptance and Rejection; Non-conformity; Latent Defect; Defective Product.

8.2.1 Aimmune shall have [***] ([***]) days from the receipt of Bulk Product and all associated Production Records to inspect the Bulk Product, review the certificates of analysis and other documents and/or perform or have performed any or all of the quality control procedures outlined in the relevant Specifications or the Quality Agreement to determine if the Bulk Product meets the Product Specifications.

8.2.2 If Aimmune has evidence to indicate that Bulk Product contains a Non-conformity, Aimmune shall promptly notify CoreRx in writing and CoreRx shall initiate an investigation of the alleged Non-conformity.  If so requested by CoreRx, Aimmune will send to CoreRx a sample of the rejected shipment.

8.2.3 In the case of Bulk Product with a Non-conformity that is a Latent Defect, Aimmune shall promptly, and in no event more than [***] ([***]) [***] after discovery or notification of such Latent Defect, notify CoreRx of such Latent Defect. The remedies for Bulk Product with a Latent Defect shall be as set forth in Section 8.2.5 below.

8.2.4 CoreRx shall reasonably cooperate with Aimmune to determine whether any Lot that is a Defective Product is attributable to CoreRx’s failure to adhere to the requirements of the Product Specifications, compliance with the Quality Agreement, this Agreement including CoreRx’s warranties under Section 5.1 hereof or Applicable Law.

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8.2.5 If the Bulk Product contains a Non-conformity or Latent Defect, but it is determined under the Quality Agreementthat such Non-conformity or Latent Defect is due [***] caused by Aimmune or its agents or is due [***], then CoreRx shall have no liability to Aimmune with respect thereto, and Aimmune shall promptly pay CoreRx for the Bulk Product per the pricing defined in Schedule Aof this Agreement.  If the Non-conformity or Latent Defect is otherwise caused by CoreRx, then CoreRx shall promptly, at [***] option, either (a) [***], or (b) [***] and [***].  In addition, regardless of whether [***] chooses a [***], CoreRx will also promptly reimburse Aimmune for (x) the cost of [***], (y) the cost[***] and (z) the[***]. The number of Defective Product Lots shall [***] and [***], even if [***] elects [***] under clause (a).

8.2.6 Any dispute between the Parties regarding whether a Lot of Bulk Product is a Defective Product shall be resolved by discussion between the Parties, and absent resolution, discussion between senior executives of each Party.  If the dispute is still not resolved, the Parties agree that the matter will be resolved by an independent expert to be agreed upon by the Parties, who shall have at least [***] ([***]) years of experience in the pharmaceutical manufacturing industry. The decision of such expert will be binding on both Parties.

8.2.7 The fees of the expert will be borne by CoreRx if the Bulk Product in dispute is deemed by the expert to be Non-conforming and such Non-conformity is [***] to CoreRx.  The fees of the expert will be borne by Aimmune if the Bulk Product in dispute is not deemed by the expert to be Non-conforming, or where such Non-conformity is [***] to CoreRx. The Party that is obligated to pay the fees of the expert will also pay the costs, if any, incurred by the other Party for third-party testing, packaging and/or shipping.

8.2.8 In any case where either Party possesses Bulk Product that such Party knows or suspects is a Defective Product, such Party shall not dispose of such Defective Product without written authorization and instructions of the other Party to either dispose of the Defective Product or to return the Defective Product to the other Party.

ARTICLE 9:   PRICE; TAXES; INVOICES; METHOD OF PAYMENT; ANNUAL RECONCILIATION

9.1 Product Price Schedule; Release Testing Price Schedule.

9.1.1 All Product manufactured under this Agreement will be priced according to the Product Price schedule set forth in Schedule A. All Product that is Release Tested

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by CoreRx under this Agreement will be priced according to the Release Testing priceschedule set forth in Schedule A.

9.1.2 The pricing in Schedule A shall be adjusted annually [***], beginning with start of the second Contract Year.  

9.1.3 In addition, starting [***] Aimmune shall pay to CoreRx in accordance with Section 9.1.4 the difference between (a) the total Supplier Readiness Fee per calendar quarter and (b) the total amount invoiced for that calendar quarter, including fees pursuant to any FTE agreement and analytical personnel, between CoreRx and Aimmune, as well as any other separately invoiced items that comprise the Supplier Readiness Fee. [***]. If the amount invoiced in a particular calendar quarter exceeds the number required to cover the Supplier Readiness Fee for that calendar quarter, Aimmune will not owe any Supplier Readiness Fee for that particular quarter.

9.1.4 CoreRx shall provide an accounting of the quarterly Supplier Readiness Fee on a quarterly basis no later than the [***] ([***]) day of the next quarter. If the accounting shows that Aimmune is required to pay a Supplier Readiness Fee for a particular quarter, then CoreRx shall send an invoice to Aimmune along with the accounting document. All such invoices shall be payable in accordance with Section 9.4.

9.1.5 No later than the [***] ([***]) day from the end of each Contract Year, CoreRx shall provide a detailed accounting to Aimmune showing (a) the actual amount invoiced to Aimmune under this Agreement for each quarter of such Contract Year, (b) the annual value of the Supplier Readiness Fee and (c) all quarterly Supplier Readiness Fees paid by Aimmune in such Contract Year.  If the [***] exceeds the [***], then [***] will [***] by [***].  [***] will be [***], and [***] the [***]. If Aimmune disagrees with a quarterly or annual accounting, then the Parties agree to cooperate and discuss in good faith to reach a prompt and reasonable resolution.

9.1.6 From time to time, [***] may [***] with [***].  As part of the [***], the Parties agree to [***] in a manner that [***], taking into account the [***].

9.2 Taxes.  

The Product Price set forth in Schedule A does not include sales, use, consumption, or excise taxes of any taxing authority.  The amount of such taxes, if any, will be added to the Product Price in effect at the time of shipment thereof and shall be reflected in the invoices submitted to Aimmune by CoreRx pursuant to this Agreement.  Aimmune shall pay the amount of such taxes (excluding any franchise or income taxes or other taxes or charges

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based on the income of the assets of CoreRx) to CoreRx in accordance with the payment provisions of this Agreement.  The Parties will cooperate to allow Aimmune to recover any value added taxes (“VAT”) (or other taxes, as applicable) that Aimmune may be entitled to recover from any country that assesses VAT on any Bulk Product.

9.3 Invoices.

9.3.1 Product Processed and Dispositioned for Release.  For all Bulk Product Processed and Dispositioned for Release by CoreRx in accordance with this Agreement, the Quality Agreement, and Section 8.1 above, CoreRx may invoice Aimmune for the Product Price for such Bulk Product once Dispositioned for Release, irrespective of whether after such Disposition for Release the Bulk Product is warehoused at CoreRx or shipped by CoreRx to Aimmune or its designee. CoreRx will invoice for the Unit Cost of the actual Bulk Yield listed in the Product Price in Schedule A. CoreRx shall provide any invoice hereunder to Aimmune to the attention of Aimmune Accounts Payable via email ([***]) referencing the Aimmune PO number, with a copy to the attention of Aimmune’s [***].  Invoices will be due net [***] ([***]) days after receipt of invoice.

9.3.2 Order Shortfalls.  If the number of Lots in a given [***] of a Purchase Order is less than the [***] Manufacturing Firm Amount for such [***], then the difference between the number of Lots for that [***], as set out in the Purchase Order and in the [***] Manufacturing Firm Amount, represents an “Order Shortfall”. If Aimmune fails, within that same month, to order additional Lots in an aggregate quantity sufficient to eliminate the Order Shortfall, then Aimmune shall pay CoreRx an amount [***] “Order Shortfall Payment” and such amount, the “Order Shortfall Amount”).  Aimmune shall pay to CoreRx the full amount of the Order Shortfall Amount in one (1) lump sum payment net [***] ([***]) days after receipt of invoice for such Order Shortfall Payment, provided that CoreRx has invoiced Aimmune no earlier than the [***] day of the month following the month in which the Order Shortfall occurs. Further, Aimmune shall include additional Lots within future Purchase Orders, to be manufactured in months 3, 4, or 5 of the Firm Manufacturing Commitment following the Order Shortfall, so as to cancel out such Order Shortfall.

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9.4 Payment Procedure.

Aimmune shall pay all correct invoices net [***] ([***]) days after receipt of invoice, or if Aimmune disputes such invoice in good faith, then Aimmune shall pay the undisputed amount as provided earlier in this sentence and the remainder [***] ([***]) days following resolution of such dispute, in accordance with Section 18.1 hereof.  All payments due hereunder to CoreRx shall be sent to CoreRx at the times set forth herein by wire transfer to such accounts as CoreRx may designate to Aimmune in writing from time to time in accordance with Section 19.10 hereof.  

9.5 Monthly Reporting.

CoreRx shall provide Aimmune with the following information by the [***] ([***]) calendar day of the month in a format to be determined and acceptable to both companies:  (1) detailed report of the Lots released in the previous month, including quantity and value; (2) reconciliation of Peanut Flour and work-in-progress remaining at month-end (e.g. [***]); (3) reconciliation of “End of Lot”/ready-to-ship product close out report that [***]; and (4) a near expiry (within [***] ([***]) months) and obsolescence schedule for Peanut Flour.

9.6 Inventory and Physical Asset Counts.

CoreRx shall support Aimmune requests for inventory or physical inventory accounts on a quarterly basis.

ARTICLE 10:   RECORDS; AUDITS; REGULATORY MATTERS; RECALLS  

10.1 Production Records.  

If requested, CoreRx shall provide Aimmune or its designee with one properly completed copy of the Production Records prepared for each Lot of Bulk Product Dispositioned for Release by CoreRx’s quality assurance group.  CoreRx will provide additional copies at Aimmune’s expense.

10.2 Recordkeeping.  

CoreRx shall maintain true and accurate books, records, test and laboratory data, reports and all other information relating to Processing and Release Testing under this Agreement, including all information required to be maintained by all Applicable Laws and any Regulatory Authority.  Such information shall be maintained in forms, notebooks and records for a period of at [***] ([***]) years or longer if required by Applicable Laws.

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10.3 Quality Audits and Inspections.

During the Term of this Agreement, duly-authorized employees, agents and representatives of Aimmune shall be granted access to the Commercial Facility and other pre-approved CoreRx facilities utilized for the Processing, Release Testing, and warehousing of Raw Materials, Peanut Flour, or the Product, once per Calendar Year and upon reasonable notice as per the terms of the Quality Agreement for the purpose of inspecting and verifying that CoreRx is complying with the Quality Agreement, Applicable Laws, the Specifications and the Batch Records.  CoreRx shall make all records regarding its performance under this Agreement reasonably available for inspection by Aimmune at such audits, as well as any records relating to performance of any Third Parties that are performing under this Agreement or supplying materials or ingredients to be used in the performance of this Agreement.  Aimmune shall have the right to perform additional audits solely to the extent necessary to address specific quality problems with the Product (“For Cause Audit”), however such problems must be identified in writing prior to such For Cause Audit.  Furthermore, CoreRx shall submit to inspections by any Regulatory Authority as may be required by Applicable Law or requested by such Regulatory Authority.  In the event that deficiencies in meeting with the requirements of this Agreement or the Quality Agreement are discovered by Aimmune or such Regulatory Authority and reported to CoreRx, CoreRx shall respond, in accordance with the terms of the Quality Agreement, and in any case within a reasonable period of time, to Aimmune with a written plan for corrective action and shall execute such plan as mutually agreed or as required by Applicable Law. CoreRx shall provide Aimmune promptly with a copy of any inspection reports.

10.4 Representatives for Inspection of Processing and Release Testing.  

10.4.1 Quality.  Aimmune may [***] representatives at the Facility to [***] that portion of the CoreRx Facility where Product is manufactured or stored, or to review Product documents as reasonably necessary. Such Aimmune representatives shall liaise with CoreRx regarding technical issues pursuant to the Quality Agreement, including but not limited to compliance matters associated with Batch Records, cGMP Regulations, Raw Material Specifications, Peanut Flour Specification, Product Specification, Applicable Laws, Environmental Laws, and Process Requirements. Such Aimmune representatives may provide input and advice to CoreRx personnel based on their observation of Processing and/or Release Testing, and may, commensurate with their authority, grant approvals, or take other actions required by the Quality Agreement.

10.4.2 Governmental Inspections. Aimmune may [***] representatives at the Facility for any governmental inspections as outlined in Section 10.3 with reasonable prior written notice to CoreRx (email acceptable) to be available for consultation as

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needed during such inspection.  Aimmune’s representatives may elect to be on-site for consultation only during a regulatory inspection specifically related to Aimmune’s Peanut Flour or Product.  Direct interaction with Regulatory Authorities during inspection of the Commercial Facility, Warehouse, and Testing Facility shall be the sole responsibility of CoreRx personnel; provided that CoreRx shall notify Aimmune prior to sending any responses to any Regulatory Authorities that implicates in any way the Product and Aimmune shall have the right to review and suggest changes to such responses, in advance in writing, such approval of changes not to be unreasonably withheld or delayed or conditioned by CoreRx with regard to incorporating such reasonable Aimmune comments. CoreRx will have final say on responses sent to any Regulatory Authority with regard to inspection of CoreRx.  Aimmune shall indemnify and hold harmless CoreRx for any action or activity of such Aimmune representatives while on CoreRx’s premises, except to the extent arising from CoreRx’s negligence, willful misconduct or breach of this Agreement.

10.4.3 [***].

[***] shall [***], and shall [***].

10.5 Governmental Inspections and Requests.  

CoreRx shall promptly, within [***] ([***]) [***], advise Aimmune in writing if an authorized agent of any Regulatory Authority intends to visit the Facility, Testing Facility, or any other pre-approved CoreRx facilities.  Such notification shall occur in advance if CoreRx is provided any advance notice.  If CoreRx is not provided any advance notice, such notification shall occur as soon as reasonably possible.  CoreRx shall furnish to Aimmune a copy of any report issued by such Regulatory Authority within [***] of CoreRx’s receipt of such report in the event that such report [***].  CoreRx may at its sole discretion redact any such report to protect the Confidential Information of CoreRx or any Third Parties.  Further, upon receipt of a Regulatory Authority request to inspect the Facility and any other pre-approved CoreRx facilities or audit CoreRx’s books and records with respect to the Facility, any other pre-approved CoreRx facilities, the Peanut Flour or the Product, CoreRx shall promptly, within [***] ([***]) [***], provide written notification to Aimmune, and shall provide Aimmune with a copy of any written document received from such Regulatory Authority as it relates to the Peanut Flour or the Product.  CoreRx will additionally notify Aimmune in writing of any and all inspections of the Facility or any other pre-approved CoreRx facilities by [***].

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10.6 Quality Agreement.

All records and regulatory matters shall be compliant with the Quality Agreement and with 21 CFR and any other Applicable Laws.

10.7 Recall.  

10.7.1 In the event CoreRx believes a recall from the market, field alert, Product withdrawal, withdrawal from clinical testing or field correction (“Recall”) may be necessary with respect to any Product provided under this Agreement, CoreRx shall promptly, within [***], notify Aimmune in writing.  CoreRx will not act to initiate a Recall without the express prior written approval of Aimmune. In the event Aimmune believes a Recall may be necessary with respect to a Product provided under this Agreement, Aimmune shall immediately notify CoreRx in writing and CoreRx shall provide all necessary cooperation and assistance to Aimmune.

10.7.2 CoreRx and Aimmune shall fully cooperate regarding any proposed Recall; and the Parties agree to keep each other advised, and to exchange copies of such documentation as may be required to assure regulatory compliance. Any decision for a Recall and all communications with the Regulatory Authorities relating to any such Recall, shall be the sole responsibility of, and under the control of, Aimmune.  Aimmune shall be responsible for coordinating all necessary activities relating to a potential Recall.  The Quality Agreement will set forth in detail each Party’s obligations in the event of a Recall.  Aimmune acknowledges and understands that CoreRx, as manufacturer of the Bulk Product, has significant regulatory obligations and each Party shall only act consistent with such obligations in connection with such Recall.  

10.7.3 Except as provided in Section 10.7.4 below, CoreRx shall bear the cost of, and shall reimburse Aimmune for all direct costs and expenses of Aimmune and of any Aimmune agents, contractors, Affiliates, licensees, sublicensees, co-marketers, co-promoters and distributors incurred in connection with any Recall related to the Product, including but not limited to [***] in the event such Recall is [***] by (a) negligence or willful misconduct of CoreRx (or any of its directors, officers, employees agents or Affiliates); or (b) supply by CoreRx of Bulk Product that does not comply with (w) this Agreement, (x) the Quality Agreement; (y) with the Product Specifications in effect at the time the Bulk Product was Processed; or (z) Applicable Laws.

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10.7.4 Aimmune shall bear the cost of and shall reimburse CoreRx and any of its agents, contractors, Affiliates, and distributors costs and expenses incurred in connection with any Recall related to the Product, including but not limited [***] in the event such Recall is [***] by (i) Aimmune’s negligence or willful misconduct, (ii) the acts or omissions of any Third Party except those contractors or vendors selected by CoreRx, (iii) the use of Artwork, Peanut Flour or other Aimmune Materials that do not comply with this Agreement, the Quality Agreement or Applicable Law, (iv)[***], or (v)[***].

10.7.5 If each Party contributes to the cause for a Recall, [***].  Aimmune shall give CoreRx prompt written notice of any Product Recalls that Aimmune believes were caused or may have been caused in whole or in part by CoreRx’s failure to comply with this Agreement or the Product Specifications.  

ARTICLE 11:   QUALIFICATION/VALIDATION; PLI READINESS

11.1 Qualification.  

Qualification/validation of the ML3 Facility, the Commercial Facility, and the Testing Facility (including all equipment, facilities, systems, SOPs, documentation, processes and materials) will be governed by the Quality Agreement and by the approved protocols for these qualification and validation activities.

11.2 PLI Readiness.

In order to have commercial scale manufacturing capacity available on a timely basis to supply Aimmune in connection with its anticipated launch of the Product, CoreRx agrees to use commercially reasonable efforts to prepare the ML3 Facility, the Commercial Facility (including all equipment, facilities, systems, SOPs and materials to be used in connection with the Processing and Release Testing of the Bulk Product under this Agreement), the Testing Facility and any other pre-approved CoreRx facility to successfully pass anticipated PLIs on a timely basis.

ARTICLE 12:   TERM; TERMINATION

12.1 Initial Term.  

Unless earlier terminated pursuant to the terms hereof, the term of this Agreement will commence on the Effective Date and will continue for a period of six (6) Contract Years following the Effective Date (the “Initial Term”). The Parties agree that effective on the Effective Date, the current FTE Program SOW (signed on August 28, 2017) and the Amendment to the FTE Program SOW (with an effective date of January 1^st, 2018) will terminate, and the terms and billing for commercial support of the Product by CoreRx as set forth in this Agreement, begin.

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12.2 Renewal Term.

This Agreement shall automatically be renewed for successive two (2) year terms after the end of the Initial Term (each, a “Renewal Term”), unless (a) CoreRx provides Aimmune with written notice at least two (2) years prior to the expiration of the Initial Term or any Renewal Term that CoreRx does not intend to renew after expiration of the Initial Term or current Renewal Term (as the case may be); (b) Aimmune provides CoreRx with written notice at least two (2) years prior to the expiration of the Initial Term or the current Renewal Term that Aimmune does not intend to renew after expiration of the Initial Term or the current Renewal Term (as the case may be); or (c) the Agreement is otherwise terminated in accordance with the other terms of this Article 12.   For purposes of this Agreement, the “Term” means, collectively, the Initial Term and the Renewal Term(s) (if any).

12.3 Termination by Mutual Agreement.  

This Agreement may be terminated at any time effective upon mutual written agreement between the Parties.

12.4 Termination for Default.  

This Agreement may be terminated by either Party in the event of the material breach or default by the other Party of the terms and conditions hereof; provided, however, the other Party shall first give to the defaulting Party written notice of the proposed termination of this Agreement, specifying the grounds therefor.  Upon receipt of such notice, the defaulting Party shall have thirty (30) days to cure such default or if a cure is not available using commercially reasonable efforts during such thirty (30) day period, the breaching Party shall exercise its best efforts to commence a cure during such thirty (30) day period and to cure the breach within an additional thirty (30) days; provided the breaching Party provides proof reasonably acceptable to the non-breaching Party that a cure during the initial thirty (30) days period was not available.  If the breaching Party does not cure such breach within the thirty (30) day cure period, then the other Party may terminate this Agreement effective immediately upon written notice of termination to the breaching Party.  Termination of this Agreement pursuant to this Section 12.4 shall not affect any other rights or remedies which may be available to the non-defaulting Party under this Agreement or at law or in equity.   The Parties acknowledge and agree that any termination of this Agreement pursuant to Sections 12.5 or 12.6 below is effective immediately and does not provide for any cure period.

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12.5 Regulatory.

12.5.1 If [***] is delayed by more than [***] ([***]) months due [***] or due [***], this delay shall be considered an incurable material breach of this Agreement, entitling Aimmune to terminate this Agreement in accordance with Section 12.4. Notwithstanding the foregoing, in the event of [***] because [***], Aimmune will not be entitled to terminate in relation to the PLI failure pursuant to Section 12.4 of this Agreement.

12.5.2 If Aimmune receives a [***], and if the [***] is [***] to [***], then Aimmune may terminate this Agreement effective immediately upon notice in writing to CoreRx.  

12.5.3 Notwithstanding the provisions of Sections 12.5.1 and 12.5.2, if the [***] in Section 12.5.1 or the [***] are due [***], and [***] less than [***] ([***]) months prior to the event that would otherwise have permitted Aimmune to terminate the Agreement under Sections 12.5.1 or 12.5.2, then Aimmune’s right to terminate the Agreement in such circumstance will not apply.  

12.6 Bankruptcy; Insolvency.  

Either Party may terminate this Agreement effective upon prior written notice to the other Party upon the occurrence of either of the following:

12.6.1 The entry of a decree or order for relief by a court having jurisdiction in respect of the other Party in an involuntary case under the Federal Bankruptcy Code, as now constituted or hereafter amended, or under any other applicable federal or state insolvency or other similar law and the continuance of any such decree or order unstayed and in effect for a period of sixty (60) consecutive days; or

12.6.2 The filing by the other Party of a petition for relief under the Federal Bankruptcy Code, as now constituted or hereafter amended, or any other applicable federal or state insolvency or other similar law.

