10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

______________________________________

FORM 10-Q

______________________________________

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

For the quarterly period ended March 31, 2020

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: 001-39011

______________________________________

EXICURE, INC.

(Exact name of registrant as specified in its charter)

_____________________________________

Delaware	81-5333008
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

8045 Lamon Avenue

Suite 410

Skokie, IL 60077

(Address of principal executive offices)

Registrant’s telephone number, including area code (847) 673-1700

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	XCUR	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically 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  x    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	x	Smaller reporting company	x
		Emerging growth company	x

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. x

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

As of May 12, 2020, there were 87,150,447 shares of the registrant’s common stock, par value $0.0001 per share, outstanding.

EXICURE, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION	6
Item 1. Financial Statements	6
Unaudited Condensed Consolidated Balance Sheets	6
Unaudited Condensed Consolidated Statements of Operations	7
Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss)	8
Unaudited Condensed Consolidated Statements of Changes in Stockholders’ Equity	9
Unaudited Condensed Consolidated Statements of Cash Flows	10
Notes to Unaudited Condensed Consolidated Financial Statements	12
Item 2. Management's Discussion and Analysis and Results of Operations	32
Item 3. Quantitative and Qualitative Disclosures About Market Risk	45
Item 4. Controls and Procedures	46
PART II - OTHER INFORMATION	47
Item 1. Legal Proceedings	47
Item 1A. Risk Factors	47
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	83
Item 3. Defaults Upon Senior Securities	83
Item 4. Mine Safety Disclosures	83
Item 5. Other Information	83
Item 6. Exhibits	83
Signatures	85

3

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q, or this Quarterly Report, contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act. All statements other than statements of historical fact contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “could,” “will,” “would,” “should,” “expect,” “plan,”, “anticipate,” “believe,” “estimate,” “intend,” “predict,” “seek,” “contemplate,” “project,” “continue,” “potential,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these identifying words. These forward-looking statements include, but are not limited to, statements about:

• our expectations regarding the impact of the ongoing coronavirus 2019, or COVID-19, pandemic including the expected duration of disruption and immediate and long-term delays, interruptions or other adverse effects to clinical trials, delays in regulatory review, preclinical research and development (“R&D”), collaboration and partnership programs, manufacturing and supply chain interruptions, adverse effects on healthcare systems and disruption of the global economy, and the overall impact of the coronavirus pandemic on our business, financial condition and results of operations;

• our estimates of expenses, ongoing losses, future revenue and capital requirements, including our expectations relating to our needs for additional financing;

• the initiation, timing, progress and results of our current and future preclinical studies, clinical trials, collaboration and partnership programs, including our ongoing clinical trials and any planned clinical trials for AST-008 or any of our product candidates, and the research and development programs we pursue;

• our ability to advance our product candidates into, and successfully complete, clinical trials;

• the timing and likelihood of regulatory filings for our current and future product candidates including any Investigational New Drug, or IND, application, Investigational Medicinal Product Dossier, or IMPD, Clinical Trial Application, or CTA, New Drug Application, or NDA, or other regulatory submissions;

• our ability to obtain and maintain regulatory approval of our product candidates in the indications for which we plan to develop them, and any related restrictions, limitations or warnings in the label of an approved drug or therapy;

• the size and growth potential of the markets for our product candidates, if approved, and the rate and degree of market acceptance of our product candidates, including reimbursement that may be received from payors;

• the diversion of healthcare resources away from the conduct of clinical trials as a result of the ongoing COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

• the interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel, quarantines or social distancing protocols imposed or recommended by federal or state governments, employers and others in connection with the ongoing COVID-19 pandemic;

• our dependence on current and future collaborators for advancement of therapeutic candidates pursuant to the terms of such collaborations, including ability to obtain and maintain regulatory approval and commercialization, if approved;

• the status of clinical trials, development timelines and discussions with regulatory authorities related to product candidates under development by us and our collaborators;

• our receipt and timing of any milestone payments or royalties under any current or future research collaboration and license agreements or arrangements;

4

• our ability to identify and develop therapeutic candidates for treatment of additional disease indications;

• the rate and degree of market acceptance of any approved therapeutic candidates;

• the commercialization of any approved therapeutic candidates;

• the implementation of our business model and strategic plans for our business, technologies and therapeutic candidates;

• our ability to obtain additional funds for our operations;

• our ability to obtain and maintain intellectual property protection for our technologies and therapeutic candidates and our ability to operate our business without infringing the intellectual property rights of others;

• our reliance on third parties to conduct our preclinical studies and clinical trials;

• our reliance on third party supply and manufacturing partners to supply the materials and components for, and manufacture, our research and development, preclinical and clinical trial supplies;

• our expectations regarding our ability to attract and retain qualified key management and technical personnel;

• our expectations regarding the time during which we will be an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or JOBS Act;

• statements regarding our internal controls;

• the impact of government laws and regulations as well as developments relating to our competitors or our industry; and

• other factors that may impact our financial results.

You should refer to the section titled “Risk Factors” for a discussion of important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Quarterly Report will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report.

This Quarterly Report also contains or may contain estimates, projections and other information concerning our industry, our business and the markets for certain therapeutics, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.

Except where the context otherwise requires, in this Quarterly Report, the “Company,” “Exicure,” “we,” “us” and “our” refers to Exicure, Inc., a Delaware corporation, and, where appropriate, our wholly owned subsidiary, Exicure Operating Company.

5

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

	March 31, 2020			December 31, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	24,577		$	48,460
Short-term investments	74,223			62,326
Accounts receivable	27			16
Unbilled revenue receivable	11			19
Prepaid expenses and other assets	2,906			1,955
Total current assets	101,744			112,776
Property and equipment, net	2,298			2,099
Other noncurrent assets	1,487			388
Total assets	$	105,529		$	115,263
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of long-term debt	$	—		$	4,965
Accounts payable	3,392			1,814
Accrued expenses and other current liabilities	1,268			2,435
Current portion of deferred revenue	15,713			21,873
Total current liabilities	20,373			31,087
Common stock warrant liability	42			414
Deferred revenue non-current	—			2,956
Other noncurrent liabilities	—			59
Total liabilities	$	20,415		$	34,516
Stockholders’ equity:
Common stock, $0.0001 par value per share; 200,000,000 shares authorized, 87,150,447 issued and outstanding, March 31, 2020; 86,069,263 issued and outstanding, December 31, 2019	9			9
Additional paid-in capital	165,269			162,062
Accumulated other comprehensive loss	(17		)	(27		)
Accumulated deficit	(80,147		)	(81,297		)
Total stockholders' equity	85,114			80,747
Total liabilities and stockholders’ equity	$	105,529		$	115,263

See accompanying notes to the unaudited condensed consolidated financial statements.

6

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

	Three Months Ended, March 31,
	2020			2019
Revenue:
Collaboration revenue	$	9,183		$	25
Total revenue	9,183			25
Operating expenses:
Research and development expense	6,075			3,395
General and administrative expense	2,574			2,208
Total operating expenses	8,649			5,603
Operating income (loss)	534			(5,578		)
Other income (expense), net:
Dividend income	39			105
Interest income	360			1
Interest expense	(128		)	(183		)
Other income (expense), net	345			369
Total other income (expense), net	616			292
Net income (loss)	$	1,150		$	(5,286	)
Basic earnings (loss) per common share	$	0.01		$	(0.12	)
Diluted earnings (loss) per common share	$	0.01		$	(0.12	)
Weighted-average basic common shares outstanding	87,079,160			44,358,000
Weighted-average diluted common shares outstanding	88,244,632			44,358,000

See accompanying notes to the unaudited condensed consolidated financial statements.

7

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands, except share and per share data)

	Three Months Ended, March 31,
	2020		2019
Net income (loss)	$	1,150	$	(5,286	)
Other comprehensive income, net of taxes
Unrealized gains on available for sale securities, net of tax	10		—
Other comprehensive income	10		—
Comprehensive income (loss)	$	1,160	$	(5,286	)

See accompanying notes to the unaudited condensed consolidated financial statements.

8

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands, except shares)

	Common Stock
	Shares	$		Additional Paid-in- Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Stockholders' Equity
Balance at December 31, 2019	86,069,263	$	9	$	162,062	$	(81,297	)	$	(27	)	$	80,747
Equity-based compensation	—	—		441		—			—			441
Issuance of common stock	1,081,184	—		2,766		—			—			2,766
Other comprehensive income, net	—	—		—		—			10			10
Net income (loss)	—	—		—		1,150			—			1,150
Balance at March 31, 2020	87,150,447	$	9	$	165,269	$	(80,147	)	$	(17	)	$	85,114

	Common Stock
	Shares	$		Additional Paid-in- Capital		Accumulated Deficit			Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
Balance at December 31, 2018	44,358,000	$	4	$	75,942	$	(54,994	)	$	—	$	20,952
Equity-based compensation	—	—		489		—			—		489
Net income (loss)	—	—		—		(5,286		)	—		(5,286		)
Balance at March 31, 2019	44,358,000	$	4	$	76,431	$	(60,280	)	$	—	$	16,155

See accompanying notes to the unaudited condensed consolidated financial statements.

9

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Three Months Ended March 31,
	2020			2019
Cash flows from operating activities:
Net income (loss)	1,150			(5,286		)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	148			87
Equity-based compensation	441			489
Amortization of long-term debt issuance costs and fees	35			34
Other	84			36
Change in fair value of warrant liabilities	(346		)	(369		)
Changes in operating assets and liabilities:
Unbilled revenue receivable and accounts receivable	(2		)	—
Prepaid expenses and other current assets	(911		)	(62		)
Other noncurrent assets	30			(559		)
Accounts payable	1,807			354
Accrued expenses and other current liabilities	(1,108		)	(52		)
Deferred revenue	(9,116		)	975
Other noncurrent liabilities	(59		)	341
Net cash used in operating activities	(7,847		)	(4,012		)
Cash flows from investing activities:
Purchase of available for sale securities	(21,926		)	—
Proceeds from sale or maturity of available for sale securities	10,000			—
Capital expenditures	(577		)	(8		)
Net cash used in investing activities	(12,503		)	(8		)
Cash flows from financing activities:
Proceeds from common stock offering	2,973			—
Repayment of long-term debt	(4,999		)	—
Payment of long-term debt fees and issuance costs	(100		)	(52		)
Payment of common stock financing costs	(207		)	—
Net cash used in financing activities	(2,333		)	(52		)
Net decrease in cash, cash equivalents, and restricted cash	(22,683		)	(4,072		)
Cash, cash equivalents, and restricted cash - beginning of period	48,460			26,268
Cash, cash equivalents, and restricted cash - end of period	$	25,777		$	22,196

10

EXICURE, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

(in thousands)

	Three Months Ended March 31,
	2020		2019
Supplemental disclosure of cash flow information:
Non-cash financing activities:
Debt fees (accrued expenses)	$	—	$	100
Non-cash investing activities:
Capital expenditures (accounts payable and accrued expenses)	126		8

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the unaudited condensed consolidated balance sheets that sum to the total of the amounts shown in the unaudited condensed consolidated statements of cash flows:

	March 31, 2020		December 31, 2019
Cash and cash equivalents	$	24,577	$	48,460
Restricted cash included in other noncurrent assets	1,200		—
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows	$	25,777	$	48,460

See accompanying notes to the unaudited condensed consolidated financial statements.

11

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

1. Description of Business and Basis of Presentation

Description of Business

Exicure, Inc. (the “Company”) is a clinical-stage biotechnology company developing therapeutics for immuno-oncology, genetic disorders and other indications based on our proprietary Spherical Nucleic Acid (“SNA”) technology. SNAs are nanoscale constructs consisting of densely packed synthetic nucleic acid sequences that are radially arranged in three dimensions. The Company believes that the design of its SNAs gives rise to distinct chemical and biological properties that may provide advantages over other nucleic acid therapeutics and enable therapeutic activity outside of the liver. The Company is working to advance its SNA therapeutic candidates through multiple clinical trials, including the ongoing Phase 1b/2 trial of AST-008 in cancer patients.

The Company believes that one of the key strengths of its proprietary SNAs is that they have the potential to enter a number of different cells and organs. The Company has shown in preclinical studies that SNAs may have therapeutic potential in neurology, ophthalmology, pulmonology, and gastroenterology. As a consequence, the Company has expanded its pipeline into neurology, and is conducting early stage research activities in ophthalmology, pulmonology, and gastroenterology.

Throughout these unaudited condensed consolidated financial statements, the terms the “Company” and “Exicure” refer to Exicure, Inc. and its wholly owned subsidiary, Exicure Operating Company. Exicure Operating Company holds all material assets and conducts all business activities and operations of Exicure, Inc. 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2020 and December 31, 2019, and for the three months ended March 31, 2020 and 2019, have been presented in conformity with generally accepted accounting principles in the United States (“GAAP”).

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Exicure, Inc. and its wholly owned subsidiary, Exicure Operating Company. All intercompany transactions and accounts are eliminated in consolidation.

Significant Risks and Uncertainties

With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, the Company has taken active measures designed to address and mitigate the impact of the COVID-19 pandemic on its business, such as facilitating management’s routine communication to address employee and business concerns and frequent provision of updates to the Board. Under social distancing guidelines for COVID-19, the Company is typically operating with less than 50% of its R&D staff on-site at any one time. The Company is managing laboratory staffing and taking other appropriate managerial actions to maintain progress on its preclinical and collaboration programs. The Company’s office and general and administrative team has been working from home. The Company’s preclinical development program in Friedreich’s ataxia (“FA”) is ongoing and it continues to expect that IND-enabling studies for the Company’s FA drug candidate, XCUR-FXN, will begin in late 2020. The Company also continues to progress its collaborations with Allergan and DERMELIX, LLC, d/b/a Dermelix Biotherapeutics (“Dermelix”). However, if the COVID-19 pandemic continues and persists for an extended period of time, the Company could experience significant disruptions to its preclinical development timelines, which would adversely affect its business, financial condition, results of operations and growth prospects.

The Company anticipates that the COVID-19 pandemic may have an impact on the clinical development timelines for its AST-008 clinical program. The extent to which the COVID-19 pandemic impacts the Company’s

12

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biotechnology industry with research and development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; and the challenges of complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties.

Liquidity Risk

As of March 31, 2020, the Company has generated an accumulated deficit of $98,984 since inception and expects to incur significant expenses and negative cash flows for the foreseeable future. Based on the Company’s current operating plans, it believes that existing working capital at March 31, 2020 is sufficient to fund the Company for at least the next 12 months. Management believes that it will be able to obtain additional working capital through equity financings, partnerships and licensing, or other arrangements, to fund operations. However, there can be no assurance that such additional financing will be available and, if available, can be obtained on terms acceptable to the Company. The Company has historically principally raised capital through the sale of its securities. However, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. The Company believes raising capital in the current market could be very difficult for early stage biotech companies like Exicure. If the disruption persists and deepens, the Company could experience an inability to access additional capital, which could in the future negatively affect its operations.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated balance sheet as of March 31, 2020, the interim condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019, the interim condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2020 and 2019, the interim condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2020 and 2019, and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019, are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements; and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2020, the results of its operations for the three months ended March 31, 2020 and 2019, and the results of its cash flows for the three months ended March 31, 2020 and 2019. The financial data and other information disclosed in these notes related to the three months ended March 31, 2020 and 2019 are unaudited. The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, or any other interim periods, or any future year or period.

13

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions which it believes are reasonable in the circumstances and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a significant effect on the Company’s financial position, results of operations or cash flows. Actual results in future periods could differ from those estimates.

2. Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto, which are included in the in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2020. Since the date of those audited consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.

Recently Adopted Accounting Pronouncements

None.

Recent Accounting Pronouncements Not Yet Adopted

Financial Instruments - Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13). ASU 2016-13 is a new standard intended to improve reporting requirements specific to loans, receivables and other financial instruments. ASU 2016-13 requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the amount by which carrying value exceeds fair value. ASU 2016-13 also requires enhanced disclosure of credit risk associated with financial assets. The effective date of ASU 2016-13 was deferred by ASU 2019-09, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates to the annual period beginning after December 15, 2022 for companies that (i) meet the definition of an SEC filer and (ii) are eligible as “smaller reporting companies” as such term is defined by the SEC, with early adoption permitted. The Company is currently assessing the impact of adoption of ASU 2016-13 to its consolidated financial statements.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

3. Collaborative Research and License Agreements

Allergan Collaboration Agreement

Summary of Agreement 

On November 13, 2019 (the “Effective Date”), the Company entered into a Collaboration, Option and License Agreement (the “Allergan Collaboration Agreement”), with a wholly-owned subsidiary of Allergan plc, Allergan Pharmaceuticals International Limited (“Allergan”). On May 8, 2020, Allergan plc, including Allergan, was acquired by AbbVie Inc. (“AbbVie”). Accordingly, all references to “Allergan” in the defined terms including, but not limited to, “Allergan,” “Allergan Collaboration Agreement,” “Allergan R&D Services” and “Allergan JDC Services,” should be read and construed as references to AbbVie. Pursuant to the Allergan Collaboration Agreement, the Company granted to Allergan exclusive access and options to license SNA based therapeutics arising from two collaboration programs related to the treatment of hair loss disorders (each, a “Collaboration Program”). Under each such license (obtained in connection with the exercise of an Option, as defined and discussed further below), the Company would grant to Allergan exclusive, royalty-bearing, sublicenseable, nontransferable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics. Under the Allergan Collaboration Agreement, the Company will use commercially reasonable efforts to conduct two Collaboration Programs, each focused on one or more hair loss disorders to discover one or more SNA products that are directed to, bind to or inhibit one or more specific Collaboration Program targets (each, a “Program Target”).

As of the Effective Date, the Company and Allergan have agreed upon a development plan for each Collaboration Program that describes the development activities and timelines required to advance such Collaboration Program through first IND filing (each, a “Development Plan”). The activities described in the Development Plan are conducted under the supervision of the Joint Development Committee (the “JDC”) consisting of three members from each of the Company and Allergan. The Company is primarily responsible for performing early stage discovery and preclinical activities (the “Initial Development Activities”) set forth in the Development Plan for each Collaboration Program and will be solely responsible for all costs and expenses related to the Initial Development Activities. Allergan may elect, in its sole discretion and at its sole cost and expense, to conduct formulation assessment and in vivo testing as set forth in a Development Plan.

Following the completion of all Initial Development Activities, the Company is required to deliver to Allergan a report that describes the results of the Initial Development Activities and identifies at least one SNA-based compound that satisfies certain criteria for such Collaboration Program as determined by the JDC (the “Initial Development Report”). Following the delivery of the Initial Development Report for a Collaboration Program, Allergan will have the ability for a defined period of time (the “Initial Option Exercise Period”) to exercise an option (each an “Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each a “Licensed Product”) that results from such Collaboration Program during the term of the Allergan Collaboration Agreement.

At Allergan’s sole option, Allergan may extend the Initial Option Exercise Period (the “Option Extension”) and require the Company to perform IND-enabling activities described in the Development Plan (the “IND-Enabling Activities”), subject to the payment of additional consideration (“Extension Exercise”). If Allergan exercises the Option Extension, the Company would be responsible for conducting the IND-Enabling Activities and would be solely responsible for all costs and expenses associated with such activities. Upon completion of the IND-Enabling Activities, the Company is required to deliver a report that describes the results of the IND-Enabling Activities (the “IND-Enabling Activities Data Package”) to Allergan. Following the delivery of IND-Enabling Activities Data Package, Allergan will have the ability for a defined period of time (the “Extended Option Exercise Period”) to exercise an Option with respect to such Collaboration Program. After the exercise of an Option with respect to a Collaboration Program, Allergan will be responsible for all development, manufacturing, and commercialization activities, and costs and expense associated with such activities in connection with Licensed Products arising from such Collaboration Program.

15

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The Company’s obligation to conduct the activities defined in the Development Plan under the Allergan Collaboration Agreement commenced on November 13, 2019 and continues until the earlier of (i) the date Allergan exercises an Option, (ii) the date Allergan abandons a Collaboration Program and foregoes its Option to that Collaboration Program, or (iii) the fifth anniversary of the Effective Date (the “Research Term”). If the Initial Option Exercise Period or Extended Option Exercise Period is still in effect for a Collaboration Program or if the Company has not delivered a complete Initial Development Report or, if Allergan made an Extension Exercise for a Collaboration Program, a complete IND-Enabling Activities Data Package for such Collaboration Program, as determined by the JDC, then the Research Term will automatically extend by one-year increments until such obligation is satisfied, but in no event past the seventh anniversary of the Effective Date.

Under the terms of the Allergan Collaboration Agreement, the Company received a $25,000 upfront, non-refundable, non-creditable cash payment (the “Allergan Upfront Payment”) related to the Company’s research and development costs for conducting the Development Plan for two Collaboration Programs, each focused on one or more targets, and certain options to obtain exclusive, worldwide licenses under certain intellectual property rights owned or controlled by the Company to develop, manufacture and commercialize certain products resulting from each such Collaboration Programs. The option exercise fee during the Initial Option Exercise Period is $10,000 per Collaboration Program. If Allergan elects to extend the Initial Option Exercise Period, Allergan is required to pay an additional fee of $10,000. If Allergan elects to exercise its option during the Extended Option Exercise Period, Allergan must pay the Company the option exercise fee of $15,000.

Following the exercise by Allergan of an Option with respect to a Collaboration Program, Allergan would be required to make certain milestone payments to the Company upon the achievement of specified development, product approval and launch, and commercial events, on a Licensed Product by Licensed Product basis. On a Licensed Product by Licensed Product basis, for the first Licensed Product to achieve the associated milestone event, the Company is eligible to receive up to an aggregate of $55,000 for development milestone payments and $132,500 for product approval and launch milestone payments. The Company is also eligible for up to $175,000 in sales milestone payments on a Collaboration Program by Collaboration Program basis, associated with aggregate worldwide sales. Certain product approval milestones are subject to certain reductions under specified circumstances, including for payments required to be made by Allergan to obtain certain third party intellectual property rights.

In addition, to the extent there is any Licensed Product, the Company would be entitled to receive tiered royalty payments of mid-single digits to the mid-teens percentage on future net worldwide product sales of such Licensed Products, subject to certain reductions under specified circumstances. Royalties are due on a Licensed Product by Licensed Product and country by country basis from the date of the first commercial sale of each Licensed Product in a country until the latest to occur of: (i) the expiration date in such country of the last to expire valid claim within the licensed intellectual property covering the manufacture, use or sale of such Licensed Product in such country, (ii) the tenth anniversary of the first commercial sale of such Licensed Product in such country, and (iii) the expiration of regulatory exclusivity for such Licensed Product in such country.

Allergan may terminate the Allergan Collaboration Agreement for any reason or no reason, either in its entirety or on a Collaboration Program by Collaboration Program basis, at any time on 90 days’ prior written notice to the Company. Unless earlier terminated, the term of the Allergan Collaboration Agreement shall continue until (i) if both Option Exercise Periods expire without Allergan exercising either Option, the expiration of the later to expire Option Exercise Period, and (ii) if either or both Options are exercised on a Licensed Product-by-Licensed Product and country-by-country basis, the expiration of the royalty term for such Licensed Product in such country. Either party may terminate the Allergan Collaboration Agreement if the other party has materially breached or defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure period.

Termination of the Allergan Collaboration Agreement for any reason will not release either party from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination. In addition, termination of the Allergan Collaboration Agreement will not preclude either party from pursuing any rights and remedies it may have under the agreement or at law or in equity with

16

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

respect to any breach of the Allergan Collaboration Agreement. If either party terminates the Allergan Collaboration Agreement, the license and rights granted to Allergan with respect to the terminated Collaboration Program or License Product shall terminate.

Accounting Analysis

The Company concluded that Allergan is a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. Under the Allergan Collaboration Agreement, the Company has identified a single performance obligation that includes (i) the research and development activities during the Research Term (the “Allergan R&D Services”), and (ii) Joint Development Committee services during the Research Term (the “Allergan JDC Services”). The Company has concluded that the Allergan R&D Services is not distinct from the Allergan JDC Services during the Research Term. The JDC provides oversight and management of the overall Allergan Collaboration Agreement, and the members of the JDC from the Company have specialized industry knowledge, particularly as it relates to SNA technology. The JDC is meant to facilitate the early stage research being performed and coordinate the activities of both the Company and Allergan. Further, the JDC services are critical to the ongoing evaluation of a Collaboration Program and the drafting and evaluation of the Initial Development Report and the IND-Enabling Data Package. Accordingly, the Company’s participation on the JDC is essential to Allergan receiving value from the Allergan R&D Services and as such, the Allergan JDC Services along with the Allergan R&D Services are considered one performance obligation (the “Collaboration Program Services”). In addition, the Company has concluded that the option to purchase two development and commercialization licenses is considered a marketing offer as the options did not provide any discounts or other rights that would be considered a material right in the arrangement, and thus, not a performance obligation at the onset of the agreement.  The consideration for these options will be accounted for when they are exercised.

As of the Effective Date of the Allergan Collaboration Agreement, the total transaction price was determined to be $25,000, consisting solely of the Allergan Upfront Payment. The Company also utilized the most likely amount method to estimate any development and regulatory milestone payments to be received. As of the Effective Date of the Allergan Collaboration Agreement, there were no milestones included in the transaction price. The milestones were fully constrained due to the significant uncertainties surrounding such payments. The Company considered the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or Allergan. The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur. As of March 31, 2020, the Company determined that any development, regulatory, or commercial milestones continue to be constrained and therefore the related milestone payments continue to be excluded from the transaction price at March 31, 2020.

The Company will recognize revenue related to the Collaboration Program Services as the performance obligation is satisfied using an input method to measure progress. The Company believes the input method that most accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the research service.

During the three months ended March 31, 2020, the Company recognized revenue under the Allergan Collaboration Agreement of approximately $9,116. As of March 31, 2020, there was $15,713 of deferred revenue related to the Allergan Collaboration Agreement, which is classified as current on the unaudited condensed consolidated balance sheet.

17

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Dermelix Collaboration Agreement

Summary of Agreement 

On February 17, 2019, Exicure entered into a License and Development Agreement with Dermelix (the “Dermelix Collaboration Agreement.”) Pursuant to the Dermelix Collaboration Agreement, the Company granted to Dermelix exclusive, worldwide royalty-bearing license rights to, develop, manufacture, have manufactured, use and commercialize the Company’s SNA technology for the treatment of Netherton Syndrome (“NS”) and, at Dermelix’s option, up to five additional specified orphan diseases that are within the dermatology field. Upon written notice to the Company, Dermelix may exercise its option at any time following the effective date of the Dermelix Collaboration Agreement until the date that is six (6) years from the date that the first collaboration SNA therapeutic achieves first dosing in humans in a Phase 1 clinical trial for NS.

Dermelix will initially seek to develop a targeted therapy for the treatment of NS. Under the terms of the Dermelix Collaboration Agreement, the Company will be responsible for conducting the early stage development for each indication up to IND enabling toxicology studies. Dermelix will assume subsequent development, commercial activities and financial responsibility for such indications. Dermelix will pay the costs and expenses of development and commercialization of any licensed products under the Dermelix Collaboration Agreement, including the Company’s expenses incurred in connection with development activities and in accordance with the development budget. Under the terms of the Dermelix Collaboration Agreement, Exicure received an upfront payment of $1,000, to be applied against the initial $1,000 of the Company’s development expenses. If Dermelix exercises any of its option rights for additional indications, Dermelix will pay an option exercise fee equal to $1,000 for each exercised option (each, an “Option Exercise Fee”). Any Option Exercise Fee will be applied against the Company’s development expenses with respect to the particular indication for which the option was exercised.

Pursuant to the Dermelix Collaboration Agreement, the Company shall have the right to pursue the development and commercialization of SNA technology for the treatment of orphan diseases which are neither NS nor one of the additional specified orphan diseases selected by Dermelix pursuant to its option rights. If the Company commences development activities of SNA technology for the treatment of such an orphan disease, the Company will notify Dermelix in writing of such development and Dermelix will have thirty (30) days following receipt of such notice to use one of its remaining option rights on such orphan disease. If Dermelix does not use one of its remaining option rights on such orphan disease, or has no option rights remaining, then the Company will have no further obligations to Dermelix with respect to the development of SNA therapeutics for such orphan disease and shall be free to continue commercialization and development activities with respect thereto.

For each of NS as well as any additional licensed product for which Dermelix exercises one of its options, the Company shall be eligible to receive additional cash payments totaling up to $13,500 upon achievement of certain development and regulatory milestones and up to $152,500 upon achievement of certain sales milestones. The regulatory milestones are payable upon the initiation or completion of clinical trials, and regulatory approval in the United States and outside the United States, per program. The commercial sales milestones are payable upon achievement of specified aggregate annual product sales thresholds. In the event a therapeutic candidate subject to the collaboration results in commercial sales, the Company will receive low double-digit royalties on annual net sales for such licensed products.

Accounting Analysis

The Company concluded that Dermelix is a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. The Company identified performance obligations under the Dermelix Collaboration Agreement for the license of intellectual property for the NS therapeutic candidate and associated research and development services for the NS therapeutic candidate. The Company determined that the performance obligations were not separately identifiable and were not distinct or distinct within the context of the contract due to the specialized nature of the services to be provided by Exicure, specifically with respect to the

18

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Company’s expertise related to SNA technology, and the interdependent relationship between the performance obligations. As such, the Company concluded that there is a single identified performance obligation.

The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential development and regulatory milestone, which is considered variable consideration, was zero, as the achievement of those milestones is uncertain and highly susceptible to factors outside of the Company’s control. Accordingly, all such milestones were excluded from the transaction price. Management will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and adjust the transaction price as necessary. Sales-based royalties, including commercial sales milestone payments based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company will recognize such revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Revenue associated with the performance obligation will be recognized as services are provided using a cost-to-cost measure of progress method. The transfer of control occurs over time and, in management’s judgment, this input method is the best measure of progress towards satisfying the performance obligation under the Dermelix Collaboration Agreement and reflects a faithful depiction of the transfer of goods and services.

The Company initially recorded the upfront payment of $1,000 as deferred revenue related to its wholly unsatisfied performance obligation and reduced this balance to zero during 2019 by recognizing revenue as services were provided. The Company recognized $67 of revenue under the Dermelix Collaboration Agreement during the three months ended March 31, 2020, which reflects reimbursement by Dermelix for additional costs incurred by Exicure for early stage development costs beyond the initial $1,000 upfront payment. The Company expects to incur additional early stage development costs and expects to be reimbursed by Dermelix for such costs under the terms of the Dermelix Collaboration Agreement. The Company will recognize both revenue and research and development expense for such costs on a gross basis during the period in which those costs are incurred. The Company recognized $25 of revenue under the Dermelix Collaboration Agreement during the three months ended March 31, 2019 which related to amortization of the above-mentioned deferred revenue related to the upfront payment for services provided during that period.

4. Supplemental Balance Sheet Information

Prepaid expenses and other current assets

	March 31, 2020		December 31, 2019
Prepaid clinical, contract research and manufacturing costs	$	1,219	$	481
Interest receivable	398		236
Prepaid insurance	369		533
Other	920		705
Prepaid expenses and other current assets	$	2,906	$	1,955

19

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Property and equipment, net

	March 31, 2020			December 31, 2019
Scientific equipment	$	3,315		$	2,795
Leasehold improvements	192			192
Computers and software	48			32
Furniture and fixtures	41			41
Construction in process	168			356
Property and equipment, gross	3,764			3,416
Less: accumulated depreciation	(1,466		)	(1,317		)
Property and equipment, net	$	2,298		$	2,099

Depreciation and amortization expense was $148 and $87 for the three months ended March 31, 2020 and 2019, respectively.

Other noncurrent assets

	March 31, 2020		December 31, 2019
Restricted cash	$	1,200	$	—
Operating lease asset	285		356
Other	2		32
Total other noncurrent assets	$	1,487	$	388

Accrued expenses and other current liabilities

	March 31, 2020		December 31, 2019
Accrued payroll-related expenses	$	386	$	920
Accrued legal expenses	318		254
Operating lease liability	275		292
Accrued clinical, contract research and manufacturing costs	152		515
Accrued other expenses	137		454
Accrued expenses and other current liabilities	$	1,268	$	2,435

Other noncurrent liabilities

	March 31, 2020		December 31, 2019
Operating lease liability	$	—	$	59
Total other noncurrent liabilities	$	—	$	59

20

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

5. Investments

As of March 31, 2020 and December 31, 2019, the Company primarily invested its excess cash in debt instruments of corporations, the U.S. Treasury, financial institutions, and U.S. government agencies with strong credit ratings and an investment grade rating at or above a long-term rating of Aa3/AA- and a short-term rating of P1/A1. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The following table summarizes the contract maturity of the available-for-sale securities the Company held as of March 31, 2020:

One year or less	64	%
After one year but within two years	36	%
Total	100	%

All of the Company’s available-for-sale securities are available to the Company for use in its current operations. As a result, the Company categorizes all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of cash equivalents and available-for-sale securities by type of security at March 31, 2020 and December 31, 2019 were as follows:

	March 31, 2020
	Amortized Costs		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Commercial paper	$	10,718	$	3	$	(9	)	$	10,712
Corporate notes/bonds	49,973		44		(158		)	49,859
U.S. Treasuries	4,510		36		—			4,546
U.S. Government agency securities	9,039		67		—			9,106
	$	74,240	$	150	$	(167	)	$	74,223

	December 31, 2019
	Amortized Costs		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Commercial paper	$	13,932	$	1	$	(2	)	$	13,931
Corporate notes/bonds	36,620		1		(24		)	36,597
U.S. Treasuries	4,513		—		(1		)	4,512
U.S. Government agency securities	9,786		—		(2		)	9,784
	$	64,851	$	2	$	(29	)	$	64,824

21

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

6. Debt

On March 2, 2020, pursuant to the terms of the loan agreement with Hercules Technology Growth Capital (“Hercules”) and subsequent amendments thereto (the “Hercules Loan Agreement”), the Company repaid all remaining outstanding obligations under the Hercules Loan Agreement as of the maturity date, including the outstanding principal balance of $4,999 and the end of term fee of $100.

The Company paid interest on the Hercules Loan Agreement of $142 and $149 during the three months ended March 31, 2020 and 2019, respectively.

7. Leases

The Company has lease agreements for its facilities in: Skokie, Illinois, which serves as the Company’s principal executive offices and where the Company has laboratory space; Cambridge, Massachusetts, where the Company leases office space; Chicago, Illinois, where the Company leases office and laboratory space; and leases for office equipment (the “Office Equipment Leases”), as further described below. Each of these leases are classified as operating leases.

Skokie Lease – The Company’s lease agreement for office and laboratory space in Skokie, Illinois commenced in March 2012 and expires in February 2021 (the “Skokie Lease”). The Skokie Lease includes a renewal option which the Company is not reasonably certain to exercise. Lease payments for the Skokie Lease include a fixed payment amount as well as variable payments related to a proportionate share of operating and real estate expenses.

Cambridge Lease – The Company’s lease agreement for office space at a multi-tenant facility in Cambridge, Massachusetts commenced in March 2019 and is month-to-month (the “Cambridge Lease”). The Cambridge Lease is cancellable at any time. Due to the nature of the Cambridge Lease, the Company determined that this lease represented a short-term lease with an initial term of less than twelve months and, as such, the Cambridge Lease is not recorded on the balance sheet and related lease costs are recognized in the statement of operations as they are incurred.

Chicago Lease – The Company has approximately thirty-thousand square feet of office and laboratory space in Chicago, Illinois (the “Chicago Lease”). The original term (the “Original Term”) of the Chicago Lease is 10 years, commencing on the date on which the Premises are ready for occupancy under the terms of the Chicago Lease (the "Anticipated Commencement Date"). The Company has options to extend the term of the Chicago Lease for two additional successive periods of five years each (the “Extension Periods”) at the then prevailing effective market rental rate.

The initial annual base rent during the Original Term is $37.00 per square foot per year, or approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the Anticipated Commencement Date. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12,761 over the Original Term. The Company must also pay its proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12-month period of the Original Term, the base rent and the Company's proportionate share of operating expenses and taxes are subject to certain abatements.

The Landlord will contribute a maximum of $3,159 toward tenant improvements. In connection with the Chicago Lease, the Company will maintain a letter of credit for the benefit of the Landlord in an initial amount of $1,200, which amount is subject to reduction over time. Upon execution of the Chicago Lease, the Company paid to the Landlord the first installment of base rent and the estimated monthly amount of its pro rata share of taxes and its pro rata share of operating expenses in the aggregate amount of $87 which amount had been adjusted for the abatement as set forth in the lease agreement.

As part of the agreement for the Chicago Lease, the Company is required to maintain a standby letter of credit during the term of the lease, currently in the amount of $1,200, which is secured by a restricted certificate of deposit

22

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

account and presented within other noncurrent assets on the Company’s unaudited condensed consolidated balance sheet at March 31, 2020. 

The Chicago Lease has not yet commenced for accounting purposes as of March 31, 2020. As a result, the Company has not yet recognized an operating lease asset or operating lease liability on the unaudited condensed consolidated balance sheet for the Chicago Lease. The Company currently expects the Chicago Lease to commence in June of 2020.

Office Equipment Leases – The Company has also elected to not record the Office Equipment Leases on the balance sheet since related payment amounts and lease costs are insignificant. Lease costs for the Office Equipment Leases are recognized in the statement of operations on a straight-line basis over the lease term.

The following table summarizes the presentation in the Company’s unaudited condensed consolidated balance sheets of its operating leases:

	March 31, 2020
Assets:
Operating lease asset	$	285
Liabilities:
Operating lease liability	$	275

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating lease asset and related operating lease liabilities were as follows:

	March 31, 2020
Remaining lease term (1)	0.9 years
Discount rate	16.1	%

⁽¹⁾ Does not include a renewal term beyond February 28, 2021. Renewal terms are included in the lease term when it is reasonably certain that the Company will exercise the option.

The following table summarizes lease costs in the Company’s unaudited condensed consolidated statement of operations:

	Three Months Ended March 31,
	2020		2019
Operating lease costs	$	84	$	84
Short term lease costs	38		6
Variable lease costs	57		84
Total lease costs	$	179	$	174

During the three months ended March 31, 2020 and 2019, the Company made cash payments of $114 and $277 for operating leases, respectively.

23

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Maturities of the Company’s lease liability as of March 31, 2020 were as follows:

Years Ending December 31,	Operating Leases (1)
2020 (remaining nine months)	$	235
2021	59
Total	$	294
Less: imputed interest	(19		)
Total lease liability	$	275
Current operating lease liability	$	275

⁽¹⁾  Excluded from the table above are the lease payments associated with the Chicago Lease that has not commenced as of the end of the period, which is the date the asset is made available to the Company by the lessor.

8. Stockholders’ Equity

Preferred Stock

As of March 31, 2020 and December 31, 2019, the Company had 10,000,000 shares of preferred stock, par value $0.0001 authorized and no shares issued and outstanding.

Common Stock

As of March 31, 2020 and December 31, 2019, the Company had authorized 200,000,000 shares of common stock, par value $0.0001. As of March 31, 2020 and December 31, 2019, the Company had 87,150,447 shares and 86,069,263 shares issued and outstanding, respectively.

The holders of shares of the Company’s common stock are entitled to one vote per share on all matters to be voted upon by the Company’s stockholders and there are no cumulative rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of the Company’s common stock are entitled to receive ratably any dividends that may be declared from time to time by the Company’s Board out of funds legally available for that purpose. In the event of the Company’s liquidation, dissolution or winding up, the holders of shares of the Company’s common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The Company’s common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Company’s common stock. The outstanding shares of the Company’s common stock are fully paid and non-assessable.

December 2019 Offering

On December 23, 2019, the Company sold 10,000,000 shares of its common stock at the public offering price of $2.75 per share in an underwritten public offering, for gross proceeds of $27,500 and estimated net proceeds of $25,344 after deducting underwriting discounts and commission and other offering expenses payable by the Company (the “December 2019 Offering”). In addition, the Company granted the underwriters a 30-day option to purchase an additional 1,500,000 shares of common stock offered in the common stock offering. On January 6, 2020, the underwriters partially exercised the option to purchase an additional 1,081,184 shares of common stock at the public offering price of $2.75 per share for additional gross proceeds of $2,973 and net proceeds of $2,766 after deducting underwriting discounts and commission and other offering expenses.

The shares sold in the December 2019 Offering were sold pursuant to a registration statement on Form S-3 that was declared effective by the SEC on July 24, 2019.

24

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Common Stock Warrants

As of March 31, 2020, warrants to purchase 413,320 shares of common stock at a price of $3.00 per share remain outstanding. The Warrants expire as follows: 163,174 warrants expire on March 27, 2021; 132,884 expire on April 28, 2021; and 117,262 expire on May 3, 2021. The Warrants are classified as a liability which is remeasured each period at fair value. See Note 12, Fair Value Measurements for more information on the fair value of the common stock warrant liability.

Accumulated Other Comprehensive Loss

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for 2020:

	Unrealized gains (losses) on short-term investments			Total
Balance at December 31, 2019	$	(27	)	$	(27	)
Other comprehensive income (loss) before reclassifications	10			10
Net current period other comprehensive loss	10			10
Balance at March 31, 2020	$	(17	)	$	(17	)

9. Equity-Based Compensation

The number of shares of common stock reserved for issuance under the 2017 Equity Incentive Plan automatically increases on January 1 of each year, beginning on January 1, 2020, by the lesser of (i) 4,600,000 shares, (ii) 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or (iii) a lesser number of shares determined by the Compensation Committee of the Company’s Board. The Compensation Committee made the determination to increase the share reserve for the 2017 Equity Incentive Plan by 4,303,463 shares, effective January 1, 2020.

As of March 31, 2020, the aggregate number of common stock options available for grant under the 2017 Equity Incentive Plan was 3,127,813.

Equity-based compensation expense is classified in the statements of operations as follows:

	Three Months Ended March 31,
	2020		2019
Research and development expense	$	157	$	121
General and administrative expense	284		368
	$	441	$	489

Unamortized equity-based compensation expense at March 31, 2020 was $3,944, which is expected to be amortized over a weighted-average period of 2.8 years.

The Company utilizes the Black-Scholes option-pricing model to determine the fair value of common stock option grants. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model also requires the input of highly subjective assumptions. In addition to an assumption on the expected term of the option grants as discussed below,

25

EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

application of the Black-Scholes model requires additional inputs for which we have assumed the values described in the table below:

	Three Months Ended March 31,
	2020		2019
Expected term	5.2 to 6.1 years		6.0 to 6.1 years
Risk-free interest rate	1.68%		2.56%
Expected volatility	81.0% to 83.1%; weighted avg. 83.0%		83.2% to 83.4%; weighted avg. 83.4%
Forfeiture rate	5	%	5	%
Expected dividend yield	—	%	—	%

The expected term is based upon the “simplified method” as described in Staff Accounting Bulletin Topic 14.D.2. Currently, the Company does not have sufficient experience to provide a reasonable estimate of an expected term of its common stock options. The Company will continue to use the “simplified method” until there is sufficient experience to provide a more reasonable estimate in conformance with ASC 718-10-30-25 through 30-26. The risk-free interest rate assumptions were based on the U.S. Treasury bond rate appropriate for the expected term in effect at the time of grant. The expected volatility is based on calculated enterprise value volatilities for publicly traded companies in the same industry and general stage of development. The estimated forfeiture rates were based on historical experience for similar classes of employees. The dividend yield was based on expected dividends at the time of grant.

The fair value of the underlying common stock and the exercise price for the common stock options granted during the three months ended March 31, 2020 and 2019 are summarized in the table below:

Common Stock Options Granted During Period Ended:	Fair Value of Underlying Common Stock	Exercise Price of Common Stock Option
Three months ended March 31, 2020	$1.19 to $2.80; weighted avg. $1.27	$1.19 to $2.80; weighted avg. $1.27
Three months ended March 31, 2019	$2.80	$2.80

The weighted-average grant date fair value of common stock options granted in the three months ended March 31, 2020 and 2019 was $0.89 and $2.01 per common stock option, respectively.

A summary of common stock option activity as of the periods indicated is as follows:

	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
Outstanding - December 31, 2019	5,697,714	$	2.34	6.7	$	4,625
Granted	1,211,704	1.27
Outstanding - March 31, 2020	6,909,418	$	2.15	7.1	$	1,492
Exercisable - March 31, 2020	4,164,925	$	2.06	5.6	$	1,172
Vested and Expected to Vest - March 31, 2020	6,693,125	$	2.15	7.0	$	1,461

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

10. Income Taxes

Pre-tax income was $1,150 for the three months ended March 31, 2020, which consists entirely of income in the United States. and resulted in no provision for income tax expense during the period then ended since it projects a pre-tax loss for the year ending December 31, 2020. Pre-tax loss was $5,286 for the three months ended March 31, 2019, which consists entirely of loss in the United States and resulted in no provision for income tax expense during the period then ended. The effective tax rate is 0% in each of the three months ended March 31, 2020 and 2019 because the Company has generated tax losses and has provided a full valuation allowance against its deferred tax assets.

On March 27, 2020,  the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act, among other things, allows for a five-year carry back of federal net operating losses generated in 2018 through 2020 and removes the 80% taxable income limitation for net operating loss deductions for tax years ending before 2021. While the Company continues to analyze the relevant provisions of the CARES Act, the provisions of the legislation did not have an impact on the Company’s income taxes.

11. Earnings (Loss) Per Common Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is calculated using the treasury share method by giving effect to all potentially dilutive securities that were outstanding. Potentially dilutive options and warrants to purchase common stock that were outstanding during the three months ended March 31, 2019 were excluded from the diluted loss per share calculation for the three months ended March 31, 2019 because such shares had an anti-dilutive effect due to the net loss reported in that period. Therefore, basic and diluted loss per common share is the same for the three months ended March 31, 2019.

The following is the computation of earnings (loss) per common share for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
Net income (loss)	1,150		(5,286		)
Weighted-average basic common shares outstanding	87,079,160		44,358,000
Dilutive effect of exercise of stock options	1,165,472		—
Weighted-average diluted common shares outstanding	88,244,632		44,358,000
Earnings (loss) per basic common share	$	0.01	$	(0.12	)
Earnings (loss) per diluted common share	$	0.01	$	(0.12	)

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The outstanding securities presented below were excluded from the calculation of earnings (loss) per common share for the periods presented, because such securities would have been anti-dilutive due to the Company’s earnings (loss) per share during that period:

	As of March 31,
	2020	2019
Options to purchase common stock	2,924,355	5,125,659
Warrants to purchase common stock	413,320	413,320

12. Fair Value Measurements

ASC Topic 820, Fair Value Measurement, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, as follows: Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date; Level 2 Inputs - other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 Inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 are as follows:

	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	12,900	$	12,900	$	—	$	—
Short-term investments:
Commercial paper	10,712		—		10,712		—
Corporate notes/bonds	49,859		—		49,859		—
U.S. Treasuries	4,546		—		4,546		—
U.S. Government agency securities	9,106		—		9,106		—
Total financial assets	$	87,123	$	12,900	$	74,223	$	—
Liabilities
Common stock warrant liability	$	68	$	—	$	—	$	68
Total financial liabilities	$	68	$	—	$	—	$	68

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 are as follows:

	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	31,078	$	31,078	$	—	$	—
Commercial paper	2,498		—		2,498		—
Short-term investments:
Commercial paper	11,433		—		11,433		—
Corporate notes/bonds	36,597		—		36,597		—
U.S. Treasuries	4,512		—		4,512		—
U.S. Government agency securities	9,784		—		9,784		—
Total financial assets	$	95,902	$	31,078	$	64,824	$	—
Liabilities
Common stock warrant liability	$	414	$	—	$	—	$	414
Total financial liabilities	$	414	$	—	$	—	$	414

The Company uses the market approach and Level 1 and Level 2 inputs to value its cash equivalents and Level 2 inputs to value its short-term investments.

The Company’s common stock warrant liability (refer to Note 8, Stockholders’ Equity, for more information) is classified within Level 3 of the fair value hierarchy. The fair value of the common stock warrant liability was determined using the Black-Scholes option-pricing model.

The fair value of the common stock warrant liability is based significantly on the fair value of the Company’s common stock. At the date of issuance, the common stock warrant liability was determined using the following weighted-average assumptions: expected term of 2.0 years, risk-free interest rate of 1.53%, expected volatility of 78.97%, and no expected dividends.

The following weighted-average assumptions were used to estimate the fair value of the common stock warrant liability at March 31, 2020:

	March 31, 2020
Expected term	1.0 years
Risk-free interest rate	0.2	%
Expected volatility	84.69	%
Expected dividend yield	—	%

A 10% change in the estimate of expected volatility at March 31, 2020 would increase or decrease the fair value of the common stock warrant liability in the amount of $18. A 10% change in the estimate of fair value of the common stock at March 31, 2020 would increase or decrease the fair value of the common stock warrant liability in the amount of $19.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

The following is a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2020:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Common Stock Warrant Liability
Balance at December 31, 2019	$	414
Additions
Gain included in other income (expense), net	(346		)
Balance at March 31, 2020	$	68

13. Commitments and Contingencies

Leases

Refer to Note 7, Leases, for a discussion of the commitments associated with the Company’s lease agreements.

Northwestern University License Agreements

On December 12, 2011, (1) AuraSense, LLC, the Company’s former parent, assigned to the Company all of its worldwide rights and interests under AuraSense, LLC’s 2009 license agreement with Northwestern University (“NU”) in the field of the use of nanoparticles, nanotechnology, microtechnology or nanomaterial-based constructs as therapeutics or accompanying therapeutics as a means of delivery, but expressly excluding diagnostics (the “Assigned Field”); (2) in accordance with the terms and conditions of this assignment, the Company assumed all liabilities and obligations of AuraSense, LLC as set forth in its license agreement in the assigned field; and (3) in order to secure this assignment and the patent rights from NU, the Company agreed (i) to pay NU an annual license fee, which may be credited against any royalties due to NU in the same year, (ii) to reimburse NU for expenses associated with the prosecution and maintenance of the license patent rights, (iii) to pay NU royalties based on any net revenue generated by the Company’s sale or transfer of any licensed product, (iv) to pay NU, in the event the Company grants a sublicense under the licensed patent rights, the greater of a percentage of all sublicensee royalties or a percentage of any net revenue generated by a sublicensee’s sale or transfer of any licensed product, and (v) to pay NU a percentage of all other sublicense payments received by the Company. In August 2015, the Company entered into a restated license agreement with NU (the “Restated License Agreement”). In February 2016, the Company obtained exclusive license as to NU’s rights in certain SNA technology it jointly owns with NU (the “Co-owned Technology License”). The Company’s license to NU’s rights is limited to the assigned field, however the Company has no such limitation as to its own rights in this jointly owned technology. In June 2016, the Company entered into an exclusive license with NU to obtain worldwide rights to certain inhibitors of glucosylceramide synthase and their use in wound healing in diabetes (the “Wound Healing License”). The Company’s rights and obligations in the Co-owned Technology License and the Wound Healing License agreements are substantially the same as in the Restated License Agreement from August 2015 (collectively referred to as “the Northwestern University License Agreements”). As of December 31, 2019, all pending patent applications under the Wound Healing License have been abandoned. As of March 31, 2020, the Company has paid to NU an aggregate of $8,198 in consideration of each of the obligations described above.

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EXICURE, INC.

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except share and per share data)

14. Related-Party Transactions

The Company received consulting services from, and paid fees to, one of its co-founders who is not an employee but serves as a member of the Board. The Company paid $25 in each of the three months ended March 31, 2020 and 2019 in connection with these consulting services and these amounts are recognized as an expense in the accompanying unaudited condensed consolidated statement of operations.

15. Subsequent Events

The Company has evaluated subsequent events which may require adjustment to or disclosure in the accompanying unaudited condensed consolidated financial statements and has concluded that there are no subsequent events or transactions that occurred subsequent to the balance sheet date that would require recognition or disclosure in the accompanying unaudited condensed consolidated financial statements.

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

The following information should be read in conjunction with our unaudited condensed consolidated financial statements and the notes thereto included in this Quarterly Report on Form 10-Q, or Quarterly Report, and the audited financial information and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2019, which was filed with the Securities and Exchange Commission, or SEC, on March 10, 2020, or the Annual Report. This discussion and analysis contains forward-looking statements that involve significant risks and uncertainties. Our actual results, performance or experience could differ materially from what is indicated by any forward-looking statement due to various important factors, risks and uncertainties, including, but not limited to, those set forth under the section titled “Risk Factors” in Part II, Item 1A. Such factors may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy.

Overview

We are a clinical-stage biotechnology company developing therapeutics for immuno-oncology, genetic disorders and other indications based on our proprietary Spherical Nucleic Acid, or SNA, technology. SNAs are nanoscale constructs consisting of densely packed synthetic nucleic acid sequences that are radially arranged in three dimensions. We believe the design of our SNAs gives rise to distinct chemical and biological properties that may provide advantages over other nucleic acid therapeutics and enable therapeutic activity outside of the liver. We are working to advance our SNA therapeutic candidates through multiple clinical trials, including the ongoing Phase 1b/2 trial of AST-008 in cancer patients.

We believe that one of the key strengths of our proprietary SNAs is that they have the potential to enter a number of different cells and organs. We have shown in preclinical studies that SNAs may have therapeutic potential in neurology, ophthalmology, pulmonology, and gastroenterology. As a consequence, we have expanded our pipeline into neurology, and are conducting early stage research activities in ophthalmology, pulmonology, and gastroenterology.

The table below sets forth the current status of development of our SNA therapeutic candidates:

___________

(1) In combination with checkpoint inhibitors.

(2) On May 8, 2020, AbbVie Inc. completed the previously announced acquisition of Allergan plc.

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Immuno-oncology, AST-008

AST-008 is an SNA consisting of toll-like receptor 9, or TLR9, agonists designed for immuno-oncology applications. TLR9 agonists bind to and activate TLR9 receptors. We believe AST-008 may be used for immuno-oncology applications in combination with checkpoint inhibitors. We have observed that, in preclinical studies in a variety of tumor models, AST-008, applied in combination with certain checkpoint inhibitors, exhibited anti-tumor responses and survival rates that were greater than those demonstrated by checkpoint inhibitors alone. We have also demonstrated that AST-008 was active when administered subcutaneously, intratumorally or intravenously, in both prevention and established mouse tumor models. The administration of AST-008 also produced localized as well as abscopal anti-tumor activity in mouse cancer models. Additionally, the administration of AST-008 in combination with certain checkpoint inhibitors conferred adaptive immunity in breast and colon cancer mouse models. In mouse tumor models, administration of AST-008 with anti-PD-1 antibodies suppresses regulatory T-cells, or Tregs, and myeloid-derived suppressor cells, or MDSCs, and increases the levels of CD8 effector T-cells. We believe these important results suggest that the combination of immuno-oncology SNAs and checkpoint inhibitors could potentially treat a larger proportion of cancer patients than checkpoint inhibitors alone.

During the first half of 2019, we opened five clinical trial sites and began dosing patients for the Phase 1b/2 clinical trial. As of April 30, 2020, we had seven clinical trial sites open for enrollment and we expect to open up to 15 sites. The Phase 1b/2 clinical trial is an open-label, multi-center trial designed to evaluate the safety, tolerability, pharmacokinetics, pharmacodynamics and preliminary efficacy of intratumoral AST-008 injections alone and in combination with intravenous pembrolizumab in patients with advanced solid tumors. We are recruiting patients with advanced or metastatic Merkel cell carcinoma, head and neck squamous cell carcinoma, cutaneous squamous cell carcinoma, and melanoma. The primary outcome measure is the safety and tolerability of AST-008 alone and in combination with pembrolizumab. Secondary outcomes include the recommended Phase 2 dose and disease assessment with RECIST 1.1.

As of April 30, 2020, we have dosed 20 patients in the Phase 1b stage of the clinical trial and have completed enrollment for the Phase 1b stage of the clinical trial. We have observed no treatment related serious adverse events, or SAEs, to date nor have we observed any dose-limiting toxicity, or DLT, among the treated subjects. The most common reported adverse event was injection site reactions. In December 2019, we received preliminary results from the Phase 1b/2 stage of the clinical trial showing potential signs of anti-tumor activity in patients with Merkel cell carcinoma.

In the second quarter of 2020, we plan to begin enrolling patients in the Phase 2 dose expansion phase for intratumoral AST-008 in combination with pembrolizumab or cemiplimab, approved checkpoint inhibitors, to treat two cohorts of patients with advanced or metastatic Merkel cell carcinoma or cutaneous squamous cell carcinoma. Each cohort is expected to enroll up to 29 patients who have failed anti-PD-1/PD-L1, or programmed cell death protein 1/programmed death-ligand 1, therapy.

Neurology

We are investigating the utility of our SNA technology for the treatment of neurological conditions and have ongoing research programs underway. In the fall of 2018, we completed a biodistribution study in rats comparing nusinersen to nusinersen in SNA format. Nusinersen, marketed by Biogen Inc. as Spinraza®, is a linear nucleic acid therapeutic approved by the FDA in late 2016 for the treatment of spinal muscular atrophy, or SMA. We found that more nusinersen in SNA format compared to nusinersen was retained in the rats’ brain and spinal cord at 24, 72 and 168 hours.

On June 26, 2019, we announced data from a preclinical study we conducted evaluating the biodistribution of SNAs in the non-human primate central nervous system. In this study, 7 mg of radio-labeled SNAs were injected intrathecally into cynomolgus monkeys. The biodistribution of the SNAs was followed for 14 days by PET/CT scans. SNAs were observed throughout the entire brain and were found both in the brain stem as well as inside the brain. High content of SNA was observed in all 46 regions of the brain examined. These key data indicate that the SNA platform may be well-suited for development of new therapeutics directed towards diseases of the central nervous system.

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Friedreich’s ataxia

We are developing XCUR-FXN, an SNA-based therapeutic candidate for the treatment of Friedreich’s ataxia, or FA. FA is an autosomal recessive, neurodegenerative disease characterized by progressively impaired muscle coordination caused by the degeneration of neurons in the cerebellum and dorsal root ganglia in the spinal cord. FA patients may also experience impairment of visual, auditory and speech functions. FA patients also commonly suffer from life-threatening heart conditions such as hypertrophic cardiomyopathy, myocardial fibrosis and heart failure. The typical age of onset for FA is between 5 and 15 years. An estimated 5,000 patients in the United States and 15,000 patients worldwide are affected by FA. There are currently no FDA-approved treatments for FA.

We have conducted extensive preclinical research evaluating the suitability of our SNA technology for genetically defined neurological diseases, including efficacy studies in animal models, and biodistribution in rodent and non-human primates. Based on the results, we believe we can target FA at the genetic source and meet an important unmet medical need for FA patients. FA is driven by expansion of guanine-adenine-adenine bases of the DNA sequence, or GAA, triplet repeats in the first intron of frataxin, or FXN, gene. The expanded repeat of FXN forms an intramolecular triple-helix, which impairs transcription and reduces levels of frataxin protein. Our strategy will be to use a genetically-targeted SNA therapy to increase FXN protein. We are designing and developing our FA program, XCUR-FXN, with guidance from and in collaboration with the Friedreich’s Ataxia Research Alliance, or FARA, the non-profit, charitable organization dedicated to accelerating research leading to treatments and a cure for FA. We expect to initiate IND-enabling studies for XCUR-FXN in late 2020.

Other neurological indications

We are building on our proof-of-concept work with nusinersen and our therapeutic candidate XCUR-FXN to further explore new therapeutic applications of our SNA technology in neurology. We aim to address indications with great unmet medical need and where we believe the attributes of our SNA technology would lead to therapeutic and commercial advantages. In order to select new therapeutic indications, we expect to analyze a variety of attributes including: (i) indications where there is a known genetic basis for the disorder, (ii) disorders where we can target multiple genes, (iii) the existence of a patient registry or a patient advocacy group that can work with us for easier trial enrollment, (iv) the competitive therapeutic landscape including disorders not easily addressable by small molecules or antibodies, (v) indications with no approved therapies, and (vi) indications amenable to localized therapeutic administration. Based on these and other criteria, we are currently exploring additional neurological conditions, including spinocerebellar ataxia, Batten disease, amyotrophic lateral sclerosis (ALS), and Huntington’s disease.

Ophthalmology

We believe that the eye may be an attractive organ for locally-applied SNAs because (i) it is a small and immune-privileged organ, (ii) there are established and non-invasive clinical assessment procedures, and (iii) effective trials can be designed by dosing one eye while using the contralateral eye as a control. We believe that the results of our preclinical studies of SNA technology in the eye may provide proof-of-concept for expansion of our research and development activities into ophthalmological genetic disorders. Our preclinical data indicated that SNAs distributed to both posterior (retinal) and anterior (cornea) ocular structures, exhibited higher distribution and persisted longer compared to linear oligonucleotides, and did not cause inflammation in the eye.

We believe SNAs may possess key potential advantages over gene therapy in the eye. These key potential advantages include: (i) delivery via intravitreal injections which are safer and easier than subretinal injections, (ii) tunable and reversible control of target expression, and (iii) the ability to treat toxic gain-of-function diseases and target large genes. We believe, based on our internal analysis, that there are approximately 250 rare ophthalmological diseases with known genetic targets, such as CLN3 for Batten disease, BEST1 for vitelliform macular dystrophy, and USH2A for usher syndrome type 2A. As such, we intend to expand our preclinical research and development activities in ophthalmology in 2020 and beyond.

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Dermatology

XCUR17

XCUR17 is an SNA that targets the mRNA that encodes interleukin 17 receptor alpha, or IL-17RA, a protein that is considered essential in the initiation and maintenance of psoriasis. Although the availability of inhibitors of TNF revolutionized the systemic treatment of severe psoriasis, studies of disease pathogenesis have shifted attention to the IL-17 pathway in which IL-17RA is a key driver of psoriasis. Our strategy is to reduce the levels of IL-17RA in the skin by topically applying XCUR17.

In the fourth quarter of 2018, we reported results from our Phase 1 clinical trial of XCUR17. Of the 21 treated patients, we observed that the 11 patients treated with the highest strength of XCUR17 gel had a reduction in redness and improvement in healing as determined by blinded physician assessments. We also observed no adverse safety events and no relevant changes in mean psoriatic infiltrate thickness related to treatment with XCUR17.

In October 2019, at the 15th Annual Meeting of the Oligonucleotide Therapeutics Society, we disclosed biomarker results from the skin biopsies collected from the 21 patients treated in the Phase 1 clinical trial. Clinical observations in this Phase 1 trial correlated with psoriasis-related markers and histological changes from biopsies provided by the patients. In this trial, we observed clinically that XCUR17 had:

• Resulted in a decrease in the levels of psoriasis and inflammation markers downstream of its target, IL-17RA;

• Produced a statistically significant reduction in keratin 16 expression, a key marker of psoriasis (p=0.002);

• Resulted in reductions in the major inflammatory markers beta defensin 4A, interleukin 19, and interleukin 36A versus psoriatic skin at baseline; and

• Revealed clinical improvements that matched reductions in keratin 16 protein and epidermal thickness.

We believe these findings suggest that SNA-based drugs, such as XCUR17, may address clinical symptoms in patients with inflammatory diseases, such as psoriasis. We currently are not conducting additional clinical activities for XCUR17 and we seek to out-license the XCUR17 program.

Collaboration Programs

Allergan Collaboration Agreement

On November 13, 2019, we entered into a Collaboration, Option and License Agreement, or Allergan Collaboration Agreement, with a wholly-owned subsidiary of Allergan plc, Allergan Pharmaceuticals International Limited, or Allergan. On May 8, 2020, Allergan plc, including Allergan, was acquired by AbbVie Inc., or AbbVie. Accordingly, all references to “Allergan” in the defined terms including, but not limited to, “Allergan,” “Allergan Collaboration Agreement,” “Allergan R&D Services” and “Allergan JDC Services,” should be read and construed as references to AbbVie. Pursuant to the Allergan Collaboration Agreement, we granted to Allergan exclusive access and options to license SNA based therapeutics arising from two collaboration programs related to the treatment of hair loss disorders. Under each such license, we grant to Allergan exclusive, royalty-bearing, sublicenseable, nontransferable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics.

Under the terms of the Allergan Collaboration Agreement, we received an upfront payment of $25.0 million, and, if Allergan exercises any of its option rights during the initial option exercise period for each such option, Allergan will pay us an option exercise fee equal to $10.0 million for each exercised option. Allergan may extend an option exercise period beyond the applicable initial exercise period for a particular program for an additional fee.

If Allergan exercises an option for a program, we are eligible to receive up to an aggregate of $55.0 million for development milestone payments and $132.5 million for product approval and launch milestones, per program. We are also eligible to receive up to $175.0 million in sales milestone payments, on a program-by-program basis, based on aggregate worldwide sales. In the event a therapeutic candidate subject to the collaboration results in commercial sales,

35

we are eligible to receive tiered royalties at percentages ranging from the mid-single digits to the mid-teens on future net product sales of such commercialized therapeutic candidates. A percentage of the aforementioned payments will be due to Northwestern University, or Northwestern, upon receipt, pursuant to our existing license agreements with Northwestern.

Dermelix Collaboration Agreement

On February 17, 2019, we entered into a License and Development Agreement, or Dermelix License Agreement, with DERMELIX, LLC, d/b/a Dermelix Biotherapeutics, or Dermelix. Under the terms of the Dermelix License Agreement, Dermelix licensed worldwide rights to research, develop, and commercialize our technology for the treatment of Netherton Syndrome, or NS, and, at Dermelix’s option, up to five additional rare skin indications.

Pursuant to the terms of the Dermelix License Agreement, we and Dermelix have agreed to initially develop a targeted therapy for the treatment of NS. NS is a rare and severe autosomal recessive disorder caused by loss-of-function mutations in the SPINK5 gene, which encodes the serine protease inhibitor LEKTI involved in skin barrier function. NS affects approximately one in 200,000 children born each year, and is characterized by severely inflamed, red, scaled, itchy skin, and patients are at increased risk of mortality in the first year of life due to recurrent infections and dehydration as a result of the impaired skin barrier. Currently, there are no approved treatments for NS patients and off-label use of standard of care treatments are of limited utility.

