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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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: 001-37449
ALPINE IMMUNE SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware20-8969493
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
188 East Blaine Street, Suite 200
Seattle, WA  98102
(206) 788-4545
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
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 $0.001 per shareALPNThe 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      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer  Accelerated filer 
Non-accelerated Filer  Smaller reporting company 
Emerging growth company     
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  
As of November 5, 2020, the registrant had 23,803,183 shares of common stock, $0.001 par value per share, outstanding.



ALPINE IMMUNE SCIENCES, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30,2020
 
TABLE OF CONTENTS
 
 
 
 
 
 
   
   
 
   
 
 
In this report, unless otherwise stated or as the context otherwise requires, references to “Alpine,” “the Company,” “we,” “us,” “our” and similar references refer to Alpine Immune Sciences, Inc. “Variant Immunoglobulin Domain”, “vIgD”, “Transmembrane Immunomodulatory Protein”, “TIP”, “Secreted Immunomodulatory Protein”, and “SIP” are registered trademarks of Alpine Immune Sciences, Inc. All rights reserved. This report also contains registered marks, trademarks, and trade names of other companies. All other trademarks, registered marks, and trade names appearing in this report are the property of their respective holders. 




SUMMARY RISK FACTORS

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk Factors.” The following is a summary of the principal risks we face:

Our approach to the discovery and development of innovative therapeutic treatments based on our technology is unproven and may not result in marketable products.
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.
Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier preclinical and clinical trials may not be predictive of future clinical trial results.
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 us. If these companies develop technologies or therapeutic candidates more rapidly than we do, or their technologies, including delivery technologies, are more effective, our ability to develop and successfully commercialize therapeutic candidates may be adversely affected.
To date, our revenue has been primarily derived from our collaboration agreements, and our success will be dependent, in part, on our collaborators’ efforts to develop our therapeutic candidates.
If third parties on which we depend to conduct our clinical or preclinical studies, or any future clinical trials, do not perform as expected, fail to satisfy regulatory or legal requirements, or miss expected deadlines, our development program could be delayed, which may result in materially adverse effects on our business, financial condition, results of operations, and prospects.
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 may be unable to successfully commercialize any such future products.
The COVID-19 coronavirus could adversely impact our business, including our clinical trials.
Our business and operations could suffer in the event of system failures.
We will need to raise substantial additional funds to advance development of our therapeutic candidates, and we cannot guarantee we will have sufficient funds available in the future to develop and commercialize our current or future therapeutic candidates.
We are an early stage biopharmaceutical company with a history of losses, we expect to continue to incur significant loses for the foreseeable future, we may never achieve or maintain profitability, and we have a limited operating history that may make it difficult for investors to evaluate the potential success of our business.
If we are not able to obtain and enforce patent protection for our technology, including therapeutic candidates, therapeutic products, and platform technology, development of our therapeutic candidates and platform, and commercialization of our therapeutic products may be materially and adversely affected.
We may license patent rights from third-party owners or licensees. If such 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 materially and adversely affected.
We or our licensors, collaborators, or any 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 of our therapeutic candidates and commercialization of our therapeutic products, or put our patents and other proprietary rights at risk.
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 necessary for developing and protecting our technology, including our platform technology, therapeutic candidates, and therapeutic products, or we could lose certain rights to grant sublicenses, either of which could have a material adverse effect on our results of operations and business prospects.





We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our therapeutic candidates.
The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels, and our failure to comply with applicable requirements may subject us to penalties and negatively affect our financial condition.
Our stock price may be volatile, and an active, liquid, and orderly trading market may not develop for our common stock. As a result, stockholders may not be able to resell shares at or above their purchase price.
Our officers and directors, and their respective affiliates, have a controlling influence over our business affairs and may make business decisions with which stockholders disagree and which may adversely affect the value of their investment.




PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
 September 30, 2020December 31, 2019
 (unaudited) 
Assets  
Current assets:  
Cash and cash equivalents$141,075 $16,123 
Short-term investments 24,397 
Restricted cash, current 132 
Prepaid expenses and other current assets1,475 1,650 
Total current assets142,550 42,302 
Restricted cash, noncurrent254 254 
Property and equipment, net1,695 1,552 
Operating lease, right-of-use asset9,534 9,985 
Total assets$154,033 $54,093 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$742 $1,543 
Accrued liabilities5,065 5,285 
Deferred revenue, current28,505 1,435 
Operating lease liability, current219  
Current portion of long-term debt1,318 418 
Total current liabilities35,849 8,681 
Deferred revenue, noncurrent29,988  
Operating lease liability, noncurrent11,987 11,429 
Long-term debt8,741 4,509 
Total liabilities86,565 24,619 
Commitments and contingencies
Stockholders’ equity:
Common stock, $0.001 par value per share; 200,000,000 shares authorized at September 30, 2020 and December 31, 2019; 23,853,650 shares issued and 23,803,183 shares outstanding at September 30, 2020; 18,638,359 shares issued and 18,587,892 shares outstanding at December 31, 2019
24 19 
Treasury stock, at cost; 50,467 shares at September 30, 2020 and December 31, 2019
  