12.7 Low Yield.  

It will be deemed a material breach under Section 12.4 if, (a) during any Contract Year, [***] percent ([***]%) of the total aggregate Lots of Bulk Product produced by CoreRx under this Agreement or [***] ([***]) Lots of Bulk Product, [***], is Non-conforming, or (b) for any Contract Year, the Annual Bulk Yield falls below [***] percent ([***]%) of the Expected Bulk Yield.

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12.8 Unilateral Termination by Aimmune.

Aimmune may unilaterally terminate this Agreement effective upon six (6) months’ prior written notice to CoreRx if:  

12.8.1 AR101 is not approved by the FDA on or before [***]; or

12.8.2 Aimmune discontinues development or commercialization of AR101 in the United States [***] in the United States.

12.9 Expiration; Termination; Consequences.

12.9.1 Options After Expiration or Termination by Aimmune. In the event that Aimmune terminates this Agreement other than pursuant to Section 12.4, then upon such termination, CoreRx shall Process, Release Test if requested by Aimmune, and ship, and Aimmune shall purchase in accordance with the provisions hereof, any and all amounts of Bulk Product ordered via Purchase Order by Aimmune hereunder prior to the date on which such notice is given. In such case, Aimmune shall pay CoreRx for the amount of any Bulk Product produced pursuant to such Purchase Order and for the value of the Raw Materials purchased in reasonable expectation of the Firm Commitment prior to the date of notification of termination.  These reasonable expenses for the Bulk Product shall not exceed [***], and CoreRx shall, in good faith, make prompt and reasonable efforts to reduce any avoidable costs.  Aimmune shall also compensate CoreRx for all other reasonable uncancellable commitments made by CoreRx to satisfy then-outstanding Purchase Orders or Firm Commitments, and [***], net of invoiced amounts charged to Aimmune.

12.9.2 On termination or expiration of this Agreement by Aimmune, Aimmune shall also have the option, subject to Section 12.9.1, to either (a) cease Processing of Bulk Product at the Facility and Warehouse or (b) [***]. CoreRx shall take reasonable measures to cease any ongoing Processing of Bulk Product and limit further expenses associated with such ongoing Processing.  

12.9.3 In the event that Aimmune ceases production of Bulk Product, CoreRx shall promptly return any remaining inventory of Peanut Flour, Product, Bulk Product or any other material being stored for Aimmune, to Aimmune or its designee at Aimmune’s cost and expense.  CoreRx shall either, at Aimmune’s option and cost and expense, (i) ship all any such remaining inventory of Peanut Flour, Product, Bulk Product or any other material to Aimmune as set forth in this Agreement or

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(ii) allow Aimmune reasonable access to the Facility or other pre-approved CoreRx facility, as Aimmune requires, to remove such Peanut Flour, Product, Bulk Product or any other material.  

12.9.4 Removal of Equipment.  Upon expiration or any termination of this Agreement, the Parties shall within [***] ([***]) days agree on a procedure which allows Aimmune to gain reasonable access to the ML3 Facility, as Aimmune requires, to remove any Equipment that is owned by Aimmune from the ML3 Facility (with Aimmune paying all reasonable costs to access and remove such Equipment) or offer CoreRx to purchase such Equipment from Aimmune by paying Aimmune the depreciated book value thereof (calculated on a straight-line basis).

12.9.5 Purchase of Materials.  Upon termination of this Agreement by CoreRx under Section 12.4 or by Aimmune under Section 12.8, at CoreRx’s option, Aimmune [***] purchase from CoreRx (i) at CoreRx’s Acquisition Cost, all Raw Materials and other materials acquired by CoreRx hereunder, subject to the limitations set forth in Section 4.4 above, (ii) all work-in-progress for the Bulk Product at CoreRx’s cost, and (iii) all other finished Bulk Product then in CoreRx’s possession at the applicable Product Price under this Agreement; and (iv) Aimmune shall compensate CoreRx for all other reasonable uncancellable commitments made by CoreRx to satisfy then-outstanding Purchase Orders or Firm Commitments.  Notwithstanding the foregoing, if any applicable cancellation penalty amount is less than an actual expense for such commitment (including restocking fees for returnable materials), Aimmune shall be required to reimburse CoreRx solely for the amount of the cancellation penalty rather than for the applicable expense.

12.9.6 Accrued Rights/Obligations/Survival.  Termination or expiration of this Agreement for any reason shall be without prejudice to any rights, which shall have accrued to the benefit of either Party prior to such termination or expiration, and shall not relieve either Party from any of its obligations (including payment obligations) which shall have accrued prior to such termination or expiration.  The following Articles and Sections shall survive expiration or any termination of this Agreement:  Articles 1, 10, 13, 14, 15, 17, 18 and 19; and Sections 5.3.5, 5.4, 9.4 and 12.9.

12.9.7 Other Obligations.  Upon expiration or termination of this Agreement, Aimmune shall have the right to require CoreRx to transfer manufacturing documentation (except those required to be maintained and stored by CoreRx by law) that CoreRx has used in its performance of this Agreement.  CoreRx shall promptly provide to Aimmune copies of any such manufacturing documentation that CoreRx maintains or stores. Commencing promptly upon the effective date of expiration or termination of this Agreement, CoreRx shall transfer to Aimmune and/or its

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designated alternative supplier(s) of Bulk Product copies of the most current versions of all such materials, regulatory and manufacturing documentation then at CoreRx, and shall make CoreRx’s personnel and other resources reasonably available, at Aimmune’s cost, as necessary to effect an orderly transfer to Aimmune or such alternative supplier(s), in each case subject to any restrictions or limitations owed by CoreRx to any Third Parties.  In the event that such documentation referenced in this paragraph include any CoreRx Background IP, CoreRx hereby grants to Aimmune under CoreRx’s Background IP a non-exclusive, worldwide, fully paid up, royalty-free, cancellable, perpetual license solely to use such documentation to Process and Test Bulk Product; provided that Aimmune shall reimburse CoreRx for any payments due for any Third Party components or Intellectual Property incorporated therein or necessary to use such documentation.

12.9.8 Exclusivity.  During the Term of this Agreement and for a period of [***] ([***]) years following the expiration or termination of this Agreement, CoreRx agrees that, other than pursuant to this Agreement, it will not [***], without the [***]: (a) [***] any [***] product for (i) the [***], or (ii) the [***] for which [***] to [***] product; or (b) [***] (collectively, “[***]”) any [***] product for (i) the [***], or (ii) the [***] for which [***] to [***] product. In addition, during the Term of this Agreement, CoreRx agrees that, other than pursuant to this Agreement, it will not [***], without the [***]: (a) [***] any [***] product for the [***], so long as such [***] appears on Schedule H hereof; or (b) [***] any [***] product for the [***], so long as such [***] appears on Schedule Hhereof.[***].  CoreRx agrees that its employees, contractors, officers and directors will (a) remain subject to the restrictions set forth in this Section 12.9.8 after the closing of any such acquisition and (b) not share with or disclose to, or use on behalf of, the acquiring entity any Confidential Information, Agreement Inventions or Work Product related to the Product or the Processing or Release Testing of the Product.  

ARTICLE 13:   INDEMNIFICATION; LIMITATION OF LIABILITY

13.1 Indemnification by Aimmune.  

Aimmune shall indemnify, defend and hold CoreRx, its Affiliates and their respective directors, officers, employees, contractors, agents, successors and assigns harmless from and against any damages, judgments, claims, suits, actions, liabilities, costs and expenses (including, but not limited to, reasonable attorneys’ fees) resulting from any Third Party claims or suits (“Losses”) to the extent arising out of (a) after passage of title and risk of loss for Bulk Product to Aimmune (or Aimmune’s designee), the use, handling, Discharge, distribution, marketing or sale of Bulk Product supplied to Aimmune by CoreRx under this Agreement; (b) Aimmune’s uncured material breach of any of its warranties,

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representations, covenants or obligations under this Agreement; (c) any [***] or willful misconduct by Aimmune or its Affiliates, employees, contractors selected by Aimmune or agents under this Agreement; (d) the use of Aimmune Materials and Artworkprovided to CoreRx by Aimmune under this Agreement. (e) [***]; and/or (f) any claim of infringement or misappropriation of Intellectual Property rights of a Third Party related to the use of Aimmune Materials, Aimmune Confidential Information or Intellectual Property rights owned or controlled by Aimmune;provided, however that the foregoing indemnity shall not apply to the extent that any Losses are covered by CoreRx’s indemnification obligations under Section 13.2 of this Agreement.

13.2 Indemnification by CoreRx.  

CoreRx shall indemnify, defend and hold Aimmune, its Affiliates and their respective directors, officers, employees, contractors, agents, successors and assigns harmless from and against any Losses to the extent arising out of (a) CoreRx’s uncured material breach of any of its warranties, representations, covenants or obligations under this Agreement; (b)  any [***] or willful misconduct by CoreRx or its Affiliates, employees, contractors selected by CoreRx or agents under this Agreement; (c) any claim of infringement or misappropriation of Intellectual Property rights of a Third Party related to the use of CoreRx Confidential Information or Intellectual Property rights owned or controlled by CoreRx; and/or (d) the generation, transportation, storage, handling and/or Discharge of Hazardous Materials by CoreRx in connection with CoreRx’s performance of this Agreement; provided, however that the foregoing indemnity shall not apply to the extent that any Losses are covered by Aimmune’s indemnification obligations under Section 13.1 of this Agreement.

13.3 Indemnification Procedures.  

A Party (the “Indemnitee”) that intends to claim indemnification under this Article 13 shall promptly notify the other Party (the “Indemnitor”) in writing of any action, claim or other matter in respect of which the Indemnitee or any of its Affiliates, or any of their respective directors, officers, employees, contractors or agents intend to claim such indemnification; provided, however, the failure to provide such notice within a reasonable period of time shall not relieve the Indemnitor of any of its obligations hereunder except to the extent the Indemnitor is prejudiced by such failure. The Indemnitee, its Affiliates, and their respective directors, officers, employees, contractors and agents shall use all reasonable efforts to cooperate with the Indemnitor and its legal representatives in the investigation, negotiation, compromise, settlement and defense of any action, claim or other matter covered by this indemnification, including by providing access to witnesses and evidence, including documents, available to the Indemnitee, at the Indemnitor’s sole cost and expense.  The Indemnitor shall be obligated to be in charge of and control of any such investigation, negotiation, compromise, settlement and defense, and shall have the

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right to select counsel reasonably satisfactory to the Indemnitee with respect thereto, provided that the Indemnitor shall promptly notify the Indemnitee of all developments in the matter.  The Indemnitee shall have the right, but not the obligation, to employ separate counsel in any such claim or action and to participate in the defense thereof but the fees and expenses of such counsel shall be at the expense of the Indemnitee unless (a) the employment of such separate counsel has been specifically authorized by the Indemnitor or (b) the Indemnitor has failed to assume the defense of such claim or action.  In no event shall the Indemnitee or Indemnitor compromise or settle any such matter without the prior written consent of the other Party, which consent shall not be unreasonably withheld, conditioned or delayed; nor shall the non-consenting Party be bound by any such settlement.

13.4 Survival of Indemnification and Limitation of Liability Obligations.  

The provisions of this Article 13 shall survive the expiration or any termination of this Agreement.

13.5 Limitation of Liability.  

in no event shall either Party be liable to the other Party for incidental, special, consequential, exemplary, indirect or punitive damages, including, but not limited to, any claim for damages based upon lost profits or lost business opportunity.

EXCEPT AS SET FORTH BELOW IN THIS SECTION 13.5, CORERX’S TOTAL LIABILITY to aimmune UNDER THIS AGREEMENT IS LIMITED TO THE [***] OF (A) [***] ([***]) PERCENT OF THE [***] in the Previous [***] ([***]) Months UNDER THIS AGREEMENT OR (B) $[***].  

eXCEPT AS SET FORTH IN THIS SECTION 13.5, AIMMUNE’S TOTAL LIABLITY to corerx UNDER THIS AGREEMENT IS LIMITED TO $[***].

THE LIMITATIONS AND EXCLUSIONS OF LIABILITY IN THIS SECTION 13.5 DO NOT APPLY TO DAMAGES ARISING OUT OF ANY OF THE FOLLOWING: (I) THE INTENTIONAL TORTS, UNLAWFUL CONDUCT OR GROSS NEGLIGENCE OF A PARTY; (II) A PARTY’S BREACH OF ITS OBLIGATIONS WITH RESPECT TO CONFIDENTIAL INFORMATION OF THE OTHER PARTY; OR (III) A PARTY’S INTENTIONAL MISAPPROPRIATION OR INTENTIONAL INFRINGEMENT OF THE OTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS.

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ARTICLE 14:   CONFIDENTIALITY

14.1 Confidentiality and Non-Use.  

Except as otherwise permitted under this Article 14, each Party agrees that during the Term and for a period of [***] ([***]) years thereafter, a Party and its Affiliates (collectively, the “Receiving Party”) receiving Confidential Information of the other Party or its Affiliates (collectively, the “Disclosing Party”) will (i) maintain in confidence such Confidential Information, which shall include without limitation using not less than the efforts such Receiving Party uses to maintain in confidence its own proprietary industrial information of similar kind and value, which shall be no less than a reasonable degree of care, (ii) not disclose such Confidential Information to any Third Party without the prior written consent of the Disclosing Party, except for disclosures expressly permitted below, and (iii) not use such Confidential Information for any purpose except those expressly permitted by this Agreement. Notwithstanding the foregoing, the Parties obligations of confidentiality and non-use shall survive with respect to any trade secret until such trade secret becomes generally known, if at all, through no fault of the Party receiving such Confidential Information.  

14.2 Access to Confidential Information.  

Each Party shall limit disclosure of Confidential Information received hereunder to only those of its (or its Affiliates’) directors, officers, employees, contractors, agents, legal counsel or other retained experts (“Representatives”) who are directly concerned with and have a need to receive such Confidential Information for the performance of this Agreement provided that (i) the Receiving Party first advises each such Representative to whom such Confidential Information is to be disclosed of the confidential nature thereof, and (ii) in each case such Representative is bound by obligations of confidentiality and non-use consistent with and at least as stringent as those set forth in this Article 14.  Each Party shall use reasonable safeguards to prevent unauthorized use or disclosure of the Confidential Information by such Representatives.

14.3 Exceptions to Confidential Information.  

Both Parties agree that the following shall not be considered “Confidential Information” subject to this Article 14:

14.3.1 information which the Receiving Party can demonstrate by competent evidence was in the public domain when disclosed by the Disclosing Party to the Receiving Party hereunder, or subsequently becomes publicly known through no act or failure to act on the party of the Receiving Party in breach of this Article 14;

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14.3.2 information that the Receiving Party can establish by competent evidence was already known by the Receiving Party prior to the time of disclosure by the Disclosing Party and was not acquired by the Receiving Party, directly or indirectly, from the Disclosing Party;

14.3.3 information that the Receiving Party lawfully receives from a Third Party; provided, however, that such Third Party was not obligated to hold such information in confidence; or

14.3.4 information that was independently developed by the Receiving Party without reference to or any other use of any Confidential Information of the Disclosing Party, as established by as evidenced by written records.

14.4 Return.

All Confidential Information shall remain the property of the Disclosing Party.  Upon the expiration or any termination of this Agreement, or at any time upon the request of the other Party, the Receiving Party shall immediately return or destroy any Confidential Information in the Receiving Party’s possession, custody or control, except that the Receiving Party may keep one (1) copy for archival purposes.  The Disclosing Party’s failure to request the return of Confidential Information shall not relieve the Receiving Party of its confidentiality obligations under this Agreement.

14.5 Enforcement.  

Each Party acknowledges and expressly agrees that the remedy at law for any breach by it of the terms of this Article 14 may be inadequate and that the full amount of damages which could result from such breach are not readily susceptible to being measured in monetary terms.  Accordingly, in the event of a breach or threatened breach by either Party of this Article 14, the other Party may be entitled to immediate injunctive relief prohibiting any such breach and requiring the immediate return of all Confidential Information. The remedies set forth in this Section 14.5 shall be in addition to any other remedies at law or in equity available for any such breach or threatened breach, including the recovery of damages from the breaching Party.

14.6 Permitted Disclosures.  

Notwithstanding any other provision of this Article 14, disclosure of Confidential Information of the Disclosing Party shall not be precluded if such disclosure:

14.6.1 is required under a valid order of a court or other governmental body to which the Receiving Party is subject, provided that to the extent practicable (i) the Receiving Party shall have first given written notice to the Disclosing Party of the need for

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such disclosure reasonably in advance so that the Disclosing Party may (if it elects) seek a protective order or other confidential treatment of its Confidential Information, and (ii) the Receiving Party shall limit the scope of disclosure of Confidential Information of the Disclosing Party to that reasonably necessary to comply with such applicable law, regulation or court order; or

14.6.2 is necessary for the Receiving Party to conduct financings, to file or prosecute patent applications, to prosecute or defend litigation, to comply with Applicable Laws (including without limitation securities laws, cGMP Regulations, the FDCA or regulations promulgated thereunder), to prepare or submit any filings with any Regulatory Authority relating to the Product or its Processing and Release Testing (including any BLA or MAA), to prepare for or undergo any inspections (including a PLI) by any Regulatory Authorities for the Product, to make any filing with the Securities and Exchange Commission or the securities regulators of any state or other jurisdiction or otherwise to establish rights or enforce obligations under this Agreement, but only to the extent that any such disclosure is reasonably necessary.

14.6.3 In the event either Party proposes to file with the Securities and Exchange Commission or the securities regulators of any state or other jurisdiction a registration statement or any other disclosure document which describes, discloses or refers to this Agreement under the Securities Act of 1933, as amended, the Securities and Exchange Act of 1934, or any other applicable securities law, such Party shall notify the other Party of such intention and shall provide, to the extent practicable, such other Party with a copy of relevant portions of the proposed filing reasonably prior to such filing (and any revisions to such portions of the proposed filing a reasonable time prior to the filing thereof), including without limitation any exhibits thereto, and shall use reasonable efforts to seek confidential treatment of any information concerning such other Party to the extent consistent with such Party’s disclosure obligations under applicable securities laws.

14.7 Confidentiality of Agreement.

The terms and conditions of this Agreement, but not the fact of its existence, shall constitute Confidential Information of the Parties, except that either Party may disclose such terms and conditions to its Affiliates in accordance with this Article 14.

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ARTICLE 15:   INTELLECTUAL PROPERTY

15.1 Background IP.  

As between the parties, CoreRx shall have and retain all right, title and interest in and to CoreRx Background IP. Aimmune shall have and retain all right, title and interest in and to Aimmune Background IP.  CoreRx shall use the Aimmune Background IP solely for the purposes of performing under this Agreement.  No rights are granted to the CoreRx Background IP unless expressly stated herein.

15.2 Work Product and Agreement Inventions.  

All Work Product and Agreement Inventions shall be the exclusive property of Aimmune. CoreRx agrees to and hereby does assign all of its rights, title and interest in all Work Product and Agreement Inventions to Aimmune. CoreRx shall promptly disclose to Aimmune all Agreement Inventions. At Aimmune’s request and expense, CoreRx shall execute (and shall cause its directors, employees, contractors and agents, and the directors, employees, contractors and agents of its Affiliates, to execute) any and all applications, assignments or other instruments which Aimmune shall reasonably deem necessary to apply for and obtain Intellectual Property rights in the United States or any foreign country in Aimmune’s name and to otherwise fully vest and protect the interests of Aimmune therein, all at Aimmune’s cost and expense. Aimmune will have the sole right to file, prosecute, maintain, defend and enforce any Intellectual Property rights related to Agreement Inventions and Work Product.  CoreRx further agrees that, at Aimmune’s request, cost and expense, CoreRx will assist Aimmune in the preparation, filing, prosecution, defense and enforcement of any such Intellectual Property rights.  CoreRx shall ensure that each of its employees, agents, consultants and contractors performing services under this Agreement have assigned or are obligated to assign his or her interests in any Agreement Invention and Work Product to CoreRx.

15.3 Licenses to Perform under this Agreement.

CoreRx hereby grants to Aimmune and its Affiliates a perpetual, irrevocable, worldwide, royalty-free, non-exclusive, transferable license solely to use CoreRx Background IP and other Intellectual Property rights owned or controlled by CoreRx solely as necessary for Aimmune to perform under this Agreement and Process, Release Test and further distribute and sell the Product in each case solely under and in accordance with this Agreement.  Aimmune hereby grants to CoreRx and its Affiliates a royalty-free, non-exclusive, nontransferable license solely to use Aimmune Background IP and other Intellectual Property rights owned or controlled by Aimmune solely as necessary for CoreRx to perform under this Agreement.  

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15.4 No Third Party IP.

CoreRx agrees that it will not knowingly: incorporate into or use in the manufacturing process of Bulk Product any Intellectual Property owned or controlled by a Third Party without the prior written consent of Aimmune.

ARTICLE 16:   FORCE MAJEURE

16.1 Effects of Force Majeure.  

Neither Party shall be held liable or responsible for failure or delay in fulfilling or performing any of its obligations under this Agreement in case such failure or delay is due to any condition beyond the reasonable control of the affected Party including, without limitation, Acts of God, war, riot, earthquake, tornado, hurricane, fire, civil disorder, explosion, accident, flood, sabotage, national defense requirements, or supplier strike, lockout or injunction (in any case, a “Force Majeure Event”); provided, however, that the party whose performance is delayed or prevented promptly notifies (or uses commercially reasonable efforts to notify) the other party of the nature and anticipated duration of the Force Majeure Event, as soon as it is reasonably able to do so.  Such excuse shall continue as long as the Force Majeure Event continues and during any reasonable recovery period, provided, however, that Aimmune’s Minimum Manufacturing Commitment Percentage under Section 6.1 and Minimum Testing Commitment Percentage under Section 6.2 will be proportionately adjusted based on the duration of the Force Majeure Event, and Aimmune may cancel without penalty any and/or all Purchase Orders or this Agreement in the event CoreRx is unable to fulfill any outstanding Purchase Order within sixty (60) days of its scheduled Delivery Date due to a Force Majeure Event.  Upon cessation of such Force Majeure Event, such Party shall promptly resume performance on all Purchase Orders which have not been terminated.