Under the terms of the Dermelix License Agreement, we received an upfront payment of $1.0 million at closing of the transaction and will receive an additional $1.0 million upon the exercise of each of the five options granted to Dermelix. We will be responsible for conducting the early-stage development for each indication up to IND enabling toxicology studies. Dermelix will assume subsequent development, commercial activities and financial responsibility for such indications. Dermelix will pay the costs and expenses of development and commercialization of any licensed products under the Dermelix License Agreement, including our expenses incurred in connection with development activities and in accordance with the development budget. For each of NS as well as any additional licensed product for which Dermelix exercises one of its options, we are eligible to receive potential payments totaling up to $13.5 million upon achievement of certain development and regulatory milestones and up to $152.5 million upon achievement of certain sales milestones per indication in each of six indications. In addition, we will receive low double-digit royalties on annual net sales for SNA therapeutics developed.

Other operating, financing, and cash flow considerations

Since our inception in 2011, we have devoted substantial resources to the research and development of SNAs and the protection and enhancement of our intellectual property. We have no products approved for sale and primarily all of our $26.0 million in revenue since inception through March 31, 2020 has been earned through our research collaboration, license, and option agreement with Purdue Pharma L.P., or Purdue Collaboration Agreement, our research collaboration license and option agreement with Allergan, as a primary contractor or as a subcontractor on government grants, or through our research collaboration license and option agreement with Dermelix.

Since our inception, we have primarily funded our operations through sales of our securities and collaborations. Through March 31, 2020, we have raised net proceeds of $190.1 million from the sale of common stock and preferred stock. We have also received $36.0 million in upfront payments under our current collaborations, including an upfront payment of $25.0 million we received in November 2019 in connection with the Allergan Collaboration Agreement and an upfront payment of $1.0 million we received in February 2019 in connection with the Dermelix Collaboration Agreement. As of March 31, 2020, our cash, cash equivalents, short-term investments, and restricted cash were $100.0 million.

Since our inception, we have incurred significant operating losses. As of March 31, 2020, we have generated an accumulated deficit of $99.0 million. Substantially all of our operating losses resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant and increasing losses in the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year. We anticipate that our expenses will increase substantially as we:

36

•continue to advance AST-008 through clinical development for immuno-oncology applications;

•continue research and development of XCUR-FXN and other neurological therapeutic candidates;

• advance our SNA platform in dermatological indications with suitable collaboration partners;

• initiate research and development, preclinical studies and clinical trials for any additional therapeutic candidates that we may pursue in the future;

•advance other therapeutic candidates through preclinical and clinical development;

•increase our research and development activities to enhance our technology;

• continue to manufacture increasing quantities of drug substance and drug product material for use in preclinical studies and clinical trials;

•seek regulatory approval for our therapeutic candidates that successfully complete clinical trials;

•maintain, expand and protect our intellectual property portfolio;

• acquire or in-license other approved drugs, drug candidates or technologies;

• hire additional operational, financial and management information systems and personnel, including personnel to support our product development and planned future commercialization efforts; and

•incur additional costs associated with operating as a public company.

We have not generated any revenue from commercial drug sales nor do we expect to generate substantial revenue from product sales unless and until or until we successfully complete development and obtain regulatory approval of and commercialize one or more of our therapeutic candidates. We do not anticipate generating revenue from drug sales for the next several years, if ever. If we obtain regulatory approval for any of our therapeutic candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Other sources of revenue could include a combination of research and development payments, license fees and other upfront payments, milestone payments, and royalties in connection with our current and any future collaborations and licenses. Until such time, if ever, that we generate revenue from whatever source, we expect to finance our cash needs through a combination of public or private equity offerings, debt financings and research collaboration and license agreements. We may be unable to raise capital or enter into such other arrangements when needed or on favorable terms. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our therapeutic candidates.

Recent Developments

COVID-19 Business Update

With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, we have been closely monitoring the developments and have taken active measures to protect the health of our employees and their families, our communities, as well as our clinical trial investigators, patients, and caregivers. On March 21, 2020, Governor Pritzker of Illinois announced a “stay-at-home” order restricting all Illinois residents to their homes, with few limited exceptions, which has subsequent been extended through May 2020. However, the Governor also designated certain businesses, such as biotechnology companies, as “essential” businesses, thereby permitting us to continue our R&D operations.

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Business and R&D operations

Under social distancing guidelines for COVID-19, we are typically operating with less than 50% of our R&D staff on-site at any one time. We are managing laboratory staffing and taking other appropriate managerial actions to maintain progress on our preclinical and collaboration programs. Our office and general and administrative team has been working from home. Our preclinical development program in FA is ongoing and we continue to expect that IND-enabling studies for XCUR-FXN will begin in late 2020. We also continue to progress our collaborations with Allergan and Dermelix. However, if the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our preclinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Our principal accounting systems are cloud-based and have been fully operational during the stay at home order. We believe that all of our fundamental internal control disciplines are being maintained despite work being conducted from our employees’ homes.

Supply chain

We are working closely with our third-party manufacturers and other partners to manage our supply chain activities and mitigate potential disruptions as a result of the COVID-19 pandemic. We have observed minor delays in receipt of key chemicals, reagents and materials as certain manufacturers have had supply disruptions, related to the COVID-19 pandemic. If the COVID-19 pandemic persists for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and our clinical supply, which would adversely impact our preclinical and clinical development activities.

Clinical operations

We have one active clinical program, AST-008. We have completed enrollment for the Phase 1b stage of the clinical trial and are preparing to begin the Phase 2 dose expansion phase in patients with advanced or metastatic Merkel cell carcinoma or cutaneous squamous cell carcinoma. At this time, and given the severity of both of these indications, we continue to believe that we will begin enrolling patients in the Phase 2 dose expansion phase of the trial as expected in the second quarter of 2020. We continue to be in close communication with the seven clinical sites currently open and, among other things, have confirmed that AST-008 is available for conduct of the trial at each of the sites.

We remain committed to maintaining our development plans for AST-008 and continue to monitor and manage the rapidly evolving situation. We have taken measures to implement remote and virtual approaches, including remote patient monitoring where possible, to maintain patient safety and trial continuity and to preserve study integrity. Should the COVID-19 pandemic continue, our ability to maintain patient enrollment could be negatively impacted. We could also see an impact on our ability to supply study drug, report trial results, or interact with regulators, ethics committees or other important agencies due to limitations in regulatory authority employee resources or otherwise. In addition, we rely on contract research organizations or other third parties to assist us with clinical trials, and we cannot guarantee that they will continue to perform their contractual duties in a timely and satisfactory manner as a result of the COVID-19 pandemic. If the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to our clinical development timelines, which would adversely affect our business, financial condition, results of operations and growth prospects.

Liquidity and capital resources

As of March 31, 2020, our cash, cash equivalents, short-term investments, and restricted cash were $100.0 million, which we believe provides operating cash to fund our current operations until early 2022. However, our operating plan may change as a result of many factors currently unknown to us including due to the effects of COVID-19, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. We have historically principally raised capital through the sale of our securities. However, the COVID-19 pandemic continues to rapidly evolve and

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has already resulted in a significant disruption of global financial markets. We believe raising capital in the current market could be very difficult for early stage biotech companies like us. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

New corporate headquarters

On February 28, 2020, we entered into a lease agreement for approximately 30,000 square feet of laboratory and office space in Chicago, Illinois. We intend to move our corporate headquarters and research facility to these premises upon occupancy, which is expected to occur in June of 2020.

Segment Reporting

We view our operations and manage our business as one segment, which is the discovery, research and development of treatments based on our SNA technology.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the revenue and expenses incurred during the reported periods. We base our estimates on 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 apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ from these estimates under different assumptions or conditions, including uncertainty in the current economic environment due to the recent outbreak of COVID-19.

Our critical accounting policies require the most significant judgments and estimates in the preparation of our consolidated financial statements. There have been no significant changes to our critical accounting policies from those which were discussed in our Annual Report.

Recently adopted accounting pronouncements

None.

Recent accounting pronouncements not yet adopted

Refer to Note 2 of the accompanying unaudited condensed consolidated financial statements for a description of recently accounting pronouncements not yet updated.

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Results of Operations

Comparison of the Three Months Ended March 31, 2020 and 2019

The following table summarizes the results of our operations for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
(dollars in thousands)	2020			2019			Change
Revenue:
Collaboration revenue	$	9,183		$	25		$	9,158		36,632	%
Total revenue	9,183			25			9,158			36,632	%
Operating expenses:
Research and development expense	6,075			3,395			2,680			79	%
General and administrative expense	2,574			2,208			366			17	%
Total operating expenses	8,649			5,603			3,046			54	%
Operating loss	534			(5,578		)	6,112			(110	)%
Other income (expense), net:
Dividend income	39			105			(66		)	(63	)%
Interest income	360			1			359			35,900	%
Interest expense	(128		)	(183		)	55			(30	)%
Other income (expense), net	345			369			(24		)	(7	)%
Total other income (expense), net	616			292			324			111	%
Net income (loss)	$	1,150		$	(5,286	)	$	6,436		n/m

Revenue

The following table summarizes our revenue earned during the periods indicated:

	Three Months Ended March 31,
(dollars in thousands)	2020		2019		Change
Collaboration revenue:
Allergan Collaboration Agreement	$	9,116	$	—	$	9,116	n/m
Dermelix Collaboration Agreement	67		25		42		168	%
Total collaboration revenue	$	9,183	$	25	$	9,158	36,632	%
Total revenue	$	9,183	$	25	$	9,158	36,632	%

We received collaboration revenue in the amount of $9.2 million during the three months ended March 31, 2020, which is primarily related to activities performed under the Allergan Collaboration Agreement. In November 2019, we received an upfront payment of $25.0 million in connection with the Allergan Collaboration Agreement for which revenue has been deferred and will be recognized as revenue in future periods as we satisfy our obligations under the Allergan Collaboration Agreement. At March 31, 2020, deferred revenue under the Allergan Collaboration Agreement was $15.7 million and is expected to be recognized as revenue over the next twelve months as we satisfy our obligations under the Allergan Collaboration Agreement. Refer to Note 3 of the accompanying unaudited condensed consolidated financial statements for more information regarding revenue recognition for the Allergan Collaboration Agreement.

The collaboration revenue during the three months ended March 31, 2020 also included $0.1 million related to the reimbursable research and development activities performed under the Dermelix Collaboration Agreement, for

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which related costs are presented on a gross basis in the accompanying unaudited condensed consolidated statement of operations. We expect to incur additional early stage development costs under the Dermelix Collaboration Agreement in 2020 and expect to be reimbursed by Dermelix for such costs under the terms of the Dermelix Collaboration Agreement. We will recognize both revenue and research and development expense for such costs on a gross basis during the period in which those costs are incurred.

We do not expect to generate any product revenue for the foreseeable future. However, future revenue may include amounts attributable to partnership activities including, a combination of research and development payments, license fees and other upfront payments, milestone payments, product sales and royalties, and reimbursement of certain research and development expenses, in connection with the Allergan Collaboration Agreement or the Dermelix License Agreement or any future collaboration and licenses.

Research and development expense

The following table summarizes our research and development expenses incurred during the periods indicated:

	Three Months Ended March 31,
(dollars in thousands)	2020		2019		Change
Platform and discovery-related expense	2,681		$	1,137	$	1,544	136	%
Clinical development programs expense	1,537		935		602		64	%
Employee-related expense	1,494		1,026		468		46	%
Facilities, depreciation, and other expenses	363		297		66		22	%
Total research and development expense	$	6,075	$	3,395	$	2,680	79	%
Full time employees	36		19		17

Research and development expense was $6.1 million for the three months ended March 31, 2020, reflecting an increase of $2.7 million, or 79%, from research and development expense of $3.4 million for the three months ended March 31, 2019. Since March 31, 2019, we have increased our full-time employee staffing in R&D from 19 to 36 at March 31, 2020. The increase in research and development expense for the three months ended March 31, 2020 of $2.7 million reflects this increased staffing level and the related increase in research and development activities, in addition to the growth in clinical trial activities. More specifically, the increase in research and development expense for the three months ended March 31, 2020 of $2.7 million was primarily due to higher platform and discovery-related expense of $1.5 million, a net increase in costs related to our clinical development programs of $0.6 million, higher employee-related expenses of $0.5 million, and higher facilities, depreciation, and other expenses in the amount of $0.1 million.

The increase in platform and discovery-related expense of $1.5 million is mostly due to higher costs for materials, reagents, lab supplies, and contract research organizations, all in connection with increased research and development activities related to the Allergan Collaboration Agreement, our FA program, XCUR-FXN, and our discovery efforts for other drug candidates for neurology and ophthalmology, partially offset by lower intellectual property costs.

The net increase in clinical development programs expense for the three months ended March 31, 2020 of $0.6 million was primarily due to manufacturing costs in connection with the initiation of the upcoming Phase 2 phase of our Phase 1b/2 clinical trial for AST-008 and other higher clinical trial expenses, partially offset by lower clinical trial expenses for XCUR17.

The increase in employee-related expense for the three months ended March 31, 2020 of $0.5 million was due to higher compensation and related costs in connection with the net increase in headcount during the period presented as well as certain salary increases in 2020 for existing employees and higher recruiting costs. The increase in facilities, depreciation, and other expenses for the three months ended March 31, 2020 of $0.1 million

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was mostly due to higher depreciation expense in connection with the acquisition of additional scientific equipment that was placed in service during the period.

We expect our research and development expenses to increase in 2020 as we broaden our pipeline of SNA-based therapeutic candidates, continue spending on our clinical development programs, and further develop our SNA technology platform.

General and administrative expense

	Three Months Ended March 31,
(dollars in thousands)	2020		2019		Change
General and administrative expense	$	2,574	$	2,208	366	17	%
Full time employees	7		7		—

General and administrative expense was $2.6 million for the three months ended March 31, 2020, representing an increase of $0.4 million, or 17%, from $2.2 million for the three months ended March 31, 2019. The increase for the three months ended March 31, 2020 is mostly due to higher legal and accounting costs associated with operating as a public company, higher investor relations costs, and higher D&O insurance expense, partially offset by lower stock-based compensation expense and travel costs.

Interest income

The increase in interest income of $0.4 million in the three months ended March 31, 2020 as compared to the same period in the prior year was the result of higher average balances invested in available for sale securities as compared to the prior-year period.

Liquidity and Capital Resources

As of March 31, 2020, our cash, cash equivalents, short-term investments, and restricted cash were $100.0 million, which we believe provides operating cash to fund our current operations until early 2022. However, our operating plan may change as a result of many factors currently unknown to us including due to the effects of COVID-19, and we may need to seek additional funds sooner than planned, through public or private equity or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or any combination of these approaches. We have historically principally raised capital through the sale of our securities. However, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. We believe raising capital in the current market could be very difficult for early stage biotech companies like us. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

In March 2019, we filed a shelf registration statement on Form S-3 with the SEC, which was declared effective by the SEC on July 24, 2019. The shelf registration statement allows us to sell from time-to-time up to $125.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for our own account in one or more offerings; the remaining amount available under this shelf registration is approximately $31.3 million.

On January 6, 2020, we sold 1,081,184 shares of our common stock at a price of $2.75 per share pursuant to the exercise of the underwriters’ option to purchase additional shares at the public offering price in connection with the December 2019 Offering. We received gross proceeds of $3.0 million before deducting underwriting discounts and commissions and offering expenses of $0.2 million in January 2020 in connection with the December 2019 offering.

Similar to other development stage biotechnology companies, we have not generated any revenue since inception. We have incurred losses and experienced negative operating cash flows since our inception and anticipate that we will continue to incur losses for at least the next several years. As of March 31, 2020, we have generated an accumulated deficit of $99.0 million.

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See “—Funding Requirements” below for additional information on our future capital needs.

Cash Flows

The following table shows a summary of our cash flows for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
(in thousands)	2020			2019
	(unaudited)
Net cash used in operating activities	$	(7,847	)	$	(4,012	)
Net cash used in investing activities	(12,503		)	(8		)
Net cash used in financing activities	(2,333		)	(52		)
Net decrease in cash, cash equivalents, and restricted cash	$	(22,683	)	$	(4,072	)

Operating activities

Net cash used in operating activities was $7.8 million and $4.0 million for the three months ended March 31, 2020 and 2019, respectively. The increase in cash used in operating activities for the three months ended March 31, 2020 of $3.8 million was primarily due higher cash used for working capital and the absence of the $1.0 million upfront payment in connection with the Dermelix Collaboration Agreement that was received in the three months ended March 31, 2019.

Investing activities

Net cash used in investing activities was $12.5 million and $0.0 million for the three months ended March 31, 2020 and 2019, respectively. The increase in cash used in investing activities of $12.5 million was primarily due to the purchase, net of maturities, of available-for-sale securities of $11.9 million as well as the purchase of scientific equipment of $0.6 million.

Financing activities

Net cash used in financing activities of $2.3 million for the three months ended March 31, 2020 is primarily due the repayment of the Hercules loan in the amount of $5.0 million upon the loan’s maturity, partially offset by the net proceeds from the sale of shares of our common stock in the amount of $2.8 million pursuant to the partial exercise of the option to purchase additional shares by the underwriters from our December 2019 financing.

Hercules Loan and Security Agreement

On March 2, 2020, pursuant to the terms of the loan agreement with Hercules Technology Growth Capital, or Hercules, and subsequent amendments thereto, or Hercules Loan Agreement, we repaid all remaining outstanding obligations under the Hercules Loan Agreement, to include the outstanding principal balance of $5.0 million and a deferred end of term fee of $0.1 million. As a result, Hercules no longer has a security interest in any of our assets.

Funding Requirements

We expect that our primary uses of capital will continue to be third-party clinical and research and development services, compensation and related expenses, laboratory and related supplies, legal and other regulatory expenses and general overhead costs. Because of the numerous risks and uncertainties associated with research, development and commercialization of therapeutic candidates, we are unable to estimate the exact amount of our working capital requirements. Our future capital requirements are difficult to forecast and will depend on many factors, including:

• the terms and timing of any other collaboration, licensing and other arrangements that we may establish;

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• the initiation, progress, timing and completion of preclinical studies and clinical trials for our potential therapeutic candidates;

• the effects of health epidemics, including the global COVID‑19 pandemic, on our operations or the business or operations of our CROs or other third parties with whom we conduct business;

• the number and characteristics of therapeutic candidates that we pursue;

• the progress, costs and results of our preclinical studies and clinical trials;

• the outcome, timing and cost of regulatory approvals;

• delays that may be caused by changing regulatory requirements;

• the cost and timing of hiring new employees to support our continued growth;

• unknown legal, administrative, regulatory, accounting, and information technology costs as well as additional costs associated with operating as a public company;

• the costs involved in filing and prosecuting patent applications and enforcing and defending patent claims;

• the costs of filing and prosecuting intellectual property rights and enforcing and defending any intellectual property-related claims;

• the costs and timing of procuring clinical and commercial supplies of our therapeutic candidates;

• the extent to which we acquire or in-license other therapeutic candidates and technologies; and

• the extent to which we acquire or invest in other businesses, therapeutic candidates or technologies.

Based on our current operating plans, we believe that our existing working capital at March 31, 2020 is sufficient to fund our operations into early 2022. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our capital resources sooner than we expect.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, and marketing, distribution or licensing arrangements with third parties. The COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our operations.

To the extent that we raise additional capital through future equity financings, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants that would restrict our operations. If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or other arrangements when needed, we may be required to delay, reduce or eliminate our product development efforts or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

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Contractual Obligations and Commitments

There have been no material changes to our contractual obligations from those described in our Annual Report, other than the following:

New corporate headquarters

During the quarter ended March 31, 2020, we entered into a new lease signed in February 2020 to secure approximately 30,000 square feet of office and laboratory space at 2430 N. Halsted St., Chicago, Illinois. The Chicago Lease commences on the date on which the premises leased thereunder are ready for occupancy and expires 10 years from the commencement date for the initial term with Exicure having the option to renew for two additional successive periods of five years each.

Off-balance Sheet Arrangements

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

JOBS Act

In April 2012, the Jumpstart Our Business Startups Act of 2012, or JOBS Act, was enacted by the federal government. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

In addition, as an emerging growth company, we will not be required to provide an auditor’s attestation report on our internal control over financial reporting in future annual reports on Form 10-K as otherwise required by Section 404(b) of the Sarbanes-Oxley Act.

In addition, we are also a smaller reporting company as defined in the Securities Exchange Act of 1934, as amended, or Exchange Act. We may continue to be a smaller reporting company even after we are no longer an emerging growth company. We may take advantage of certain of the scaled disclosures available to smaller reporting companies and will be able to take advantage of these scaled disclosures for so long as (i) our voting and non-voting common stock held by non-affiliates is less than $250.0 million measured on the last business day of our second fiscal quarter or (ii) our annual revenue is less than $100.0 million during the most recently completed fiscal year and our voting and non-voting common stock held by non-affiliates is less than $700.0 million measured on the last business day of our second fiscal quarter.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

As a smaller reporting company, as defined by Rule 12b-2 of the Exchange Act and in Item 10(f)(1) of Regulation S-K, we are electing scaled disclosure reporting obligations and therefore are not required to provide the information requested by this Item.

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Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed in our periodic and current reports that we file with the SEC under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of March 31, 2020, our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive officer and principal financial officer have concluded based upon the evaluation described above that, as of March 31, 2020, 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 fiscal quarter ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we may be subject to legal proceedings. We are not currently a party to or aware of any proceedings that we believe will have, individually or in the aggregate, a material adverse effect on our business, financial condition or results of operations.

Item 1A. Risk Factors.

In addition to other information contained in this Quarterly Report on Form 10-Q, the following risks should be considered in evaluating our business and future prospects and an investment in our common stock. The risks and uncertainties described below are not the only ones we face. If any of the following risks and uncertainties develops into actual events, our business, financial condition, results of operations and cash flows could be materially adversely affected. In that case, the price of our common stock could decline and you may lose all or part of your investment.

Risks Related to Our Business

We are a clinical-stage biotechnology company with a history of losses. We expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability, which could result in a decline in the market value of our common stock.

We are a biotechnology company developing therapeutics for immuno-oncology, genetic disorders and other indications based on our proprietary SNA technology. We have a limited operating history. Since our inception in June 2011, we have devoted our resources to the development of SNA technology. We have had significant operating losses since our inception. As of March 31, 2020, we have generated an accumulated deficit of $99.0 million. Substantially all of our losses have resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations. Our technology and therapeutic candidates are in early stages of development, and we are subject to the risks of failure inherent in the development of therapeutic candidates based on novel technologies.

We have not generated, and do not expect to generate, any product revenue for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies, clinical trials, and the regulatory approval process for therapeutic candidates. The amount of future losses is uncertain. Our ability to achieve profitability, if ever, will depend on, among other things, us, or any current or future collaborators, successfully developing therapeutic candidates, obtaining regulatory approvals to market and commercialize therapeutic candidates, manufacturing any approved products on commercially reasonable terms, establishing a sales and marketing organization or suitable third-party alternatives for any approved product and raising sufficient funds to finance business activities. If we, or any current or future collaborators, are unable to develop and commercialize one or more of our therapeutic candidates or if sales revenue from any therapeutic candidate that receives approval is insufficient, we will not achieve profitability, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our approach to the discovery and development of innovative therapeutic treatments based on our technology is unproven and may not result in marketable products.

We plan to develop a pipeline of therapeutic candidates based on our proprietary SNA technology. We believe that therapeutic candidates identified with our therapeutic discovery technology may offer an improved therapeutic approach compared to small molecules and antibodies, as well as several advantages over linear oligonucleotide-based therapeutics. However, the scientific research that forms the basis of our efforts to develop therapeutic candidates based on our SNA technology and the identification and optimization of SNA-based therapeutic candidates is relatively new. Further, the scientific evidence to support the feasibility of developing therapeutic treatments based on SNA technology is both preliminary and limited.

Therapeutic candidates based on SNA technology have not been extensively tested in humans, and a number of clinical trials conducted by other companies using oligonucleotide technologies have not been successful. We may

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discover that the SNA-based therapeutic candidates do not possess certain properties required for therapeutic treatment to be effective, such as the ability to remain stable in the human body for the period of time required for the therapeutic candidate to reach the target tissue or the ability to cross the cell membrane and enter into cells within the target tissue for effective delivery. We currently have only limited data, and no conclusive evidence, to suggest that we can introduce these necessary drug-like properties into SNA-based therapeutic candidate. We may spend substantial funds attempting to introduce these properties and may never succeed in doing so. In addition, therapeutic candidates based on SNA technology may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies. Even if therapeutic candidates have successful results in animal studies, they may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective or harmful ways. As a result, we may never succeed in developing a marketable therapeutic, we may not become profitable and the value of our common stock would decline.

Further, the U.S. Food and Drug Administration, or FDA, and equivalent foreign regulatory authorities have limited experience with SNA-based therapeutics. No regulatory authority has granted approval to any person or entity, including us, to market and commercialize SNA-based therapeutics, which may increase the complexity, uncertainty and length of the regulatory approval process for our therapeutic candidates. We and any current or future collaborators may never receive approval to market and commercialize any therapeutic candidate. Even if we or a future collaborator obtain regulatory approval, the approval may be for disease indications or patient populations that are not as broad as we intended or desired or may require labeling that includes significant use or distribution restrictions or safety warnings. We or a future collaborator may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements to maintain regulatory approval. If our SNA technology proves to be ineffective, unsafe or commercially unviable, our technology and pipeline would have little, if any, value, which could have a material adverse effect on our business, financial condition, results of operations and prospects.

Our therapeutic candidates are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability.

We have no therapeutics on the market and all of our therapeutic candidates are in early stages of development. Our ability to achieve and sustain profitability depends on obtaining regulatory approvals, including an institutional review board, or IRB, approval to conduct clinical trials at particular sites for, and successfully commercializing, our therapeutic candidates, either alone or with third parties. Before obtaining regulatory approval for the commercial distribution of our therapeutic candidates, we or an existing or a future collaborator must conduct extensive preclinical studies and clinical trials to demonstrate the safety and efficacy in humans of our therapeutic candidates. Preclinical studies and clinical trials are expensive, difficult to design and implement, can take many years to complete and are uncertain as to outcome. The start or end of a clinical trial is often delayed or halted due to changing regulatory requirements, manufacturing challenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative therapeutic or required prior therapy, clinical outcomes or financial constraints. For instance, delays or difficulties in patient enrollment or difficulties in retaining trial participants can result in increased costs, longer development times or termination of a clinical trial. Clinical trials of a new therapeutic candidate require the enrollment of a sufficient number of patients, including patients who are suffering from the disease the therapeutic candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, the age and condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical sites and the availability of effective treatments for the relevant disease.

A therapeutic candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for therapeutic candidates is high due to scientific feasibility, safety, efficacy, changing standards of medical care and other variables. The results from preclinical studies or early clinical trials of a therapeutic candidate may not predict the results that will be obtained in later phase clinical trials of the therapeutic candidate. We, the FDA, an IRB, an independent ethics committee, or other applicable regulatory authorities may suspend clinical trials of a therapeutic candidate at any time for various reasons, including a finding that subjects participating in such trials are being exposed to unreasonable and significant risk of illness or injury. Similarly, an IRB or ethics committee may suspend a clinical trial at a particular trial site. We may not have the financial resources to continue development of, or to enter into collaborations for, a therapeutic candidate if we experience any problems or other unforeseen events that delay or prevent regulatory approval of, or our ability to commercialize, therapeutic candidates, including:

• negative or inconclusive results from our clinical trials or the clinical trials of others for therapeutic candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;

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• therapeutic-related side effects experienced by participants in our clinical trials or by individuals using therapeutics similar to our therapeutic candidates;

• delays in submitting INDs or CTAs, or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators or IRBs or ethics committees to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;

• conditions imposed by the FDA or comparable foreign authorities, such as the European Medicines Agency, or EMA, or European Union national competent authorities, regarding the scope or design of our clinical trials;

• delays in enrolling research subjects in clinical trials;

• high drop-out rates of research subjects;

• inadequate supply or quality of therapeutic candidate components or materials or other supplies necessary for the conduct of our clinical trials;

• greater than anticipated clinical trial costs;

• poor effectiveness of our therapeutic candidates during clinical trials;

• unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;

• failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;

• delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular, especially in light of the novelty of our therapeutic candidates;

• varying interpretations of data by the FDA and similar foreign regulatory agencies; or

• refusal of the FDA to accept data from clinical trials conducted outside the United States, or acceptance of these data subject to certain conditions by the FDA.

Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical studies and clinical trials may not be predictive of future clinical trial results.

Clinical testing is expensive and generally takes many years to complete, and the outcome is inherently uncertain. Failure can occur at any time and at any stage during the clinical trial process. The results of preclinical studies and early clinical trials of our therapeutic candidates may not be predictive of the result of any subsequent clinical trials. Therapeutic candidates that have shown promising results in early stage clinical trials may still suffer significant setbacks in subsequent clinical trials. We will have to conduct trials in our proposed indications to verify the results obtained to date and to support any regulatory submissions for further clinical development. A number of companies in the biopharmaceutical industry have suffered significant setbacks in clinical trials due to lack of efficacy or adverse safety profiles despite promising results in earlier clinical trials. Moreover, clinical data is often susceptible to varying interpretations and analyses. We do not know whether Phase 1, Phase 2, Phase 3, or other clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety with respect to the proposed indication for use sufficient to receive regulatory approval or market our therapeutic candidates.  If we experience delays in the completion of, or termination of, any clinical trial of our therapeutic candidates, the commercial prospects of our therapeutic candidates may be harmed, and our ability to generate product revenues from any of these therapeutic candidates will be delayed.  In addition, any delays in completing clinical trials will increase our costs, slow down our therapeutic candidate development and approval process and jeopardize our ability to commence product sales and generate revenues.  Any of these occurrences could materially and adversely affect our business, financial condition, results of operations or prospects.

Additionally, some of the clinical trials we conduct may be open-label in study design and may be conducted at a limited number of clinical sites on a limited number of patients. An “open-label” clinical trial is one where both the patient and investigator know whether the patient is receiving the investigational product candidate or either an existing approved drug or placebo. Most typically, open-label clinical trials test only the investigational product candidate and sometimes may do so at different dose levels. Open-label clinical trials are subject to various limitations that may exaggerate any therapeutic effect as patients in open-label clinical trials are aware when they are receiving treatment.

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Open-label clinical trials may be subject to a “patient bias” where patients perceive their symptoms to have improved merely due to their awareness of receiving an experimental treatment. Moreover, patients selected for early clinical studies often include the most severe sufferers and their symptoms may have been bound to improve notwithstanding the new treatment. In addition, open-label clinical trials may be subject to an “investigator bias” where those assessing and reviewing the physiological outcomes of the clinical trials are aware of which patients have received treatment and may interpret the information of the treated group more favorably given this knowledge. Given that our planned open-label Phase 1b/2 clinical trial of AST-008 includes an open-label dosing design, the results from this clinical trial may not be predictive of future clinical trial results with this or other product candidates for which we conduct an open-label clinical trial when studied in a controlled environment with a placebo or active control.

We will need substantial additional funds to advance the development of our therapeutic candidates, and we cannot guarantee that we will have sufficient funds available in the future to develop and commercialize our current or future therapeutic candidates.

If our existing therapeutic candidates or our future therapeutic candidates enter and advance through preclinical studies and clinical trials, we will need substantial additional funds to expand our development, regulatory, manufacturing, marketing, and sales capabilities or contract with other organizations to provide these capabilities for us. We have used substantial funds to develop our therapeutic candidates and will require significant funds to conduct further research and development and preclinical studies and clinical trials of our therapeutic candidates, to seek regulatory approvals for our therapeutic candidates and to manufacture and market products, if any, that are approved for commercial sale. As of March 31, 2020, we had $25.8 million in cash, cash equivalents, and restricted cash and $74.2 million in short-term investments. Based on our current operating plans, we believe that existing working capital at March 31, 2020 is sufficient to fund our operations into early 2022. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing development and corporate activities. Since the length of time and activities associated with successful development of our therapeutic candidates is highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. To execute our business plan, we will need, among other things:

• to obtain the human and financial resources necessary to develop, test, obtain regulatory approval for, manufacture and market our therapeutic candidates;

• to build and maintain a strong intellectual property portfolio and avoid infringing the intellectual property of third parties;

• to establish and maintain successful licenses, collaborations and alliances;

• to satisfy the requirements of clinical trial protocols, including patient enrollment;

• to establish and demonstrate the clinical efficacy and safety of our therapeutic candidates;

• to obtain regulatory approvals;

• to manage our spending as costs and expenses increase due to preclinical studies and clinical trials, regulatory approvals, and commercialization;

• to obtain additional capital to support and expand our operations; and

• to market our products to achieve acceptance and use by the medical community in general.

If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, reduce or terminate our research and development programs and preclinical studies or clinical trials, if any, limit strategic opportunities or undergo reductions in our workforce or other corporate restructuring activities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of our technology or therapeutic candidates that we would otherwise pursue on our own. We do not expect to realize revenue from product sales, milestone payments or royalties in the foreseeable future, if at all. Our revenue sources are, and will remain, extremely limited unless and until our therapeutic candidates are clinically tested, approved for commercialization and successfully marketed. To date, we have primarily financed our operations through the sale of equity securities, payments received in connection with our collaboration, option, and license agreement with Allergan plc, or Allergan, our research collaboration, license, and option agreement with Purdue Pharma L.P., or Purdue, our license and development agreement with Dermelix LLC, or Dermelix, or as a primary contractor or as a subcontractor on government grants, and

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proceeds from our loan agreement with Hercules Technology Growth Capital, or Hercules. We will be required to seek additional funding in the future and intend to do so through either collaborations, public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. Our ability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. Additional funds may not be available to us on acceptable terms, or at all, and our ability to raise additional capital may be adversely impacted by potential worsening global economic conditions and the recent disruptions to and volatility in the credit and financial markets in the United States and worldwide resulting from the ongoing COVID-19 pandemic. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of any financing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of equity securities received any distribution of corporate assets.

Our business could be adversely affected by the effects of health epidemics, including the global COVID‑19 coronavirus pandemic, in regions where we or third parties on which we rely have business operations and at our clinical trial sites, as well as the business or operations of our CROs or other third parties with whom we conduct business.

The recent outbreak of the novel strain of coronavirus, SARS-CoV-2, which causes coronavirus disease 2019, or COVID-19, has negatively impacted and could continue to negatively impact the global economy. Our business and operations could be adversely affected by the effects of health epidemics, including the recent and ongoing COVID-19 pandemic, on our business activities performed by us or by third parties with whom we conduct business, including our third party manufacturers, contract research organizations, or CROs, shippers and others. Such effects could be more pronounced in regions where we have concentrations of clinical trial sites or other business operations. Our company headquarters is located in Skokie, Illinois, our CROs are located globally, and our substance and drug product manufacturers are located in the United States and Europe.

In March 2020, the World Health Organization declared the COVID-19 outbreak a pandemic, and the U.S. government imposed travel restrictions on travel between the United States, Europe and certain other countries. Further, the President of the United States declared the COVID-19 pandemic a national emergency, invoking powers under the Stafford Act, the legislation that directs federal emergency disaster response. In addition, the Governor of Illinois issued a shelter-in-place order pursuant to which all individuals living in the State of Illinois were ordered to stay at home, subject to certain exceptions, until May 30, 2020. The Illinois executive order contains certain exceptions to facilitate authorized necessary activities) to mitigate the impact of the COVID-19 pandemic. The executive order exempts certain individuals needed to maintain continuity of operations of critical infrastructure sectors as determined by the federal government, and the executive order clarifies that biotechnology companies like us (including operations, research and development, manufacture and supply chain) are considered essential and exempt.

In response to these public health directives and orders and to ensure the safety and wellbeing of our employees, we have implemented work-from-home policies to support the community efforts to reduce the transmission of COVID-19 and protect employees, complying with guidance from federal, state/provincial or municipal government and health authorities. We implemented a number of measures to ensure employee safety and business continuity. Under social distancing guidelines for COVID-19, we are typically operating with less than 50% of our R&D staff on-site at any one time. We are managing laboratory staffing and taking other appropriate managerial actions to maintain progress on our preclinical and collaboration programs. Our office and general and administrative team has been working from home. Business travel has been suspended, and online and teleconference technology is used to meet virtually rather than in person. We have taken measures to secure our research and development project activities, while work in laboratories and facilities which have been organized to reduce risk of COVID-19 transmission.

The regions in which we operate are currently being affected by COVID-19. Further, timely enrollment in our clinical trials is dependent upon clinical trial sites which may be adversely affected by COVID-19. Quarantines, shelter-in-place and similar government orders, or the perception that such orders, shutdowns or other restrictions on the conduct of business operations could occur, related to COVID-19 or other infectious diseases could impact personnel at third-party manufacturing facilities and CROs in the United States and other countries, or the availability or cost of materials, which would disrupt our supply chain. Additionally, our clinical trials may involve immunocompromised patients who are at higher risk for COVID-19 and who are therefore more likely to avoid hospitals or other high risk areas.

The effects of the executive orders and our work-from-home policies may negatively impact productivity, disrupt our business and delay our clinical programs and timelines (for example, our timelines for any of our product candidates), the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course.

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As a result of the COVID-19 outbreak, or similar pandemics, we may experience disruptions that could severely impact our business, clinical trials and preclinical studies, including:

• delays or difficulties in enrolling or maintaining patients in our clinical trials, including patients who may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services;

• increased rates of patients withdrawing from our clinical trials following enrollment as a result of contracting COVID-19, being forced to quarantine, or being unable to visit clinical trial locations;

• delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff who may have heightened exposure to COVID-19 or experience additional restrictions by their institutions, city, or state;

• delays or disruptions in non-clinical experiments and investigational new drug application-enabling good laboratory practice standard toxicology studies due to unforeseen circumstances in supply chain;

• diversion or prioritization of healthcare resources away from the conduct of clinical trials and towards the COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, and because, who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations;

• interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;

• interruption of our key clinical trial activities , such as clinical assessments at pre-specified timepoints during the trial and clinical trial site data monitoring, due to limitations on travel imposed or recommended by governmental entities, employers and others or interruption of clinical trial subject visits and study procedures (particularly any procedures that may be deemed non-essential), which may impact the integrity of subject data and clinical study endpoints;

• interruption or delays in the operations of the FDA, European Medicines Agency and comparable foreign regulatory agencies or their refusal to accept data from clinical trials in affected geographies, which may impact approval timelines;

• delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

• limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people.

For our clinical trials that we might conduct at sites outside the United States, in addition to the risks listed above, we may also experience the following adverse impacts, particularly in countries which are experiencing heightened impact from the COVID-19 pandemic:

• delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

• delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;

• interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product and comparator drugs used in our clinical trials;

• changes in local regulations as part of a response to the COVID-19 outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

• delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and

• the refusal of the FDA to accept data from clinical trials in these affected geographies.

The spread of COVID-19, which has caused broad global impact, may materially affect us economically. The trading price for our shares as well as the trading prices of other biopharmaceutical companies, as well as the broader equity and debt markets overall, have been highly volatile as a result of the COVID-19 pandemic and the resulting impact on U.S. economic activities. Although the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, a widespread pandemic could result in significant disruption of global financial markets, reducing our

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ability to access capital, which could in the future negatively affect our liquidity. In addition, even after the COVID-19 pandemic has subsided, a recession or market correction that has occurred or may occur in the future because of the COVID-19 could materially affect our business and the value of our common stock.

The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus or a similar pandemic will impact our business, preclinical studies and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration and severity of the outbreak, limitations on our ability to conduct our business in the ordinary course, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions for us, our third party contractors and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. The ultimate impact of the COVID-19 pandemic or a similar health pandemic is highly uncertain and subject to change; we continue to monitor the COVID-19 situation closely.

If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

We may not be able to initiate or continue conducting clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Some of our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates. Patient enrollment is affected by other factors including:

• the size and nature of the patient population;

• the severity of the disease under investigation;

• the eligibility criteria for, and design of, the trial in question;

• the perceived risks and benefits of the product candidate under study;

• competition in recruiting and enrolling patients in clinical trials;

• the efforts to facilitate timely enrollment in clinical trials;

• the patient referral practices of physicians;

• the ability to monitor patients adequately during and after treatment;

• the proximity and availability of clinical trial sites for prospective patients; and

• delays or difficulties due to the recent COVID-19 pandemic.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays and could require us to abandon one or more clinical trials altogether. We may encounter difficulties and/or delays in completing our planned enrollments. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, or the inability to complete development of our product candidates, which would cause the value of our company to decline, limit our ability to obtain additional financing, and materially impair our ability to generate revenues.

Our quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may cause our stock price to fluctuate or decline.

We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors, including:

• variations in the level of expense related to our therapeutic candidates or future development programs;

• results of clinical trials, or the addition or termination of clinical trials or funding support by us, or a future collaborator or licensing partner;

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• our execution of any collaboration, licensing or similar arrangement, and the timing of payments we may make or receive under such existing or future arrangements or the termination or modification of any such existing or future arrangements;

• any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved;

• additions and departures of key personnel;

• strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes in business strategy;

• whether or not any of our therapeutic candidates receives regulatory approval, market acceptance and demand for such therapeutic candidates;

• regulatory developments affecting our therapeutic candidates or those of our competitors; and

• changes in general economic, industry, political and market conditions, including, but not limited to, the ongoing impact of the COVID-19 pandemic.

If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to develop and commercialize product candidates, impact our cash position, increase our expense and present significant distractions to our management.

From time to time, we may consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases and out- or in-licensing of product candidates or technologies. In particular, in addition to our current arrangements with Allergan, which began in November 2019, and Dermelix, which began in February 2019, and Purdue, with which there no active therapeutic candidates in development and which has not indicated any further interest in development, we will evaluate and, if strategically attractive, seek to enter into additional collaborations, including with major biotechnology or pharmaceutical companies. The competition for collaborators is intense, and the negotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may be unable to maintain any new or existing collaboration if, for example, development or approval of a therapeutic candidate is delayed, sales of an approved product do not meet expectations or the collaborator terminates the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business. These transactions entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business. Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, any transactions that we do complete may be subject to the foregoing or other risks and have a material adverse effect on our business, results of operations, financial condition and prospects. Conversely, any failure to enter any collaboration or other strategic transaction that would be beneficial to us could delay the development and potential commercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches market.

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

We rely on third-party clinical investigators, CROs, clinical data management organizations and consultants to design, conduct, supervise and monitor preclinical studies and clinical trials for our therapeutic candidates. Because we

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rely on third parties and do not have the ability to conduct preclinical studies or clinical trials independently, we have less control over the timing, quality and other aspects of preclinical studies and clinical trials than we would if we conducted them on our own. These investigators, CROs and consultants are not our employees and we have limited control over the amount of time and resources that they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw time and resources away from our programs. The third parties with which we contract might not be diligent, careful or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.

If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial. The FDA requires preclinical studies to be conducted in accordance with applicable GLPs, and clinical trials to be conducted in accordance with applicable FDA regulations and GCPs, including requirements for conducting, recording and reporting the results of preclinical studies and clinical trials to assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of clinical trial participants are protected. Our reliance on third parties that we do not control does not relieve us of these responsibilities and requirements. Any adverse development or delay in our preclinical studies or clinical trials could have a material adverse effect on our business, financial condition, results of operations and prospects.

In addition, the operations of our CROs may be constrained or disrupted by the recent COVID-19 pandemic. Clinical site closure and other activities that require visits to clinical sites, have been and may continue to be delayed due to prioritization of hospital resources toward the COVID-19 pandemic or concerns among patients about participating in clinical trials during a pandemic. If these third parties do not successfully carry out their contractual duties, meet expected deadlines or conduct our preclinical studies or clinical trials in accordance with regulatory requirements or our stated protocols, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain, or may be delayed in obtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms. Switching or adding additional CROs involves additional cost and requires management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays could occur, which could compromise our ability to meet our desired development timelines. Though we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.

Because we rely on third-party manufacturing and supply partners, our supply of research and development, preclinical studies and clinical trial materials may become limited or interrupted or may not be of satisfactory quantity or quality.

We rely on third-party partners to manufacture and supply the materials and components for our research and development, preclinical study and clinical trial supplies. We do not own manufacturing facilities or supply sources for such components and materials. Our manufacturing requirements include oligonucleotides and lipids. We procure our nonclinical toxicology and clinical development materials from a single source supplier on a purchase order basis. There can be no assurance that our supply of research and development, preclinical study and clinical trial therapeutic candidates and other materials will not be limited, interrupted, restricted in certain geographic regions or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of our drug product manufacturers could require significant effort and expertise because there may be a limited number of qualified replacements.

The manufacturing process for a therapeutic candidate is subject to oversight by the FDA and foreign regulatory authorities. Suppliers and manufacturers must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with regulatory requirements, such as cGMPs. In the event that any of our suppliers or manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities or resources, or enter into an agreement with another third-party, which we may not be able to

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do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our therapeutic candidates may be unique or proprietary to the original manufacturer and we may have difficulty, or there may be contractual restrictions prohibiting us from, transferring such skills or technology to another third-party and a feasible alternative may not exist. These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third-party manufacture our therapeutic candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop therapeutic candidates in a timely manner or within budget.

We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any therapeutic candidate. To the extent that we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or maintain third-party manufacturing for therapeutic candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our therapeutic candidates successfully. Our or a third-party’s failure to execute on our manufacturing requirements and comply with cGMPs could adversely affect our business in a number of ways, including:

• an inability to initiate or continue preclinical studies or clinical trials of our therapeutic candidates under development;

• delay in submitting regulatory applications, or receiving regulatory approvals, for therapeutic candidates;

• loss of the cooperation of a future collaborator;

• subjecting manufacturing facilities of our therapeutic candidates to additional inspections by regulatory authorities;

• requirements to cease distribution or to recall batches of our therapeutic candidates; and

• in the event of approval to market and commercialize a therapeutic candidate, an inability to meet commercial demands for our therapeutics.

If our relationships with our manufacturers, suppliers or other vendors are terminated or scaled back as a result of the COVID-19 pandemic or other health epidemics, we may not be able to enter into arrangements with alternative suppliers or vendors or do so on commercially reasonable terms or in a timely manner. Further, if the COVID-19 pandemic persists for an extended period of time and begins to impact essential distribution systems such as FedEx and postal delivery, we could experience disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our product candidates. Switching or adding additional suppliers or vendors involves substantial cost and requires management time and focus. In addition, there is a natural transition period when a new supplier or vendor commences work. As a result, delays may occur, which could adversely impact our ability to meet our desired clinical development and any future commercialization timelines. Although we carefully manage our relationships with our suppliers and vendors, there can be no assurance that we will not encounter challenges or delays in the future or that these delays or challenges will not harm our business.

We face competition from entities that have developed or may develop therapeutic candidates for our target disease indications, including companies developing novel treatments and technology platforms based on modalities and technology similar to ours. If these companies develop technologies, including delivery technologies, or therapeutic candidates more rapidly than we do or their technologies are more effective, our ability to develop and successfully commercialize therapeutic candidates may be adversely affected.

The development and commercialization of therapeutic candidates is highly competitive. We compete with a number of multinational pharmaceutical companies and specialized biotechnology companies, as well as technology being developed at universities and other research institutions. Our competitors have developed, are developing or will develop therapeutic candidates and processes competitive with our therapeutic candidates. Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments that enter the market. We believe that a significant number of therapeutics are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may try to develop therapeutic candidates. There is intense and rapidly evolving competition in the biotechnology, pharmaceutical and oligonucleotide therapeutics fields. While we believe that our SNA technology, its associated intellectual property and our scientific and technical know-how give us a competitive advantage in this space, competition from many sources remains. Our

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competitors include larger and better funded pharmaceutical, biotechnology and oligonucleotide therapeutics companies. Moreover, we also compete with current and future therapeutics developed at universities and other research institutions.

We are aware of several companies that are developing oligonucleotide delivery platforms and oligonucleotide-based therapeutics. These competitors include Ionis Pharmaceuticals, Inc., Alnylam Pharmaceuticals, Inc., Dicerna Pharmaceuticals, Inc., Arbutus Biopharma Corp., Wave Life Sciences Ltd., Arrowhead Pharmaceuticals, Inc., ProQR Therapeutics N.V., Stoke Therapeutics, Inc., Neubase Therapeutics, Inc., Idera Pharmaceuticals, Inc., and Checkmate Pharmaceuticals, Inc. These and other competitors compete with us in recruiting scientific and managerial talent, and for funding from pharmaceutical companies.

Our success will partially depend on our ability to develop and protect therapeutics that are safer and more effective than competing therapeutics. Our commercial opportunity and success will be reduced or eliminated if competing therapeutics are safer, more effective, or less expensive than the therapeutics we develop.

If our therapeutic candidates are approved for the indications we are currently pursuing, they will compete with a range of therapeutic treatments that are either in development or currently marketed. A number of therapeutics for treating psoriasis and cancers are on the market or in clinical development. For the treatment of psoriasis, marketed therapies range from small molecules like topical steroids to biologics, such as AbbVie Inc.’s adalimumab. In addition, numerous compounds are in clinical development for psoriasis treatment. With respect to immunogenic cancers such as melanoma, the most common treatments are chemotherapeutic compounds, radiation therapy and now immunotherapeutic antibodies such as ipilimumab, atezolizumab, pembrolizumab and others.

Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. If we successfully obtain approval for any therapeutic candidate, we will face competition based on many different factors, including the safety and effectiveness of our therapeutics, the ease with which our therapeutics can be administered and the extent to which patients accept relatively new routes of administration, the timing and scope of regulatory approvals for these therapeutics, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage and patent position. Competing therapeutics could present superior treatment alternatives, including by being more effective, safer, less expensive or marketed and sold more effectively than any therapeutics we may develop. Competitive therapeutics may make any therapeutics we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our therapeutic candidates. Such competitors could also recruit our employees, which could negatively impact our level of expertise and our ability to execute our business plan.

The market may not be receptive to our therapeutic candidates based on a novel therapeutic modality, and we may not generate any future revenue from the sale or licensing of therapeutic candidates.

Even if approval is obtained for a therapeutic candidate, we may not generate or sustain revenue from sales of the product due to factors such as whether the product can be sold at a competitive cost and otherwise accepted in the market. The therapeutic candidates that we are developing are based on our SNA technology. Market participants with significant influence over acceptance of new treatments, such as physicians and third-party payors, may not adopt a treatment based on SNA technology, and we may not be able to convince the medical community and third-party payors to accept and use, or to provide favorable reimbursement for any therapeutic candidates developed by us or any current or future collaborators. Market acceptance of our therapeutic candidates will depend on, among other factors:

• the timing of our receipt of any marketing and commercialization approvals;

• the terms of any approvals and the countries in which approvals are obtained;

• the safety and efficacy of our therapeutic candidates;

• the prevalence and severity of any adverse side effects associated with our therapeutic candidates;

• limitations or warnings contained in any labeling approved by the FDA or other regulatory authority;

• relative convenience and ease of administration of our therapeutic candidates;

• the willingness of patients to accept any new methods of administration;

• the success of our physician education programs;

• the availability of adequate government and third-party payor reimbursement;

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• the pricing of our products, particularly as compared to alternative treatments; and

• availability of alternative effective treatments for indications our therapeutic candidates are intended to treat and the relative risks, benefits and costs of those treatments.

With our focus on SNAs, these risks may increase to the extent the space becomes more competitive or less favored in the commercial marketplace. Additional risks apply in relation to any disease indications we may pursue which are classified as rare diseases and allow for orphan drug designation by regulatory agencies in major commercial markets, such as the U.S., Europe and Japan. Because of the small patient population for a rare disease, if pricing is not approved or accepted in the market at an appropriate level for an approved product with orphan drug designation, such therapeutic may not generate enough revenue to offset costs of development, manufacturing, marketing and commercialization despite any benefits received from the orphan drug designation, such as market exclusivity, assistance in clinical trial design or a reduction in user fees or tax credits related to development expense. Market size is also a variable in disease indications not classified as rare. Our estimates regarding potential market size for any indication may be materially different from what we discover to exist at the time we commence commercialization, if any, for a therapeutic, which could result in significant changes in our business plan and have a material adverse effect on our business, financial condition, results of operations and prospects.

If a therapeutic candidate that has orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the therapeutic candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same therapeutic candidate for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval of one of our therapeutic candidates for seven years if a competitor obtains approval of the same therapeutic candidate as defined by the FDA or if our therapeutic candidate is determined to be contained within the competitor’s therapeutic candidate for the same indication or disease.

As in the U.S., we may apply for designation of a therapeutic candidate as an orphan drug for the treatment of a specific indication in the European Union before the application for marketing authorization is made. Sponsors of orphan drugs in the European Union can enjoy economic and marketing benefits, including up to ten years of market exclusivity for the approved indication. During such period, marketing applications for similar medicinal products will not be accepted, unless certain exceptions apply. In the EU, a “similar medicinal product” is a medicinal product containing a similar active substance or substances as contained in a currently authorized orphan medicinal product, and which is intended for the same therapeutic indication.

Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.

Our success largely depends on the continued service of key management and other specialized personnel, including David A. Giljohann, Ph.D., our Chief Executive Officer, David S. Snyder, our Chief Financial Officer, and Matthias G. Schroff, our Chief Operating Officer. The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs and materially harm our business, financial condition, results of operations and prospects. The relationships that our key managers have cultivated within our industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technical personnel because of the highly technical nature of our therapeutic candidates and our technology and the specialized nature of the regulatory approval process. Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any of our management team members or key employees. Our future success will depend in large part on our continued ability to attract and retain highly qualified scientific, technical and management personnel, as well as personnel with expertise in clinical testing, manufacturing, governmental regulation and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities and other organizations.

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

As of March 31, 2020, we had 43 employees.As our development and commercialization plans and strategies develop, and as we further develop as a public company, we expect to need additional managerial, operational, financial and other personnel, including personnel to support our product development and planned future commercialization efforts. Future growth will impose significant added responsibilities on members of management, including:

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

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• managing our internal development efforts effectively, including the clinical, FDA and EMA review processes for our product candidates; and

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

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

If we are not able to effectively expand our organization by hiring new employees, we may not be able to successfully implement the tasks necessary to further develop and commercialize our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

If any of our therapeutic candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distribution capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable to successfully commercialize any such future therapeutics.

We currently have no sales, marketing or distribution capabilities or experience. If any of our therapeutic candidates is approved, we will need to develop internal sales, marketing and distribution capabilities to appropriately commercialize such therapeutics, which would be expensive and time-consuming, or enter into collaborations with third parties to perform these services. If we decide to market our approved therapeutics directly, we will need to commit significant financial and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration and compliance capabilities. If we rely on third parties with such capabilities to market our approved therapeutics or decide to co-promote therapeutics with collaborators, we will need to establish and maintain compliant marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter into such arrangements on acceptable terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the efforts of the third parties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any approved therapeutic. If we are not successful in commercializing any therapeutic approved in the future, either on our own or through third parties, our business, financial condition, results of operations and prospects could be materially and adversely affected.

If we fail to comply with U.S. or foreign regulatory requirements, regulatory authorities could withhold marketing or commercialization approvals, limit or withdraw any marketing or commercialization approvals we may receive and subject us to other penalties that could materially harm our business.

We and our therapeutic candidates, as well as our suppliers, contract manufacturers, distributors, and contract testing laboratories are subject to extensive regulation by governmental authorities in the European Union, the U.S., and other countries, with the regulations differing from country to country.

If we or current or future collaborators, manufacturers or service providers fail to comply with applicable requirements, these regulatory authorities could refuse to issue necessary approvals for marketing and commercialization. Even if we receive marketing and commercialization approval of a therapeutic candidate, we and our third-party service providers will be subject to continuing regulatory requirements, including a broad array of regulations related to establishment registration and product listing, manufacturing processes, risk management measures, quality and pharmacovigilance systems, pre- and post-approval clinical data, labeling, advertising and promotional activities for such therapeutic, record keeping, distribution, and import and export of therapeutics for any therapeutic for which we obtain marketing approval. We are required to submit safety and other post market information and reports and are subject to continuing regulatory review, including in relation to adverse patient experiences with the therapeutic and clinical results that are reported after a therapeutic is made commercially available, both in the U.S. and any foreign jurisdiction in which we seek regulatory approval. The FDA and certain foreign regulatory authorities, such as the EMA, have significant post-market authority, including the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials to evaluate safety risks related to the use of a therapeutic or to require withdrawal of the therapeutic from the market. The FDA also has the authority to require a Risk Evaluation and Mitigation Strategies, or REMS, plan either before or after approval, which may impose further requirements or restrictions on the distribution or use of an approved therapeutic. The EMA now routinely requires risk management plans, or RMPs, as part of the marketing authorization application process, and such plans must be continually modified and updated throughout the lifetime of the product as new information becomes available. In addition, for nationally authorized medicinal products,

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the relevant governmental authority of any European Union member state can request an RMP whenever there is a concern about the risk/benefit balance of the product.

The manufacturer and manufacturing facilities we use to make a future therapeutic, if any, will also be subject to periodic review and inspection by the FDA and other regulatory agencies, including for continued compliance with cGMP requirements. The discovery of any new or previously unknown problems with our third-party manufacturers, manufacturing processes or facilities may result in restrictions on the therapeutic, manufacturer or facility, including withdrawal of the therapeutic from the market. If we rely on third-party manufacturers, we will not have control over compliance with applicable rules and regulations by such manufacturers. Any product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review. If we or our future collaborators, manufacturers or service providers fail to comply with applicable continuing regulatory requirements in the U.S. or foreign jurisdictions in which we seek to market our therapeutics, we or they may be subject to, among other things, fines, warning and untitled letters, clinical holds, delay or refusal by the FDA or foreign regulatory authorities to approve pending applications or supplements to approved applications, suspension, refusal to renew or withdrawal of regulatory approval, recalls, seizures or administrative detention of products, refusal to permit the import or export of therapeutics, operating restrictions, inability to participate in government programs including Medicare and Medicaid, and total or partial suspension of production or distribution, injunction, restitution, disgorgement, debarment, civil and criminal penalties and criminal prosecution.

Price controls imposed in foreign markets may adversely affect our future profitability.

In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control at the national level, and in some cases also at the regional level. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a therapeutic. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic and regulatory developments may further complicate pricing and reimbursement negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or current or future collaborators may be required to conduct a clinical trial or other studies that compare the cost-effectiveness of our SNA therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any therapeutic candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, financial condition, results of operations or prospects could be adversely affected.

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

Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing therapeutics, such claims could result in an investigation by certain regulatory authorities, such as the FDA or foreign regulatory authorities, of the safety and effectiveness of our therapeutics, our manufacturing processes and facilities or our marketing programs and potentially a recall of our therapeutics or more serious enforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our therapeutics, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our stock price. We currently have product liability insurance that we believe is appropriate for our stage of development and may need to obtain higher levels of product liability insurance prior to marketing any of our therapeutic candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims that could have a material adverse effect on our business.

Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements which could have an adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include, but is not limited to, intentional failures to comply with FDA, the Centers for Medicare & Medicaid Services, or CMS, the

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Department of Health and Human Services, or HHS, Office of Inspector General, or OIG, or other agency regulations, applicable laws, regulations, guidance or codes of conduct set by foreign governmental authorities or self-regulatory industry organizations, or provide accurate information to any governmental authorities, such as the FDA, comply with manufacturing standards we may establish, comply with federal and state healthcare fraud and abuse laws and regulations, report financial information or data accurately or disclose unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws, regulations, guidance and codes of conduct intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws, regulations, guidance and codes of conduct may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, including, fines, debarment, or disqualification of those employees from participation in certain government-regulated activities, and serious harm to our reputation. This could include violations of the U.S. federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union Data Protection Directive.

It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, regulations, guidance or codes of conduct. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business, including exclusion from participation in the U.S. federal healthcare programs, the imposition of significant fines or other sanctions.

Compliance with governmental regulations regarding the treatment of animals used in research could increase our operating costs, which would adversely affect the commercialization of our technology.

The Animal Welfare Act, or AWA, is the federal law that covers the treatment of certain animals used in research. Currently, the AWA imposes a wide variety of specific regulations that govern the humane handling, care, treatment and transportation of certain animals by producers and users of research animals, most notably relating to personnel, facilities, sanitation, cage size, and feeding, watering and shipping conditions. Third parties with whom we contract are subject to registration, inspections and reporting requirements under the AWA. Furthermore, some states have their own regulations, including general anti-cruelty legislation, which establish certain standards in handling animals. Comparable rules, regulations, and or obligations exist in many foreign jurisdictions. If we or our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.

Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our therapeutic development programs.

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could cause interruptions of our operations. For instance, the loss of preclinical study or clinical trial data involving our therapeutic candidates could result in delays in our development and regulatory filing efforts and significantly increase our costs. In addition, theft or other exposure of data may interfere with our ability to protect our intellectual property, trade secrets, and other information critical to our operations. We can provide no assurances that certain sensitive and proprietary information relating to one or more of our therapeutic candidates has not been, or will not in the future be, compromised. Although we have invested resources to enhance the security of our computer systems, there can be no assurances we will not experience additional unauthorized intrusions into our computer systems, or those of our CROs and other contractors and consultants, that we will successfully detect future unauthorized intrusions in a timely manner, or that future unauthorized intrusions will not result in material adverse effects on our financial condition, reputation, or business prospects. Payments related to the elimination of ransomware may materially affect our financial condition and results of operations.

Certain data breaches must also be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA, as amended by HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union Data Protection Directive. Financial penalties may also apply in some data breaches where noncompliance with the applicable law is identified.

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To the extent that any disruption or security breach were to result in a loss of, or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the development of our therapeutic candidates could be delayed.

If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.

Our research, development and manufacturing involve the use of hazardous materials and various chemicals. We maintain quantities of various flammable and toxic chemicals in our facilities in Skokie, Illinois that are required for our research, development and manufacturing activities. We are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We believe our procedures for storing, handling and disposing these materials in our Skokie facilities comply with the relevant guidelines of Skokie, the state of Illinois, and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that our safety procedures for handling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury from these materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject to numerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-borne pathogens and the handling of animals and biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological or hazardous materials. Additional federal, state and local laws and regulations affecting our operations may be adopted in the future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.

Our information technology systems could face serious disruptions that could adversely affect our business.

Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines and connection to the Internet, face the risk of systemic failure that could disrupt our operations. A significant disruption in the availability of our information technology and other internal infrastructure systems could cause interruptions and delays in our research and development work.

Increasing scrutiny and changing expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.

Companies are facing increasing scrutiny from customers, regulators, investors, and other stakeholders related to their environmental, social and governance practices. Investor advocacy groups, investment funds and influential investors are also increasingly focused on these practices, especially as they relate to the environment, health and safety, supply chain management, diversity and human rights. Failure to adapt to or comply with regulatory requirements or investor or stakeholder expectations and standards could negatively impact our reputation and the price of our ordinary shares.

Any of the factors mentioned above, or the perception that we or our suppliers, or contract manufacturers or collaborators have not responded appropriately to the growing concern for such issues, regardless of whether we are legally required to do so, may damage our reputation and have a material adverse effect on our business, financial condition, results of operations cash flows and/or ordinary share price.

Natural disasters or other unexpected events may disrupt our operations, adversely affect our results of operations and financial condition, and may not be covered by insurance.

The occurrence of one or more unexpected events, including fires, tornadoes, tsunamis, hurricanes, earthquakes, floods, and other forms of severe hazards in the United States or in other countries in which we or our suppliers or manufacturers operate or are located could adversely affect our operations and financial performance. These types of unexpected events could result in physical damage to and complete or partial closure of one or more of the manufacturing facilities operated by our contract manufacturers, or the temporary or long-term disruption in the supply of products, and/or disruption of our ability to deliver products to customers. Further, the long-term effects of climate change on general economic conditions and the pharmaceutical manufacturing and distribution industry in particular are unclear, and changes in the supply, demand or available sources of energy and the regulatory and other costs associated with energy production and delivery may affect the availability or cost of goods and services, including natural resources, necessary to

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run our businesses. Existing insurance arrangements may not provide protection for the costs that may arise from such events, particularly if such events are catastrophic in nature or occur in combination. Any long-term disruption in our ability to service our customers from one or more distribution centers or outsourcing facilities could have a material adverse effect on our operations, our business, results of operations and stock price.

Our current operations are concentrated in one location and any events affecting this location may have material adverse consequences.

Our current operations are located in our facilities situated in Skokie, Illinois. Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, telecommunication failure or other natural or man-made accidents or incidents that result in us being unable to fully utilize the facilities, may have a material adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the development of our therapeutic candidates or interruption of our business operations. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages and losses. If our facilities are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed. Any business interruption may have a material adverse effect on our business, financial position, results of operations and prospects.

The investment of our cash, cash equivalents and fixed income marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.

As of March 31, 2020, we had $25.8 million in cash, cash equivalents, and restricted cash and $74.2 million in short-term investments. We historically have invested excess cash in certificates of deposit or money market mutual funds that invest in securities issued or guaranteed by the U.S. government or U.S. government agencies, floating rate and variable rate demand notes of U.S. and foreign corporations, and commercial paper. During the fourth quarter of 2019, we have made direct purchases, and expect to continue to make direct purchases of, U.S. government or U.S. government agency securities, floating rate and variable rate demand notes of U.S. and foreign corporations, and commercial paper. These investments are subject to general credit, liquidity, market and interest rate risks, including potential future impacts similar to the impact of U.S. sub-prime mortgage defaults that have affected various sectors of the financial markets and caused credit and liquidity issues. We may realize losses in the fair value of these investments, an inability to access cash in these investments for a potentially meaningful period, or a complete loss of these investments, which would have a negative effect on our financial statements.

In addition, should our investments cease paying or reduce the amount of interest paid to us, our interest income would suffer. The market risks associated with our investment portfolio may have an adverse effect on our results of operations, liquidity and financial condition.

If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, the Sarbanes-Oxley Act of 2002 and the rules and regulations of The Nasdaq Capital Market. Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Section 404, we are now required to perform system and process evaluation and testing of our internal control over financial reporting to allow our management to report on the effectiveness of our internal control over financial reporting.However, while we remain an emerging growth company, we will not be required to include an attestation report on internal control over financial reporting issued by our independent registered public accounting firm.

During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. Further, we may in the future discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Moreover, our internal controls over financial reporting will not prevent or detect all errors and all fraud. A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected. Moreover, we are aware that the remote working arrangements implemented in connection with the COVID-19 pandemic potentially present new areas of risk, and we are carefully monitoring any impact to our internal controls and procedures.

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If we are unable to assert that our internal control over financial reporting is effective, investors could lose confidence in the reliability of our financial statements, the market price of our stock could decline and we could be subject to sanctions or investigations by The Nasdaq Capital Market, the SEC or other regulatory authorities.