Additional paid-in capital177,009 117,371 
Accumulated other comprehensive gain (loss)(41)10 
Accumulated deficit(109,524)(87,926)
Total stockholders’ equity67,468 29,474 
Total liabilities and stockholders’ equity$154,033 $54,093 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1


ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share amounts)
 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
 (unaudited)
Collaboration revenue$1,913 $289 $3,692 $856 
Operating expenses:
Research and development6,156 9,532 18,130 30,048 
General and administrative2,728 2,467 7,850 7,365 
Total operating expenses8,884 11,999 25,980 37,413 
Loss from operations(6,971)(11,710)(22,288)(36,557)
Other income (expense):
Interest expense(214)(66)(560)(197)
Interest income11 301 202 1,042 
Other income1,037  1,042  
Loss before taxes(6,137)(11,475)(21,604)(35,712)
Income tax benefit  6  
Net loss$(6,137)$(11,475)$(21,598)$(35,712)
Comprehensive income (loss):
Unrealized gain (loss) on investments 5 (16)37 
Unrealized gain (loss) on foreign currency translation14 (7)(35)(17)
Comprehensive loss$(6,123)$(11,477)$(21,649)$(35,692)
Weighted-average shares used to compute basic and diluted net loss per share22,277,146 18,586,950 19,826,985 18,281,707 
Basic and diluted net loss per share$(0.28)$(0.62)(1.09)$(1.95)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.

2


ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(in thousands, except share amounts)
 Common StockTreasuryAdditional
Paid-in Capital
Accumulated
Other Comprehensive Loss
Accumulated DeficitTotal
Stockholders’ Equity
 SharesAmountSharesAmount
Balance, December 31, 201813,854,205 $14 50,467 $ $90,664 $(13)$(46,074)$44,591 
Issuance of Units in Private Placement, net of offering costs4,706,700 5 — — 23,613 — — 23,618 
Exercise of stock options124 — — — — — —  
Stock-based compensation— — — — 754 — — 754 
Unrealized gain on investments— — — — — 15 — 15 
Unrealized loss on foreign currency translation— — — — — (14)— (14)
Net loss— — — — — — (12,381)(12,381)
Balance, March 31, 201918,561,029 19 50,467  115,031 (12)(58,455)56,583 
Offering costs associated with Private Placement— — — — (20)— — (20)
Exercise of stock options23,701 — — — 11 — — 11 
Stock-based compensation— — — — 682 — — 682 
Unrealized gain on investments— — — — — 17 — 17 
Unrealized gain on foreign currency translation— — — — — 4 — 4 
Net loss— — — — — — (11,856)(11,856)
Balance June 30, 201918,584,730 19 50,467  115,704 9 (70,311)45,421 
Issuance of warrants— — — — 60 — — 60 
Exercise of stock options3,038 — — — 2 — — 2 
Stock-based compensation— — — — 825 — — 825 
Unrealized gain on investments— — — — — 5 — 5 
Unrealized loss on foreign currency translation— — — — — (7)— (7)
Net loss— — — — — — (11,475)(11,475)
Balance September 30, 201918,587,768 $19 50,467 $ $116,591 $7 $(81,786)$34,831 
Balance, December 31, 201918,587,892 $19 50,467 $ $117,371 $10 $(87,926)$29,474 
Stock-based compensation— — — — 986 — — 986 
Issuance of warrants— — — — 60 — — 60 
Unrealized loss on investments— — — — — (15)— (15)
Unrealized loss on foreign currency translation— — — — — (113)— (113)
Net loss— — — — — — (5,533)(5,533)
Balance, March 31, 202018,587,892 19 50,467  118,417 (118)(93,459)24,859 
Exercise of stock options3,339 — — — 2 — — 2 
Stock-based compensation— — — — 1,232 — — 1,232 
Unrealized loss on investments— — — — — (1)— (1)
Unrealized gain on foreign currency translation— — — — — 64 — 64 
Net loss— — — — — — (9,928)(9,928)
Balance, June 30, 202018,591,231 19 50,467  119,651 (55)(103,387)16,228 
Issuance of Units in Public Offering, net of offering costs5,139,610 5 — — 56,266 — — 56,271 
Issuance of common stock under equity incentive plans72,342 — — — 119 — — 119 
Stock-based compensation— — — — 973 — — 973 
Unrealized gain on foreign currency translation— — — — — 14 — 14 
Net loss— — — — — — (6,137)(6,137)
Balance, September 30, 202023,803,183 $24 50,467 $ $177,009 $(41)$(109,524)$67,468 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 Nine Months Ended
September 30,
 20202019
 (unaudited)
Operating activities  
Net loss$(21,598)$(35,712)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense419 344 
Amortization of premium/discount on investments(60)(274)
Non-cash interest expense192 99 
Stock-based compensation expense3,191 2,261 
Changes in operating assets and liabilities:
Prepaid expenses and other current assets272 (4,492)
Right-of-use asset458 699 
Accounts payable and accrued liabilities(1,276)5,596 
Deferred revenue57,058 2,069 
Lease liabilities777 (265)
Net cash provided by (used in) operating activities39,433 (29,675)
Investing activities
Purchases of property and equipment(314)(335)
Purchase of short-term investments(4,967)(54,306)
Maturities of short-term investments29,311 65,625 
Proceeds from the sale of short-term investments 1,391 
Net cash provided by investing activities24,030 12,375 
Financing activities
Proceeds from borrowings, net of issuance costs5,000 1,977 
Proceeds from sale of common stock and warrants, net of offering costs56,271 23,598 
Repayment of debt (1,333)
Proceeds from exercise of stock options121 13 
Net cash provided by financing activities61,392 24,255 
Effect of exchange rate on cash, cash equivalents and restricted cash(35)(17)
Net increase in cash and cash equivalents and restricted cash124,820 6,938 
Cash and cash equivalents and restricted cash, beginning of period16,509 10,843 
Cash and cash equivalents and restricted cash, end of period$141,329 $17,781 
Supplemental Information
Discount in connection with issuance of debt$335 $ 
Cash paid for interest$345 $97 
Recognition of right-of-use asset$ $11,667 
 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 is unaudited)