ARTICLE 17:   PRESS RELEASES; USE OF NAMES

17.1 Press Releases.  

Subject to Section 14.6, each Party agrees not to issue any press release or other public statement relating to this Agreement without the prior written consent of the other Party.  If a public statement is required by Applicable Laws, each Party shall use all reasonable efforts to provide to the other Party a copy of any public announcement regarding this Agreement as soon as reasonably practicable under the circumstances prior to its scheduled release (but in no event less than [***] ([***]) [***] prior to its scheduled release, unless a shorter period is required to comply with Applicable Laws under the circumstances).  Each Party shall have the right to expeditiously review and recommend changes to any such announcement and the Party whose announcement has been reviewed shall remove any Confidential Information of the reviewing Party that the reviewing Party reasonably

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deems to be inappropriate for disclosure except to the extent such disclosure is required by Applicable Laws or rules of a securities exchange or the Securities and Exchange Commission or the securities regulators of any state or other jurisdiction.  The contents of any announcement or similar publicity, which has been reviewed and approved by the reviewing Party, and any filing with the Securities and Exchange Commission, can be rereleased by either Party without a requirement for reapproval.

17.2 Use of Names.  

Except as expressly provided or contemplated hereunder and except as otherwise required by Applicable Laws, no right is granted pursuant to this Agreement to either Party to use in any manner the trademarks or name of the other Party, or any other trade name, service mark, or trademark owned by or licensed to the other Party in connection with the performance of this Agreement.  Notwithstanding the above, as may be required by Applicable Laws, Aimmune, CoreRx and their Affiliates shall be permitted to use the other Party’s name and to disclose the existence and terms of this Agreement in connection with securities or other public filings.

ARTICLE 18:   DISPUTE RESOLUTION

18.1 Dispute Resolution.  

The Parties recognize that a bona fide dispute as to certain matters may from time to time arise during the Term of this Agreement, which relates to either Party’s rights and/or obligations hereunder.  In the event of the occurrence of such a dispute, either Party may, by notice to the other Party, have such dispute referred to their senior officers as may be designated by each Party for attempted resolution by good faith negotiations within [***] ([***]) days after such notice is received.  If such personnel are unable to resolve such dispute within [***] ([***]) days (or such other period of time as the Parties may mutually agree in writing) of initiating such negotiations, each Party may thereafter pursue any and all rights and remedies it may have at law or equity.  If mutually agreeable, the Parties may explore alternative forms of dispute resolution, such as mediation.  Notwithstanding any other provision of this Article 18, either Party may seek a temporary restraining order or injunction against the other Party in the event of a breach of any confidentiality obligation hereunder, or to prevent a Party’s wrongful use of any Intellectual Property or other property hereunder, or any commercial matter relating to performance under this Agreement.

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ARTICLE 19:   MISCELLANEOUS

19.1 Independent Contractors.  

The relationship between Aimmune and CoreRx is that of independent contractors and nothing herein shall be deemed to constitute the relationship of partners, joint venturers, nor of principal and agent between Aimmune and CoreRx.  Neither Party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking with any Third Party.

19.2 Insurance.  

19.2.1 CoreRx shall, at its own cost and expense, obtain and maintain in full force and effect the following insurance policies during the Term: (i) Commercial General Liability insurance with per-occurrence and general aggregate limits of not less than $[***]; (ii) Products and Completed Operations Liability Insurance with per-occurrence and general aggregate limits of not less than [***]; (iii) Workers’ Compensation and Employer’s Liability Insurance with statutory limits for Workers’ Compensation and Employer’s Liability insurance limits of not less than $[***]; (iv) Professional Services Errors & Omissions Liability Insurance with per claim and aggregate limits of not less than $[***] covering sums that CoreRx becomes legally obligated to pay as damages resulting from claims made by Aimmune for errors or omissions committed in the conduct of the services outlined in the Agreement; (v) All Risk Property Insurance in an amount equal to [***], (vi) and Umbrella liability coverage providing excess limits for Commercial General Liability, Employer’s Liability ($[***] per occurrence/$[***] aggregate) and (vii) product recall insurance with limits of not less than $[***].  Notwithstanding any language in this Section 19.2.1 to the contrary, coverage under subsection (vii) may begin upon the earlier of: (a) the first (1^st) day that such coverage is required by CoreRx’s insurance policies, or (b) the [***] ([***]) day after Aimmune provides notice of a BLA or MAA approval to CoreRx.  In the event that any of the required policies of insurance are written on claims made basis, then such policies shall be maintained during the entire Term of this Agreement and for a period of not less than [***] ([***]) years following the termination or expiration of this Agreement.  CoreRx shall obtain a waiver from any insurance carrier with whom CoreRx carries Workers’ Compensation insurance releasing its subrogation rights against Aimmune.  CoreRx shall obtain a waiver from any insurance carrier with whom CoreRx carries Property Insurance releasing its subrogation rights against Aimmune.  Aimmune and its Affiliates shall be named as additional insureds under the Commercial General Liability, Products and Completed Operations Liability

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insurance policies as respects the manufacturing services outlined in this Agreement.  CoreRx shall furnish certificates of insurance for all of the above listed policies and required additional insured status to Aimmune as soon as practicable after the Effective Date and upon renewal of any such policies.  Each insurance policy that is required under this Section shall be obtained from an insurance carrier with an A.M.  Best rating of at least [***].  

19.2.2 Aimmune shall, at its own cost and expense, obtain and maintain in full force and effect the following insurance policies during the Term: (i) Commercial General Liability insurance with per-occurrence and general aggregate limits of not less than $[***]; (ii) Products and Completed Operations Liability Insurance with per-occurrence and general aggregate limits of not less than $[***]; (iii) Workers’ Compensation and Employer’s Liability Insurance with statutory limits for Workers’ Compensation and Employer’s Liability insurance limits of not less than $[***]; (iv)  All Risk Property Insurance in an amount equal to [***], (v) and Umbrella liability coverage providing excess limits for Commercial General Liability, Employer’s Liability and Automobile Liability insurance ($[***] per occurrence/$[***] aggregate) and (vi) product recall insurance with limits of not less than $[***].  Notwithstanding any language in this Section 19.2.2 to the contrary, coverage under subsection (vi) may begin upon the earlier of (a) the first (1^st) day that such coverage is required by Aimmune’s insurance policies or (b) the [***] ([***]) day after notice by Aimmune to CoreRx of a BLA or MAA approval.  In the event that any of the required policies of insurance are written on claims made basis, then such policies shall be maintained during the entire Term of this Agreement and for a period of not less than [***] ([***]) years following the termination or expiration of this Agreement.  Aimmune shall obtain a waiver from any insurance carrier with whom Aimmune carries Workers’ Compensation insurance releasing its subrogation rights against CoreRx.  Aimmune shall obtain a waiver from any insurance carrier with whom Aimmune carries Property Insurance releasing its subrogation rights against CoreRx.  Aimmune shall ensure that CoreRx and its Affiliates are named as additional insureds under the Commercial General Liability, Products and Completed Operations Liability insurance policies as respects the manufacturing services outlined in this Agreement.  Aimmune shall furnish certificates of insurance for all of the above listed policies and required additional insured status to CoreRx as soon as practicable after the Effective Date and upon renewal of any such policies.  Each insurance policy that is required under this Section shall be obtained from an insurance carrier with an A.M.  Best rating of at least [***].  

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19.3 Further Actions.

Each Party agrees to execute, acknowledge and deliver such further instruments, and do all such other acts, as may be reasonably necessary or appropriate in order to carry out the purposes and intent of this Agreement.

19.4 Assignment; Subcontractors.  

19.4.1 The Agreement may not be assigned or otherwise transferred by either Party without the prior written consent of the other Party; provided, however, that (a) Aimmune may, without such consent, assign the Agreement (i) in connection with the transfer or sale of all or substantially all of the assets of Aimmune or the line of business of which the Agreement forms a part, whether by merger, consolidation, sale of stock, reorganization or other transaction or series of transactions, or (ii) to any Affiliate of Aimmune, and further Aimmune shall be able, without prior written consent of CoreRx to cause an Affiliate of Aimmune to become an additional Party to this Agreement on the same terms and conditions in furtherance of its foreign business expansion; provided further that (b) CoreRx may, without such consent, assign the Agreement (i) in connection with the transfer or sale of all or substantially all of the assets of CoreRx or the line of business of which the Agreement forms a part, whether by merger, consolidation, sale of stock, reorganization or other transaction or series of transactions, or (ii) to any Affiliate of CoreRx. Any purported assignment in violation of the preceding sentence shall be void.  Any permitted assignee shall assume all obligations of its assignor under the Agreement.  No assignment shall relieve either Party of responsibility for the performance of any obligation under the Agreement.  

19.4.2 CoreRx may with Aimmune’s prior written consent, utilize subcontractors to perform any part of this Agreement. In the event Aimmune agrees to such a delegation of CoreRx’s responsibilities under this Agreement, CoreRx shall ensure such Third Party complies with the terms and conditions of this Agreement.

19.5 Waiver.  

Neither Party’s waiver of any breach or failure to enforce any of the terms and conditions of this Agreement, at any time, shall in any way affect, limit or waive such Party’s right thereafter to enforce and compel strict compliance with every term and condition of this Agreement.

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19.6 Severability.

Each Party hereby expressly agrees that it has no intention to violate any public policy, statutory or common laws, rules, regulations, treaty or decision of any government agency or executive body thereof of any country or community or association of countries; that if any word, sentence, paragraph, clause or combination thereof in this Agreement is found by a court or executive body with judicial powers having jurisdiction over this Agreement or either Party hereto, in a final unappealed order, to be in violation of any such provisions in any country or community or association of countries, such words, sentences, paragraphs, clauses or combination shall be inoperative in such country or community or association of countries and the remainder of this Agreement shall remain binding upon the Parties, so long as enforcement of the remainder does not violate the Parties’ overall intentions in this transaction.

19.7 Headings.  

The headings in this Agreement are for convenience of reference only and shall not affect its interpretation.

19.8 Construction.  

This Agreement has been jointly prepared on the basis of the mutual understanding of the Parties and shall not be construed against either Party by reason of such Party’s being the drafter hereof or thereof.

19.9 Exhibits, Schedules and Attachments.  

Any and all exhibits, schedules and attachments referred to herein form an integral part of this Agreement and are incorporated into this Agreement by such reference.

Page 61

19.10 Notices.

Any notice required or permitted to be given by the Parties pursuant to this Agreement shall be in writing and shall be (i) delivered by hand, (ii) delivered by overnight courier with tracking capabilities, (iii) mailed postage prepaid by first class, registered or certified mail, or (iv) transmitted by electronic mail) with receipt confirmed by the recipient or followed by a confirmation copy by mail as provided in (iii), and in each case (clauses (i) through (iv)) addressed to the recipient Party as set forth below, unless changed by notice so given:

If to CoreRx:	CoreRx, Inc.
	14205 Myerlake Circle
	Clearwater, FL
	Attn:  [***]
	Phone No.: [***]
	Email: [***]
	With a copy to:
	[***]
	Phone: [***]
	Email: [***]
If to Aimmune:	Aimmune Therapeutics, Inc.
	8000 Marina Boulevard, Suite 300
	Brisbane, CA 94005
	Attn:  [***]
	Phone: [***]
	Email: [***]
	With a copy to:
	[***]
	Phone: [***]
	Email: [***]

(A) with respect to any notice delivered pursuant to clauses (i) or (iv), such notice shall be deemed effective upon submission to such other Party, (B) with respect to any notice delivered pursuant to clause (ii), such notice shall be deemed effective the [***] following the date of submission to the carrier, and (C) with respect to any notice delivered pursuant to clause (iii), such notice shall be deemed effective five (5) [***] after the earlier of (x) confirmation of receipt by the recipient or (y) the date of submission of such facsimile or

Page 62

electronic mail, as applicable.  A Party may add, delete, or change the person or address to whom notices should be sent at any time upon written notice delivered to the other Party in accordance with this Section 19.10.

19.11 Counterparts.  

This Agreement may be executed in two or more counterparts, including counterparts delivered by facsimile or other electronic transmission, with the same effect as if both Parties had signed the same document.  All such counterparts shall be deemed an original, shall be construed together and shall together constitute one and the same instrument.

19.12 Governing Law; Entire Agreement.  

The validity, interpretation and performance of this Agreement shall be governed and construed in accordance with the laws of the State of Delaware without regard to the conflicts of laws provisions thereof.  This document constitutes the full understanding of the Parties and a complete and exclusive statement of the terms of their agreement.  This Agreement may not be modified or amended except in writing signed by a duly authorized representative of each Party.  No modification to this Agreement shall be effected by the acknowledgment or acceptance of any Purchase Order or shipping instruction forms or similar documents containing terms or conditions at variance with or in addition to those set forth herein.

19.13 Schedules.  

The following Schedules are attached hereto and incorporated herein by reference:

Schedule A: Product Price for Bulk Product; Analytical Release Testing Price; Supplier Readiness Fee

Schedule B: Product Definition; Product Specifications and Definition of “Process”, “Processed”, and “Processing” And Definition of “Release Test”, “Release Tested”, and “Release Testing”

Schedule C: List of Equipment and Equipment Maintenance Schedule

Schedule D: Theoretical and Expected Yields

Schedule E: Commercial Facility, ML3 Facility and Warehouse

Schedule F: Core Parameters

ScheduleG: CoreRx Maximum Capacity

ScheduleH: Additional Allergens

Page 63

IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed by their respective duly authorized representatives as of the day and year first above written.

AIMMUNE THERAPEUTICS, INC.		CORERX, INC.
By:	/s/ William Turner	By:	/s/ Todd R. Daviau
Name:	William Turner	Name:	Todd. R. Daviau
Title:	SVP, Technical Operations and_  Regulatory Science	Title:	President &CEO

Page 64

SCHEDULE A

Product Price for Bulk Product; Analytical Release Testing Price; Supplier Readiness Fee

Omitted pursuant to Regulation S-K, Item 601(a)(5)

SCHEDULE B

Product Definition; Product Specifications and Definition of “Process”, “Processed”, and “Processing” And Definition of “Release Test”, “Release Tested”, and “Release Testing”

Omitted pursuant to Regulation S-K, Item 601(a)(5)

SCHEDULE C

List of Equipment and Equipment Maintenance Schedule

Omitted pursuant to Regulation S-K, Item 601(a)(5)

SCHEDULE D

Theoretical and Expected Yields

Omitted pursuant to Regulation S-K, Item 601(a)(5)

Schedule E

Commercial Facility, ML3 Facility and Warehouse

Omitted pursuant to Regulation S-K, Item 601(a)(5)

SCHEDULE F

Core Parameters

Omitted pursuant to Regulation S-K, Item 601(a)(5)

SCHEDULE G

CoreRx Maximum Capacity

Omitted pursuant to Regulation S-K, Item 601(a)(5)

SCHEDULE H

Additional Allergans

Omitted pursuant to Regulation S-K, Item 601(a)(5)

EX-10.6

                                            Exhibit 10.6

Aimmune Therapeutics, Inc.

8000 Marina Boulevard, Suite 300

Brisbane, CA 94005

June 13, 2019

Stephen G. Dilly, M.B.B.S., Ph.D. 8000 Marina Boulevard, Suite 300

Brisbane, California 94005 Dear Stephen:

Aswehavediscussed,weareexcitedtoofferyouatemporarypromotion,temporaryincreasein your base salary and an extension to the term of your stock options in connection with an anticipatedincreaseinyourcommitmenttoAimmuneTherapeutics,Inc.(the"Company")asan employeeonthetermsdescribedinthisletter.Asyouknow,onNovember5,2017,youandthe CompanyenteredintoaTransitionandSeparationAgreementthatwasamendedinDecember 2018(the"Agreement")underwhichyouareemployedasSpecialAdvisortotheCompany.

UndertheAgreement,asamended, yourpart-timeemploymentwiththeCompanyisscheduled to end on December 31, 2019 (the "Employment End Date"). Under the Agreement, your currentbasesalaryispaidattherateof$12,000perannum(your"ExistingSalary")andyour outstandingequityawardscontinuetovestinaccordancewiththeiroriginalterms.

Inanticipationofasignificantincreaseinthecommitmentrequiredofyouinconnectionwith youremploymentwiththeCompany,wearepleasedtoincreaseyourbasesalaryfortheperiod ofJune1,2019throughSeptember30,2019(the"Full-TimeEmploymentPeriod")totherateof

$450,000perannum(the"TemporarySalary").Fromthedateyousignthisletterthroughthe end of the Full-Time Employment Period, you will serve the Company as its Senior Vice President, Clinical Science. In addition to the Temporary Salary, each option to purchase CompanycommonstockthatisvestedandoutstandingasoftheEmploymentEndDatewill remainoutstandinguntiltheearlierofDecember31,2021ortheoriginalexpirationdateofthe option.Youacknowledgethat,becauseofthisextension,eachoptionheldbyyouthatconstitutes an"incentivestockoption"willceasetoconstituteanincentivestockoptionuponyoursignature tothisletterandwillnolongerbeeligibleforthepotentialtaxbenefitsassociatedwithincentive stock options.

UpontheendoftheFull-TimeEmploymentPeriod,yourrighttotheTemporarySalarywillend, yourtitlewillreverttoSpecialAdvisorandyourbasesalarywillreverttotheExistingSalary.

Fortheavoidanceofdoubt,youroptionstopurchaseCompanycommonstockwillcontinueto vestthroughtheEmploymentEndDateand yourvestedoptionswillremainoutstandingthrough theearlierofDecember31,2021ortheoriginalexpirationdatethereof.

Ifyouareinagreementwiththechangesdescribedinthisletter,pleaseindicateyouracceptance ofthetermsofthisletterbyyoursignaturebelow,andreturnittomeatyourearliest

US-DOCS\I 07993598.3

 

convenience.Uponyoursignaturetothisletter,theAgreementwillbedeemedamendedto reflectthetermsofthisletter.AllothertermsandconditionsoftheAgreementwillnotbe affected by thisletter.

Sincerely,

By:

Dougl.Sheehy

Generounsel &Secretary

 

Accepted and Agreed:

Stephen G. Dilly, M.B.B.S. , Ph.D.

Date:0""i-J1:.   112.o19

2

US-DOCS\I07993598.3

 

EX-10.7

Exhibit 10.7

         Diamond Marina LLC & Diamond Marina II LLC

Attention: Stephen P. Diamond, Manager 2000 Sierra Point Parkway, Suite I 00 Brisbane, CA 94005

June 11, 2019

   Aimmune Therapeutics, Inc.

f.k.a. Allergen Research Corporation 8000 Marina Boulevard, Suite 200 Brisbane, CA 94005

Re: Lease dated February 23, 2015 (the "Lease") between Diamond Marina  LLC and Diamond Marina II LLC (collectively "Landlord") and Aimmune  Therapeutics,  Inc. (f.k.a. Allergen Research Corporation) encumbering ce1iain real prope1iy located at 8000 Marina Boulevard, Suites 200, 300, & 301, Brisbane, CA 94005 (the"Property")

Ladies and Gentlemen:

Please be advised that (1) as of the date hereof, Landlord  has conveyed  all of its  right,  title and interest in and to the Property, including its interest as landlord under the Lease, to HCP Life Science REIT, Inc. a Maryland corporation ("Purchaser"), and (2) Purchaser has assumed Landlord's obligations under the Lease arising from and after the datehereof.

In addition, all security deposits held by Landlord, if any, together with any interest earned thereon, have been transferred toPurchaser.

Accordingly, effective as of the date hereof, you are hereby notified and directed to deliver any notices, inquiries or requests relating to the Lease to Purchaser at: 1920 MainStreet

#1200, Irvine, CA 92614 Attn: Ryan Anderson and Scott Bohn.  The Purchaser will be reaching out with additional information, including property management and where to direct future rent payments.

Very truly yours,

Diamond Marina LLC, a California limited liability company

By:/s/Stephen P. Diamond

Stephen P. Diamond

Title: Manager

Diamond Marina II LLC, a California limited liability company

By:/s/Andrew Diamond

Andrew Diamond

Title: Manager

 

SECOND AMENDMENT TO LEASE

THISSECONDAMENDMENTTOLEASE(“SecondAmendment”)ismadeeffectiveandenteredintoasof June27,2017,byandbetweenDIAMONDMARINALLC,aCalifornialimitedliabilitycompany,andDIAMOND MARINA II LLC, a California limited liability company (collectively “Landlord”), and AIMMUNE THERAPEUTICS,INC.,aDelawarecorporation,formerlyknownasALLERGENRESEARCHCORPORATION,INC.,a Delaware corporation (“Tenant”).

RECITALS

A.Landlord and Tenant are parties to that certain Lease Agreement (“Lease”) dated February 23, 2015 and that First Amendment (“First Amendment”), pursuant to which Landlord leases to Tenant and Tenant leases from Landlord the Second Floor (Suite 200), which contains approximately 26,355 net rentable square feet, and a portion of the Third Floor (Suite 300), which contains approximately 11,665 net rentable square feet (collectively “Current Premises”), at 8000 Marina Boulevard, Brisbane, California, 94005 (“Building”). Capitalized terms used but not defined herein shall have the meanings given in theLease.

B.Landlord desires to lease to Tenant and Tenant desires to lease from Landlord a portion of the Third Floor (Suite 301) of the Building, which contains approximately 14,841 net rentable square feet and is shown in the floor plan attached hereto as Exhibit A (“ExpansionPremises”).

NOW, THEREFORE, in consideration of the foregoing Recitals, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

1.Commencement. The Lease of the Expansion Premises shall commence upon the later of January 1, 2018 and the date Landlord delivers the Expansion Premises to Tenant (which date must be a Business Day) with the Tenant Improvement Work substantially completed (“Expansion Premises Commencement Date”). Landlord shall use commercially reasonable best efforts to deliver the Expansion Premises to Tenant with the Tenant Improvement Work substantially completed on or before January 1, 2018, and Tenant agrees that it shall fully cooperate with Landlord throughout the construction process to meet this timeline goal.

2.Delivery and Tenant Improvement Work.  Landlord shall deliver the Expansion Premises  to Tenant in good condition and repair and in compliance with applicable building codes and laws with the “Tenant Improvement Work” which shall be performed by Landlord at Landlord’s expense pursuant to the terms of the “Work Letter” attached hereto as Exhibit B. Following delivery, the term “Premises” shall reflect both the Expansion Premises and the Current Premises combined.

AimmuneSecondAmendment- 1-

 

3.Term. The Term of the Expansion Premises shall commence upon the Expansion Premises Commencement Date and shall end on June 30, 2024. The Term of the Current Premises shall also be extended to be coterminous, so that Tenant’s Lease of the Expansion Premises and the Current Premises shall expire on June 30, 2024 (“Lease Expiration Date”).