Risks Related to Intellectual Property

If we are not able to obtain and enforce patent protection for our technology or therapeutic candidates, development and commercialization of our therapeutic candidates may be adversely affected.

Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our therapeutic candidates, methods used to manufacture our therapeutic candidates and methods for treating patients using our therapeutic candidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate without infringing upon the proprietary rights of others. As of March 31, 2020, our patent portfolio consists of over 90 issued patents and allowed patent applications and over 115 pending patent applications. We may not be able to apply for patents on certain aspects of our therapeutic candidates in a timely fashion or at all. Our existing issued and granted patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing therapeutics and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, that any of our issued or granted patents will not later be found to be invalid or unenforceable or that any issued or granted patents will include claims that are sufficiently broad to cover our therapeutic candidates or to provide meaningful protection from our competitors. Moreover, the patent position of pharmaceutical and biotechnology companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and therapeutic candidates are covered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and adversely impact our position in the market.

The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology and pharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietary therapeutics and technology. While we will endeavor to try to protect our therapeutic candidates with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive and sometimes unpredictable.

In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the USPTO, which may have a significant impact on our ability to protect our technology and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act enacted in 2011, involves significant changes in patent legislation. The U.S. Supreme Court has ruled on several patent cases in recent years, some of which cases either narrow the scope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. The 2013 decision by the Supreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence that is identical to a sequence found in nature and unmodified. We currently are not aware of an immediate impact of this decision on our patents or patent applications because we are developing oligonucleotide therapeutics which contain modifications that we believe are not found in nature. However, this decision has yet to be clearly interpreted by courts and by the USPTO. We cannot assure you that the interpretations of this decision or subsequent rulings will not adversely impact our patents or patent applications. 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 decisions by the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that may weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.

Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification or derivation action in court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections against such initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of

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the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether. In addition, there can be no assurance that:

• Others will not or may not be able to make, use or sell compounds that are the same as or similar to our therapeutic candidates but that are not covered by the claims of the patents that we own or license.

• We or our licensors, or any current or future collaborators, are the first to make the inventions covered by each of our issued patents and pending patent applications that we own or license.

• We or our licensors, or any current or future collaborators, are the first to file patent applications covering certain aspects of our inventions.

• Others will not independently develop similar or alternative technologies or duplicate any of our technology without infringing our intellectual property rights.

• A third-party will not challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable and infringed.

• Any issued patents that we own or have licensed will provide us with any competitive advantages, or will not be challenged by third parties.

• We will develop additional proprietary technologies that are patentable.

• The patents of others will not have an adverse effect on our business.

• Our competitors will not conduct research and development activities in countries where we lack enforceable patent rights and then use the information learned from such activities to develop competitive therapeutics for sale in our major commercial markets.

Patent term may be inadequate to protect our competitive position on our future therapeutics for an adequate amount of time.

Given the amount of time required for the development, testing and regulatory review of new therapeutic candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. We expect to seek extensions of patent terms in the U.S. and, if available, in other countries where we have patents covering our product candidates. In the U.S., the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years as compensation for patent term lost during product development and the FDA regulatory review process. However, the patent term extension or restoration cannot extend the remaining term of a patent beyond a total of 14 years from the approval date of the product candidate. Only one patent applicable to an approved product candidate is eligible for the extension and the application for extension must be made prior to expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patent life beyond their current expiration dates. However, the applicable authorities, including the FDA and the USPTO in the U.S., and any equivalent regulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grant extensions to our patents, or may grant more limited extensions than we request. If this occurs, our competitors may be able to take advantage of our investment in development and clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.

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We currently license patent rights from Northwestern University and may in the future license patent rights from third-party owners or licensees. If Northwestern University or such other owners or licensees do not properly or successfully obtain, maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be adversely affected.

We do, and will continue to, rely on intellectual property rights licensed from third parties to protect our technology. We are a party to a number of licenses that give us rights to third-party intellectual property that is necessary or useful for our business. In particular, we have a license from Northwestern University, which provides us the exclusive worldwide right under certain patents and patent applications owned by Northwestern University to exploit therapeutics and processes using nanoparticles, nanotechnology, microtechnology and nanomaterial-based constructs as therapeutics or accompanying therapeutics as a means of administration. We may also license additional third-party intellectual property in the future. Our success will depend in part on the ability of our licensors to obtain, maintain and enforce patent protection for our licensed intellectual property, and in particular, for those patents to which we have secured exclusive rights. Our licensors may not successfully prosecute the patent applications licensed to us. Even if patents issue or are granted, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies that are infringing these patents, or may pursue litigation less aggressively than we would. Further, we may not obtain exclusive rights, which would allow for third parties to develop competing therapeutics. Without protection for, or exclusive rights to, the intellectual property we license, other companies might be able to offer substantially identical therapeutics for sale, which could adversely affect our competitive business position and harm our business prospects. In addition, the U.S. government has certain rights to the inventions covered by the patent rights licensed to us by third parties and Northwestern University, as an academic research and medical center, has reserved the right to practice the patent rights it has licensed to us (i) for research, teaching and/or other educationally related purposes (including the right to distribute materials for such purposes) and (ii) for use in the field of diagnostics (including theradiagnostics) and in any field other than the field of use licensed to us.

Other companies or organizations may challenge our or our licensors’ patent rights or may assert patent rights that prevent us from developing and commercializing our therapeutic candidates.

Oligonucleotide and SNA-based therapeutics are a relatively new scientific field. We have obtained grants and issuances of SNA therapeutic patents and have licensed many of these patents from a third-party on an exclusive basis for therapeutics applications. The issued patents and pending patent applications in the U.S. and in key markets around the world that we own or license claim many different methods, compositions and processes relating to the discovery, development, manufacture and commercialization of SNA therapeutics. Specifically, we own and have licensed a portfolio of patents, patent applications and other intellectual property covering SNA compositions of matter as well as their methods of use.

As the field of SNA therapeutics matures, patent applications are being processed by national patent offices around the world. There is uncertainty about which patents will issue, and, if they do, as to when, to whom, and with what claims. In addition, third parties may attempt to invalidate our intellectual property rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual property rights. Our defense against any attempt by third parties to circumvent or invalidate our intellectual property rights could be costly to us, could require significant time and attention of our management and could have a material adverse effect on our business and our ability to successfully compete.

There are many issued and pending patents that claim aspects of oligonucleotide chemistry and modifications that we may need to apply to our SNA therapeutic candidates. There are also many issued patents that claim targeting genes or portions of genes that may be relevant for SNA therapeutics we wish to develop. Thus, it is possible that one or more organizations will hold patent rights to which we will need a license. If those organizations refuse to grant us a license to such patent rights on reasonable terms, we may not be able to market therapeutics or perform research and development or other activities covered by these patents.

We may be unable to protect our intellectual property rights throughout the world.

Obtaining a valid and enforceable issued or granted patent covering our technology in the U.S. and worldwide can be extremely costly. In jurisdictions where we have not obtained patent protection, competitors may use our technology to develop their own therapeutics and, further, may export otherwise infringing therapeutics to territories where we have patent protection, but where it is more difficult to enforce a patent as compared to the U.S. Competitor therapeutics may compete with our future therapeutics in jurisdictions where we do not have issued or granted patents or where our issued or granted patent claims or other intellectual property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make it difficult to enforce

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patents and such countries may not recognize other types of intellectual property protection, particularly that relating to biotechnology and pharmaceuticals. This could make it difficult for us to prevent the infringement of our patents or marketing of competing therapeutics in violation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.

We generally file a provisional patent application first, also known as a priority filing, at the USPTO. An international application under the Patent Cooperation Treaty, or PCT, is usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in the U.S., European Union, Japan, Australia and Canada and, depending on the individual case, also in any or all of, inter alia, China, India, South Korea, and Mexico. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before grant or after grant by nonpayment of maintenance fees for the resulting patent. Finally, the grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant registration authorities, while granted by others. It is also quite common that depending on the country, various scopes of patent protection may be granted on the same therapeutic candidate or technology.

The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the U.S., and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business and results of operations may be adversely affected.

We or our licensors, or any current or future strategic partners, may become subject to third-party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay or prevent the development and commercialization of our therapeutic candidates, or put our patents and other proprietary rights at risk.

We or our licensors, or any current or future strategic partners, may be subject to third-party claims for infringement or misappropriation of patent or other proprietary rights. We are generally obligated under our license agreements to indemnify and hold harmless our licensors for damages arising from intellectual property infringement by us. If we or our licensors, or any current or future strategic partners, are found to infringe a third-party patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we or our licensors, or any current or future strategic partners, may choose to seek, or be required to seek, a license from a third-party, which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we or any current or future collaborator may be unable to effectively market therapeutic candidates based on our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.

If we were to initiate legal proceedings against a third-party to enforce a patent covering one of our therapeutics or our technology, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty, obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during

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prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our therapeutics or certain aspects of our technology. Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legally infringing our patents or other intellectual property rights.

It is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. applications filed before November 29, 2000 and certain U.S. applications filed after that date that will not be filed outside the U.S. remain confidential until patents issue. Patent applications in the U.S. and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our therapeutics or technology could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our SNA technology, our therapeutics or the use of our therapeutics. Third-party intellectual property right holders may also actively bring infringement claims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigation and may be prevented from or experience substantial delays in marketing our therapeutics. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing any of our therapeutic candidates that are held to be infringing. We might, if possible, also be forced to redesign therapeutic candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to our business.

If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose intellectual property rights that are necessary for developing and protecting our therapeutic candidates or we could lose certain rights to grant sublicenses.

Our current licenses impose, and any future licenses we enter into are likely to impose, various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture and sell therapeutics that are covered by the licensed technology or could enable a competitor to gain access to the licensed technology. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights in such unlicensed intellectual property. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on sales of future therapeutics, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in therapeutics that we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize therapeutics, we may be unable to achieve or maintain profitability.

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

In addition to seeking patent protection for certain aspects of our therapeutic candidates, we also consider trade secrets, including confidential and unpatented know-how important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, some courts in the U.S. and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that

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technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.

Under the terms of the Northwestern University License Agreements, Northwestern University could publish research findings relating to the patent rights licensed to us by Northwestern University, which could have a material adverse effect on our business.

We are also subject both in the U.S. and outside the U.S. to various regulatory schemes regarding requests for the information we provide to regulatory authorities, which may include, in whole or in part, trade secrets or confidential commercial information. While we are likely to be notified in advance of any disclosure of such information and would likely object to such disclosure, there can be no assurance that our challenge to the request would be successful.

We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to pay monetary damages and may lose valuable intellectual property rights or personnel.

Many of our employees were previously employed at universities or pharmaceutical or biotechnology companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key research personnel or their work product could hamper our ability to commercialize, or prevent us from commercializing, our therapeutic candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.

If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be adversely affected.

Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively and our business may be adversely affected.

Third parties may independently develop similar or superior technology.

There can be no assurance that others will not independently develop, or have not already developed, similar or more advanced technologies than our technology; or that others will not design around, or have not already designed around, aspects of our technology and/or our trade secrets developed therefrom. If third parties develop technology similar or superior to our technology, or they successfully design around our current or future technology, our competitive position, business prospects, and results of operations could be materially and adversely affected.

The intellectual property which we have licensed from Northwestern University was discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements, and a preference for U.S. industry. Compliance with such regulations may limit our exclusive rights, subject us to expenditure of resources with respect to reporting requirements, and limit our ability to contract with non-U.S. manufacturers.

We have licensed certain intellectual property from Northwestern University pursuant to the Northwestern University License Agreements. The Northwestern University License Agreements indicate that the rights licensed to us by Northwestern University are subject to the obligations to and the rights of the U.S. government, including those set forth in the Bayh-Dole Act of 1980, or Bayh-Dole Act. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future therapeutics based on the licensed Northwestern University intellectual property. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us to grant exclusive, partially exclusive, or nonexclusive licenses to any of these inventions to a third-party if it determines that: (i) adequate steps have not been taken to commercialize the invention; (ii) government action is necessary to meet public health or safety needs; or (iii) government action is necessary to meet requirements for public use under federal regulations, also referred to as “march-in rights.” While the

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U.S. government has sparingly used, and to the Company’s knowledge never successfully exercised, such march-in rights, any exercise of the march-in rights by the U.S. government could harm our competitive position, business, financial condition, results of operations, and prospects. If the U.S. government exercises such march-in rights, we may receive compensation that is deemed reasonable by the U.S. government in its sole discretion, which may be less than what we might be able to obtain in the open market. Intellectual property generated under a government funded program is also subject to certain reporting requirements, compliance with which may require us to expend substantial resources.

In addition, the U.S. government requires that any therapeutics embodying any invention generated through the use of U.S. government funding be manufactured substantially in the U.S. The manufacturing preference requirement can be waived if the owner of the intellectual property can show that reasonable but unsuccessful efforts have been made to grant licenses on similar terms to potential licensees that would be likely to manufacture substantially in the United States or that under the circumstances domestic manufacture is not commercially feasible. This preference for U.S. manufacturers may limit our ability to contract with non-U.S. therapeutic manufacturers for therapeutics covered by such intellectual property.

Risks Related to Government Regulation

We may be unable to obtain U.S. or foreign regulatory approval and, as a result, unable to commercialize our therapeutic candidates.

Our therapeutic candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing, safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing, sampling, and distribution of therapeutics. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completed in the U.S. and in many foreign jurisdictions before a new therapeutic can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the therapeutic candidates we may develop will obtain the regulatory approvals necessary for us or any current or future collaborators to begin selling them.

We have very limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA as well as foreign regulatory authorities, such as the EMA and European Union national competent authorities. The time required to obtain FDA and foreign regulatory approvals is unpredictable but typically takes many years following the commencement of clinical trials, depending upon the type, complexity and novelty of the therapeutic candidate. The standards that the FDA and its foreign counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, for example, from future legislation or administrative action, or from changes in the policy of the FDA or foreign regulatory authorities during the period of therapeutic development, clinical trials and regulatory review by the FDA or foreign regulatory authorities. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign laws, regulations, guidance or interpretations will be changed, or what the impact of such changes, if any, may be. In addition, unfavorable changes in our industry or the global economy, including as a result of the recent COVID-19 pandemic, could contribute to some of the events listed above and further impact our ability to progress our clinical trials, submit for marketing approval or commercialize our product candidates, if approved, as planned.

Because the therapeutics we are developing may represent a new class of therapeutic, the FDA and its foreign counterparts have not yet established any definitive policies, practices or guidelines in relation to these therapeutics. While we believe the therapeutic candidates that we are currently developing are regulated as new drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, the FDA could decide to regulate them or other therapeutics we may develop as biologics under the Public Health Service Act. The lack of policies, practices or guidelines may hinder or slow review by the FDA or foreign regulatory authorities of any regulatory filings that we may submit. Moreover, the FDA may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delays in the clinical development of our therapeutic candidates.

Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular therapeutic candidate for which we are seeking approval. Furthermore, any regulatory approval to market a therapeutic may be subject to limitations on the approved uses for which we may market the therapeutic or the labeling or other restrictions. Regulatory authorities also may impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the therapeutic. In addition, the FDA has the authority to require a REMS plan as part of a NDA or a Biologics License Application, or BLA, or after

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approval, which may impose further requirements or restrictions on the distribution or use of an approved drug or biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. These limitations and restrictions may limit the size of the market for the therapeutic and affect coverage and reimbursement by third-party payors.

We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketing authorization, pricing and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities outside the U.S. and vice versa.

Certain of our therapeutic candidates may require companion diagnostics in certain indications. Failure to successfully develop, validate and obtain regulatory clearance or approval for such tests could harm our product development strategy or prevent us from realizing the full commercial potential of our therapeutic candidates.

Certain of our therapeutic candidates may require companion diagnostics to identify appropriate patients for those therapeutic candidates in certain indications. Companion diagnostics are subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device and may require separate regulatory authorization prior to commercialization. We may rely on third parties for the design, development, testing and manufacturing of these companion diagnostics, the application for and receipt of any required regulatory authorization, and the commercial supply of these companion diagnostics. If these parties are unable to successfully develop companion diagnostics for these therapeutic candidates, or experience delays in doing so, the development of our therapeutic candidates may be adversely affected and we may not be able to obtain marketing authorization for these therapeutic candidates. Furthermore, our ability to market and sell, as well as the commercial success, of any of our therapeutic candidates that require a companion diagnostic will be tied to, and dependent upon, the receipt of required regulatory authorization and the continued ability of such third parties to make the companion diagnostic commercially available on reasonable terms in the relevant geographies. Any failure to develop, validate, obtain and maintain marketing authorization for a companion diagnostic and supply such companion diagnostic will harm our business, results of operations and financial condition.

If we or current or future collaborators, manufacturers or service providers fail to comply with healthcare laws and regulations, we or they could be subject to enforcement actions, which could affect our ability to develop, market and sell our therapeutics and may harm our reputation.

Although we do not currently have any products on the market, our current and future business operations may subject us to additional healthcare statutory and regulatory requirements and enforcement by the federal, state and foreign governments of the jurisdictions in which we conduct our business. Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any therapeutic candidates for which we obtain marketing approval. Our arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we research, market, sell or distribute our therapeutic candidates for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations, include, but are not limited to, the following:

• the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering or providing remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program, such as Medicare or Medicaid. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand, and prescribers, purchasers and formulary managers, among others, on the other. A person or entity does not need to have actual knowledge pf the statute or specific intent to violate it in order to have committed a violation;

• the U.S. federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. For example, pharmaceutical companies have been prosecuted under the False Claims Act in connection with their alleged off-label promotion of drugs, purportedly concealing price concessions in the pricing information submitted to the government for government price reporting purposes,

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and allegedly providing free product to customers with the expectation that the customers would bill federal health care programs for the product. In addition, the government may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;

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

• federal price reporting laws, which require manufacturers to calculate and report complex pricing metrics to government programs, where such reported prices may be used in the calculation of reimbursement and/or discounts on approved products;

• HIPAA includes a fraud and abuse provision sometimes referred to as the HIPAA All-Payor Fraud Law, which imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program (i.e., not just federal healthcare programs), or knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;

• HIPAA, as amended by the HITECH, and its implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates that perform certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information. HITECH also created new tiers of civil monetary penalties, amended HIPAA to make civil and criminal penalties directly applicable to business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorneys’ fees and costs associated with pursuing federal civil actions;

• the federal Physician Payment Sunshine Act and the implementing regulations, also referred to as “Open Payments,” issued under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or collectively, the ACA, which require that manufacturers of pharmaceutical and biological drugs reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program report to the Department of Health and Human Services all consulting fees, travel reimbursements, research grants, and other payments, transfers of value or gifts made to U.S.-licensed physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and U.S. teaching hospitals with limited exceptions. Effective January 1, 2022, these reporting obligations will extend to include transfers of value made during the previous year to certain non-physician providers such as physician assistants and nurse practitioners; and

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

If we are found to be in violation of any of the laws described above and other applicable state and federal fraud and abuse laws, we may be subject to penalties, including significant civil, criminal and/or administrative penalties, damages, fines, individual imprisonment, disgorgement, possible exclusion from government healthcare reimbursement programs, integrity oversight and reporting obligations to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations.

Ensuring that our future business arrangements with third-parties comply with applicable healthcare laws and regulations could involve substantial costs. If our operations are found to be in violation of any such requirements, we may be subject to penalties, including significant civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although an effective compliance program can mitigate the risk of investigation and prosecution for violations of these

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laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time and resources.

If we or current or future collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market and sell our therapeutics successfully and could harm our reputation and lead to reduced acceptance of our therapeutics by the market. These enforcement actions include, among others:

• adverse regulatory inspection findings;

• warning or untitled letters;

• voluntary product recalls or public notification or medical product safety alerts to healthcare professionals;

• restrictions on, or prohibitions against, marketing our therapeutics;

• restrictions on, or prohibitions against, importation or exportation of our therapeutics;

• suspension of review or refusal to approve pending applications or supplements to approved applications;

• exclusion from participation in government-funded healthcare programs;

• exclusion from eligibility for the award of government contracts for our therapeutics;

• FDA debarment;

• suspension or withdrawal of therapeutic approvals;

• seizures or administrative detention of therapeutics;

• injunctions; and

• civil and criminal penalties and fines.

Any therapeutics we develop may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices or healthcare reform initiatives, thereby harming our business.

The regulations that govern marketing approvals, pricing and reimbursement for new therapeutics vary widely from country to country. Some countries require approval of the sale price of a therapeutic before it can be marketed. In many countries, the pricing review period begins after marketing or therapeutic licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. Although we intend to monitor these regulations, our programs are currently in the early stages of development and we will not be able to assess the impact of price regulations for a number of years. As a result, we might obtain regulatory approval for a therapeutic in a particular country, but then be subject to price regulations that delay our commercial launch of the therapeutic and negatively impact the revenues we are able to generate from the sale of the therapeutic in that country.

Patients who are prescribed therapeutics for the treatment of their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their prescription drugs. There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved therapeutics. Our ability to commercialize any therapeutics successfully also will depend in part on the extent to which coverage and reimbursement for these therapeutics and related treatments will be available from government health administration authorities, private health insurers and other organizations. However, there may be significant delays in obtaining coverage for newly-approved therapeutics. Moreover, eligibility for coverage does not necessarily signify that a therapeutic will be reimbursed in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution costs. Also, interim payments for new therapeutics, if applicable, may be insufficient to cover our costs and may not be made permanent. Thus, even if we succeed in bringing one or more therapeutics to the market, these therapeutics may not be considered cost-effective, and the amount reimbursed for any therapeutics may be insufficient to allow us to sell our therapeutics on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their cost effectiveness or the likely level or method of reimbursement. Increasingly, the third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are seeking greater upfront discounts, additional

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rebates and other concessions to reduce the prices for therapeutics. If the price we are able to charge for any therapeutics we develop, or the reimbursement provided for such therapeutics, is inadequate in light of our development and other costs, our return on investment could be adversely affected.

We currently expect that some therapeutics we develop may need to be administered under the supervision of a physician on an outpatient basis. Under currently applicable U.S. law, certain therapeutics that are not usually self-administered (including injectable therapeutics) may be eligible for coverage under Medicare through Medicare Part B. Medicare Part B is part of original Medicare, the federal health care program that provides health care benefits to the aged and disabled, and covers outpatient services and supplies, including certain pharmaceutical products that are medically necessary to treat a beneficiary’s health condition. Specifically, Medicare Part B coverage may be available for eligible beneficiaries when the following, among other requirements, have been satisfied:

• the product is reasonable and necessary for the diagnosis or treatment of the illness or injury for which the product is administered according to accepted standards of medical practice;

• the product is typically furnished incident to a physician’s services;

• the product has been approved by the FDA.

Under the Medicaid Drug Rebate Statute, a manufacturer must participate in the Medicaid Drug Rebate Program in order to receive payment for its covered outpatient drugs under Medicare Part B (the Medicare program that generally covers physician-administered, outpatient drugs).  42 U.S.C. § 1396r-8(a)(1). In addition, manufacturers who participate in the Medicaid Drug Rebate Program are also required to (1) sign the Pharmaceutical Pricing Agreement and participate in the 340B Drug Pricing Program, and (2) sign the VA Master Agreement for inclusion of the manufacturer’s drugs on the Federal Supply Schedule, or FSS. Id. The Medicaid Drug Rebate Program requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients. Under the 340B Drug Pricing Program, the manufacturer must extend discounts to entities eligible to participate in the program. Average prices for drugs 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 therapeutics from countries where they may be sold at lower prices than in the U.S. Self-administered therapeutics are typically reimbursed under Medicare Part D, and therapeutics that are administered in an inpatient hospital setting are typically reimbursed under Medicare Part A under a bundled payment. It is difficult for us to predict how Medicare coverage and reimbursement policies will be applied to our therapeutics in the future and coverage and reimbursement under different federal healthcare programs are not always consistent. Medicare reimbursement rates may also reflect budgetary constraints placed on the Medicare program.

Commercial third-party payors often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement rates. Our inability to promptly obtain coverage, and adequate reimbursement from both government-funded and private payors for new therapeutics we develop and for which we obtain regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products and our financial condition.

We believe that the efforts of governments and third-party payors to contain or reduce the cost of healthcare, and specifically, therapeutics, and legislative and regulatory proposals to broaden the availability of healthcare will continue to affect the business and financial condition of pharmaceutical and biotechnology companies. A number of legislative and regulatory changes in the healthcare system in the U.S. and other major healthcare markets have been proposed. These developments could, directly or indirectly, affect our ability to sell our therapeutics, if approved, at a favorable price.

For example, in the U.S., in 2010, the U.S. Congress passed the ACA, a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional policy reforms.

Although the future of the ACA is uncertain, provisions of the ACA addressing coverage and reimbursement of pharmaceutical products that may be of importance to our potential therapeutic candidates include the following:

• Increases to pharmaceutical manufacturer rebate liability under the Medicaid Drug Rebate Program due to an increase in the minimum basic Medicaid rebate on most branded prescription drugs and the application of Medicaid rebate liability to drugs used in risk-based Medicaid managed care plans.

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• The expansion of the 340B Drug Pricing Program to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, critical access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospitals.

• Requirements imposed on pharmaceutical companies to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap, commonly referred to as the “Donut Hole.” In February 2018, Congress passed the Bipartisan Budget Act of 2018, which, beginning in 2019, increased the discount to be paid by pharmaceutical companies from 50% to 70% of a brand-name drug’s negotiated price and added biosimilars to the coverage gap discount program.

• Requirements imposed on pharmaceutical companies to pay an annual non-tax-deductible fee to the federal government based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs, and Department of Defense. Since we currently expect our branded pharmaceutical sales to constitute a small portion of the total federal healthcare program pharmaceutical market, we do not currently expect this annual assessment to have a material impact on our financial condition.

• For therapeutic candidates classified as biologics, marketing approval for a follow-on biologic therapeutic may not become effective until 12 years after the date on which the reference innovator biologic therapeutic was first licensed by the FDA, with a possible six-month extension for pediatric therapeutics. After this exclusivity ends, it may be possible for biosimilar manufacturers to enter the market, which is likely to reduce the pricing for such therapeutics and could affect our profitability if our therapeutics are classified as biologics.

Separately, pursuant to the health reform legislation and related initiatives, CMS is working with various healthcare providers to develop, refine, and implement Accountable Care Organizations, or ACOs, and other innovative models of care for Medicare and Medicaid beneficiaries, including the Bundled Payments for Care Improvement Initiative, the Financial Alignment Initiative Demonstration, and other models. The continued development and expansion of ACOs and other innovative models of care will have an uncertain impact on any future reimbursement we may receive for approved therapeutics administered by such organizations.

There remain judicial, administrative, executive, and legislative challenges to certain aspects of the ACA, and we expect there will be additional challenges and amendments to the ACA in the future. Various portions of the ACA are currently undergoing legal and constitutional challenges in the Fifth Circuit Court and the United States Supreme Court; the Trump Administration has issued various Executive Orders which eliminated cost sharing subsidies and various provisions that would impose a fiscal burden on states or a cost, fee, tax, penalty or regulatory burden on individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices; and Congress has introduced several pieces of legislation aimed at significantly revising or repealing the ACA. It is unclear whether the ACA will be overturned, repealed, replaced, or further amended. We cannot predict what affect further changes to the ACA would have on our business.

There has been increasing legislative and enforcement interest in the United States with respect to drug pricing practices. Specifically, there have been several recent U.S. Congressional inquiries and proposed federal and state legislation designed to, among other things, bring more transparency to drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drugs. At the federal level, the Trump administration’s budget proposal for fiscal year 2021 includes a $135 billion allowance to support legislative proposals seeking to reduce drug prices, increase competition, lower out-of-pocket drug costs for patients, and increase patient access to lower-cost generic and biosimilar drugs. On March 10, 2020, the Trump Administration sent “principles” for drug pricing to Congress, calling for legislation that would, among other things, cap Medicare Part D beneficiary out-of-pocket pharmacy expenses, provide an option to cap Medicare Part D beneficiary monthly out-of-pocket expenses, and place limits on pharmaceutical price increases.  Further, the Trump Administration previously released a “Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contained proposals to increase drug manufacturer competition, increase the negotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products, and reduce the out of pocket costs of drug products paid by consumers. The Department of Health and Human Services has solicited feedback on some of these measures and has implemented others under its existing authority. For example, in May 2019, CMS issued a final rule to allow Medicare Advantage Plans the option of using step therapy for Part B drugs beginning January 1, 2020.This final rule codified CMS’s policy change that was effective January 1, 2019.

In addition, individual states have also become increasingly active in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursement constraints,

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discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, to encourage importation from other countries and bulk purchasing.

In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our therapeutic candidates, if approved. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs. The delivery of healthcare in the European Union, including the establishment and operation of health services and the pricing and reimbursement of medicines, is almost exclusively a matter for national, rather than European Union, law and policy. National governments and health service providers have different priorities and approaches to the delivery of health care and the pricing and reimbursement of products in that context. In general, however, the healthcare budgetary constraints in most European Union member states have resulted in restrictions on the pricing and reimbursement of medicines by relevant health service providers. Coupled with ever-increasing European Union and national regulatory burdens on those wishing to develop and market products, this could prevent or delay marketing approval of our therapeutic candidates, restrict or regulate post-approval activities and affect our ability to commercialize our therapeutic candidates, if approved. In markets outside of the United States and European Union, reimbursement and healthcare payment systems vary significantly by country, and many countries have instituted price ceilings on specific products and therapies.

However, we cannot predict the ultimate content, timing or effect of any healthcare reform legislation or the impact of potential legislation on us. If we or any third parties we may engage are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or such third parties are not able to maintain regulatory compliance, our current or any future therapeutic candidates we may develop may lose any regulatory approval that may have been obtained and we may not achieve or sustain profitability.

We face potential liability related to the privacy of health information we obtain from clinical trials sponsored by us.

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

Furthermore, certain health privacy laws, data breach notification laws, consumer protection laws and genetic testing laws may apply directly to our operations and/or those of our collaborators and may impose restrictions on our collection, use and dissemination of individuals’ health information. Patients about whom we or our collaborators obtain health information, as well as the providers who share this information with us, may have statutory or contractual rights that limit our ability to use and disclose the information. We may be required to expend significant capital and other resources to ensure ongoing compliance with applicable privacy and data security laws. Claims that we have violated individuals’ privacy rights or breached our contractual obligations, even if we are not found liable, could be expensive and time- consuming to defend and could result in adverse publicity that could harm our business.

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

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Our ability to obtain services, reimbursement or funding from the federal government may be impacted by possible reductions in federal spending.

U.S. federal government agencies currently face potentially significant spending reductions. The Budget Control Act of 2011, or BCA, established a Joint Select Committee on Deficit Reduction, which was tasked with achieving a reduction in the federal debt level of at least $1.2 trillion. That committee did not draft a proposal by the BCA’s deadline. As a result, automatic cuts, referred to as sequestration, in various federal programs were scheduled to take place. This includes reductions to Medicare payments to providers of 2% per fiscal year, that began in April 2013, and, due to subsequent legislative amendments, will remain in effect through 2030 unless additional Congressional action is taken. The Coronavirus Aid, Relief and Economic Security Act, or CARES Act, which was signed into law in March 2020 and is designed to provide financial support and resources to individuals and businesses affected by the COVID-19 pandemic, suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2020, and extended the sequester by one year, through 2030.

These reductions may also impact the ability of relevant agencies to timely review and approve therapeutic research and development, manufacturing, and marketing activities, which may delay our ability to develop, market, and sell any therapeutics we may develop.

If any of our therapeutic candidates receives marketing approval and we or others later identify undesirable side effects caused by the therapeutic candidate, our ability to market and derive revenue from the therapeutic candidates could be compromised.

In the event that any of our therapeutic candidates receive regulatory approval and we or others identify undesirable side effects, adverse events or other problems caused by one of our therapeutics, any of the following adverse events could occur, which could result in the loss of significant revenue to us and materially and adversely affect our results of operations and business:

• regulatory authorities may withdraw their approval of the therapeutic or seize the therapeutic;

• we may need to recall the therapeutic or change the way the therapeutic is administered to patients;

• additional restrictions may be imposed on the marketing of the particular therapeutic or the manufacturing processes for the therapeutic or any component thereof;

• we may be subject to fines, restitution or disgorgement of profits or revenues, injunctions, or the imposition of civil penalties or criminal prosecution;

• regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;

• regulatory authorities may require us to implement a REMS, or to conduct post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the therapeutic;

• we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;

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

• the therapeutic may become less competitive; and

• our reputation may suffer.

Risks Related to Ownership of Our Common Stock

An active trading market for our common stock may not develop or be sustainable. If an active trading market does not develop, investors may not be able to resell their shares at or above the price for which they were purchased and our ability to raise capital in the future may be impaired.

Our common stock began trading on the Nasdaq Capital Market on July 31, 2019. Although our common stock is listed on the Nasdaq Capital Market, an active trading market for our shares may never develop or, if developed, be maintained. If an active market for our common stock does not develop or is not maintained, it may be difficult for investors to sell shares without depressing the market price for the shares or at all. An inactive trading market may also

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impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

The market price of our common stock has been, and is likely to continue to be, highly volatile, and you may not be able to resell your shares at or above the price you paid for them.

Since July 31, 2019, our stock price has been volatile and it is likely that the trading price of our common stock will continue to be volatile. As a result of this volatility, investors may not be able to sell their common stock at or above the price paid for the shares. The market price for our common stock may be influenced by a variety of factors, including the other risks described in this section titled “Risk Factors” and the following:

• the success of competitive therapeutics or technologies;

• results of our preclinical studies and clinical trials of our therapeutic candidates, or those of our competitors, or any current or future collaborators;

• regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our therapeutics;

• introductions and announcements of new therapeutics by us, our future commercialization partners, or our competitors, and the timing of these introductions or announcements;

• actions taken by regulatory agencies with respect to our therapeutics, clinical studies, manufacturing process or sales and marketing terms;

• actual or anticipated variations in our financial results or those of companies that are perceived to be similar to us;

• the success of our efforts to acquire or in-license additional technologies, therapeutics or therapeutic candidates;

• developments concerning any current or future collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners;

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

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

• our ability or inability to raise additional capital and the terms on which we raise it;

• the recruitment or departure of key personnel;

• changes in the structure of healthcare payment systems;

• market conditions in the pharmaceutical and biotechnology sectors;

• actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally;

• our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market;

• fluctuations in the valuation of companies perceived by investors to be comparable to us;

• announcement and expectation of additional financing efforts;

• speculation in the press or investment community;

• trading volume of our common stock and overall fluctuations in U.S. equity markets, including as a result of the recent COVID-19 pandemic;

• sales of our common stock by us or our stockholders;

• the concentrated ownership of our common stock;

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• changes in accounting principles;

• terrorist acts, acts of war or periods of widespread civil unrest;

• natural disasters and other calamities; and

• general economic, industry, political and market conditions, including, but not limited to, the ongoing impact of the COVID-19 pandemic.

In addition, the stock markets in general, and the markets for pharmaceutical and biotechnology stocks in particular, have experienced extreme volatility that has been often unrelated to the operating performance of the issuer. These broad market and industry factors, such as those related to recent COVID-19 pandemic, may seriously harm the market price of our common stock, regardless of our operating performance.

Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to relinquish proprietary rights.

Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, grants and license and development agreements in connection with any collaborations. We do not have any committed external source of funds. To the extent that we raise additional capital through the issuance of shares or other securities convertible into shares, our stockholders will be diluted. Future issuances of our common stock or other equity securities, or the perception that such sales may occur, could adversely affect the prevailing market price of our common stock and impair our ability to raise capital through future offerings of equity or equity-linked securities. For example, on December 23, 2019, we completed the sale of 10,000,000 shares of our common stock in the December 2019 Offering and on August 2, 2019 we completed the sale of 31,625,000 shares of our common stock in the August 2019 Offering. The issuance of shares in both the December 2019 Offering and August 2019 Offering were pursuant to a shelf registration statement on Form S-3 that was declared effective by the SEC on July 24, 2019. The shelf registration statement allows us to sell from time-to-time up to $125.0 million of common stock, preferred stock, debt securities, warrants, or units comprised of any combination of these securities, for our own account in one or more offerings; the remaining amount available under this shelf registration after the December 2019 Offering (inclusive of the exercise of the underwriters’ option in January 2020 to purchase additional shares at the public offering price in connection with the December 2019 Offering) is approximately $31.3 million. The issuance of the shares pursuant to the December 2019 Offering and the August 2019 Offering and/or the resale of a substantial number of shares of our common stock in the public market could adversely affect the market price for our common stock and make it more difficult for you to sell shares of our common stock at times and prices that you feel are appropriate. Adverse market and price pressures that may result from the December 2019 Offering or the August 2019 Offering or an offering pursuant to the shelf registration statement may continue for an extended period of time and continued negative pressure on the market price of our common stock could have a material adverse effect on our ability to raise additional equity capital.

Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. Any debt financing that we enter into may involve covenants that restrict our operations. These restrictive covenants may include limitations on additional borrowing and specific restrictions on the use of our assets as well as prohibitions on our ability to create liens, pay dividends, redeem our stock or make investments. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.

We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company” as defined in the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including (1) not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, (2) reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and (3) exemptions from the

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requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. In addition, as an emerging growth company, we are only required to provide two years of audited financial statements and two years of selected financial data. We could be an emerging growth company for up to five years, although circumstances could cause us to lose that status earlier, including if the market value of our common stock held by non-affiliates exceeds $700.0 million as of any June 30 before that time or if we have total annual gross revenue of $1.07 billion or more during any fiscal year before that time, in which cases we would no longer be an emerging growth company as of the following December 31, or if we issue more than $1.0 billion in non-convertible debt during any three-year period before that time, in which case we would no longer be an emerging growth company immediately. Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our share price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

FINRA sales practice requirements may limit a stockholder’s ability to buy and sell our stock.

The Financial Industry Regulatory Authority, or FINRA, has adopted rules requiring that, in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is suitable for that customer. Prior to recommending speculative or low-priced securities to their non-institutional customers, broker-dealers must make reasonable efforts to obtain information about the customer’s financial status, tax status, investment objectives and other information. Under interpretations of these rules, FINRA has indicated its belief that there is a high probability that speculative or low-priced securities will not be suitable for at least some customers. If these FINRA requirements are applicable to us or our securities, they may make it more difficult for broker-dealers to recommend that at least some of their customers buy our common stock, which may limit the ability of our stockholders to buy and sell our common stock and could have an adverse effect on the market for and price of our common stock.

If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Our research coverage by securities and industry analysts is currently limited. In addition, because we did not become a reporting company by conducting an underwritten initial public offering of our common stock, security analysts of brokerage firms may not provide wider coverage of our Company. In addition, investment banks may be less likely to agree to underwrite secondary offerings on our behalf than they might if we became a public reporting company by means of an underwritten initial public offering, because they may be less familiar with our Company as a result of more limited coverage by analysts and the media, and because we became public at an early stage in our development. The failure to receive wider research coverage or support in the market for our shares will have an adverse effect on our ability to develop a liquid market for our common stock and the trading price for our stock would be negatively impacted.

In the event we obtain wider securities or industry analyst coverage, 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 target studies 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.

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.

Based on the beneficial ownership of our common stock as of March 31, 2020, our executive officers and directors, together with holders of five percent or more of our outstanding common stock and their respective affiliates, will beneficially own approximately 45% of our outstanding common stock. As a result, these stockholders, if acting together,

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will continue to have significant influence over the outcome of corporate actions requiring stockholder approval, including the election of directors, any merger, consolidation or sale of all or substantially all of our assets and any other significant corporate transaction. The interests of these stockholders may not be the same as or may even conflict with your interests. For example, these stockholders could delay or prevent a change of control of our Company, even if such a change of control would benefit our other stockholders, which could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might affect the prevailing market price of our common stock. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.

Anti-takeover provisions in our charter documents and under the General Corporation Law of the State of Delaware could make an acquisition of us more difficult and may prevent attempts by our stockholders to replace or remove our management.

Provisions in our amended and restated certificate of incorporation and our bylaws may delay or prevent an acquisition of us or a change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of our stockholders, and the ability of the Board to issue preferred stock without stockholder approval. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or DGCL, which prohibits stockholders owning in excess of 15% of the outstanding combined organization voting stock from merging or combining with the combined organization. Although we believe these provisions collectively will provide for an opportunity to receive higher bids by requiring potential acquirers to negotiate with our Board, they would apply even if the offer may be considered beneficial by some stockholders. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove then-current management by making it more difficult for stockholders to replace members of the Board, which is responsible for appointing the members of management.

Anti-takeover provisions in our charter documents could discourage, delay or prevent a change in control of us and may affect the trading price of our common stock.

Our corporate documents and the DGCL contain provisions that may enable our Board to resist a change in control of us even if a change in control were to be considered favorable by our stockholders. These provisions:

• stagger the terms of our Board and require 66 and 2/3% stockholder voting to remove directors, who may only be removed for cause;

• authorize our Board to issue “blank check” preferred stock and to determine the rights and preferences of those shares, which may be senior to our common stock, without prior stockholder approval;

• establish advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholders’ meetings;

• prohibit our stockholders from calling a special meeting and prohibit stockholders from acting by written consent;

• require 66 and 2/3% stockholder voting to effect certain amendments to our certificate of incorporation and bylaws; and

• prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates.

These provisions could discourage, delay or prevent a transaction involving a change in control of us. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions our stockholders desire.

Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole source of gain.

We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth and development of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders,

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which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.

Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of our common stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate of incorporation. This choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, or the Tax Act, enacted many significant changes to the U.S. tax laws. Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation. For example, the CARES Act modified certain provisions of the Tax Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.

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

We have incurred substantial losses during our history and do not expect to become profitable in the near future and we may never achieve profitability. Our net operating loss, or NOL, carryforwards generated in tax years ending on or prior to December 31, 2017, are only permitted to be carried forward for 20 years under applicable U.S. tax law.Under the Tax Act, as modified by the CARES Act, our federal NOLs generated in tax years beginning after December 31, 2017, may be carried forward indefinitely, but the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Act, or the CARES Act. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards, and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We have experienced ownership changes in the past. In addition, we may experience ownership changes in the future as a result of subsequent shifts in our stock ownership, some of which are outside of our control. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to us. In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, which could accelerate or permanently increase state taxes owed.

82

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

Item 6. Exhibits.

		Incorporated by Reference
Exhibit No.	Exhibit Description	Form	Exhibit No.	Filing Date	File No.
3.1	Certificate of Amendment to Certificate of Incorporation, filed with the Secretary of State of the State of Delaware on September 26, 2017.	8-K	3.2	10/02/17	000-55764
3.2	Form of Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on November 15, 2017.	8-K	3.3	10/02/17	000-55764
3.3	Amended and Restated Bylaws, as currently in effect.	8-K	3.4	10/02/17	000-55764
10.1*	Lease Agreement dated as of February 28, 2020 by and between 2430 N. Halsted, LLC and Exicure, Inc.
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
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
32.1**	Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

83

101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB*	XBRL Taxonomy Extension Label Linkbase Document
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** 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 Exicure, 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 such 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.

Date: May 14, 2020

EXICURE, INC.
By:	/s/ David S. Snyder
	David S. Snyder
	Chief Financial Officer
	(Principal Financial Officer and Principal Accounting Officer)

85

EX-10.1

Exhibit 10.1

LEASE

Between

2430 N. HALSTED, LLC, a Delaware limited liability company

as Landlord

and

EXICURE, INC., a Delaware corporation

as Tenant

For certain premises at 2430 N. Halsted Street, Chicago, Illinois

TABLE OF CONTENTS

ARTICLE 1 Premises and Term	1
ARTICLE 2 Base Rent	1
ARTICLE 3 Additional Rent	3
ARTICLE 4 Landlord's Core & Shell Work; Delivery and Condition of Premises	12
ARTICLE 5 Use; Compliance with Laws and Rules	14
ARTICLE 6 Services and Utilities	15
ARTICLE 7 Alterations and Liens	21
ARTICLE 8 Maintenance and Repairs	24
ARTICLE 9 Casualty Damage	25
ARTICLE 10 Insurance, Subrogation, and Waiver of Claims	27
ARTICLE 11 Condemnation	30
ARTICLE 12 Return of Possession and Decommissioning	32
ARTICLE 13 Holding Over	33
ARTICLE 14 No Waiver	33
ARTICLE 15 Attorneys’ Fees and Jury Trial	34
ARTICLE 16 Rent Taxes and Other Taxes	34
ARTICLE 17 Entry by Landlord	34
ARTICLE 18 Subordination and Attornment	35
ARTICLE 19 Estoppel Certificate	36
ARTICLE 20 Assignment and Subletting	36
ARTICLE 21 Certain Rights Reserved By Landlord	39
ARTICLE 22 Landlord’s Remedies	41
ARTICLE 23 Landlord Event of Default	45
ARTICLE 24 Conveyance by Landlord; Liability of Landlord and Tenant	46
ARTICLE 25 Waiver; Indemnification	47
ARTICLE 26 Security Deposit	48
ARTICLE 27 Notices	50
ARTICLE 28 Real Estate Brokers	51
ARTICLE 29 Covenant of Quiet Enjoyment	51
ARTICLE 30 Hazardous Materials	52
ARTICLE 31 Miscellaneous	54
ARTICLE 32 Renewal Option	59
ARTICLE 33 Right of First Refusal	61
ARTICLE 34 Tenant Incentives	65
ARTICLE 35 Temporary Storage	65
ARTICLE 36 Side Letter	65

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EXHIBITS

EXHIBIT ALegal Description of Land

EXHIBIT BFloor Plan of Premises

EXHIBIT CMinimum Cleaning Specifications

EXHIBIT DForm of Commencement Date Certificate

EXHIBIT E Base Rent Schedule

EXHIBIT FCore & Shell Work

EXHIBIT G Work Letter

EXHIBIT H Rules and Regulations

EXHIBIT I Permitted Superior Rights

EXHIBIT J Form of Subordination, Non-Disturbance and Attornment Agreement

EXHIBIT K Form of Letter of Credit

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LEASE

THIS LEASE made as of the 28th day of February, 2020 (“Execution Date”) between 2430 N. HALSTED, LLC, a Delaware limited liability company (“Landlord”) and EXICURE, INC., a Delaware corporation (“Tenant”).

WITNESSETH:

ARTICLE 1Premises and Term

A.Premises.

1.Landlord hereby leases to Tenant and Tenant hereby leases from Landlord certain premises in a building with five stories above grade located on the land ("Land") legally described on Exhibit A attached hereto, having an address of 2430 North Halsted Street, Chicago, Illinois (the “Building”). Such premises shall consist of the fourth (4^th) floor of the Building, containing approximately 30,085 square feet of Rentable Area (as hereinafter defined) as shown on the floor plan attached hereto as Exhibit B and made a part hereof (the “Premises”). The Premises include the restroom(s) located on said fourth (4^th) floor. The term "Property," as used herein, shall mean the Land and the Building and any other improvements on the Land, collectively. All portions of the Building and Property that are for the non-exclusive use of the tenants of the Property, such as (i) service corridors, elevators, loading docks, public restrooms, public entranceways, lobbies and stairways, electric and telephone closets and janitorial closets, (other than any of the foregoing exclusively serving the Premises, if any), (ii) pipes, ducts, conduits and wires serving other portions of the Property and (iii) other areas from time to time designated as common areas by Landlord (all to the extent located in the Building or on the Property) are hereinafter referred to as “common areas.”

2.For purposes of this Lease, the term “Rentable Area” shall mean, in respect of any space, the rentable area of such space determined in accordance with the methods of measuring rentable area and usable area as described in the guidelines of The Building Owners and Managers Association (BOMA) International 2017 and the accompanying guidelines applicable to a multi-tenant building, consistently applied (the “Measurement Method”). Landlord represents that the Rentable Area of the Building is 125,109 square feet of Rentable Area using the Measurement Method.

B.Term.    The term ("Term") of this Lease shall commence on the date (the "Commencement Date") that is the Delivery Date (as defined in Section 5 hereof). The Term shall end on the last day of the one hundred twentieth (120^th) full calendar month following the Commencement Date (the “ExpirationDate”), unless sooner terminated or extended pursuant to the terms of this Lease. Promptly after the occurrence of the Commencement Date, Landlord and Tenant shall, upon written request of either party, execute a certificate confirming the actual Commencement Date and all other related dates and other matters then ascertainable under this Lease, including without limitation the Rentable Areas of the Premises and the Building, in the form of Exhibit D attached hereto and made a part hereof.

ARTICLE 2Base Rent

A.Tenant shall pay to Landlord annual fixed rent (“Base Rent”) with respect to the Premises according to the Base Rent schedule attached hereto as Exhibit E and made a part hereof based on the Rentable Area of the Premises, subject to remeasurement of such Rentable Area by Landlord as provided in Section 1(A)(2). Except as otherwise expressly specified herein (including,

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without limitation, Section 2(C) and Section 4(G), Base Rent shall be payable in equal monthly installments, each installment being payable in advance on the first day of each and every calendar month during the Term, except that if Tenant’s obligation to pay Base Rent commences on a day other than the first day of a calendar month, or ends on a day other than the last day of a calendar month, Base Rent for such month shall be prorated by multiplying same by a fraction, the numerator of which is the number of days with respect to which Base Rent is payable during such calendar month and the denominator of which is the total number of days within such calendar month. Subject to the express terms and conditions set forth in Section 1(A)(1) above, if the Rentable Area of the Premises shall change during any calendar month, monthly Base Rent shall be prorated on the basis of the Base Rent payable per square foot of Rentable Area for the portion of such calendar month before and after such change in the Rentable Area. Any amounts paid on account of the Base Rent for a particular month which are in excess of the actual Base Rent payable for such month shall be credited against the monthly installment of Base Rent next due hereunder or, if no further Base Rent is then due hereunder, shall be repaid to Tenant within thirty (30) days thereafter.

B.For purposes of this Lease, the term “Additional Rent” shall mean Tenant’s Pro Rata Share of Taxes, Tenant’s Pro Rata Share of Operating Expenses and any other amounts (other than Base Rent) which Tenant is or becomes obligated to pay Landlord under this Lease. Base Rent and Additional Rent are sometimes hereinafter referred to collectively as “Rent,” and all remedies applicable to the non-payment of Base Rent shall be applicable thereto. Rent shall be paid in good funds by check (including Tenant’s uncertified personal check) or ACH or wire transfer in currency which at the time or times of payment represents legal tender for public and private debts in the United States of America, at such place in the United States of America as Landlord may designate by notice to Tenant, including without limitation any “lock box” or other address established for payment of rent in connection with any financing secured by the Building. Except to the extent otherwise expressly provided in this Lease, Rent shall be paid without any prior demand or notice therefor and without any deduction, set-off or counterclaim, or relief from any valuation or appraisement laws. Any Rent which is not paid when due shall bear interest from the date due until the date paid at the Default Rate (as defined below); and, in addition, Tenant shall pay Landlord a late charge for any Rent payment which is paid more than five (5) business days after its due date equal to three percent (3%) of such payment Notwithstanding the foregoing, no such default interest or late charge shall be due or owing for the first delinquent payment of Base Rent or for the first delinquent payment of Additional Rent so long as such first delinquent amount is fully paid within thirty (30) days after the due date thereof.

C.Notwithstanding anything contained herein to the contrary, provided that an Event of Default by Tenant does not exist on the due date of any such payment, payments of (a) Base Rent on 12,765 square feet of Rentable Area of the Premises shall be abated from and after the Commencement Date through the day immediately preceding the day that is twelve (12) months after the Commencement Date and (b) Tenant’s Pro Rata Share of Taxes and Tenant’s Pro Rata Share of Operating Expenses, each on 12,765 square feet of Rentable Area of the Premises, shall be abated from and after the Commencement Date through the day immediately preceding the day that is twelve (12) months after the Commencement Date (collectively, “Rent Abatements”). If any Rent Abatements are not available to Tenant due to the existence of an Event of Default by Tenant and such Event of Default is subsequently cured and neither this Lease nor Tenant’s right to possession of the Premises has been terminated, then any installments of such abatement which were not available due to such Event of Default shall be reinstated and shall be applied as an abatement against the installments of Base Rent, Tenant’s Pro Rata Share of Taxes and Tenant’s Pro Rata Share of Operating Expenses next due and payable after such cure until fully utilized.

D.The first installment of Base Rent and the estimated monthly amount of Tenant’s Pro Rata Share of Taxes and Tenant’s Pro Rata Share of Operating Expenses in the aggregate amount of Eighty-Seven Thousand Three Hundred Twenty-One and 67/100 Dollars ($87,321.67) be due and

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payable upon Tenant’s execution of this Lease. Such prepaid Rent shall be applied to the first installment(s) of Rent payable under this Lease.

ARTICLE 3Additional Rent

A.Taxes.

1.Commencing on the Commencement Date, Tenant shall pay Landlord in the manner described below an amount equal to Tenant’s Pro Rata Share of Taxes (subject to the abatement set forth in Section 2.C. of this Lease and any other abatement expressly provided hereunder). Taxes shall be calculated on a cash basis (i.e., with respect to the year due and payable, rather than when accrued), reflecting the amount actually due and payable in each calendar year which includes any portion of the Term (subject to prorations in accordance with Section 3(E) hereof), without regard to any different fiscal year used by any government authority and notwithstanding that any of such items may be assessed or imposed in a different calendar year. In the event that any such government authority shall change its method of assessing or imposing Taxes such that more than one year of Taxes is payable in any such calendar year, any such excess Taxes payable during such calendar year shall be equitably adjusted such that Tenant is not liable for the payment during the Term, taken as a whole, of a greater amount of Taxes than it would have paid if such change had not been effectuated. Landlord shall not voluntarily pay more than one (1) year of Taxes in any calendar year unless required by law. If any Taxes can be paid in multiple installments, Landlord shall elect to pay any such Tax in multiple installments unless owners of Comparable Buildings do not customarily do so due to applicable discounts, interest rates or other applicable economic inducements that favor lump-sum payment.

2.For purposes of this Lease, “Taxes” shall mean all federal (if any), state (if any), county or local governmental or municipal real estate taxes, fees, assessments, governmental charges, or other governmental impositions of every kind and nature, whether general, special, ordinary or extraordinary which are assessed, levied, or imposed upon all or any part of the Property and/or the fixtures, machinery, equipment or apparatus located on or affixed to the Property and owned or leased and used by Landlord exclusively in connection with the Property (collectively, the “Taxable Equipment”) and/or the public sidewalks, plazas or streets in front of or adjacent to the Property (provided that all assessments shall be treated as being payable over the longest permitted period, and shall include any interest charged by or payable to the applicable governmental authority solely as a consequence thereof).

3.Notwithstanding the foregoing, there shall be excluded from Taxes: (i) all excess profits, revenue, excise, transfer, gain, transfer gain, foreign ownership or control, mortgage, intangible, franchise, gift, capital stock, inheritance and succession, estate and income taxes, whether state or federal, and whether assessed solely against corporations or solely against other types of ownership entities; (ii) any amounts attributable to fees or assessments for public improvements located outside of the Property imposed upon Landlord in connection with the development or construction of the Building or the Property; (iii) Taxes assessed on any personal property located on the Property other than Taxable Equipment; and (iv) any fines, penalties, costs or interest on account of late payment or non-payment of any Taxes not specifically included in Taxes pursuant to Section 3(A)(4) below. All such items due and payable by Landlord and excluded from Taxes shall be the sole responsibility of Landlord.

4.If and to the extent due to a future change in the method of taxation, the State of Illinois, or any political subdivision of that state or any other governmental authority having jurisdiction over the Property shall, in substitution for, in whole or in part, any tax which would constitute Taxes,

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or any increase in any such tax, (a) impose a new tax on real estate or Taxable Equipment (including, without limitation, any transit tax, water or sewer rent, assessment, charge or fee on real estate or generally and not based on the consumption or actual usage of any service or utility or the number of occupants of the Property), (b) impose a new tax based upon (or newly interpret any existing tax to apply to) the creation of leasehold interests or the receipt of rent including gross receipts or sales taxes applicable to the receipt of rent but only if such taxes are not based on business income or receipts generally and only to the extent rent from tenants in the Building is treated as the only rent and/or other income from the Building received by Landlord, and/or (c) levy against Landlord as an owner of real property any income, excess profit, revenue, excise, franchise or capital stock tax not levied against business owners generally; such new tax, assessment, charge, fee or income, excess profit, rent, revenue, excise, franchise or capital stock tax (computed as if the Property were the only asset or business of Landlord) shall be deemed to be included (to the extent applicable as described above) within the definition of “Taxes” under this Lease, provided that such amounts are (i) customarily passed-through to tenants of Comparable Buildings and (ii) Landlord is, in fact, passing such amounts through to all other tenants in the Property having “net” leases. If any such real estate taxes or assessments are payable in installments without interest, premium or penalty, then Landlord shall include in Taxes for any particular tax year only the installment of such real estate taxes or assessments that the applicable governmental authority requires Landlord to pay (and that Landlord actually pays) during such tax year. Rebates or refunds of amounts previously included in Taxes shall be applied to decrease the Taxes otherwise attributable to the tax year in which such rebate or refund is received by Landlord. With respect to each tax year during the Term, Landlord shall initiate and pursue strategies to protest, reduce, limit any increase in or otherwise minimize Taxes and, if Landlord, in its good faith judgment, deems it cost effective to do so, initiate and pursue in good faith an application or proceeding seeking a reduction in or abatement of Taxes or the assessed valuation of the Building and the Land, in each case using an experienced real estate tax attorney or other tax consultant. Landlord’s actual, reasonable costs and expenses paid to such third parties (including, without limitation, all reasonable fees for consultants and attorneys) paid by Landlord in seeking a reduction or abatement of Taxes or the assessed valuation of the Building and Land shall also be included in Taxes in the calendar year such expenses are paid. Provided no Event of Default is outstanding, Landlord shall pay all Taxes before delinquency.

5.If Taxes attributable to any portion of the Term shall increase after payment thereof by Landlord for any reason, including, without limitation, error or reassessment by applicable governmental or municipal authorities and such increase is not reflected in Tenant’s payments pursuant to the foregoing provisions of this Section, Landlord shall promptly furnish a statement thereof to Tenant and Tenant shall pay Landlord within thirty (30) days after receipt of such statement, Tenant’s Pro Rata Share (as of the date Tenant made the applicable payment) of such increased Taxes. If Landlord receives a refund of any Taxes or receives notification of the approval of a refund of any Taxes, for any calendar year with respect to which Tenant has paid its Pro Rata Share and (i) the calendar year in which Landlord receives such refund or notification is not more than two (2) calendar years after the calendar year in which the Term of this Lease ended and (ii) an Event of Default by Tenant is not then continuing, Landlord shall remit to Tenant its allocable share of such refund within thirty (30) days after Landlord’s receipt thereof of such refund, or, if an Event of Default by Tenant is then continuing, within thirty (30) days after both Landlord’s receipt of such refund and Tenant’s cure of such Event of Default.

B.Operating Expenses.

1.Commencing on the Commencement Date, Tenant shall pay Landlord in the manner described below an amount equal to Tenant’s Pro Rata Share of Operating Expenses (subject to the abatement set forth in Section 2.C. of this Lease and any other abatement expressly provided hereunder).

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2.For purposes of this Lease, “Operating Expenses” shall mean all expenses, costs and amounts (other than Taxes and exclusions therefrom) of every kind and nature incurred by Landlord determined for each calendar year on an accrual basis and in accordance with sound and generally accepted accounting practices for Comparable Buildings in the Chicago real estate market, consistently applied in respect of any calendar year any portion of which occurs during the Term, because of or in connection with the management, repair, maintenance and operation of the Building and the Property (which for purposes of this Section 3(B) shall be deemed to include any sidewalks or similar adjoining public areas which Landlord is obligated to maintain), including without limitation, any amounts paid for (except to the extent excluded below): (a) utilities for the Property, including, but not limited to, electricity, gas, steam, oil or other fuel, water, sewer, lighting, heating, air conditioning, ventilating, and chilled water, including both consumption and capacity charges, but excluding those costs separately billed to specific tenants; (b) permits, licenses and certificates necessary to operate, manage and lease the Property other than those related to the development of the Property or construction of the Building or which are required as a condition to any initial occupancy of the Building; (c) premiums for insurance maintained by Landlord applicable to the Property, not limited to the amount of coverage which Landlord is required to provide under this Lease; (d) supplies, tools, equipment and materials used in the operation, repair, cleaning and maintenance of the Property; (e) accounting, legal, inspection, consulting, concierge and other services for the Building; (f) the rental of equipment not affixed to the Building which is used in providing Building amenities available to Tenant, as well as repair, maintenance or, with respect to the common areas only, janitorial services; (g) fees for management services, provided that the amount of management fees that may be included in Operating Expenses for any applicable year shall not exceed three percent (3%) of the gross rental revenues of the Building for such applicable year; (h) the fair rental value of any space (not exceeding the then-current gross rental rate per square foot under this Lease) reasonably devoted to management or operation of the Building, so long as such rental rate is included in operating expenses under all other "net" leases entered into by Landlord and then in effect for office space in the Building; (i) wages, salaries and other compensation and benefits for all persons employed by Landlord or whose wages are chargeable to Landlord (but only to the extent Landlord pays or reimburses its manager for such wages) directly engaged in the operation, maintenance or security of the Property, including any employer’s Social Security taxes, unemployment taxes or insurance, and any other taxes in respect of such wages, salaries, compensation and benefits; and (j) operation, repair, and maintenance of all systems and equipment and components thereof (including replacement of components), including without limitation, janitorial service to the common areas, alarm and security service, window cleaning, trash removal, elevator maintenance, cleaning of walks, plazas and building walls, removal of ice and snow, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, restrooms and other common or public areas or facilities of the Building, maintenance and non-capital replacement of shrubs, trees, grass, sod and other landscaped items, irrigation systems, drainage facilities, fences, curbs and walkways, and roof repairs (subject to the limitations on capital expenditures and improvements set forth in Section 3.B.5 below).

3.If Landlord has leased less than one hundred percent (100%) of the Rentable Area of the Building for all or a portion of any calendar year, Landlord may determine the amount of Operating Expenses that vary with occupancy of the Building (“Variable Operating Expenses”) that would have been incurred had 100% of the Rentable Area of the Building been leased for such calendar year and the amount so determined shall be deemed to be the amount of such Variable Operating Expenses for such calendar year, provided, however, that in no event shall Landlord be entitled to recover in any calendar year, in total or in the aggregate within any category, more than the total Operating Expenses actually incurred by Landlord during any calendar year. The categories of Operating Expenses that will be considered Variable Operating Expenses shall be limited to those expenses that actually vary based on the levels of occupancy of the Building. Without limitation of the foregoing, the following are generally variable Operating Expenses:

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a)Common area cleaning and janitorial and trash removal expenses and supplies;

b)Contract elevator maintenance services;

c)Security services;

d)Engineer and property management expenses;

e)Management fees; and

f)Utilities, including electricity, water and chilled water consumption and capacity charges, provided that the portion of such utilities which is fixed and does not vary with occupancy shall not be so increased.

4.If with respect to any item, utility or service that would otherwise be includable in Operating Expenses, such item is furnished by Landlord to Tenant (as part of an Operating Expense) and any other tenant of the Building pays directly for such item, utility or service to either Landlord or to the provider or supplier of such item, utility or service (as opposed to paying its proportionate share of such Operating Expense), the amount of such Operating Expense for purposes of this Article 3 shall be deemed increased by the amount that would have been included in Operating Expenses if such tenant were not paying such amount directly, provided that in no event shall Landlord be entitled to recover in any calendar year, in the aggregate, more than the total amount of such Operating Expense actually incurred by Landlord during such calendar year.

5.Notwithstanding the foregoing, Operating Expenses shall not include:

a)Capital improvements or capital expenditures made to the Land or the Building, including, without limitation, all costs of development, renovation and redevelopment of the Building, tenant build-outs, and any other initial improvements on the land regardless of when incurred, except costs of (1) any capital improvements made to the Building after the Commencement Date which improvements actually reduce Operating Expenses, limited to the amount of actual savings realized therefrom and (2) any capital improvement which is required by government regulation enacted after the Commencement Date, the amount of all such costs described in said clauses (1) and (2) to be amortized on a straight-line basis over the asset’s useful life.

b)To the extent such costs constitute capital costs under GAAP and unless otherwise permitted under clause (a) above, the cost of replacement of HVAC, mechanical, security, electrical, plumbing systems, or of any substantial component or part of such systems beyond the scope of routine maintenance and repair; replacement or repair of the foundations and structure elements of the building located on the property outside the scope of routine maintenance and repair.

c)Rent payments and other related costs incurred in leasing air conditioning systems or equipment, elevators or other equipment that under GAAP should be capitalized (subject to the limitations on capital expenditures set forth under Clause (a) above).

d)Any special services rendered to any tenant of the Building, specifically for the benefit of one or more other tenants, that is not rendered to Tenant, including, without limitation, any cleaning or janitorial services performed for any other tenant of the Building or in any space in the Building other than common areas.