1. Description of Business
Alpine Immune Sciences, Inc. (the “Company”, “Alpine”, “we”, “us”, or “our”), together with its consolidated subsidiaries, is a clinical-stage immunotherapy company committed to leading a new wave of immune therapeutics, creating potentially powerful multifunctional immunotherapies to improve patients’ lives via unique protein engineering technologies. Our approach includes a proprietary scientific platform that uses a process known as directed evolution to convert native immune system proteins into multi-targeted therapeutics potentially capable of modulating the human immune system. We were incorporated under the laws of the State of Delaware and are headquartered in Seattle, Washington.
A novel strain of coronavirus, SARS-CoV-2 (“COVID-19”), was first reported in December 2019, and subsequently declared a global pandemic by the World Health Organization in March 2020. As a result of the COVID-19 outbreak, many companies have experienced disruptions in their operations and in markets served. We have implemented some and may take additional temporary precautionary measures intended to help ensure the well-being of our employees and minimize business disruption. We considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts to our results of operations and financial position at September 30, 2020. The full extent of the future impacts of the COVID-19 outbreak on our operations is uncertain. A prolonged outbreak may adversely impact our business, including our clinical trials.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include those used for revenue recognition, accruals for clinical trial activities and other accruals, and the estimated fair value of equity-based awards. We base our estimates and assumptions on historical experience when available and on various factors we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates.
The accompanying unaudited condensed consolidated financial statements as of September 30, 2020 and for the three and nine months ended September 30, 2020 and 2019 and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all normal recurring adjustments necessary for a fair statement of our financial position for the interim periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the years ended December 31, 2019 and December 31, 2018 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 30, 2020 (“Annual Report”). The results of our operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
Our unaudited condensed consolidated financial statements include the financial position and results of operations of Alpine Immune Sciences, Inc. and our wholly owned operating company and subsidiary, AIS Operating Co., Inc., and our wholly-owned subsidiary, Alpine Immune Sciences Australia PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. 
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Cash and Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits with commercial banks in checking and interest-bearing accounts, and highly liquid money market funds.
Restricted cash represents cash drawn on lines of credit used to establish collateral to support the security deposit on our operating leases to rent office and laboratory space in Seattle, Washington.
Periodically, we maintain deposits in financial institutions in excess of government insured limits. We believe we are not exposed to significant credit risk as our deposits, which are held at financial institutions, are high credit quality securities such as money market funds, U.S. Treasury securities, and commercial paper. To date, we have not realized any losses on these deposits.
Short-Term Investments
Our short-term investments include funds invested in highly liquid money market funds, U.S. Treasury securities, commercial paper, and corporate debt securities with a final maturity of each security of less than one year. These investments are classified as available-for-sale debt securities, which are recorded at fair value based on quoted prices in active markets.
If the estimated fair value of a debt security is below its amortized cost basis, we evaluate whether it is more likely than not that we will sell the security before its anticipated recovery in market value. If an impairment exists, the security is written down to its estimated fair value and we consider whether credit losses exist for the related securities. A credit loss exists if the present value of expected cash flows is less than the amortized cost basis of the security. Credit-related losses are recognized as an allowance for credit losses on the balance sheet with a corresponding adjustment to earnings. Unrealized gains and losses that are unrelated to credit deterioration are reported in other comprehensive income (loss). Purchase premiums and discounts are recognized as interest income using the interest method over the terms of the securities. Realized gains and losses and declines in fair value deemed to be other than temporary are reflected in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) using the specific-identification method.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our steps for recognizing revenue consist of; (1) identifying the contract, (2) identifying the performance obligations as either distinct or bundled goods and services, (3) determining the transaction price associated with each performance obligation for which we expect to be entitled in exchange for transferring such goods and services, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue upon satisfaction of performance obligations.
Our collaboration agreements principally contain multiple performance obligations, which may include (1) grants of, or options to obtain, intellectual property licenses; (2) research and development services; and/or (3) manufacturing or supply services. Payments typically received under these arrangements include one or more of the following: non-refundable upfront license fees, option exercise fees, payment for research and/or development efforts, amounts due upon the achievement of specified objectives, and/or royalties on future product sales. Our revenue is primarily derived from our collaboration agreements with Adaptimmune Therapeutics plc (“Adaptimmune”) and AbbVie Ireland Unlimited Company (“AbbVie”). See further discussion of our collaboration agreements in Note 8.
We allocate revenue to each performance obligation based on its relative stand-alone selling price. We generally determine stand-alone selling prices at the inception of the contract based on our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying Condensed Consolidated Balance Sheets and recognized as revenue when the related revenue recognition criteria are met. We recognize revenue under our collaboration agreements based on employee hours contributed to each performance obligation, or by using a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period.
Our collaboration agreements provide for non-refundable milestone payments. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to us for such milestone (1) is consistent with our performance necessary to achieve the milestone or the increase in value to the collaboration resulting from our performance; (2) relates solely to our past performance; and (3) is reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors
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such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone and whether any portion of the milestone consideration is related to future performance or deliverables.
We review the contributed employee hours and progress towards completion for each performance obligation under our collaboration agreements, and adjust the revenue recognized to reflect changes in assumptions relating to the estimated satisfaction of the performance obligation. We could accelerate revenue recognition in the event of early termination of programs or if our expectations change. Alternatively, we could decelerate revenue recognition if programs are extended or delayed. While such changes to our estimates have no impact on our reported cash flows, the timing of revenue recorded in future periods could be materially impacted.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740, Income Taxes, and clarifying existing guidance to facilitate consistent application. The standard will become effective for us beginning on January 1, 2021. We are currently evaluating the new standard to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures.
Recently Adopted Accounting Pronouncements
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses, as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures. We will continue to monitor the impact of the COVID-19 outbreak on expected credit losses.
3. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. The net loss per share for the three and nine months ended September 30, 2020 reflects 5,139,610 shares of our common stock issued pursuant to the securities offering completed in July 2020. The significant number of shares issued has affected the period-over-period comparability of our net loss per share calculations. The common stock issuable upon the conversion or exercise of the following dilutive securities has been excluded from the diluted net loss per share calculation because their effect would have been anti-dilutive. Diluted net loss per share, therefore, does not differ from basic net loss per share for the periods presented.
 September 30,
 20202019
 (unaudited)
Warrants to purchase common stock4,464,261 1,877,094 
Stock options and restricted stock units outstanding4,136,352 3,264,600 
Total8,600,613 5,141,694 