4.Monthly Base Rent for Expansion Premises. The monthly Base Rent for the Expansion Premises shall commence on the Expansion Premises Commencement Date and shall be as follows:

For Suite 301:

Period	Monthly Base Rent Rate	Monthly Base Rent
Through Dec 31, 2018	$3.70	$54,912
Jan 1, 2019 – Dec 31, 2019	$3.81	$56,544
Jan 1, 2020 – Dec 31, 2020	$3.93	$58,325
Jan 1, 2021 – Dec 31, 2021	$4.05	$60,106
Jan 1, 2022 – Dec 31, 2022	$4.17	$61,887
Jan 1, 2023 – Dec 31, 2023	$4.30	$63,816
Jan 1, 2024 – June 30, 2024	$4.43	$65,730

Tenant’s monthly Base Rent during Months 1 – 3 shall be 100% Abated. Tenant’s monthly Base Rent during Months 4 – 6 shall be 50% Abated. In lieu of monthly rent credits for such Abated Rent, Landlord may pay Tenant all or a portion of the unapplied credits or give more than each month’s required credit earlier against rent otherwise due.

5.Monthly Base Rent for the Current Premises. The monthly Base Rent for the Current Premises shall remain as stated in the First Amendment, with additional three percent (3%) annual escalations through the extended portion of the Term shown asfollows:

For Suite 200:

Period	Monthly Base Rent Rate	Monthly Base Rent
Dec 1, 2021 – Nov 30, 2022	$4.12	$108,569
Dec 1, 2022 – Nov 30, 2023	$4.24	$111,826
Dec 1, 2023 – June 30, 2024	$4.37	$115,181

For Suite 300:

Period	Monthly Base Rent Rate	Monthly Base Rent
Dec 1, 2021 – Nov 30, 2022	$4.12	$48,055
Dec 1, 2022 – Nov 30, 2023	$4.24	$49,496
Dec 1, 2023 – June 30, 2024	$4.37	$50,981

6.Security Deposit. The Security Deposit shall remain$304,124.

7.Parking, Pro Rata Share, and Base Year. Upon the Expansion Commencement Date, Tenant’s Pro Rata Share (to be 26.2%) shall be increasedaccordingly

AimmuneSecondAmendment- 2-

 

based on the additional square footage leased. From and after the Expansion Commencement Date, Tenant shall be entitled to use 3.3 parking spaces per 1,000 rentable square feet of space in the Premises (i.e., 173 parking spaces). Retroactive to January 1, 2017, The Base Year for the both the Current Premises and the Expansion Premises shall be Calendar Year 2017. The Operating Expense Excess payments made by Tenant for the Current Premises from January – June 2017 totals $8,843, and such payment shall  be  refunded  by  Landlord  to  Tenant. Notwithstanding anything to the contrary, (a) Operating Expenses for the Base Year shall be determined as if the Building had been 100% occupied and Landlord had been supplying services to of the Rentable Area of the Building, (b) Operating Expenses shall exclude deductibles for earthquake and flood insurance and other costs of uninsured casualty to the extent Tenant’s Pro Rata Share thereof exceeds $50,000, (c) to the extent Operating Expenses for a calendar year include premiums for insurance not carried during the Base Year, then Operating Expenses for the Base Year shall be increased as if Landlord carried such insurance during the Base Year, and (d) if a special assessment payable in installments is levied against the Building, Operating Expenses and Real Estate Taxes for any year shall include only the installment of such assessment and any interest payable or paid during such year as if such assessment were paid over the longest possibleterm.

8.Right of First Offer.By virtue of the First Amendment (Section 8 + Exhibit C), Tenant already has an on-going Right of First Offer (“ROFO”) on the 4th Floor of the Building (the 4th Floor’s current tenant is Stella & Dot). Such ROFO right shall remain in full force and effect. Upon execution of this Second Amendment, and pursuant to the terms and conditions attached hereto as Exhibit C, Tenant shall additionally be granted an on-going Right of First Offer (“ROFO”) with respect to all or any space which may become available for lease located on the 1st, 5th, and 6th Floor of the Building (each a “ROFO Premises”) subject to the existing rights of tenants leasing the ROFO Premises on such floors as of the date hereof and any ROFO rights thereto existing as of the date hereof.

9.FF&E Allowance. Upon Tenant’s acceptance of the Expansion Premises and delivery of the Acceptance Form, Landlord shall pay to Tenant an FF&E Allowance of One Hundred Thousand Dollars ($100,000), to reimburse Tenant for its reasonable costs associated with construction of and its occupancy in the Expansion Premises, which may include “soft” costs associated with making the Premises ready for Tenant’s occupancy, such as consultants, architects, design, engineering costs, IT cabling, furniture, and Exterior Building Signage (the “FF&E Allowance”).

10.Renewal Option. Tenant’s “Renewal Option” described in Section 4.4 of the Lease shall remain in full force and affect, except that the Renewal Option shall be for a five (5) year term (the “Renewal Term”).

AimmuneSecondAmendment- 3-

 

11.Exterior Building Signage. Landlord shall provide Tenant with the right, subject to Landlord’s reasonable consent, to install one (1) Exterior Building-Top Sign facing Highway 101 and suite entry signage on the second and third floors on the doors to the Premises or the walls adjacent thereto, pursuant to the following terms and conditions:

A. The name shown on the Building-top sign shall be “Aimmune” or “Aimmune Therapeutics” and may in either case, at Tenant’s option, include Tenant’slogo.

B. Tenant’s right shall be subject to applicable governmental approvals, the City of Brisbane, and the Sierra Point Owners Association. The “Sierra Point Building-Mounted Signage Standards” call for maximum dimensions of building top signage to be 6’ tall x 41’ 6” wide. (http://www.brisbaneca.org/sites/default/files/SierraPointSignProgram_2016.pdf) The location of the Building-top sign shall be subject to such approvals; Landlord consents to the installation of the sign in the location of the red box on this photograph of the Building:

C. Prior to installing any Building-top sign, Tenant shall submit to Landlord detailed plans showing the proposed signage and the details for its installation, and obtain Landlord’s advance written approval, which shall not be unreasonably withheld.

D. The Building-top sign shall be personal to the original Tenant or its affiliate assignee or any Permitted Transferee. The Building-top signage right cannot be transferred to any subtenant, assignee, transferee, or third party other than to an affiliate assignee or any PermittedTransferee.

E. Tenant’s right to exterior building signage is not exclusive, and Landlord hereby advises Tenant that it may permit other tenants to install additional exterior Building-topsigns.

F. Tenant shall be responsible for all costs of installation, maintenance, and removal of the Building Signage. Removal of the Building-top signage shall include any necessary  repair of the Building in order to return the Building to its condition before the signage was installed. In the event that Tenant fails to properly maintain or remove the Building Signage, then Landlord shall have right to perform such acts at Tenant’s expense.

AimmuneSecondAmendment- 4-

 

G. Subject to applicable governmental approvals, the Building-top sign may at Tenant’s option be a lit sign.

H. Tenant’s right to exterior building signage shall be terminated in the event of any of the following:

• TenantremovestheBuilding-topsignanddoesnotinstallanewsignwithintwelve

(12) months

• Tenant Default that remains uncured for a period exceeding thirty (30)days

• Tenant vacates thePremises

• The event of any Assignment, Sublease, or Transfer of fifty percent (50%) or more of the Premises other than to an affiliate assignee or any PermittedTransferee.

• The expiration of the Lease

12. Other Lease Changes.

A. Section 4.5 of the Lease (Substitution of Space) is hereby deleted in itsentirety.

B. In Section 14.1(b) of the Lease, the phrase “or Tenant has defaulted under this Lease on two or more occasions within the prior year” is hereby deleted.

C. Section 14.1(c) of the Lease is hereby replaced with: “the assignment or sublease is for a portion of a floor or would result in the dividing or sub-demising of afloor.”

D. Section 14.7 of the Lease (Permitted Transfers) is hereby amended by deleting the phrase “and credit quality” throughout the Section.

E. Section 15.1(c) of the Lease is hereby replaced with: “The abandonment or vacating for more than six (6) months of the Premises by Tenant.

F. Section 29.12 of the Lease (Confidentiality) is hereby deleted.

G. Section 7.2 of the Lease (Operating Expenses) is hereby amended: to the extent Operating Expenses for a calendar year include premiums for earthquake insurance not carried during the Base Year, then Operating Expenses for the Base Year shall be increased as if Landlord carried such earthquake insurance during the Base Year.

H. Section 7.3 of the Lease (Occupancy Assumption) is hereby amended by deleting the phrase “at Landlord’s Option” from the firstsentence.

I. Pursuant to Section 16.5 of the Lease, within sixty (60) days after the execution of this Second Amendment, Landlord shall use commercially reasonable best efforts to cause its current security holder to execute a Subordination Agreement, Attornment and Nondisturbance Agreement generally in the form attached hereto as Exhibit D. The  following  language  will  be  added  to  the  end  of  Section  16.5  of  the  Lease: “Landlord and Tenant agree that any subordination to any future financing will include non-disturbance on a lender’s commercially reasonable subordination and non-disturbance form.

AimmuneSecondAmendment- 5-

 

By way of example, the parties agree that the form attached as Exhibit D to the Second Amendment is commercially reasonable.”

13.No Further Amendment. The Lease, as modified by this Second Amendment, shall remain in full force andeffect.

14.Confirmation of Lease. Tenant hereby represents and warrants to Landlord that, as of the date hereof, (a) the Lease is in full force and effect and has not been modified except pursuant to the First Amendment and this Second Amendment; (b) Tenant has not subleased or assigned any of its right, title and interestinandtotheLeaseandhasfullpowerandauthoritytoenterintoandperformitsobligationshereunder;

(c) to Tenant’s knowledge without duty of inquiry, there are no defaults on the part of Landlord existing under the Lease; (d) to Tenant’s knowledge without duty of inquiry, there exists no valid abatements, causes of action, counterclaims, disputes, defenses, offsets, credits, deductions, or claims against the enforcement of any of the terms and conditions of the Lease; (e) this Second Amendment has been duly authorized, executed and delivered by Tenant and, if executed and delivered by Landlord, shall constitute the legal, valid and binding obligation of Tenant; and (f) there are no actions, whether voluntary or otherwise, pending against Tenant under the bankruptcy or insolvency laws of the United States or any state thereof.

15.Voluntary Agreement. The parties have read this Second Amendment, and on the advice of counsel they have freely and voluntarily entered into this Second Amendment.

16.Representation by Counsel. Each party acknowledges that it has been representedby independent legal counsel of its own choice in connection with the execution of this Second Amendment and has had an adequate opportunity to investigate the subject matter of this Second Amendment before executing this Second Amendment.

17.Brokerage. Landlord and Tenant each warrant to the other that it has not had dealings with any other finder, broker, or agent in connection with this Second Amendment, other than CBRE (Todd Graves) representing Tenant and Newmark Cornish & Carey (Craig Kalinowski) representing Landlord, who shall both be paid by Landlord pursuant to their separate agreement. Each party shall indemnify, defend and hold harmless the other party from and against any and all costs, expenses or liability for commissions or other compensation or charges claimed by any other finder, broker, or agent based on dealings with the indemnifying party with respect to this Second Amendment.

18.General Provisions. This Second Amendment shall bind and inure to the benefit of the parties and their respective successors and assigns. This Second Amendment shall be governed, and construed  in accordance with, the laws of the State of California without regard to or application of the principles of conflict of laws. This Second Amendment together with the Lease and the First Amendment constitutes the entire agreement between the parties with respect to the subject matter hereof and thereof.

AimmuneSecondAmendment- 6-

 

19.Counterparts. This Second Amendment may be signed in two or more counterparts. When at least one such counterpart has been signed by each party, this Second Amendment shall be deemed to have been fully executed, each counterpart shall be deemed to be an original, and all counterparts shall be deemed to be one and the same agreement.

INWITNESSWHEREOF,thepartieshaveexecutedthisSecondAmendmenttoLeaseasofthedatefirst set forth above.

TENANT:LANDLORD:

AIMMUNE THERAPEUTICS, INC.DIAMOND MARINALLC

a Delaware corporationa California limited liability company

By:	/s/ ERICBJERKHOLT	By:	/s/ STEPHEN DIAMOND
Name:	Erik Bjerkholt	Name:	Stephen Diamond
Title:	CFO	Title:	Manager
Date:	June 30, 2017	Date:	June 30, 2017

DIAMOND MARINA II LLC

a California limited liability company

By:/s/ ANDREW DIAMOND

Name:Andrew Diamond Title:Manager Date: June 30,2017

AimmuneSecondAmendment- 7-

 

EXHIBIT A

FLOOR PLAN OF EXPANSION PREMISES

AimmuneSecondAmendment- 8-

 

EXHIBIT B

WORK LETTER FOR TENANT IMPROVEMENTS

TenantImprovementWork.Landlord at Landlord’s expense shall deliver the Expansion Premises to Tenant having completed the following “Tenant Improvement Work” at its sole cost andexpense:

1) Generally consistent with the “Reconfigured Floor Plan” attached hereto as Exhibit B-1, Landlord shall construct new interior improvements consisting of new offices, conference rooms, break room, and reception area. Demising walls and doors currently dividing the Third Floor shall also be removed.

2) With the construction of the new walls and rooms, Landlord shall also perform related as- needed modifications to the lighting fixture and switch layout, HVAC System distribution, and Fire Life Safety & Sprinkler distribution.

3) Electrical: there shall be at least 2 electric outlets per office, j-boxes for Tenant’sworkstations, and miscellaneous electric outlets for Tenant’s printers, appliances, board room AV equipment, network equipment, and other typical standard officeneeds.

4) The new rooms shall be constructed with full-height doors, frames, and glass sidelights, consistent with the finishes for the pre-existingoffices.

5) All new building standard carpet tiles (Shaw Contract Carpet Tiles - Style: Stipple (5T116); Color: Graphite (13510)) shall be installed throughout the office areas of the entire third floor. The flooring in the reception area and break room shall be polished concrete or Armstrong LVT or similarproduct.

6) All new paint as needed throughout the entire third floor. Walls shall primarily be painted white, with accent colors for selected walls.

7) The existing ceiling lighting, grid and tiles shall remain, with the cleaning, repair, or replacement of any damaged or stained ceiling tiles so that the ceiling grid looks in good condition.

8) The existing exterior window blinds shall remain, with the cleaning, repair, or replacement of any damaged or stained window blinds so that the window blinds look in good condition.

9) The Break Room shall be redesigned with new cabinetry, sink with garbage disposal, two dishwashers, and electrical to accommodate Tenant’s appliances. The flooring in the Break Room shall be polished concrete or Armstrong LVT or similarproduct.

10) 3 IT Rooms – There are 3 IT Rooms (2 located on the 3rd Floor and 1 located on the 2nd Floor), and each shall be equipped with 24/7 Cooling

AimmuneSecondAmendment- 9-

 

sized to Tenant’s current needs. Additionally, on both the 2nd Floor and 3rd Floor shall each have 1 dedicated circuit connected to the Building’s emergency power system.

Tenant’s Construction Contact. Tenant’s Construction Contact, who shall be empowered by Tenant to make decisions and respond to questions raised by Landlord during the construction of Tenant Improvement Work, shall be: Mark Camarena, mcamarena@aimmune.com.

Special Conditions. All of Landlord’s work shall be performed in a good and workmanlike manner, using materials of good quality and in accordance with law.Landlord shall bear responsibility to construct all improvements consistent with any applicable building codes and laws. Tenant agrees that Landlord has the right to modify the Tenant Improvement Work as required by law.Tenant agrees to promptly respond to  any inquiry or question of Landlord for the construction of these improvements. Following Delivery of the Premises, Landlord shall have no further responsibility to perform improvements to the Premises, subject to a Punch List of minor items to be completed following Delivery and otherwise subject to the terms of the Lease; except, if required by written notice from governmental jurisdiction, Landlord shall be responsible to perform ADA, Title 24, or other code compliance work for the Expansion Premises asdelivered.

Exclusions. For avoidance of doubt, the following is excluded from the Landlord’s Tenant Improvement Work: furniture, fixtures, equipment, network cabling, TV cabling and service, AV systems, office signage, specialty finishes, cabinetry (excluding new Break Room cabinetry), special power systems, security systems, break room appliances (excluding dishwashers and garbage disposal), moving & relocation, server room set-up, or any other items not included above.

Early Access. Tenant shall be permitted at least four (4) weeks of early access to the entire third floor prior to the Expansion Premises Commencement Date, without rental obligation, for the purpose of preparing the space for occupancy.

Stairwell Improvements. Tenant shall be permitted to install, maintain and operate, at Tenant’s sole cost and expense, a keycard entry system in both stairwells on the second and third floors for entry into the Premises on both floors and a video surveillance system in connection therewith. In such event, provided Tenant’s system is compatible with the Building system then Landlord shall program the main entry to the Building to accept the same keycards used for Tenant’s stairwell keycard entry system.

AimmuneSecondAmendment- 10-

 

EXHIBIT B-1

RECONFIGURED FLOOR PLAN

AimmuneSecondAmendment- 11-

 

EXHIBIT C

RIGHT OF FIRST OFFER TERMS

Tenant’s Right of First Offer (“ROFO”) is based on and subject to the following conditions:

(a)The ROFO shall be subject to the existing rights of any Tenants leasing the ROFO Premises as of the date hereof.  The ROFO shall not limit Landlord’s ability to extend or renew the  leases of those tenants now or at any time in the future in possession of any ROFO Premises.

(b)The ROFO Premises will be incorporated into the Leased Premises except that (a) the economic terms for the ROFO Premises shall be as set forth in the ROFO Notice or as otherwise agreed in writing by the parties, (b) the Lease Term shall be a minimum of five (5) years, (c) Tenant’s Pro Rata Share shall be increased to reflect the addition of the ROFO Premises, and (d) the number of parking spaces shall be adjusted to reflect the addition of the ROFO Premises. Unless specified otherwise in the ROFO Notice, the ROFO Premises shall be leased on an “as-is” basis, and Landlord shall have no obligation to improve the ROFO Premises or grant Tenant any improvement allowance for the ROFO Premises unless Landlord intends to offer (or offers) any such concessions in the ROFONotice.

(c) The ROFO Premises must be accepted by and leased to Tenant inits

entirety.

(d) Anything herein to the contrary notwithstanding, Tenant shall haveno

rights with respect to the ROFO Premises if:

(i)an Event of Default exists and is continuing, either on the date Landlord delivers the ROFO Notice to Tenant or when the ROFO Premises are to be incorporated into this Lease;

(ii)Tenant has assigned or sublet any portion of the Premises (other than pursuant to a Permitted Transfer) as of the date Landlord would otherwise deliver the ROFONotice;

(iii)Tenant or a Permitted Transferee is not occupying the Premises on the date Landlord would otherwise deliver the ROFO Notice; or

(iv) the ROFO Premises is not intended for the exclusive useof

Tenant or a Permitted Transferee.

Tenant’s sole rights as to the ROFO Premises shall be as follows:

(e)At all times during the Term of the Lease, and prior to offering the ROFO Premises for lease to any third party, Landlord shall deliver a written notice(the

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“ROFO Notice”) to Tenant setting forth the terms upon which Landlord proposes to lease all or a portion of any ROFO Premises defined in this First Amendment.

(f)Tenant shall have five (5) business days in which to accept theterms contained in the ROFO Notice or otherwise to reach agreement to incorporate such ROFO Premises into the Lease. If Landlord and Tenant do not so reach agreement within such period and thereafter incorporate the applicable ROFO Premises into the Lease, Landlord shall be free to market the ROFO Premises to third parties; provided that Landlord shall not enter into an agreement to lease the ROFO Premises on terms thatare materially more favorable to the third party than those set forth in the ROFO Notice without submitting such terms to Tenant in a new ROFO Notice. For purposes hereof, the terms offered to a third party shall be deemed to be materially more favorable than those set forth in the ROFO Notice if there is more than a ten percent (10%) reduction in the effective cost per square foot of Rentable Area, considering all of the applicable economic terms, including, without limitation, the length of term, the net rent, and any expense or other financial escalation, or other material modification of the size or condition of the ROFO Premises being offered and/or any concessions offered in connection with such space. If the terms agreed to with a third party are materially more favorable than those set forth in the ROFO Notice, then Landlord shall so inform Tenant with a new ROFO Notice and Tenant shall have the right, for a period of ten (10) business days, to accept such terms in writing and thereafter promptly to enter into an amendment of the Lease incorporating the ROFO Premises, subject to subsection (b) above. In the event Landlord and Tenant do not enter into such amendment within the period specified, Landlord shall be free to enter into a lease with a third party on terms not materially more favorable to the third party than those offered toTenant.

(g)If Landlord fails to enter into a lease agreement with a third party with respect to the ROFO Premises within six (6) months after the date of the ROFO Notice, Tenant’s ROFO rights shall be reinstated, and Landlord shall again be obligated to comply with the provisions of this Section.

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EXHIBIT D

WELLS FARGO BANK DRAFT SNDA AGREEMENT

SUBORDINATION AGREEMENT, ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL, ATTORNMENT AND NON-DISTURBANCE AGREEMENT

(Lease to Security Instrument)

NOTICE: THIS SUBORDINATION AGREEMENT RESULTS IN YOUR SECURITY INTEREST IN THE PROPERTY BECOMING SUBJECT TO AND OF LOWER PRIORITY THAN THE LIEN OF SOME OTHER OR LATER SECURITY INSTRUMENT.

THIS SUBORDINATION AGREEMENT, ACKNOWLEDGMENT OF LEASE ASSIGNMENT, ESTOPPEL, ATTORNMENT  AND  NON-DISTURBANCE  AGREEMENT  ("Agreement")ismade, 2017 by and between DIAMOND MARINA LLC, A CALIFORNIA LIMITED LIABILITY COMPANY, AND DIAMONDMARINAIILLC,ACALIFORNIALIMITEDLIABILITYCOMPANY,owner(s)ofthereal

property hereinafter described (collectively, "Mortgagor"), AIMMUNE THERAPEUTICS, INC., ("Tenant") and Wells Fargo Bank, National Association (collectively with its successors or assigns, "Lender").

R E C I T A L S

A. Pursuant to the terms and provisions of a lease dated February 23, 2015, as amended by that certain First Amendment dated August 26, 2015 and that certain Second Amendment dated June 27, 2017 (as amended, the "Lease"), Mortgagor granted to Tenant a leasehold estate in and to a portion of the property described on Exhibit A attached hereto and incorporated herein by this reference (which property, together with all improvements now or hereafter located on the property, is defined as the "Property").