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e)Capital expenditures for expansion of the Building or for remodeling or refurbishment of the Building except as permitted under clause (a) above.

f)Interest and amortization of funds borrowed by Landlord, whether secured or unsecured, points, finder’s fees, legal fees, commissions or other expenses incurred in connection with borrowed funds, including without limitation, interest and principal payments or mortgage debt, and loan fees and participation payments.

g)Depreciation of the Building or amortization expense (except for capital expenditures specifically includable in Operating Expenses above).

h)Contributions made by Landlord in any given calendar year to one or more cash “reserve” accounts, which reserves are established by Landlord to cover Operating Expenses anticipated to be incurred during any periods following the applicable calendar year.

i)The cost of repairs, replacements or other work occasioned by fire, windstorm or other casualty, provided that Operating Expenses shall include all amounts paid by Landlord with respect thereto on account of the existence of commercially reasonable deductibles (in keeping with the practices of Comparable Buildings) under Landlord’s property insurance policies required under this Lease, which Tenant acknowledges benefit Tenant by reducing the insurance premiums included in Operating Expenses.

j)The cost of repairs, replacements or other work occasioned by the exercise of the power of eminent domain, condemnation, state action, or other taking.

k)Leasing commissions and other leasing costs.

l)Expenses incurred in procuring or retaining tenants or subtenants for the Building including, but not limited to decorating and improvement costs specific to a tenant space, advertising, tenant allowances, leasing entertainment and promotional expenses, legal fees for preparation of leases, amendments or consents, rent abatements, lease takeover expenses, and space plans.

m)Salaries, wages, benefits or other compensation paid to personnel above the grade of general manager or, in the case of personnel who do not devote substantially all of their work efforts to the Property, that portion of such personnel’s compensation which is not equitably allocated to the time spent working on matters involving the Property.

n)Salaries, wages or other compensation paid to employees, officers or executives of Landlord who are not assigned to the operation, management, maintenance or repairs of the Building.

o)Key man and other life insurance, disability insurance and health, accident and sickness insurance, except only for the premiums for group or other plans providing reasonable benefits to persons of the grade of general manager and below engaged on a substantially full-time or allocated basis in operating and managing the Building, and any other insurance in excess of the insurance required to be maintained by Landlord under this Lease if and to the extent that any such insurance is not customarily maintained by landlords of Comparable Buildings.

p)Any expenses or costs associated with bringing the Building in compliance with current interpretation of any local, State or Federal law or code, ordinance,

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statute or other law, such as The Americans with Disabilities Act (except as expressly provided above with respect to capital expenditures) in effect as of the Commencement Date (provided that this exclusion shall not limit the responsibility of Tenant for the cost of certain compliance of the Premises with The Americans with Disabilities Act to the extent specifically provided for in Section 5(B) below), including penalties or damages incurred due to non-compliance and any costs to convert or upgrade any existing machinery or building equipment to meet any local, State or Federal environmental codes or requirements in effect as of the Commencement Date.

q)Taxes and all costs expressly excluded from the definition of Taxes.

r)Ground rent or other payments under any ground lease.

s)Original construction costs of the Building.

t)The cost of utility installation for tenants, separate metering for tenants and/or tap-in charges for adding tenants, or the cost of any utilities for which Tenant or any other tenant directly contracts with a third party therefor or in respect of which Tenant or any other tenant or other occupant is separately metered or sub-metered and pays Landlord directly.

u)Legal or arbitration fees and disbursements that are paid or incurred in connection with the negotiation or enforcement of, or disputes arising out of, any leases at the Property.

v)Any and all costs arising from the release of Hazardous Materials (as hereinafter defined) in or about the Building or the Property, including, without limitation, hazardous substances in the ground water or soil, not placed in the Building or the Property by or upon the direction of Tenant, and any costs that Landlord incurs in abating lead-based paint or asbestos-containing materials.

w)All expenses directly resulting from the gross negligence or willful misconduct of Landlord or any affiliate of Landlord or any of their respective agents, servants or other employees or damages or other costs for or in connection with bodily injury or personal injury resulting from any tortuous conduct of Landlord or its agents, including without limitation, the amount of any judgments rendered against Landlord in excess of the amount of any applicable liability policies.

x) Dues to professional and lobbying associations or trade associations (other than BOMA or any similar organization) and contributions to political or charitable organizations.

y)Costs incurred in connection with the acquisition or sale of air rights, easements or similar interests in real property.

z)Landlord’s general corporate overhead and general and administrative expenses, including costs that Landlord incurs in organizing or maintaining in good standing the entity that constitutes Landlord, or in authorizing Landlord to do business in the jurisdiction where the Building is located, or administration expenses, deed recordation expenses, legal and accounting fees (other than with respect to Building operations). For the avoidance of doubt, audit costs and the costs of preparing financial statements of Landlord (as opposed to records and statements for the Building) shall be excluded from Operating Expenses.

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aa)Any expense for which Landlord is compensated through proceeds of insurance or which would have been compensated had Landlord maintained the insurance required hereunder, or through condemnation proceeds, claims under warranties, guaranties, tenants or other occupants in the Building making payments directly to Landlord or Landlord’s agents for services in the Building or otherwise.

bb)The cost of any judgment, settlement, payment or arbitration award arising from claims, disputes or potential disputes in connection with potential or actual claims, litigation or arbitration pertaining to Landlord’s contractual breach, negligence, willful misconduct, or other fault, and all expenses, including attorneys’ fees, incurred in connection therewith.

cc)Any fee, expenditure, overhead or profit increment paid or payable to Landlord’s affiliated entities (or former affiliated entities) above that which would be paid to unaffiliated third parties for comparable goods or services, provided that the property management fee paid to an affiliated entity shall be subject to the 3% of gross revenues cap set forth above.

dd)Costs associated with Landlord’s relocation, or attempted relocation, of any tenant in the Building.

ee)Any Operating Expenses to the extent such expenses are to be reimbursed to Landlord by virtue of warranties or guaranties from contractors or suppliers (whether or not actually received).

ff)Expenses that Landlord incurs in buying or selling the Property.

gg)Costs that Landlord incurs in performing, or correcting defects in the Core & Shell Work or the Initial Tenant Work.

hh)Amounts payable by Landlord for withdrawal liability or underfunded pension liability to a multi-employer pension plan (under Title IV of the Employee Retirement Income Security Act of 1974, as amended).

ii)Interest, penalties and late charges that in either case are paid or incurred as a result of late payments made by Landlord or by reason of Landlord’s failure to comply with Lease requirements or any contracts to which Landlord is a party.

jj)Costs incurred by Landlord which result from a breach by Landlord of this Lease or any other lease at the Building.

kk)Costs arising from the negligence or fault of other tenants or occupants at the Property to the extent that Landlord has actually recovered all or a portion thereof from a third party.

ll)Costs that Landlord incurs to correct a representation made by Landlord in this Lease or any fines or penalties that are assessed against Landlord by a governmental authority by virtue of violations at the Building of applicable requirements.

mm)The cost of providing after hours HVAC to portions of the Building (except that Landlord shall have the right to include in Operating Expenses the cost of providing

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after hours HVAC that Landlord ordinarily supplies to the common areas of the Building or the entire Building (as opposed to only portions thereof).

nn)The cost of objects of art that Landlord installs in the Building, provided that nothing contained in this clause precludes Landlord from including in Operating Expenses the reasonable cost of maintaining, insuring and repairing objects of art that Landlord installs in the common areas of the Building.

oo)The cost of any “tenant relations” parties, events or promotions not consented to by an authorized representative of Tenant in writing, except that Landlord may include in Operating Expenses the cost of customary events that are directed toward the office tenants of the Building and not others who are not tenants in the Building and that are otherwise consistent with the events that are held in Comparable Buildings.

oo)    Any costs that are duplicative of any other cost that is included in Operating Expenses.

Operating Expenses for the Building are to be “net” only and for that purpose shall be deemed reduced by the amounts of any insurance reimbursement or recovery, other reimbursement, recoupment, payment discount, credit, reduction, allowance or the like received by or credited to Landlord.

C.Tenant’s Pro Rata Share. For purposes of this Lease, “Tenant’s Pro Rata Share” for any calendar year shall mean the percentage determined by dividing the Rentable Area of the Premises by an amount equal to the Rentable Area of the Building. Accordingly, Tenant’s Pro Rata Share is 24.047% (30,085 rsf / 125,109 rsf).

D.Manner of Payment of Taxes and Operating Expenses.

1.On or before the Commencement Date and annually on or before January 1 of each calendar year during the Term or as soon thereafter as is practicable, Landlord shall deliver to Tenant a notice setting forth Landlord’s good faith estimate of Taxes and Operating Expenses for the applicable full or partial calendar year (“Landlord’s Estimate”). Commencing on the Commencement Date and continuing thereafter on the first day of each month throughout the Term, Tenant shall pay one twelfth (1/12th) of Tenant’s Pro Rata Share of such estimated amounts of Taxes and Operating Expenses taking into account the abatements under Section 2.C. and any other applicable abatements in this Lease. Landlord’s Estimate may be adjusted in good faith from time to time by Landlord by written notice to Tenant not more than twice within a calendar year. Any such adjustments of Landlord’s Estimate within a calendar year shall be based on Landlord’s reasonable expectations. Any revision to any Landlord’s Estimate shall become effective commencing on the first day of the calendar month that is at least thirty (30) days after Tenant’s receipt of the revised Landlord’s Estimate. If Landlord fails to timely deliver Landlord’s Estimate, Tenant shall pay one-twelfth (1/12th) of the actual Tenant’s Pro Rata Share of Taxes and Operating Expenses paid for the previous calendar year or the monthly installments of the most recently available Landlord’s Estimate. Commencing on the first day of the calendar month following thirty (30) days after Tenant’s receipt of Landlord’s Estimate for the current calendar year, the monthly payment on account of estimated Taxes and Operating Expenses shall be increased or decreased (i.e., reconciled) to reflect the estimate set forth therein.

2.Within one hundred fifty (150) days after the end of each calendar year containing a portion of the Term, or as soon thereafter as practicable (but in no event later than July 1 of any calendar year), Landlord shall send Tenant a statement setting forth the actual Operating Expenses and Taxes for such calendar year (“Landlord’s Statement”). Landlord’s Statement shall

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include: (a) an itemized statement of the actual Operating Expenses and Taxes (setting forth with a reasonable level of detail all Operating Expenses and Taxes); (b) copies of all relevant Tax bills; (c) in the case of the first and the last such statement, a calculation showing the portion of Operating Expenses and Taxes properly allocable under Section 3(E) hereof to the portion of the applicable calendar year occurring during the Term; and (d) the calculations of any overpayment or underpayment of such amounts by Tenant.

3.If the aggregate amount paid by Tenant pursuant to Landlord’s Estimate with respect to any calendar year is less than the actual amount due from Tenant set forth in Landlord’s Statement for such calendar year, Tenant shall pay to Landlord Tenant’s Pro Rata Share of the amount of such underpayment within thirty (30) days after receipt of the Landlord’s Statement showing such underpayment and instructing Tenant to pay the same.

4.If the total amount paid by Tenant pursuant to Landlord’s Estimate with respect to any calendar year is more than the actual amount due from Tenant set forth in Landlord’s Statement for such calendar year, Landlord shall credit the amount of such overpayment by Tenant against the next installment(s) of Base Rent and Additional Rent until the credit is fully exhausted, provided that if no further installments of Base Rent or Additional Rent shall be due, Landlord shall refund to Tenant the amount of such overpayment at the same time that Landlord delivers Landlord’s Statement to Tenant. The provisions of this Section shall survive the expiration or earlier termination of this Lease.

5.If the Term shall have expired or been terminated, the obligation of Tenant to pay Tenant’s Pro Rata Share of Taxes and Operating Expenses for the final calendar year through the date on which this Lease expired or was terminated, and Landlord’s obligation to reimburse Tenant for any overpayment on account thereof, shall each survive for a two (2) year period following such expiration or termination.

6.In no event shall a decrease in the Taxes or Operating Expenses decrease the monthly Base Rent payable hereunder (except to the extent a credit against Base Rent for overpayment by Tenant is provided for in Section 3(D)(4) above).

E.Proration. If Tenant’s obligation to pay Tenant’s Pro Rata Share of Taxes or Operating Expenses commences on any date other than January 1 or ends on any date other than December 31, the amount of Taxes and Operating Expenses for such first or final calendar year shall be prorated to reflect the portion of such years after the Commencement Date, and before the Expiration Date or earlier date that this Lease may be terminated, as the case may be. Such proration shall be made by multiplying the Taxes or Operating Expenses, as applicable, in respect of any such calendar year by a fraction, the numerator of which shall be the number of days in such calendar year for which Tenant is required to pay Tenant’s Pro Rata Share of Taxes or Operating Expenses, as applicable, and the denominator of which shall be 365.

F.Audit Rights.

1.    Each Landlord’s Statement shall be subject to Tenant’s right to audit such Landlord’s Statement using Tenant’s own employees or any other reputable firm chosen by Tenant. Tenant shall not retain any party to audit Landlord’s Statement on a contingent fee basis. Landlord and Tenant shall attempt to reconcile any disputes over the contents of any Landlord’s Statement during the first ninety (90) days after delivery of such Landlord’s Statement. If Tenant notifies Landlord within such ninety (90) day period that Tenant desires to audit those books and records of Landlord relevant to the Operating Expenses and Taxes covered by such Landlord’s Statement, then Tenant shall have an additional period of one hundred twenty (120) days to perform such audit, but in no event shall any audit continue later than the date which is two hundred ten (210) days after the date

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such Landlord’s Statement is delivered to Tenant, or such Landlord’s Statement shall be deemed conclusive and binding on Tenant and shall not be subject to audit by Tenant thereafter. Tenant shall pay for any such audit, provided, that if any audit discloses any error of three percent (3%) or more with respect to either the amount of Operating Expenses or the amount of Taxes set forth in such Landlord’s Statement, Landlord shall reimburse Tenant promptly thereafter for the reasonable costs incurred by Tenant in connection with such audit. Upon at least ten (10) business days’ notice, Landlord shall make available for examination or copying by the person or persons conducting such audit all books and records relevant to the Operating Expenses and Taxes covered by the Landlord Statement in question either at the Building or at Landlord’s principal place of business in Chicago, Illinois, as selected by Landlord. Any person or persons conducting an audit on behalf of Tenant (each an “Auditor”) shall execute and deliver to Landlord a confidentiality agreement in form and substance reasonably acceptable to Landlord to hold any information derived from its review of the books and records of the Building and the results of such audit in confidence, provided that (a) such Auditor may disclose such audit or any information obtained in connection therewith to Tenant or Landlord, or to such other parties as may be reasonably necessary to resolve any potential dispute with respect to Operating Expenses or Taxes or as required by Laws, and (b) any such confidentiality agreement shall not prohibit such Auditor from performing audits or similar services for others, so long as such Auditor does not solicit third party clients based on confidential information obtained when conducting an audit for Tenant hereunder.

2.    If an audit results in a determination that Tenant has overpaid any amounts on account of Operating Expenses or Taxes, Landlord may dispute the results of the audit and, if the parties are unable to reach agreement within thirty (30) days thereafter, Landlord and Tenant shall jointly select an independent certified public accountant to act as a single impartial arbitrator within an additional thirty (30) days thereafter. The fees of such arbitrator are to be either shared equally by Landlord and Tenant or paid in full by Landlord if such arbitrator confirms an overcharge to Tenant of three percent (3%) or more with respect to either the amount of Operating Expenses of Taxes set forth in the Landlord’s Statement in question.

3.    The amount of such Operating Expenses and/or Taxes with respect to the Landlord’s Statement in question shall be the amount determined by the arbitrator, provided that such amount shall be no higher than the amount set forth in the disputed Landlord’s Statement or less than the amount determined by Tenant’s audit.

4.    If an audit results in a determination that Tenant has underpaid any amounts on account of Operating Expenses or Taxes, then Tenant agrees to pay to Landlord any underpayment (subject to an offset, as reasonably determined, for the costs incurred by Tenant in discovering any such underpayment) within thirty (30) days after the amount thereof is determined. Any overpayment by Tenant shall be credited by Landlord against the next installment(s) of Base Rent or Additional Rent, until the credit is fully exhausted, provided that if no further installments of Base Rent or Additional Rent shall be due, Landlord shall refund to Tenant the amount of such overpayment within thirty (30) days after the amount thereof is determined. The provisions of this Section 3(F) shall survive the expiration or earlier termination of this Lease.

ARTICLE 4Landlord's Core & Shell Work; Delivery and Condition of Premises

A.Landlord’s Core & Shell Work. Landlord shall complete, at Landlord’s expense, the work described on Exhibit F attached hereto (“Landlord’s Core & Shell Work”). Landlord’s Core & Shell Work shall be completed at Landlord’s expense, in a good and workmanlike manner, and in compliance with all applicable Laws. Landlord’s Core & Shell Work shall be Substantially Completed prior to the Commencement Date. “Substantially Completed”, as it related to Landlord’s Core &

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Shell Work, shall mean that Landlord shall have substantially completed the work described on Exhibit F and received a core & shell certificate of occupancy (or jurisdictional equivalent thereof) from the City of Chicago for the Building.

B.Delivery and Condition of the Premises. Landlord shall complete, at Tenant’s expense, subject to application of Landlord’s Maximum Expenditure (as described in Exhibit G) the Initial Tenant Work (as described in Exhibit G). The date on which Landlord’s Core & Shell Work and Initial Tenant Work are both Substantially Completed is hereinafter referred to as the “Delivery Date”; provided that Landlord shall notify Tenant in writing of the Delivery Date, which shall be the date Tenant may take possession of the Premises at least thirty (30) days prior to the Delivery Date. Subject to the terms and conditions of this Lease, including, without limitation, the terms set forth in this Article 4, Landlord leases to Tenant and Tenant leases from Landlord the Premises on an “as is” basis (except as otherwise expressly set forth in this Lease, including, without limitation, Landlord’s obligation to complete Landlord’s Core & Shell Work and the Initial Tenant Work). By taking possession of the Premises following the Delivery Date, Tenant shall be deemed to have accepted the Premises and agreed that the Premises are in good order and satisfactory condition with no representation or warranty by Landlord as to the condition of the Premises or the Building, or suitability thereof for Tenant’s use (except as otherwise expressly set forth in this Lease to the contrary).

C.Anticipated Delivery Date and Penalties. Landlord anticipates that the Delivery Date shall occur by June 30, 2020 (“Anticipated Delivery Date”). If the actual Delivery Date does not occur on or prior to the Anticipated Delivery Date, this Lease shall not be voidable or terminable as a result thereof, nor shall Landlord be liable for any penalties in connection with such late delivery, except to the extent specifically set forth in this Section 4.C. Notwithstanding the foregoing, (i) if the actual Delivery Date does not occur on or before the six (6) month anniversary of the Execution Date, subject to extension for Tenant Delays (as defined in Exhibit G) and Unavoidable Delays (such Unavoidable Delays not to exceed sixty [60] days in the aggregate) (“Initial Delivery Deadline”), then Tenant shall be entitled to one (1) additional day’s abatement of Base Rent and Tenant’s Pro Rata Share of Operating Expenses and Taxes for each day between the Initial Delivery Deadline and the actual Delivery Date, following the Rent Abatements provided in Section 2.C., and (ii) if the actual Delivery Date does not occur on or before December 31, 2020, subject to extension for Tenant Delays and Unavoidable Delays (such Unavoidable Delays not to exceed sixty [60] days in the aggregate), then Tenant shall be entitled to terminate this Lease by written notice to Landlord delivered at any time prior to the Delivery Date. If Tenant exercises the termination right set forth herein, Landlord shall immediately return to Tenant the Security Deposit and any prepaid Rent and reimburse Tenant for any Tenant’s Excess (as defined in Exhibit G) paid by Tenant. The remedies set forth in this Section 4.C. shall be Tenant’s sole and exclusive remedies for late delivery of the Premises, to the exclusion of any other rights or remedies available to Tenant at law, in equity or under this Lease.

D.Early Access to the Premises. Following Tenant’s written request, if deemed reasonably appropriate by Landlord’s construction supervisor, Landlord may, in Landlord’s sole but reasonable discretion, permit Tenant to have early access to the Premises on a date (the “Early Access Date”) prior to the Delivery Date, solely for the purposes of permitting Tenant to install its equipment, provided such installation shall not in any material way interfere with or delay Landlord’s completion of Landlord’s Core & Shell Work and the Initial Tenant Work. Tenant specifically agrees that from and after the Early Access Date, Tenant shall work, and shall cause its equipment installers to work, in coordination in all reasonable respects with Landlord’s construction supervisor so that Landlord can continue to complete Landlord’s Core & Shell Work and the Initial Tenant Work in a customary construction sequence without employing overtime and without any material interference from Tenant or its contractors, notwithstanding Tenant’s concurrent conduct of such installation of equipment.

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ARTICLE 5Use; Compliance with Laws and Rules

A.Uses. Tenant may use the Premises for general business and administrative office and biotechnology laboratory use in in compliance with all applicable Laws (as hereinafter defined) in effect from time to time during the Term, but for no other purpose whatsoever. Tenant shall obtain validation by any medical review board or similar governmental licensing of the Premises if and to the extent required by applicable Law for Tenant’s use thereof. Additionally, prior to Tenant’s actual use of any laboratory space in the Premises, Tenant shall deliver to Landlord a copy of all of Tenant’s non-trade secret safety protocols, which protocols shall also describe generally the nature of the work anticipated to occur in the laboratory space. Notwithstanding anything to the contrary herein, in no event shall Tenant generate, produce, bring upon, use, store or treat Hazardous Materials with a risk category higher than Biosafety Level 2 as established by the Department of Health and Human Services (“DHHS”) and as further described in the DHHS publication Biosafety in Microbiological and Biomedical Laboratories (5th Edition) or such nationally recognized new or replacement standards as may be reasonably selected by Landlord and reasonably approved by Tenant if applicable to similar facilities in the City of Chicago.

B.Compliance with Laws. Tenant shall comply with all laws, orders, ordinances, codes, regulations, rules, rulings, orders, decrees, directives, policies and requirements of all local, municipal, state and federal governments, departments, agencies, commissions, boards or political subdivisions having jurisdiction over the Building or the Land (collectively, “Laws”) and with all applicable Board of Fire Insurance Underwriters’ regulations and requirements, in each instance if and to the extent that same relate to Tenant’s particular manner of use of the Premises or any Alteration Work (as hereinafter defined) that Tenant proposes to perform therein (whether directed to Tenant or Landlord). Landlord shall be responsible for effecting (and Landlord shall promptly effect) any repairs, additions, alterations or changes to (1) the Building, Premises and common areas of the Building that are necessitated by the acts or omissions of Landlord or the other Indemnified Landlord Parties and (2) to the common areas and the Building (except to the extent necessitated by the acts and omissions of a Tenant Indemnified Party) that are required to comply with Laws (except to the extent the Building is exempted from compliance with any Law) that affect laboratory office buildings generally or the Building specifically and are not required solely because of (a) the particular manner (other than office) of use of the Premises by Tenant or (b) Tenant’s improvements or alterations in the Premises or Building. Landlord may include the costs of performing its obligations under the preceding sentence in Operating Expenses to the extent permitted pursuant to Article 3 hereof. Tenant shall not knowingly or negligently: (i) make or permit any use of the Premises or the Property; or (ii) do or permit to be done anything in or on the Premises or the Property, or bring on or keep anything in the Premises or the Property, in each case that would violate any Laws. Tenant shall procure and maintain all licenses and permits legally necessary for Tenant’s use of the Premises and any Alteration Work and shall allow Landlord to inspect them upon reasonable prior request at no cost to Tenant.

C.Building Rules. Tenant shall comply with all rules set forth on Exhibit H (the “Rules”). To the extent of any conflict between the Rules and the provisions of this Lease, the provisions of this Lease shall control. Landlord shall have the right to reasonably amend the Rules and supplement the same with other reasonable rules (not inconsistent with this Lease) as may be necessary or appropriate for the promotion of the safety, care or cleanliness of the Property or good order therein, and all such amendments or new rules shall be binding upon not fewer than thirty (30) days’ notice thereof to Tenant, subject to the terms and conditions of this Section. All of the Rules shall be applied on a non-discriminatory basis to all of the tenants of the Building, in a reasonable manner, and in a manner which shall not unreasonably interfere with Tenant’s use or occupancy of the Premises for the purposes permitted under this Lease. Nothing herein shall be construed to give Tenant or any

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other person any claim, demand or cause of action for damages against Landlord arising out of a violation of the Rules by any other tenant or occupant of, or visitor to, the Property.

D.Entry and Exit from Building and Building Security. All persons entering or leaving the Building at any time may be required to identify themselves to a watchman by registering or otherwise to establish a right to enter or leave the Building. Tenant shall have access to the Building twenty-four (24) hours per day, seven (7) days per week, subject to Landlord’s reasonable security protocol, applicable Laws and force majeure events. The parties acknowledge that the safety and security devices, services and programs provided by Landlord, while intended to deter crime and enhance safety, may not in certain instances prevent theft or other criminal acts, or ensure safety of persons or property. The risk that any safety or security device, service or program may not be effective, or may malfunction, or may be circumvented by a criminal, is assumed by Tenant with respect to Tenant’s property and interests, except as otherwise expressly provided herein.

E.Tenant Security Systems. Tenant shall have the right to (i) install its own security systems in the Premises and (ii) to connect such security system into the Building’s security system, subject to obtaining Landlord’s prior approval, not to be unreasonably withheld, conditioned or delayed. Such security system is designed and operated in such a manner that Landlord shall at all times be able to access the Premises, which access shall be subject to compliance by Landlord with the other applicable provisions of this Lease. Installation of such system may be part of the Initial Tenant Work. Tenant acknowledges and agrees that security of the Premises is Tenant’s obligation hereunder.

F.    Animal Research in the Premises. Landlord and Tenant acknowledge and agree that, as of the Execution Date, Tenant does not intend to conduct any animal research in the Premises or the Building. If, at any time during the Term, Tenant desires to conduct such research in the Premises, Landlord shall permit same, provided that: (i) such research is permitted under, and is conducted in compliance with, applicable Laws, (ii) Tenant, at its expense, procures all permits and approvals for same, (iii) Tenant, at its sole expense, pays for any improvements or alterations to the Premises, Building and/or Property required for such animal research (including, without limitation, any additional ventilation system customarily required for such use in Comparable Buildings [as hereinafter defined]), (d) such animal research cannot unreasonably disturb the operations of other tenants in the Building, and (e) Tenant must comply with Landlord’s reasonable rules with respect to such animal research (which may include, without limitation, requiring delivery or removal of animals to only be at certain times or through certain entrances and/or reasonably requiring to Tenant to carry additional insurance coverages as are customarily required of tenants conducting animal research in Comparable Buildings).

ARTICLE 6Services and Utilities

A.Utilities and Services. Landlord shall manage, operate, keep and maintain the Building and the Property (including, without limitation, all common areas) and provide the following services and utilities in a manner comparable to the management, maintenance and operation of other comparable life sciences office and laboratory buildings of similar quality in the Chicago area (the “Comparable Buildings”). The cost of providing such utilities and services required to be provided by Landlord shall be included in Operating Expenses unless, to the extent expressly provided in this Lease, all or a portion of such cost is to be paid by Tenant or borne by Landlord without reimbursement.

1.HVAC. Landlord shall provideheating, ventilation and air conditioning (“HVAC”) to the Premises during the period from 8:00 a.m. to 6:00 p.m. Monday through Friday and 8:00 a.m. to 1:00 p.m. on Saturday, excluding holidays (the “Normal Hours”) at levels commensurate with the “business hours” practices of Comparable Buildings (collectively, the “Business Hour Standards”).

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For purposes of this Lease, “holidays” mean New Year’s Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day, and “business days” shall mean days other than Saturdays, Sundays and holidays. Such HVAC service in the Premises shall be delivered by a system installed as part of Landlord's Core & Shell Work and designed to meet the performance criteria set out in Exhibit F. Upon not less than one business day’s prior written notice to Landlord or any lesser period as Landlord may establish from time to time for other office tenants in the Building generally, Landlord shall provide Tenant HVAC outside of Normal Hours in accordance with the Business Hour Standards at Landlord’s actual cost and procedures for such after-hours services. If (i) Tenant's use of (or the number of persons working within) the Premises is beyond the capacity of the HVAC system of the Building, and such use requires the installation and operation of any supplementary air-conditioning, ventilation, heat, electrical or other systems or equipment (or adjustments or modifications to the existing Building systems and equipment), and (ii) Landlord notifies Tenant in writing (and provides reasonably satisfactory written evidence) of the need for such supplementary air-conditioning, ventilation, heat, electrical or other systems or equipment (or such adjustments or modifications to existing systems and equipment), then Tenant shall, within a reasonable time after such written notice from Landlord, either cause its use of the Premises to comply with such requirements or install any such supplemental system or equipment (or make such adjustment or modification), or otherwise mitigate the conditions giving rise to the need for supplemental cooling, at Tenant's expense; provided that if Tenant fails to commence such actions within thirty (30) days after such notice and then pursue such actions diligently to completion (subject to reasonable extension due to delays caused by Landlord or by other events beyond Tenant's reasonable control), then Landlord shall have the right (without obligation) to install any such supplementary system or equipment (or make such adjustment or modification) on Tenant's account, whereupon Tenant shall pay Landlord's costs and expenses in providing, installing and/or operating such supplemental systems or equipment (or making such adjustment or modification). Landlord shall enforce the foregoing requirements relative to Tenant and other tenants in the Building in a non-discriminatory manner.

2.Electricity. Landlord shall provide electricity to the Premises through the installation in the Building as part of Landlord's Core & Shell Work of an electrical system having the capacities and characteristics specified in Exhibit F and shall separately meter the Premises as part of the Initial Tenant Work. Tenant acknowledges and agrees that such capacity is inclusive of any watts needed to operate the base building equipment servicing the Premises included in Landlord's Core & Shell Work. Tenant’s use of electricity provided by Landlord shall not exceed in voltage and rated capacity set forth above or the overall load that which is standard for the Building; provided, however, that if Tenant requests additional electrical service to the Premises in excess of the current capacity, Landlord shall not unreasonably withhold, condition or delay its consent to the provision of such additional electric service, so long as (a) Tenant demonstrates the need for such additional electrical service for the reasonable operation of Tenant’s business in the Premises and (b) any and all costs and expenses associated with such additional electric service are borne solely by Tenant. Landlord shall have the right at any time and from time to time during the Term to contract for electricity service from such providers of such services as Landlord shall elect (each being an “Electric Service Provider”). Tenant shall cooperate with Landlord, and the Electric Service Provider, at all times and, as reasonably necessary, shall allow Landlord and such Electric Service Provider reasonable access to the Building’s electric lines, feeders, risers, wiring, and any other machinery within the Premises. Landlord may require that Landlord's designated riser management company (charging reasonably competitive rates for type and quality of service provided in the local marketplace) be used for any work done in or affecting the Buildings risers (including any Initial Tenant Work or Alteration Work). Tenant shall make its own arrangements with the Electric Service Provider for the delivery of electricity to the Premises and for the installation of a separate meter to measure Tenant's usage, all at Tenant's sole cost and expense, and Tenant shall pay the Electric Service Provider for the electric service to

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the Premises; provided, however, that if for any reason Tenant is not billed directly for electrical service, Tenant shall reimburse Landlord without mark-up for the portion of the Building electric bill that pertains to Tenant’s consumption of the electrical service in the Premises. Tenant shall make no alterations or additions to the electric equipment or appliances used within or serving the Premises which would overload the CT cabinets or switches on any floor of the Premises.

3.Domestic Water. Landlord shall provide municipal cold water for drinking at one or more points on the floor on which the Premises are located, for restrooms in the common areas of the Building, and, subject to Landlord’s approval and at Tenant’s sole cost and expense, for any private restrooms or office kitchens installed by Tenant in the Premises. Landlord shall either submeter other water service to the Premises and charge Tenant directly for same as Additional Rent or cause the water service to the Premises to be provided as part of Operating Expenses, for which Tenant shall pay Tenant’s Pro Rata Share thereof.

4.Gas Service.    Landlord shall make available to Tenant gas service for the Premises in accordance with the specifications described on Exhibit F. Additional capacity in excess of such maximum shall be available to Tenant only at Landlord’s discretion. Landlord shall either submeter such gas service to the Premises and charge Tenant directly for same as Additional Rent or cause the gas service to the Premises to be provided as part of Operating Expenses, for which Tenant shall pay Tenant’s Pro Rata Share thereof.

5.Elevator Service and Loading Dock. Landlord shall provide passenger elevator service, in common with other tenants or occupants of the Building. Landlord shall provide freight elevator service and provide shared use of the Building’s loading docks. Such freight elevator may be reserved on a first-come first-served basis subject to prior scheduling with no less than twenty-four (24) hours prior notice to Landlord and subject to after-hours charges for use on Saturdays, Sundays and holidays and after Normal Hours on Monday through Friday. The Building’s elevators shall be used in common with Landlord and the other tenants and their respective contractors, agents and visitors. Landlord reserves the right to modify or terminate the use of any elevators in the Building or to designate specific elevators for the use of specific other tenants or occupants of the Building at any time and from time to time provided there is no material adverse effect on Tenant or elevator service to the Premises.

6.Common Conference Rooms. Landlord shall provide and maintain one (1) large conference room consisting of approximately 1,219 square feet (the “Large Conference Room”) and two (2) smaller conference rooms (one consisting of approximately 263 square feet and the other consisting of approximately 273 square feet) (together, the “Small Conference Rooms” and, collectively with the Large Conference Rooms, collectively, the “Conference Rooms”) in the lobby of the Building for common use of tenants and occupants of the Building. There shall be no rental fee or charge for any tenant’s use or reservation of the Conference Rooms; provided that the costs of maintaining, insuring, repairing, cleaning and operating same shall be included in Operating Expenses. Tenant's personnel shall be permitted to use such Conference Rooms in common with the personnel of other tenants of the Building, subject to such scheduling and use restrictions as Landlord may reasonably establish from time to time. Landlord shall maintain the Large Conference Room at all times during the Term, as same may be extended but Landlord shall have the right, exercisable by Landlord in its sole but reasonable discretion after the fifth (5^th) anniversary of the Commencement Date, to use either or both of the Small Conference Rooms for purposes other than conference rooms, including, without limitation, as rentable square footage to be leased to new or existing tenants.

7.Other Common Amenities. If Landlord, in its sole discretion, elects to provide other common Building amenities (including, without limitation, a vivarium), Tenant and Tenant's personnel shall have the same access to, and rights to use, such common facilities in the same

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manner as personnel of the other tenants of the Building generally (including payment of any Building-standard required fees or other charges).

8.Cleaning. Landlord shall provide cleaning services to and trash removal from the common areas of the Building as part of Operating Expenses, which services shall be consistent with the cleaning services and trash removal provided by Comparable Buildings and at a minimum as set forth in Exhibit C attached hereto. Tenant shall be responsible, at Tenant’s expense, for cleaning Tenant’s Premises and removing all hazardous materials waste therefrom in accordance with applicable Laws.

9.Building Directory; Signage. Landlord shall list the name of Tenant on the Building directory, if any, and in any computer or other directory, if any, serving the Building at no cost to Tenant (except as may otherwise be included in Operating Expenses) and also, at Tenant’s expense, on (a) any lobby directory listing certain Building tenants, if any, and (b) outside of the entry to Tenant’s suite. In the event that any monument or other exterior sign listing tenant(s) in the Building is installed on the Property, Tenant shall have the right, at Tenant’s cost and expense, to be listed on such sign in a size and location that is commensurate with Tenant’s pro rata share of the Rentable Area of the Building.

10.Parking. During the Term of the Lease, as same may be renewed pursuant Article 32 of this Lease, Tenant shall license up to twelve (12) non-reserved parking spaces in the Building's parking garage at the Building-standard rate of $150 per parking space per month, which parking rate shall be subject to reasonable market increases during the Term. Tenant shall elect in a written notice to Landlord, delivered not later than the sixtieth (60^th) day following the Commencement Date, if Tenant elects to license less than the twelve (12) spaces to which it is entitled. If Tenant elects to license less than the twelve (12) spaces to which it is entitled, then Landlord shall release such un-used spaces into the general pool of spaces made available to other tenants of the Building. If Tenant fails to deliver the written notice prior to the expiration of such 60-day period, then Tenant shall be deemed to have elected to license all twelve (12) spaces for the entire initial Term of the Lease (and any extension thereof in accordance with Article 32). Tenant’s use of the parking garage shall be subject to such reasonable rules and regulations that Landlord may establish for use of same, provided Tenant has prior written notice thereof and same are otherwise in accordance with the terms of Section 5(C). Notwithstanding anything contained herein to the contrary, during the initial twelve (12) months of the Term, Landlord shall not charge Tenant any monthly license rent or other fee for Tenant’s use of two (2) unreserved parking spaces (which spaces shall be part of, and not in addition to, the maximum twelve (12) spaces permitted hereunder). Any exterior parking spaces located on the Property shall be designated for visitors of the Building and shall not be leased or licensed to any particular Building tenant or occupant.

B.Additional Services. Landlord’s property manager may perform such additional services on such terms and conditions as may be mutually agreed upon by Landlord and Tenant. All charges for such additional services shall be due and payable within thirty (30) days after such billing. In case Tenant shall fail to make payment for any such additional services, Landlord’s property manager may, without notice to Tenant, discontinue any or all such additional services. If Tenant requests any additional services of the Building after the Normal Hours, except as specifically otherwise provided herein, Tenant shall pay Landlord’s normal and reasonable charges for such after hour services; provided that the foregoing after-hours charges shall not apply to the after-hours usage of utilities other than HVAC.

C.LEED. Landlord may, at Landlord's sole cost and expense, design the Building and prepare the specifications therefor in accordance with the promulgated standards for obtaining a LEED Certified Rating for the shell and core of the Building. Upon achievement of a LEED certification

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for the Building and as a condition of maintaining such LEED certification, the USGBC may require that actual energy and water usage data for both the general building areas and tenant spaces be shared with it for a period of at least five (5) years from the date of such certification. The failure to report such information can result in the revocation of any achieved LEED certification. Tenant shall comply with any reasonable requests from Landlord to share such actual energy and water data usage for the Premises during such time period. Operating Expenses shall exclude any and all costs associated with initial commissioning and initial certifying the Property in accordance with such LEED standards, but all costs of maintaining the Building's LEED Certified Rating at its initial level, and of recommissioning the Building for purposes thereof, shall be included in Operating Expenses, subject to the terms and conditions of Article 3 above. Tenant shall not be required to apply for or achieve LEED Certification (of any rating) for the Initial Tenant Work or any leasehold improvements to the Premises, but Landlord shall reasonably cooperate in connection therewith if Tenant so elects at no expense to Landlord.

D.Recycling and Waste Management. Landlord shall maintain a waste management policy establishing reasonable, non-discriminatory obligations on Tenant and all other tenants of the Building which are comparable with those imposed from time to time on tenants in Comparable Buildings. Landlord may also establish a reasonable recycling program for the Building; provided that such program shall not require that Tenant incur any material out-of-pocket cost or expense or to modify its business operations in any material way except for any actions required of Tenant by Law.

E.Other Energy Conservation Programs. Landlord shall have the right (which costs shall be included as part of Operating Expenses), to institute such other energy conservation policies, programs and measures on a Building-wide basis as may be required to comply with any Laws, or if consistent with voluntary measures being taken at other Comparable Buildings and Tenant shall comply with any requests from Landlord to cooperate with such instituted energy conservation policies, programs and measures. Nothing contained in this subsection shall be construed so as to require that Tenant incur any material out-of-pocket cost or expense or to modify its business operations in any material way except for any actions required of Tenant by Law.

F.Internet/Communications Services. Tenant may make arrangements for the communications provider(s) of its choice to bring redundant service into the Building’s network point-of-presence (“net-pop“), and Landlord shall use reasonable efforts to furnish reasonable space for Tenant’s communications providers at the net-pop and otherwise reasonably cooperate in connection with the provision of such redundant service to Tenant; provided that all such access shall be coordinated through Landlord’s riser manager and any installation/construction shall be subject to Landlord’s approval of plans and specifications for same.

G.No Warranty; Failure of Services.

1.Stoppage of Services.

a)Landlord does not warrant that any services or utilities (including without limitation, electrical service) will be free from Unavoidable Delays (as defined below) and Landlord reserves the right to suspend any of the foregoing services or utilities if and so long as necessary by reason of an emergency or repairs or alterations to the architectural, structural or mechanical systems of the Building. Landlord shall not, however, except in an emergency, voluntarily effect any stoppage or reduction of any service without giving prior oral or written notice to Tenant of the time and duration thereof. In case of any service stoppage or reduction arising out of, or the ending of which requires, any work by Landlord or any other person other than a utility company or governmental agency, Landlord shall prosecute such work (or cause

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such work to be prosecuted) diligently and continuously and so as to minimize the duration of such service stoppage or reduction.

b)Except as herein expressly specified, no stoppage or interruption of services pursuant to the preceding paragraph shall be deemed an eviction or disturbance of Tenant’s use and possession of the Premises or any part thereof, or relieve Tenant from performance of Tenant’s obligations under this Lease or entitle Tenant to any abatement of Rent, except as otherwise expressly contemplated under this Lease. In no event shall Landlord be liable for damages by reason of loss of profits, business interruption or other consequential damages on account of such interruption in services or utilities.

c)“Unavoidable Delays” shall mean delays or interruptions to the extent caused by strikes or lockouts (except to the extent any such strike or lockout is attributable to the acts or omissions of the party claiming such delay, including the failure of such party to promptly initiate and diligently pursue all commercially reasonable steps to avoid such strike or lockout), failure of power (except to the extent such failure has been caused by the acts or omissions of the party claiming the delay), failure of any utility provider to timely complete service connections (but only with respect to delays relating to that particular utility and provided that such delays do not arise out of the failure of the party claiming the delay to timely schedule such service connections or delinquency with respect to any payment to such utility company or other cause within such party’s reasonable control), conditions of supply or demand for building materials which are affected by war or other national, state or municipal emergency, restrictive governmental laws or regulations not in effect as of the date of execution of this Lease, condemnations, riots, insurrections, war, fire or other casualty, unforeseen weather conditions and taking into account the varying impact that such conditions have on different stages of construction, or acts of God. Notwithstanding the foregoing to the contrary, lack of money, financial inability, failure to perform of any contractor, agent, vendor or consultant of the party claiming such delay, delays in applying for or obtaining permits for construction or occupancy, reasonably foreseeable governmental action or inaction, failure of any utility provider to timely complete service connections, failure to order long-lead items sufficiently in advance of the time needed and delays caused by the party claiming such delay shall not be Unavoidable Delays. Notwithstanding the foregoing to the contrary, no Unavoidable Delay will be deemed to have occurred unless the party claiming delay provides the other party with a notice specifying such Unavoidable Delay within ten (10) business days after the commencement thereof and such Unavoidable Delay does not cease within two (2) business days after delivery of such notice.

2.Failure of Services. Notwithstanding anything herein to the contrary:

a)If (i) any failure or interruption of any service or utility to be provided to Tenant hereunder by Landlord shall result in any portion of the Premises being unusable and Tenant cannot and in fact does not use such portion of the Premises (such failure or interruption, a “Critical Failure”), and (ii) such Critical Failure is caused by the negligence or willful misconduct of Landlord’s or Landlord’s employees or contractors, and (iii) such Critical Failure continues for more than five (5) consecutive business days (or any shorter period covered under Landlord’s rent loss insurance), then commencing on the sixth (6th) consecutive business day after Tenant ceases to use such portion of the Premises for the normal conduct of its business due to such Critical Failure (or any shorter period covered under Landlord’s rent loss insurance), all Rent payable hereunder with respect to such portion of the Premises shall abate until the earlier of (1) the date the Premises is again usable and/or Tenant does in fact use the Premises for the normal conduct of Tenant’s business and (2) the next business day following restoration of the applicable service or utility.

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b)Notwithstanding any of the foregoing provisions of this Section, if any failure or interruption of service is due to a fire or other casualty, is caused by Tenant or involves a service not being provided to Tenant by Landlord hereunder, the remedies provided for in this Section shall not apply.

c)The remedies expressly set forth in this Lease shall constitute Tenant’s sole and exclusive remedies with respect to any damages arising out of any failure or interruption of any service that Landlord is obligated hereunder to provide, and Tenant hereby waives any and all other rights or remedies it may have at law or in equity in connection with the same.

ARTICLE 7Alterations and Liens

A.Alterations.

1.Except to the extent expressly set forth herein, Tenant shall have no right to make additions, changes, alterations or improvements to the Premises or the Building (“Alteration Work”). Upon twenty (20) days prior written notice to Landlord, Tenant may perform Alteration Work, which does not constitute a Major Alteration (defined below) and is strictly cosmetic and non-structural, such as painting, wall coverings and floor coverings (collectively, “Decorative Alterations”). As used herein, a “Major Alteration” is any Alteration Work that either (a) requires the issuance of a building permit from the City of Chicago; (b) affects the structure, exterior or exterior appearance of the Premises or the Building; (c) affects the views of the interior of the Building from any common area of the Building or the exterior of the Building; (d) affects the Building’s electrical, HVAC, communication risers, mechanical or plumbing systems and equipment (collectively “Building Systems”); (e) affects other tenants or occupants of the Building in any material way, as reasonably determined by Landlord; (f) affects space outside of the Premises; (g) may cause unreasonable noise, vibrations or odors to emanate outside of the Premises or through the Building’s ducts or exhausts, or (h) costs more than $50,000 in the aggregate.

2.Prior to the commencement of its performance of any Alteration Work, Tenant shall submit to Landlord in writing: (a) complete architectural and engineering working drawings and specifications (the “plans and specifications”) therefor (unless such Alteration Work is only Decorative Alterations), (b) a statement from an engineer approved by Landlord (acting reasonably) stating that the Alteration Work will not adversely affect any Building Systems or the structure of the Property (unless such Alteration Work is only Decorative Alterations); and (c) a detailed description of the proposed Alteration Work. Prior to approving any laboratory-related Alteration Work that could reasonably be anticipated to affect the ventilation in the Building, Landlord also reserves the right to require Tenant to provide Landlord with a third-party report from a reputable consultant, in form reasonably acceptable to Landlord, showing that such work will not adversely affect the ventilation systems or air quality of the Building. When required, Landlord shall give or withhold its consent within ten (10) business days after Tenant’s submission of all materials required under this Section. To the extent any aspect of an Alteration Work affects only the appearance or configuration of the Premises, Landlord’s consent to such aspect shall not be unreasonably withheld, conditioned or delayed. Prior to the commencement of its performance of any Alteration Work (including but not limited to Major Alterations), Tenant shall submit to Landlord copies of all permits required by applicable Laws (if any), evidence of Workers’ Compensation insurance and, with respect to Commercial General Liability insurance, Comprehensive Automobile Liability insurance and “All Risk” Builder’s Risk insurance, certificates of insurance from all contractors naming the Landlord Protected Parties (as hereinafter defined) as additional insureds, and the identities of all architects, engineers, contractors, subcontractors and suppliers to be utilized with respect to such Alteration Work to the extent such

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contracts or subcontracts have been executed and/or such architects, engineers, contractors, subcontractors and suppliers have been identified.

3.Upon the completion of any Alteration Work, Tenant shall deliver to Landlord unconditional final lien waivers for all work, services and materials incorporated into such Alteration Work, affidavits listing all contractors, subcontractors and suppliers involved in such Alteration Work, “as built” or marked record set drawings for all Major Alterations, a certificate of substantial completion from Tenant’s architect or engineer (if applicable), and, to the extent applicable and required, all certificates or other evidence issued by applicable governmental authorities indicating final approval of such Major Alterations or other Alteration Work.

4.All Alteration Work shall be designed by engineers and architects selected by Tenant and shall be performed by contractors, subcontractors and suppliers selected by Tenant (other than that portion of any Alteration Work involving connections to the Building Systems, which shall be performed at Tenant’s expense by a contractor designated by Landlord in its sole but reasonable discretion provided that the rates charged to Tenant are the same rates charged to Landlord for similar services). Landlord shall have the right to approve such engineers, architects, contractors, subcontractors and suppliers but such approval shall not be unreasonably withheld, conditioned or delayed. All engineers, architects, contractors, subcontractors and suppliers retained in connection with the Alteration Work shall be duly licensed if and to the extent required and shall perform the tasks for which they are retained in a good, worker like manner so as to maintain harmonious labor relations in the Building and not create any work stoppage, picketing or labor dispute. All materials used in connection with the Alteration Work shall be of a quality comparable to or better than those materials used in the initial construction of the Premises and, in the case of a Major Alteration, shall comport, in all material respects, with the plans and specifications approved by Landlord. During Tenant’s performance of any Alteration Work and upon at least forty‑eight (48) hours prior notice to Tenant, Landlord shall have the right to inspect same to confirm compliance with the terms and conditions of this Article and, except with respect to Decorative Alterations, with the plans and specifications delivered to and approved by Landlord pursuant to this Article 7.

5.All Alteration Work shall comply with all applicable Laws, the Rules and all of Landlord’s reasonable requirements relating to work at the Building regarding insurance, access to the Premises and Building, life safety and protection of property, which Rules and reasonable requirements of Landlord shall be applied on a non-discriminatory basis to all tenants of the Building in a reasonable manner.

6.Tenant shall not be required to pay a supervision fee to Landlord in connection with any Alteration Work. Tenant shall reimburse Landlord for the actual, reasonable out-of-pocket costs and expenses paid by Landlord to third parties to review any plans and specifications for, or inspection of, any Alteration Work that is not a Decorative Alteration.

7.If Landlord consents to any Alteration Work, the same shall not be deemed a warranty as to the adequacy of the design, workmanship or quality of materials to be used therein, and Landlord hereby expressly disclaims any responsibility or liability for same. Landlord shall under no circumstances have any obligation to repair, maintain, or replace any portion of the Alteration Work unless the need for such repair, replacement or maintenance is due to or arises from the negligence or willful misconduct of Landlord, its agents, employees, contractors or subcontractors.

8.If at any time Tenant proposes to make any Major Alteration or to run cabling, wires or other associated equipment within any risers, conduits, shafts, pipes or ducts in the Building, whether as part of the Initial Tenant Work or thereafter during the Term, Landlord shall advise Tenant in writing, at the time that Landlord consents thereto if it is being done as part of a Major Alteration

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or, within ten (10) business days after Tenant’s request, if it is not being done as part of a Major Alteration, whether or not Tenant will be required, at Tenant’s expense, to remove such Major Alteration and/or cabling, wires and associated equipment upon expiration of the Term or earlier termination of this Lease. Without limiting the foregoing, Tenant shall be required, at Tenant’s cost, at or prior to the expiration of the Term to remove any cabling, wires and associated equipment to the extent such removal is required by applicable building codes and other Laws, even if the right to request such removal has not been reserved by Landlord.

9.Notwithstanding anything contained herein to the contrary, all Alteration Work and Initial Tenant Work which is necessary for the use of the Premises as an operational biotechnology laboratory (the “Base Laboratory Improvements”), regardless of who funded their acquisition and installation, shall be part of the Building and owned by the Landlord and shall in no event constitute Tenant’s personal property if they are hard-wired to the Premises or otherwise built into the Premises in a manner preventing their removal without causing damage to the Premises. Base Laboratory Improvements may include, without limitation, built-in cabinet work and paneling, sinks and related plumbing fixtures, laboratory benches, exterior venting fume hoods and walk-in freezers and refrigerators, ductwork, conduits, electrical panels and circuits). Such items shall (unless, prior to such construction or installation, Landlord elects otherwise in writing) become the property of Landlord upon the expiration or earlier termination of the Term, and shall remain upon and be surrendered with the Premises as a part thereof.

10.In the event that Tenant leases or finances the acquisition of office or laboratory equipment, furnishings, trade fixtures or other personal property of a removable nature utilized by Tenant in the operation of Tenant’s business, Tenant agrees that any Uniform Commercial Code financing statement shall, upon its face or by exhibit thereto, indicate that such financing statement is applicable only to removable personal property of Tenant located within the Premises. In no event shall the address of the Premises, the Building or the Property be furnished on a financing statement without qualifying language as to applicability of the lien only to removable personal property located in an identified suite leased by Tenant. Should any holder of a financing statement record or place of record a financing statement that appears to constitute a lien against any interest of Landlord or against equipment that may be located other than within an identified suite leased by Tenant, Tenant shall, within ten (10) days after filing such financing statement, cause (a) a copy of the lender security agreement or other documents to which the financing statement pertains to be furnished to Landlord to facilitate Landlord’s ability to demonstrate that the lien of such financing statement is not applicable to Landlord’s interest and (b) Tenant’s lender to amend such financing statement and any other documents of record to clarify that any liens imposed thereby are not applicable to any interest of Landlord in the Premises, the Building or the Property.

B.    Liens. Tenant shall keep the Property and Premises free from any mechanic’s, materialman’s or similar liens or encumbrances filed in connection with any Alteration Work performed by Tenant or by anyone (other than Landlord or any affiliate thereof) performing such Alteration Work on behalf or at the request of Tenant and, if any such lien or encumbrance shall be filed, Tenant shall remove any such lien or encumbrance or provide title insurance or bond covering such lien or encumbrance in a form reasonably satisfactory to Landlord within ten (10) business days after Tenant’s receipt of notice from Landlord with respect to the existence of such lien or encumbrance. If Tenant shall fail to timely remove, or provide such insurance against or bond over, any such lien or encumbrance, after not fewer than ten (10) days’ prior written notice to Tenant that Landlord is intending to do so, Landlord may (unless Tenant sooner notifies Landlord that Tenant has satisfied its obligations under this Section) pay the amount necessary to remove such lien or encumbrance, without being responsible for investigating the validity thereof, and Tenant shall indemnify and hold Landlord harmless from and against any claims, liabilities, judgments and costs (including reasonable attorneys’ fees) arising out of Tenant’s failure to so remove, insure against or bond over any such liens or

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encumbrances. The amount paid by Landlord to remove any such lien or encumbrance or otherwise due pursuant to the foregoing indemnity shall be deemed Additional Rent and shall be payable within thirty (30) days after demand, accompanied by reasonable evidence of such amounts due.

ARTICLE 8Maintenance and Repairs

A.Tenant’s Obligations.

1.Except for: (i) the cleaning and trash removal provided by Landlord pursuant to Article 6 hereof; (ii) Landlord’s obligation to repair and maintain certain portions and elements of the Building as set forth in Section 8(B) hereof; (iii) Landlord’s obligation to repair any damage due to or arising from any acts, omissions or negligence of Landlord or its agents, employees, contractors or subcontractors; (iv) Landlord’s obligations with respect to repairs necessitated by fire or other casualty or condemnation pursuant to Articles 9 and 11 hereof; (v) Landlord’s obligation to comply with Laws as set forth in Section 5(B) hereof, and (vi) any express obligation of Landlord under this Lease, Tenant shall keep the Premises in good and sanitary condition and repair, including, without limitation, carpet, wall-coverings, doors, plumbing and other utility systems or equipment (including private restrooms), installed for Tenant’s exclusive use as part of the Initial Tenant Work or any Alteration Work, ordinary wear and tear and casualty and condemnation damage that Tenant is not required to restore pursuant to the express provisions of this Lease excepted. In the event that any repairs, maintenance or replacements in the Premises are required of Tenant hereunder, Tenant shall promptly arrange for the same either through (at Tenant’s election): (a) Landlord for such reasonable charges as Landlord may from time to time establish; (b) such contractors as Landlord generally uses at the Property; or (c) such other contractors as Landlord shall first approve in writing (acting reasonably). All repairs, maintenance and replacements shall be performed in a first class, worker like manner. Tenant, with its employees or contractors of its choosing, subject to maintaining labor harmony, may perform all work within the Premises related to painting, furniture moving, light bulb replacement, millwork maintenance, picture hanging and similar minor decorating work without obtaining Landlord’s prior consent and without prior notice to Landlord.

2.Subject to the provisions of Section 10(C) hereof, if any damage to the Building outside of the Premises or to any equipment or appurtenance thereto or any part thereof results from any negligent act or omission, willful misconduct or breach of Tenant’s obligations under this Lease of or by Tenant or its contractors, subcontractors, agents or employees, Landlord may, at Landlord’s option and subject to the provisions of Section 22(F) hereof, make such repairs and replacements or undertake such maintenance at Tenant’s cost and expense.

B.Landlord’s Obligations. Landlord shall keep and maintain: (i) the common areas and public areas of the Building and the Property under Landlord’s control; (ii) elevators and elevator shafts serving the Premises; (iii) service and utility areas of the Building (including any loading docks and common utility closets), (iv) the roof and roof membrane of the Building; (v) exterior plate glass; (vi) public restrooms and restrooms used by Tenant in common with other tenants of the Building; (vii) footings, foundations, structural portions of load bearing walls, structural floors and subfloors, structural columns and beams and curtain walls and other structural elements; and (vii) those mechanical, plumbing, electrical and communications systems, equipment and risers serving the Premises except those systems, equipment and risers installed as part of the Initial Tenant Work or Alteration Work for Tenant’s exclusive use; (viii) those heating, ventilating and air conditioning systems or equipment serving the Premises except those systems and equipment installed as part of the Initial Tenant Work or Alteration Work for Tenant’s exclusive use; and (ix) those plumbing and other utility systems or equipment serving the Premises except those systems and equipment installed as part of the Initial Tenant Work or Alteration Work for Tenant’s exclusive use, in good and sanitary condition

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and repair, in compliance with all Laws (the cost of which shall be included in Operating Expenses to the extent permitted by Article 3 hereof). Subject to the provisions of Section 10(C) hereof, if any damage to the Premises or to any equipment therein or appurtenance thereto or any part thereof results from any negligent act or omission or willful misconduct by Landlord or its contractors, subcontractors, agents or employees or from the breach of Landlord’s obligations under this Lease, Landlord shall undertake at its sole cost and expense all repairs and replacements that are required to address such damage. No promises of Landlord to alter, remodel, improve, repair, decorate or clean the Property or any part thereof have been made, and no representation respecting the condition of the Property or any part thereof has been made to Tenant by or on behalf of Landlord except to the extent expressly set forth in this Lease.

C.Minimization of Interference. Whenever Landlord or any person authorized by Landlord shall perform any work required under Section 8(B) hereof, Landlord shall do so, or shall cause such person to do so, diligently and in such a manner as shall minimize interference with Tenant’s conduct of its business, provided that this sentence shall not require Landlord to incur additional costs for labor at overtime or premium rates unless such work is necessitated by any negligent act, omission or willful misconduct by Landlord or its contractors, subcontractors, agents or employees or by the breach of Landlord’s obligations under this Lease.

D.Casualty or Condemnation Events. The provisions of this Article shall not apply in the case of fire or other casualty or condemnation, in which case Article 9 or Article 11 hereof, as the case may be, shall control.

ARTICLE 9Casualty Damage

A.Casualty.

1.If the Building or any part of the Property providing access thereto shall be damaged by fire or other occurrence, Landlord shall repair and restore the same unless this Lease is terminated by Landlord or Tenant pursuant to the provisions of this Article. Such restoration of the Building or the Property shall be to substantially the condition existing immediately prior to the fire or other occurrence, except for modifications required by zoning and building codes and other Laws, and except that Landlord shall not be required to repair or replace any of Tenant’s furniture, furnishings, movable fixtures, equipment, or personal property (collectively, “Tenant’s Property”) or any portion of the Initial Tenant Work or any Alteration Work. Notwithstanding the foregoing, Landlord shall make available for Tenant’s restoration of Tenant’s Property, the Initial Tenant Work or any Alteration Work, any insurance proceeds actually received by Landlord on account of Tenant’s Property, the Initial Tenant Work or any Alteration Work, if any. Landlord shall not be liable for any inconvenience or annoyance to Tenant or its visitors, or injury to Tenant’s business resulting in any way from such damage or the repair thereof; provided that Landlord shall make such repairs and restoration diligently, promptly (given the nature of the damage to be repaired) and in such a manner as to not, to the extent practicable, unreasonably interfere with Tenant’s conduct of its business elsewhere in the Premises. Landlord shall not be required to do such repair or restoration work on an overtime or premium time basis unless (i) Tenant is continuing to conduct business operations in a portion of the Premises and (ii) such work, if performed during normal business hours, will unreasonably interfere with the conduct Tenant’s business operations in such portion of the Premises, in which event those elements of such repair or restoration work which will cause such unreasonable interference will be performed after normal business hours and the overtime cost associated with performing such work at such times may be included in Landlord’s insurance claims.

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2.Landlord shall, within sixty (60) days after the occurrence of any damage to the Building and/or the Property or destruction thereof resulting from a fire or other occurrence, deliver to Tenant a notice (an “Anticipated Completion Date Notice”) accompanied by the written opinion of a qualified, experienced and reputable architect not affiliated with Landlord (hereinafter referred to as the “CasualtyConsultant”) of: (a) the date by which Landlord anticipates being able to substantially complete the repair and restoration of the Building and/or the Property, as applicable, based on good construction practices and without employing labor at overtime or other premium rates, and including reasonably anticipated periods for insurance claim processing and adjustments (the “Anticipated Completion Date”); and (b) the period of time required for Tenant to commence and diligently prosecute to completion the repair and restoration of the Initial Tenant Work and any other Alteration Work and/or Tenant’s Property to substantially the condition existing immediately prior to the fire or other occurrence based on good construction practices and without employing labor at overtime or other premium rates (“Tenant’s Completion Period”).

3.If the Building shall be so damaged or destroyed by fire or other occurrence (whether or not the Premises are damaged or destroyed) such that: (a) it will require a reasonably estimated expenditure of more than fifty percent (50%) of the full insurable value of the Building immediately prior to the fire or other occurrence; or (b) it will take more than fifteen (15) months to repair or rebuild the portion of the Building so damaged or destroyed, then in either such case Landlord may terminate this Lease by giving Tenant notice to such effect at the same time that Landlord delivers the Anticipated Completion Date Notice. Notwithstanding the foregoing, Landlord shall not exercise any termination right under this Section unless Landlord (or the applicable tenant) shall have terminated all other similarly affected leases on account of such casualty to the extent permitted under such leases.

4.If: (a) more than fifty percent (50%) of the Rentable Area of the Premises is rendered unusable by such fire or other occurrence and (b) either (i) the Anticipated Completion Date set forth in the Anticipated Completion Date Notice is later than fifteen (15) months after the date of such fire or other occurrence; or (ii) the fire or other occurrence occurs during the last twelve (12) months of the Term and the Anticipated Completion Date set forth in the Anticipated Completion Date Notice is later than the earlier of the Expiration Date or sixty (60) days after the date of such fire or other occurrence, Tenant may elect to terminate this Lease by delivering to Landlord a notice within thirty (30) days after Tenant receives the Anticipated Completion Date Notice (or within ninety (90) days after the date of such damage or destruction if Landlord shall fail timely to give the Anticipated Completion Date Notice), specifying the date for the termination of this Lease.

5.As used herein, any portion of the Premises shall be deemed “unusable” if: (a) such portion of the applicable space is unusable for the normal conduct of Tenant’s business, including, without limitation, any elevator service or inability to use such portion of the Premises as a result of any interruption of electricity, water, any other service to be provided by Landlord under this Lease, in each case serving such portion of the Premises; or (b) there is no reasonably safe method of ingress to or egress from such space. Any portion of the Premises that is unusable is sometimes hereinafter referred to as the “Untenantable Space.”

B.Repair and Restoration. Unless this Lease is terminated as provided in Section 9(A) hereof, Landlord shall proceed with reasonable diligence and promptness, given the nature of the damage to be repaired, to repair such damage and restore the Building, all subject to Unavoidable Delays. Notwithstanding any provision in this Lease to the contrary, Landlord shall not be liable for any loss of business, inconvenience or annoyance arising from any repair, restoration or rehabilitation of any portion of the Premises or the Building as a result of any damage from fire or other occurrence. If restoration of the damage or destruction to the Premises under this Section has not been substantially completed by a date fifteen (15) months from the date of such casualty (as such date may be extended

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by Unavoidable Delays, but not to exceed eighteen (18) months from the date of such casualty), then Tenant may elect to terminate this Lease by giving written notice to Landlord promptly after the end of such period and prior to substantial completion of such restoration.

C.Rent Abatement. If the damage or destruction resulting from any fire or other occurrence renders all or any portion of the Premises unusable and if this Lease shall not be terminated pursuant to the foregoing provisions of this Article, Base Rent and all other Rent allocable to the Untenantable Space shall abate for the period commencing on the date the Premises or such portion thereof becomes unusable and Tenant ceases to use such space for the normal conduct of its business and continuing until the earlier of: (i) the date on which Tenant shall reoccupy such space for the normal conduct of its business, and (ii) the period of time equal to Tenant’s Completion Period as the same may be extended pursuant to periods of Unavoidable Delays. Notwithstanding the foregoing, if Tenant reoccupies any portion of the Untenantable Space for the continuous, normal conduct of its business, such abatement shall end with respect to such portion of the Untenantable Space.

D.Rent Adjustments. If this Lease is terminated pursuant to this Article: (i) Rent shall be apportioned on a per diem basis and be paid to the date of the fire or other occurrence with appropriate adjustment for any portion of the Premises that Tenant continuously occupied for the normal conduct of Tenant’s business from the date of the fire or other occurrence until said termination, and any payments of Rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant within thirty (30) days after the termination of this Lease; and (ii) upon the date specified in any notice terminating this Lease, this Lease shall expire and terminate as fully and completely as if such date were the date set forth for the expiration of this Lease. The provisions of this Section 9(D) shall survive the expiration or earlier termination of this Lease.

E.Restoration of Tenant’s Work. If this Lease is not terminated pursuant to this Article as a result of such a fire or casualty, Tenant, at its expense, and whether or not its insurance proceeds will be sufficient for such purpose, shall proceed with reasonable diligence to repair, reconstruct or replace the Initial Tenant Work, as modified by any Alteration Work.

F.Sole Remedies. Landlord and Tenant agree that Landlord’s obligation to restore the Building, Tenant’s obligation to restore the Initial Tenant Work and Alteration Work, the abatement of Rent provided herein and Landlord’s and Tenant’s rights to terminate this Lease, all as set forth in this Article, shall be each party’s sole recourse as against each other in the event of damage to or destruction of the Premises, the Building and/or the Property by fire or other occurrence, and each of Landlord and Tenant waive any other rights either party may have under any applicable Law to terminate this Lease by reason of damage to the Premises or the Property.

ARTICLE 10Insurance, Subrogation, and Waiver of Claims

A.Tenant’s Insurance.