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4. Cash Equivalents and Short-Term Investments
The amortized cost and fair value of our cash equivalents and short-term investments are as follows (in thousands):
 September 30, 2020
Assets:(unaudited)
 Amortized CostGross unrealized gainsGross unrealized lossesFair market value
Money market funds$137,558 $ $ $137,558 
 December 31, 2019
Assets:Amortized CostGross unrealized gainsGross unrealized lossesFair market value
Money market funds$9,995 $ $ $9,995 
U.S. treasury bills5,019 2  5,021 
Corporate debt securities and commercial paper21,862 14  21,876 
Total$36,876 $16 $ $36,892 
As of September 30, 2020, all of our investments were classified as cash equivalents. All short-term investments held as of December 31, 2019 were classified as available-for-sale debt securities and had contractual maturities of less than one year. There were no realized gains and losses on these securities for the periods presented.
5. Fair Value Measurements
Cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on the short-term nature of these financial instruments. Fair value is defined as the exchange price received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, is as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs supported by little or no market activity and significant to the fair value of the assets or liabilities.
As of September 30, 2020, and December 31, 2019, cash of $3.5 million and $3.6 million, respectively, is excluded from the fair value table below. The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 September 30, 2020
(unaudited)
Assets:Level 1Level 2Level 3Total
Money market funds$137,558 $ $ $137,558 
 December 31, 2019
Assets:Level 1Level 2Level 3Total
Money market funds$9,995 $ $ $9,995 
U.S. treasury bills5,021   5,021 
Corporate debt securities and commercial paper 21,876  21,876 
Total$15,016 $21,876 $ $36,892 
Our Level 2 assets consist of commercial paper and corporate debt securities. We review trading activity and pricing for our available-for-sale securities as of the measurement date. When sufficient quoted pricing for identical securities is not
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available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data.
6. Additional Balance Sheet Information
Prepaid expenses and other current assets consist of the following (in thousands):
September 30, 2020December 31, 2019
(unaudited)
Prepaid insurance$634 $301 
Prepaid research and development341 574 
Tenant improvement allowance receivable25 586 
Prepaid other203 89 
Other receivables272 100 
Prepaid expenses and other current assets$1,475 $1,650 