B. Mortgagor has executed that certain deed of trust dated July 13, 2010, to American Securities Company, as Trustee, in favor of Lender, as Beneficiary, and recorded on July 16, 2010, as Instrument Number 2010-078058, in the Official Records of San Mateo County, California ("Security Instrument") securing, among other things, that certain Promissory Note Secured by Deed of Trust dated July 13, 2010 ("Note") in the principal sum of TWENTY-FOUR MILLION AND NO/100THS DOLLARS ($24,000,000.00), in favor of Lender("Loan").

C. Mortgagor and Tenant have agreed to the subordination, attornment and other agreements herein in favor ofLender.

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NOW THEREFORE, for valuable consideration and to induce Lender to make the Loan, Mortgagor and Tenant hereby agree for the benefit of Lender as follows:

1. SUBORDINATION. Mortgagor and Tenant hereby agree that:

1.1 Prior Lien. The Security Instrument securing the Note in favor of Lender, and any modifications, renewals or extensions thereof (including, without limitation, any modifications, renewals or extensions with respect to any additional advances made subject to the Security Instrument), shall unconditionally be and at all times remain a lien on the Property prior and superior to the Lease [and the Option To Purchase];

1.2 Subordination. Lender would not make the Loan without this agreement to subordinate;and

1.3 Whole Agreement. This Agreement shall be the whole agreement and only agreement with regard to the subordination of the Lease [and the Option To Purchase] to the lien of the Security Instrument and shall supersede and cancel, but only insofar as would affect the priority between the Security Instrument and the Lease [and the Option To Purchase], any prior agreements as to such subordination, including, without limitation, those provisions, if any, contained in the Lease which provide for the subordination of the Lease [and the Option To Purchase] to a deed or deeds of trust or to a mortgage ormortgages.

AND FURTHER, Tenant individually declares, agrees and acknowledges for the benefit of Lender, that:

1.4 Use of Proceeds. Lender, in making disbursements pursuant to the Note, the Security Instrument or any loan agreements with respect to the Property, is under no obligation or duty to, nor has Lender represented that it will, see to the application of such proceeds by the person or persons to whom Lender disburses such proceeds, and any application or use of such proceeds for purposes other than those provided for in such agreement or agreements shall not defeat this agreement to subordinate in whole or in part; and

1.5 Waiver,Relinquishment and Subordination. Tenant intentionally and unconditionally waives, relinquishes and subordinates all of Tenant's right, title and interest in and to the Property to the lien of the Security Instrument and understands that in reliance upon, and in consideration of, this waiver, relinquishment and subordination, specific loans and advances are being and will be made by Lender and, as part and parcel thereof, specific monetary and other obligations are being and will be entered into which would not be made or entered into but for said reliance upon this waiver, relinquishment andsubordination.

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2. ASSIGNMENT. Tenant acknowledges and consents to the assignment of the Lease by Mortgagor in favor ofLender.

3. ESTOPPEL. Tenant acknowledges and representsthat:

3.1 Entire Agreement. The Lease constitutes the entire agreement between Mortgagor and Tenant with respect to the Property and Tenant claims no rights with respect to the Property other than as set forth in the Lease;

3.2 No Prepaid Rent. No deposits or prepayments of rent have been made in connection with the Lease, except as follows (if none, state "None"): None;

3.3 No Default. To Tenant's knowledge without duty of inquiry, as of the date hereof: (i) there exists no breach, default, or event or condition which, with the giving of notice or the passage of time or both, would constitute a breach or default under the Lease; and (ii) there are no existing claims, defenses or offsets against rental due or to become due under theLease;

3.4 Lease Effective. The Lease has been duly executed and delivered by Tenant and, subject to the terms and conditions thereof, the Lease is in full force and effect, the obligations of Tenant thereunder are valid and binding and there have been no further amendments, modifications or additions to the Lease, written or oral; and

3.5 No Broker Liens. Neither Tenant nor Mortgagor has incurred any fee or commission with  any real estate broker which would give rise to any lien right under state or local law, except  as follows (if none, state "None"): Commissions to the brokers identified in the Second Amendment payable byMortgagor.

4. ADDITIONAL AGREEMENTS. Tenant covenants and agrees that, during all such times as Lender  is the Beneficiary under the Security Instrument:

4.1 Modification, Termination and Cancellation. Except as provided for in the Lease, Tenant will not consent to any modification, amendment, termination or cancellation of the Lease (in whole or in part) without Lender's prior written consent and will not make any payment to Mortgagor in consideration of any modification, termination or cancellation of the Lease (in whole or in part) without Lender's prior written consent;

4.2 Notice of Default. Tenant will notify Lender in writing concurrently with any notice given to Mortgagor of any default by Mortgagor under the Lease, and Tenant agrees that Lender has the right (but not the obligation) to cure any breach or default specified in such notice within the time periods set forth below and Tenant will not declare a default of the Lease, as to Lender, if Lender cures such default within fifteen (15) days from and afterthe

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expiration of the time period provided in the Lease for the cure thereof by Mortgagor ; provided, however, that if such default cannot with diligence be cured by Lender within such fifteen (15) day period, the commencement of action by Lender within such fifteen (15) day period to remedy the same shall be deemed sufficient so long as Lender pursues such cure with diligence;

4.3 No Advance Rents. Tenant will make no payments or prepayments of rent more than one (1) month in advance of the time when the same become due under the Lease;

4.4 Assignment of Rents. Upon receipt by Tenant of written notice from Lender that Lender has elected to terminate the license granted to Mortgagor to collect rents, as provided in the Security Instrument, and directing the payment of rents by Tenant to Lender, Tenant shall comply with such direction to pay and shall not be required to determine whether Mortgagor is in default under the Loan and/or the Security Instrument.

4.5 Insurance and Condemnation Proceeds. In the event there is any conflict between the terms in the Security Instrument and the Lease regarding the use of insurance proceeds or condemnation proceeds with respect to the Property, the provisions of the Security Instrument shall control.

5. ATTORNMENT. In the event of a foreclosure under the Security Instrument, Tenant agrees for the benefit of Lender (including for this purpose any transferee of Lender or any transferee of Mortgagor's title in and to the Property by Lender's exercise of the remedy of sale by foreclosure under the Security Instrument) as follows:

5.1 Payment of Rent. Tenant shall pay to Lender all rental payments required to be made by Tenant pursuant to the terms of the Lease for the duration of the term of theLease;

5.2 Continuation of Performance. Tenant shall be bound to Lender in accordance with all of the provisions of the Lease for the balance of the term thereof, and Tenant hereby attorns to Lender as its landlord, such attornment to be effective and self-operative without the execution of any further instrument immediately upon Lender succeeding to Mortgagor's interest in the Lease and giving written notice thereof to Tenant;

5.3 No Offset. Lender shall not be liable for, nor subject to, any offsets or defenses which Tenant may have by reason of any act or omission of Mortgagor under the Lease, nor for the return of any sums which Tenant may have paid to Mortgagor under the Lease as and for security deposits, advance rentals or otherwise, except to the extent that such sums are actually delivered by Mortgagor to Lender; and

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5.4 Subsequent Transfer. If Lender, by succeeding to the interest of Mortgagor under the Lease, should become obligated to perform the covenants of Mortgagor thereunder, then, upon any further transfer of Mortgagor's interest by Lender, all of such obligations shall terminate as to Lender.

5.5 Limitation on Lender’s Liability. Tenant agrees to look solely to Lender’s interest in the Property and the rent, income or proceeds derived therefrom for the recovery of any judgment against Lender, and in no event shall Lender or any of its affiliates, officers, directors, shareholders, partners, agents, representatives or employees ever be personally liable for any such obligation, liability or judgment.

5.6 No Representation, Warranties or Indemnities. Lender shall not be liable with respect to any representations, warranties or indemnities from Mortgagor, whether pursuant to the Lease or otherwise, including, but not limited to, any representation, warranty or indemnity related to the use of the Property, compliance with zoning, landlord’s title, landlord’s authority, habitability or fitness for purposes or commercial suitability, or hazardous wastes, hazardous substances, toxic materials or similar phraseology relating to the environmental condition of the Property or any portion thereof.

6. NON-DISTURBANCE. In the event of a foreclosure under the Security Instrument, so long as there shall then exist no breach, default, or event of default beyond any applicable notice and cure period on the part of Tenant under the Lease, Lender agrees for itself and its successors and assigns that the leasehold interest of Tenant under the Lease shall not be extinguished or terminated by reason of such foreclosure, but rather the Lease shall continue in full force and effect and Lender shall recognize and accept Tenant as tenant under the Lease subject to the terms and provisions of the Lease except as modified by this Agreement; provided, however, that Tenant and Lender agree that the following provisions of the Lease (if any) shall not be binding on Lender nor its successors and assigns: any option to purchase with respect to the Property; and any right of first refusal with respect to the Property.

7. MISCELLANEOUS.

7.1 Remedies Cumulative. All rights of Lender herein to collect rents on behalf of Mortgagor under the Lease are cumulative and shall be in addition to any and all other rights and remedies provided by law and by other agreements between Lender and Mortgagor or others.

7.2 NOTICES. All notices, demands, or other communications under this Agreement and the other Loan Documents shall be in writing and shall be delivered to the appropriate party at the address set forth below (subject to change from time to time by written notice to all other parties to this Agreement). All notices, demands or other communications shall be considered as properly given if delivered personally or sent by first class

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United States Postal Service mail, postage prepaid, or by Overnight Express Mail or by overnight commercial courier service, charges prepaid, except that notice of Default may be sent by certified mail, return receipt requested, charges prepaid. Notices so sent shall be effective three (3) Business Days after mailing, if mailed by first class mail, and otherwise upon delivery or refusal; provided, however, that non-receipt of any communication as the result of any change of address of which the sending party was not notified or as the result of a refusal to accept delivery shall be deemed receipt of such communication. For purposes of notice, the address of the parties shall be:

Mortgagor:	Diamond Marina LLC and Diamond Marina II LLC 2000 Sierra Point Parkway, Suite 100 Brisbane, CA 94005 Attention: Andrew Diamond
Tenant:	Aimmune Therapeutics, Inc. 8000 Marina Boulevard Suite 200 Brisbane, CA 94005-1884 Attention: General Counsel
Lender:	Wells Fargo Bank, National Association CRE San Francisco (AU #02034) 420 Montgomery Street, 6th Floor San Francisco, CA 94104 Attention: Tim Mahoney Loan #: 1002751
With a copy to:	Wells Fargo Bank, National Association Minneapolis Loan Center 600 South 4th Street, 9th Floor Minneapolis, MN 55415 Attention:  Kathy Perkins

Any party shall have the right to change its address for notice hereunder to any other location within the continental United States by the giving of thirty (30) days’ notice to the other party in the manner set forth hereinabove.

7.3 Heirs, Successors and Assigns. Except as otherwise expressly provided under the terms and conditions herein, the terms of this Agreement shall bind and inure to the benefit of the heirs, executors, administrators, nominees, successors and assigns of the parties hereto.

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7.4 Headings. All article, section or other headings appearing in this Agreement are for convenience of reference only and shall be disregarded in construing thisAgreement.

7.5 Counterparts. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All  counterparts  shall  collectively  constitute  a  single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

7.6 Exhibits, Schedules and Riders. All exhibits, schedules, riders and other items attached hereto are incorporated into this Agreement by such attachment for all purposes.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

NOTICE: THIS SUBORDINATION AGREEMENT CONTAINS A PROVISION WHICH ALLOWS THE PERSON OBLIGATED ON YOUR REAL PROPERTY SECURITY TO OBTAIN A LOAN A PORTION OF WHICH MAY BE EXPENDED FOR OTHER PURPOSES THAN IMPROVEMENT OF THE LAND.

IT IS RECOMMENDED THAT, PRIOR TO THE EXECUTION OF THIS AGREEMENT, THE PARTIES CONSULT WITH THEIR ATTORNEYS WITH RESPECT HERETO.

"MORTGAGOR" DIAMOND MARINA LLC,

A California limited liability company

By:/s/ STEPHEN DIAMOND

Name:Stephen P. Diamond Title:Manager

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"MORTGAGOR"

DIAMOND MARINA II LLC,

A California limited liability company

By:/s/ ANDREW DIAMOND

Name:Andrew Diamond Title:Manager

"TENANT"

AIMMUNE THERAPEUTICS, INC.,

A Delaware corporation

By:/s/ ERICBJERKHOLT

Name:Eric Bjerkholt

Title:CFO "LENDER"

WELLS FARGO BANK, N.A.

BY:

Name:D. Tim Mahoney Title:Senior VicePresident

[IF DOCUMENT TO BE RECORDED, ALL SIGNATURES MUST BE ACKNOWLEDGED - ADD APPROPRIATE NOTARY ACKNOWLEDGEMENT]

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EXHIBIT A - DESCRIPTION OF PROPERTY LEGAL DESCRIPTION

Real property in the City of Brisbane, County of San Mateo, State of California, described as follows: PARCEL I:

LOT 3, AS SHOWN ON THAT CERTAIN MAP ENTITLED “FINAL MAP”, CITY OF BRISBANE, SAN MATEO COUNTY, CALIFORNIA, FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN MATEO COUNTY, STATE OF CALIFORNIA, ON FEBRUARY 27, 1987 IN BOOK 58 OF PARCEL MAPS AT PAGE(S) 79, 80, 81 AND 82.

EXCEPTING ALL MINERALS AND MINERAL RIGHTS OF EVERY KIND AND CHARACTER NOW KNOWN TO EXIST OR HEREAFTER DISCOVERED, INCLUDING WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, OIL AND GAS AND RIGHTS THERETO, TOGETHER WITH THE SOLE, EXCLUSIVE, AND PERPETUAL RIGHT TO EXPLORE FOR, REMOVE AND DISPOSE OF SAID MINERALS BY ANY MEANS OR METHODS SUITABLE TO THE GRANTOR, ITS SUCCESSORS AND ASSIGNS, INCLUDING LATERALOR SLANT DRILLING, BUT WITHOUT ENTERING UPON OR USING THE SURFACE OF THE LANDS HEREBY CONVEYED, AND IN SUCH MANNER AS NOT TO DAMAGE THE SURFACE OF SAID LANDS OR ANY BUILDING NOR THEREON OR HEREAFTER ERECTED THEREON OR THE SUBSTRUCTURE OF ANY SUCH BUILDING, OR TO INTERFERE WITH THE USE THEREOF BY THE GRANTEE, ITS SUCCESSORS OR ASSIGNS, AS EXCEPTED IN THE FOLLOWING DEEDS TO UTAH CONSTRUCTING & MINING CO., A CORPORATION, PREDECESSOR IN INTEREST TO THE VESTEE HEREIN:

A. FROM MAUDE LOUISE PHILLIPS, RECORDED SEPTEMBER 14, 1959, IN BOOK 3670, OF OFFICIAL RECORDS AT PAGE 624, DOCUMENT NO.86272-R.

B. FROM JOHN F. WILLCOX, ALSO KNOWN AS JOHN FREDERICK WILLCOX, RECORDED SEPTEMBER 14, 1959, IN BOOK 3670 OF OFFICIAL RECORDS AT PAGE 625, DOCUMENT  NO. 86273-R.

C. FROM MARITA CLARKE, RECORDED SEPTEMBER 14, 1959 IN BOOK 3670 OF OFFICIAL RECORDS AT PAGE 626, DOCUMENT NO.86274-R.

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PARCEL II:

NON-EXCLUSIVE EASEMENTS FOR ROADWAYS, WALKWAYS, INGRESS AND EGRESS, PARKINGOF MOTOR VEHCILES, LOADING AND UNLOADING OF COMMERICAL AND OTHER VEHICLES AND FOR DRIVEWAY PURPOSES OVER THE COMMON AREA PORTION OF LOT 2 AS SHOWN ON THAT CERTAIN MAP ENTITLED “FINAL MAP” FILED FEBRUARY 27, 1987, IN BOOK 58 OF PARCEL MAPS, PAGES 79 THROUGH 82, SAN MATEO COUNTY RECORDS, AS DEFINED AND CREATED IN THE GRANT OF EASEMENT AND MAINTENANCE AGREEMENT, DATED APRIL 29, 1988 BY AND BETWEEN SIERRA POINT ASSOCIATES TWO, A CALIFORNINA GENERAL PARTNERSHIP AND HITACHI AMERICA LTD., A NEW YORK CORPORATION, RECORDED APRIL 29, 1988 UNDER RECORDER’S SERIAL NO. 88052436, OFFICIAL RECORDS OF SAN MATEO COUNTY.

SAID EASEMENT IS APPURTENANT TO AND FOR THE BENEFIT OF PARCEL I ABOVE.

First American Title Insurance Company

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EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Jayson Dallas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Aimmune Therapeutics, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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; and

(d) 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 8, 2019	By:	/s/ Jayson Dallas
		Jayson Dallas, M.D.
		President and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,

AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Eric H. Bjerkholt, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Aimmune Therapeutics, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) 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; and

(d) 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 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 8, 2019	By:	/s/ Eric H. Bjerkholt
		Eric H. Bjerkholt Chief Financial Officer
		(Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

AIMMUNE THERAPEUTICS, INC.

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 Aimmune Therapeutics, Inc. (the “Company”) on Form 10-Q for the period ending June 30, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Jayson Dallas, President and Chief Executive Officer of the Company, and Eric H. Bjerkholt, Chief Financial Officer of the Company, do each hereby certify, pursuant to 18 U.S.C. § 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 15(d) of the Securities Exchange Act of 1934; and

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

Date: August 8, 2019	By:	/s/ Jayson Dallas
		Jayson Dallas M.D.
		President and Chief Executive Officer (Principal Executive Officer)
Date: August 8, 2019	By:	/s/ Eric H. Bjerkholt
		Eric H. Bjerkholt
		Chief Financial Officer   (Principal Financial and Accounting 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 Aimmune Therapeutics, 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.

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Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Trading Symbol	AIMT
Entity Registrant Name	AIMMUNE THERAPEUTICS, INC.
Entity Central Index Key	0001631650
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		62,668,957
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity File Number	001-37519
Entity Tax Identification Number	452748244
Entity Address, Address Line One	8000 Marina Blvd.
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Brisbane
Entity Address, State or Province	California
Entity Address, Postal Zip Code	94005
City Area Code	650
Local Phone Number	614-5220

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CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 72,564	$ 107,511
Short-term investments	171,108	196,421
Prepaid expenses and other current assets	6,859	8,687
Total current assets	250,531	312,619
Long-term investments	6,584
Property and equipment, net	29,414	26,328
Operating lease right-of-use assets	11,736
Prepaid expenses and other assets	511	608
Total assets	298,776	339,555
Current liabilities:
Accounts payable	14,086	8,833
Accrued liabilities	27,083	29,144
Operating lease liabilities, current	2,022
Other current liabilities	20	35
Total current liabilities	43,211	38,012
Long term debt, net of discount	38,526
Operating lease liabilities, non-current	11,036
Other liabilities	1,029	2,596
Total liabilities	93,802	40,608
Stockholders’ equity:
Preferred stock, par value $0.0001 per share— 10,000 shares authorized at June 30, 2019 and December 31, 2018; 0 shares issued and outstanding at June 30, 2019 and December 31, 2018
Common stock, par value $0.0001 per share—290,000 shares authorized as of June 30, 2019, and December 31, 2018; 62,660 and 62,142 shares issued and outstanding as of June 30, 2019, and December 31, 2018, respectively	6	6
Additional paid-in capital	798,058	775,283
Accumulated other comprehensive gain(loss)	236	(108)
Accumulated deficit	(593,326)	(476,234)
Total stockholders’ equity	204,974	298,947
Total liabilities and stockholders’ equity	$ 298,776	$ 339,555

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Jun. 30, 2019	Dec. 31, 2018
Statement Of Financial Position [Abstract]
Preferred stock, par value	$ 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	$ 0.0001	$ 0.0001
Common stock, shares authorized	290,000,000	290,000,000
Common stock, shares issued	62,660,000	62,142,000
Common stock, shares outstanding	62,660,000	62,142,000

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CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (Unaudited) - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Operating expenses
Research and development	$ 31,988	$ 35,254	$ 63,304	$ 68,700
General and administrative	31,200	18,559	54,912	35,232
Total operating expenses	63,188	53,813	118,216	103,932
Loss from operations	(63,188)	(53,813)	(118,216)	(103,932)
Interest income, net	358	1,294	1,149	1,930
Loss before provision for income taxes	(62,830)	(52,519)	(117,067)	(102,002)
Provision for income taxes	48	33	77	50
Net loss	(62,878)	(52,552)	(117,144)	(102,052)
Other comprehensive loss, net of tax:
Unrealized gains (losses) on investments	174	2	345	(15)
Comprehensive loss	$ (62,704)	$ (52,550)	$ (116,799)	$ (102,067)
Net loss per common share, basic and diluted	$ (1.01)	$ (0.91)	$ (1.88)	$ (1.83)
Weighted average shares used in computing net loss per common share, basic and diluted	62,332	57,903	62,178	55,752