1.To the fullest extent permitted by Law, Tenant, at its sole cost and expense, shall maintain in force and effect: (a) commercial property insurance covering, at a minimum, the perils insured under the ISO special cause of loss form, which provides “all risk” coverage (excluding earthquake, flood and other customary exclusions reasonably approved by Landlord), with respect to: (i) any Alteration Work, together with any other fixtures installed by or on behalf of Tenant in the Building, including, but not limited to, special wall and floor coverings, special lighting fixtures, built-in cabinets and bookshelves; and (ii) Tenant’s inventory, contents, furniture, equipment and other personal property of Tenant located in the Premises, in each case for not less than the full replacement cost of such property (such property insurance shall be for full replacement cost value of all of Tenant’s

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property at the Premises and the Property); (b) commercial general liability insurance written on the current ISO CG 001 01 Occurrence Form or its equivalent covering liability arising in respect of the Premises and the conduct or operation of Tenant’s business therein for premises operations, bodily injury, broad form property damage, advertising injury and personal injury, including products/completed operations and liability assumed under an insured contract, independent contractors (including tort liability of another assumed in a business contract) and, to the extent applicable, host liquor liability insurance, with limits of not less than $2,000,000 aggregate/$1,000,000 each occurrence for bodily injury (including death), or damage or injury to or destruction of property (including the loss of use thereof) with the aggregate applicable on a per location basis, with a $5,000,000 per occurrence/aggregate umbrella policy at least as broad as the commercial general liability, employers liability and, if applicable, automobile liability insurance; (c) workers’ compensation insurance in statutory limits, together with Employers Liability limits of not less than $1,000,000 bodily injury per accident and per illness; (d) if and when Tenant leases or owns automobiles, automobile liability insurance insuring all owned and non-owned and hired automobiles with limits of liability of not less than $1,000,000 combined single limit; (e) business interruption and/or extra coverage as part of its commercial property insurance (provided that in no event shall Landlord be liable for any business interruption or other consequential loss sustained by Tenant, whether or not it is insured by Tenant, even if such loss is caused by the negligence of Landlord, its employees, officers, directors or agents) and such insurance shall be for full replacement cost value of Tenant’s responsibility for ongoing rent payments under this Lease in the event of damage to the Property; and (g) pollution and environmental liability insurance covering the environmental risks of Tenant’s business with limits of not less than One Million Dollars ($1,000,000) per occurrence and not less than Five Million Dollars ($5,000,000) in the aggregate, with respect to environmental contamination and pollution of the Premises caused by Tenant.. Landlord may periodically require that Tenant reasonably increase the aforementioned coverages and limits of liability on a basis consistent with the insurance required to be maintained by comparable tenants in the Comparable Buildings.

2.Tenant’s insurance (excluding worker’s compensation and employer’s liability) shall include Landlord, those of its members of whose identity Tenant has received notice, from time to time, their respective directors, officers, employees and agents (including the Building’s managing agent) and any mortgagees of the Building whose names and addresses shall have been previously provided to Tenant (the “Landlord Protected Parties”) as additional insureds. Tenant’s insurance policies (including primary, excess and/or umbrella) shall (a) be primary to and non-contributory with any insurance maintained by such additional insureds, and that the additional insured’s own insurance will only apply in excess of the coverage provided regardless of any policy language to the contrary, and (b) contain a severability of interest clause for all additional insureds with no cross suits liability exclusion. The coverage provided to the Landlord Protected Parties shall be at least as broad as that provided to the first named insured on each policy. In the event any policy provided by Tenant states that coverage provided to an additional insured shall be no broader than that required by contract, or words of similar meaning, the parties agree that nothing in this Lease shall be intended to restrict or limit the breadth of any such coverage.

3.The deductibles or self-insured retentions for Tenant’s insurance must be declared to Landlord. If any of the insurance required to be maintained by this Lease is written with aggregate limits, Tenant shall actively monitor all claims, incidents and occurrences that may affect such insurance to assure that the application of the aggregate limit will not have the practical effect of reducing the minimum amount of insurance coverage that is available on a per occurrence or per claim basis.

4.Tenant shall deliver to Landlord certificates of insurance evidencing such coverage (and showing the Landlord Protected Parties as additional insureds) prior to taking possession of the Premises. Thereafter, Tenant shall endeavor to deliver to Landlord certificates of

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insurance evidencing Tenant’s insurance coverage (and showing Landlord Protected Parties as additional insureds) at least thirty (30) days prior to the expiration date of any such policy and shall deliver such certificate, in any event, at least ten (10) days prior to such expiration date. Unless such policy provisions are unavailable in the market, all such insurance policies shall contain a provision that the insurer will provide at least thirty (30) days prior written notification to Landlord prior to cancellation of such policies. Upon notice of cancellation by the insurer, Tenant shall provide immediate notice of same to Landlord.

5.If and to the extent that any type or amount of insurance required under this Lease is not commercially available in the applicable domestic insurance market, then Landlord and Tenant shall reasonably cooperate to amend the requirements hereunder to conform to the amounts and types of insurance so available and customarily required to be maintained by comparable tenants in Comparable Buildings.

B.Landlord’s Insurance. Landlord agrees to purchase and keep in force and effect: (i) policies of insurance covering loss or damage to the Building and that portion of the tenant improvements therein paid for by Landlord in an amount and in form and substance (including applicable deductibles) reasonably acceptable to Landlord and its mortgagee, (ii) commercial general liability insurance applicable to the Building and the common areas in amounts and coverages and deductibles as reasonably determined by Landlord and any mortgagee of Landlord; (iii) rent loss insurance; and (iv) to the extent that Landlord has employees, workers compensation insurance in statutory limits and employer’s liability insurance with limits of not less than $1,000,000 per accident and per disease.

C.General Provisions of Insurance.

1.Except as provided herein to the contrary, any insurance carried by Landlord or Tenant shall be for the sole benefit of the party carrying such insurance (or its assignee). Any insurance policies required hereunder may be “blanket policies” and/or umbrella policies issued to, as applicable: (x) Tenant and covering the Premises and other properties owned or leased by Tenant or its Affiliates; or (y) Landlord and covering the Building and/or the Property and other properties owned or leased by Landlord or its Affiliates, provided that such policies otherwise; (a) comply with the provisions of this Lease; (b) expressly allocate to the Premises, the Building and/or the Property, as applicable, the specified coverage, without possibility of reduction of the amounts payable with respect to the Premises, the Building or the Property, as applicable, below the levels required by this Article, except that, with respect to Landlord’s commercial property insurance, such policies may contain a per occurrence loss limit that is less than the aggregate full replacement cost of all properties insured thereunder so long as such per occurrence loss limit is not less than the coverage required hereunder with respect to the Building. If the insurance required by this Lease shall be effected by any such blanket or umbrella policies, the party maintaining such blanket or umbrella policy shall furnish to the other from time to time upon request reasonable evidence of valid current coverage; provided that any person or persons receiving or reviewing such evidence of insurance on behalf of the requesting party shall by so doing be deemed to have agreed to hold same in confidence, provided that such person may disclose such information to Tenant or Landlord, any persons within such person’s organization, and such other parties as may be reasonably necessary to determine whether such blanket or umbrella policy satisfies the terms and conditions of this Lease.

2.All insurance required hereunder shall be provided by insurers that are licensed and approved to conduct business in Illinois or authorized to write insurance in Illinois with a minimum Best rating of “A-VII” or “Excellent” or the equivalent from a reputable rating agency, such as S&P.

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3.Landlord and Tenant waive any rights of recovery they may have against the other and hereby agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a property loss to the extent that such coverage is agreed to be provided hereunder. For this purpose, any applicable deductible or self-insured amount shall be treated as though it were recoverable under such policies.

4.Landlord agrees that it will include in its commercial property insurance and commercial general liability insurance policy or polices appropriate clauses pursuant to which the insurance companies: (a) waive all right of subrogation against Tenant and its subtenants and assigns with respect to losses payable under such policies, notwithstanding that such losses may result from the negligence or fault of Tenant, its servants, agents, employees, subtenants or assigns; and (b) agree that such policies shall not be invalidated should the insured waive in writing prior to a loss any or all right of recovery against any party for losses covered by such policies. Landlord further waives any claims it may have against Tenant to recover from Tenant (except to the extent a portion thereof is includable in Operating Expenses under Article 3) any deductible or self-insured amounts required to be paid by Landlord under such policy or policies notwithstanding that such amounts may have been payable as a result of the negligence or fault of Tenant, its servants, agents or employees.

5.Tenant agrees that it will include in its commercial property insurance and commercial general liability insurance policy or policies appropriate clauses pursuant to which the insurance companies, (a) waive the right of subrogation against Landlord and any other tenant of space in the Building with respect to losses payable under such policy or policies notwithstanding that such loss or damage may result from the negligence or fault of Landlord, its servants, agents or employees, or such other tenant and/or the servants, agents or employees thereof; and (b) agree that such policy or policies shall not be invalidated should the insured waive in writing prior to a loss any or all right of recovery against any party for losses covered by such policy or policies. Tenant further waives any claims it may have against Landlord to recover from Landlord any deductible or self-insured amounts required to be paid by Tenant under such policy or policies notwithstanding that such amounts may have been payable as a result of the negligence or fault of Landlord, its servants, agents or employees.

6.Landlord and Tenant hereby agree to advise the other promptly if the clauses to be included in their respective insurance policies pursuant to this Section cannot be obtained. Landlord and Tenant hereby also agree to notify each other promptly of any cancellation or change of the terms of any such policy which would affect such clauses.

7.Upon request from the other party from time to time, Landlord and Tenant shall provide the requesting party with a certificate of insurance or other reasonable evidence that Landlord or Tenant, as applicable, has in place the insurance required of it hereunder. Failure to provide a certificate of insurance and/or any other required documentation will not relieve Tenant of its obligations under this Article; furthermore, failure of Landlord to identify, object to, or otherwise Tenant of any discrepancy in such certificate shall not be deemed to be waiver of any Tenant insurance requirement set forth in this Lease. The insurance coverages maintained by Tenant or Landlord required to be maintained by Tenant or Landlord under this Lease are not intended to limit any of Tenant’s or Landlord’s indemnity obligations or other liabilities of Tenant or Landlord under this Lease.

ARTICLE 11Condemnation

A.Total Taking. If the whole of the Premises shall be lawfully taken or condemned by any governmental authority for any public or quasi-public use or purpose, upon the date of title vesting in such proceeding, the Term shall terminate as fully and completely as if such date were the date

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set forth herein for the expiration of this Lease and Tenant shall forthwith quit, surrender and vacate the Premises without prejudice however to each of Landlord’s and Tenant’s rights and remedies against each other for any obligations under the provisions of this Lease which accrued prior to such termination, and any Rent owing shall be paid up to such date and any payments of Rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant within thirty (30) days after the termination of this Lease.

B.Partial Taking. If only a part of the Premises shall be so taken or condemned (such part being hereinafter the “Partial Taking Premises”): (1) upon the date of title vesting in such proceeding, the Term shall terminate with respect to the Partial Taking Premises and Tenant shall forthwith quit, surrender and vacate the Partial Taking Premises without prejudice, however, to each of Landlord’s and Tenant’s rights and remedies against the other for any obligations under the provisions of this Lease in effect with respect to the Partial Taking Premises which accrued prior to such termination, and any Rent owing in respect of the Partial Taking Premises shall be paid up to such date and any payments of Rent in respect of the Partial Taking Premises made by Tenant which were on account of any period subsequent to such date shall within thirty (30) days after the termination of this Lease with respect to the Partial Taking Premises be returned to Tenant; and (2) except as provided in Section 11(C) below, this Lease shall continue in full force and effect with respect to the balance of the Premises and from and after the date of such taking the Rent shall be reduced by the amount attributable to the Partial Taking Premises.

C.Termination Rights. If the Partial Taking Premises shall be more than twenty percent (20%) of the Premises, or if any other portion of the Building or the Land shall be taken or condemned which causes more than twenty percent (20%) of the Premises to be untenantable, Tenant shall have the right to terminate this Lease by giving to Landlord, within sixty (60) days following the date on which Tenant shall have received notice of the vesting of title, notice specifying a date for the termination thereof. Upon any termination pursuant to this Article 11, Tenant shall forthwith quit, surrender and vacate the Premises without prejudice, however, to each of Landlord’s and Tenant’s rights and remedies against the other under the provisions of this Lease in effect prior to such termination. Any Rent owing shall be paid up to such date and any payments of Rent made by Tenant which were on account of any period subsequent to such date shall be returned to Tenant within thirty (30) days after the termination of this Lease.

D.Interest in Awards. Notwithstanding any termination of the Lease, in the case of either a partial or complete taking or condemnation of the Premises, Tenant shall have the right to make an independent claim to the condemning authority for (i) Tenant’s moving and relocation expenses (if available under applicable Law), including the costs of temporary space, and (ii) Tenant’s personal property, trade fixtures and equipment, provided that Tenant is entitled pursuant to the terms of this Lease to remove such property, trade fixtures and equipment at the end of the Term and that portion of Tenant’s leasehold improvements funded by Tenant. Tenant shall have no right to make any such claim with respect to the value of the unexpired portion of the Term of this Lease or the Initial Tenant Work to the extent funded by Landlord, all of which shall be deemed to be Landlord’s property for such condemnation purposes.

E.Temporary Taking. If the temporary use or occupancy of all or any part of the Premises shall be lawfully taken or condemned by any governmental authorityfor any public or quasi-public use or purpose during the Term (any such taking being herein called a “temporary taking”), then (i) this Lease shall be and remain unaffected by such taking, except that Base Rent and Additional Rent shall be proportionately abated with respect to the period for which all or any portion of the Premises is so taken, (ii) Tenant shall be entitled, except as hereinafter set forth, to receive that portion of the award for such temporary taking which represents compensation for the use and occupancy of the Premises (except to the extent that Base Rent and Additional Rent shall have been abated),

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for the temporary taking of any improvements to the Premises made by or at the direction of Tenant, Tenant’s personal property, trade fixtures and equipment and for moving expenses and (iii) Landlord shall be entitled to receive that portion of the award, if any, for such temporary taking which represents reimbursement for the rental abatement given Tenant as a result of such temporary taking and for the cost of restoring the Premises, but only to the extent Landlord is obligated to pay such cost, pursuant to Section 11(F) hereof. If the period of temporary use or occupancy shall extend beyond the Expiration Date, that part of the award which represents compensation for the use and occupancy of the Premises (or a part thereof) shall be divided between Landlord and Tenant so that Tenant shall receive so much thereof as represents the period up to and including such Expiration Date and Landlord shall receive so much thereof as represents the period after such Expiration Date.

F.Restoration. If any part of the Building or the Premises shall be acquired or condemned by eminent domain for any public or quasi-public use or purpose (including, without limitation, any temporary taking) and this Lease is not terminated as a result thereof, (i) Landlord, at its expense shall proceed with reasonable diligence to repair any damage to any portion of the Building not so taken and restore such portion of the Building to substantially its former condition, to the extent that the same may be feasible and so as to constitute an architecturally complete Building and cause the Premises to be ready for the installation of tenant improvements, and to enable Tenant to occupy the Premises, subject to completion therein of any required restoration of the Initial Tenant Work funded by Tenant and any other tenant improvement work or Alteration Work in the Premises by Tenant, and (ii) Tenant, at its expense, provided an award or awards will be sufficient for the purpose, shall proceed with reasonable diligence to repair any damage to any portion of the Tenant Work not so taken and restore such portion of the Tenant Work to substantially its former condition or such other condition as may be reasonably acceptable to Tenant and Landlord, to the extent that the same may be reasonably feasible.

ARTICLE 12Return of Possession and Decommissioning

A.    At the expiration or earlier termination of this Lease or Tenant’s right of possession, Tenant shall surrender possession of the Premises in good condition, ordinary wear and tear and damage by fire, other occurrence or condemnation which Tenant is not obligated to repair excepted (it being agreed that Tenant shall not be responsible for repairing or returning to good condition any items that Landlord is required to maintain or repair under this Lease, unless Tenant’s negligence or willful misconduct was the cause for such item not being in good condition), and shall surrender all keys and any key cards, to Landlord, and advise Landlord as to the combination of any locks or vaults then remaining in the Premises, and shall remove all of Tenant’s trade fixtures and personal property. All improvements and fixtures in or upon the Premises (except trade fixtures and personal property belonging to Tenant) that are not removed by Tenant prior to the termination or expiration of this Lease, whether installed by Tenant or Landlord, shall be Landlord’s property and shall remain upon the Premises, all without compensation, allowance or credit to Tenant. Any trade fixtures and personal property of Tenant not removed from the Premises on or before the expiration or earlier termination of the Term shall be conclusively presumed to have been abandoned and conveyed by Tenant to Landlord, without payment by Landlord or warranty of representation by Tenant, and Landlord may thereafter remove, store, sell or otherwise dispose of such trade fixtures and personal property and Tenant shall reimburse Landlord on demand for any net costs incurred by Landlord in doing so. Notwithstanding anything to the contrary contained herein, any and all leasehold improvements which are a part of Initial Tenant Work or any Alteration Work shall be the property of Landlord and shall not be removed by Tenant upon surrender of possession of the Premises, except to the extent removal of any portion of the Tenant Work or Alteration Work is required as provided in Article 7. Except as expressly provided to the contrary in this Article 12 or in Article 7 Tenant shall have no obligation to

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pay any amounts to Landlord for the demolition, removal or restoration of the leasehold improvements in the Premises following the expiration or termination of this Lease.

B.    Within fifteen (15) days after Tenant’s surrender of possession of any part of the Premises, Tenant shall provide Landlord with (a) a facility decommissioning and Hazardous Materials closure plan for the Premises (“Exit Survey”) prepared by an independent third party reasonably acceptable to Landlord, (b) written evidence of any appropriate governmental releases obtained by Tenant in accordance with Applicable Laws, including laws pertaining to the surrender of the Premises, and (c) proof that the Premises have been decommissioned in material compliance with American National Standards Institute (“ANSI”) Publication Z9.11-2016 (entitled “Laboratory Decommissioning”) or any successor standards published by ANSI or any successor organization (or, if ANSI and its successors no longer exist, a similar entity publishing similar standards) (or such other standard reasonably approved by Landlord). Landlord hereby grants Tenant and its agents, employees and consultants access to the Premises upon reasonable prior notice and with Landlord present (at Landlord’s option) during Normal Hours for fifteen (15) days after the Expiration Date solely for purposes of the foregoing, which access may be conditioned upon Landlord’s receipt of evidence of reasonable insurance coverage from those parties accessing the Premises naming the Landlord Protected Parties as additional insureds. In addition, Tenant agrees to remain responsible after the surrender of the Premises for the remediation of any uncorrected current Recognized Environmental Conditions as defined by the ANSI standard caused by Tenant (or any party accessing or occupying the Premises through Tenant) during the Term and in compliance with any recommendations set forth in the Exit Survey. Tenant’s obligations under this Section shall survive the expiration or earlier termination of this Lease.

ARTICLE 13Holding Over

Unless Landlord expressly agrees otherwise in writing, if Tenant shall retain possession of the Premises or any part thereof after the expiration or earlier termination of this Lease, Tenant shall pay Landlord (i) for the first thirty (30) days of such holding over, one hundred fifty percent (150%) of the Base Rent and Additional Rent applicable immediately prior thereto and (ii) for the period from and after the thirty-first (31^st) day of such holding over, two hundred percent (200%) of such Base Rent and Additional Rent, in each case prorated on a per diem basis for each day of such holding over. In addition, Tenant shall also be liable to Landlord for any direct and/or consequential damages, costs and expenses incurred as a result of any such holdover, including without limitation any losses from Landlord’s inability to timely fulfill its obligations to any subsequent tenants of the Premises or portions thereof. Landlord hereby waives and agrees not to pursue any right Landlord might otherwise have at law to treat any holdover as an extension of this lease for any period other than a month to month lease. The foregoing provisions shall not serve as permission for Tenant to holdover, nor serve to extend the Term (although after commencement of said holdover Tenant shall remain bound to comply with all provisions of this Lease until Tenant vacates the Premises, and shall be subject to the provisions of Article 12 hereof). Tenant shall not be entitled to any renewal, right of first offer or expansion rights contained in this Lease or in any amendments hereto during any such holdover period. The provisions of this Section shall not operate as a waiver by Landlord of any right of re-entry herein provided.

ARTICLE 14No Waiver

No provision of this Lease will be deemed waived by either Landlord or Tenant unless such waiver is express and is set forth in a written document signed by Landlord or Tenant, as the case may be. No waiver shall be implied by delay or any other act or omission of either Landlord or Tenant. No waiver by either Landlord or Tenant of any provision of this Lease shall be deemed a waiver of

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such provision with respect to any subsequent matter relating to such provision, and the consent or approval of Landlord or Tenant, as applicable, respecting any action by Tenant or Landlord, as applicable, shall not constitute a waiver of any requirement for obtaining the consent or approval respecting any subsequent action. Payment of Rent by Tenant or acceptance thereof by Landlord shall not constitute a waiver of any breach by Landlord or Tenant, as applicable, of any term or provision of this Lease. No acceptance of a lesser amount than the Rent herein stipulated shall be deemed a waiver of Landlord’s right to receive the full amount due, nor shall any endorsement or statement on any check or payment or any letter accompanying such check or payment be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the full amount due. The acceptance of Rent or of the performance of any other term or provision from any person or entity other than Tenant, including any Transferee (as hereinafter defined), shall not constitute a waiver of any right that Landlord may have hereunder to approve any Transfer (as hereinafter defined).

ARTICLE 15Attorneys’ Fees and Jury Trial

In the event of any litigation between Landlord and Tenant, the prevailing party shall be entitled to obtain, as part of the judgment, all reasonable attorneys’ fees, costs and expenses incurred in connection with such litigation, except as may be limited by applicable Law. In the interest of obtaining a speedier and less costly hearing of any dispute, Landlord and Tenant hereby each irrevocably waive the right to trial by jury in any action, proceeding or counterclaim brought by either of them against the other on any matters whatsoever arising out of or in any way connected with this Lease, the relationship of Landlord and Tenant, or Tenant’s use or occupancy of the Premises.

ARTICLE 16Rent Taxes and Other Taxes

A.    If after the effective date of this Lease any governmental authority imposes any sales or rent tax on the Rent paid under this Lease (as distinguished from income taxes), Tenant shall be responsible for the payment of the same.

B.    Landlord shall timely pay all real estate taxes and assessments levied against the Premises so as to avoid any loss or forfeiture of Tenant’s interests hereunder.

C.     Tenant shall pay prior to delinquency all taxes, charges or other governmental impositions assessed against or levied upon Tenant’s fixtures, furnishings, equipment and personal property located in the Premises (as distinguished from any Taxes on the Building or the improvements therein).

ARTICLE 17Entry by Landlord

Landlord may enter the Premises at all reasonable times (and Tenant shall have the right to have its representative present) as long as Landlord provides Tenant with reasonable prior notice thereof (except in the case of an emergency in which case Landlord shall attempt to notify Tenant as promptly as practicable but no notice shall be required) and coordinates such entry with Tenant so as not to unreasonably disrupt Tenant’s business to: (A) inspect the same; (B) exhibit the same to prospective purchasers, mortgagees or tenants; (C) supply any services required or permitted to be provided by Landlord to Tenant under this Lease; (D) perform such maintenance or make such repairs in or to the Building or the Premises as Landlord is required to perform or make pursuant to the terms hereof; and (E) make such improvements to any portion of the Building other than the Premises as

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Landlord desires to make, and for such purposes enter upon the Premises, provided that same do not violate any provision of this Lease. All such work shall be done by Landlord as expeditiously as reasonably possible and so as to cause as little interference to Tenant as is reasonably practicable. Tenant waives any claim for special or consequential damages of whatever kind for any injury to, or inconvenience or unreasonable interference with, Tenant’s business, occupancy or quiet enjoyment of the Premises resulting from Landlord’s exercise of the foregoing rights, absent Landlord’s gross negligence or willful misconduct. Subject to the terms and conditions of this Article. Landlord shall at all times have and retain a key with which to unlock all of the doors in, on or about the Premises (excluding Tenant’s vaults, safes and similar areas designated from time to time by Tenant in writing to Landlord), and Landlord shall have the right to use reasonable means to open such doors to obtain entry to the Premises, and any entry to the Premises obtained by Landlord by any such means shall not under any circumstances be deemed or construed to be a forcible or unlawful entry into or a detainer of the Premises or an eviction, actual or constructive, of Tenant from any part of the Premises. Such entry by Landlord shall not act as a termination of Tenant’s obligations under this Lease. Notwithstanding anything contained herein to the contrary, Tenant reserves the right, upon reasonable advance notice thereof to Landlord from time to time, to designate one or more reasonable areas of the Premises as “secure areas” in which Landlord’s access to such areas shall be prohibited (absent an emergency) or subject to a protocol reasonably established by Tenant to preserve trade secrets, proprietary information and other confidential and to address safety concerns, including requiring a Tenant representative to accompany Landlord during such access.

ARTICLE 18Subordination and Attornment

A.Subordination. Tenant agrees that this Lease and the rights of Tenant hereunder are and shall be subject and subordinate to: (i) the Existing Superior Mortgagee (as defined below) and, subject to the covenants of Landlord and conditions under this Section 18, all existing or future mortgages, deeds of trust, ground leases or master leases encumbering all or any part of the Property; (ii) all past and future advances made thereunder; and (iii) all renewals, modifications, replacements and extensions of any such mortgages, deeds of trust, ground leases or master leases (“Superior Mortgage” or “Superior Lease”), with each mortgagee or lessor thereunder being referred to as a “Superior Mortgagee” or “Superior Lessor”, as the case may be). Any Superior Mortgagee and any Superior Lessor shall have the right to elect, by written notice given to Tenant, to have this Lease made superior in whole or in part to its own Superior Mortgage or Superior Lease. If more than one Superior Mortgagee or Superior Lessor sends conflicting notices, those of the more senior Superior Mortgagee or Superior Lessor will control. Notwithstanding the foregoing to the contrary, (a) Landlord represents and warrants to Tenant that, as of the date of this Lease, Delphi Cre Funding LLC, a Delaware limited liability company, as Administrative Agent for Lenders, is the only Superior Mortgagee (the “Existing Superior Mortgagee”) and its mortgage dated October 30, 2018 is the only existing Superior Mortgage and there is no existing Superior Lease, (b) Landlord agrees to cause the cause the Existing Superior Mortgage to enter into with Tenant, and Tenant agrees to execute and deliver, a Subordination, Non-Disturbance and Attornment Agreement in the case of a Superior Mortgage or a Recognition and Non-Disturbance Agreement, in the case of a Superior Lease (in either case, an “SNDA“) with respect to such Superior Mortgage or Superior Lease in the form attached hereto as Exhibit J or in such other form as may be reasonably satisfactory to Tenant and such Superior Mortgagee or Superior Lessor, as applicable. Tenant shall execute an SNDA in the form required by this Section and return same to the requesting holder of the Superior Mortgage or lessor under the Superior Lease within ten (10) business days after its receipt thereof. Any actual, reasonable, out-of-pocket costs incurred by Landlord in connection with the preparation and negotiation of an SNDA with any Superior Mortgagee where Tenant is unwilling to accept an SNDA that is not in form and substance attached hereto as Exhibit J shall be borne by Tenant.

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B.Attornment. If the interest of Landlord under this Lease shall be transferred to any mortgagee under a Superior Mortgage or lessor under a Superior Lease, or other purchaser or person taking title to the Property by reason of the foreclosure of any Superior Mortgage or deed in lieu of foreclosure or termination of any Superior Lease (any such person being sometimes referred to as “Successor Landlord“), Tenant shall, subject to any applicable SNDA, be bound to such Successor Landlord under all of the terms, covenants and conditions of this Lease for the balance of the Term remaining and any extensions or renewals thereof which may be effected in accordance with any option therefor in this Lease, with the same force and effect as if the Successor Landlord were the landlord under this Lease, and Tenant shall, subject to any applicable SNDA, attorn to and recognize as Tenant’s landlord under this Lease such Successor Landlord, said attornment to be effective and self-operative without the execution of any further instruments upon the Successor Landlord’s succeeding to the interest of Landlord under this Lease and assuming the obligations of Landlord hereunder provided that such Successor Landlord shall thereby be deemed to have agreed to be subject to all of Tenant’s rights under this Lease, including, without limitation, Tenant’s rights of quiet and exclusive use and enjoyment of the Premises, and to recognize Tenant and all of its rights under this Lease and to assume all of Landlord’s obligations under this Lease.

ARTICLE 19Estoppel Certificate

Tenant agrees that, from time to time upon written request by Landlord, Tenant shall (within ten (10) business days after receipt of such request) execute and deliver to Landlord a written certificate certifying: (i) that this Lease is unmodified and in full force and effect (or if there have been modifications, a description of such modifications and that this Lease as modified is in full force and effect); (ii) the dates to which Rent has been paid; (iii) that Tenant is in possession of the Premises, if that is the case; (iv) to Tenant’s knowledge, that Landlord is not in default under this Lease, or, if Tenant believes Landlord is in default, the nature thereof in detail; (v) to Tenant’s knowledge, that Tenant has no off‑sets or defenses to the performance of its obligations under this Lease (or if Tenant believes there are any off‑sets or defenses, a full and complete explanation thereof); and (vi) such additional matters as may be reasonably requested by Landlord. Any estoppel certificate delivered pursuant to this Article may be relied upon by the party to whom it is addressed but only so as to estop Tenant from making any claims to the contrary, and the estoppel certificate may (without limiting the efficacy of the foregoing) so specifically state.

ARTICLE 20Assignment and Subletting

A.Transfers.

1.Except as otherwise provided in this Article, Tenant shall not have the right, without the prior written consent of Landlord, to: (a) mortgage, pledge, hypothecate, encumber, permit any lien to attach to, or otherwise transfer, directly or indirectly, this Lease or any interest hereunder, by operation of law or otherwise; (b) assign this Lease or sublet the Premises or any part thereof; or (c) otherwise permit the use of the Premises by any persons other than Tenant (each of the foregoing is herein sometimes referred to as a “Transfer” and any person to whom any Transfer is made or sought to be made is herein sometimes referred to as a “Transferee”).

2.If Tenant desires to consummate any Transfer with respect to which Landlord’s consent is required pursuant to the terms hereof, Tenant shall notify Landlord in writing of the material terms and conditions of such Transfer (each a “Transfer Request”) including, without limitation: (a) the proposed effective date of such Transfer (which shall not be less than fifteen (15) business days after the date of the Transfer Request); (b) in the case of a sublease, the portion of the Premises proposed

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to be Transferred (the “SubjectSpace”); (c) the proposed rent or other consideration therefor; and (d) the name and address of the proposed Transferee. The Transfer Request shall be accompanied by a copy of the proposed document or documents effecting the proposed Transfer and, in the case of an assignment, the most recent financial statements of the proposed Transferee. Such financial statements shall be certified by an officer, partner, owner or independent auditor of the proposed Transferee, to the extent certified statements are available to Tenant. Tenant shall also submit to Landlord such other information regarding the proposed Transfer and the proposed Transferee as Landlord may reasonably request. Any Transfer made in violation of this Article shall, at Landlord’s option, be deemed null, void and of no effect, and/or shall constitute a Default (as hereinafter defined).

B.Approval.

1.Subject to Landlord’s right to recapture under Section 20(E), if applicable, Landlord shall not unreasonably withhold or condition or delay its consent to any proposed Transfer. Within ten (10) business days after delivery of any Transfer Request, Landlord shall: (a) grant consent to the proposed Transfer; or (b) notify Tenant that Landlord withholds its consent to the proposed Transfer, which notice shall specify Landlord’s reasons for withholding such consent.

2.Tenant agrees that Landlord shall be acting reasonably in withholding its consent, when such consent is required hereunder, if any one or more of the following applies: (a) the Transferee is of a character or reputation or engaged in a business which will damage the reputation of the Building or is inconsistent with the type of tenants found in Comparable Buildings; (b) the Transferee intends to use the Premises or any portion thereof for purposes which are not permitted under this Lease or purposes that are expressly prohibited for any other tenant in the Building under another tenant’s lease in the Building; (c) the Transferee is on another Building tenant’s list of prohibited users pursuant to such tenant’s lease; (d) the Transferee is a governmental or quasi-governmental agency or instrumentality; (e) there exists an Event of Default at the time Tenant requests consent to the proposed Transfer; (f) the Transferee is not a party of reasonable financial worth and/or financial stability in light of the responsibilities to be undertaken in connection with the Transfer on the date consent is requested; (g) the Transferee is an existing or prospective tenant of the Building (and there is other similar vacant space available in the Building); or (h) the proposed transferee, assignee or sublessee is subject to a material enforcement order issued by any Governmental Authority in connection with the use, disposal or storage of Hazardous Materials.

3.Tenant agrees to pay to Landlord, within thirty (30) days after demand therefor, the actual, reasonable, out-of-pocket legal, architectural and engineering costs incurred by Landlord in connection with any Transfer (other than a Permitted Transfer) requested by Tenant, whether or not Landlord consents thereto, provided that any such legal costs shall not exceed $5,000 per transaction.

C.Transfer Premium. If Landlord consents to any Transfer in the nature of a sublease or an assignment (other than a Permitted Transfer), Tenant, contemporaneously with Tenant’s delivery of a fully executed duplicate original of the document or documents effecting such Transfer, shall deliver to Landlord a certification (the “Transfer Premium Certificate”) of the amount of any consideration to be received by Tenant that is attributable to such Transfer. Except in the case of a Permitted Transfer, Landlord shall have the right, but not the obligation, to require Tenant to pay to Landlord fifty percent (50%) of any Net Transfer Premium (as hereinafter defined) within thirty (30) days after same is received and collected by Tenant from time to time. As used herein, “Net Transfer Premium” shall mean, with respect to any Transfer, the amount of any consideration received from any Transferee in consideration for such Transfer less: (i) in the case of a subletting, all Rent payable under this Lease in respect of the Subject Space during the term of such sublease; and (ii) Transfer Costs (as hereinafter defined). As used herein, “Transfer Costs” with respect to any Transfer shall

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mean: (a) any allowances or other economic concessions (including free rent periods); (b) costs of alterations made to the Premises (including without limitation costs of dividing the Premises and creating common corridors); (c)  reasonable brokerage commissions and reasonable legal fees; and (d) advertising and marketing costs. If part of the consideration for such Transfer shall be payable other than in cash, Landlord’s share of such non-cash consideration shall be in such form as is reasonably satisfactory to Landlord and to Tenant. For the avoidance of doubt, no Transfer Premium shall be due or payable with respect to any Permitted Transfer.

D.Subordination of Subleases. Any sublease hereunder shall be subject and subordinate to the provisions of this Lease, and if this Lease shall be terminated during the term of any sublease, Landlord shall have the right to: (i) treat such sublease as having been canceled effective as of the date this Lease shall terminate and if such subtenant shall fail to vacate the Subject Space on or before such date, to repossess the Subject Space by any lawful means; or (ii) require that such subtenant attorn to and recognize Landlord as its landlord under any such sublease. If there exists an Event of Default, Landlord is hereby irrevocably authorized, as Tenant’s agent, to deliver a notice to any Transferee (with a copy to Tenant), directing such Transferee to make all payments under or in connection with the Transfer directly to Landlord (which payment or payments Landlord shall apply first to any Rent then due and payable to Landlord, then to any arrears under this Lease, and any excess in such payment over Tenant’s then current obligations or arrears shall be promptly delivered to Tenant) until such time as such Transferee receives notice from either Landlord or Tenant that such Event of Default has been cured (and Landlord and Tenant each agree that a copy of such notice shall be simultaneously delivered to the other party).

E.Landlord’s Recapture Right. Except with respect to Permitted Transfers, in the event Tenant at any time desires to assign this Lease or to sublet any portion of the Premises and if such sublease would cause more than fifty percent (50%) of the Premises to be subject to subleases for all or substantially all of the remainder of the Term, Landlord shall have the right, to be exercised by giving written notice to Tenant within fifteen (15) business days after receipt of Tenant’s notice requesting Landlord’s exercise or waiver of such right, to recapture the space then proposed to be assigned or sublet as described in Tenant’s notice and such recapture notice shall, if given, cancel and terminate this Lease with respect to the space therein described as of the effective date of such assignment or sublease as stated in Tenant’s notice. Tenant’s notice may be given prior to Tenant locating an assignee or subtenant. If Landlord fails to so notify Tenant within such 15 business-day period, Landlord shall be deemed to have elected not to exercise such recapture right and Tenant may, after obtaining Landlord’s approval thereof to the extent required in Section 20(B), enter into an assignment or sublease as specified in Tenant’s notice not later than nine (9) months after the giving of Tenant’s notice or, if Tenant fails to do so, such recapture right shall be reinstated. If Tenant’s notice shall cover all of the Premises, and Landlord shall have exercised its foregoing recapture right, the Term of this Lease shall expire and end on the date stated in Tenant’s notice as fully and completely as if the date had been herein definitely fixed for the expiration of the Term. If, however, this Lease shall be cancelled with respect to less than the entire Premises, Base Rent and Tenant’s Pro Rata Share shall be adjusted to reflect only those portions of the Premises retained by Tenant as described in this Lease, and this Lease as so amended shall continue thereafter in full force and effect. Notwithstanding anything to the contrary contained in this subsection E., if Landlord delivers written notice to Tenant exercising its right of recapture and Tenant delivers written notice to Landlord within five (5) business days after Tenant’s receipt of Landlord’s recapture notice withdrawing Tenant’s request for assignment or sublease, then Landlord’s recapture notice shall be deemed null and void and of no further force or effect.

F.Non-Waiver. The consent by Landlord to any Transfer shall not relieve Tenant, or any person claiming through or by Tenant, of the obligation to obtain the consent of Landlord, pursuant to this Article, to any further Transfer (other than a Permitted Transfer). Landlord’s collection of Rent

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from any Transferee during the continuance of an Event of Default in accordance with the provisions of Section 20(D) hereof shall not be deemed a waiver of any of Landlord’s rights under this Article, an acceptance of such Transferee as Tenant, or a release of Tenant from the performance of Tenant’s obligations under this Lease. No Transfer (including without limitation any Permitted Transfer) shall release or discharge Tenant of or from any liability, whether past, present or future, under this Lease, and Tenant shall continue to be fully liable hereunder, provided that in the case of a recapture of the Premises pursuant to Paragraph E. immediately above, Tenant shall be released of liability with respect to the portion of the Premises recaptured from and after the earlier of (x) the date that Tenant has vacated such portion of the Premises and Landlord has taken over such portion of the Premises and (y) the later of the date Tenant vacates such portion of the Premises or the date Tenant’s lease of such portion of the Premises expires.

G.Permitted Transfers. Notwithstanding anything contained in this Article to the contrary:

1.Tenant shall have the right, without Landlord’s prior consent (and without triggering any recapture right of Landlord under Section E above) but subject to the terms herein contained, to assign this Lease or any interest herein to, sublease all or any portion of the Premises to or permit the use of all or any portion of the Premises by: (i) any successor to Tenant or any transferee resulting from a merger, reorganization, consolidation, stock offering or other transaction with Tenant or such transferee, including any sale of all or substantially all of Tenant’s assets or shares in Tenant if Tenant is a corporation, provided that the net worth of such successor is not less than the net worth of Tenant immediately prior to such merger, reorganization, consolidation or other transaction; or (ii) any Affiliate of Tenant or any such transferee provided in (i) above (each of the foregoing is herein sometimes referred to as a “Permitted Transfer” and any person to whom any Permitted Transfer is made is herein sometimes referred to as a “Permitted Transferee”), provided that any such Permitted Transferee shall be bound by all of the terms of this Lease, including without limitation the restrictions on Tenant's use of the Premises set forth in Article 5 above. As used herein, an “Affiliate” shall mean a person or entity that directly or indirectly through one or more intermediaries controls, is controlled by, or is under common control with Tenant (“control” being interpreted as the ownership of more than ten percent (10%) of the interests in such entity or the possession of the power to direct the management and policies of such entity or the distribution of its profits).

2.Tenant shall notify Landlord of a Permitted Transfer as soon as reasonably possible (and in no event later than the effective date thereof), and such notice shall include information establishing the relationship between Tenant and the Permitted Transferee. Notwithstanding anything contained in this Section to the contrary: (a) such Permitted Transferee’s use of the Premises shall comply with the requirements of the Lease; (b) any assignee of this Lease shall expressly assume all of Tenant’s obligations and liabilities hereunder to thereafter be performed without releasing Tenant; (c) any sublease shall by its terms be expressly subordinate to all of the terms, covenants and conditions of this Lease; and (d) Tenant shall deliver to Landlord on or prior to the effective date an original executed copy of all documentation effecting such Transfer.

ARTICLE 21Certain Rights Reserved By Landlord

Landlord shall have the following rights, exercisable without notice (except as herein expressly provided) and without effecting an eviction, constructive or actual, of Tenant’s possession of the Premises, giving rise to any claim for set-off or abatement of Rent and without being liable to Tenant (except insofar as same constitutes a breach of an express provision of this Lease or, subject to Section 10(C) hereof, involves the negligence or willful misconduct of Landlord or its agents or employees):

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A.To change the name of the Building or the Building’s street address after written notice to Tenant; provided that Landlord shall reimburse Tenant for the actual, reasonable, out-of-pocket costs of any stationary or printed materials that Tenant has on hand as of the date of any such change (not to exceed $5,000.00 in the aggregate).

B.To install, affix and maintain any and all signs on the exterior and interior of the Building.

C.To reasonably approve, prior to installation, all types of window shades, blinds, drapes and similar window coverings, which approval shall not be unreasonably withheld, conditioned or delayed.

D.To reasonably approve, prior to installation, all internal lighting that may be visible from the exterior of the Building, which approval shall not be unreasonably withheld, conditioned or delayed.

E.To decorate or to make alterations, additions or improvements, structural or otherwise, in or to the Property or any part thereof (outside of the Premises), provided that access to, or Tenant’s use or occupancy of, the Premises or the Building is not materially and adversely affected thereby. In connection with such matters, or with any other repairs, maintenance, improvements or alterations, in or about the Property (outside of the Premises), Landlord may temporarily erect scaffolding and other structures reasonably required (provided that no such scaffolding or structures shall be permitted to temporarily obstruct Tenant’s windows for more than the period reasonably required to complete such work) and may temporarily close public entry ways, other public areas, restrooms, stairways or corridors, provided that such closure or other activities contemplated herein do not unreasonably interfere with Tenant’s use and enjoyment of the Premises (including, without limitation, materially interfering with Tenant’s access to the Premises). Landlord shall take all reasonable steps to minimize any interference with Tenant’s operations (or access to the Premises) resulting from any actions taken by Landlord under this Section. Landlord agrees to promptly repair any damage and restore the Premises to their condition prior to the actions taken pursuant to this Section.

F.To have and retain paramount title to the Premises and the Property free and clear of any act of Tenant purporting to burden or encumber it beyond this Lease.

G.To lease any space in the Property not leased to Tenant to any person or entity.

H.To grant to anyone the exclusive right to use any portion of the Property for any specified purpose, provided that any such exclusive right shall not bind Tenant, including, without limitation, shall not operate to exclude Tenant from any use of the Premises otherwise allowed under this Lease.

I.To approve (which approval shall not be unreasonably withheld, conditioned or delayed) the weight, size and location of safes and other heavy equipment and bulky articles in and about the Premises and the Building (so as not to overload the floors of the Premises), and to require all such items to be moved into and out of the Building and Premises only at such times and in such manner as Landlord shall reasonably direct in writing. Subject to the waiver of subrogation set forth in Section 10(C) hereof, any damages done to the Building, the Premises or to other tenants in the Building by Tenant in the course of moving safes, furniture and other items, or from overloading floors in any way, shall be paid by Tenant. Furniture, boxes, merchandise or other bulky articles shall be transported within the Building only upon or by vehicles equipped with rubber tires and shall be carried only in the freight elevators and in the case of bulk deliveries at such times as the management of the Building shall require pursuant to reasonable rules promulgated and consistently applied to all tenants of the Building. Movements of Tenant’s property into or out of the Building and within the Property are entirely at the risk and responsibility of Tenant.

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J.To limit access to the Building after normal working hours and on Saturdays, Sundays and holidays subject, however, to Tenant’s right to admittance as set forth herein under such reasonable regulations as Landlord may prescribe from time to time, which may include by way of example but not of limitation, that persons entering or leaving the Building identify themselves to Building personnel by registration or otherwise and that said persons establish their right to enter or leave the Building. Notwithstanding the foregoing, Tenant, subject to the other terms and conditions hereof (and subject to any emergency, fire or other occurrence, or other situation beyond the reasonable control of Landlord), shall have access to the Building and the Premises twenty-four (24) hours per day, seven days per week, fifty-two weeks per year (including holidays), and services shall be delivered to the Premises at all times and to the extent described in Article 6 hereof.

K.To limit or prevent access to the Property, shut down elevator service, activate elevator emergency controls, or otherwise take such action or preventative measures reasonably necessary for the safety of tenants or other occupants of the Property or the protection of the Property and other property located thereon or therein, in case of fire, invasion, insurrection, riot, war or other condition that poses a material threat to the health or safety of the tenants or the other occupants of the Property, or the material threat thereof.

L.To install and maintain pipes, ducts, conduits, wires and structural elements in the Premises which serve other parts of the Building provided that: (i) no location outside the Premises is commercially reasonable, (ii) such installations and maintenance shall not unreasonably or materially interfere with the ability of Tenant to conduct its business and shall not be conducted during working hours; (iii) the location of any such installations and the timing, means and methods of implementing the same shall be subject to the reasonable approval of Tenant after the Delivery Date; and (iv) any damage caused thereby to the Premises or Tenant’s property is promptly repaired and the Premises restored to the condition existing prior to such installation or maintenance, all at Landlord’s expense.

Landlord may exercise any or all of the foregoing rights hereby reserved, subject at all times to the provisions of Article 6 hereof (to the extent applicable).

ARTICLE 22Landlord’s Remedies

A.Default. The occurrence of any one or more of the following events shall constitute a default by Tenant, which if not cured within any applicable time permitted for cure herein, shall constitute an “Event of Default” or “Default” by Tenant which shall give rise to Landlord’s remedies set forth in Section 22(B) hereof: (i) failure by Tenant to make when due any payment of Rent, unless such failure is cured within five (5) business days after Landlord shall have delivered to Tenant a notice specifying such default; provided that if at any time Landlord shall have delivered to Tenant notices twice in any twelve month period that Tenant failed to timely make its recurring Rent payment, then thereafter for the balance of the Term it shall be an Event of Default if Tenant fails to make when due any payment of such recurring Rent within five (5) business days after the date on which it was due (without need of Landlord notice); (ii) failure by Tenant to observe or perform any of the terms or conditions of this Lease or the Rules to be observed or performed by Tenant other than as specified in clauses (i) or (viii) of this paragraph, unless such failure is cured within thirty (30) days after Landlord shall have delivered to Tenant a notice specifying such failure (provided that, if the nature of Tenant’s failure is such that more time is reasonably required to cure same or Tenant is delayed in or prevented from effecting such cure due to Unavoidable Delay, an Event of Default shall not exist if Tenant commences such cure within said thirty (30) day period and thereafter diligently pursues such cure to completion and in fact effects said cure within an additional period of one hundred twenty (120) days); (iii) the making by Tenant or any guarantor of Tenant's obligations under this Lease of any

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general assignment for the benefit of creditors; (iv) the filing by or against Tenant or any such guarantor of a petition to have Tenant or such guarantor adjudged a bankrupt under any bankruptcy or insolvency law, or the filing by or against Tenant or any such guarantor under the arrangement or insolvency provisions of the United States Bankruptcy Code or under the provisions of any Law of like import (unless, in the case of an involuntary petition filed against Tenant, the same is dismissed within ninety (90) days); (v) appointment of a trustee or receiver to take possession of substantially all of Tenant’s assets located on the Premises or of Tenant’s interest in this Lease or of substantially all of any such guarantor's assets, where possession is not restored to Tenant or such guarantor within ninety (90) days; (vi) attachment, execution or other judicial seizure of substantially all of Tenant’s assets located on the Premises or of Tenant’s interest in this Lease or of substantially all of any such guarantor's assets; or (vii) there occurs a Transfer of this Lease, or the Premises or any part thereof, in violation of Article 20 hereof. For the avoidance of doubt, references in this Lease to any “guarantor” shall not create an implication that any guaranty exists or is required under or in connection with this Lease.

The notice and cure periods provided herein are in lieu of, and not in addition to, any notice and cure periods provided by Law. To the extent that any of the foregoing notice periods provided for in this Article are greater than the notice periods required under any Law, such greater notice periods provided for herein shall substitute for such shorter notice periods required under such Law, and, to the extent not prohibited by such Law, any notices given pursuant to the terms hereof shall be deemed the notice required by any such Law.

B.    Remedies.

1.If an Event of Default occurs, Landlord shall have, in addition to those rights and remedies described in Section 22(C) hereof, the rights and remedies hereinafter set forth, any and all of which may be, except as otherwise expressly provided herein, exercised with or without further notice and with or without demand whatsoever, concurrently or successively, and at such time or times and in such order as Landlord may from time to time determine:

a)Landlord may terminate this Lease and Tenant’s right to possession of the Premises and repossess the Premises by detainer suit, summary proceedings or other lawful means, and recover from Tenant as damages an amount of money equal to the sum of:

(i)any accrued and unpaid Rent as of the date this Lease is terminated including interest at the Default Rate on any accrued and unpaid amount from the time due until the time paid, and

(ii)as liquidated damages for Tenant’s obligations under the Lease for unpaid Rent which would have accrued after the date this Lease is terminated, the net present value of any unpaid Rent which would have accrued after the date this Lease terminated during the balance of the then-current Term (i.e., through the then-current Expiration Date), less the net present value of the current market rate for the Premises for such period, after deducting from the current market rate for the Premises the Costs of Re-letting (as hereinafter defined) for such balance of the Term (such net amount not to be less than zero in any event, it being the intention of the parties that Landlord shall have no obligation to pay to Tenant or to offset against other sums Tenant owes to Landlord the excess, if any, of the net present value of current market rate over the net present value of said unpaid Rent).

For purposes of computing the amount of Rent herein that would have accrued after the date this Lease is terminated, Tenant’s Pro Rata Share of Taxes and Operating Expenses, shall be

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projected, based upon the average rate of increase, if any, in such items from the Commencement Date through the date this Lease is terminated. Net present value shall be computed on the basis of a discount rate (the “Applicable Rate”) equal to the then-current yield on United States Treasury obligations having a maturity approximately equal to the residue of the Term as reasonably determined by Landlord.

b)Landlord may terminate Tenant’s right of possession and repossess the Premises by detainer suit, summary proceedings or other lawful means, without terminating this Lease (and if applicable Law permits, and Landlord shall not have expressly terminated this Lease in writing, any termination shall be deemed a termination of Tenant’s right of possession only), and recover from Tenant as damages an amount of money equal to the sum of:

(i)any accrued and unpaid Rent as of the date possession is terminated, including interest at the Default Rate (as hereinafter defined) on any accrued and unpaid amount from the time due until the time paid, and

(ii)sums equal to unpaid Rent reserved hereunder, payable on the due dates specified herein commencing on the date possession is terminated and ending on the then current Expiration Date, less any Base Re-Letting Proceeds (as hereinafter defined) received by Landlord during such period.

2.Landlord may bring suit or suits for the recovery of Landlord’s damages, or any installments thereof, from time to time as the same accrue or after the same have accrued, and no suit or recovery of any portion due hereunder shall be deemed a waiver of Landlord’s right to collect all amounts to which Landlord is entitled hereunder, nor shall the same serve as any defense to any subsequent suit brought for any amount not theretofore reduced to judgment. Notwithstanding anything contained herein to the contrary, (a) Landlord shall have no right to accelerate rent and (b) Landlord shall not seek to recover any damages for payable and unpaid Rent following an Event of Default except as expressly set forth in and in accordance with Sections 22(B)(1)(a) and 22(B)(1)(b) above.

3.Without limiting the generality of Section 22(B)(1) hereof, an election by Landlord to terminate Tenant’s right to possession with respect to the Premises or exercise any one or more of its other rights and remedies, without terminating this Lease, shall not preclude a subsequent election by Landlord to terminate this Lease.

Except as otherwise expressly specified herein, Landlord shall have all of the rights and remedies available at law and in equity in addition to those rights and remedies specified herein, including without limitation the right to seek any declaratory, injunctive or other equitable relief.

B.Interest. Any damages payable pursuant to this Article that are not paid when due shall accrue interest from the due date at the Default Rate, until payment is received by Landlord. Such interest payments shall not be deemed consent by Landlord to late payments, nor a waiver of Landlord’s right to insist upon timely payments at any time, nor a waiver of any remedies to which Landlord is entitled as a result of the late payment of such damages.

C.Certain Definitions. For purposes hereof:

1.The term “Base Re-Letting Proceeds” shall mean the total amount of rent and other consideration paid by any Replacement Tenants, less all Costs of Re-Letting. If the Premises

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shall be re-let in combination with other space, then Base Re-Letting Proceeds shall be apportioned on a square foot of Rentable Area basis.

2.The term “Costs of Re-Letting” shall include without limitation, all reasonable actual out-of-pocket costs and expenses of re-letting the Premises incurred by Landlord for any repairs, maintenance, changes, alterations and improvements to the Premises, brokerage commissions, advertising costs, reasonable attorneys’ fees, any customary free rent periods or credits, tenant improvement allowances, take-over lease obligations and other customary economic incentives required to enter into leases with Replacement Tenants, amortized over the terms of such leases to such Replacement Tenants with interest at the Default Rate. Such Costs of Re-Letting shall be apportioned between costs and expenses allocable to the remaining balance of the Term (or, in the event of a subsequent termination of this Lease, what would have been the balance of the Term but for such termination) and the costs and expenses allocable to such portion of the term of the Replacement Tenant’s lease that extends beyond the remaining balance of the Term (or what would have been the remaining balance of the Term).

3.The term “Replacement Tenants” shall mean any person or entity to whom Landlord re-lets the Premises or any portion thereof pursuant to this Article provided that if such person is an affiliate of Landlord or such re-letting is not an arm’s-length transaction, rent with respect to such lease shall be deemed the greater of: (a) the rent actually paid by such person; or (b) the current market rate for the applicable space.

4.The term “Prime Rate” shall mean a rate per annum equal to the prime rate of interest announced from time to time by JPMorgan Chase Bank, N.A. or any successor thereto, such rate to change when and as such announced prime rate changes.

5.The term “Default Rate” shall mean the lower of: (a) the sum of: (i) the Prime Rate in effect from time to time; plus (ii) four percent (4%); or (b) the highest rate permitted by applicable Law.

B.Landlord Action. If Tenant at any time fails to make any payment or perform any other act on its part to be paid or performed under this Lease following notice and the expiration of any applicable grace or cure period (or in the case of an emergency immediately, but with notice to Tenant as promptly thereafter as practicable), Landlord may, but shall not be obligated to, make such payment or perform such other act to the extent Landlord may deem desirable after delivering to Tenant an additional notice (except in the event of an emergency, in which case no additional notice shall be required) stating in BOLD PRINT that if Tenant shall fail to make such payment or perform such act within fifteen (15) days after Landlord delivers such notice, Landlord shall make such payment or perform such act, which notice shall identify with reasonable specificity the nature of the payments or acts to be made or performed by Landlord, if applicable, any contractors to be engaged by Landlord (including a copy of the cost or bid proposal submitted to Landlord by such contractor (which proposal shall be the lowest of at least two bids obtained by Landlord from reputable union contractors capable of performing first-class work)). Tenant shall promptly reimburse Landlord within twenty (20) business days after demand for all reasonable actual, out-of-pocket expenses (including, without limitation, reasonable counsel’s fees and expenses) incurred in connection with Landlord’s payment or performance of Tenant’s obligations, and all such sums shall be deemed Additional Rent hereunder.

D.Other Matters. No re-entry or repossession, repairs, changes, alterations and additions, re-letting, acceptance of keys from Tenant, or any other action or omission by Landlord shall be construed as an election by Landlord to terminate this Lease or Tenant’s right to possession, or accept a surrender of the Premises, nor shall the same operate to release Tenant in whole or in part from any of Tenant’s obligations hereunder, unless express notice of such intention is sent by

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Landlord or its agent to Tenant. To the fullest extent permitted by Law, all rent and other consideration paid by any Replacement Tenant shall be applied: first, to the Costs of Re-Letting apportionable to the Premises and allocable to the remaining balance of the Term (or what would have been the balance of the Term but for termination of this Lease pursuant to this Article), second, to the payment of any Rent payable prior to the date Landlord recovers possession of the Premises from Tenant; third, to the damages payable by Tenant to Landlord pursuant to this Article, as the same become due, and any remaining sums shall be retained by Landlord. Landlord may apply payments received from Tenant to any obligations of Tenant then accrued, without regard to such obligations as may be designated by Tenant. The times set forth herein for the curing of Events of Default by Tenant are of the essence of this Lease. Tenant hereby irrevocably waives any right otherwise available under any Law to redeem or reinstate this Lease.

E.Duty to Mitigate. Landlord shall use commercially reasonable efforts to mitigate its damages by attempting to re-let all or any part of the Premises to a Replacement Tenant, for such rent and upon such terms as shall be satisfactory to Landlord (including the right to re-let the Premises or a portion thereof for a term greater or lesser than that remaining under the Term of this Lease, the right to re-let the Premises as a part of a larger area and the right to change the character or use made of the Premises). For the purpose of such re-letting, Landlord shall have the right to decorate or to make any repairs, changes, alterations or additions in or to the Premises that may be necessary in connection with any re-letting or proposed re-letting to any Replacement Tenant.

ARTICLE 23Landlord Event of Default

A.    The occurrence of any one or more of the following events shall constitute a default by Landlord, which if not cured within any applicable time permitted for cure below, shall constitute a “Landlord Event of Default“ or a “Landlord Default“ and shall give rise to Tenant’s remedies set forth herein: (i) failure by Landlord to make when due any payment to Tenant, unless such failure is cured within ten (10) business days after Tenant shall have delivered to Landlord a written notice specifying such Landlord Default; or (ii) failure by Landlord to observe or perform any of the terms or conditions of this Lease to be observed or performed by Landlord other than the payment of money, unless such failure is cured within thirty (30) days after Tenant shall have delivered to Landlord a written notice specifying such failure (provided that, if the nature of Landlord’s failure is such that more time is reasonably required to cure same or Landlord is delayed in or prevented from effecting such cure due to Unavoidable Delay or Tenant Delay, a Landlord Event of Default shall not be deemed to have occurred if Landlord commences such cure within said thirty (30) day period and thereafter diligently pursues such cure to completion and in fact effects said cure within an additional period of one hundred twenty (120) days), subject to extension for Unavoidable Delay or Tenant Delay.

B.    If a Landlord Event of Default occurs, in addition to those other rights and remedies expressly specified herein, Tenant shall have all of the rights and remedies available at law and in equity, except as otherwise expressly limited herein, including without limitation the right to seek any declaratory, injunctive or other equitable relief, any and all of which rights and remedies may be exercised, except as otherwise expressly provided herein, with or without further notice and with or without demand whatsoever, concurrently or successively, and at such time or times and in such order as Tenant may from time to time determine, subject to the provisions of this Lease and the terms of any SNDA.

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ARTICLE 24Conveyance by Landlord; Liability of Landlord and Tenant

A.If any Landlord hereunder (“Existing Landlord”) shall convey or otherwise transfer the Building or the Property to a bona‑fide, independent third‑party, person or entity (“Landlord’s Transferee”), effective upon the date of such conveyance or transfer: (i) Landlord’s Transferee shall become landlord hereunder and shall be deemed to have fully assumed and be liable for all obligations of this Lease to be performed by the Landlord hereunder which first arise after such date, except that Landlord’s Transferee shall be obligated to cure any default of the Landlord under this Lease that is continuing after such date; (ii) Tenant shall attorn to Landlord’s Transferee; and (iii) such Existing Landlord shall, thereafter, be free of all liabilities and obligations hereunder which first arise after such date, provided that Landlord’s Transferee shall have expressly in writing assumed the Existing Landlord’s liabilities and obligations hereunder first arising after such date. Nothing herein shall be construed to restrict or prevent any conveyance or transfer by an Existing Landlord.

B.It is expressly understood and agreed by Tenant that any liability of Landlord for damages for breach or nonperformance by Landlord of Landlord’s covenants, undertakings or agreements or otherwise arising under this Lease or in connection with the relationship of Landlord and Tenant hereunder, shall be collectible only out of Landlord’s interest in the Property (including, without limitation, the rents, income and profits therefrom), proceeds from the conveyance or other transfer of the Land and/or the Building or proceeds of insurance or a condemnation (or if Landlord is the beneficiary of a land trust, Landlord’s right, title and interest in such land trust), in each case as the same may then be encumbered (as long as any loan is from a lender that is not an affiliate of Landlord), and no personal liability is assumed by, nor at any time may be asserted against, Landlord’s or Tenant’s members or shareholders or their respective other owners, direct or remote, all such personal liability, if any, being expressly waived and released by Tenant and Landlord, as applicable. Similarly, none of the members or other owners of the Landlord Protected Parties shall have any personal liability hereunder. Each of Landlord and Tenant expressly understands and agrees that if any instrument involving the Building is executed by an agent, member or representative of Landlord or its agent (“Landlord’s Agent”) or of Tenant or its agent (“Tenant’s Agent”) on behalf of Landlord or Tenant, as applicable, Landlord’s Agent or Tenant’s Agent, as the case may be, will be executing such instrument, not in its own right but solely as an agent and that nothing in this Lease shall be construed as creating any liability whatsoever against such Landlord’s Agent or Tenant’s Agent or their respective owners, direct and remote, and their respective directors, officers or employees and in particular, without limiting the generality of the foregoing, there shall be no liability of Landlord’s Agent or Tenant’s Agent, as the case may be, to pay any indebtedness or sum accruing thereunder, or to perform any covenant or agreement whether express or implied therein contained, it being agreed that Landlord or Tenant, as applicable, shall have sole responsibility therefor. Nothing contained herein shall constitute a waiver or release of any of Landlord’s obligations under this Lease or limit the right of Tenant to name any current, former, or future partner, principal, officer, director, member or employee of Landlord as a party in any action or suit by Tenant against Landlord to the extent that applicable state Law or court rules or procedures require Tenant to name such partner, principal, officer, director, member or employee (rather than the Landlord entity) as parties to obtain a judgment against, or proceed against, Landlord or Landlord’s assets; provided, however, that no judgment resulting from any such suit or action shall be enforced against Landlord or any such partner, principal, officer, director, member or employee personally or against any of its assets (other than Landlord’s interest in the Property (including, without limitation, the rents, income and profits therefrom), proceeds from the conveyance or other transfer of the Land and/or the Building or proceeds of insurance or a condemnation (or if Landlord is the beneficiary of a land trust, Landlord’s right, title and interest in such land trust), in each case as the same may then be encumbered, as long as any loan is from a lender that is not an affiliate of Landlord).

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ARTICLE 25Waiver; Indemnification

A.Mutual Waivers.

1.To the extent permitted by Law, Tenant waives and releases the Landlord Protected Parties, Landlord’s Agent, and Landlord’s contractors, subcontractors and servants from all claims for damage to property and injuries to persons sustained by Tenant or any occupant of the Building or Premises relating to: (a) the Building or Premises or any part of either or any equipment or appurtenance becoming out of repair; (b) any accident in or about the Building; or (c) directly or indirectly, any act or neglect of any tenant or occupant of the Building or of any other person but the foregoing shall not be deemed to release any Landlord Protected Parties, Landlord’s Agent or Landlord’s contractors, subcontractors or servants from their own negligence or willful misconduct (except as waived under Section 10(C) hereof) or from any breach of the provisions of this Lease.

2.To the extent permitted by Law, Landlord waives and releases Tenant and Tenant’s agents, contractors, subcontractors, servants, subtenants and assignees from all claims for damage to property and injuries to persons sustained by Landlord or any occupant of the Building or Premises relating to: (a) the Premises or any equipment therein or appurtenance thereto becoming out of repair; (b) any accident in or about the Building; or (c) directly or indirectly, any act or neglect of any tenant or occupant of the Building or of any other person but the foregoing shall not be deemed to release any of Tenant and Tenant’s agents, contractors, subcontractors, servants, subtenants or assignees from their own negligence or willful misconduct (except as waived under Section 10(C) hereof) or from any breach of the provisions of this Lease.

3.This Section shall apply especially, but not exclusively, to damage caused by the flooding of basements or other subsurface areas, refrigerators, sprinkling devices, air-conditioning apparatus, water, snow, frost, steam, excessive heat or cold, falling plaster, broken glass, sewage, gas, odors or noise, or the bursting or leaking of pipes or plumbing fixtures, and shall apply equally whether the damage results from the act or neglect of other tenants of the Building or of any other person and whether that damage caused or resulted from any thing or circumstance above mentioned or referred to, or any other thing or circumstance, whether of a like or of a wholly different nature.

B.Tenant’s Property. All property situated in the Building or the Premises and belonging to Tenant, its agents, contractors, subcontractors, employees or invitees or any occupant of the Premises shall be situated there at the risk of Tenant or such other person only, and Landlord shall not be liable for damage, theft, misappropriation or loss of that property. Not limiting the foregoing, Landlord shall not be liable to Tenant for and Tenant assumes all risk of damage or losses caused by fire, electrical malfunction, gas explosion, water damage of any type (including broken water lines, malfunctioning fire sprinkler systems, roof leaks or stoppages of lines). Tenant further waives any claim for injury to Tenant’s business or loss of income relating to any such damage or destruction of personal property as described in this Section. Notwithstanding anything in the foregoing or this Lease to the contrary, except (x) as otherwise expressly provided herein, (y) as may be provided by Applicable Laws, in no event shall Landlord or Tenant be liable to the other for any consequential, special or indirect damages arising out of this Lease.

C.Indemnity. Subject to the provisions of Section 10(C) hereof, to the fullest extent permitted by Law, Tenant shall protect, defend, indemnify and hold harmless the Landlord Protected Parties from and against any and all claims, demands, liabilities, damages, judgments, orders, suits, decrees, actions, proceedings, fines, penalties, losses, costs and expenses (including, without limitation, court costs and reasonable attorneys’ fees and expenses) (collectively, “Damages”) suffered by a Landlord Protected Party directly or by reason of any claim, suit or judgment brought against

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such Landlord Protected Party arising out of or attributable to any negligent act or omission or willful misconduct of Tenant, its agents, employees, contractors or subcontractors or any breach of Tenant’s obligations under this Lease with respect to Tenant’s leasing of or operations in the Premises, including, but not limited to, bodily injury (including death) or property damage. If any claim for Damages is asserted or any such action is brought, Landlord shall give Tenant prompt notice thereof and Tenant shall resist and defend such claim, action or proceeding by counsel approved by Landlord or the applicable Landlord Protected Party (such approval not to be unreasonably withheld, conditioned or delayed); however, Tenant shall not be liable for the costs of any separate counsel employed by any Landlord Protected Party. Landlord hereby approves any counsel designated by Tenant’s insurance carrier. If it shall be finally determined by a court of competent jurisdiction that, pursuant to the foregoing provisions of this Section, Tenant is or was not required to indemnify or hold harmless any Landlord Protected Party from any such claim, action or judgment for Damages, Landlord shall (or shall cause the applicable Landlord Protected Party to) reimburse Tenant for all or such portion of the costs and expenses incurred by Tenant (or its insurance carrier) under this Section on account thereof plus interest at the Default Rate on such costs and expenses. Without limiting the generality of the foregoing, Tenant specifically acknowledges that the indemnity herein shall apply to claims in connection with or arising out of any Alteration Work, the installation of Tenant’s furniture, fixtures and equipment and the installation, maintenance, use or removal of any cabling. Notwithstanding the foregoing, Tenant shall not be obligated to indemnify a Landlord Protected Party against such party’s own negligence or willful misconduct or breach of such party’s obligations under this Lease. Tenant’s obligations and liabilities pursuant to this Section shall survive the expiration or earlier termination of this Lease.