Accrued liabilities consist of the following (in thousands):
 September 30, 2020December 31, 2019
 (unaudited) 
Research and development services$2,404 $2,543 
Employee compensation1,430 1,761 
Legal and professional fees880 515 
Accrued other351 466 
Accrued Liabilities$5,065 $5,285 

7. Long-term Debt
In December 2016, we entered into a Loan and Security Agreement (the “Original Agreement”), with Silicon Valley Bank (“SVB”), under which we borrowed $5.0 million. The Original Agreement accrued interest at a floating per annum rate equal to the lender’s prime rate minus 1.75%. The Original Agreement had an interest-only period through July 2018.
In August 2019 (the “Effective Date”), we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with SVB, pursuant to which SVB agreed to extend term loans to us with an aggregate principal amount of up to $15.0 million (the “Term Loans”). Borrowings under the Loan Agreement consist of up to three separate tranches. The initial tranche of $5.0 million was funded in August 2019, $3.0 million of which was used to repay amounts owing under our Original Agreement. In March 2020, the second tranche of $5.0 million was funded to us. We did not draw down the final tranche of $5.0 million, which expired on July 31, 2020. We intend to use the debt proceeds for working capital and other general corporate purposes, including the advancement of our development programs.
The Term Loans accrue interest at a floating per annum rate of 0.25% above the prime rate, subject to a floor of 5.75%, which interest is payable monthly commencing in September 2019. Upon the occurrence and during the continuance of an event of default, a default interest rate will apply that is 4.0% above the otherwise applicable interest rate. The Term Loans were interest only until September 30, 2020, however, under the Loan Agreement our interest only period automatically extends to June 30, 2021 if we receive aggregate new capital of at least $40.0 million no later than June 30, 2020. We met this milestone in June 2020 in conjunction with the AbbVie agreement, discussed in detail in Note 8. As a result of the interest only extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable on July 1, 2023.
We may prepay all of the Term Loans subject to a prepayment fee equal to $75,000, which represents the deferred portion of the final payment due under the Original Agreement, plus the outstanding principal balance under the Term Loans at the time of such prepayment multiplied by a prepayment fee of 2.0% in the first year, 1.0% in the second year, and 0% in the third year and thereafter. Additionally, a final payment in the amount of 5.5% of the funded Term Loans is payable to SVB on
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the date on which the Term Loans are prepaid, paid or become due and payable in full. The final payment fees are recorded in long-term debt with an offsetting reduction to debt discount on our accompanying Condensed Consolidated Balance Sheets.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets, engage in any new lines of business, and enter into certain transactions with affiliates, in each case subject to certain exceptions. We assessed the likelihood of the lender accelerating payment of the loan due to a material adverse change in our business, operations, financial, or other condition as remote. We were in compliance with our covenants as of September 30, 2020. As such, as of September 30, 2020, the classification of the loan is split between current and noncurrent based on the timing of payment obligations. As security for its obligations under the Loan Agreement, we granted SVB a first priority security interest on substantially all of our assets, except intellectual property, and subject to certain other exceptions.
In connection with the Loan Agreement, we issued a warrant to SVB to purchase up to 52,083 shares of our common stock at a price of $4.32 per share, 17,361 shares of which became exercisable in August 2019 after we drew down the initial tranche. In March 2020, after we drew down the second tranche of our Term Loan, an additional 17,361 shares became exercisable. The remaining warrants did not vest and expired on July 31, 2020, upon the expiration of the third tranche of our Term Loan. The fair value of the warrants on the date of issuance for the initial tranche and second tranche was $60,000 and $60,000, respectively, determined using the Black-Scholes option-pricing model, and was recorded as a component of equity and as a debt discount on our accompanying Condensed Consolidated Balance Sheets. In connection with Original Agreement, SVB also holds 7,069 fully vested common stock warrants at an exercise price of $12.38 per share.