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Unaudited) - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Accumulated Other Comprehensive (Loss)/Gain	Accumulated deficit
Beginning balance at Dec. 31, 2017	$ 177,805	$ 5	$ 443,390	$ (108)	$ (265,482)
Beginning balances (in shares) at Dec. 31, 2017		51,091
Issuance of common stock upon exercise of vested options	2,743		2,743
Issuance of common stock upon exercise of vested options (in shares)		308
Issuance of common stock upon securities agreement (in shares)		300
Issuance of common stock upon public offering	190,454	$ 1	190,453
Issuance common stock upon initial public offering (in shares)		6,325
Stock-based compensation expense	7,607		7,607
Other comprehensive gain (loss)	(17)			(17)
Net loss	(49,500)				(49,500)
Ending balances at Mar. 31, 2018	329,092	$ 6	644,193	(125)	(314,982)
Ending balances (in shares) at Mar. 31, 2018		58,024
Beginning balance at Dec. 31, 2017	177,805	$ 5	443,390	(108)	(265,482)
Beginning balances (in shares) at Dec. 31, 2017		51,091
Other comprehensive gain (loss)	(15)
Net loss	(102,052)
Ending balances at Jun. 30, 2018	287,838	$ 6	655,490	(123)	(367,535)
Ending balances (in shares) at Jun. 30, 2018		58,461
Beginning balance at Mar. 31, 2018	329,092	$ 6	644,193	(125)	(314,982)
Beginning balances (in shares) at Mar. 31, 2018		58,024
Issuance of common stock upon exercise of vested options and vesting of restricted stock units	2,641		2,641
Issuance of common stock upon exercise of vested options and vesting of restricted stock units (in shares)		437
Issuance of common stock upon public offering	(19)		(18)		(1)
Stock-based compensation expense	8,674		8,674
Other comprehensive gain (loss)	2			2
Net loss	(52,552)				(52,552)
Ending balances at Jun. 30, 2018	287,838	$ 6	655,490	(123)	(367,535)
Ending balances (in shares) at Jun. 30, 2018		58,461
Beginning balance at Dec. 31, 2018	298,947	$ 6	775,283	(108)	(476,234)
Beginning balances (in shares) at Dec. 31, 2018		62,142
Issuance of common stock upon exercise of vested options	3,633		3,633
Issuance of common stock upon exercise of vested options (in shares)		328
Stock-based compensation expense	7,765		7,765
Other comprehensive gain (loss)	171			171
Accumulated depreciation upon adoption of ASU Topic 842	51				51
Net loss	(54,266)				(54,266)
Ending balances at Mar. 31, 2019	256,301	$ 6	786,681	63	(530,449)
Ending balances (in shares) at Mar. 31, 2019		62,470
Beginning balance at Dec. 31, 2018	298,947	$ 6	775,283	(108)	(476,234)
Beginning balances (in shares) at Dec. 31, 2018		62,142
Other comprehensive gain (loss)	345
Net loss	(117,144)
Ending balances at Jun. 30, 2019	204,974	$ 6	798,058	236	(593,326)
Ending balances (in shares) at Jun. 30, 2019		62,659
Beginning balance at Mar. 31, 2019	256,301	$ 6	786,681	63	(530,449)
Beginning balances (in shares) at Mar. 31, 2019		62,470
Issuance of common stock upon exercise of vested options and vesting of restricted stock units	2,637		2,637
Issuance of common stock upon exercise of vested options and vesting of restricted stock units (in shares)		189
Stock-based compensation expense	8,740		8,740
Other comprehensive gain (loss)	174			173	1
Net loss	(62,878)				(62,878)
Ending balances at Jun. 30, 2019	$ 204,974	$ 6	$ 798,058	$ 236	$ (593,326)
Ending balances (in shares) at Jun. 30, 2019		62,659

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net loss	$ (117,144)	$ (102,052)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation expense	1,751	738
Stock-based compensation expense	16,505	16,281
Non-cash interest expense	2,259
Amortization of premium on investment securities	(1,094)	(225)
Changes in operating assets and liabilities:
Prepaid expenses and other assets	2,596	(191)
Accounts payable	5,466	2,559
Accrued liabilities	(2,887)	6,366
Other liabilities	553	207
Net cash used in operating activities	(91,995)	(76,317)
Cash flows from investing activities:
Purchase of property and equipment	(4,860)	(6,243)
Purchase of investments	(106,980)	(133,208)
Maturities of investments	127,146	88,618
Net cash provided by (used in) investing activities	15,306	(50,833)
Cash flows from financing activities:
Borrowings under debt agreement	40,000
Debt issuance costs	(3,856)
Proceeds from underwritten public offering, net of offering costs		190,435
Net cash proceeds from exercise of stock options, including early exercise	6,270	5,385
Tax withholdings related to net share settlements of restricted stock units	(672)
Net cash provided by financing activities	41,742	195,820
Net increase (decrease) in cash and cash equivalents	(34,947)	68,670
Cash and cash equivalents at the beginning of the period	107,511	73,487
Cash and cash equivalents at the end of the period	72,564	142,157
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment purchases included in accounts payable and accrued liabilities	1,916	$ 556
Debt issuance costs, discount and interest payable	$ 2,259

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Formation and Business of the Company

6 Months Ended

Jun. 30, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Formation and Business of the Company

1. Formation and Business of the Company

Aimmune Therapeutics, Inc., is a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary product candidates, to reduce the frequency and severity of allergic reactions, including anaphylaxis, upon exposure to peanut and other food allergens. Our therapeutic approach, which we refer to as Characterized Oral Desensitization Immunotherapy, or CODIT^TM, is designed to desensitize patients to food allergens using rigorously characterized biologic products, defined treatment protocols and tailored support services. We are headquartered in Brisbane, California, and were incorporated in the state of Delaware on June 24, 2011.

Since inception, we have incurred net losses and negative cash flows from operations. During the quarter and six months ended June 30, 2019, we incurred a net loss of $62.9 million and $117.1 million, respectively, and we used $92.0 million of cash in operations. As of June 30, 2019, we had an accumulated deficit of $593.3 million, and we do not expect to experience positive cash flows in the near future. As of June 30, 2019, we had cash, cash equivalents and investments of $250.3 million. We believe that our existing capital resources will be sufficient to fund our planned operations for at least the next 12 months and through expected regulatory approval and potential commercial launch in the United States and Europe for AR101, our lead CODIT^TM product candidate. We have financed our operations to date primarily through private placements of our equity securities, our initial public offering, or IPO, of common stock in August 2015, an underwritten public offering of common stock in February and March 2018 and our loan agreement entered into in January 2019. Our ability to continue to meet our obligations and to achieve our business objectives is dependent upon a number of factors, which include obtaining U.S. Food and Drug Administration, or FDA, and European Medicines Agency, or EMA, approval, raising additional capital, the successful and timely completion of our clinical trials, our ability to control expenses and generating sufficient revenue in the United States and Europe. Failure to obtain FDA and EMA approval, commercialize our lead product candidate, manage discretionary expenditures, or raise additional financing, as required, may adversely impact our ability to achieve our intended business objectives.

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial 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, 2018, 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 condensed consolidated 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 quarter and six months ended June 30, 2019, are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other interim period or for any other future year. We operate in one reportable segment.

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, 2018, included in our Annual Report on Form 10-K filed with the SEC.

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of our wholly-owned subsidiaries. All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of costs and expenses during the reporting period. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.

Significant Accounting Policies

There have been no significant changes to the accounting policies during the six months ended June 30, 2019, as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, except as noted below.

Recently Adopted Accounting Pronouncements

We adopted Accounting Standards Update, or ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019 using the alternative modified retrospective approach provided in ASU No. 2018-11, Lease (Topic 841): Targeted Improvements. In doing so, we have continued to apply Accounting Standards Codification, or ASC 840 in the comparative periods and recognized the cumulative effect of applying Topic 842 to retained earnings on January 1, 2019. We elected a package of practical expedients for leases that commenced prior to January 1, 2019, which among other things, allowed us to carry forward the historical lease assessment for: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. We have also elected a practical expedient, by class of underlying asset, not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. We have made an accounting policy election to not apply the recognition requirements to leases with a lease term of 12 months or less. We have recognized those lease payments in the consolidated statements of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Adoption of this standard has resulted in the recognition of operating lease right-of-use assets of $11.7 million and lease liabilities of $13.1 million as of June 30, 2019. The standard did not materially impact our consolidated statement of operations or our consolidated statements of cash flows.

We adopted ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (Topic 718), as of January 1, 2019, which amends ASC Topic 718, “Compensation—Stock Compensation”. The ASU simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. Upon adoption of this standard, share-based awards issued to non-employees are measured at the grant date and are not subject to remeasurement. We have elected to continue to use the contractual term as the estimated expected term. The adoption of ASU No. 2018-07 did not have a material impact on our financial statements and is expected to reduce the volatility in stock-based compensation expense for non-employees recognized from period to period.

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the Financial Accounting Standards Board, or the FASB, issued ASU 2018-13, Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which adds and modifies certain disclosure requirements for fair value measurements. Under the new guidance, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, or valuation processes for Level 3 fair value measurements. However, public companies will be required to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and related changes in unrealized gains and losses included in other comprehensive income. ASU 2018-13 is effective for fiscal periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact that the adoption of ASU 2018-13 will have on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 modifies the other-than-temporary impairment model for available-for-sale debt securities and requires an estimate of expected credit losses when the fair value is below the amortized cost of the asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-13 will have on our consolidated financial statements and related disclosures.

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Available-for-Sale Securities and Fair Value Measurements

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Available-for-Sale Securities and Fair Value Measurements

3. Available-for-Sale Securities and Fair Value Measurements

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

• 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 following tables set forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	June 30, 2019
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash and money market funds	$	72,564	$	—	$	—	$	72,564
Total cash and cash equivalents	$	72,564	$	—	$	—	$	72,564
Investments:
Agency securities	$	—	$	21,256	$	—	$	21,256
Corporate securities		—		44,153		—		44,153
Commercial paper		—		11,033		—		11,033
U.S. government securities		—		101,250		—		101,250
Total investments	$	—	$	177,692	$	—	$	177,692

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash and money market funds	$	107,511	$	—	$	—	$	107,511
Total cash and cash equivalents	$	107,511	$	—	$	—	$	107,511
Investments:
Agency securities		—		17,352		—		17,352
Corporate securities		—		54,474		—		54,474
Commercial paper		—		5,965		—		5,965
U.S. government securities		—		118,630		—		118,630
Total investments	$	—	$	196,421	$	—	$	196,421

Our valuation techniques used to measure the fair value of money market funds were derived from quoted prices in active markets for identical assets. The valuation techniques used to measure the fair value of investments, all of which have counterparties with high credit ratings, were valued based on quoted market prices or model-driven valuations using significant inputs derived from or corroborated by observable market data. Investments are carried at fair value. During the quarters and six months ended June 30, 2019 and 2018, there were no transfers between Level 1 and Level 2 of the fair value hierarchy.

Available-for-sale investments are carried at fair value and are included in the tables above. The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in cash equivalents and investments, as of June 30, 2019 and December 31, 2018, are as follows (in thousands):

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities	$	21,243	$	13	$	—	$	21,256
Corporate securities		44,051		102		—		44,153
Commercial paper		11,033		—		—		11,033
U.S. government securities		101,129		121		—		101,250
Total available-for-sale investments	$	177,456	$	236	$	—	$	177,692

	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Fair Value
Agency securities	$	17,361	$	—	$	(9	)	$	17,352
Corporate securities		54,536		—		(62	)		54,474
Commercial paper		5,965		—		—			5,965
U.S. government securities		118,667		14		(51	)		118,630
Total available-for-sale investments	$	196,529	$	14	$	(122	)	$	196,421

At June 30, 2019, all of the available-for-sale securities have contractual maturities within eighteen months. We periodically review our available-for-sale investments for other-than-temporary impairment loss. We consider factors such as the duration, severity and the reason for the decline in value, the potential recovery period and our intent to sell. For debt securities, we also consider whether (i) it is more likely than not that we will be required to sell the debt securities before recovery of their amortized cost basis, and (ii) the amortized cost basis cannot be recovered as a result of credit losses. During the quarters and six months ended June 30, 2019 and 2018, we did not recognize any other-than-temporary impairment losses. All marketable securities with unrealized losses have been in a loss position for less than twelve months.

The carrying value of our long-term debt approximates its fair value at each balance sheet date due to its variable interest rate, which approximates a market interest rate.

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Balance Sheet Components

6 Months Ended

Jun. 30, 2019

Balance Sheet Related Disclosures [Abstract]

Balance Sheet Components

4. Balance Sheet Components

Property and Equipment, Net

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

	June 30, 2019			December 31, 2018
Furniture and equipment	$	2,642		$	2,221
Computer equipment		2,603			2,073
Manufacturing equipment		6,473			1,733
Leased equipment		100			100
Leasehold improvements		14,506			4,469
Buildings		—			688
Construction in progress		7,918			18,295
Property and equipment, gross		34,242			29,579
Less: accumulated depreciation		(4,828	)		(3,251	)
Property and equipment, net	$	29,414		$	26,328

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2019		December 31, 2018
Compensation and benefits	$	7,054	$	8,912
Research and development		8,721		15,504
Professional and consulting		10,829		4,691
Other		479		37
Total accrued liabilities	$	27,083	$	29,144

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Long-Term Debt, Net of Discounts

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Long-Term Debt, Net of Discounts

5. Long-term Debt, Net of Discounts

In January 2019, we entered into a loan agreement with an affiliate of KKR for up to $170.0 million in three tranches, or the KKR Loans. Of the total loan amount, $40.0 million was funded upon closing of the transaction, with $85.0 million to be funded upon FDA approval of AR101, or the Regulatory Approval and satisfaction of other customary borrowing conditions, and $45.0 million to be made available at our option in 2020 upon the satisfaction of certain borrowing conditions. The KKR Loans have a maturity date being the earliest of (a) January 3, 2025, or if Regulatory Approval has not occurred on or before December 31, 2020, January 15,

2021 and (b) the date that is 91 days prior to the earliest current maturity date of any other loans we might have in excess of $15.0 million prior to the funding of the third tranche of the KKR Loans or $25.0 million following the funding of the third tranche of the KKR Loans. The KKR Loans bear interest through maturity, at our election with respect to (a) Alternate Base Rate, or ABR Loans, ABR plus 6.50% per annum and (b) London Interbank Offered Rate, or LIBOR Loans, 30-day LIBOR plus 7.50% per annum. We have the option to elect to make interest payments from available funds or make interest payments in kind by capitalizing such interest amounts on the applicable interest payment date by adding the amounts to the outstanding principal amount of the loan. Any capitalized amounts also bear interest. To date, we have selected to pay in kind and capitalized the interest for the six months ending June 30, 2019. We will begin paying accrued interest on outstanding KKR Loans on the last business day of each March, June, September and December thereafter while any KKR Loans are outstanding, as well as on the final maturity date of the KKR Loans, with each such date being referred to herein as an Interest Payment Date.

Principal payments on the KKR Loans are paid according to the following schedule: (i) on December 31, 2023, 50.0% of the outstanding principal amount of the loans as of such date, including any capitalized interest, (ii) on each Interest Payment Date thereafter, 12.5% of the outstanding principal amount of the KKR Loans as of December 31, 2023 and (iii) on January 3, 2025, or the Maturity Date, any remaining outstanding balance of the KKR Loans. We are also required to make mandatory prepayments of the KKR Loans under the Agreement, subject to specified exceptions, with the proceeds of asset sales, debt issuances, royalty transactions, collaboration transactions, and specified other events. In addition, upon the occurrence of a change of control, we must prepay, the outstanding amount of the KKR Loans.

The KKR Loans can be prepaid at our discretion, at any time, subject to prepayment fees. If all or any of the KKR Loans are prepaid or required to be prepaid, then we must pay, in addition to such prepayment, a prepayment premium (the “Prepayment Premium”) equal to (i) with respect to any such prepayment paid on or prior to January 3, 2021, the amount, if any, by which (a) the present value as of such date of determination of (x) 105.00% of the principal amount of the KKR Loans prepaid plus (y) all required interest payments that would have been due on the principal amount of the KKR Loans prepaid through and including January 3, 2021, computed using a discount rate equal to the treasury rate most nearly equal to the period from such date of prepayment to January 3, 2021 plus 50 basis points exceeds (b) the principal amount of the KKR Loans prepaid, (ii) with respect to any prepayment paid or required to be paid after January 3, 2021 but on or prior to January 3, 2022, 5.00% of the principal amount of the KKR Loans prepaid, (iii) with respect to any prepayment paid or required to be paid after January 3, 2022 but on or prior to January 3, 2023, 2.00% of the principal amount of the KKR Loans prepaid and (iv) with respect to any prepayment paid or required to be prepaid thereafter, 0.00% of the principal amount of the KKR Loans prepaid. If we receive Regulatory Approval and do not draw the $85 million, then we would have to pay on the earlier of (i) the date on which commitments have been terminated and no KKR Loans are outstanding and (ii) the Interest Payment Date falling in the first full fiscal quarter after receipt of Regulatory Approval, a premium in an amount equal to $3.4 million and the Prepayment Premium for such date on a principal amount equal to $85.0 million. The premium with respect to the Regulatory Approval described in the immediately preceding sentence is not due if we draw the additional (after the first $40.00 million on the closing date) $85.0 million of the KKR Loans. In addition, upon the occurrence of a change of control, we must prepay, the outstanding amount of the KKR Loans. Upon the prepayment or repayment of all or any of the KKR Loans, we must pay an additional (in addition to the Prepayment Premium) exit fee in an amount equal to 4.00% of the principal amount of the KKR Loans prepaid or repaid.

In connection with the KKR Loans, we paid direct fees of $3.9 million, including debt issuance costs. The fees are being amortized as interest expense over the term of the debt.  As of June 30, 2019 and December 31, 2018, $41.9 million and $0, respectively, was outstanding under the KKR Loans. As of June 30, 2019, the interest rate on the KKR Loans was 9.94%.

The following table represents our short-term and long-term debt obligations (in thousands):

	June 30, 2019
Principal amount of long-term debt	$	41,961
Less: Current portion of long-term debt		-
Long-term debt, net of current portion		41,961
Unamortized discount relating to deferred financing costs, net		(3,559	)
Accrued exit fee payment		124
Long-term debt, net of discount and current portion	$	38,526

Future principal payments of our long-term debt as of June 30, 2019 are as follows:

Fiscal year ending December 31:
2019	$	-
2020		-
2021		-
2022		-
2023		20,981
Thereafter		20,980
Total	$	41,961

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

Leases

We lease facilities for office and manufacturing space under various operating leases and a security system under a financing lease. Our leases have remaining lease terms of approximately 1 year to 6 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms. Our lease payments consist primarily of fixed rental payments for the right to use the underlying leased assets over the lease terms. We often receive customary incentives from our landlords, such as reimbursements for tenant improvements and rent abatement periods, which effectively reduce the total lease payments owed for these leases.

Operating lease right-of-use assets and liabilities on our condensed consolidated balance sheets represent the present value of our remaining lease payments over the remaining lease terms. We do not allocate lease payments to non-lease components. We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable.

As of June 30, 2019, the maturities of our operating lease liabilities were as follows (in thousands):

	Remaining Lease Payments June 30, 2019
	Operating			Financing			Total
2019	$	1,567		$	17		$	1,584
2020		3,330			34			3,364
2021		3,413			35			3,448
2022		3,497			9			3,506
2023		3,378			-			3,378
Thereafter		1,744			-			1,744
Total lease payments	$	16,929		$	95		$	17,024
Less: Effects of discounting		(3,871	)		(29	)		(3,900	)
Present value of lease liabilities	$	13,058		$	66		$	13,124
Less: current portion		(2,022	)		(19	)		(2,041	)
Long-term lease liabilities	$	11,036		$	47		$	11,083
Weighted-average remaining lease term	5 years			2.8 years
Weighted-average incremental borrowing rate		11	%		23	%

As of June 30, 2019, we have additional operating leases, primarily for our manufacturing facility, that have not yet commenced of $0.7 million. These operating leases will commence in the third quarter of 2019 with a lease term of 6.25 years.

The component of our lease costs included in our condensed consolidated statements of income were as follows (in thousands):

	Quarter Ended		Six Months Ended
Lease Cost	June 30, 2019
Operating lease cost	$	914	$	1,879
Finance lease cost
Amortization of leased assets		8		16
Interest on lease liabilities		4		8
Net lease cost	$	926	$	1,903

Other information related to our operating lease was as follows (in thousands):

Other Information	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,879
Operating cash flows from finance leases	$	24

Total future aggregate minimum lease payments calculated under ASC 840 at December 31, 2018 were as follows (in thousands):

	Remaining Lease Payments December 31, 2018
	Operating			Financing			Total
2019	$	3,133		$	33		$	3,166
2020		3,330			34			3,364
2021		3,413			35			3,448
2022		3,497			9			3,506
2023		3,378			-			3,378
Thereafter		1,744			-			1,744
Total lease payments	$	18,495		$	111		$	18,606
Less: amount representing interest		-			(33	)		(33	)
Value of lease liabilities under ASC 840	$	18,495		$	78		$	18,573
Less: current portion		(3,133	)		(17	)		(3,150	)
Long-term lease liabilities	$	15,362		$	61		$	15,423

Purchase Commitments

We purchase food-grade peanut flour from Golden Peanut Company, or GPC, pursuant to a long-term exclusive commercial supply agreement, which was expanded and extended in January 2018. GPC is precluded from selling several peanut flour products to any third party worldwide for use in oral immunotherapy, or OIT, for the treatment or cure of peanut allergy, provided that we are in compliance with our exclusive purchase obligation and meet specified annual purchase commitments. The restated agreement remains in effect until ten years after the first delivery to us of peanut flour for commercial use and includes an option for us to extend the term for an additional five years.

In connection with the expansion and extension of the agreement, we issued Archer Daniels Midland Company 300,000 shares of restricted common stock, vesting in four tranches over a 3.5 year period. Expense related to these shares will be measured as each tranche vests and recognized over the vesting period. At issuance, these shares had a fair value of $11.7 million, which will be remeasured as each tranche vests and recognized as general and administrative expense over the vesting period. Subject to certain exceptions, in the event that the price per share of our common stock were to fall below a specified level, the restated agreement provides that GPC would only be prohibited from selling one peanut flour product to any third party in the United States, Mexico, Canada, the European Union or Japan for use in OIT for the treatment or cure of peanut allergy.

Pursuant with the restated agreement, our purchase obligation commences with the first delivery of peanut flour for commercial use, which we currently anticipate will occur in 2019, and the aggregate purchase commitment under this agreement would be $3.3 million over a term of ten years.

In December 2018, we entered into an exclusive supply agreement for egg protein with Michael Foods, Inc. Pursuant to the agreement, we have exclusive access to the clinical and commercial use of Michael Foods’ egg products for any egg allergy treatment, prevention or cure for a period of up to 15 years beyond the potential approval of AR201.

In May 2019, we entered into a Commercial Supply Agreement, or the Commercial Supply Agreement, pursuant to which CoreRx, Inc. agreed to manufacture commercial supply of AR101, if approved. Under the Commercial Supply Agreement, we are required to purchase a minimum percentage of our AR101 commercial supply requirements in each of the first six years of the Commercial Supply Agreement, subject to certain conditions and restrictions, ranging from 100% in 2019 and decreasing to a majority in 2024. We are also required to purchase a minimum percentage of our AR101 supply requirements for release testing in each of the first six years of the Commercial Supply Agreement, ranging from 100% in 2019 and decreasing to a significant majority in 2024. As of June 30, 2019, the minimum aggregate purchase commitment under this agreement would be $4.3 million. The initial term of the Commercial Supply Agreement began upon execution of the Commercial Supply Agreement and will continue until December 31, 2024. The Commercial Supply Agreement then automatically renews for successive two-year terms, unless earlier terminated pursuant to its terms, or upon either party’s notice of termination to the other.