D.Landlord Indemnity. Subject to the provisions of Section 10(C) hereof, to the fullest extent permitted by Law, Landlord shall protect, defend, indemnify and hold harmless Tenant, its partners, Affiliates and subsidiaries and their respective principals, officers, directors, members, employees, agents, contractors, subcontractors, and invitees (each, an “Indemnified Tenant Party”) from and against any and all Damages suffered by the Indemnified Tenant Party directly or by reason of any claim, suit, or judgment brought against such Indemnified Tenant Party and arising out of or attributable to the gross negligence or willful misconduct of any Landlord Protected Party with respect to the Property, the Premises or the Building or any breach by Landlord of its obligations under this Lease. If any claim for Damages is asserted or any such action is brought, Tenant shall give Landlord prompt notice thereof and Landlord shall resist and defend such claim, action or proceeding by counsel approved by Tenant or the applicable Indemnified Tenant Party (such approval not to be unreasonably withheld, conditioned or delayed); however, Landlord shall not be liable for the costs of any separate counsel employed by any Indemnified Tenant Party. Tenant hereby approves any counsel designated by Landlord’s insurance carrier. If it shall be finally determined by a court of competent jurisdiction that pursuant to the foregoing provisions of this Section, Landlord is or was not required to indemnify or hold harmless any Indemnified Tenant Party from any such claim, action or judgment for Damages, Tenant shall (or shall cause the applicable Indemnified Tenant Party) to reimburse Landlord for all or such portion of the costs and expenses incurred by Landlord (or its insurance carrier) under this Section on account thereof plus interest at the Default Rate on such costs and expenses. Notwithstanding the foregoing, Landlord shall not be obligated to indemnify any Indemnified Tenant Party for any Damages caused by such party’s negligence or willful misconduct or breach of such party’s obligations under this Lease. Landlord’s obligations and liabilities pursuant to this Section shall survive the expiration or earlier termination of this Lease.

ARTICLE 26Security Deposit

Tenant shall deposit a security deposit (the “Security Deposit”) with Landlord as security for the prompt, full and faithful performance by Tenant of each and every provision of the Lease and of

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all obligations of Tenant hereunder in the Security Deposit Amount (as defined below). The Security Deposit shall be delivered not later than twenty-one (21) days after the Execution Date in the initial Security Deposit Amount. At Landlord’s election, Tenant’s failure to timely deliver the Security Deposit shall be deemed a “Tenant Delay” under this Lease for each day after such twenty-one (21) day period until the Security Deposit is delivered; provided that the foregoing election shall not limit any other rights and remedies of Landlord under this Lease, at law or in equity for such delivery. Unless an Event of Default has occurred and is then continuing, the Security Deposit shall be decreased to the lower Security Deposit Amounts on the dates described below.

1.The term “Security Deposit Amount” as used herein shall mean (i) One Million Two Hundred Thousand and No/100 Dollars ($1,200,000) from the date of execution of this Lease until the fourth (4^th) anniversary of the Commencement Date, (ii) Nine Hundred Sixty Thousand and No/100 Dollars ($960,000) from the day after the fourth (4^th) anniversary of the Commencement Date until the fifth (5^th) anniversary of the Commencement Date, (iii) Seven Hundred Twenty Thousand and No/100 Dollars ($720,000) from the day after the fifth (5^th) anniversary of the Commencement Date until the sixth (6^th) anniversary of the Commencement Date, (iv) Four Hundred Eighty Thousand and No/100 Dollars ($480,000) from the day after the sixth (6^th) anniversary of the Commencement Date until the seventh (7^th) anniversary of the Commencement Date; and (v) Two Hundred Forty Thousand and No/100 Dollars ($240,000) from the day after the seventh (7^th) anniversary of the Commencement Date through the remaining Term of this Lease.

2.If an Event of Default by Tenant then exists under the Lease, Landlord may use, apply or retain the whole or any part of the Security Deposit which is necessary for the payment of: (i) any Rent or other sums of money which Tenant may not have paid when due after any applicable cure period; (ii) any sum expended by Landlord on behalf of Tenant in accordance with the provisions of the Lease; or (iii) any sum which Landlord may expend or be required to expend by reason of any Event of Default under the Lease by Tenant, including, without limitation, any damage or deficiency in or from the reletting of the Premises as provided in Article 22 of the Lease. The use, application or retention of the Security Deposit, or any portion thereof, by Landlord shall not prevent Landlord from exercising any other right or remedy provided by the Lease or by law (it being intended that Landlord shall not first be required to proceed against the Security Deposit) and shall not operate as a limitation on any recovery to which Landlord may otherwise be entitled. If any portion of the Security Deposit is used, applied or retained by Landlord for the purposes set forth above, Tenant agrees, within ten (10) business days after the written demand therefor is made by Landlord, deposit cash security with Landlord in an amount sufficient to restore the then-current required Security Deposit Amount.

3.If Tenant shall fully and faithfully comply with all of the provisions of the Lease, the Security Deposit shall be promptly returned to Tenant without interest after the expiration or termination of the Term, whether pursuant to Articles 9 or 11 or otherwise, or upon any later date after which Tenant has vacated the Premises. In the absence of evidence satisfactory to Landlord of any permitted assignment of the right to receive the Security Deposit, Landlord may return the same to the original Tenant, regardless of one or more assignments of Tenant’s interest in the Lease or the Security Deposit. In such event, upon the return of the Security Deposit to the original Tenant, Landlord shall be completely relieved of liability under this Article 26 or otherwise with respect to the Security Deposit.

4.Tenant acknowledges that Landlord has the right to transfer its interest in the Building and in the Lease as to the extent set forth herein and Tenant agrees that if such a transfer occurs, Landlord shall have the right to transfer or assign the Security Deposit to the transferee. Upon such transfer or assignment and delivery of the Security Deposit to the transferee and such transferee’s written assumption of responsibility for the return of the Security Deposit to Tenant, Landlord shall

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thereby be released by Tenant from all liability or obligation for the return of such Security Deposit and Tenant shall look solely to such transferee for the return of the Security Deposit.

5.The Security Deposit shall be in the form of a Letter of Credit (as defined below). The term “Letter of Credit” as used herein shall mean an irrevocable, unconditional standby letter of credit in the form attached hereto as Exhibit K or such other form reasonably satisfactory to Landlord, with either an initial expiration date no earlier than ninety (90) days after the Expiration Date, or an initial expiration date of no less than one (1) year from the date of issue with automatic annual renewals, issued by a national banking association reasonably acceptable to Landlord having an office in Chicago (the “Issuing Bank”), which Letter of Credit shall be payable to Landlord upon demand made in the City of Chicago pursuant to presentation of an unconditional sight draft with a statement by Landlord that Landlord is entitled to draw thereunder pursuant to the terms of this Lease. With respect to any scheduled decreases in the Security Deposit Amount, Landlord shall accept an amendment to or replacement of the Letter of Credit reflecting such decrease within ten (10) business days after the applicable date, provided all conditions to such decrease have been satisfied. Unless the stated expiration date of the Letter of Credit is at least ninety (90) days after the Expiration Date or the Letter of Credit shall be automatically renewed or, no later than thirty (30) days prior to the then expiration date, Tenant shall have provided a new Letter of Credit compliant with the terms required hereunder or an amendment to the then-existing Letter of Credit extending the then applicable expiration date thereof for a period of no less than one (1) year with automatic annual renewals, unless the Issuing Bank shall deliver to Landlord a notice of non-renewal no later than sixty (60) days prior to the expiration of the Letter of Credit. In the event that the Issuing Bank has not timely renewed the Letter of Credit, Landlord shall be entitled to draw the full amount of the Letter of Credit and hold the same as a cash security deposit, subject to the same terms and conditions of this Article 26.

ARTICLE 27Notices

Every notice or other communication to be given by either party to the other with respect hereto or to the Premises or Property, shall be in writing (whether or not stated elsewhere in this Lease) and shall be sent by: (a) hand; (b) served personally or by reputable overnight courier service (e.g. Federal Express) or (c) certified mail, return receipt requested, postage prepaid and posted in a United States Postal Service station or letter box in the continental United States addressed as follows:

If to Landlord: 2430 N. Halsted, LLC

c/o Sterling Bay, LLC

1330 W. Fulton, Suite 800

Chicago, Illinois 60607

Attn: Andrew Gloor

With a copy to: 2530 N. Halsted, LLC
c/o Sterling Bay, LLC1330 W. Fulton, Suite 800
Chicago, Illinois 60607
Attn: Dean Marks, Esq.

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If to Tenant: All notices:

prior to the Commencement Date to:Exicure, Inc.8045 Lamon Avenue, Suite 410Skokie, Illinois 60077
Attn: David Snyder

on or after the Commencement Date to:Exicure, Inc.2430 N. Halsted Street
Chicago, Illinois 60614
Attn: David Snyder

or to such other address or addresses as Tenant or Landlord may from time to time designate by notice given as above provided. Every notice or other communication hereunder shall be deemed to have been given: (i) if sent by hand, upon the date received or the date delivery is refused; (ii) if sent by overnight courier for next business day delivery, on the next business day following the date such notice was sent; and (iii) if sent by mail, upon receipt or refusal to accept receipt. Notices not sent in accordance with the foregoing shall be of no force or effect until actually received by the foregoing parties at the addresses specified in this Article.

ARTICLE 28Real Estate Brokers

Landlord and Tenant each represents that it has dealt only with CBRE, Inc. and Sterling Bay Realty, LLC (collectively, “Landlord’s Brokers”) and CBRE, Inc. (“Tenant’s Broker”) as broker, agent, consultant or finder in connection with this Lease. Landlord agrees to pay to Landlord’s Brokers and Tenant’s Broker all amounts owing to Landlord’s Brokers and Tenant’s Broker in respect of the consummation of this Lease pursuant to separate commission agreements between Landlord and Landlord’s Brokers and Tenant’s Broker. Landlord agrees to indemnify and hold Tenant harmless from all damages, judgments, liabilities and expenses (including, without limitation, reasonable attorneys’ fees) arising from any claims or demands of Landlord’s Brokers and Tenant’s Broker and any other broker, agent, consultant or finder with whom Landlord has dealt for any commission or fee alleged to be due in connection with its participation in the procurement of Tenant or the negotiation of this Lease. Tenant agrees to indemnify and hold Landlord harmless from all damages, judgments, liabilities and expenses (including, without limitation, reasonable attorneys’ fees) arising from any claims or demands of any broker, agent, consultant or finder, other than Landlord’s Brokers and Tenant’s Broker, with whom Tenant has dealt for any commission or fee alleged to be due in connection with its participation in the procurement of Tenant or the negotiation of this Lease. The provisions of this Article shall survive the expiration or earlier termination of this Lease.

ARTICLE 29Covenant of Quiet Enjoyment

Landlord covenants and agrees that Tenant, on paying the Rent and on keeping, observing and performing all of the other terms, covenants, conditions, provisions and agreements herein

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contained on the part of Tenant to be kept, observed and performed, shall, during the Term, peaceably and quietly have, hold and enjoy the Premises subject to the terms, covenants, conditions, provisions and agreements hereof, free from hindrance by Landlord or any person claiming by, through or under Landlord.

ARTICLE 30Hazardous Materials

A.Hazardous Materials. Tenant shall not cause or permit any Hazardous Materials (as defined below) to be Handled in or about the Premises, the Building or the Property in violation of Applicable Laws by Tenant or its employees, agents, contractors or invitees. If Tenant breaches such obligation, or if the presence of Hazardous Materials as a result of such a breach results in contamination of the Property, any portion thereof, or any adjacent property, or if contamination of the Premises otherwise occurs during the Term or any extension or renewal hereof or holding over hereunder (other than if such contamination results from migration of Hazardous Materials from outside the Premises not caused by Tenant or its employees, agents, contractors or invitees or if such contamination in the Premises exists as of the Delivery Date), then Tenant shall indemnify, save, defend (at Landlord’s option and with counsel reasonably acceptable to Landlord) and hold the Landlord Indemnitees harmless from and against any and all Claims that arise during or after the Term as a result of such breach or contamination. This indemnification by Tenant includes costs incurred in connection with any investigation of site conditions or any clean-up, remedial, removal or restoration work required by any Governmental Authority because of Hazardous Materials present in the air, soil or groundwater above, on or under or about the Property. Landlord hereby represents and warrants that (i) to Landlord's knowledge, there are no asbestos-containing materials or other Hazardous Materials presently located in, on, or about the Premises or the Property except as disclosed by the environmental reports and materials that have been delivered to Tenant; (ii) to Landlord's knowledge, the environmental reports and materials that have been delivered to Tenant are true, complete and correct copies of all of the environmental reports in Landlord's possession or control; (iii) Landlord has not received any notices with respect to the Premises or the Property alleging any violation of any Environmental Law or requiring any testing or remedial action concerning Hazardous Materials; and (iv) no testing or remedial action concerning Hazardous Materials is currently underway or planned with respect to the Premises or the Property. Landlord covenants to Tenant that all work performed by Landlord in, on, or under the Premises or the Property shall be performed in a manner that does not incorporate therein any Hazardous Materials, except for normal quantities of Hazardous Materials customarily incorporated in such work at Comparable Buildings in full compliance with Environmental Laws, and in a manner which does not result in injury or health risks to persons. Tenant agrees that, except as permitted by this Section 30, no Hazardous Materials shall be Handled upon, about, above or beneath the Premises or any portion of the Premises by Tenant, its subtenants or its assignees, or their respective contractors, clients, officers, directors, employees, or invitees (any such Hazardous Materials so handled being referred to as "Tenant's Hazardous Materials"). Tenant agrees that Tenant shall, at its sole cost and expense, promptly remove or remediate, or cause to be removed or remediated, any Tenant's Hazardous Materials on the Premises (except to the extent permitted below) promptly after discovery thereof. Landlord agrees that, except as permitted by this Section 30(A), no Hazardous Materials shall be Handled upon, about, above or beneath the Premises or any portion of the Premises by or on behalf of Landlord or its contractors, officers, directors, employees or invitees (but specifically excluding tenants or occupants of the Building) (any such Hazardous Materials so Handled shall be known as "Landlord's Hazardous Materials"). Notwithstanding the foregoing, normal quantities of Tenant's Hazardous Materials or Landlord's Hazardous Materials customarily used in the conduct of general administrative and executive office activities (e.g., copier fluids and cleaning supplies), or the construction or maintenance

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of leasehold improvements or the Building, may be Handled, as the case may be, in compliance with Environmental Laws, and in a manner that does not result in injury or health risks to persons

B.Landlord acknowledges that it is not the intent of this Article to prohibit Tenant from operating its business for the Permitted Use. Tenant may operate its business according to the custom of Tenant’s industry so long as the use or presence of Hazardous Materials is carefully monitored in accordance with applicable Laws. As a material inducement to Landlord to allow Tenant to use Hazardous Materials in connection with its business, Tenant agrees to deliver to Landlord (a) a list identifying each type of Hazardous Material to be present at the Premises that is subject to regulation under any environmental Applicable Laws (including, without limitation, OSHA), (b) a list of any and all approvals or permits from Governmental Authorities required in connection with the presence of such Hazardous Material at the Premises and (c) correct and complete copies of notices of violations of Applicable Laws related to Hazardous Materials (collectively, “Hazardous Materials Documents”). Tenant shall deliver to Landlord updated Hazardous Materials Documents (i) no later than five (5) business days after the initial occupancy of any portion of the Premises or the initial placement of equipment anywhere at the Property, (ii) if there are any changes to the Hazardous Materials Documents, annually thereafter no later than December 31 of each year, and (iii) prior to the initiation by Tenant of any Alterations or changes in Tenant’s business that involve any material increase in the types or amounts of Hazardous Materials. For each type of Hazardous Material listed, the Hazardous Materials Documents shall include (1) the chemical name, (2) the material state (e.g., solid, liquid, gas or cryogen), (3) the concentration, (4) the storage amount and storage condition (e.g., in cabinets or not in cabinets), (5) the use amount and use condition (e.g., open use or closed use), (6) the location (e.g., room number or other identification) and (7) if known, the chemical abstract service number. Landlord may, at Landlord’s expense, cause the Hazardous Materials Documents to be reviewed by a person or firm qualified to analyze Hazardous Materials to confirm compliance with the provisions of this Lease and with Applicable Laws. In the event that a review of the Hazardous Materials Documents indicates non-compliance with this Lease or Applicable Laws, Tenant shall, at its expense, diligently take steps to bring its storage and use of Hazardous Materials into compliance. At any time, and from time to time, prior to the expiration of the Term, Landlord shall have the right to conduct appropriate tests of the Property or any portion thereof to demonstrate that Hazardous Materials are present or that contamination has occurred due to Tenant or Tenant’s employees, agents, contractors or invitees. Tenant shall pay all reasonable costs of such tests if such tests reveal that Hazardous Materials exist at the Property in violation of this Lease.

C.    "Environmental Laws" means and includes all now and hereafter existing statutes, laws, ordinances, codes, regulations, rules, rulings, orders, decrees, directives and requirements by any Regulatory Authority regulating, relating to, or imposing liability or standards of conduct concerning public health and safety or the environment and applicable to the Premises, the Building or the Property.

D.    "Hazardous Materials" means any material or substance: (i) which is defined or becomes defined as a "hazardous substance," "hazardous waste," "toxic substance," "contaminant," "infectious waste," "chemical mixture or substance," or "air pollutant" under Environmental Laws; (ii) containing petroleum, crude oil or any fraction thereof (except to the extent used in connection with emergency back-up generators in accordance with applicable law); (iii) containing polychlorinated biphenyls (PCB's); (iv) containing asbestos; (v) which is radioactive; (vi) which is infectious; or (vii) which possesses inherently toxic, reactive, flammable or corrosive characteristics, as all such terms are used in their broadest sense, to the extent any such items are or become regulated by Environmental Laws.

E.    "Handle," "handle," "Handled," "handled," "Handling," or "handling" shall mean any installation, handling, generation, storage, treatment, use, disposal, discharge, release, manufacture,

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refinement, presence, migration, emission, transportation, or any other activity of any type in connection with or involving Hazardous Materials.

F.    "Regulatory Authority" shall mean any federal, state or local governmental agency, commission, board or political subdivision.

ARTICLE 31Miscellaneous

A.Binding. Each of the terms and provisions of this Lease shall be binding upon and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, guardians, custodians, successors and assigns, subject to the provisions of Articles 20 and 23 hereof.

B.No Recording. Landlord and Tenant agree that this Lease shall not be recorded with the Recorder of Deeds of Cook County, Illinois.

C.Laws. This Lease shall be construed in accordance with the Laws of the State of Illinois. Landlord and Tenant hereby submit to the jurisdiction of the courts in and for the County of Cook, State of Illinois and each agrees that any action by Tenant against Landlord or Landlord against Tenant, as the case may be, shall be instituted in the County of Cook, State of Illinois and that Landlord shall have personal jurisdiction over Tenant for any action brought by Landlord against Tenant, and Tenant shall have personal jurisdiction over Landlord for any action brought by Tenant against Landlord in the County of Cook, State of Illinois.

D.Air. This Lease does not grant any legal rights to “light and air” outside of the Premises nor to any particular view or cityscape visible from the Premises.

E.Amendments. This Lease and the Exhibits hereto shall not be amended, changed or modified in any way except in writing executed and delivered by Landlord and Tenant.

F.Survival of Obligations. Any obligations of Landlord and Tenant accruing prior to the expiration of this Lease shall survive the expiration or earlier termination of this Lease, and Landlord and Tenant shall promptly perform all such obligations whether or not this Lease has expired or been terminated.

G.No Joint Venture. Nothing contained in this Lease shall be deemed or construed by the parties to this Lease, or by any third party, to create the relationship of principal and agent, partnership, joint venture, or any association between Landlord and Tenant, it being expressly understood and agreed that neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties to this Lease shall be deemed to create any relationship between Landlord and Tenant other than the relationship of landlord and tenant.

H.Interpretation. Landlord and Tenant each acknowledge that it has read and reviewed this Lease and that it has had the opportunity to confer with counsel in the negotiation of this Lease. Accordingly, this Lease shall be construed neither for nor against Landlord or Tenant notwithstanding the party which drafted same, but shall be given a fair and reasonable interpretation in accordance with the meaning of its terms and the intent of the parties.

I.Independent Covenants. Except as expressly provided herein with respect to offset and abatement, each covenant, agreement, obligation or other provision of this Lease to be performed by Tenant or Landlord, including without limitation the obligation to pay Base Rent and the obligation

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to pay Tenant's Pro Rata Share of Taxes and Operating Expenses, is a separate and independent covenant of Tenant or Landlord (as the case may be), and is not dependent on any other provision of the Lease.

J.Time of Essence. Time is of the essence of this Lease and each of its provisions.

K.Exhibits. The Exhibits set forth in the Table of Contents or otherwise attached hereto are incorporated into this Lease by reference and made a part hereof.

L.Full Agreement. This Lease and the Exhibits contain all of the terms and agreements between Landlord and Tenant relating to the matters set forth herein and no prior or contemporaneous agreement or understanding pertaining to the same shall be of any force or effect, except any such contemporaneous agreement specifically referring to and modifying this Lease which is signed by Landlord and Tenant. Without limitation as to the generality of the foregoing, Tenant hereby acknowledges and agrees that Landlord’s leasing agents and field personnel are only authorized to show the Premises and negotiate terms and conditions for leases subject to Landlord’s final approval, and are not authorized to make any agreements or representations or create any binding understandings or obligations, respecting the condition of the Premises or Property, the suitability of the same for Tenant’s business, or any other matter, and no agreements, representations, understandings or obligations not expressly contained herein or in such contemporaneous agreement shall be of any force or effect.

M.Financial Statements. If Tenant is other than a publicly traded entity whose shares are listed on a nationally recognized securities exchange, Tenant will furnish Tenant’s most recent audited financial statements to Landlord, or, if no such audited statements have been prepared, such other financial statements as may have been prepared by an independent certified public accountant or, failing those, Tenant’s internally prepared financial statements. Tenant shall not be required to deliver the financial statements required under this Section more than once in any 12-month period other than in connection with a contemplated sale or financing of the Building by Landlord. Landlord shall execute a customary confidentiality letter in connection with the delivery of such financial statements, which shall permit Landlord to share such statements with its partners and lenders.

N.Captions and Severability. The captions of the Articles and Sections of this Lease are for convenience of reference only and shall not be considered or referred to in resolving questions of interpretation. If any term or provision of this Lease shall be found invalid, void, illegal or unenforceable with respect to any party hereto by a court of competent jurisdiction, it shall not affect, impair or invalidate any other terms or provisions hereof, or its enforceability with respect to the other party, the parties hereto agreeing that they would have entered into the remaining portion of this Lease notwithstanding the omission of the portion or portions adjudged invalid, void, illegal or unenforceable.

O.Tenant and Landlord Authority. Tenant represents and warrants that this Lease has been duly authorized, executed and delivered by and on behalf of Tenant and constitutes the valid and binding agreement of Tenant in accordance with its terms. Landlord represents and warrants that this Lease has been duly authorized, executed and delivered by and on behalf of Landlord and constitutes the valid and binding agreement of Landlord in accordance with its terms.

P.Confidentiality. Subject to the terms of this Section 31(P), Landlord and Tenant shall each keep confidential the terms of this Lease. Landlord and Tenant shall each have the right to make disclosures of the terms of this Lease (i) to the extent required by applicable Law, including, without limitation, any rule of the Securities and Exchange Commission or to the extent required by any stock exchange upon which Landlord, Tenant or any Affiliate of either is publicly traded or seeking to be publicly traded, (ii) to the extent reasonably required to enforce such party’s rights hereunder,

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(iii) to the extent reasonably necessary in connection with such party’s financing, selling, leasing, or otherwise transferring or capitalizing its assets or its business (or any such transaction consummated by such party’s Affiliate) (including, without limitation, disclosures that are reasonably necessary to comply with rules of the Securities and Exchange Commission or any stock exchange), (iv) to the extent reasonably required in constructing, operating, maintaining, repairing or restoring the Premises or the other portions of the Building, and (v) in connection with the pursuit, processing or receipt of governmental economic incentives. If applicable Law, including, without limitation, any rule of the Securities and Exchange Commission or any stock exchange upon which Landlord, Tenant or any Affiliate of either is publicly traded or seeking to be publicly traded (as the case may be) requires Landlord or Tenant to file a copy of this Lease in a manner that provides the general public with access thereto, then such party shall (a) first give the other party reasonable advance notice thereof and (b) file only a copy hereof that is redacted to remove the material economic terms hereof and such other material terms as are requested by the other party to the extent permitted by applicable Law or the rules of the Securities and Exchange Commission or any stock exchange (as the case may be). Neither Landlord nor Tenant shall unreasonably withhold, condition or delay its approval of any disclosure of the terms of this Lease that is not otherwise authorized by this Section 31(P) and that the other party proposes to make; provided, however, that notwithstanding anything to the contrary contained herein, either party shall be authorized to make disclosures to its employees. Neither party shall make any press releases or hold a press conference or make similar disclosures concerning the entering into of this Lease without the prior approval of the other party, which shall not be unreasonably withheld, delayed or conditioned. If applicable Law, including, without limitation, any rule of the Securities Exchange Commission or any stock exchange upon which Landlord, Tenant or any Affiliate of either is publicly traded or seeking to be publicly traded (as the case may be) requires either party to make any press release or similar disclosure concerning the entering into this Lease, then such party shall (x) first give the other party reasonable advance notice thereof and (y) release only such information and/or make only such disclosures as are required at a minimum to comply with such Law or rule.

Q.Prohibited Persons and Transactions. Tenant represents and warrants that Tenant has not received notice and has no knowledge that either Tenant or any of its affiliates or any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the Office of Foreign Assets Control (“OFAC”) of the Department of the Treasury (including those named on OFAC’s Specially Designated Nationals and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not knowingly Transfer this Lease to, contract with or otherwise engage in any dealings or transactions or be otherwise associated with such persons or entities. Landlord represents and warrants that Landlord has not received notice and has no knowledge that either Landlord or any of its affiliates, or any of their respective partners, members, shareholders or other equity owners, and none of their respective employees, officers, directors, representatives or agents is a person or entity with whom U.S. persons or entities are restricted from doing business under regulations of the OFAC (including those named on OFAC’s Specially Designated Nationals and Blocked Persons List) or under any statute, executive order (including the September 24, 2001, Executive Order Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism), or other governmental action and is not and will not knowingly Transfer this Lease to, contract with or otherwise engage in any dealings or transactions or be otherwise associated with such persons or entities.

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R.UBTI. Landlord and Tenant agree that all Rent payable by Tenant to Landlord shall qualify as “rents from real property” within the meaning of both Sections 512(b)(3) and 856(d) of the Internal Revenue Code of 1986, as amended (the “Code”) and the U.S. Department of Treasury Regulations promulgated thereunder (the “Regulations”). If Landlord in its sole reasonable judgment determines that all or part of any Rent shall not qualify as “rents from real property” for the purposes of Sections 512(b)(3) or 856(d) of the Code and the Regulations promulgated thereunder, Tenant agrees (i) to cooperate reasonably with Landlord by entering into such amendment or amendments as Landlord reasonably deems necessary to qualify all Rents as “rents from real property,” and (ii) to permit an assignment of the Landlord’s interest under this Lease to an affiliate of Landlord; provided, however, that any adjustments or other actions required pursuant to this Section shall (a) be made so as to produce the equivalent Rent (in economic terms) payable prior to such adjustment or other action, as mutually determined by Landlord and Tenant, each acting reasonably, (b) not impose any additional obligations or liabilities on Tenant, nor modify or waive any right of Tenant under or in connection with this Lease, (c) not waive or release any of the obligations or liabilities of Landlord under or in connection with this Lease, and (d) be made at Landlord’s sole cost and expense, with Landlord reimbursing Tenant for all of Tenant’s reasonable out-of-pocket accountants’, attorneys’ and consultants’ fees and expenses incurred in connection with each such adjustment or other action.

S.Relocation Rights. Landlord shall have no right or authority to relocate the Premises.

T.No Operating Covenant. Nothing contained in this Lease shall be construed so as to create an operating covenant on the part of Tenant and Tenant may “go dark” or curtail its business operations from time to time in Tenant’s sole discretion. The foregoing shall not constitute a waiver of Tenant’s obligations to comply with all obligations of Tenant under this Lease, including, without limitation, the payment of Rent and Tenant’s maintenance and repair obligations under the Lease.

U.Good Faith, Fair Dealing and Reasonableness. Tenant and Landlord acknowledge their duty to exercise their rights and remedies and perform their obligations reasonably and in good faith. Wherever a party's consent or approval is required, unless this Lease expressly provides, otherwise, such consent or approval shall not be unreasonably withheld, conditioned or delayed. Whenever the provisions of this Lease allow Landlord or Tenant to perform or not perform some act at its option, in its judgment, or to its satisfaction, the decision of Landlord and Tenant to perform or not perform such act must be commercially reasonable unless this Lease expressly provides otherwise.

V.Landlord’s Representations and Warranties. Landlord hereby represents and warrants to Tenant that, as of the Execution Date:

(a)Landlord is the record title owner of the Property;

(b)No Superior Mortgage, Superior Lease or other mortgage, security interest or ground lease currently encumbers the Property or any portion thereof, except as otherwise expressly set forth in this Lease;

(c)Landlord has full power and authority and has taken all action necessary to execute this Lease between the parties and to fulfill all of its obligations herein;

(d)This Lease has been duly executed and delivered by Landlord and constitutes the legally binding and enforceable obligations of Landlord;

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(e)To Landlord's knowledge, there are no notices of violation, claims, disputes, or litigation of any kind pending or (to the best of Landlord’s knowledge) threatened, with respect to the Property;

(f)To Landlord's knowledge no zoning approvals are required from the City of Chicago for use of the Premises for Landlord’s Core & Shell Work;

(g)The Initial Tenant Work shall be completed in accordance with all applicable Laws;

(h)Tenant’s proposed use of the Premises as a medical service and office is permitted under current zoning applicable to the Building;

(i)The common areas will comply in all material respects with all statutes, regulations and codes (including the ADA) with respect to Landlord’s Core & Shell Work; and

(j)Without limiting or waiving the provisions of Article 30, to Landlord's knowledge, there are no asbestos-containing materials or other Hazardous Materials presently located in, on, or about the Premises except as may be disclosed by the environmental reports and materials that have been delivered to Tenant; (ii) to Landlord's knowledge, the environmental reports and materials that have been delivered to Tenant are true, complete and correct copies of all of the environmental reports in Landlord's possession or control; and (iii) Landlord has not received any notices with respect to the Premises alleging any violation of any Environmental Law or requiring any testing or remedial action concerning Hazardous Materials.

W.Limitations on Liability.

1.Landlord's Liability. Without limiting the efficacy of any applicable rights or remedies under this Lease in the nature of liquidated damages, the liability of Landlord (and its predecessors or successors) to Tenant (or any person or entity claiming by, through or under Tenant) for any monetary damages arising from any default by Landlord under the terms of this Lease or any matter relating to or arising out of the occupancy or use of the Premises and/or other areas of the Project shall, except as expressly specified in Article 13 hereof, be limited to Tenant's actual direct, but, except as expressly specified in Article 13 hereof, not consequential, punitive or incidental, damages therefor. The foregoing limitation on liability shall apply notwithstanding any indemnification set forth in this Lease or any other provision which might otherwise be construed as giving rise to a claim for consequential, punitive or incidental damages.

2.Tenant's Liability. Without limiting the efficacy of any applicable rights or remedies under this Lease in the nature of liquidated damages, the liability of Tenant (and its predecessors or successors) to Landlord (or any person or entity claiming by, through or under Landlord) for any monetary damages arising from any default by Tenant under the terms of this Lease or any matter relating to or arising out of the occupancy or use of the Premises and/or other areas of the Project shall be limited to Landlord's actual direct, but not consequential, punitive or incidental damages therefor. The foregoing limitation on liability shall apply notwithstanding any indemnification set forth in this Lease or any other provision which might otherwise be construed as giving rise to a claim for consequential, punitive or incidental damages.

3.Non-Monetary Claims. Nothing in this subsection (U) shall affect or limit either party's rights to file legal actions to recover possession of the Premises, or for either party to file for injunctive or any other non-monetary relief against the other party. The provisions of this Section shall survive any expiration or termination of this Lease.

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ARTICLE 32Renewal Option

A.Renewal Options. Tenant shall have the option to extend the Term for: (a) a period of five (5) years (the “First Renewal Term“) commencing at midnight on the day immediately following the Initial Expiration Date (the “First Renewal Term Commencement Date“) and expiring on the fifth (5^th) anniversary of the Initial Expiration Date (the “First Renewal Expiration Date“); and (b) an additional five (5) year period (the “Second Renewal Term“) commencing at midnight on the day immediately following the expiration of the First Renewal Term and expiring on the tenth (10^th) anniversary of the Initial Expiration Date (the "Second Renewal Expiration Date") (the first five (5) year option is referred to herein as the “First Renewal Option”, the second five (5) year option is referred to herein as the “SecondRenewal Option“, and the First Renewal Option and the Second Renewal Option is each referred to herein as a "Renewal Option" and collectively referred to herein as the “Renewal Options“), upon the terms and conditions contained herein. For the avoidance of doubt, if Tenant exercises the First Renewal Option or the Second Renewal Option, the “Term” of this Lease shall mean the term of this Lease as so extended. The Base Rent for the Premises for each such Renewal Term shall be the Current Market Rate as determined pursuant to this Article 32.

B.Exercise of Renewal Option. Except as otherwise provided in Section 33(D) below, Tenant shall exercise the First Renewal Option or the Second Renewal Option, as applicable, by delivering to Landlord a notice (a “Renewal Notice”) after the date that is fifteen (15) months, and on or before the date that is twelve (12) months, prior to the initial Expiration Date or the First Renewal Expiration Date, with respect to the First Renewal Option and the Second Renewal Option, respectively.

C.Conditions to Tenant’s Exercise of Renewal Option. Any notice purporting to exercise any Renewal Option shall be effective only if (i) neither this Lease nor Tenant’s right of possession hereunder have been previously terminated and (ii) no material Event of Default shall have occurred and be continuing, and (iii) no Transfer (except a Permitted Transfer) shall have occurred.

D.Application of Lease. If Tenant exercises the First Renewal Option or the Second Renewal Option, the First Renewal Term and the Second Renewal Term, as the case may be, shall be on the same terms and conditions as those contained in this Lease, except that (a) Base Rent with respect to the First Renewal Term and the Second Renewal Term, as applicable, shall be at the Current Market Rate as determined pursuant to Section 32(E) below and (b) Landlord shall have no obligation to perform any Initial Tenant Work or Landlord’s Maximum Expenditure or any other allowance or perform any tenant improvements or other work with respect to the Premises.

E.Current Market Rent; Arbitration.

1.As used herein the term “Current Market Rate” shall mean, as of any date, the then-current market base rental rate for the Premises and shall be determined in accordance with this Article 32. Current Market Rate shall be based on the net rental rate per rentable square foot under Comparable Leases (based on relative rentable square footage leased thereunder), for the relevant term, taking into consideration the condition of the applicable premises, and specifically excluding the existing value of any improvements installed by Tenant or other tenants above the unamortized value of any applicable allowances given to such tenants, all as calculated and expressly adjusted herein. “Comparable Leases” shall mean those leases then being entered into with office tenants of comparable size and credit to Tenant in the Comparable Buildings for improved space that is comparable in size and quality to the premises for which Current Market Rate is being determined and for a term approximately as long as the period for which the Current Market Rate is being

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determined, which leases are scheduled to commence within one (1) year before or after the scheduled commencement date of the period with respect to the space for which the Current Market Rate is being determined. If any Comparable Lease (i) is not a fully net lease and instead obligates the tenant thereunder either to pay only gross rent or to pay only its share of increases in operating expenses and taxes over a “base year” or a “base amount”, the amounts attributable to operating expenses and taxes for such a base year or included in such a base amount shall be deducted in calculating the base rental payments under such Comparable Lease, (ii) includes services that the tenant thereunder receives without payment of an additional charge to its landlord or other third party which Tenant would be obligated to pay for under this Lease, the projected costs of such services shall be deducted from the base rental payments under such Comparable Lease, or (iii) includes consumer price adjustment provisions or fixed rent increases, then the projected adjustments or increases shall be included in the base rental payments under such Comparable Lease. The reference to the foregoing factors is illustrative only and the presence or absence of such factors, as well as Tenant Concessions provided under Comparable Leases and other matters affecting current market rental rates, shall be taken into account in determining Current Market Rate. “Tenant Concessions” shall mean, with respect to any lease, (i) rent concessions, rent abatements, free rent periods, or similar rent relief thereunder and (ii) all costs incurred by the landlord thereunder to construct tenant improvements or any allowances therefor, pay leasing commissions and make any other payments, including without limitation reimbursement for rents at prior locations, to or solely for the benefit of the tenant thereunder.

2.Once the Current Market Rate has been determined in accordance with the terms of Section 32(E)(1) above on a fully as-is basis, the Current Market Rate shall then be adjusted (upward and downward as the case may be) to reflect any specific costs being incurred (or not being incurred) by Landlord in providing the applicable space in the Building to Tenant, as compared to costs incurred relative to Comparable Leases. These will include (i) the leasing commission, if any, payable to Tenant’s leasing broker on account of such space as compared to leasing commissions payable to tenant brokers for Comparable Leases and (ii) any Tenant Concessions expressly granted to Tenant with respect to the applicable space as compared to Tenant Concessions provided in Comparable Leases.

3.In the event of the failure of the parties to agree as to Current Market Rate by the last day of any period provided for in this Lease (or if no period is provided within thirty (30) days after the need for such agreement becomes known), such dispute shall be determined by arbitration as herein provided in Subsections 4 through 7 of this Section 32(E).

4.Landlord and Tenant, within seven (7) days after expiration of such period (time being of the essence), shall each simultaneously submit to the other at a location mutually agreeable to Landlord and Tenant (provided that if no such location is mutually agreeable, then in the office in the Building of the Building manager), in a sealed envelope, its good faith estimate of the Current Market Rate (collectively, the “Estimates”). If the higher of the Current Market Rate contained in such Estimates is not more than one hundred five percent (105%) of the Current Market Rate contained in the other Estimate, the Current Market Rate shall be the average of the amounts set forth in the two Estimates.

5.If the Current Market Rate is not resolved by the exchange of Estimates, Landlord and Tenant, within seven (7) business days after the exchange of the Estimates (or the latest date on which such exchange of Estimates should have occurred), shall each select an arbitrator to determine which of the two Estimates most closely reflects the Current Market Rate for the Premises for the applicable Renewal Term and determine any other disputed issues in connection therewith. Each arbitrator selected pursuant to this Article shall be an independent third party and shall have at least twenty (20) years’ experience in the business of acting as a real estate broker dealing with Comparable Buildings. Upon selection, Landlord’s and Tenant’s arbitrators shall work together in

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good faith to agree upon which of the two Estimates most closely reflects the Current Market Rate for the Renewal Term in question and determine any other disputed issues in connection therewith. The Estimate chosen by such arbitrators shall be binding on both Landlord and Tenant as the Current Market Rate for the Renewal Term in question. If either Landlord or Tenant fails to appoint an arbitrator within the seven (7) day period referred to above, the party with an arbitrator appointed shall provide a second and final notice to appoint an arbitrator to the party who has not appointed an arbitrator, which notice shall make reference to this Section and the consequences of a failure to reply in a clear and conspicuous manner (“Second and Final Arbitrator Notice”) and if after such Second and Final Arbitrator Notice a five (5) business day period has expired without appointment of an additional arbitrator, the Arbitrator selected by the other party shall be the sole arbitrator for the purposes hereof.

6.If the two arbitrators cannot agree upon which of the two Estimates most closely reflects the Current Market Rate, or if they cannot resolve any other disputed issues in connection therewith within twenty (20) days after their appointment, within ten (10) days after the expiration of such twenty (20) day period, the two (2) arbitrators shall select a third arbitrator meeting the aforementioned criteria. As soon as practicable after the third arbitrator has been selected as provided for above, but in any case within fourteen (14) days thereafter, such third arbitrator shall select which of the two Estimates most closely reflects the Current Market Rate and such Estimate shall be binding on both Landlord and Tenant as the Current Market Rate for the applicable Renewal Term, and such third arbitrator shall determine any other disputed issues in connection therewith. If the third arbitrator believes that expert advice would materially assist in reaching a determination, such arbitrator may retain one or more qualified persons, to provide such expert advice. The parties shall share equally in the costs of the third arbitrator and of any experts retained by the third arbitrator. Any fees of any arbitrator, counsel or experts engaged directly by Landlord or Tenant shall be borne by the party retaining such arbitrator, counsel or expert.

7.Each arbitrator determining Current Market Rate shall be bound by the provisions of this Lease and shall not have the power to add to, subtract from, or otherwise modify such provisions. Landlord and Tenant agree to sign all reasonable documents and to do all other things reasonably necessary to submit any such matter to such arbitrators and further agree to, and hereby do, waive any and all rights they or either of them may at any time have to revoke their agreement hereunder to submit the determination of Current Market Rate to such arbitrators and to abide by the decision rendered by such arbitrators.

ARTICLE 33Right of First Refusal

A.First Refusal Space/Existing Rights. From and after the date hereof, except with respect to leasing pursuant to the timely exercise of any Permitted Superior Rights (as defined below), during the initial Term (it being understood that this Article shall not apply during any Renewal Terms), Landlord shall not lease all or any portion of the fifth floor of the Building (collectively, the “Fifth Floor Space”), unless and until after Landlord has offered such space to Tenant under this Article 33. Landlord hereby represents and warrants, as of the date hereof, that no person or entity has any right to lease any portion of the Fifth Floor Space except as may be expressly described on Exhibit J attached hereto. “Permitted Superior Rights” shall mean, (a) any First Refusal Space (as defined below) leased to a third party tenant upon Tenant’s election not to lease such space pursuant to this Article 33, together with (b) any specified expansion space (not to exceed 50% of the First Refusal Space) which such third party tenant has an option to lease at a fixed rental rate pursuant to its initial lease of such First Refusal Space and (c) any renewals of the leases of space described in the preceding clauses (a) and (b). For purposes of clarity, in no event shall “Permitted Superior Rights” include (1) any space over which such third-party tenant has rights of first offer, rights of first opportunity

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or other rights not expressly described in the preceding clauses (a) - (c) or (2) any space leased by Tenant.

B.Refusal Notice/Exercise of Option.

1.    If, from time to time, Landlord has made or receives a bona fide third party offer to lease space in the Building that includes all or any portion of the Fifth Floor Space that Landlord and such third party are willing to accept (such portion of the Fifth Floor Space being subject to such third party offer is hereinafter referred to as the “First Refusal Space”) and such space is either not subject to any prior lease right under the Permitted Superior Rights or the holder of the Permitted Superior Right has waived its rights to such offer, then then Landlord shall deliver one or more notices (each a “ROFR Trigger Notice”) to Tenant that:

a.    Describes the First Refusal Space;

b.    Describes all pertinent business terms of such third-party offer, including without limitation the date on which Landlord would commit to deliver vacant possession of the First Refusal Space (a “Refusal Space Scheduled Delivery Date”), the date on which rent would first be payable therefor, the rental terms for such space (and annual escalations thereof) and any tenant improvement or moving allowances, rent abatement periods or other concessions to the proposed tenant (collectively, the “Offered Concessions”);

c.    Specifies the maximum term for which Landlord proposes to lease the First Refusal Space and, for purposes of determining the Permitted Superior Rights that may be created under Section 35(A), the maximum expansion rights or options that would be offered in the lease of such First Refusal Space; and

d.    Specifies any other material economic terms and conditions that would be applicable to the First Refusal Space.

C.Tenant shall have the option to lease all, but not less than all, of the First Refusal Space described in any ROFR Trigger Notice by delivering a notice to Landlord within ten (10) business days after its receipt of such ROFR Trigger Notice (such notice to Landlord being referred to herein as a “ROFR Exercise Notice”).

D.Any ROFR Exercise Notice shall be effective only if, at the time of delivery of Tenant’s ROFR Exercise Notice (a) neither this Lease nor Tenant’s right of possession hereunder shall have been previously terminated, (b) no Transfer (except a Permitted Transfer) has occurred, (c) no Event of Default exists and is continuing under this Lease, and (d) there are at least thirty-six (36) months remaining in the Term at the time Landlord delivers its ROFR Trigger Notice, provided, if fewer than thirty-six (36) months remain in the Term at the time Landlord delivers its ROFR Trigger Notice and Tenant has not yet exercised one or both Renewal Options, Tenant shall have the right to (notwithstanding the timing for such notice set forth in Section 32(B)) exercise the next applicable Renewal Option by delivering to Landlord a Renewal Notice, together with the ROFR Exercise Notice in which event the condition specified in clause (d) shall be deemed satisfied.

E.If Tenant does not timely exercise its option to lease all of any particular First Refusal Space in response to a ROFR Trigger Notice, Landlord shall have the right to lease all or any portion of such First Refusal Space to the third party prospective tenant identified in the ROFR Trigger Notice (or to an affiliate thereof) on materially the same terms and conditions as set forth in the ROFR Trigger Notice, or terms which are more economically favorable to Landlord, within two hundred seventy (270) days Tenant’s waiver of such rights. If Landlord so leases such First Refusal Space, then Landlord

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shall promptly notify Tenant thereof and any and all expansion options created thereby which are included within the definition of “Permitted Superior Rights” under Section 35(A) above, if any. If Landlord (a) fails to consummate any such lease within the 270-day period described above or (b) proposes to lease all or any portion of such First Refusal Space at a Net Effective Rent (as hereinafter defined) that is more than five percent (5%) less than the Net Effective Rent represented by the economic terms, taking into account all Offered Concessions, set out in Landlord’s ROFR Notice (in which case such proposed lease shall be deemed to be materially less favorable to Landlord than the terms and conditions set forth in the ROFR Trigger Notice), then Landlord will deliver an additional notice re-offering such First Refusal Space to Tenant, which notice shall set forth (i) the proposed Net Effective Rent with respect to such First Refusal Space (the “Re-Offer Rent”), if applicable and (ii) the other terms and conditions required to be included in a ROFR Trigger Notice for such First Refusal Space. Tenant shall have the option to lease such First Refusal Space by delivering to Landlord a ROFR Exercise Notice with respect to such First Refusal Space within five (5) business days after its receipt of Landlord’s notice with respect to such First Refusal Space. If Tenant does not timely exercise its option to lease all or any portion of any particular First Refusal Space, Landlord shall have the right to lease all or any portion of such space to the third party prospective tenant identified in the ROFR Trigger Notice (or to an affiliate thereof) for a Net Effective Rent which is not more than five percent (5%) less than the Re-Offer Rent and on materially the same terms and conditions as set forth in Landlord’s notice for such First Refusal Space, or terms which are more economically favorable to Landlord, within two hundred seventy (270) days after Tenant’s waiver of such rights. No waiver by Tenant of any of its rights under this Article 33 as to any First Refusal Space shall waive or modify any of Tenant’s rights under Article 32 above.

F.If Tenant duly exercises its option to lease any First Refusal Space under this Article 33, then such First Refusal Space shall be leased under this Lease on the following terms and conditions:

1.Landlord shall deliver possession of such First Refusal Space to Tenant on or before the applicable Refusal Space Scheduled Delivery Date and the term of this Lease with respect to such space shall commence on the later of: (i) the applicable Refusal Space Scheduled Delivery Date; and (ii) the date that Landlord actually delivers and Tenant accepts such First Refusal Space with all Landlord’s Core & Shell Work and all other improvements by Landlord contemplated under the ROFR Trigger Notice having been substantially completed (such later date being herein referred to as the “Refusal Space Commencement Date”). Rent for the First Refusal Space shall commence on the rent start date specified in the applicable ROFR Trigger Notice.

2.The expiration of the term of this Lease with respect to such First Refusal Space shall occur simultaneously with the expiration of the Term as it may be extended pursuant to Article 32 hereof or otherwise or as it may be earlier terminated as elsewhere provided herein.

3.Such First Refusal Space shall be included in the Premises effective as of the applicable Refusal Space Commencement Date on the same terms, covenants and conditions as are contained in this Lease, with the following exceptions and modifications:

(a)The Rentable Area of the Premises shall be increased by the Rentable Area of such First Refusal Space;

(b)Tenant’s Pro Rata Share shall be increased to reflect the Rentable Area of such First Refusal Space;

(c)Base Rent and all other economic terms and conditions as to such First Refusal Space, shall be equal to the Base Rent and economic terms and conditions specified in the applicable

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ROFR Trigger Notice but if the term of the Lease proposed in the applicable ROFR Trigger Notice would expire prior to or after the then-current Expiration Date of this Lease then, in either case, the term of such First Refusal Space shall be changed to the then-current Expiration Date, such Base Rent continuing to be payable during, and shall continue to increase throughout, any period by which the remaining initial Term of this Lease (or then-current Renewal Term if such First Refusal Space is being added either during a Renewal Term or after Tenant has exercised its Renewal Option under Article 32 for such Renewal Term) exceeds the term proposed in the applicable ROFR Trigger Notice, using the same annual escalation rate provided for in the applicable ROFR Trigger Notice, it being agreed and acknowledged that the term of the First Refusal Space be co-terminous with the remainder of the Premises;

(d)Landlord shall provide any Offered Concessions for the applicable First Refusal Space as provided for in the applicable ROFR Trigger Notice, provided that, in each case, such rent Offered Concessions shall be increased or decreased, as the case may be, in proportion to the percentage difference as of the date of the applicable ROFR Trigger Notice between the term proposed in the applicable ROFR Trigger Notice and the then-current remaining Term of this Lease; and

(e)Tenant shall otherwise accept possession from Landlord of any First Refusal Space in the condition specified in the ROFR Trigger Notice or if no condition is specified then in its “as is” condition (but free of all Hazardous Materials) as of the date Tenant exercises such option, provided that the Landlord’s Core & Shell Work and any additional work described in the applicable ROFR Trigger Notice has been completed.

4.Within thirty (30) days following written request by either Landlord or Tenant, following the exercise by Tenant of an option to lease any First Refusal Space, Landlord and Tenant shall enter into a supplement to this Lease confirming the terms, conditions and provisions applicable to such First Refusal Space, as determined in accordance herewith; provided that the failure to do so shall not affect Tenant’s leasing of any First Refusal Space or constitute or give rise to a Default or Landlord’s Default hereunder.

G.If Tenant does not timely exercise its option to lease any particular First Refusal under this Section and Landlord thereafter leases such First Refusal Space, such space shall nevertheless remain subject to the applicable provisions of this Article 33 when such First Refusal Space again becomes available for leasing, subject only to Permitted Superior Rights.

H.Notwithstanding anything to the contrary contained herein, as long as Landlord has not granted the occupant of such space or any other party any rights which conflict with Tenant’s rights under this Article 33, Landlord shall have no liability to Tenant and Landlord shall not be deemed in default under this Lease, if it is unable to deliver any First Refusal Space on the Refusal Space Scheduled Delivery Date due solely to the failure of any third party occupant of such space to have vacated it by such date; provided that if any such delay continues for more than ninety (90) days (which period shall not be extended due to Unavoidable Delays), Tenant shall have the right to rescind its ROFR Exercise Notice with respect to such First Refusal Space by notice delivered to Landlord at any time thereafter but prior to delivery of such space. Landlord will use reasonable efforts to regain possession of such space as promptly as reasonably possible. In no event shall Tenant be required to accept delivery of less than the full amount of any First Refusal Space that it has elected to lease under this Article 33.

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ARTICLE 34Tenant Incentives

Landlord has been made aware that Tenant intends to pursue certain state, county and/or city incentives in connection with Tenant’s location to and occupancy of the Premises (collectively, “Incentives”). Nothing contained herein shall be construed as imposing any obligation on Tenant to make any application, petition, certification or other filing with respect to any such Incentives. However, if Tenant does elect to pursue such Incentives, Landlord agrees to reasonably cooperate, at no expense to Landlord, with Tenant in Tenant’s pursuit of same. Tenant’s inability or failure to receive any Incentives from any governmental or other applicable body shall not excuse the performance of its obligations under this Lease. Neither party shall take any action relative to Incentives that would impose any cost, expense, obligation or liability upon the other party.

ARTICLE 35
Temporary Storage

Landlord acknowledges that Tenant has requested the right to temporarily store certain items in the Building prior to the Commencement Date of this Lease. Landlord agrees to reasonably cooperate with Tenant to determine whether any such space in the Building is suitable for Tenant’s storage needs, and if it is, Landlord and Tenant shall enter into a separate storage license agreement in a form mutually agreeable to both parties, documenting the terms of Tenant’s use of such space. Landlord agrees not to charge Tenant any fee for its use of such storage space; provided, however, that Landlord shall not be required to incur any out-of-pocket cost in connection with Tenant’s use of such space.

ARTICLE 36Side Letter

Landlord and Tenant hereby agree and acknowledge that certain letter dated January 7, 2020, as amended by that certain supplement to letter agreement dated February 11, 2020 by and between the parties (as so amended, the “Side Letter”) is hereby terminated as of the Execution Date and no amounts are due or payable by Tenant thereunder; rather, amounts actually incurred by Landlord pursuant to the Side Letter prior to the Execution Date shall be deemed to be “Construction Costs” paid for by (and thus deducted from) Landlord’s Maximum Expenditure.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS]

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IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument as of the day and year first above written.

LANDLORD:

2430 N. HALSTED, LLC,

a Delaware limited liability company

/s/ Andrew Gloor

Andrew Gloor

Authorized signatory

TENANT:

EXICURE, INC., a Delaware corporation

/s/ David S. Snyder

David S. Snyder

CFO

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EXHIBIT A

LEGAL DESCRIPTION OF LAND

A-1

EXHIBIT B

FLOOR PLAN OF PREMISES

This Exhibit is intended to show the general outline of the Premises, but shall not be deemed a representation or warranty as to the final dimensions or layout thereof.

B-1

EXHIBIT C

MINIMUM CLEANING SPECIFICATIONS

Daily Services

1. Main Entrance/Lobby

a. Dust sweep flooring

b. Wash polished concrete flooring in building entrance and foyers

c. Wipe down all metal and glass surfaces in the lobby interior using appropriate cleaner

d. Dust lobby desk

e. Clean all monitoring devices and telephone units

f. Vacuum runner mats when down

2. Elevator Cabs

a. Clean saddles, door, and frames of elevators at lobby

b. Remove all gum, foreign matter, and unauthorized writing

c. Clean metal and sides of elevator cabs

d. Vacuum and spot clean carpet

3. Public Areas

a. Maintain public area walls in clean condition

b. Vacuum clean all carpets in public areas

c. Inspect and maintain cleanliness of fire hoses, extinguishers, and other similar equipment

4. Restrooms

a. Scour, wash, and disinfect all basins, bowls and urinals with approved germicidal detergent solution using spray tank method

b. Wash and disinfect both sides of all toilet seats with approved germicidal detergent solution

c. Wash and polish all countertops, mirrors, shelves, dispensers, faucets, and flush meters with a non-abrasive disinfectant cleanser. Mirrors shall be left in a streak-free condition

d. Hand dust and wash all partitions, dispensers, and receptacles

e. Sweep and wash all lavatory flooring with an approved disinfectant

f. Empty and clean all paper towels, sanitary disposal receptacles, transporting waste to the designated location

g. Fill all toilet tissue holders, paper towel dispensers, sanitary napkin, and soap dispensers.

Exterior window washing shall occur not less than twice per calendar year.

C-1

EXHIBIT D

FORM OF COMMENCEMENT CERTIFICATE

Date        ______________________

Tenant        ______________________

Address    ______________________

______________________

        ______________________

Re: Commencement Letter with respect to that certain Lease dated as of ____________, 20__, by and between 2430 N. HALSTED, LLC, a Delaware limited liability company, as Landlord, and [TENANT], a _______________, as Tenant.

Dear    __________________:

In accordance with the terms and conditions of the above referenced Lease, Tenant has accepted possession of the Premises and Landlord and Tenant hereby acknowledge that:

1.    The Commencement Date of the Lease is ________________________;

2.    The Expiration Date of the Lease is ___________________________;

3.    The Rentable Area of the Premises is ________________________.

4.    The Rentable Area of the Building is _______________________.

5.    Tenant’s Pro Rata Share is _______________

6.    Tenant’s initial Base Rent is _______________ per square foot of Rentable Area.

Please acknowledge the foregoing and your acceptance of possession by signing one counterpart of this Commencement Letter in the space provided and returning 1 fully executed counterpart to my attention. Tenant’s failure to execute and return this letter, or to provide written objection to the statements contained in this letter, within thirty (30) days after the date of this letter shall be deemed an approval by Tenant of the statements contained herein.

Sincerely,

___________________________________

Authorized Signatory

Acknowledged and Accepted:

Tenant: [TENANT], a _______________

D-1

By:    ______________________Name:    ______________________Title:    ______________________Date:    ______________________

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EXHIBIT E

BASE RENT SCHEDULE

Base Rent for Premises
Lease Months	Base Rent PSF	RSF	Annual Base Rent	Monthly Base Rent
1-12*	$37.00	30,085	$1,113,145.00	$92,762.08
13-24	$38.11	30,085	$1,146,539.35	$95,544.95
25-36	$39.25	30,085	$1,180,836.25	$98,403.02
37-48	$40.43	30,085	$1,216,336.55	$101,361.38
49-60	$41.64	30,085	$1,252,739.40	$104,394.95
61-72	$42.89	30,085	$1,290,345.65	$107,528.80
73-84	$44.18	30,085	$1,329,155.30	$110,762.94
85-96	$45.51	30,085	$1,369,168.35	$114,097.36
97-108	$46.88	30,085	$1,410,384.80	$117,532.07
109-120	$48.29	30,085	$1,452,804.65	$121,067.05

*Base Rent for the first twelve (12) months following the Commencement Date is subject to the abatement set forth in Section 2.C. of the Lease.

E-1

EXHIBIT F

OUTLINE SCOPE FOR LANDLORD’S CORE & SHELL WORK

Life Science

2430 N Halsted

Core & Shell Turnover Condition – Lab

February 14, 2020

1. PROJECT DESCRIPTION:

A. The building consists of 5-storys, plus Lower Level parking garage with a footage of approximately 125,562 square feet.

B. The building and all systems shall be in conformance with applicable codes, laws, ordinances, and standards at the time of permitting.

C. 53 indoor parking spaces are provided at the sub surface level, including 3 handicap accessible space. 7 surface parking spots on south exterior of building

2. STRUCTURE:

A. Existing Substructure

i. Reinforced concrete structural slab

B. Existing Superstructure:

i. Exterior Walls:

a. The exterior wall structural framing generally consists of pre-cast wall panels attached to the interior framework.

ii. Interior Framework:

a. The interior framework consists of a reinforced concrete columns and beams.

iii. Suspended Floor Construction:

a. The suspended floor construction consists of a reinforced concrete two-way “waffle-type” slab.

b. Live Load Capacity:

125 PSF First Floor

125 PSF Lab Floors Levels 2 – 5

150 PSF Mech Rooms

50 PSF Parking

100 PSF Stairs

30 PSF Roof Live Load

c. Floor to Floor Height:

First Floor: 16’-6.5”

Second Floor: 15’-1”

Third Floor: 14’-11”

Fourth Floor: 14’-11”

Fifth Floor: 14’-11”

d. Typical Interior Lab Floor to Ceiling Clear Height: 9’-0”

e. Typical Floor Vibration Ranges: Testing in Process

iv. Roof Framing and Decking:

a. The roof framing construction consists of a reinforced concrete two-way “waffle-type” slab at the main area and rigid steel framing with beams and girders at the mechanical penthouse areas.

F-1-1

v. Tenant coring and patching in the slab must be approved by Owner’s structural engineer.

3. EXTERIOR ENCLOSURE:

A. Roof (unoccupied portions):

i. Roofing System Type:

a. Modified bitumen with cap sheet and TPO roofing systems over tapered rigid insulation is provided.

ii. Skylights/Accessories:

a. Metal mechanical screens are provided on the roof area.

B. Roof Drains/Gutters:

i. Interior roof and overflow roof drains are provided.

C. Exterior Walls:

i. The exterior wall construction generally consists of precast panel with thin face brick veneer and metal stud furring with insulation and gypsum board on the interior.

D. Windows and Storefront:

i. Fixed hollow aluminum mullion frame windows with low-E double panel set-in glass panes are provided.

ii. Additionally, “bay-type” aluminum windows are provided.

E. Entrance Vestibule:

i. A pair of outswing doors in a vestibule type entrance constructed of hollow aluminum mullion frames are provided with ADA push button access.

4. GROUND FLOOR

A. Renovated lobby with new furniture.

5. AMENITY SPACES

A. First floor:

i. Building amenities will be provided at the 1^st floor and consist of a large flexible conference room with capacity of 24 in a classroom setting and 70 in a reception setting and two smaller conference rooms with capacity of 10 each.

ii. Finishes:

a. Floors

a. Carpet in conference rooms

a. Concrete in lobby

b. Walls

a. Paint in conference rooms

a. Wallcovering in lobby

iii. Ceilings

a. Painted drywall in large conference room and lobby

a. Acoustic ceiling tile in corridors

B. Multi-tenant floors will have common area kitchenette and breakroom.

i. Finishes:

a. Floors

a. Concrete in kitchenette/breakroom

b. Walls

a. Paint in kitchenette/breakroom

6. CORE & SHELL FINISHES:

A. Lobby

i. Polished Concrete Floor

F-1-2

ii. Gypsum Board Walls

iii. Gypsum Board – Hard Ceiling

B. Common Restrooms:

i. Porcelain Ceramic Tile Floors, Walls

ii. Gypsum Board – Hard Ceiling

C. General Lab Facility:

i. Bio Science and General Chemistry Lab space

D. Access Control System:

i. Building issued credentials consist of HID iClass SE readers and printable HID iClass smart cards for access through controlled doors:

a. Perimeter entries

b. Garage

c. Restricted access to tenant floors in elevator & center stairs

d. Entry to tenant suite from public corridors

ii. Video intercom at main entry and dock

iii. Visitor management system

E. CCTV System:

i. High resolution cameras monitoring and recording video:

a. Building perimeter with focus on entry points

b. First floor lobby

c. Elevators – inside of cabs

ii. Recording of all video on-site

F. Tel-Comms:

i. Vendors: Comcast

ii. Riser Manager: IMG: Review with Building for Contact

G. Loading Dock and Common Storage:

i. Door Height: 13’-8”

ii. Bay Width: 18’-8” (Coiling Door Width)

iii. Max Truck Length: 40ft – Note alley access may further limit size.

iv. Dock Hydraulic Lift: 6,000 lb. Capacity

v. Loading Dock Support and Specialty Rooms

a. Hazardous Waste Staging Area

b. Tenant Storage for Lab Gas with Cages

c. Receiving

d. Flamable Storage Room and Cabinets

e. Corrosives/Acid Storage Room and Cabinets

H. Vertical Transportation:

i. PASSENGER ELEVATORS (1 & 2)

a. 2500 lb. capacity

b. Door opening: 42”

c. Cab size: 80” wide x 51” long x 89” tall

ii. Freight Elevator (3)

a. 4000 lb. capacity

b. Door opening: 42”

c. Cab size: 76” long x 56” wide x 96” tall

d. Door opens toward the East of building on floors 3, 4, & 5

e. Door opens toward the West of building on floors 1 & 2

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iii. Freight Elevator (4)

a. 5000 lb. capacity

b. Door opening: 48”

c. Cab size: 96” long x 75” wide x 96” tall

d. Door opens toward the East of building on floors 2, 3, 4, & 5

e. Door opens toward the West of building on floor 1

7. HVAC

A. Landlord to provide AHU with hot water reheat and VAV boxes with reheat coils for conditioning and fresh air. Temperature of 75 degrees will be maintained inside during the summer with a temperature of 70 degrees in the winter. Summer will also include a maximum relative humidity of 60%. Specialty spaces, such as the cool rooms have independent refrigeration systems and will be maintained to the temperature specified by the tenant pending landlord approval.

i. 4 North. 26,780 cfm 12 ACH

ii. 4 South. 19,770 cfm 15 ACH

B. Landlord to provide cold condenser water for tenant’s cooling to the demising walls. The tenant condenser water system shall operate at a minimum 15-degree delta T and a supply design temperature of condition of 80 F. The 587 ton south cooling tower and two (2) 418 ton north cooling towers have had their rated capacity increased and the system has excess capacity for tenant cooling of approximately 150 tons.

i. 4 North. 15 tons & 30 gpm

ii. 4 South. 15 tons & 30 gpm

C. Exhaust Air Capacity will be provided at building riser for tenant equipment tie in.

i. 4 North. EF-5 General Exhaust = 10 ACH, 9,700 cfm of additional point of use exhaust

ii. 4 South. EF-2-1 General Exhaust = 10 ACH, 6,850 cfm of additional point of use exhaust

D. Tenant’s HVAC control system shall tie into base building system by Schneider Electric.

8. ELECTRICAL

A. Main Services:

i. A 3,000-Amp, 480/277-Volt, 3-phase, 4-wire electric service feeds the building split between Phase 1 and Phase 2. Each floor is equipped with one (1) or more transformer rated between 30-kVA and 212.5-kVA. The transformers convert 480-Volt, 3-phase, 3-wire power into 208/120-Volt, 3-phase, 4-wire power. Each half of floor to be individually metered for standard and emergency power. Please note that for lab panels power panels, the panels have been fused down to 125 Amps, some of the lab panels have bus ratings up to 225 Amps.

a. 4 North. Nine (9) 125 Amp 208/120V Power Panels, Two (2) 225 Amp 277V Lighting Panels, 12 W/sq. ft available overall.

b. 4 South. Nine (9) 125 Amp 208/120V Power Panels, lab panels fused at 125 A, Two (2) 225 Amp Lighting Panels, 12 W/sq. ft available overall.

B. Exit Signs and Emergency Lighting:

i. Hardwired exit signs and emergency lighting connected to the emergency generators is provided.

C. Emergency Power:

i. The building is provided with two (2) emergency generators, which were installed in two (2) phases.

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a. The Phase 1 Caterpillar emergency generator is diesel powered with a rated capacity of 750-kW (975-kVA) of 480-Volt, 3-phase, 3-wire power.

b. The Phase 2 Newage Stanford emergency generator is natural gas powered with a rated capacity of 500-kW (625-kVA) of 480/277-Volt, 3-phase, 4-wire power. The diesel generator is equipped with a belly tank for fuel storage.

c. Capacity Provided per Tenant

a. 4 North. 6 W/sq. ft, One(1) 208/120V standby 400 Amp Panel for the floor – three(3) sub panels fed from that panel feeding north.

a. 4 South. 6 W/sq. ft, One(1) 208/120V standby 400 Amp Panel for the floor – one(1) sub panels fed from that panel feeding south.

9. PLUMBING

A. Domestic Cold and Hot Water – The domestic water main consists of a 3” line feeding a triplex booster pump. Cold water temperature is typical city water temperature at 57 degrees. – Two (2) AERCO steam to hot water hx provide 130F water that is mixed down to 120F at the fixture. Building is provided with a recirculatory pump

i. 4 North. 20 gpm cold water, 10gpm hot water

ii. 4 South. 20 gpm cold water, 10gpm hot water

B. Purified Water – Reverse Osmosis system with a 1000 gallon storage tank. Diversity increases the gpm, however a minimum value has been provided.

i. 4 North. R.O. 100 gallons or 1.2 gpm

ii. 4 South. R.O. 100 gallons or 1.2 gpm

C. Natural Gas Lines – Size and Capacity – A 6” low pressure gas service is provided to the building it supplies all of the lab spaces with the exception of the 2^nd floor vivarium with natural gas in addition to the phase 2(south) generator.

i. 4 North. Fed by 2” gas riser

ii. 4 South. Fed by 2” gas riser

D. Lab Gas Lines – Lab compressed air is provided by a duplex air compressor with two(2) 20 HP compressors located in the basement mechanical room.

i. 4 North. Fed by 1-1/4” riser, 1” distribution on floor.

ii. 4 South. Fed by 2” riser, 1” distribution on floor.

E. Vacuum – There is a triplex lab vacuum pump with three(3) 10 HP pumps located in the basement mechanical room. The north and south building each have 3” risers.

i. 4 North. Fed by 3” riser, 1” distribution on floor.

ii. 4 South. Fed by 3” riser, 1” distribution on floor.

10. FIRE PROTECTION

A. Fire Suppression System:

i. The building is fully covered by a combination wet-pipe and dry-pipe automatic sprinkler fire protection system. The dry-pipe portion of the system serves the loading dock and the parking garage. Standpipe risers with sprinkler zone test stations are provided in the stairwells. Concealed, recessed and pendant sprinkler heads are provided. A Peerless fire pump rated for 750-gpm at 120-psi and powered by a 75-hp electric motor serves the building.

B. Fire Extinguishers:

i. Fire extinguishers are provided throughout the building.

C. Fire Alarm System:

i. A Notifier addressable fire alarm system with integral battery backup and elevator recall is provided. Input devices include smoke detectors, heat detectors, pull stations, tamper

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switches and flow sensors. Output devices include speakers, strobes, combination audible visible alarms and a remote dialer.

11. Specialty Equipment:

A. Walk-In Cooler Units. The walk-in coolers are generally connected to the tenant supplemental cooling loop.

i. 4 North. Two (2) 100 sq. ft chambers.

ii. 4 South. Two (2) 100 sq. ft chambers.

B. Fume Hoods/BSC’s – Existing fume hoods primarily for biological research.

i. 4 North. Eight (8) 6’ Cabinet Fume Hoods

ii. 4 South. Four (4) 6’ Fume Hoods, One (1) 6’ Biosafety Cabinet, One (1) 4’ Fume Hood

C. Lab Benches – All Benches are High Pressure Laminate Tops

i. 4 North. Fourteen (14) Long Lab Benches Power Data Sink w PHW & PCW at 13, Gas Air Vacuum at all, 8 bays of window lab benches with power/data.

ii. 4 South. Eight (8) Long Lab Benches Power/Data Sink w PHW & PCW, RO water, and Lab Waste at 5 benches. One (1) Short Lab Bench Power/Data, Two (2) Window Benches Power/Data

D. Specialty Rooms

i. 4 North. None Provided

ii. 4 South. Two (2) Tissue Culture Suites

E. Misc Coolers, Freezers, Ice Machines

i. Several free-standing pieces of equipment are spread throughout the building. Reuse of these units by tenant can be reviewed with building ownership on a case by case basis.

12. Restrooms. Two (2) restrooms in the Premises upgraded to be consistent in quality and finish as the restrooms on the first floor of the Building.

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EXHIBIT G

WORK LETTER

1.    Initial Tenant Work.

A.    The “Initial Tenant Work” shall mean that certain improvement work in the Premises described in the Final Plans (as hereinafter defined) to be performed by Landlord, at Landlord’s expense up to the amount of Landlord’s Maximum Expenditure. Any additional costs of the Initial Tenant Work in excess of Landlord’s Maximum Expenditure are the sole responsibility of Tenant. Landlord shall engage architects, engineers, contractors and/or other third-party professionals selected by Landlord for the completion of the Initial Tenant Work (collectively, “Landlord’s Construction Team”). Landlord’s general contractor shall be Skender, unless Landlord elects to use another general contractor (which other contractor shall be subject to Tenant’s reasonable approval). The Initial Tenant Work shall be completed in accordance with the Final Plans, in a good and workmanlike manner and in compliance with all applicable laws, codes and regulations affecting the Building and the Premises.

B.    A description of the preliminary plans for the Initial Tenant Work is attached hereto as Schedule 1 (“Initial Scope”) and an estimated budget for that Initial Scope is attached hereto as Schedule 2. Following execution of this Lease, Landlord shall cause Landlord’s Construction Team to create more detailed plans and specifications for the Initial Tenant Work based on the Initial Scope (the “Plans”). Landlord’s Construction Team shall work closely with Landlord and Tenant to finalize the Plans for the Initial Tenant Work. Tenant shall approve or disapprove the Plans (which approval shall not be unreasonably withheld, conditioned or delayed) until the final plans are approved by Landlord and Tenant. Tenant shall have five (5) business days after Landlord’s submission of any revised Plans to approve same. If Tenant disapproves same, it will advise Landlord of the reasons for such disapproval in writing. This process shall repeat until final Plans for the Initial Tenant Work are agreed upon by Landlord and Tenant (the “Approved Plans”). The Approved Plans, as modified by Landlord and Tenant in accordance with the terms of this Work Letter and as approved by any authority having jurisdiction are hereinafter referred to as the “Final Plans”. Landlord’s approval of any plans shall in no way be deemed to be (i) an acceptance or approval of any element therein contained which is in violation of any applicable laws, ordinances, regulations or other governmental requirements, or (ii) an assurance that work done pursuant to the Approved Plans will comply with all applicable laws (or with the interpretations thereof) or satisfy Tenant’s objectives and needs.

C.    While Landlord and Tenant are reviewing and approving the plans and specifications, Landlord shall also submit to Tenant for its approval a preliminary budget and schedule for the Initial Tenant Work. Tenant shall have five (5) business days after Landlord’s submission of the preliminary budget and schedule to approve or disapprove same (which approval shall not be unreasonably withheld, conditioned or delayed). If Tenant disapproves same, it will advise Landlord of the reasons for such disapproval in writing. This process shall repeat until the preliminary budget and schedule are approved by Tenant (such budget being hereinafter referred to as the “Preliminary Budget” and such schedule being hereinafter referred to as the “Preliminary Schedule”).

D.    Following approval of the Approved Plans, provided no Event of Default exists under the Lease, Landlord shall use diligent efforts to obtain all permits necessary to commence the Initial Tenant Work. For purposes hereof, "diligent efforts" shall mean that Landlord: (i) submits to the proper governmental authorities all required documents, plans and specifications to obtain the permits in a timely manner, (ii) pays all fees required by such governmental authorities in order to obtain the permits

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in a timely manner, and (iii) reasonably cooperates with such governmental authorities by submitting any additional information or documents required by such governmental authorities in a timely manner.

E.    The Preliminary Budget and Preliminary Schedule may be revised from time to time (to the extent reasonably required) with written notice to Tenant as each set of Plans is approved. Once the Approved Plans have been approved, Landlord shall deliver to Tenant an estimate of the cost to complete the Initial Tenant Construction Work. Such estimate shall include all hard and soft costs of the Initial Tenant Construction Work, including, without limitation, Landlord’s Construction Management Fee (as hereinafter defined), builder’s risk insurance and consultants engaged by Landlord, if any. Such estimate, as approved by Tenant, shall be referred to as the “Final Budget”. Landlord shall also at that time advise Tenant of the final schedule. Such final schedule, as agreed upon by Tenant, shall be hereinafter referred to as the “Final Schedule”. Tenant shall have five (5) business days to approve the Final Budget and Final Schedule (which approval shall not be unreasonably withheld, conditioned or delayed). The approval process shall be the same as for the Preliminary Budget and Schedule set forth above, except that Tenant shall not have any right to disapprove the Final Budget or Final Schedule to the extent that they are consistent with the Preliminary Budget and Preliminary Schedule, respectively. Any and all approvals required by Landlord and Tenant hereunder shall be required to be in writing, which may be satisfied via email, by its respective authorized representative. Landlord hereby designates Andy Essary (email: aessary@sterlingbay.com), with a copy to Steve Di Vito (email:sdivito@sterlingbay.com) as Landlord’s representative, and Tenant hereby designates David Giljohann (email davidg@exicuretx.com).

2    Change Orders. Tenant may request changes to the Plans by submitting sufficient information to Landlord in writing (“Tenant Change Request” or "TCR”) so that Landlord may promptly evaluate the cost and schedule impact of the request. Landlord shall, within ten (10) days of any Tenant Change Request, provide a written proposal (“Tenant Potential Change Order” or "TPCO") for the cost increase (“TCO Cost Increase”) or decrease and schedule impact resulting from the Change Request. Notwithstanding the above, Landlord may reject any single Tenant Change Request or Tenant Change Requests which in Landlord’s reasonable judgment would, in the aggregate, extend substantial completion of the Initial Tenant Work by more than 30 days or materially increase the cost of the Initial Tenant Work. Tenant shall have five (5) business days from receipt of a Tenant Potential Change Order to accept or reject same. If Tenant elects to accept the TPCO, Tenant shall (a) deliver a countersigned copy of same to Landlord within five (5) business days and the Tenant Potential Change Order shall then constitute a “Tenant Change Order” or "TCO" and (b) deposit with Landlord or Escrow Agent (as hereinafter defined) within thirty (30) days thereafter the additional estimated costs for the Initial Tenant Work incurred as a result of such TCO(such additional costs to be treated as additional Tenant’s Excess). If Tenant does not deliver written notice of acceptance or rejection to Landlord within five (5) business days of receipt of Landlord’s TPCO, Tenant will be deemed to have elected not to proceed with the work contemplated therein and the TCR shall be considered withdrawn. Actual costs of all TCOs (up to the amount of the TCO Cost Increase) shall be borne by Tenant, subject to application of Landlord’s Maximum Expenditure. “Tenant’s Excess”, as used herein, shall mean any monetary contribution by Tenant towards the Construction Costs of Initial Tenant Work. As used herein, “Construction Costs” are the actual reasonable out of pocket costs incurred by Landlord for design, engineering, permitting and construction of the Initial Tenant Work, including, without limitation, all design costs and fees (including, without limitation, costs charged by the Design Team), permits, material, labor, taxes, fees, scavenger, utility consumption, insurance, bonds, administrative expenses, and any Landlord supervisory fee, as described in this Work Letter.

3.    Construction Escrow. At Landlord’s election, Landlord shall establish a construction escrow with a title insurer acceptable to Landlord and Landlord’s construction or permanent lender, if any, (the “Escrow Agent”), by entering into an Escrow Agreement (as hereinafter defined) providing for payment for the Construction Costs (as hereinafter defined) of the Initial Tenant Work. All fees due

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to the Escrow Agent under the Escrow Agreement shall be paid by Landlord and not paid out of or included in Landlord’s Maximum Expenditure. The escrow agreement by and among Escrow Agent, Landlord and Landlord’s construction or permanent lender, if any, (the “Escrow Agreement”) shall provide for payment of the Construction Costs in accordance with the terms of this Work Letter and which is otherwise satisfactory to the Escrow Agent and Landlord’s construction or permanent lender, if any, provided that Tenant shall not be bound by, and the Escrow Agreement shall not diminish vis-à-vis Landlord and Tenant, the obligations of Landlord under the Lease, including, without limitation, the obligation of Landlord to pay for the Initial Tenant Work up to Landlord’s Maximum Expenditure.. If Tenant contributes any Tenant’s Excess for the Initial Tenant Work, Tenant shall join as a party to the Escrow Agreement; provided Tenant shall not be liable for any liability or obligations of Landlord, including, without limitation, any obligation under the loan pursuant to which the Escrow Agreement was established.

4.    Landlord’s Maximum Expenditure; Tenant’s Excess; Construction Supervision Fee

A.    Landlord’s Maximum Expenditure. Landlord shall contribute an amount not to exceed $105.00 per square foot of Rentable Area in the Premises (the “Landlord’s Maximum Expenditure”) to be applied toward the Construction Costs in accordance with the terms of this Paragraph 4. Any costs of the Initial Tenant Work that exceed Landlord’s Maximum Expenditure shall be the sole responsibility of Tenant. Items of Tenant’s furniture, fixtures and equipment may, at Tenant’s option, be included in Construction Costs. Tenant shall be solely responsible for any costs of the Initial Tenant Work that exceed the amount of the Landlord’s Maximum Expenditure or for costs that do not qualify as Construction Costs.

B.    Tenant’s Excess. If the anticipated cost of Initial Tenant Work based on the Final Plans indicates that the cost of the Initial Tenant Work exceeds the amount of Landlord’s Maximum Expenditure, Tenant shall have sole responsibility for the payment of such excess cost (“Tenant’s Excess”). The amount of Tenant’s Excess shall be the estimated cost of the Initial Tenant Work less the amount of Landlord’s Maximum Expenditure and shall be paid to Escrow Agent within ten (10) days following written notice from Landlord. Landlord shall have no obligation to commence the Initial Tenant Work or to engage a general contractor until Tenant has paid Tenant’s Excess. Payments from the construction escrow of Tenant’s Excess as the Initial Tenant Work progresses shall be made on a pari passu basis along with the funding of Landlord’s Maximum Expenditure, in the respective proportions that Landlord’s Maximum Expenditure and Tenant’s Excess bear to the expected total cost of the Initial Tenant Work. After completion of the Initial Tenant Work, Landlord shall send to Tenant a final accounting certified by Landlord setting forth the final actual cost of the Initial Tenant Work. If the final actual cost of the Initial Tenant Work is equal to or less than the Landlord’s Maximum Expenditure (plus any Tenant’s Excess actually paid by Tenant), Landlord shall refund to Tenant the resulting unused portion of Tenant’s Excess within thirty (30) days after sending the final accounting to Tenant. If the final actual cost of the Initial Tenant Work exceeds Landlord’s Maximum Expenditure (plus any Tenant’s Excess paid by Tenant), Tenant shall pay Landlord an amount equal to such shortfall within thirty (30) days after receipt of the final accounting. Any portion of Landlord’s Maximum Expenditure not spent completing the Initial Tenant Work shall be deemed forfeited by Tenant and Tenant shall not have any further right or claim thereto.

C.    Construction Supervision Fee. Tenant shall pay a supervision fee on the Construction Costs in the amount of five percent (5%) of the costs of the Initial Tenant Work

5.    Costs of Plans. In addition to Landlord’s Maximum Expenditure, Landlord will pay for an initial space plan for the Premises and one revision thereto.

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6.    Substantial Completion and Punch-List. Landlord shall use reasonable efforts to cause the Initial Tenant Work to be “Substantially Completed” in accordance with the Final Schedule, subject to delays caused by Tenant or delays beyond Landlord’s reasonable control. The Initial Tenant Work shall be considered “Substantially Completed” for all purposes under this Work Letter and the Lease upon the earliest of (a) the date Landlord’s architect or general contractor issues a written certificate to Landlord and Tenant, certifying that the Initial Tenant Work has been completed (except for minor finish-out and “punchlist” items) in substantial compliance with the Final Plans or (b) the date Tenant first takes occupancy of the Premises for the conduct of Tenant’s business, or (c) the date a certificate of occupancy or other occupancy permit for the Premises has been issued by the local governmental authority having jurisdiction, or (d) the date the Initial Tenant Work would have been completed but for Tenant Delays (as hereinafter defined). If the Initial Tenant Work is not substantially completed in accordance on or before the Commencement Date, Landlord shall have no liability to Tenant as a result of any delay in occupancy, the Commencement Date shall still occur as scheduled, and both parties shall cooperate in good faith to have the Initial Tenant Work be substantially completed as soon as practicable. Within ten (10) days following substantial completion of Initial Tenant Work, Tenant shall have the right to submit a written “punch-list” to Landlord describing any items of the Initial Tenant Work that have not been completed, and Landlord shall promptly cause such items to be completed at Landlord’s expense. “Tenant Delays”, as used herein, may include, without limitation, Tenant’s failure to respond to any Landlord request for approval within the time periods set forth herein (or, if no time period is expressly set forth herein, then within five (5) business days after Landlord’s request) or Tenant’s failure to deposit any funds due hereunder within the time periods set forth herein (or, if no time period is expressly set forth herein, then within five (5) business days after Landlord’s request), or other interference by Tenant that delays Landlord’s completion of the Initial Tenant Work (provided that Landlord first notifies Tenant of such delay in writing and Tenant does not cure same within two (2) business days after receipt of such notice).

7.    Miscellaneous.

A.    Time is of the essence of this Work Letter.

B.    The headings set forth herein are for convenience only.

C.    Article 4 of the Lease and this Work Letter sets forth the entire agreement of Tenant and Landlord regarding the Initial Tenant Work. This Work Letter may only be amended if in writing, duly executed by both Landlord and Tenant.

D.    All amounts due from Tenant to Landlord hereunder shall be deemed to be Rent due under the Lease.

E.    Tenant's failure to pay any amounts owed by Tenant to Landlord hereunder when due or Tenant's failure to perform its obligations hereunder shall also constitute a default under the Lease and Landlord shall have all the rights and remedies granted to Landlord under the Lease for nonpayment of any amounts owed thereunder or failure by Tenant to perform its obligations thereunder, subject to the terms of the Lease.

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SCHEDULE 1 TO EXHIBIT G

INITIAL SCOPE

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SCHEDULE 2 TO EXHIBIT G

INITIAL BUDGET

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EXHIBIT H

RULES AND REGULATIONS

In the event of any express conflict between the express terms and conditions of the Lease and the terms of this Exhibit H, the terms and provisions of the Lease shall control and prevail.

1.    Tenant shall not make any room to room canvas to solicit business from other tenants in the Building and shall not exhibit, sell or offer to sell, use, rent or exchange any item or services in or from the Premises unless ordinarily included within Tenant's use of the Premises or Tenant’s business as specified in the Lease.

2.    Tenant shall not make any use of the Premises which may be unreasonably dangerous to person or property or which shall materially increase the cost of Landlord’s insurance for the Property or require additional insurance coverage by Landlord for the Property. Landlord agrees that the uses specifically allowed under Article 5 do not breach this paragraph 2.

3.    Except as expressly provided in the Lease, Tenant shall not paint, display, inscribe or affix any sign, picture, advertisement, notice, lettering or direction or install any lights on any part of the outside or inside of the Building, and then not on any part of the inside of the Premises which can be seen from outside the Premises, except as approved by Landlord in writing, which approval shall not be unreasonably withheld, conditioned or delayed.

4.    Tenant shall not use the name, logo, trademark or pictures of the Building in advertising or other publicity, without Landlord’s prior approval.

5.    Tenant shall not obstruct or place objects on or in sidewalks, entrances, passages, courts, corridors, vestibules, halls, elevators and stairways in and about the Building. Tenant shall not place objects against glass partitions or doors or windows or adjacent to any open common space which would be unsightly from the Building corridors or from the exterior of the Building.

6.    Bicycles shall not be permitted in the Building other than in locations designated by Landlord.

7.    Other than service dogs (as such term is used under the ADA) in strict compliance with applicable Laws, Tenant shall not allow its employees or invitees to bring any animals in the Premises or the Building.

8.    Tenant shall not unreasonably disturb other tenants or make unreasonably excessive noises, cause unreasonable disturbances, create excessive vibrations, odors or noxious fumes or use or operate any electrical or electronic devices or other devices that emit excessive sound waves or are dangerous to other tenants of the Building or that would interfere in any material way with the operation of any device or equipment or radio or television broadcasting or reception from or within the Building or elsewhere, and shall not place or install any projections, antennae, aerials or similar devices outside of the Building or the Premises.

9.    Tenant shall not knowingly waste electricity or water and shall cooperate fully with Landlord in connection with Landlord’s efforts to assure the most effective operation of the Building's heating and air conditioning and Tenant shall refrain from attempting to adjust any controls except for the thermostats within the Premises. Tenant shall keep all doors to the Premises closed.

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10.    The water and wash closets and other plumbing fixtures shall not be used for any purposes other than those for which they were constructed, and no sweepings, rubbish, ashes, chemicals, or other refuse or injurious substances shall be deposited therein or used in connection therewith by Tenant, or left by Tenant in the lobbies, passages, elevators or stairways of the Building. Furthermore, Tenant shall not dispose of any foreign substances in the toilets, urinals, sinks or other washroom facilities, nor shall Tenant permit such items to be used other than for their intended purposes; and Tenant shall be liable for any damage caused by Tenant’s violation of this rule.

11.    Discharge of industrial sewage shall only be permitted if Tenant, at its sole expense, first obtains all necessary permits and licenses therefor from all applicable Governmental Authorities.

12.    Smoking is prohibited inside the Building. Tenant shall not permit its employees, invitees or guests to smoke in the Premises or any lobbies, passages, corridors, elevators, vending rooms, restrooms, stairways, parking garage or any other area shared in common with other tenants in the Building. Nor shall Tenant permit its employees, invitees, or guests to loiter at the building entrances for the purpose of smoking.

13.    The Building shall be subject to Landlord’s reasonable security requirements which are commensurate with Comparable Buildings. The Landlord shall in no event be responsible for admitting or excluding any person from the Premises. In case of invasion, hostile attack, insurrection, mob violence, riot, public excitement or other commotion, explosion, fire or any casualty, the Landlord shall have the right to bar or limit access to the Property or Building to protect the safety of occupants of the Property or the Building. Tenant shall cooperate and participate in all reasonable security programs affecting the Building.

14.    Except as otherwise provided in the Lease, Tenant shall not install any signal, communication, alarm or other utility or service system or equipment without the prior written consent of Landlord.

15.    Tenant shall not use any draperies or other window coverings instead of or in addition to the Building standard window coverings designated and approved by Landlord in its reasonable discretion for exclusive use throughout the Building or other coverings reasonably approved in advance by Landlord in writing.

16.    Landlord may require that all persons who enter or leave the Building identify themselves to watchmen, by registration or otherwise. Landlord, however, shall have no responsibility or liability for any theft, robbery or other crime in the Premises or the Building. Tenant shall assume full responsibility for protecting the Premises, including keeping all doors to the Premises locked after the close of business.

17.    Tenant shall not overload floors; and Tenant shall obtain Landlord's prior written approval as to size, maximum weight, routing and location of business machines, safes, and heavy objects. Tenant shall not install or operate machinery or any mechanical devices of a nature not directly related to Tenant's permitted use of the Premises.

18.    In no event shall Tenant bring into the Building inflammables such as gasoline, kerosene, naphtha and benzene, or explosives or firearms or any other articles of an intrinsically dangerous nature, except as otherwise permitted under the Lease.

19.    Furniture, equipment and other large articles may be brought into the Building only at the time and in the manner reasonably designated by Landlord. Tenant shall furnish Landlord with a list of furniture, equipment and other large articles which are to be removed from the Building, and Landlord

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may require permits before allowing anything to be moved in or out of the Building. Movements of Tenant's property into or out of the Building and within the Building are entirely at the risk and responsibility of Tenant.

20.    No person or contractor, unless approved in advance by Landlord, shall be employed to do janitorial work, interior window washing, cleaning, decorating or similar services in the Premises.

21.    Tenant shall not use the Premises for lodging, cooking (except for microwave reheating and coffee makers) or manufacturing or selling any alcoholic beverages or for any illegal purposes.

22.    Tenant shall comply with all safety, fire protection and evacuation procedures and regulations reasonably established by Landlord or any governmental agency.

23.    Tenant shall not loiter, eat, drink, sit or lie in the lobby or other public areas in the Building, except for any portions thereof intended for any such purpose. Tenant shall not go onto the roof of the Building or any other non public areas of the Building (except the Premises), and, subject to the terms of the Lease, Landlord reserves all rights to control the public and non public areas of the Building. In no event shall Tenant have access to any electrical, telephone, plumbing or other mechanical closets without Landlord's prior written consent.

24.    Tenant shall not use the freight or passenger elevators, loading docks or receiving areas of the Building except in accordance with regulations for their use reasonably established by Landlord; provided that the foregoing shall not preclude Tenant from using the passenger elevators for personnel access to and from the Premises.

25.    Tenant shall not conduct animal research in the Premises or the Building, except as expressly permitted in the Lease and in accordance with reasonable rules and regulations for same established by Landlord or its vivarium operator/manager, if any.

26.    Tenant shall store all of its trash, garbage and Hazardous Materials in receptacles within its Premises or, for the non-Hazardous Materials, in receptacles designated by Landlord outside of the Premises for such purposes. Tenant shall not place in any such receptacle any material that cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. Any Hazardous Materials transported through common areas shall be held in secondary containment devices and transported in strict accordance with all applicable Laws and industry standard practices for handing such materials. Tenant shall comply with all orders, requirements and conditions now or hereafter imposed by applicable Laws and reasonably comply with trash and recycling programs established by Landlord at the Building (collectively, “Waste Regulations”) regarding the collection, sorting, separation and recycling of waste products, garbage, refuse and trash generated by Tenant (collectively, “Waste Products”), including (without limitation) the separation of Waste Products into receptacles reasonably approved by Landlord and the removal of such receptacles in accordance with any collection schedules prescribed by Waste Regulations.

Subject to Section 5(C) of the Lease, Landlord reserves the right to amend, revise, supplement and update the rules and regulations from time to time upon notice to Tenant.

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EXHIBIT I

PERMITTED SUPERIOR RIGHTS

None.

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EXHIBIT J

FORM OF SNDA

SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT

THIS SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this “Agreement”) is entered into as of February __, 2020 (the “Effective Date”) by and between DELPHI CRE FUNDING LLC, a Delaware limited liability company (in its capacity as Administrative Agent (as defined in the Loan Agreement) for and on behalf of the Lenders (as defined in the Loan Agreement, as hereinafter defined), together with its successors and/or assigns, the “Administrative Agent”), and EXICURE, INC., a Delaware corporation (together with its permitted successors and assigns, the “Tenant”), with reference to the following facts:

A.    2430 N. Halsted, LLC, a Delaware limited liability whose address is 1330 W. Fulton Street, Suite 800, Chicago, Illinois 60607 (the “Landlord”) owns fee simple title or a leasehold interest in the real property described in Exhibit “A” attached hereto (the “Property”).

B.    Pursuant to that certain Loan Agreement dated as of the date hereof among Administrative Agent, the Lenders party thereto and Landlord (the “Loan Agreement”), the Lenders have made a loan to Landlord in the original principal amount of Thirty-Two Million One Hundred Sixty Five Thousand Dollars ($32,165,000.00) (the “Loan”).

C.    The Loan is secured by, among other things, that certain Mortgage, Assignment of Leasesand Rents, Security Agreement, and Fixture Filingdated October 30, 2018 in favor of Administrative Agent, recorded in the Cook County Clerk’s Office as Instrument Number 1830406223 (as may be further amended, increased, renewed, extended, spread, consolidated, severed, restated, or otherwise changed from time to time, the “Mortgage”).

D.    Pursuant to that certain Lease effective ________________, (the “Lease”), Landlord demised to Tenant a portionof the Property consisting of the following (the “Leased Premises”): fourth (4^th) floor of the Property, consisting of approximately 29,929 rentable square feet.

E.    Tenant and Administrative Agent desire to agree upon the relative priorities of their interests in the Property and their rights and obligations if certain events occur.

NOW, THEREFORE, for good and sufficient consideration, Tenant and Administrative Agent agree:

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1.Definitions. The following terms shall have the following meanings for purposes of this Agreement.

a.Foreclosure Event. A “Foreclosure Event” means: (i) foreclosure under the Mortgage; (ii) any other exercise by Administrative Agent of rights and remedies (whether under the Mortgage or under applicable law, including bankruptcy law) as holder of the Loan and/or the Mortgage, as a result of which a Successor Landlord becomes owner of the Property; or (iii) delivery by Landlord to Administrative Agent (or its designee or nominee) of a deed or other conveyance of Landlord’s interest in the Property in lieu of any of the foregoing.

b.Former Landlord. A “Former Landlord” means Landlord and any other party that was landlord under the Lease at any time before the occurrence of any attornment under this Agreement.

c.Offset Right. An “Offset Right” means any right or alleged right of Tenant to any offset, defense (other than one arising from actual payment and performance, which payment and performance would bind a Successor Landlord pursuant to this Agreement), claim, counterclaim, reduction, deduction, or abatement against Tenant’s payment of Rent or performance of Tenant’s other obligations under the Lease, arising (whether under the Lease or under applicable law) from Landlord’s breach or default under the Lease.

d.Rent. The “Rent” means any fixed rent, base rent or additional rent due and payable by Tenant to Landlord or Successor Landlord, as applicable, under the Lease.

e.Successor Landlord. A “Successor Landlord” means any party that becomes owner of the Property as the result of a Foreclosure Event.

f.Termination Right. A “Termination Right” means any right of Tenant to cancel or terminate the Lease or to claim a partial or total eviction arising (whether under the Lease or under applicable law) from Landlord’s breach or default under the Lease.

g.Other Capitalized Terms. If any capitalized term is used in this Agreement and no separate definition is contained in this Agreement, then such term shall have the same respective definition as set forth in the Lease.

2.Subordination. The Lease, as the same may hereafter be modified, amended or extended, shall be, and shall at all times remain, subject and subordinate to the lien imposed by the Mortgage and all advances, renewals, extensions and modifications thereof.

3.Nondisturbance, Recognition and Attornment.

a.No Exercise of Mortgage Remedies Against Tenant. So long as the Tenant is not in default under the Lease beyond any applicable grace or cure periods (an “Event of Default”), Administrative Agent (i) shall not terminate or disturb Tenant’s possession of the Leased Premises or any of Tenant’s rights under the Lease, except in accordance with the terms of the Lease and this agreement and (ii) shall not name or join Tenant as a defendant in any exercise of Administrative Agent’s rights and remedies arising upon a default under the Mortgage unless applicable law requires

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Tenant to be made a party thereto as a condition to proceeding against Landlord or prosecuting such rights and remedies. In the latter case, Administrative Agent may join Tenant as a defendant in such action only for such purpose and shall not terminate the Lease or otherwise adversely affect any of Tenant’s rights under the Lease or this Agreement in such action.

b.Recognition and Attornment. Upon Successor Landlord taking title to the Property (i) Successor Landlord shall be bound to Tenant under all the terms and conditions of the Lease (except as provided in this Agreement); (ii) Tenant shall recognize and attorn to Successor Landlord as Tenant’s direct landlord under the Lease as affected by this Agreement; and (iii) the Lease shall continue in full force and effect as a direct lease, in accordance with its terms (except as provided in this Agreement), between Successor Landlord and Tenant. Administrative Agent hereby notifies Tenant, and Tenant hereby acknowledges, that, pursuant to the Mortgage and assignment of rents, leases and profits, Landlord has granted to the Administrative Agent an absolute, present assignment of the Lease and Rents which provides that Tenant continue making payments of Rents and other amounts owed by Tenant under the Lease to or at the direction of the Landlord and to recognize the rights of Landlord under the Lease until notified otherwise in writing by the Administrative Agent. After receipt of such notice from Administrative Agent, the Tenant shall thereafter make all such payments directly to the Administrative Agent or as the Administrative Agent may otherwise direct, without any further inquiry on the part of the Tenant. Landlord, by its signature hereon, consents to the foregoing and waives any right, claim or demand which Landlord may have against Tenant by reason of such payments to Administrative Agent or as Administrative Agent directs.

c.Further Documentation. The provisions of this Article 3 shall be effective and self-operative without any need for Successor Landlord or Tenant to execute any further documents. Tenant and Successor Landlord shall, however, confirm the provisions of this Article 3 in writing, in form and substance reasonably acceptable to each of them, upon request by either of them within ten (10) business days of such request.

4.Protection of Successor Landlord. Notwithstanding anything to the contrary in the Lease or the Mortgage, Successor Landlord shall not be liable for or bound by any of the following matters:

a.Claims Against Former Landlord. Any Offset Right that Tenant may have against any Former Landlord relating to any event or occurrence before the date of attornment, including any claim for damages of any kind whatsoever as the result of any breach by Former Landlord that occurred before the date of attornment. The foregoing shall not limit either (i) Tenant’s right to exercise against Successor Landlord any Offset Right otherwise available to Tenant because of events occurring after the date of attornment or (ii) Successor Landlord’s obligation to correct any conditions and/or perform any obligations that existed as of the date of attornment and violate Successor Landlord’s continuing obligations as landlord under the Lease.

b.Prepayments. Any payment of Rent that Tenant may have made to Former Landlord more than thirty (30) days before the date such Rent was first due and payable under the Lease with respect to any period after the date of attornment other than, and only to the extent that, the Lease expressly required such a prepayment.

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c.Payment; Security Deposit; Work. Any obligation: (i) to pay Tenant any sum(s) that any Former Landlord owed to Tenant pursuant to the Lease unless such sums, if any, shall have been actually delivered to Administrative Agent by way of an assumption of escrow accounts or otherwise; (ii) with respect to any security deposited with Former Landlord, unless such security deposit was actually delivered to Administrative Agent; (iii) to commence or complete any initial construction of improvements in the Leased Premises or any expansion or rehabilitation of existing improvements thereon, provided, however, if Administrative Agent or any Successor Landlord fails or refuses to complete the Initial Tenant Improvements in accordance with the terms of the Lease, Tenant shall have the right to terminate the Lease by delivering written notice thereof to Administrative Agent or Successor Landlord, as applicable; (iv) to reconstruct or repair improvements following a fire, casualty or condemnation, except as set forth in the Mortgage; or (v) arising from representations and warranties in the Lease related to Former Landlord.

d.Modification, Amendment or Waiver. Any material modification or amendment of the Lease, or any waiver of the terms of the Lease, made without Administrative Agent’s prior written consent.

e.Surrender, Etc. Any consensual or negotiated surrender, cancellation, or termination of the Lease, in whole or in part, agreed upon between Landlord and Tenant, unless effected unilaterally by Tenant pursuant to the express terms of the Lease.

5.Exculpation of Successor Landlord. Notwithstanding anything to the contrary in this Agreement or the Lease, Successor Landlord’s obligations and liability under the Lease shall never extend beyond Successor Landlord’s (or its successors’ or assigns’) interest, if any, in the Leased Premises from time to time, including insurance and condemnation proceeds, rents, security deposits, escrows, Successor Landlord’s interest in the Lease, and the profits and proceeds from any sale, lease or other disposition of the Property (or any portion thereof) by Successor Landlord (collectively, the “Successor Landlord’s Interest”). Tenant shall look exclusively to Successor Landlord’s Interest (or that of its successors and assigns) for payment or discharge of any obligations of Successor Landlord under the Lease as affected by this Agreement. If Tenant obtains any money judgment against Successor Landlord with respect to the Lease or the relationship between Successor Landlord and Tenant, then Tenant shall look solely to Successor Landlord’s Interest (or that of its successors and assigns) to collect such judgment. Tenant shall not collect or attempt to collect any such judgment out of any other assets of Successor Landlord.

6.Administrative Agent’s Right to Cure. Notwithstanding anything to the contrary in the Lease or this Agreement, before exercising any Offset Right or Termination Right:

a.Notice to Administrative Agent. Tenant shall provide Administrative Agent with notice of the breach or default by Landlord giving rise to same (the “Default Notice”) and, thereafter, the opportunity to cure such breach or default as provided for below.

b.Administrative Agent’s Cure Period. After Administrative Agent receives a Default Notice, Administrative Agent shall have a period of thirty (30) days beyond the time available to Landlord under the Lease (the “Landlord’s Original Cure Period”) in which to cure the breach or default by Landlord. Administrative Agent shall have no obligation to cure (and shall have no

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liability or obligation for not curing) any breach or default by Landlord, except to the extent that Administrative Agent agrees or undertakes otherwise in writing. In the event that such breach or default is not susceptible of cure within the Landlord’s Original Cure Period, so long as Administrative Agent has commenced and is diligently pursuing such cure, Administrative Agent shall have an additional one hundred twenty (120) days after expiration of the Landlord’s Original Cure Period in which to cure the applicable breach or default.

7.Miscellaneous.

a.Notices. Any notice or request given or demand made under this Agreement by one party to the other shall be in writing, and may be given or served by hand-delivered personal service, or by depositing the same with a reliable overnight courier service and addressed to the party to be notified, or by telefax transmission, with the original machine- generated transmit confirmation report as evidence of transmission. Delivery by overnight courier service shall be deemed effective on the next succeeding business day after it is so deposited and notice by personal service or telefax transmission shall be deemed effective when delivered to its addressee or within two (2) hours after its transmission unless given after 3:00 p.m. on a business day, in which case it shall be deemed effective at 9:00 a.m. on the next business day. For purposes of notice, the addresses and telefax number of the parties shall, until changed as herein provided, be as follows:

i. If to the Administrative Agent, at:

Delphi CRE Funding LLC
c/o ACORE Capital Mortgage, LP
80 E. Sir Francis Drake Blvd., Suite 2A
Larkspur, California 94939 Attention: Stew Ward, Managing PartnerEmail: notices@acorecapital.com

ii. If to the Tenant prior to the Commencement Date, at:

Exicure, Inc.8045 Lamon Avenue, Suite 410
Skokie, Illinois 60077
Attn: David Snyder

Email: dsnyder@exicuretx.com

on or after the Commencement Date to:
Exicure, Inc.2430 N. Halsted Street, 4^th floor
Chicago, Illinois 60614
Attn: David Snyder

Email: dsnyder@exicuretx.com

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b.Successors and Assigns. This Agreement shall bind and benefit the parties, their successors and assigns, any Successor Landlord, and its successors and assigns. If Administrative Agent assigns the Mortgage, then upon delivery to Tenant of written notice thereof accompanied by the assignee’s written assumption of all obligations under this Agreement, all liability of the assignor shall terminate from and after the date of such assignment and assumption.

c.Entire Agreement. This Agreement constitutes the entire agreement between Administrative Agent and Tenant regarding the subordination of the Lease to the Mortgage and the rights and obligations of Tenant and Administrative Agent as to the subject matter of this Agreement.

d.Interaction with Lease and with Mortgage. If this Agreement conflicts with the Lease, then this Agreement shall govern as between the parties and any Successor Landlord, including upon any attornment pursuant to this Agreement. This Agreement supersedes, and constitutes full compliance with, any provisions in the Lease that provide for subordination of the Lease to, or for delivery of nondisturbance agreements by the holder of, the Mortgage.

e.Administrative Agent’s Rights and Obligations. Except as expressly provided for in this Agreement, Administrative Agent shall have no obligations to Tenant with respect to the Lease. If an attornment occurs pursuant to this Agreement, then all rights and obligations of Administrative Agent under this Agreement shall terminate, without thereby affecting in any way the rights and obligations of Successor Landlord provided for in this Agreement.

f.Interpretation; Governing Law. The interpretation, validity and enforcement of this Agreement shall be governed by and construed under the internal laws of the State in which the Leased Premises are located, excluding such State’s principles of conflict of laws.

g.Amendments. This Agreement may be amended, discharged or terminated, or any of its provisions waived, only by a written instrument executed by the party to be charged.

h.Due Authorization. Tenant represents to Administrative Agent that it has full authority to enter into this Agreement, which has been duly authorized by all necessary actions. Administrative Agent represents to Tenant that it has full authority to enter into this Agreement, which has been duly authorized by all necessary actions.

i.Execution. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same instrument.

[THIS SPACE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, Administrative Agent and Tenant have caused this Agreement to be executed as of the date first above written.

ADMINISTRATIVE AGENT:DELPHI CRE FUNDING LLC,
a Delaware limited liability company

By:   ACORE Capital, LP, a Delaware limited partnership, as Authorized Signatory

By:   ACORE Capital GP, LLC, a Delaware limited liability company, its general partner

By:_______________________________________

Name:

Title: 

TENANT: 
EXICURE, INC.,a Delaware corporation 
By:_________________________   Name:   Title:

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LANDLORD’S CONSENT

Landlord consents and agrees to the foregoing Agreement, which was entered into at Landlord’s request. The foregoing Agreement shall not alter, waive or diminish any of Landlord’s obligations under the Mortgage or the Lease. The above Agreement discharges any obligations of Administrative Agent under the Mortgage and related loan documents to enter into a nondisturbance agreement with Tenant. Landlord is not a party to the above Agreement. Landlord represents to Tenant and Administrative Agent that it has full authority to enter into this Landlord’s Consent, which has been duly authorized by all necessary actions.

	LANDLORD:  2430 N. HALSTED, LLC,a Delaware limited liability company By:___________________________   Name:   Title:
Dated: __________________, 20__

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ADMINISTRATIVE AGENT’S ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of California

County of _____________________________)

On _________________________ before me, ________________________________________     (insert name and title of the officer)

personally appeared ____________________________________________________________,

who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ______________________________ (Seal)

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TENANT’S ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of Illinois         )

County of __________    )

On _____________________________, 20__, before me, ________________________, a Notary Public, personally appeared _______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of Illinois that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ____________________________________ (Seal)

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LANDLORD’S ACKNOWLEDGMENT

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

State of __________        )

County of __________    )

On _____________________________, 20__, before me, ________________________, a Notary Public, personally appeared _______________________________________, who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of Illinois that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature ____________________________________ (Seal)

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LIST OF EXHIBITS

If any exhibit is not attached hereto at the time of execution of this Agreement, it may thereafter be attached by written agreement of the parties, evidenced by initialing said exhibit.

Exhibit “A” - Legal Description of the Land

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EXHIBIT K

FORM OF LETTER OF CREDIT

DATE:

BENEFICIARY:

APPLICANT:

LETTER OF CREDIT NO.

GENTLEMEN:

BY ORDER OF OUR CLIENT, ______________________________ (THE “APPLICANT”), WE HEREBY OPEN OUR IRREVOCABLE STANDBY LETTER OF CREDIT NO. _____________, IN YOUR FAVOR FOR AN AMOUNT NOT TO EXCEED IN AGGREGATE USD_____________ (AMOUNT IN WORDS ________________________________________AND 00/100 U.S. DOLLARS), EFFECTIVE IMMEDIATELY AND EXPIRING AT THE OFFICE OF OUR SERVICER, CITICORP NORTH AMERICA, INC. AT 3800 CITIBANK CENTER, BUILDING B, 3^RD FLOOR, TAMPA, FLORIDA 33610 ATTN. STANDBY LETTER OF CREDIT UNIT OR SUCH OTHER OFFICE AS WE MAY ADVISE YOU FROM TIME TO TIME (THE “OFFICE”), ON NOT LESS THAN SIXTY (60) DAYS’ PRIOR NOTICE.

FUNDS HEREUNDER ARE AVAILABLE TO YOU AGAINST PRESENTATION OF YOUR SIGHT DRAFT(S), DRAWN ON US, MENTIONING THEREON OUR LETTER OF CREDIT NUMBER _____________, ACCOMPANIED BY YOUR WRITTEN AND DATED STATEMENT, SIGNED BY AN AUTHORIZED REPRESENTATIVE OF YOUR COMPANY, STATING THE FOLLOWING:

“WE HEREBY CERTIFY THAT THE AMOUNT OF ANY DRAFT(S) DRAWN HEREUNDER REPRESENTS FUNDS DUE AND PAYABLE IN ACCORDANCE WITH THE TERMS OF THAT CERTAIN LEASE AGREEMENT BETWEEN _________________________ (THE "TENANT"), AND ______________________________ (THE "LANDLORD"), DATED ______________ (AS AMENDED FROM TIME TO TIME, THE “LEASE”);”

FULL AND PARTIAL DRAWS SHALL BE PERMITTED.

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT SHALL BE DEEMED AUTOMATICALLY EXTENDED, WITHOUT AMENDMENT, FOR ADDITIONAL PERIOD(S) OF ONE YEAR FROM THE EXPIRY DATE HEREOF, OR ANY FUTURE EXPIRATION DATE, BUT NOT BEYOND ______________, UNLESS AT LEAST ___________(_________) DAYS PRIOR TO ANY EXPIRATION DATE WE NOTIFY YOU BY REGISTERED MAIL OR BY ANY OTHER RECEIPTED MEANS THAT WE ELECT NOT TO CONSIDER THIS LETTER OF CREDIT RENEWED FOR ANY SUCH ADDITIONAL PERIOD, WHEREUPON YOU MAY DRAW FOR THE AVAILABLE AMOUNT UNDER THIS LETTER OF CREDIT BY MEANS OF YOUR SIGHT DRAFT(S), DRAWN ON US, MENTIONING OUR LETTER OF CREDIT NUMBER. BENEFICIARY SHALL HAVE THE RIGHT TO CHANGE ITS NOTICE ADDRESS FROM TIME TO TIME UPON WRITTEN NOTICE TO US DELIVERED VIA OVERNIGHT COURIER.

IT IS A CONDITION OF THIS LETTER OF CREDIT THAT IT IS TRANSFERABLE AND MAY BE TRANSFERRED IN ITS ENTIRETY, BUT NOT IN PART, AND MAY BE SUCCESSIVELY

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TRANSFERRED BY YOU OR ANY TRANSFEREE HEREUNDER TO A SUCCESSOR TRANSFEREE(S). TRANSFER UNDER THIS LETTER OF CREDIT TO SUCH TRANSFEREE SHALL BE EFFECTED UPON PRESENTATION TO US OF THE ORIGINAL OF THIS LETTER OF CREDIT AND ANY AMENDMENTS HERETO ACCOMPANIED BY A REQUEST DESIGNATING THE TRANSFEREE IN THE FORM OF EXHIBIT "A" ATTACHED HERETO APPROPRIATELY COMPLETED. A TRANSFER FEE OF 1/4 OF ONE PERCENT (MINIMUM $300) SHALL BE CHARGED TO THE APPLICANT IN CONNECTION WITH ANY TRANSFER.

WE HEREBY AGREE TO HONOR EACH DRAFT DRAWN UNDER AND IN COMPLIANCE WITH THE TERMS AND CONDITIONS OF THIS LETTER OF CREDIT IF PRESENTED, AS SPECIFIED, AT OUR OFFICE ON OR BEFORE EXPIRATION DATE.

IN ADDITION, PRESENTATION OF SUCH DRAFT AND CERTIFICATE MAY ALSO BE MADE BY FAX TRANSMISSION TO FAX NO. 813-604-7187 OR SUCH OTHER FAX NUMBER IDENTIFIED BY CITIBANK, N.A. IN A WRITTEN NOTICE TO YOU. TO THE EXTENT A PRESENTATION IS MADE BY FAX TRANSMISSION, YOU MUST (I) PROVIDE TELEPHONE NOTIFICATION THEREOF TO CITIBANK, N.A. (PHONE NO. 866 945 6284) PRIOR TO OR SIMULTANEOUSLY WITH THE SENDING OF SUCH FAX TRANSMISSION AND (II) SEND THE ORIGINAL OF SUCH DRAFT AND CERTIFICATE TO CITIBANK, N.A. BY OVERNIGHT COURIER, AT THE ADDRESS PROVIDED ABOVE FOR PRESENTATION OF DOCUMENTS , PROVIDED HOWEVER, THAT CITIBANK, N.A.'S RECEIPT OF SUCH TELEPHONE NOTICE OR ORIGINAL DOCUMENTS SHALL NOT BE A CONDITION TO PAYMENT HEREUNDER.

SHOULD YOU HAVE OCCASION TO COMMUNICATE WITH US REGARDING THIS LETTER OF CREDIT, PLEASE DIRECT YOUR CORRESPONDENCE TO OUR OFFICE, MAKING SPECIFIC MENTION OF THE LETTER OF CREDIT NUMBER INDICATED ABOVE. FOR INQUIRIES YOU MAY CONTACT US AT 1-866-945-6284 OR VIA SWIFT CITIUS33.

ALL PARTIES TO THIS LETTER OF CREDIT ARE ADVISED THAT THE U.S. GOVERNMENT HAS IN PLACE CERTAIN SANCTIONS AGAINST CERTAIN COUNTRIES, INDIVIDUALS, ENTITIES, AND VESSELS. CITIGROUP ENTITIES, INCLUDING BRANCHES AND, IN CERTAIN CIRCUMSTANCES, SUBSIDIARIES, ARE/WILL BE PROHIBITED FROM ENGAGING IN TRANSACTIONS OR OTHER ACTIVITIES WITHIN THE SCOPE OF APPLICABLE SANCTIONS

EXCEPT AS FAR AS OTHERWISE EXPRESSLY STATED HEREIN, THIS STANDBY LETTER OF CREDIT IS SUBJECT TO THE INTERNATIONAL STANDBY PRACTICES (“ISP98”), INTERNATIONAL CHAMBER OF COMMERCE, PUBLICATION NO. 590, AND AS TO MATTERS NOT GOVERNED BY THE ISP98, SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK AND APPLICABLE U.S. FEDERAL LAW.

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Exhibit A

Request for Full Transfer

Relinquishing all Rights as Beneficiary

(This form is to be used when the Letter of Credit is to be Transferred in its entirety and, no substitution of invoices is involved and, no rights are to be retained by the undersigned Beneficiary.)

Citicorp North America Inc.,                        Date:

As Servicer for Citibank, N.A.

3800 Citibank Center, Bldg. B, 3rd Fl.

Tampa, FL 33610

Re: L/C No. ______________________

Issued by: CITIBANK, N.A.

Citibank, N.A. Ref: ______________________

Gentlemen:

Receipt is acknowledged of the original instrument which you forwarded to us relative to the issuance of a Letter of Credit ( herein called the “Credit” ) bearing your reference number as above in favor of ourselves and/or Transferees and we hereby request you to transfer the said Letter of Credit, in its entirety, to:

_____________________________________________________________________________________

whose address is_______________________________________________________________________

_____________________________________________________________________________________

(Optional) Please advise Beneficiary through the below indicated Advising Bank:

_____________________________________________________________________________________

_____________________________________________________________________________________

We are returning the original instrument to you herewith in order that you may deliver it to the Transferees together with your customary letter of transfer.

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It is understood that any amendments to the Letter of Credit which you may receive are to be advised by you directly to the Transferees and that the drafts and documents of the Transferees, if issued in accordance with the conditions of the Letter of Credit, are to be forwarded by you directly to the party for whose account the credit was opened (or any intermediary) without our intervention.

    Request for Full Transfer Relinquishing all Rights as Beneficiary

Citibank, N.A. reference __________________

We understand that the Transfer charge is 1/4 of 1% on the amount being transferred (minimum $300.00) and in addition thereto we agree to pay to you on demand any expenses that may be incurred by you in connection with this transfer.

___ We enclose our check for $ _________________ to cover your charges.

(Note: Payment of charges must be in the form of a certified check if not drawn on Citibank, N.A.)

___ We authorize you to charge our Citibank N.A. account No. ____________________________

SIGNATURE GUARANTEED                Sincerely yours,

The First Beneficiary’s signature(s) with

title(s) conforms with that on file

with us and such is/are authorized

for the execution of this instrument.

___________________________________             _________________________________

(Name of Bank)                        (Name of First Beneficiary)

___________________________________            _________________________________

(Bank Address)                        (Telephone Number)

___________________________________            _________________________________

(City, State, Zip Code)                    (Authorized Name and Title)

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___________________________________            _________________________________

(Telephone Number)                    (Authorized Signature)

___________________________________            _________________________________

(Authorized Name and Title)                (Authorized Name and Title)

( If applicable )

___________________________________            _________________________________

(Authorized Signature)                    (Authorized Signature)    

( If applicable )

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EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, David A. Giljohann, Ph.D., certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Exicure, 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(s) 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(s) 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: May 14, 2020

/s/ David A. Giljohann

David A. Giljohann, Ph.D.

President and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, David S. Snyder, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Exicure, 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(s) 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 my 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(s) 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: May 14, 2020

/s/ David S. Snyder

David S. Snyder

Chief Financial Officer

EX-32.1

Exhibit 32.1

SECTION 1350 CERTIFICATIONS*

Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), David A. Giljohann, Ph. D., President and Chief Executive Officer of Exicure, Inc. (the “Company”), and David S. Snyder, Chief Financial Officer of the Company, each hereby certifies that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, to which this Certification is attached as Exhibit 32.1 (the “Quarterly Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and

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

Dated: May 14, 2020

/s/ David A. Giljohann	/s/ David S. Snyder
David A. Giljohann, Ph.D.	David S. Snyder
President and Chief Executive Officer	Chief Financial Officer

* This certification accompanies the Quarterly Report on 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 the Company 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 Quarterly Report on Form 10-Q), irrespective of any general incorporation language contained in such filing.

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Investments (Tables)

3 Months Ended

Mar. 31, 2020

Investments [Abstract]

Investments

The following table summarizes the contract maturity of the available-for-sale securities the Company held as of March 31, 2020:

One year or less	64	%
After one year but within two years	36	%
Total	100	%

Debt Securities, Available-for-sale

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of cash equivalents and available-for-sale securities by type of security at March 31, 2020 and December 31, 2019 were as follows:

	March 31, 2020
	Amortized Costs		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Commercial paper	$	10,718	$	3	$	(9	)	$	10,712
Corporate notes/bonds	49,973		44		(158		)	49,859
U.S. Treasuries	4,510		36		—			4,546
U.S. Government agency securities	9,039		67		—			9,106
	$	74,240	$	150	$	(167	)	$	74,223

	December 31, 2019
	Amortized Costs		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Commercial paper	$	13,932	$	1	$	(2	)	$	13,931
Corporate notes/bonds	36,620		1		(24		)	36,597
U.S. Treasuries	4,513		—		(1		)	4,512
U.S. Government agency securities	9,786		—		(2		)	9,784
	$	64,851	$	2	$	(29	)	$	64,824

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Related-Party Transactions

3 Months Ended

Mar. 31, 2020

Related Party Transactions [Abstract]

Related-Party Transactions

Related-Party Transactions

The Company received consulting services from, and paid fees to, one of its co-founders who is not an employee but serves as a member of the Board. The Company paid $25 in each of the three months ended March 31, 2020 and 2019 in connection with these consulting services and these amounts are recognized as an expense in the accompanying unaudited condensed consolidated statement of operations.

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Earnings (Loss) Per Common Share (Tables)

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Computation of earnings (loss) per common share

The following is the computation of earnings (loss) per common share for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
Net income (loss)	1,150		(5,286		)
Weighted-average basic common shares outstanding	87,079,160		44,358,000
Dilutive effect of exercise of stock options	1,165,472		—
Weighted-average diluted common shares outstanding	88,244,632		44,358,000
Earnings (loss) per basic common share	$	0.01	$	(0.12	)
Earnings (loss) per diluted common share	$	0.01	$	(0.12	)

Antidilutive Securities

The outstanding securities presented below were excluded from the calculation of earnings (loss) per common share for the periods presented, because such securities would have been anti-dilutive due to the Company’s earnings (loss) per share during that period:

	As of March 31,
	2020	2019
Options to purchase common stock	2,924,355	5,125,659
Warrants to purchase common stock	413,320	413,320

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) Statement - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Statement of Comprehensive Income [Abstract]
Net income (loss)	$ 1,150	$ (5,286)
Unrealized gains on available for sale securities, net of tax	10	0
Other comprehensive income	10	0
Comprehensive income (loss)	$ 1,160	$ (5,286)

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Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2020	May 12, 2020
Document And Entity Information [Abstract]
Entity Registrant Name	EXICURE, INC.
Entity Central Index Key	0001698530
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Emerging Growth Company	true
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Ex Transition Period	true
Entity Small Business	true
Document Type	10-Q
Document Period End Date	Mar. 31, 2020
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q1
Amendment Flag	false
Entity Common Stock, Shares Outstanding (in shares)		87,150,447
Entity Interactive Data Current	Yes

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Significant Accounting Policies

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Significant Accounting Policies

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements and the notes thereto, which are included in the in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the U.S. Securities and Exchange Commission (“SEC”) on March 10, 2020. Since the date of those audited consolidated financial statements, there have been no material changes to the Company’s significant accounting policies.

Recently Adopted Accounting Pronouncements

None.

Recent Accounting Pronouncements Not Yet Adopted

Financial Instruments - Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13). ASU 2016-13 is a new standard intended to improve reporting requirements specific to loans, receivables and other financial instruments. ASU 2016-13 requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the amount by which carrying value exceeds fair value. ASU 2016-13 also requires enhanced disclosure of credit risk associated with financial assets. The effective date of ASU 2016-13 was deferred by ASU 2019-09, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates to the annual period beginning after December 15, 2022 for companies that (i) meet the definition of an SEC filer and (ii) are eligible as “smaller reporting companies” as such term is defined by the SEC, with early adoption permitted. The Company is currently assessing the impact of adoption of ASU 2016-13 to its consolidated financial statements.

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Related-Party Transactions - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Board of Directors | Consulting services
Related Party Transaction [Line Items]
Expenses from transactions with related party	$ 25	$ 25

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Stockholders' Equity - Common Stock Warrants (Details) - Private Placement - $ / shares	May 03, 2021	Apr. 28, 2021	Mar. 27, 2021	Mar. 31, 2020	Nov. 02, 2017
Class of Stock [Line Items]
Number of shares called by warrants (in shares)				413,320
Exercise price (in dollars per share)					$ 3.00
Forecast
Class of Stock [Line Items]
Warrant expirations	117,262	132,884	163,174

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Debt - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended
	Mar. 02, 2020	Mar. 31, 2020	Mar. 31, 2019
Debt Instrument [Line Items]
Repayment of long-term debt		$ 4,999	$ 0
Interest paid on debt		$ 142	$ 149
Loans Payable | Secured Debt | Hercules Technology Growth Capital
Debt Instrument [Line Items]
Repayment of long-term debt	$ 4,999
Payments for debt end term fees	$ 100

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Leases - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Operating lease costs	$ 84	$ 84
Short term lease costs	38	6
Variable lease costs	57	84
Total lease costs	179	174
Operating lease, cash payments	$ 114	$ 277

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Income Taxes (Details) - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Net income (loss)	$ 1,150,000	$ (5,286,000)
Provision for income tax expense	$ 0	$ 0
Effective tax rate	0.00%	0.00%

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Equity-Based Compensation - Schedule of Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 441	$ 489
Research and development expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	157	121
General and administrative expense
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based compensation expense	$ 284	$ 368

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Fair Value Measurements - Narrative (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)	Feb. 17, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Impact of 10% change in estimate of expected volatility of the fair value of the common stock	$ 18
Impact of 10% change in the estimate of fair value of the common stock	$ 19
Warrant Liability | Preferred Stock | Expected term
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Warrant liability, measurement input, term		2 years
Warrant Liability | Preferred Stock | Risk-free interest rate
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability, measurement input		0.0153
Warrant Liability | Preferred Stock | Expected volatility
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability, measurement input		0.7897
Warrant Liability | Preferred Stock | Expected dividend yield
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Common stock warrant liability, measurement input		0

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Investments (Details)	3 Months Ended
	Mar. 31, 2020
Investments [Abstract]
One year or less	64.00%
After one year but within two years	36.00%
Total	100.00%

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 are as follows:

	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	12,900	$	12,900	$	—	$	—
Short-term investments:
Commercial paper	10,712		—		10,712		—
Corporate notes/bonds	49,859		—		49,859		—
U.S. Treasuries	4,546		—		4,546		—
U.S. Government agency securities	9,106		—		9,106		—
Total financial assets	$	87,123	$	12,900	$	74,223	$	—
Liabilities
Common stock warrant liability	$	68	$	—	$	—	$	68
Total financial liabilities	$	68	$	—	$	—	$	68

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 are as follows:

	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	31,078	$	31,078	$	—	$	—
Commercial paper	2,498		—		2,498		—
Short-term investments:
Commercial paper	11,433		—		11,433		—
Corporate notes/bonds	36,597		—		36,597		—
U.S. Treasuries	4,512		—		4,512		—
U.S. Government agency securities	9,784		—		9,784		—
Total financial assets	$	95,902	$	31,078	$	64,824	$	—
Liabilities
Common stock warrant liability	$	414	$	—	$	—	$	414
Total financial liabilities	$	414	$	—	$	—	$	414

Schedule of Assumptions Used to Estimate Fair Value of Warrant Liability

The following weighted-average assumptions were used to estimate the fair value of the common stock warrant liability at March 31, 2020:

	March 31, 2020
Expected term	1.0 years
Risk-free interest rate	0.2	%
Expected volatility	84.69	%
Expected dividend yield	—	%

Reconciliation of Liabilities Measured at Fair Value on a Recurring Basis

The following is a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2020:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Common Stock Warrant Liability
Balance at December 31, 2019	$	414
Additions
Gain included in other income (expense), net	(346		)
Balance at March 31, 2020	$	68

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Supplemental Balance Sheet Information - Property and Equipment, Net (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 3,764		$ 3,416
Less: accumulated depreciation	(1,466)		(1,317)
Property and equipment, net	2,298		2,099
Depreciation and amortization	148	$ 87
Scientific equipment
Property, Plant and Equipment [Line Items]
Property and equipment, gross	3,315		2,795
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	192		192
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	41		41
Computers and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	48		32
Construction in process
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 168		$ 356

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Income Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

Pre-tax income was $1,150 for the three months ended March 31, 2020, which consists entirely of income in the United States. and resulted in no provision for income tax expense during the period then ended since it projects a pre-tax loss for the year ending December 31, 2020. Pre-tax loss was $5,286 for the three months ended March 31, 2019, which consists entirely of loss in the United States and resulted in no provision for income tax expense during the period then ended. The effective tax rate is 0% in each of the three months ended March 31, 2020 and 2019 because the Company has generated tax losses and has provided a full valuation allowance against its deferred tax assets.

On March 27, 2020,  the President of the United States signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act, among other things, allows for a five-year carry back of federal net operating losses generated in 2018 through 2020 and removes the 80% taxable income limitation for net operating loss deductions for tax years ending before 2021. While the Company continues to analyze the relevant provisions of the CARES Act, the provisions of the legislation did not have an impact on the Company’s income taxes.

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Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Debt

Debt

On March 2, 2020, pursuant to the terms of the loan agreement with Hercules Technology Growth Capital (“Hercules”) and subsequent amendments thereto (the “Hercules Loan Agreement”), the Company repaid all remaining outstanding obligations under the Hercules Loan Agreement as of the maturity date, including the outstanding principal balance of $4,999 and the end of term fee of $100.

The Company paid interest on the Hercules Loan Agreement of $142 and $149 during the three months ended March 31, 2020 and 2019, respectively.

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Fair Value Measurements - Assets and Liabilities Measured at Fair Value (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	$ 74,223	$ 64,824
Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	87,123	95,902
Common stock warrant liability	68	414
Total financial liabilities	68	414
Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	12,900	31,078
Common stock warrant liability	0	0
Total financial liabilities	0	0
Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	74,223	64,824
Common stock warrant liability	0	0
Total financial liabilities	0	0
Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	0	0
Common stock warrant liability	68	414
Total financial liabilities	68	414
Short-term investments: | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	12,900	31,078
Short-term investments: | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	12,900	31,078
Short-term investments: | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0	0
Short-term investments: | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:	0	0
Commercial paper | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:		2,498
Commercial paper | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:		0
Commercial paper | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:		2,498
Commercial paper | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Cash equivalents:		0
Corporate notes/bonds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	49,859	36,597
Corporate notes/bonds | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	49,859	36,597
Corporate notes/bonds | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
Corporate notes/bonds | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	49,859	36,597
Corporate notes/bonds | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
Commercial paper | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	10,712	11,433
Commercial paper | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
Commercial paper | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	10,712	11,433
Commercial paper | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
U.S. Treasuries
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	4,546	4,512
U.S. Treasuries | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	4,546	4,512
U.S. Treasuries | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
U.S. Treasuries | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	4,546	4,512
U.S. Treasuries | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
U.S. Government agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	9,106	9,784
U.S. Government agency securities | Fair Value, Recurring
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	9,106	9,784
U.S. Government agency securities | Fair Value, Recurring | Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	0	0
U.S. Government agency securities | Fair Value, Recurring | Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	9,106	9,784
U.S. Government agency securities | Fair Value, Recurring | Level 3
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Debt securities, available-for-sale	$ 0	$ 0

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Equity-Based Compensation - Schedule of Stock Options Rollforward (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	12 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
Options
Outstanding beginning balance (in shares)	5,697,714
Granted (in shares)	1,211,704
Outstanding ending balance (in shares)	6,909,418	5,697,714
Weighted-Average Exercise Price
Outstanding beginning balance (in dollars per share)	$ 2.34
Granted (in dollars per share)	1.27
Outstanding ending balance (in dollars per share)	$ 2.15	$ 2.34
Share-based Compensation Arrangement by Share-based Payment Award, Options, Additional Disclosures [Abstract]
Weighted-Average Remaining Contractual Term	7 years 1 month 6 days	6 years 8 months 12 days
Aggregate Intrinsic Value	$ 1,492	$ 4,625
Exercisable (in shares)	4,164,925
Exercisable, Weighted-Average Exercise Price (in dollars per share)	$ 2.06
Exercisable, Weighted-Average Remaining Contractual Term	5 years 7 months
Exercisable, Aggregate Intrinsic Value	$ 1,172
Vested and Expected to Vest (in shares)	6,693,125
Vested and Expected to Vest, Weighted-Average Exercise Price (in dollars per share)	$ 2.15
Weighted-Average Remaining Contractual Term (years)	7 years
Aggregate Intrinsic Value (thousands)	$ 1,461

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Equity-Based Compensation - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Jan. 01, 2020
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Compensation cost not yet recognized	$ 3,944
Compensation expense recognition period	2 years 9 months 18 days
Weighted-average grant date fair value (in dollars per share)	$ 0.89	$ 2.01
Exicure, Inc. 2017 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of additional shares authorized, potential maximum additional shares	4,600,000
Number of additional shares authorized, percentage of common stock outstanding			5.00%
Number of shares available for grant (in shares)	3,127,813
Options to purchase common stock | Exicure, Inc. 2017 Equity Incentive Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)			4,303,463

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Description of Business and Basis of Presentation (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Accounting Policies [Abstract]
Percentage of R&D staff on site at any time	50.00%
Accumulated deficit generated, since inception	$ (98,984)

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Supplemental Balance Sheet Information - Other noncurrent assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Supplemental Balance Sheet Information [Abstract]
Restricted cash	$ 1,200	$ 0
Operating lease asset	285	356
Other	2	32
Total other noncurrent assets	$ 1,487	$ 388

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Investments Available-for-sale Securities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]
Amortized Costs	$ 74,240	$ 64,851
Gross Unrealized Holding Gains	150	2
Gross Unrealized Holding Losses	(167)	(29)
Fair Value	74,223	64,824
Commercial paper
Debt Securities, Available-for-sale [Line Items]
Amortized Costs	10,718	13,932
Gross Unrealized Holding Gains	3	1
Gross Unrealized Holding Losses	(9)	(2)
Fair Value	10,712	13,931
Corporate notes/bonds
Debt Securities, Available-for-sale [Line Items]
Amortized Costs	49,973	36,620
Gross Unrealized Holding Gains	44	1
Gross Unrealized Holding Losses	(158)	(24)
Fair Value	49,859	36,597
U.S. Treasuries
Debt Securities, Available-for-sale [Line Items]
Amortized Costs	4,510	4,513
Gross Unrealized Holding Gains	36	0
Gross Unrealized Holding Losses	0	(1)
Fair Value	4,546	4,512
U.S. Government agency securities
Debt Securities, Available-for-sale [Line Items]
Amortized Costs	9,039	9,786
Gross Unrealized Holding Gains	67	0
Gross Unrealized Holding Losses	0	(2)
Fair Value	$ 9,106	$ 9,784

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Equity-Based Compensation

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Equity-Based Compensation

Equity-Based Compensation

The number of shares of common stock reserved for issuance under the 2017 Equity Incentive Plan automatically increases on January 1 of each year, beginning on January 1, 2020, by the lesser of (i) 4,600,000 shares, (ii) 5% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or (iii) a lesser number of shares determined by the Compensation Committee of the Company’s Board. The Compensation Committee made the determination to increase the share reserve for the 2017 Equity Incentive Plan by 4,303,463 shares, effective January 1, 2020.