Indemnifications

We indemnify each of our officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at our request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, we currently hold director and officer liability insurance. This insurance allows the transfer of risk associated with our exposure and may enable us to recover a portion of any future amounts paid. We believe that the fair value of these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations for any period.

Legal

We are currently not a party to any material legal proceedings. During the normal course of business, we may be a party to legal claims that may not be covered by insurance. We do not believe that any such claims would have a material impact on our consolidated financial statements.

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Stock-Based Compensation

6 Months Ended

Jun. 30, 2019

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

7. Stock-Based Compensation

Equity Incentive Plan

In July 2015, we adopted the 2015 Stock Plan, or the 2015 Plan. Under the 2015 Plan, 4,681,544 shares of our common stock were initially reserved for the issuance of stock options and restricted stock to employees, directors, and consultants under terms and provisions established by the Board of Directors, or the Board, and approved by our stockholders. As of June 30, 2019 and December 31, 2018, there were 4,625,878 and 4,364,963 shares available for future grant, respectively.

Under the terms of the 2015 Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive stock options may not be less than 110% of fair market value, as determined by the Board. The terms of options granted under the 2015 Plan may not exceed ten years. All options issued to date have had a ten-year life. To date, options granted generally vest in three ways: 1) over four years at a rate of 25% upon the first anniversary of the issuance date and 1/48^th per month thereafter, 2) over two years at a rate of 1/24^th per month, or 3) over four years at a rate of 1/48^th per month. The 2015 Plan contains certain change of control provisions and the employment offer letters of certain employees provide for varied acceleration of vesting in the event of a change of control and/or termination without cause. It also contains a net exercise provision and allows for cashless exercise upon the class of shares subject to the option becoming publicly traded in an established securities market.

In August 2015, we adopted the 2015 ESPP, which commenced on January 1, 2018. Under the 2015 ESPP our employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The 2015 ESPP generally provides for offering periods of six months in duration with purchase periods ending on either May 15 or November 15. Contributions under the 2015 ESPP are limited to a maximum of 15% of an employee’s eligible compensation. ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares. We issued 41,030 shares at a weighted average price of $25.28 per share during the year ended December 31, 2018. As of June 30, 2019, we had issued 59,722 shares under the ESPP at a weighted average price of $17.75 per share and 2,346,064 shares under the ESPP remain available for purchase.

Our 2013 Stock Plan, or the 2013 Plan, which was originally adopted during January 2013, was terminated upon consummation of our IPO in August 2015. As a terminated plan, no further options can be granted from the 2013 Plan, and no further shares are reserved for issuance under the 2013 Plan.

Option activity under the 2015 Plan and 2013 Plan is set forth below:

	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Balance, December 31, 2018		7,133,113		$	20.08		7.6	$	27,413
Options granted		2,318,442			22.52
Options exercised and shares vested		(366,221	)		14.23
Options cancelled		(515,002	)		28.19
Balance, June 30, 2019		8,570,332			20.50		7.6	$	28,934
Options vested and expected to vest as of    June 30, 2019		8,017,038			20.22		7.5	$	28,771
Options exercisable as of June 30, 2019		3,891,087		$	15.93		6.3	$	26,175

The aggregate intrinsic values of options outstanding, exercisable, and vested and expected to vest were calculated as the difference between the exercise price of the options and the market price for shares of our common stock as of June 30, 2019. The 2013 Plan provided for early exercise, therefore, all our outstanding stock options issued under that plan are exercisable.

Restricted stock unit, or RSU, activity under the 2015 Plan is set forth below:

	Shares			Weighted Average Grant Date Fair Value
Unvested Balance, December 31, 2018		309,847		$	33.37
Awarded		476,127			23.06
Released		(91,354	)		33.28
Forfeited		(54,791	)		29.72
Unvested Balance, June 30, 2019		639,829		$	26.02

RSUs are measured based on the fair market value of the underlying stock on the date of grant and recognized as expense on a straight-line basis over the employee’s requisite service period (generally the vesting period).

In connection with the expansion and extension of our long-term exclusive commercial supply agreement with GPC, we issued 300,000 shares of restricted common stock in January 2018. The restricted common stock vests in four tranches over a 3.5 year period and is measured based on the fair market value of the underlying stock as the shares vest. As of June 30, 2019, 75,000 shares had vested, and the remaining shares were restricted. As of June 30, 2019, total estimated unrecognized expense related to these restricted shares was $3.6 million based upon the fair market value of our common stock on December 31, 2018, which is expected to be recognized over the remaining vesting period of 2.03 years as general and administrative expense. Stock-based compensation expense recognized during the quarters and six months ended June 30, 2019 and 2018 related to these shares was as follows (in thousands):

	2019		2018
Quarter ended June 30	$	532	$	830
Six months ended June 30		890		1,907

In February 2019, we issued 52,000 RSUs with a grant date fair value of approximately $1.3 million, to certain key employees that include service and performance vesting conditions related to the achievement of certain regulatory approvals for AR101.  Stock-based compensation expense will be recognized when we conclude that it is probable that the performance conditions will be achieved. We will reassess the probability of vesting at each reporting period and adjust stock-based compensation expense based on this probability assessment.  As the vesting is contingent upon specific performance conditions, stock-based compensation expense related to the grant will not be recognized until the specified conditions are determined to be probable of achievement. As none of the performance criteria were met during the six months ended June 30, 2019, we have not recognized any stock-based compensation related to these RSUs.

Valuation Assumptions

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model and the resulting weighted average fair value of stock options granted were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected term (in years)		6.0			6.0			6.0			6.0
Expected volatility		62.2	%		68.3	%		63.2	%		68.4	%
Risk free interest rate		2.3	%		2.6	%		2.5	%		2.4	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average estimated fair value	$	11.93		$	19.10		$	13.38		$	20.51

The weighted-average assumptions used to estimate the fair value of ESPP using the Black-Scholes option valuation model were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected term (in years)		0.5			0.5			0.5			0.9
Expected volatility		50.7	%		47.0	%		50.7	%		50.4	%
Risk free interest rate		2.4	%		2.1	%		2.4	%		1.8	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average estimated fair value	$	6.00		$	8.41		$	6.00		$	12.42

Stock-Based Compensation Expense

Stock-based compensation expense, net of estimated forfeitures, reflected in the condensed consolidated statements of comprehensive loss is as follows (in thousands):

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development	$	2,957	$	2,923	$	5,700	$	4,970
General and administrative		5,783		5,751		10,805		11,311
Total stock-based compensation expense	$	8,740	$	8,674	$	16,505	$	16,281

During the quarter and six months ended June 30, 2019, we recorded approximately $0.5 million and $1.0 million, respectively, of stock-based compensation expense related to the acceleration of certain former executives’ stock options. Such expense was approximately $0.9 million and $2.1 million for the quarter and six months ended June 30, 2018, respectively.

As of June 30, 2019, total unrecognized stock-based compensation expense and expected period over which such compensation will be recognized were as follows ($ in thousands):

	As of  June 30, 2019
Stock-option
Unrecognized stock compensation expense	$	60,246
Weighted-average remaining vesting period (years)	2.8
RSU
Unrecognized stock compensation expense	$	11,753
Weighted-average remaining vesting period (years)	2.94
ESPP
Unrecognized stock compensation expense	$	237
Weighted-average remaining vesting period (years)		0.38

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Net Loss per Share

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Net Loss per Share

8. Net Loss per Share

Basic net loss per share is calculated based on the weighted-average number of common shares outstanding during the periods presented. For periods in which we have generated a net loss, basic and diluted net loss per share are the same due to the requirement

to exclude potentially dilutive securities, consisting of common shares underlying outstanding stock options and restricted stock units, which would have an anti-dilutive effect on net loss per share.

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their inclusion would have been antidilutive:

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options		8,570,332		7,516,362		8,570,332		7,516,362
RSUs		639,829		360,574		639,829		360,574

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Related Party Transaction

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

Related Party Transaction

9. Related Party Transaction

In June 2017, Mark McDade, a member of our Board of Directors, joined the Board of Directors of MyHealthTeams, a private company that creates social networks for people living with chronic conditions by partnering with pharmaceutical and healthcare companies. We entered into an agreement with MyHealthTeams in 2015 under which they provide services to us. During the quarters and six months ended June 30, 2019 and 2018, there were payments of $0.1 million in each period to MyHealthTeams pursuant to such agreement At June 30, 2019 and December 31, 2018, there were no accrued liabilities due under the MyHealthTeams agreement.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2019

Accounting Policies [Abstract]

Basis of Preparation

Basis of Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with Generally Accepted Accounting Principles, or GAAP, in the United States and applicable rules and regulations of the Securities and Exchange Commission, or SEC, regarding interim financial 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, 2018, 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 condensed consolidated 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 quarter and six months ended June 30, 2019, are not necessarily indicative of the results to be expected for the year ending December 31, 2019, or for any other interim period or for any other future year. We operate in one reportable segment.

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, 2018, included in our Annual Report on Form 10-K filed with the SEC.

Basis of Consolidation

Basis of Consolidation

The accompanying condensed consolidated financial statements include the accounts of our wholly-owned subsidiaries. All significant intercompany transactions have been eliminated.

Use of Estimates

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of costs and expenses during the reporting period. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results could differ from these estimates under different assumptions or conditions.

Significant Accounting Policies

Significant Accounting Policies

There have been no significant changes to the accounting policies during the six months ended June 30, 2019, as compared to the significant accounting policies described in Note 2 of the “Notes to Consolidated Financial Statements” in our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018, except as noted below.

Recently Adopted Accounting Pronouncements

Recently Adopted Accounting Pronouncements

We adopted Accounting Standards Update, or ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019 using the alternative modified retrospective approach provided in ASU No. 2018-11, Lease (Topic 841): Targeted Improvements. In doing so, we have continued to apply Accounting Standards Codification, or ASC 840 in the comparative periods and recognized the cumulative effect of applying Topic 842 to retained earnings on January 1, 2019. We elected a package of practical expedients for leases that commenced prior to January 1, 2019, which among other things, allowed us to carry forward the historical lease assessment for: (i) whether any expired or existing contracts are or contain leases; (ii) lease classification for any expired or existing leases; and (iii) initial direct costs capitalization for any existing leases. We have also elected a practical expedient, by class of underlying asset, not to separate non-lease components from lease components and instead to account for each separate lease component and the non-lease components associated with that lease component as a single lease component. We have made an accounting policy election to not apply the recognition requirements to leases with a lease term of 12 months or less. We have recognized those lease payments in the consolidated statements of operations on a straight-line basis over the lease term and variable lease payments in the period in which the obligation for those payments is incurred.

Adoption of this standard has resulted in the recognition of operating lease right-of-use assets of $11.7 million and lease liabilities of $13.1 million as of June 30, 2019. The standard did not materially impact our consolidated statement of operations or our consolidated statements of cash flows.

We adopted ASU No. 2018-07, Improvements to Nonemployee Share-Based Payment Accounting (Topic 718), as of January 1, 2019, which amends ASC Topic 718, “Compensation—Stock Compensation”. The ASU simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on such payments to non-employees would be aligned with the requirements for share-based payments granted to employees. Upon adoption of this standard, share-based awards issued to non-employees are measured at the grant date and are not subject to remeasurement. We have elected to continue to use the contractual term as the estimated expected term. The adoption of ASU No. 2018-07 did not have a material impact on our financial statements and is expected to reduce the volatility in stock-based compensation expense for non-employees recognized from period to period.

Recently Issued Accounting Pronouncements Not Yet Adopted

Recently Issued Accounting Pronouncements Not Yet Adopted

In August 2018, the Financial Accounting Standards Board, or the FASB, issued ASU 2018-13, Fair Value Measurement: Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which adds and modifies certain disclosure requirements for fair value measurements. Under the new guidance, entities will no longer be required to disclose the amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, or valuation processes for Level 3 fair value measurements. However, public companies will be required to disclose the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and related changes in unrealized gains and losses included in other comprehensive income. ASU 2018-13 is effective for fiscal periods beginning after December 15, 2019, with early adoption permitted. We are currently evaluating the impact that the adoption of ASU 2018-13 will have on our consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires measurement and recognition of expected credit losses for financial assets held. ASU 2016-13 modifies the other-than-temporary impairment model for available-for-sale debt securities and requires an estimate of expected credit losses when the fair value is below the amortized cost of the asset. ASU 2016-13 is effective for fiscal years beginning after December 15, 2019 and interim periods within those fiscal years. Early adoption is permitted. We are currently evaluating the impact that the adoption of ASU 2016-13 will have on our consolidated financial statements and related disclosures.

Fair Value Measurements

We define fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Our valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources, while unobservable inputs reflect our market assumptions. We classify these inputs into the following hierarchy:

• 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.

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Available-for-Sale Securities and Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Summary of Financial Instruments Measured at Fair Value on a Recurring Basis

The following tables set forth our financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

	June 30, 2019
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash and money market funds	$	72,564	$	—	$	—	$	72,564
Total cash and cash equivalents	$	72,564	$	—	$	—	$	72,564
Investments:
Agency securities	$	—	$	21,256	$	—	$	21,256
Corporate securities		—		44,153		—		44,153
Commercial paper		—		11,033		—		11,033
U.S. government securities		—		101,250		—		101,250
Total investments	$	—	$	177,692	$	—	$	177,692

	December 31, 2018
	Level 1		Level 2		Level 3		Total
Cash and cash equivalents:
Cash and money market funds	$	107,511	$	—	$	—	$	107,511
Total cash and cash equivalents	$	107,511	$	—	$	—	$	107,511
Investments:
Agency securities		—		17,352		—		17,352
Corporate securities		—		54,474		—		54,474
Commercial paper		—		5,965		—		5,965
U.S. government securities		—		118,630		—		118,630
Total investments	$	—	$	196,421	$	—	$	196,421

Summary of Aggregate Market Value, Cost Basis and Gross Unrealized Gains and Losses of Available-for-Sale Investments by Security Type

The aggregate market value, cost basis, and gross unrealized gains and losses of available-for-sale investments by security type, classified in cash equivalents and investments, as of June 30, 2019 and December 31, 2018, are as follows (in thousands):

	June 30, 2019
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities	$	21,243	$	13	$	—	$	21,256
Corporate securities		44,051		102		—		44,153
Commercial paper		11,033		—		—		11,033
U.S. government securities		101,129		121		—		101,250
Total available-for-sale investments	$	177,456	$	236	$	—	$	177,692

	December 31, 2018
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Total Fair Value
Agency securities	$	17,361	$	—	$	(9	)	$	17,352
Corporate securities		54,536		—		(62	)		54,474
Commercial paper		5,965		—		—			5,965
U.S. government securities		118,667		14		(51	)		118,630
Total available-for-sale investments	$	196,529	$	14	$	(122	)	$	196,421

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Balance Sheet Components (Tables)

6 Months Ended

Jun. 30, 2019

Balance Sheet Related Disclosures [Abstract]

Summary of Property And Equipment, Net

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

	June 30, 2019			December 31, 2018
Furniture and equipment	$	2,642		$	2,221
Computer equipment		2,603			2,073
Manufacturing equipment		6,473			1,733
Leased equipment		100			100
Leasehold improvements		14,506			4,469
Buildings		—			688
Construction in progress		7,918			18,295
Property and equipment, gross		34,242			29,579
Less: accumulated depreciation		(4,828	)		(3,251	)
Property and equipment, net	$	29,414		$	26,328

Summary of Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

	June 30, 2019		December 31, 2018
Compensation and benefits	$	7,054	$	8,912
Research and development		8,721		15,504
Professional and consulting		10,829		4,691
Other		479		37
Total accrued liabilities	$	27,083	$	29,144

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Long-Term Debt, Net of Discounts (Tables)

6 Months Ended

Jun. 30, 2019

Debt Disclosure [Abstract]

Schedule of Short-term and Long-term Debt Obligations

The following table represents our short-term and long-term debt obligations (in thousands):

	June 30, 2019
Principal amount of long-term debt	$	41,961
Less: Current portion of long-term debt		-
Long-term debt, net of current portion		41,961
Unamortized discount relating to deferred financing costs, net		(3,559	)
Accrued exit fee payment		124
Long-term debt, net of discount and current portion	$	38,526

Schedule of Future Principal Payments of Long-term Debt

Future principal payments of our long-term debt as of June 30, 2019 are as follows:

Fiscal year ending December 31:
2019	$	-
2020		-
2021		-
2022		-
2023		20,981
Thereafter		20,980
Total	$	41,961

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Commitments and Contingencies (Tables)

6 Months Ended

Jun. 30, 2019

Commitments And Contingencies Disclosure [Abstract]

Schedule of Maturities of Operating Lease Liabilities

As of June 30, 2019, the maturities of our operating lease liabilities were as follows (in thousands):

	Remaining Lease Payments June 30, 2019
	Operating			Financing			Total
2019	$	1,567		$	17		$	1,584
2020		3,330			34			3,364
2021		3,413			35			3,448
2022		3,497			9			3,506
2023		3,378			-			3,378
Thereafter		1,744			-			1,744
Total lease payments	$	16,929		$	95		$	17,024
Less: Effects of discounting		(3,871	)		(29	)		(3,900	)
Present value of lease liabilities	$	13,058		$	66		$	13,124
Less: current portion		(2,022	)		(19	)		(2,041	)
Long-term lease liabilities	$	11,036		$	47		$	11,083
Weighted-average remaining lease term	5 years			2.8 years
Weighted-average incremental borrowing rate		11	%		23	%

Component of Lease Costs Included in Condensed Consolidated Statements of Income

The component of our lease costs included in our condensed consolidated statements of income were as follows (in thousands):

	Quarter Ended		Six Months Ended
Lease Cost	June 30, 2019
Operating lease cost	$	914	$	1,879
Finance lease cost
Amortization of leased assets		8		16
Interest on lease liabilities		4		8
Net lease cost	$	926	$	1,903

Schedule of Other Information Related to Operating Lease

Other information related to our operating lease was as follows (in thousands):

Other Information	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$	1,879
Operating cash flows from finance leases	$	24

Schedule of Future Aggregate Minimum Lease Payments Calculated under ASC 840

Total future aggregate minimum lease payments calculated under ASC 840 at December 31, 2018 were as follows (in thousands):

	Remaining Lease Payments December 31, 2018
	Operating			Financing			Total
2019	$	3,133		$	33		$	3,166
2020		3,330			34			3,364
2021		3,413			35			3,448
2022		3,497			9			3,506
2023		3,378			-			3,378
Thereafter		1,744			-			1,744
Total lease payments	$	18,495		$	111		$	18,606
Less: amount representing interest		-			(33	)		(33	)
Value of lease liabilities under ASC 840	$	18,495		$	78		$	18,573
Less: current portion		(3,133	)		(17	)		(3,150	)
Long-term lease liabilities	$	15,362		$	61		$	15,423

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Stock-Based Compensation (Tables)

6 Months Ended

Jun. 30, 2019

Summary of Stock Option Activity

Option activity under the 2015 Plan and 2013 Plan is set forth below:

	Options Outstanding
	Number of Options			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Life (in years)		Aggregate Intrinsic Value (in thousands)
Balance, December 31, 2018		7,133,113		$	20.08		7.6	$	27,413
Options granted		2,318,442			22.52
Options exercised and shares vested		(366,221	)		14.23
Options cancelled		(515,002	)		28.19
Balance, June 30, 2019		8,570,332			20.50		7.6	$	28,934
Options vested and expected to vest as of    June 30, 2019		8,017,038			20.22		7.5	$	28,771
Options exercisable as of June 30, 2019		3,891,087		$	15.93		6.3	$	26,175

Restricted Stock Unit Activity

Restricted stock unit, or RSU, activity under the 2015 Plan is set forth below:

	Shares			Weighted Average Grant Date Fair Value
Unvested Balance, December 31, 2018		309,847		$	33.37
Awarded		476,127			23.06
Released		(91,354	)		33.28
Forfeited		(54,791	)		29.72
Unvested Balance, June 30, 2019		639,829		$	26.02

Summary of Stock-based Compensation Expense

Stock-Based Compensation Expense

Stock-based compensation expense, net of estimated forfeitures, reflected in the condensed consolidated statements of comprehensive loss is as follows (in thousands):

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Research and development	$	2,957	$	2,923	$	5,700	$	4,970
General and administrative		5,783		5,751		10,805		11,311
Total stock-based compensation expense	$	8,740	$	8,674	$	16,505	$	16,281

Schedule of Weighted Average Assumptions to Fair Value of Stock Options

The weighted-average assumptions used to estimate the fair value of stock options using the Black-Scholes option valuation model and the resulting weighted average fair value of stock options granted were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected term (in years)		6.0			6.0			6.0			6.0
Expected volatility		62.2	%		68.3	%		63.2	%		68.4	%
Risk free interest rate		2.3	%		2.6	%		2.5	%		2.4	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average estimated fair value	$	11.93		$	19.10		$	13.38		$	20.51

Summary of Unrecognized Stock-Based Compensation Expense and Expected Period

As of June 30, 2019, total unrecognized stock-based compensation expense and expected period over which such compensation will be recognized were as follows ($ in thousands):

	As of  June 30, 2019
Stock-option
Unrecognized stock compensation expense	$	60,246
Weighted-average remaining vesting period (years)	2.8
RSU
Unrecognized stock compensation expense	$	11,753
Weighted-average remaining vesting period (years)	2.94
ESPP
Unrecognized stock compensation expense	$	237
Weighted-average remaining vesting period (years)		0.38

Employee Stock Purchase Plan

Schedule of Weighted Average Assumptions to Fair Value of Stock Options

The weighted-average assumptions used to estimate the fair value of ESPP using the Black-Scholes option valuation model were as follows:

	Quarter Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Expected term (in years)		0.5			0.5			0.5			0.9
Expected volatility		50.7	%		47.0	%		50.7	%		50.4	%
Risk free interest rate		2.4	%		2.1	%		2.4	%		1.8	%
Dividend yield		—	%		—	%		—	%		—	%
Weighted average estimated fair value	$	6.00		$	8.41		$	6.00		$	12.42

Restricted Stock

Summary of Stock-based Compensation Expense

Stock-based compensation expense recognized during the quarters and six months ended June 30, 2019 and 2018 related to these shares was as follows (in thousands):

	2019		2018
Quarter ended June 30	$	532	$	830
Six months ended June 30		890		1,907

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Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Antidilutive Securities Excluded from Computation of Diluted Net Loss per Share