As of March 31, 2020, the aggregate number of common stock options available for grant under the 2017 Equity Incentive Plan was 3,127,813.

Equity-based compensation expense is classified in the statements of operations as follows:

	Three Months Ended March 31,
	2020		2019
Research and development expense	$	157	$	121
General and administrative expense	284		368
	$	441	$	489

Unamortized equity-based compensation expense at March 31, 2020 was $3,944, which is expected to be amortized over a weighted-average period of 2.8 years.

The Company utilizes the Black-Scholes option-pricing model to determine the fair value of common stock option grants. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. The model also requires the input of highly subjective assumptions. In addition to an assumption on the expected term of the option grants as discussed below, application of the Black-Scholes model requires additional inputs for which we have assumed the values described in the table below:

	Three Months Ended March 31,
	2020		2019
Expected term	5.2 to 6.1 years		6.0 to 6.1 years
Risk-free interest rate	1.68%		2.56%
Expected volatility	81.0% to 83.1%; weighted avg. 83.0%		83.2% to 83.4%; weighted avg. 83.4%
Forfeiture rate	5	%	5	%
Expected dividend yield	—	%	—	%

The expected term is based upon the “simplified method” as described in Staff Accounting Bulletin Topic 14.D.2. Currently, the Company does not have sufficient experience to provide a reasonable estimate of an expected term of its common stock options. The Company will continue to use the “simplified method” until there is sufficient experience to provide a more reasonable estimate in conformance with ASC 718-10-30-25 through 30-26. The risk-free interest rate assumptions were based on the U.S. Treasury bond rate appropriate for the expected term in effect at the time of grant. The expected volatility is based on calculated enterprise value volatilities for publicly traded companies in the same industry and general stage of development. The estimated forfeiture rates were based on historical experience for similar classes of employees. The dividend yield was based on expected dividends at the time of grant.

The fair value of the underlying common stock and the exercise price for the common stock options granted during the three months ended March 31, 2020 and 2019 are summarized in the table below:

Common Stock Options Granted During Period Ended:	Fair Value of Underlying Common Stock	Exercise Price of Common Stock Option
Three months ended March 31, 2020	$1.19 to $2.80; weighted avg. $1.27	$1.19 to $2.80; weighted avg. $1.27
Three months ended March 31, 2019	$2.80	$2.80

The weighted-average grant date fair value of common stock options granted in the three months ended March 31, 2020 and 2019 was $0.89 and $2.01 per common stock option, respectively.

A summary of common stock option activity as of the periods indicated is as follows:

	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
Outstanding - December 31, 2019	5,697,714	$	2.34	6.7	$	4,625
Granted	1,211,704	1.27
Outstanding - March 31, 2020	6,909,418	$	2.15	7.1	$	1,492
Exercisable - March 31, 2020	4,164,925	$	2.06	5.6	$	1,172
Vested and Expected to Vest - March 31, 2020	6,693,125	$	2.15	7.0	$	1,461

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Investments

3 Months Ended

Mar. 31, 2020

Investments [Abstract]

Investments

Investments

As of March 31, 2020 and December 31, 2019, the Company primarily invested its excess cash in debt instruments of corporations, the U.S. Treasury, financial institutions, and U.S. government agencies with strong credit ratings and an investment grade rating at or above a long-term rating of Aa3/AA- and a short-term rating of P1/A1. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity. The Company periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity.

The following table summarizes the contract maturity of the available-for-sale securities the Company held as of March 31, 2020:

One year or less	64	%
After one year but within two years	36	%
Total	100	%

All of the Company’s available-for-sale securities are available to the Company for use in its current operations. As a result, the Company categorizes all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

The amortized cost, gross unrealized holding gains, gross unrealized holding losses and fair value of cash equivalents and available-for-sale securities by type of security at March 31, 2020 and December 31, 2019 were as follows:

	March 31, 2020
	Amortized Costs		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Commercial paper	$	10,718	$	3	$	(9	)	$	10,712
Corporate notes/bonds	49,973		44		(158		)	49,859
U.S. Treasuries	4,510		36		—			4,546
U.S. Government agency securities	9,039		67		—			9,106
	$	74,240	$	150	$	(167	)	$	74,223

	December 31, 2019
	Amortized Costs		Gross Unrealized Holding Gains		Gross Unrealized Holding Losses			Fair Value
Commercial paper	$	13,932	$	1	$	(2	)	$	13,931
Corporate notes/bonds	36,620		1		(24		)	36,597
U.S. Treasuries	4,513		—		(1		)	4,512
U.S. Government agency securities	9,786		—		(2		)	9,784
	$	64,851	$	2	$	(29	)	$	64,824

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Equity-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2020

Share-based Payment Arrangement [Abstract]

Equity-Based Compensation Expense Classification in Statement of Operations

Equity-based compensation expense is classified in the statements of operations as follows:

	Three Months Ended March 31,
	2020		2019
Research and development expense	$	157	$	121
General and administrative expense	284		368
	$	441	$	489

Assumptions Used to Determine Fair Value of Common Stock Option Grants

The fair value of the underlying common stock and the exercise price for the common stock options granted during the three months ended March 31, 2020 and 2019 are summarized in the table below:

Common Stock Options Granted During Period Ended:	Fair Value of Underlying Common Stock	Exercise Price of Common Stock Option
Three months ended March 31, 2020	$1.19 to $2.80; weighted avg. $1.27	$1.19 to $2.80; weighted avg. $1.27
Three months ended March 31, 2019	$2.80	$2.80

In addition to an assumption on the expected term of the option grants as discussed below, application of the Black-Scholes model requires additional inputs for which we have assumed the values described in the table below:

	Three Months Ended March 31,
	2020		2019
Expected term	5.2 to 6.1 years		6.0 to 6.1 years
Risk-free interest rate	1.68%		2.56%
Expected volatility	81.0% to 83.1%; weighted avg. 83.0%		83.2% to 83.4%; weighted avg. 83.4%
Forfeiture rate	5	%	5	%
Expected dividend yield	—	%	—	%

Common Stock Option Activity

A summary of common stock option activity as of the periods indicated is as follows:

	Options	Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (thousands)
Outstanding - December 31, 2019	5,697,714	$	2.34	6.7	$	4,625
Granted	1,211,704	1.27
Outstanding - March 31, 2020	6,909,418	$	2.15	7.1	$	1,492
Exercisable - March 31, 2020	4,164,925	$	2.06	5.6	$	1,172
Vested and Expected to Vest - March 31, 2020	6,693,125	$	2.15	7.0	$	1,461

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Supplemental Balance Sheet Information (Tables)

3 Months Ended

Mar. 31, 2020

Supplemental Balance Sheet Information [Abstract]

Prepaid Expense and Other Current Assets

Prepaid expenses and other current assets

	March 31, 2020		December 31, 2019
Prepaid clinical, contract research and manufacturing costs	$	1,219	$	481
Interest receivable	398		236
Prepaid insurance	369		533
Other	920		705
Prepaid expenses and other current assets	$	2,906	$	1,955

Property and Equipment, Net

Property and equipment, net

	March 31, 2020			December 31, 2019
Scientific equipment	$	3,315		$	2,795
Leasehold improvements	192			192
Computers and software	48			32
Furniture and fixtures	41			41
Construction in process	168			356
Property and equipment, gross	3,764			3,416
Less: accumulated depreciation	(1,466		)	(1,317		)
Property and equipment, net	$	2,298		$	2,099

Other Noncurrent Assets

Other noncurrent assets

	March 31, 2020		December 31, 2019
Restricted cash	$	1,200	$	—
Operating lease asset	285		356
Other	2		32
Total other noncurrent assets	$	1,487	$	388

Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities

	March 31, 2020		December 31, 2019
Accrued payroll-related expenses	$	386	$	920
Accrued legal expenses	318		254
Operating lease liability	275		292
Accrued clinical, contract research and manufacturing costs	152		515
Accrued other expenses	137		454
Accrued expenses and other current liabilities	$	1,268	$	2,435

Other Noncurrent Liabilities

Other noncurrent liabilities

	March 31, 2020		December 31, 2019
Operating lease liability	$	—	$	59
Total other noncurrent liabilities	$	—	$	59

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Commitment and Contingencies

3 Months Ended

Mar. 31, 2020

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Leases

Refer to Note 7, Leases, for a discussion of the commitments associated with the Company’s lease agreements.

Northwestern University License Agreements

On December 12, 2011, (1) AuraSense, LLC, the Company’s former parent, assigned to the Company all of its worldwide rights and interests under AuraSense, LLC’s 2009 license agreement with Northwestern University (“NU”) in the field of the use of nanoparticles, nanotechnology, microtechnology or nanomaterial-based constructs as therapeutics or accompanying therapeutics as a means of delivery, but expressly excluding diagnostics (the “Assigned Field”); (2) in accordance with the terms and conditions of this assignment, the Company assumed all liabilities and obligations of AuraSense, LLC as set forth in its license agreement in the assigned field; and (3) in order to secure this assignment and the patent rights from NU, the Company agreed (i) to pay NU an annual license fee, which may be credited against any royalties due to NU in the same year, (ii) to reimburse NU for expenses associated with the prosecution and maintenance of the license patent rights, (iii) to pay NU royalties based on any net revenue generated by the Company’s sale or transfer of any licensed product, (iv) to pay NU, in the event the Company grants a sublicense under the licensed patent rights, the greater of a percentage of all sublicensee royalties or a percentage of any net revenue generated by a sublicensee’s sale or transfer of any licensed product, and (v) to pay NU a percentage of all other sublicense payments received by the Company. In August 2015, the Company entered into a restated license agreement with NU (the “Restated License Agreement”). In February 2016, the Company obtained exclusive license as to NU’s rights in certain SNA technology it jointly owns with NU (the “Co-owned Technology License”). The Company’s license to NU’s rights is limited to the assigned field, however the Company has no such limitation as to its own rights in this jointly owned technology. In June 2016, the Company entered into an exclusive license with NU to obtain worldwide rights to certain inhibitors of glucosylceramide synthase and their use in wound healing in diabetes (the “Wound Healing License”). The Company’s rights and obligations in the Co-owned Technology License and the Wound Healing License agreements are substantially the same as in the Restated License Agreement from August 2015 (collectively referred to as “the Northwestern University License Agreements”). As of December 31, 2019, all pending patent applications under the Wound Healing License have been abandoned. As of March 31, 2020, the Company has paid to NU an aggregate of $8,198 in consideration of each of the obligations described above.

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Description of Business and Basis of Presentation

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Description of Business and Basis of Presentation

Description of Business and Basis of Presentation

Description of Business

Exicure, Inc. (the “Company”) is a clinical-stage biotechnology company developing therapeutics for immuno-oncology, genetic disorders and other indications based on our proprietary Spherical Nucleic Acid (“SNA”) technology. SNAs are nanoscale constructs consisting of densely packed synthetic nucleic acid sequences that are radially arranged in three dimensions. The Company believes that the design of its SNAs gives rise to distinct chemical and biological properties that may provide advantages over other nucleic acid therapeutics and enable therapeutic activity outside of the liver. The Company is working to advance its SNA therapeutic candidates through multiple clinical trials, including the ongoing Phase 1b/2 trial of AST-008 in cancer patients.

The Company believes that one of the key strengths of its proprietary SNAs is that they have the potential to enter a number of different cells and organs. The Company has shown in preclinical studies that SNAs may have therapeutic potential in neurology, ophthalmology, pulmonology, and gastroenterology. As a consequence, the Company has expanded its pipeline into neurology, and is conducting early stage research activities in ophthalmology, pulmonology, and gastroenterology.

Throughout these unaudited condensed consolidated financial statements, the terms the “Company” and “Exicure” refer to Exicure, Inc. and its wholly owned subsidiary, Exicure Operating Company. Exicure Operating Company holds all material assets and conducts all business activities and operations of Exicure, Inc. 

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2020 and December 31, 2019, and for the three months ended March 31, 2020 and 2019, have been presented in conformity with generally accepted accounting principles in the United States (“GAAP”).

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Exicure, Inc. and its wholly owned subsidiary, Exicure Operating Company. All intercompany transactions and accounts are eliminated in consolidation.

Significant Risks and Uncertainties

With the global spread of the ongoing COVID-19 pandemic in the first quarter of 2020, the Company has taken active measures designed to address and mitigate the impact of the COVID-19 pandemic on its business, such as facilitating management’s routine communication to address employee and business concerns and frequent provision of updates to the Board. Under social distancing guidelines for COVID-19, the Company is typically operating with less than 50% of its R&D staff on-site at any one time. The Company is managing laboratory staffing and taking other appropriate managerial actions to maintain progress on its preclinical and collaboration programs. The Company’s office and general and administrative team has been working from home. The Company’s preclinical development program in Friedreich’s ataxia (“FA”) is ongoing and it continues to expect that IND-enabling studies for the Company’s FA drug candidate, XCUR-FXN, will begin in late 2020. The Company also continues to progress its collaborations with Allergan and DERMELIX, LLC, d/b/a Dermelix Biotherapeutics (“Dermelix”). However, if the COVID-19 pandemic continues and persists for an extended period of time, the Company could experience significant disruptions to its preclinical development timelines, which would adversely affect its business, financial condition, results of operations and growth prospects.

The Company anticipates that the COVID-19 pandemic may have an impact on the clinical development timelines for its AST-008 clinical program. The extent to which the COVID-19 pandemic impacts the Company’s business, its clinical development and regulatory efforts, its corporate development objectives and the value of and market for its common stock, will depend on future developments that are highly uncertain and cannot be predicted with confidence at this time, such as the ultimate duration of the pandemic, travel restrictions, quarantines, social distancing and business closure requirements in the United States and other countries, and the effectiveness of actions taken globally to contain and treat the disease. The global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic could have a material adverse effect on the Company’s business, financial condition, results of operations and growth prospects.

In addition, the Company is subject to other challenges and risks specific to its business and its ability to execute on its business plan and strategy, as well as risks and uncertainties common to companies in the biotechnology industry with research and development operations, including, without limitation, risks and uncertainties associated with: obtaining regulatory approval of its product candidates; delays or problems in obtaining clinical supply, loss of single source suppliers or failure to comply with manufacturing regulations; identifying, acquiring or in-licensing additional products or product candidates; product development and the inherent uncertainty of clinical success; and the challenges of protecting and enhancing its intellectual property rights; and the challenges of complying with applicable regulatory requirements. In addition, to the extent the ongoing COVID-19 pandemic adversely affects the Company’s business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties.

Liquidity Risk

As of March 31, 2020, the Company has generated an accumulated deficit of $98,984 since inception and expects to incur significant expenses and negative cash flows for the foreseeable future. Based on the Company’s current operating plans, it believes that existing working capital at March 31, 2020 is sufficient to fund the Company for at least the next 12 months. Management believes that it will be able to obtain additional working capital through equity financings, partnerships and licensing, or other arrangements, to fund operations. However, there can be no assurance that such additional financing will be available and, if available, can be obtained on terms acceptable to the Company. The Company has historically principally raised capital through the sale of its securities. However, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets. The Company believes raising capital in the current market could be very difficult for early stage biotech companies like Exicure. If the disruption persists and deepens, the Company could experience an inability to access additional capital, which could in the future negatively affect its operations.

Unaudited Interim Financial Information

The accompanying interim condensed consolidated balance sheet as of March 31, 2020, the interim condensed consolidated statements of operations for the three months ended March 31, 2020 and 2019, the interim condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2020 and 2019, the interim condensed consolidated statements of changes in stockholders’ equity for the three months ended March 31, 2020 and 2019, and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2020 and 2019, are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited financial statements; and in the opinion of management, reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of March 31, 2020, the results of its operations for the three months ended March 31, 2020 and 2019, and the results of its cash flows for the three months ended March 31, 2020 and 2019. The financial data and other information disclosed in these notes related to the three months ended March 31, 2020 and 2019 are unaudited. The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, or any other interim periods, or any future year or period.

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions which it believes are reasonable in the circumstances and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a significant effect on the Company’s financial position, results of operations or cash flows. Actual results in future periods could differ from those estimates.

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Revenue:
Collaboration revenue	$ 9,183	$ 25
Total revenue	9,183	25
Operating expenses:
Research and development expense	6,075	3,395
General and administrative expense	2,574	2,208
Total operating expenses	8,649	5,603
Operating income (loss)	534	(5,578)
Other income (expense), net:
Dividend income	39	105
Interest income	360	1
Interest expense	(128)	(183)
Other income (expense), net	345	369
Total other income (expense), net	616	292
Net income (loss)	$ 1,150	$ (5,286)
Basic earnings (loss) per common share (USD per share)	$ 0.01	$ (0.12)
Diluted earnings (loss) per common share (USD per share)	$ 0.01	$ (0.12)
Weighted-average basic common shares outstanding (USD per share)	87,079,160	44,358,000
Weighted-average diluted common shares outstanding (USD per share)	88,244,632	44,358,000

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Commitment and Contingencies (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Aggregate consideration paid to NU for agreement obligations	$ 8,198

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Leases - Narrative (Details) ft² in Thousands, $ in Thousands	Feb. 28, 2020 USD ($) ft² squarefeet $ / squarefeet
Leases [Abstract]
Lease area | ft²	30
Contract term	10 years
Number of extensions | squarefeet	2
Renewal term	5 years
Annual base rate initial twelve months | $ / squarefeet	37.00
Annual rent payment initial twelve months	$ 1,113
Base rent annual percentage increase	3.00%
Estimated rental payment over original term	$ 12,761
Landlord contribution towards tenant improvement	3,159
Letters of credit outstanding	1,200
Rental payment adjusted for abatement	$ 87

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Leases - Schedule of Future Minimum Rental Payments (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
2020 (remaining nine months)	$ 235
2021	59
Total	294
Less: imputed interest	(19)
Total lease liability	275
Current operating lease liability	$ 275	$ 292

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Stockholders' Equity - Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	$ 80,747	$ 20,952
Other comprehensive income, net	10	0
Ending balance	85,114	16,155
Unrealized gains (losses) on short-term investments
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(27)
Other comprehensive income (loss) before reclassifications	10
Other comprehensive income, net	10
Ending balance	(17)
AOCI Attributable to Parent
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance	(27)	0
Other comprehensive income (loss) before reclassifications	10
Other comprehensive income, net	10
Ending balance	$ (17)	$ 0

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Earnings (Loss) Per Common Share - Computation of Earnings Per Share (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Earnings Per Share [Abstract]
Net income (loss)	$ 1,150	$ (5,286)
Weighted-average basic common shares outstanding (USD per share)	87,079,160	44,358,000
Dilutive effect of exercise of stock options (in shares)	1,165,472	0
Weighted-average diluted common shares outstanding (USD per share)	88,244,632	44,358,000
Basic earnings (loss) per common share (USD per share)	$ 0.01	$ (0.12)
Diluted earnings (loss) per common share (USD per share)	$ 0.01	$ (0.12)

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Equity-Based Compensation - Assumptions Used for Fair Value Measurement (Details)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Risk-free interest rate	1.68%	2.56%
Forfeiture rate	5.00%	5.00%
Expected dividend yield	0.00%	0.00%
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	5 years 2 months 12 days	6 years
Expected volatility	81.00%	83.20%
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term	6 years 1 month 6 days	6 years 1 month 6 days
Expected volatility	83.10%	83.40%
Weighted Average
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility	83.00%	83.40%

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Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Leases

Leases

The Company has lease agreements for its facilities in: Skokie, Illinois, which serves as the Company’s principal executive offices and where the Company has laboratory space; Cambridge, Massachusetts, where the Company leases office space; Chicago, Illinois, where the Company leases office and laboratory space; and leases for office equipment (the “Office Equipment Leases”), as further described below. Each of these leases are classified as operating leases.

Skokie Lease – The Company’s lease agreement for office and laboratory space in Skokie, Illinois commenced in March 2012 and expires in February 2021 (the “Skokie Lease”). The Skokie Lease includes a renewal option which the Company is not reasonably certain to exercise. Lease payments for the Skokie Lease include a fixed payment amount as well as variable payments related to a proportionate share of operating and real estate expenses.

Cambridge Lease – The Company’s lease agreement for office space at a multi-tenant facility in Cambridge, Massachusetts commenced in March 2019 and is month-to-month (the “Cambridge Lease”). The Cambridge Lease is cancellable at any time. Due to the nature of the Cambridge Lease, the Company determined that this lease represented a short-term lease with an initial term of less than twelve months and, as such, the Cambridge Lease is not recorded on the balance sheet and related lease costs are recognized in the statement of operations as they are incurred.

Chicago Lease – The Company has approximately thirty-thousand square feet of office and laboratory space in Chicago, Illinois (the “Chicago Lease”). The original term (the “Original Term”) of the Chicago Lease is 10 years, commencing on the date on which the Premises are ready for occupancy under the terms of the Chicago Lease (the "Anticipated Commencement Date"). The Company has options to extend the term of the Chicago Lease for two additional successive periods of five years each (the “Extension Periods”) at the then prevailing effective market rental rate.

The initial annual base rent during the Original Term is $37.00 per square foot per year, or approximately $1,113 for the first 12-month period of the Original Term, payable in monthly installments beginning on the Anticipated Commencement Date. Base rent thereafter is subject to annual increases of 3%, for an aggregate amount of $12,761 over the Original Term. The Company must also pay its proportionate share of certain operating expenses and taxes for each calendar year during the term. During the first 12-month period of the Original Term, the base rent and the Company's proportionate share of operating expenses and taxes are subject to certain abatements.

The Landlord will contribute a maximum of $3,159 toward tenant improvements. In connection with the Chicago Lease, the Company will maintain a letter of credit for the benefit of the Landlord in an initial amount of $1,200, which amount is subject to reduction over time. Upon execution of the Chicago Lease, the Company paid to the Landlord the first installment of base rent and the estimated monthly amount of its pro rata share of taxes and its pro rata share of operating expenses in the aggregate amount of $87 which amount had been adjusted for the abatement as set forth in the lease agreement.

As part of the agreement for the Chicago Lease, the Company is required to maintain a standby letter of credit during the term of the lease, currently in the amount of $1,200, which is secured by a restricted certificate of deposit account and presented within other noncurrent assets on the Company’s unaudited condensed consolidated balance sheet at March 31, 2020. 

The Chicago Lease has not yet commenced for accounting purposes as of March 31, 2020. As a result, the Company has not yet recognized an operating lease asset or operating lease liability on the unaudited condensed consolidated balance sheet for the Chicago Lease. The Company currently expects the Chicago Lease to commence in June of 2020.

Office Equipment Leases – The Company has also elected to not record the Office Equipment Leases on the balance sheet since related payment amounts and lease costs are insignificant. Lease costs for the Office Equipment Leases are recognized in the statement of operations on a straight-line basis over the lease term.

The following table summarizes the presentation in the Company’s unaudited condensed consolidated balance sheets of its operating leases:

	March 31, 2020
Assets:
Operating lease asset	$	285
Liabilities:
Operating lease liability	$	275

Because the rate implicit in each lease is not readily determinable, the Company uses its incremental borrowing rate to determine the present value of the lease payments. Information related to the Company's operating lease asset and related operating lease liabilities were as follows:

	March 31, 2020
Remaining lease term (1)	0.9 years
Discount rate	16.1	%

⁽¹⁾ Does not include a renewal term beyond February 28, 2021. Renewal terms are included in the lease term when it is reasonably certain that the Company will exercise the option.

The following table summarizes lease costs in the Company’s unaudited condensed consolidated statement of operations:

	Three Months Ended March 31,
	2020		2019
Operating lease costs	$	84	$	84
Short term lease costs	38		6
Variable lease costs	57		84
Total lease costs	$	179	$	174

During the three months ended March 31, 2020 and 2019, the Company made cash payments of $114 and $277 for operating leases, respectively.

Maturities of the Company’s lease liability as of March 31, 2020 were as follows:

Years Ending December 31,	Operating Leases (1)
2020 (remaining nine months)	$	235
2021	59
Total	$	294
Less: imputed interest	(19		)
Total lease liability	$	275
Current operating lease liability	$	275

⁽¹⁾  Excluded from the table above are the lease payments associated with the Chicago Lease that has not commenced as of the end of the period, which is the date the asset is made available to the Company by the lessor.

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Collaborative Research and License Agreements

3 Months Ended

Mar. 31, 2020

Research and Development [Abstract]

Collaborative Research and License Agreements

Collaborative Research and License Agreements

Allergan Collaboration Agreement

Summary of Agreement 

On November 13, 2019 (the “Effective Date”), the Company entered into a Collaboration, Option and License Agreement (the “Allergan Collaboration Agreement”), with a wholly-owned subsidiary of Allergan plc, Allergan Pharmaceuticals International Limited (“Allergan”). On May 8, 2020, Allergan plc, including Allergan, was acquired by AbbVie Inc. (“AbbVie”). Accordingly, all references to “Allergan” in the defined terms including, but not limited to, “Allergan,” “Allergan Collaboration Agreement,” “Allergan R&D Services” and “Allergan JDC Services,” should be read and construed as references to AbbVie. Pursuant to the Allergan Collaboration Agreement, the Company granted to Allergan exclusive access and options to license SNA based therapeutics arising from two collaboration programs related to the treatment of hair loss disorders (each, a “Collaboration Program”). Under each such license (obtained in connection with the exercise of an Option, as defined and discussed further below), the Company would grant to Allergan exclusive, royalty-bearing, sublicenseable, nontransferable, worldwide rights to develop, manufacture, use and commercialize such SNA therapeutics. Under the Allergan Collaboration Agreement, the Company will use commercially reasonable efforts to conduct two Collaboration Programs, each focused on one or more hair loss disorders to discover one or more SNA products that are directed to, bind to or inhibit one or more specific Collaboration Program targets (each, a “Program Target”).

As of the Effective Date, the Company and Allergan have agreed upon a development plan for each Collaboration Program that describes the development activities and timelines required to advance such Collaboration Program through first IND filing (each, a “Development Plan”). The activities described in the Development Plan are conducted under the supervision of the Joint Development Committee (the “JDC”) consisting of three members from each of the Company and Allergan. The Company is primarily responsible for performing early stage discovery and preclinical activities (the “Initial Development Activities”) set forth in the Development Plan for each Collaboration Program and will be solely responsible for all costs and expenses related to the Initial Development Activities. Allergan may elect, in its sole discretion and at its sole cost and expense, to conduct formulation assessment and in vivo testing as set forth in a Development Plan.

Following the completion of all Initial Development Activities, the Company is required to deliver to Allergan a report that describes the results of the Initial Development Activities and identifies at least one SNA-based compound that satisfies certain criteria for such Collaboration Program as determined by the JDC (the “Initial Development Report”). Following the delivery of the Initial Development Report for a Collaboration Program, Allergan will have the ability for a defined period of time (the “Initial Option Exercise Period”) to exercise an option (each an “Option”) to obtain worldwide rights and license to the Company’s SNA technology and the Company’s interest in joint collaboration technology to make, have made, import, use, sell or offer for sale any product (each a “Licensed Product”) that results from such Collaboration Program during the term of the Allergan Collaboration Agreement.

At Allergan’s sole option, Allergan may extend the Initial Option Exercise Period (the “Option Extension”) and require the Company to perform IND-enabling activities described in the Development Plan (the “IND-Enabling Activities”), subject to the payment of additional consideration (“Extension Exercise”). If Allergan exercises the Option Extension, the Company would be responsible for conducting the IND-Enabling Activities and would be solely responsible for all costs and expenses associated with such activities. Upon completion of the IND-Enabling Activities, the Company is required to deliver a report that describes the results of the IND-Enabling Activities (the “IND-Enabling Activities Data Package”) to Allergan. Following the delivery of IND-Enabling Activities Data Package, Allergan will have the ability for a defined period of time (the “Extended Option Exercise Period”) to exercise an Option with respect to such Collaboration Program. After the exercise of an Option with respect to a Collaboration Program, Allergan will be responsible for all development, manufacturing, and commercialization activities, and costs and expense associated with such activities in connection with Licensed Products arising from such Collaboration Program.

The Company’s obligation to conduct the activities defined in the Development Plan under the Allergan Collaboration Agreement commenced on November 13, 2019 and continues until the earlier of (i) the date Allergan exercises an Option, (ii) the date Allergan abandons a Collaboration Program and foregoes its Option to that Collaboration Program, or (iii) the fifth anniversary of the Effective Date (the “Research Term”). If the Initial Option Exercise Period or Extended Option Exercise Period is still in effect for a Collaboration Program or if the Company has not delivered a complete Initial Development Report or, if Allergan made an Extension Exercise for a Collaboration Program, a complete IND-Enabling Activities Data Package for such Collaboration Program, as determined by the JDC, then the Research Term will automatically extend by one-year increments until such obligation is satisfied, but in no event past the seventh anniversary of the Effective Date.

Under the terms of the Allergan Collaboration Agreement, the Company received a $25,000 upfront, non-refundable, non-creditable cash payment (the “Allergan Upfront Payment”) related to the Company’s research and development costs for conducting the Development Plan for two Collaboration Programs, each focused on one or more targets, and certain options to obtain exclusive, worldwide licenses under certain intellectual property rights owned or controlled by the Company to develop, manufacture and commercialize certain products resulting from each such Collaboration Programs. The option exercise fee during the Initial Option Exercise Period is $10,000 per Collaboration Program. If Allergan elects to extend the Initial Option Exercise Period, Allergan is required to pay an additional fee of $10,000. If Allergan elects to exercise its option during the Extended Option Exercise Period, Allergan must pay the Company the option exercise fee of $15,000.

Following the exercise by Allergan of an Option with respect to a Collaboration Program, Allergan would be required to make certain milestone payments to the Company upon the achievement of specified development, product approval and launch, and commercial events, on a Licensed Product by Licensed Product basis. On a Licensed Product by Licensed Product basis, for the first Licensed Product to achieve the associated milestone event, the Company is eligible to receive up to an aggregate of $55,000 for development milestone payments and $132,500 for product approval and launch milestone payments. The Company is also eligible for up to $175,000 in sales milestone payments on a Collaboration Program by Collaboration Program basis, associated with aggregate worldwide sales. Certain product approval milestones are subject to certain reductions under specified circumstances, including for payments required to be made by Allergan to obtain certain third party intellectual property rights.

In addition, to the extent there is any Licensed Product, the Company would be entitled to receive tiered royalty payments of mid-single digits to the mid-teens percentage on future net worldwide product sales of such Licensed Products, subject to certain reductions under specified circumstances. Royalties are due on a Licensed Product by Licensed Product and country by country basis from the date of the first commercial sale of each Licensed Product in a country until the latest to occur of: (i) the expiration date in such country of the last to expire valid claim within the licensed intellectual property covering the manufacture, use or sale of such Licensed Product in such country, (ii) the tenth anniversary of the first commercial sale of such Licensed Product in such country, and (iii) the expiration of regulatory exclusivity for such Licensed Product in such country.

Allergan may terminate the Allergan Collaboration Agreement for any reason or no reason, either in its entirety or on a Collaboration Program by Collaboration Program basis, at any time on 90 days’ prior written notice to the Company. Unless earlier terminated, the term of the Allergan Collaboration Agreement shall continue until (i) if both Option Exercise Periods expire without Allergan exercising either Option, the expiration of the later to expire Option Exercise Period, and (ii) if either or both Options are exercised on a Licensed Product-by-Licensed Product and country-by-country basis, the expiration of the royalty term for such Licensed Product in such country. Either party may terminate the Allergan Collaboration Agreement if the other party has materially breached or defaulted in the performance of any of its material obligations and such breach or default continues after the specified cure period.

Termination of the Allergan Collaboration Agreement for any reason will not release either party from any liability which, at the time of such termination, has already accrued to the other party or which is attributable to a period prior to such termination. In addition, termination of the Allergan Collaboration Agreement will not preclude either party from pursuing any rights and remedies it may have under the agreement or at law or in equity with respect to any breach of the Allergan Collaboration Agreement. If either party terminates the Allergan Collaboration Agreement, the license and rights granted to Allergan with respect to the terminated Collaboration Program or License Product shall terminate.

Accounting Analysis

The Company concluded that Allergan is a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. Under the Allergan Collaboration Agreement, the Company has identified a single performance obligation that includes (i) the research and development activities during the Research Term (the “Allergan R&D Services”), and (ii) Joint Development Committee services during the Research Term (the “Allergan JDC Services”). The Company has concluded that the Allergan R&D Services is not distinct from the Allergan JDC Services during the Research Term. The JDC provides oversight and management of the overall Allergan Collaboration Agreement, and the members of the JDC from the Company have specialized industry knowledge, particularly as it relates to SNA technology. The JDC is meant to facilitate the early stage research being performed and coordinate the activities of both the Company and Allergan. Further, the JDC services are critical to the ongoing evaluation of a Collaboration Program and the drafting and evaluation of the Initial Development Report and the IND-Enabling Data Package. Accordingly, the Company’s participation on the JDC is essential to Allergan receiving value from the Allergan R&D Services and as such, the Allergan JDC Services along with the Allergan R&D Services are considered one performance obligation (the “Collaboration Program Services”). In addition, the Company has concluded that the option to purchase two development and commercialization licenses is considered a marketing offer as the options did not provide any discounts or other rights that would be considered a material right in the arrangement, and thus, not a performance obligation at the onset of the agreement.  The consideration for these options will be accounted for when they are exercised.

As of the Effective Date of the Allergan Collaboration Agreement, the total transaction price was determined to be $25,000, consisting solely of the Allergan Upfront Payment. The Company also utilized the most likely amount method to estimate any development and regulatory milestone payments to be received. As of the Effective Date of the Allergan Collaboration Agreement, there were no milestones included in the transaction price. The milestones were fully constrained due to the significant uncertainties surrounding such payments. The Company considered the stage of development and the risks associated with the remaining development required to achieve the milestone, as well as whether the achievement of the milestone is outside the control of the Company or Allergan. The Company has determined that any commercial milestones and sales-based royalties will be recognized when the related sales occur and therefore have also been excluded from the transaction price. The Company will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur. As of March 31, 2020, the Company determined that any development, regulatory, or commercial milestones continue to be constrained and therefore the related milestone payments continue to be excluded from the transaction price at March 31, 2020.

The Company will recognize revenue related to the Collaboration Program Services as the performance obligation is satisfied using an input method to measure progress. The Company believes the input method that most accurately depicts the measure of progress is the actual hours incurred to date relative to projected hours to complete the research service.

During the three months ended March 31, 2020, the Company recognized revenue under the Allergan Collaboration Agreement of approximately $9,116. As of March 31, 2020, there was $15,713 of deferred revenue related to the Allergan Collaboration Agreement, which is classified as current on the unaudited condensed consolidated balance sheet.

Dermelix Collaboration Agreement

Summary of Agreement 

On February 17, 2019, Exicure entered into a License and Development Agreement with Dermelix (the “Dermelix Collaboration Agreement.”) Pursuant to the Dermelix Collaboration Agreement, the Company granted to Dermelix exclusive, worldwide royalty-bearing license rights to, develop, manufacture, have manufactured, use and commercialize the Company’s SNA technology for the treatment of Netherton Syndrome (“NS”) and, at Dermelix’s option, up to five additional specified orphan diseases that are within the dermatology field. Upon written notice to the Company, Dermelix may exercise its option at any time following the effective date of the Dermelix Collaboration Agreement until the date that is six (6) years from the date that the first collaboration SNA therapeutic achieves first dosing in humans in a Phase 1 clinical trial for NS.

Dermelix will initially seek to develop a targeted therapy for the treatment of NS. Under the terms of the Dermelix Collaboration Agreement, the Company will be responsible for conducting the early stage development for each indication up to IND enabling toxicology studies. Dermelix will assume subsequent development, commercial activities and financial responsibility for such indications. Dermelix will pay the costs and expenses of development and commercialization of any licensed products under the Dermelix Collaboration Agreement, including the Company’s expenses incurred in connection with development activities and in accordance with the development budget. Under the terms of the Dermelix Collaboration Agreement, Exicure received an upfront payment of $1,000, to be applied against the initial $1,000 of the Company’s development expenses. If Dermelix exercises any of its option rights for additional indications, Dermelix will pay an option exercise fee equal to $1,000 for each exercised option (each, an “Option Exercise Fee”). Any Option Exercise Fee will be applied against the Company’s development expenses with respect to the particular indication for which the option was exercised.

Pursuant to the Dermelix Collaboration Agreement, the Company shall have the right to pursue the development and commercialization of SNA technology for the treatment of orphan diseases which are neither NS nor one of the additional specified orphan diseases selected by Dermelix pursuant to its option rights. If the Company commences development activities of SNA technology for the treatment of such an orphan disease, the Company will notify Dermelix in writing of such development and Dermelix will have thirty (30) days following receipt of such notice to use one of its remaining option rights on such orphan disease. If Dermelix does not use one of its remaining option rights on such orphan disease, or has no option rights remaining, then the Company will have no further obligations to Dermelix with respect to the development of SNA therapeutics for such orphan disease and shall be free to continue commercialization and development activities with respect thereto.

For each of NS as well as any additional licensed product for which Dermelix exercises one of its options, the Company shall be eligible to receive additional cash payments totaling up to $13,500 upon achievement of certain development and regulatory milestones and up to $152,500 upon achievement of certain sales milestones. The regulatory milestones are payable upon the initiation or completion of clinical trials, and regulatory approval in the United States and outside the United States, per program. The commercial sales milestones are payable upon achievement of specified aggregate annual product sales thresholds. In the event a therapeutic candidate subject to the collaboration results in commercial sales, the Company will receive low double-digit royalties on annual net sales for such licensed products.

Accounting Analysis

The Company concluded that Dermelix is a customer in this arrangement, and as such the arrangement falls within the scope of the revenue recognition guidance. The Company identified performance obligations under the Dermelix Collaboration Agreement for the license of intellectual property for the NS therapeutic candidate and associated research and development services for the NS therapeutic candidate. The Company determined that the performance obligations were not separately identifiable and were not distinct or distinct within the context of the contract due to the specialized nature of the services to be provided by Exicure, specifically with respect to the Company’s expertise related to SNA technology, and the interdependent relationship between the performance obligations. As such, the Company concluded that there is a single identified performance obligation.

The Company used the most likely amount method to estimate variable consideration and estimated that the most likely amount for each potential development and regulatory milestone, which is considered variable consideration, was zero, as the achievement of those milestones is uncertain and highly susceptible to factors outside of the Company’s control. Accordingly, all such milestones were excluded from the transaction price. Management will re-evaluate the transaction price at the end of each reporting period and as uncertain events are resolved or other changes in circumstances occur and adjust the transaction price as necessary. Sales-based royalties, including commercial sales milestone payments based on the level of sales, were also excluded from the transaction price, as the license is deemed to be the predominant item to which the royalties relate. The Company will recognize such revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Revenue associated with the performance obligation will be recognized as services are provided using a cost-to-cost measure of progress method. The transfer of control occurs over time and, in management’s judgment, this input method is the best measure of progress towards satisfying the performance obligation under the Dermelix Collaboration Agreement and reflects a faithful depiction of the transfer of goods and services.

The Company initially recorded the upfront payment of $1,000 as deferred revenue related to its wholly unsatisfied performance obligation and reduced this balance to zero during 2019 by recognizing revenue as services were provided. The Company recognized $67 of revenue under the Dermelix Collaboration Agreement during the three months ended March 31, 2020, which reflects reimbursement by Dermelix for additional costs incurred by Exicure for early stage development costs beyond the initial $1,000 upfront payment. The Company expects to incur additional early stage development costs and expects to be reimbursed by Dermelix for such costs under the terms of the Dermelix Collaboration Agreement. The Company will recognize both revenue and research and development expense for such costs on a gross basis during the period in which those costs are incurred. The Company recognized $25 of revenue under the Dermelix Collaboration Agreement during the three months ended March 31, 2019 which related to amortization of the above-mentioned deferred revenue related to the upfront payment for services provided during that period.

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Earnings (Loss) Per Common Share

3 Months Ended

Mar. 31, 2020

Earnings Per Share [Abstract]

Earnings (Loss) Per Common Share

Loss) Per Common Share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is calculated using the treasury share method by giving effect to all potentially dilutive securities that were outstanding. Potentially dilutive options and warrants to purchase common stock that were outstanding during the three months ended March 31, 2019 were excluded from the diluted loss per share calculation for the three months ended March 31, 2019 because such shares had an anti-dilutive effect due to the net loss reported in that period. Therefore, basic and diluted loss per common share is the same for the three months ended March 31, 2019.

The following is the computation of earnings (loss) per common share for the three months ended March 31, 2020 and 2019:

	Three Months Ended March 31,
	2020		2019
Net income (loss)	1,150		(5,286		)
Weighted-average basic common shares outstanding	87,079,160		44,358,000
Dilutive effect of exercise of stock options	1,165,472		—
Weighted-average diluted common shares outstanding	88,244,632		44,358,000
Earnings (loss) per basic common share	$	0.01	$	(0.12	)
Earnings (loss) per diluted common share	$	0.01	$	(0.12	)

The outstanding securities presented below were excluded from the calculation of earnings (loss) per common share for the periods presented, because such securities would have been anti-dilutive due to the Company’s earnings (loss) per share during that period:

	As of March 31,
	2020	2019
Options to purchase common stock	2,924,355	5,125,659
Warrants to purchase common stock	413,320	413,320

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Supplemental Balance Sheet Information - Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Supplemental Balance Sheet Information [Abstract]
Prepaid clinical, contract research and manufacturing costs	$ 1,219	$ 481
Interest receivable	398	236
Prepaid insurance	369	533
Other	920	705
Prepaid expenses and other current assets	$ 2,906	$ 1,955

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Supplemental Balance Sheet Information - Other noncurrent liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Supplemental Balance Sheet Information [Abstract]
Operating lease liability	$ 0	$ 59
Other noncurrent liabilities	$ 0	$ 59

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UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in- Capital	Accumulated Deficit	Accumulated Other Comprehensive Loss
Beginning balance (in shares) at Dec. 31, 2018		44,358,000
Beginning balance at Dec. 31, 2018	$ 20,952	$ 4	$ 75,942	$ (54,994)	$ 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	489		489
Other comprehensive income, net	0
Net income (loss)	(5,286)			(5,286)
Ending balance (in shares) at Mar. 31, 2019		44,358,000
Ending balance at Mar. 31, 2019	16,155	$ 4	76,431	(60,280)	0
Beginning balance (in shares) at Dec. 31, 2019		86,069,263
Beginning balance at Dec. 31, 2019	80,747	$ 9	162,062	(81,297)	(27)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Equity-based compensation	441		441
Issuance of common stock (in shares)		1,081,184
Issuance of common stock	2,766		2,766
Other comprehensive income, net	10				10
Net income (loss)	1,150			1,150
Ending balance (in shares) at Mar. 31, 2020		87,150,447
Ending balance at Mar. 31, 2020	$ 85,114	$ 9	$ 165,269	$ (80,147)	$ (17)

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Current assets:
Cash and cash equivalents	$ 24,577	$ 48,460
Short-term investments	74,223	62,326
Accounts receivable	27	16
Unbilled revenue receivable	11	19
Prepaid expenses and other assets	2,906	1,955
Total current assets	101,744	112,776
Property and equipment, net	2,298	2,099
Other noncurrent assets	1,487	388
Total assets	105,529	115,263
Current liabilities:
Current portion of long-term debt	0	4,965
Accounts payable	3,392	1,814
Accrued expenses and other current liabilities	1,268	2,435
Current portion of deferred revenue		21,873
Total current liabilities	20,373	31,087
Common stock warrant liability	42	414
Deferred revenue non-current	0	2,956
Other noncurrent liabilities	0	59
Total liabilities	20,415	34,516
Stockholders’ equity:
Common stock, $0.0001 par value per share; 200,000,000 shares authorized, 87,150,447 issued and outstanding, March 31, 2020; 86,069,263 issued and outstanding, December 31, 2019	9	9
Additional paid-in capital	165,269	162,062
Accumulated other comprehensive loss	(17)	(27)
Accumulated deficit	(80,147)	(81,297)
Total stockholders' equity	85,114	80,747
Total liabilities and stockholders’ equity	$ 105,529	$ 115,263

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Leases (Tables)

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

Operating Lease Balance Sheet Presentation

The following table summarizes the presentation in the Company’s unaudited condensed consolidated balance sheets of its operating leases:

	March 31, 2020
Assets:
Operating lease asset	$	285
Liabilities:
Operating lease liability	$	275

Lease Costs

Information related to the Company's operating lease asset and related operating lease liabilities were as follows:

	March 31, 2020
Remaining lease term (1)	0.9 years
Discount rate	16.1	%

⁽¹⁾ Does not include a renewal term beyond February 28, 2021. Renewal terms are included in the lease term when it is reasonably certain that the Company will exercise the option.

The following table summarizes lease costs in the Company’s unaudited condensed consolidated statement of operations:

	Three Months Ended March 31,
	2020		2019
Operating lease costs	$	84	$	84
Short term lease costs	38		6
Variable lease costs	57		84
Total lease costs	$	179	$	174

Schedule of Future Minimum Rental Payments

Maturities of the Company’s lease liability as of March 31, 2020 were as follows:

Years Ending December 31,	Operating Leases (1)
2020 (remaining nine months)	$	235
2021	59
Total	$	294
Less: imputed interest	(19		)
Total lease liability	$	275
Current operating lease liability	$	275

⁽¹⁾  Excluded from the table above are the lease payments associated with the Chicago Lease that has not commenced as of the end of the period, which is the date the asset is made available to the Company by the lessor.

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Subsequent Events

3 Months Ended

Mar. 31, 2020

Subsequent Events [Abstract]

Subsequent Events

Subsequent Events

The Company has evaluated subsequent events which may require adjustment to or disclosure in the accompanying unaudited condensed consolidated financial statements and has concluded that there are no subsequent events or transactions that occurred subsequent to the balance sheet date that would require recognition or disclosure in the accompanying unaudited condensed consolidated financial statements.

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Leases - Right of Use Asset Information (Details)	Mar. 31, 2020
Leases [Abstract]
Remaining lease term	11 months
Discount rate	16.10%

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Stockholders' Equity - 2019 Stock Offerings (Details) - USD ($) $ / shares in Units, $ in Thousands			3 Months Ended
	Jan. 06, 2020	Dec. 23, 2019	Mar. 31, 2020	Mar. 31, 2019
Class of Stock [Line Items]
Proceeds from common stock offering			$ 2,973	$ 0
Payment of common stock financing costs			$ (207)	$ 0
Common Stock Issued December 2019
Class of Stock [Line Items]
Issuance of stock, net (in shares)		10,000,000
Price per share in sale of stock (in dollars per share)		$ 2.75
Proceeds from common stock offering		$ 27,500
Proceeds from issuance of common stock, net		$ 25,344
Over-Allotment Option
Class of Stock [Line Items]
Issuance of stock, net (in shares)	1,081,184
Proceeds from common stock offering	$ 2,973
Proceeds from issuance of common stock, net	$ 2,766
Additional shares of common stock offered in common stock offering (in shares)		1,500,000

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Fair Value Measurements - Schedule of Assumptions used to Estimate Fair Value of Warrant Liability (Details) - Warrant Liability - Common Stock	Mar. 31, 2020
Expected term
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Warrant liability, measurement input, term	1 year 18 days
Risk-free interest rate
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Common stock warrant liability, measurement input	0.0020
Expected volatility
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Common stock warrant liability, measurement input	0.8469
Expected dividend yield
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Common stock warrant liability, measurement input	0

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UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($)	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Cash flows from operating activities:
Net income (loss)	$ 1,150,000	$ (5,286,000)
Adjustments to reconcile net income (loss) to cash used in operating activities:
Depreciation and amortization	148,000	87,000
Equity-based compensation	441,000	489,000
Amortization of long-term debt issuance costs and fees	35,000	34,000
Other	84,000	36,000
Change in fair value of warrant liabilities	(346,000)	(369,000)
Changes in operating assets and liabilities:
Unbilled revenue receivable and accounts receivable	(2,000)	0
Prepaid expenses and other current assets	(911,000)	(62,000)
Other noncurrent assets	30,000	(559,000)
Accounts payable	1,807,000	354,000
Accrued expenses and other current liabilities	(1,108,000)	(52,000)
Deferred revenue	(9,116,000)	975,000
Other noncurrent liabilities	(59,000)	341,000
Net cash used in operating activities	(7,847,000)	(4,012,000)
Cash flows from investing activities:
Purchase of available for sale securities	(21,926,000)	0
Proceeds from sale or maturity of available for sale securities	10,000,000	0
Capital expenditures	(577,000)	(8,000)
Net cash used in investing activities	(12,503,000)	(8,000)
Cash flows from financing activities:
Proceeds from common stock offering	2,973,000	0
Repayment of long-term debt	4,999,000	0
Payment of long-term debt fees and issuance costs	(100,000)	(52,000)
Payment of common stock financing costs	(207,000)	0
Net cash used in financing activities	(2,333,000)	(52,000)
Net decrease in cash, cash equivalents, and restricted cash	(22,683,000)	(4,072,000)
Cash, cash equivalents, and restricted cash - beginning of period	48,460,000	26,268,000
Cash, cash equivalents, and restricted cash - end of period	25,777,000	22,196,000
Non-cash financing activities:
Debt fees (accrued expenses)	0	100,000
Non-cash investing activities:
Capital expenditures (accounts payable and accrued expenses)	126,000	8,000
Total cash, cash equivalents, and restricted cash shown in the unaudited condensed consolidated statements of cash flows	$ 25,777,000	$ 22,196,000

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UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, shares issued (in shares)	87,150,447	86,069,263
Common stock, shares outstanding (in shares)	87,150,447	86,069,263

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Stockholders' Equity (Tables)

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Schedule of Accumulated Other Comprehensive Income (Loss) [Table Text Block]

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for 2020:

	Unrealized gains (losses) on short-term investments			Total
Balance at December 31, 2019	$	(27	)	$	(27	)
Other comprehensive income (loss) before reclassifications	10			10
Net current period other comprehensive loss	10			10
Balance at March 31, 2020	$	(17	)	$	(17	)

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Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Basis of presentation

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements as of March 31, 2020 and December 31, 2019, and for the three months ended March 31, 2020 and 2019, have been presented in conformity with generally accepted accounting principles in the United States (“GAAP”).

Principles of consolidation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of Exicure, Inc. and its wholly owned subsidiary, Exicure Operating Company. All intercompany transactions and accounts are eliminated in consolidation.

Use of estimates

Use of Estimates

The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on certain assumptions which it believes are reasonable in the circumstances and while actual results could differ from those estimates, management does not believe that any change in those assumptions in the near term would have a significant effect on the Company’s financial position, results of operations or cash flows. Actual results in future periods could differ from those estimates.

Recent accounting pronouncements

Recently Adopted Accounting Pronouncements

None.

Recent Accounting Pronouncements Not Yet Adopted

Financial Instruments - Credit Losses

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2016-13, Measurement of Credit Losses on Financial Instruments (“ASU 2016-13). ASU 2016-13 is a new standard intended to improve reporting requirements specific to loans, receivables and other financial instruments. ASU 2016-13 requires that credit losses on financial assets measured at amortized cost be determined using an expected loss model, instead of the current incurred loss model, and requires that credit losses related to available-for-sale debt securities be recorded through an allowance for credit losses and limited to the amount by which carrying value exceeds fair value. ASU 2016-13 also requires enhanced disclosure of credit risk associated with financial assets. The effective date of ASU 2016-13 was deferred by ASU 2019-09, Financial Instruments—Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842)—Effective Dates to the annual period beginning after December 15, 2022 for companies that (i) meet the definition of an SEC filer and (ii) are eligible as “smaller reporting companies” as such term is defined by the SEC, with early adoption permitted. The Company is currently assessing the impact of adoption of ASU 2016-13 to its consolidated financial statements.

Loss per common share

Basic earnings (loss) per common share is calculated by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (loss) per common share is calculated using the treasury share method by giving effect to all potentially dilutive securities that were outstanding. Potentially dilutive options and warrants to purchase common stock that were outstanding during the three months ended March 31, 2019 were excluded from the diluted loss per share calculation for the three months ended March 31, 2019 because such shares had an anti-dilutive effect due to the net loss reported in that period.

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Leases - Balance Sheet Presentation (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
Operating lease asset	$ 285	$ 356
Operating lease liability	$ 275	$ 292

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Stockholders' Equity - Current Capitalization (Details)	Mar. 31, 2020 vote_per_share $ / shares shares	Dec. 31, 2019 $ / shares shares
Equity [Abstract]
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, par value (in dollars per share) | $ / shares	$ 0.0001	$ 0.0001
Preferred stock, shares issued (in shares)	0	0
Preferred stock, shares outstanding (in shares)	0	0
Common stock, shares authorized (in shares)	200,000,000	200,000,000
Common stock, par value (in dollars per share) | $ / shares	$ 0.0001	$ 0.0001
Common stock, shares issued (in shares)	87,150,447	86,069,263
Common stock, shares outstanding (in shares)	87,150,447	86,069,263
Common stock, voting rights for each share | vote_per_share	1

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Fair Value Measurements - Reconciliation of Liabilities Measured at Fair Value on a Recurring Basis (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Gain included in other income (expense), net	$ (346)	$ (369)
Fair Value Measurements Using Significant Unobservable Inputs (Level 3) | Common Stock | Warrant Liability
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward]
Balance at January 1, 2020	414
Balance at March 31, 2020	$ 68

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Earnings (Loss) Per Common Share - Antidilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares excluded from computation of weighted-average diluted common shares outstanding (in shares)	2,924,355	5,125,659
Warrants to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Potentially dilutive shares excluded from computation of weighted-average diluted common shares outstanding (in shares)	413,320	413,320

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Equity-Based Compensation - Fair Value of Underlying Common Stock and Exercise Price of Stock Options (Details) - $ / shares	Mar. 31, 2020	Mar. 31, 2019
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Underlying Common Stock (dollars per share)		$ 2.80
Exercise Price of Common Stock Option (dollars per share)		$ 2.80
Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Underlying Common Stock (dollars per share)	$ 1.19
Exercise Price of Common Stock Option (dollars per share)	1.19
Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Underlying Common Stock (dollars per share)	2.80
Exercise Price of Common Stock Option (dollars per share)	2.80
Weighted Average
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Fair Value of Underlying Common Stock (dollars per share)	1.27
Exercise Price of Common Stock Option (dollars per share)	$ 1.27

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Fair Value Measurements

3 Months Ended

Mar. 31, 2020

Fair Value Disclosures [Abstract]

Fair Value Measurements

Fair Value Measurements

ASC Topic 820, Fair Value Measurement, establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, as follows: Level 1 Inputs - unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date; Level 2 Inputs - other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3 Inputs - unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date.

Assets and liabilities measured at fair value on a recurring basis as of March 31, 2020 are as follows:

	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	12,900	$	12,900	$	—	$	—
Short-term investments:
Commercial paper	10,712		—		10,712		—
Corporate notes/bonds	49,859		—		49,859		—
U.S. Treasuries	4,546		—		4,546		—
U.S. Government agency securities	9,106		—		9,106		—
Total financial assets	$	87,123	$	12,900	$	74,223	$	—
Liabilities
Common stock warrant liability	$	68	$	—	$	—	$	68
Total financial liabilities	$	68	$	—	$	—	$	68

Assets and liabilities measured at fair value on a recurring basis as of December 31, 2019 are as follows:

	Total		Level 1		Level 2		Level 3
Assets
Cash equivalents:
Money market funds	$	31,078	$	31,078	$	—	$	—
Commercial paper	2,498		—		2,498		—
Short-term investments:
Commercial paper	11,433		—		11,433		—
Corporate notes/bonds	36,597		—		36,597		—
U.S. Treasuries	4,512		—		4,512		—
U.S. Government agency securities	9,784		—		9,784		—
Total financial assets	$	95,902	$	31,078	$	64,824	$	—
Liabilities
Common stock warrant liability	$	414	$	—	$	—	$	414
Total financial liabilities	$	414	$	—	$	—	$	414

The Company uses the market approach and Level 1 and Level 2 inputs to value its cash equivalents and Level 2 inputs to value its short-term investments.

The Company’s common stock warrant liability (refer to Note 8, Stockholders’ Equity, for more information) is classified within Level 3 of the fair value hierarchy. The fair value of the common stock warrant liability was determined using the Black-Scholes option-pricing model.

The fair value of the common stock warrant liability is based significantly on the fair value of the Company’s common stock. At the date of issuance, the common stock warrant liability was determined using the following weighted-average assumptions: expected term of 2.0 years, risk-free interest rate of 1.53%, expected volatility of 78.97%, and no expected dividends.

The following weighted-average assumptions were used to estimate the fair value of the common stock warrant liability at March 31, 2020:

	March 31, 2020
Expected term	1.0 years
Risk-free interest rate	0.2	%
Expected volatility	84.69	%
Expected dividend yield	—	%

A 10% change in the estimate of expected volatility at March 31, 2020 would increase or decrease the fair value of the common stock warrant liability in the amount of $18. A 10% change in the estimate of fair value of the common stock at March 31, 2020 would increase or decrease the fair value of the common stock warrant liability in the amount of $19.

The following is a reconciliation of the Company’s liabilities measured at fair value on a recurring basis using unobservable inputs (Level 3) for the three months ended March 31, 2020:

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Common Stock Warrant Liability
Balance at December 31, 2019	$	414
Additions
Gain included in other income (expense), net	(346		)
Balance at March 31, 2020	$	68

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Stockholders' Equity

3 Months Ended

Mar. 31, 2020

Equity [Abstract]

Stockholders' Equity

Stockholders’ Equity

Preferred Stock

As of March 31, 2020 and December 31, 2019, the Company had 10,000,000 shares of preferred stock, par value $0.0001 authorized and no shares issued and outstanding.

Common Stock

As of March 31, 2020 and December 31, 2019, the Company had authorized 200,000,000 shares of common stock, par value $0.0001. As of March 31, 2020 and December 31, 2019, the Company had 87,150,447 shares and 86,069,263 shares issued and outstanding, respectively.

The holders of shares of the Company’s common stock are entitled to one vote per share on all matters to be voted upon by the Company’s stockholders and there are no cumulative rights. Subject to preferences that may be applicable to any outstanding preferred stock, the holders of shares of the Company’s common stock are entitled to receive ratably any dividends that may be declared from time to time by the Company’s Board out of funds legally available for that purpose. In the event of the Company’s liquidation, dissolution or winding up, the holders of shares of the Company’s common stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to prior distribution rights of preferred stock then outstanding. The Company’s common stock has no preemptive or conversion rights or other subscription rights. There are no redemption or sinking fund provisions applicable to the Company’s common stock. The outstanding shares of the Company’s common stock are fully paid and non-assessable.

December 2019 Offering

On December 23, 2019, the Company sold 10,000,000 shares of its common stock at the public offering price of $2.75 per share in an underwritten public offering, for gross proceeds of $27,500 and estimated net proceeds of $25,344 after deducting underwriting discounts and commission and other offering expenses payable by the Company (the “December 2019 Offering”). In addition, the Company granted the underwriters a 30-day option to purchase an additional 1,500,000 shares of common stock offered in the common stock offering. On January 6, 2020, the underwriters partially exercised the option to purchase an additional 1,081,184 shares of common stock at the public offering price of $2.75 per share for additional gross proceeds of $2,973 and net proceeds of $2,766 after deducting underwriting discounts and commission and other offering expenses.

The shares sold in the December 2019 Offering were sold pursuant to a registration statement on Form S-3 that was declared effective by the SEC on July 24, 2019.

Common Stock Warrants

As of March 31, 2020, warrants to purchase 413,320 shares of common stock at a price of $3.00 per share remain outstanding. The Warrants expire as follows: 163,174 warrants expire on March 27, 2021; 132,884 expire on April 28, 2021; and 117,262 expire on May 3, 2021. The Warrants are classified as a liability which is remeasured each period at fair value. See Note 12, Fair Value Measurements for more information on the fair value of the common stock warrant liability.

Accumulated Other Comprehensive Loss

The following table summarizes the changes in each component of accumulated other comprehensive loss, net of tax, for 2020:

	Unrealized gains (losses) on short-term investments			Total
Balance at December 31, 2019	$	(27	)	$	(27	)
Other comprehensive income (loss) before reclassifications	10			10
Net current period other comprehensive loss	10			10
Balance at March 31, 2020	$	(17	)	$	(17	)

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Supplemental Balance Sheet Information

3 Months Ended

Mar. 31, 2020

Supplemental Balance Sheet Information [Abstract]

Supplemental Balance Sheet Information

Supplemental Balance Sheet Information

Prepaid expenses and other current assets

	March 31, 2020		December 31, 2019
Prepaid clinical, contract research and manufacturing costs	$	1,219	$	481
Interest receivable	398		236
Prepaid insurance	369		533
Other	920		705
Prepaid expenses and other current assets	$	2,906	$	1,955

Property and equipment, net

	March 31, 2020			December 31, 2019
Scientific equipment	$	3,315		$	2,795
Leasehold improvements	192			192
Computers and software	48			32
Furniture and fixtures	41			41
Construction in process	168			356
Property and equipment, gross	3,764			3,416
Less: accumulated depreciation	(1,466		)	(1,317		)
Property and equipment, net	$	2,298		$	2,099

Depreciation and amortization expense was $148 and $87 for the three months ended March 31, 2020 and 2019, respectively.

Other noncurrent assets

	March 31, 2020		December 31, 2019
Restricted cash	$	1,200	$	—
Operating lease asset	285		356
Other	2		32
Total other noncurrent assets	$	1,487	$	388

Accrued expenses and other current liabilities

	March 31, 2020		December 31, 2019
Accrued payroll-related expenses	$	386	$	920
Accrued legal expenses	318		254
Operating lease liability	275		292
Accrued clinical, contract research and manufacturing costs	152		515
Accrued other expenses	137		454
Accrued expenses and other current liabilities	$	1,268	$	2,435

Other noncurrent liabilities

	March 31, 2020		December 31, 2019
Operating lease liability	$	—	$	59
Total other noncurrent liabilities	$	—	$	59

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Collaborative Research and License Agreements (Details) $ in Thousands			3 Months Ended
	Nov. 13, 2019 USD ($) agreements	Feb. 17, 2019 USD ($) target	Mar. 31, 2020 USD ($)	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Collaboration revenue			$ 9,183	$ 25
Current portion of deferred revenue					$ 21,873
Deferred revenue non-current			0		$ 2,956
Allergan Collaboration | Collaboration Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Number of collaboration programs | agreements	2
Non-refundable upfront payment received for research agreement	$ 25,000
Collaboration option exercise fee	10,000
Collaboration option exercise fee	$ 10,000
Termination period upon written notice	90 days
Collaboration revenue			9,116
Deferred revenue			15,713
Dermelix License Agreement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Aggregate regulatory milestone revenue		$ 13,500
Potential milestone revenue		152,500
Dermelix License Agreement | Collaboration Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Non-refundable upfront payment received for research agreement		1,000
Collaboration option exercise fee		$ 1,000
Collaboration revenue			$ 67	$ 25
Number of additional collaboration targets | target		5
Collaboration agreement term		6 years
Collaboration development expenses		$ 1,000
Collaboration option rights usage term		30 days
Development and Commercialization License | Allergan Collaboration | Collaboration Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Collaboration option exercise fee	$ 15,000
Maximum | Allergan Collaboration | Collaboration Arrangement
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]
Development milestone payment	55,000
Product approval and launch milestone payment	132,500
Sales milestone payment	$ 175,000

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Supplemental Balance Sheet Information - Accrued Expense and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Supplemental Balance Sheet Information [Abstract]
Accrued payroll-related expenses	$ 386	$ 920
Accrued legal expenses	318	254
Operating lease liability	275	292
Accrued clinical, contract research and manufacturing costs	152	515
Accrued other expenses	137	454
Accrued expenses and other current liabilities	$ 1,268	$ 2,435