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their inclusion would have been antidilutive:

	Quarter Ended June 30,				Six Months Ended June 30,
	2019		2018		2019		2018
Stock options		8,570,332		7,516,362		8,570,332		7,516,362
RSUs		639,829		360,574		639,829		360,574

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Formation and Business of the Company - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Organization Consolidation And Presentation Of Financial Statements [Abstract]
Net loss	$ 62,878	$ 54,266	$ 52,552	$ 49,500	$ 117,144	$ 102,052
Net cash used in operating activities	92,000				91,995	$ 76,317
Accumulated deficit	593,326				593,326		$ 476,234
Cash, cash equivalents and investments	$ 250,300				$ 250,300

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Summary of Significant Accounting Policies - Additional Information (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($) Segment
Significant Accounting Policies [Line Items]
Number of reportable segments | Segment	1
Operating lease, right-of-use asset	$ 11,736
Operating lease, liability	13,058
ASU 2016-02
Significant Accounting Policies [Line Items]
Operating lease, right-of-use asset	11,700
Operating lease, liability	$ 13,100

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Available-for-Sale Securities and Fair Value Measurements - Summary of Financial Instruments Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Investments:
Total investments	$ 177,692	$ 196,421
Agency Securities
Investments:
Total investments	21,256	17,352
Corporate Debt Securities
Investments:
Total investments	44,153	54,474
Commercial Paper
Investments:
Total investments	11,033	5,965
U.S. Government Securities
Investments:
Total investments	101,250	118,630
Fair Value Measurements Recurring
Cash and cash equivalents
Total cash and cash equivalents	72,564	107,511
Investments:
Total investments	177,692	196,421
Fair Value Measurements Recurring | Cash and Money Market Funds
Cash and cash equivalents
Total cash and cash equivalents	72,564	107,511
Fair Value Measurements Recurring | Agency Securities
Investments:
Total investments	21,256	17,352
Fair Value Measurements Recurring | Corporate Debt Securities
Investments:
Total investments	44,153	54,474
Fair Value Measurements Recurring | Commercial Paper
Investments:
Total investments	11,033	5,965
Fair Value Measurements Recurring | U.S. Government Securities
Investments:
Total investments	101,250	118,630
Level 1 | Fair Value Measurements Recurring
Cash and cash equivalents
Total cash and cash equivalents	72,564	107,511
Level 1 | Fair Value Measurements Recurring | Cash and Money Market Funds
Cash and cash equivalents
Total cash and cash equivalents	72,564	107,511
Level 2 | Fair Value Measurements Recurring
Investments:
Total investments	177,692	196,421
Level 2 | Fair Value Measurements Recurring | Agency Securities
Investments:
Total investments	21,256	17,352
Level 2 | Fair Value Measurements Recurring | Corporate Debt Securities
Investments:
Total investments	44,153	54,474
Level 2 | Fair Value Measurements Recurring | Commercial Paper
Investments:
Total investments	11,033	5,965
Level 2 | Fair Value Measurements Recurring | U.S. Government Securities
Investments:
Total investments	$ 101,250	$ 118,630

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Available-for-Sale Securities and Fair Value Measurements - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Fair Value Disclosures [Abstract]
Fair value assets transfers between level 1 to level 2	$ 0	$ 0	$ 0	$ 0
Fair value assets transfers between level 2 to level 1	0	0	$ 0	0
Available-for-sale securities, maturities period			18 months
Other than temporary impairment losses	$ 0	$ 0	$ 0	$ 0
Marketable securities unrealized losses position maximum period			12 months

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Available-for-Sale Securities and Fair Value Measurements - Summary of Aggregate Market Value, Cost Basis, and Gross Unrealized Gains and Losses of Available for Sale Investments by Security Type (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Amortized Cost	$ 177,456	$ 196,529
Gross Unrealized Gains	236	14
Gross Unrealized Losses		(122)
Total investments	177,692	196,421
Agency Securities
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Amortized Cost	21,243	17,361
Gross Unrealized Gains	13
Gross Unrealized Losses		(9)
Total investments	21,256	17,352
Corporate Debt Securities
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Amortized Cost	44,051	54,536
Gross Unrealized Gains	102
Gross Unrealized Losses		(62)
Total investments	44,153	54,474
Commercial Paper
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Amortized Cost	11,033	5,965
Total investments	11,033	5,965
U.S. Government Securities
Fair Value Balance Sheet Grouping Financial Statement Captions [Line Items]
Amortized Cost	101,129	118,667
Gross Unrealized Gains	121	14
Gross Unrealized Losses		(51)
Total investments	$ 101,250	$ 118,630

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Balance Sheet Components - Summary of Property and Equipment, Net (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 34,242	$ 29,579
Less: accumulated depreciation	(4,828)	(3,251)
Property and equipment, net	29,414	26,328
Furniture and Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	2,642	2,221
Computer Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	2,603	2,073
Manufacturing Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	6,473	1,733
Leased Equipment
Property Plant And Equipment [Line Items]
Property and equipment, gross	100	100
Leasehold improvements
Property Plant And Equipment [Line Items]
Property and equipment, gross	14,506	4,469
Buildings
Property Plant And Equipment [Line Items]
Property and equipment, gross		688
Construction in Progress
Property Plant And Equipment [Line Items]
Property and equipment, gross	$ 7,918	$ 18,295

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Balance Sheet Components - Summary of Accrued Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Accrued Liabilities Current [Abstract]
Compensation and benefits	$ 7,054	$ 8,912
Research and development	8,721	15,504
Professional and consulting	10,829	4,691
Other	479	37
Total accrued liabilities	$ 27,083	$ 29,144

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Long-Term Debt, Net of Discounts - Additional Information (Details)				6 Months Ended
	Dec. 31, 2023	Jan. 03, 2021	Jan. 31, 2019 USD ($) Tranche	Jun. 30, 2019 USD ($)	Jan. 01, 2021 USD ($)	Dec. 31, 2020 USD ($)	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Payment of fees including debt issuance costs				$ 3,856,000
Long term debt, outstanding				$ 41,961,000
KKR Loans
Debt Instrument [Line Items]
Loan agreement, maximum borrowing capacity			$ 170,000,000.0
Debt instrument number of tranches | Tranche			3
Loan agreement, proceeds receivable upon closing of transaction			$ 40,000,000.00
Loan agreement, proceeds receivable upon FDA approval			85,000,000.0
Loan agreement, remaining borrowing capacity upon certain conditions			$ 45,000,000.0
Line of credit facility maturity date			Jan. 03, 2025
Regulatory approval last date			Dec. 31, 2020
Line of credit facility without regulatory approval expiration date			Jan. 15, 2021
Loan prepayment fee percentage, after January 3, 2021 but on or prior to January 3, 2022				5.00%
Loan prepayment fee percentage, after January 3, 2022 but on or prior to January 3, 2023				2.00%
Loan prepayment fee percentage, thereafter				0.00%
Line of credit facility, prepayment premium amount				$ 3,400,000
Loan exit fee percentage				4.00%
Payment of fees including debt issuance costs				$ 3,900,000
Long term debt, outstanding				$ 41,900,000			$ 0
Debt instrument, interest rate				9.94%
KKR Loans | Scenario, Forecast
Debt Instrument [Line Items]
Other loans trigger amount to reduce 91 days maturity of credit facility					$ 25,000,000.0	$ 15,000,000.0
Loan, spread on variable rate		0.50%
Loan redemption price, percentage	50.00%
Line of credit facility, interest rate	12.50%
Percentage of principal amount of loans prepayment paid on or prior to January 3, 2021		105.00%
KKR Loans | Alternate Base Rate
Debt Instrument [Line Items]
Loan, spread on variable rate			6.50%
KKR Loans | 30-day LIBOR
Debt Instrument [Line Items]
Loan, spread on variable rate			7.50%

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Long-Term Debt, Net of Discounts - Schedule of Short-term and Long-term Debt Obligations (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Debt Disclosure [Abstract]
Principal amount of long-term debt	$ 41,961
Long-term debt, net of current portion	41,961
Unamortized discount relating to deferred financing costs, net	(3,559)
Accrued exit fee payment	124
Long-term debt, net of discount and current portion	$ 38,526

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Long-Term Debt, Net of Discounts - Schedule of Future Principal Payments of Long-Term Debt (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Debt Disclosure [Abstract]
2023	$ 20,981
Thereafter	20,980
Total	$ 41,961

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Commitments and Contingencies - Additional Information (Details) $ in Millions	1 Months Ended		6 Months Ended
	May 31, 2019	Jan. 31, 2018 USD ($) Tranche shares	Jun. 30, 2019 USD ($)
Commitments And Contingencies [Line Items]
Operating lease, description			We lease facilities for office and manufacturing space under various operating leases and a security system under a financing lease.
Finance Lease, Description			We lease facilities for office and manufacturing space under various operating leases and a security system under a financing lease.
Operating lease, existence of option to extend			true
Operating lease, option to extend			Our leases have remaining lease terms of approximately 1 year to 6 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms.
Finance lease, existence of option to extend			true
Finance lease, option to extend			Our leases have remaining lease terms of approximately 1 year to 6 years, which represent the non-cancellable periods of the leases and include extension options that we determined are reasonably certain to be exercised. We exclude extension options that are not reasonably certain to be exercised from our lease terms.
Operating lease, variable lease payment, terms and conditions			We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable.
Finance lease, variable lease payment, terms and conditions			We use our incremental borrowing rate to calculate the present value of our lease payments, as the implicit rates in our leases are not readily determinable.
Archer Daniels Midland Company
Commitments And Contingencies [Line Items]
Long-term purchase commitment, restated agreement effective period after first delivery		10 years
Long-term purchase commitment, optional extension period		5 years
Long-term purchase commitment amount			$ 3.3
Long-term purchase commitment period			10 years
Archer Daniels Midland Company | Restricted Stock | Common Stock
Commitments And Contingencies [Line Items]
Long-term purchase commitment, shares issued | shares		300,000
Long-term purchase commitment, shares issued, vesting period		3 years 6 months
Long-term purchase commitment, fair value		$ 11.7
Number of tranches for vesting of shares | Tranche		4
CoreRx, Inc.
Commitments And Contingencies [Line Items]
Long-term purchase commitment amount			$ 4.3
Long-term purchase commitment expiration date	Dec. 31, 2024
Long-term purchase commitment renewal term	2 years
CoreRx, Inc. | AR101 Commercial Supply Requirements
Commitments And Contingencies [Line Items]
Percentage of long term purchase commitment minimum required quantity	100.00%
Number of years for minimum supply percentage after approval	6 years
Annual purchase commitments beginning year	2019
Annual purchase commitments ending year	2024
CoreRx, Inc. | AR101 Commercial Supply Requirements for Release Testing
Commitments And Contingencies [Line Items]
Percentage of long term purchase commitment minimum required quantity	100.00%
Number of years for minimum supply percentage after approval	6 years
Annual purchase commitments beginning year	2019
Annual purchase commitments ending year	2024
Manufacturing Facility
Commitments And Contingencies [Line Items]
Additional operating leases, not yet commenced, amount			$ 0.7
Additional operating leases, not yet commenced, description			we have additional operating leases, primarily for our manufacturing facility
Additional operating leases, not yet commenced, term			6 years 3 months
Minimum
Commitments And Contingencies [Line Items]
Remaining lease terms			1 year
Maximum
Commitments And Contingencies [Line Items]
Remaining lease terms			6 years
Maximum | Michael Foods, Inc.
Commitments And Contingencies [Line Items]
Long-term purchase commitment period			15 years

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Commitments and Contingencies - Schedule of Maturities of Operating Lease Liabilities (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Operating lease, 2019	$ 1,567
Operating lease, 2020	3,330
Operating lease, 2021	3,413
Operating lease, 2022	3,497
Operating lease, 2023	3,378
Operating lease, Thereafter	1,744
Operating Lease, Total lease payments	16,929
Less: Operating lease, Effects of discounting	(3,871)
Operating lease, Present value of lease liabilities	13,058
Less: Operating lease, current portion	(2,022)
Operating lease, Long-term lease liabilities	$ 11,036
Operating Lease, Weighted-average remaining lease term	5 years
Operating Lease, Weighted-average incremental borrowing rate	11.00%
Financing lease, 2019	$ 17
Financing lease, 2020	34
Financing lease, 2021	35
Financing lease, 2022	9
Financing lease, Total lease payments	95
Less: Financing lease, Effects of discounting	(29)
Financing lease, Present value of lease liabilities	66
Less: Financing lease, current portion	(19)
Financing lease, Long-term lease liabilities	$ 47
Financing lease, Weighted-average remaining lease term	2 years 9 months 18 days
Financing lease, Weighted-average incremental borrowing rate	23.00%
Remaining Lease Payments, 2019	$ 1,584
Remaining Lease Payments, 2020	3,364
Remaining Lease Payments, 2021	3,448
Remaining Lease Payments, 2022	3,506
Remaining Lease Payments, 2023	3,378
Remaining Lease Payments, Thereafter	1,744
Total lease payments	17,024
Less: Effects of discounting	(3,900)
Present value of lease liabilities	13,124
Less: current portion	(2,041)
Long-term lease liabilities	$ 11,083

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Commitments and Contingencies - Component of Lease Costs Included in Condensed Consolidated Statements of Income (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Lease Cost
Operating lease cost	$ 914	$ 1,879
Finance lease cost
Amortization of leased assets	8	16
Interest on lease liabilities	4	8
Net lease cost	$ 926	$ 1,903

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Commitments and Contingencies - Schedule of Other Information Related to Operating Lease (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows from operating leases	$ 1,879
Operating cash flows from finance leases	$ 24

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Commitments and Contingencies - Schedule of Future Aggregate Minimum Lease Payments Calculated under ASC 840 (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments And Contingencies Disclosure [Abstract]
Operating Lease, 2019	$ 3,133
Operating Lease, 2020	3,330
Operating Lease, 2021	3,413
Operating Lease, 2022	3,497
Operating Lease, 2023	3,378
Operating Lease, Thereafter	1,744
Operating Lease, Total lease payments	18,495
Less: Operating Lease, current portion	(3,133)
Operating Lease, Long-term lease liabilities	15,362
Financing Lease, 2019	33
Financing Lease, 2020	34
Financing Lease, 2021	35
Financing Lease, 2022	9
Total financing lease payments	111
Less: Financing Lease, amount representing interest	(33)
Financing Lease Value of lease liabilities under ASC 840	78
Less: Financing Lease, current portion	(17)
Financing Lease, Long-term lease liabilities	61
Remaining Lease Payments, 2019	3,166
Remaining Lease Payments, 2020	3,364
Remaining Lease Payments, 2021	3,448
Remaining Lease Payments, 2022	3,506
Remaining Lease Payments, 2023	3,378
Remaining Lease Payments, Thereafter	1,744
Total lease payments	18,606
Less: amount representing interest	(33)
Value of lease liabilities under ASC 840	18,573
Less: current portion	(3,150)
Long-term lease liabilities	$ 15,423

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Stock-Based Compensation - Additional Information (Details) - USD ($)	1 Months Ended				3 Months Ended		6 Months Ended		12 Months Ended
	Feb. 28, 2019	Jan. 31, 2018	Aug. 31, 2015	Jul. 31, 2015	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Restricted Stock | Common Stock | Archer Daniels Midland Company
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period		3 years 6 months
Long-term purchase commitment, shares issued		300,000
Long-term purchase commitment, shares issued, vesting period		3 years 6 months
Stock-based compensation, shares vested							75,000
Unrecognized employee stock-based compensation					$ 3,600,000		$ 3,600,000
Expected recognized over weighted-average remaining vesting period							2 years 10 days
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Recognized stock-based compensation expense					11,753,000		$ 11,753,000
Certain Key Employees | Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of restricted stock issued	52,000
Restricted stock units, aggregate grant date fair value	$ 1,300,000
Recognized stock-based compensation expense					0		0
Former Executive
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Accelerated stock compensation expense					$ 500,000	$ 900,000	$ 1,000,000.0	$ 2,100,000
2015 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares reserved for issuance				4,681,544
Number of shares available for future grant					4,625,878		4,625,878		4,364,963
Minimum percentage of voting rights of all classes of stock				10.00%
Percentage of statutory stock options				110.00%
Options expiration period				10 years
2015 Plan | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options expiration period				10 years
2015 Plan | First Anniversary
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period				4 years
Option vesting rights, percentage				25.00%
2015 Plan | Thereafter
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Option vesting rights, percentage				2.08%
2015 Plan | Over Two Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period				2 years
Option vesting rights, percentage				4.17%
2015 Plan | Over Four Years
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Options vesting period				4 years
Option vesting rights, percentage				2.08%
2015 ESPP
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Percentage of statutory stock options			85.00%
Description of ESPP							Under the 2015 ESPP our employees may purchase common stock through payroll deductions at a price equal to 85% of the lower of the fair market value of the stock at the beginning of the offering period or at the end of each applicable purchase period. The 2015 ESPP generally provides for offering periods of six months in duration with purchase periods ending on either May 15 or November 15. Contributions under the 2015 ESPP are limited to a maximum of 15% of an employee’s eligible compensation.
Percentage of maximum contributions employee's eligible compensation			15.00%
ESPP offering period			6 months
Description of offering period closing dates							The 2015 ESPP generally provides for offering periods of six months in duration with purchase periods ending on either May 15 or November 15
Shares issued under the plan							59,722		41,030
Weighted average price per share					$ 17.75		$ 17.75		$ 25.28
Employee stock purchase plan remain available for purchase							2,346,064
2013 Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Common stock, shares reserved for issuance					0		0
Number of shares available for future grant					0		0

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Stock-Based Compensation - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Number of Options
Number of Options, Beginning Balance	7,133,113
Number of Options, Options granted	2,318,442
Number of Options, Options exercised and shares vested	(366,221)
Number of Options, Options cancelled	(515,002)
Number of Options, Ending Balance	8,570,332	7,133,113
Number of Options, Options vested and expected to vest as of June 30, 2019	8,017,038
Number of Options, Options exercisable as of June 30, 2019	3,891,087
Weighted-Average Exercise Price
Weighted-Average Exercise Price, Beginning Balance	$ 20.08
Weighted-Average Exercise Price, Options granted	22.52
Weighted-Average Exercise Price, Options exercised and shares vested	14.23
Weighted-Average Exercise Price, Options cancelled	28.19
Weighted-Average Exercise Price, Ending Balance	20.50	$ 20.08
Weighted-Average Exercise Price, Options vested and expected to vest as of June 30, 2019	20.22
Weighted-Average Exercise Price, Options exercisable as of June 30, 2019	$ 15.93
Weighted Average Remaining Contractual Life (in years)
Weighted Average Remaining Contractual Life (in years), Balance	7 years 7 months 6 days	7 years 7 months 6 days
Weighted Average Remaining Contractual Life, Options vested and expected to vest as of June 30, 2019	7 years 6 months
Weighted Average Remaining Contractual Life, Options exercisable as of June 30, 2019	6 years 3 months 18 days
Aggregate Intrinsic Value, Balance	$ 28,934	$ 27,413
Aggregate Intrinsic Value, Options vested and expected to vest as of June 30, 2019	28,771
Aggregate Intrinsic Value, Options exercisable as of June 30, 2019	$ 26,175

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Stock-Based Compensation - Restricted Stock Unit Activity (Details) - 2015 Plan - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 30, 2019 $ / shares shares
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unvested Shares, Beginning Balance | shares	309,847
Shares, Awarded | shares	476,127
Shares, Released | shares	(91,354)
Shares, Forfeited | shares	(54,791)
Unvested Shares, Ending Balance | shares	639,829
Unvested Weighted Average Grant Date Fair Value, Beginning Balance | $ / shares	$ 33.37
Weighted Average Grant Date Fair Value, Awarded | $ / shares	23.06
Weighted Average Grant Date Fair Value, Released | $ / shares	33.28
Weighted Average Grant Date Fair Value, Forfeited | $ / shares	29.72
Weighted Average Grant Date Fair Value, Ending Balance | $ / shares	$ 26.02

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Stock-Based Compensation - Summary of Stock-based Compensation Expense Recognized (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Restricted Stock | Common Stock | Archer Daniels Midland Company
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 532	$ 830	$ 890	$ 1,907

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Stock-Based Compensation - Schedule of Weighted Average Assumptions to Fair Value of Stock Options (Details) - $ / shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	6 years	6 years	6 years	6 years
Expected volatility	62.20%	68.30%	63.20%	68.40%
Risk free interest rate	2.30%	2.60%	2.50%	2.40%
Weighted average estimated fair value	$ 11.93	$ 19.10	$ 13.38	$ 20.51
Employee Stock Purchase Plan
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Expected term (in years)	6 months	6 months	6 months	10 months 24 days
Expected volatility	50.70%	47.00%	50.70%	50.40%
Risk free interest rate	2.40%	2.10%	2.40%	1.80%
Weighted average estimated fair value	$ 6.00	$ 8.41	$ 6.00	$ 12.42

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Stock-Based Compensation - Summary of Stock-based Compensation Expense Net of Estimated Forfeitures (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 8,740	$ 8,674	$ 16,505	$ 16,281
Research and Development
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	2,957	2,923	5,700	4,970
General and Administrative
Employee Service Share Based Compensation Allocation Of Recognized Period Costs [Line Items]
Stock-based compensation expense	$ 5,783	$ 5,751	$ 10,805	$ 11,311

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Stock-Based Compensation - Summary of Unrecognized Stock-Based Compensation Expense and Expected Period (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2019 USD ($)
Stock Options
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Unrecognized stock compensation expense	$ 60,246
Weighted-average remaining vesting period (years)	2 years 9 months 18 days
Restricted Stock Units (RSUs)
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average remaining vesting period (years)	2 years 11 months 8 days
Unrecognized stock compensation expense	$ 11,753
ESPP
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Weighted-average remaining vesting period (years)	4 months 17 days
Unrecognized stock compensation expense	$ 237

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Net Loss per Share - Schedule of Antidilutive Securities Excluded from Computation of Diluted Net Loss per Share (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Stock Options
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	8,570,332	7,516,362	8,570,332	7,516,362
RSUs
Antidilutive Securities Excluded From Computation Of Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of diluted net loss per share	639,829	360,574	639,829	360,574

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Related Party Transaction - Additional Information (Details) - MyHealth Teams - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018
Related Party Transaction [Line Items]
Payments to service agreement	$ 100,000	$ 100,000	$ 100,000	$ 100,000
Accrued liabilities due	$ 0		$ 0		$ 0