The Term Loan was accounted for as a debt modification in a non-troubled debt restructuring, rather than a debt extinguishment, based on a comparison of the present value of the cash flows under the terms of the debt immediately before and after the Effective Date of the Term Loan, which resulted in a change of less than 10%. As a result, the remaining unamortized debt discount recorded in connection with the Original Agreement will be amortized to interest expense over the repayment term of Loan Agreement. In connection with the initial and second tranches of the Loan Agreement, we recorded a total debt discount of $812,000, which is being amortized to interest expense using the effective interest method over the repayment term of the loan. Non-cash interest expense associated with the amortization of the discount was $67,000 and $32,000 for the three months ended September 30, 2020 and 2019, respectively, and $192,000 and $99,000 for the nine months ended September 30, 2020 and 2019, respectively. The unamortized discount was $565,000 as of September 30, 2020. 
Scheduled principal payments on our outstanding debt as of September 30, 2020 under our Loan Agreement, excluding final fee amounts, are as follows (in thousands):
Year ending December 31,Total
2020 (remainder of year)$ 
20212,400 
20224,800 
20232,800 
Total future principal payments$10,000 
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8. License and Collaboration Agreements
AbbVie
In June 2020, we entered into an option and license agreement with AbbVie (the “AbbVie Agreement”) for the development of ALPN-101. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to ALPN-101 (the “License Option”). The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting a Phase 2 study in systemic lupus erythematosus, based on an agreed-upon development plan (the “Development Plan”). We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for ALPN-101 necessary to complete activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones (the “Alpine Development Milestones”) up to an aggregate amount of $75.0 million. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon AbbVie’s achievement of certain development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-based cash milestones, collectively referred to as (the “AbbVie Milestones”). Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments are fully constrained and were not included in the transaction price. We will re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
We recognized revenue from the AbbVie Agreement of $1.6 million for the three and nine months ended September 30, 2020. As of September 30, 2020 the remaining balance of the transaction price is $58.4 million and is recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
Adaptimmune
In May 2019, we entered into a collaboration and licensing agreement with Adaptimmune (the “Adaptimmune Collaboration”) to develop next-generation SPEAR T cell products. Under the Adaptimmune Collaboration, we are to perform certain research services and grant Adaptimmune an exclusive license to programs from our secreted immunomodulatory protein (“SIP”) and transmembrane immunomodulatory protein (“TIP”) technologies. In June 2019, under the terms of the
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Adaptimmune Collaboration, we received an upfront license payment of $2.0 million, and through September 30, 2020 we have received an additional $1.3 million in research support payments to fund ongoing programs. These payments are recorded as deferred revenue upon receipt and are recognized to revenue based on employee hours contributed to each performance obligation. Under the Adaptimmune Collaboration we have recognized revenue of $356,000 and $288,000 for the three months ended September 30, 2020, and 2019, respectively, and $2.0 million and $431,000 for the for the nine months ended September 30, 2020 and 2019, respectively. In addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of up to $288.0 million, if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit percentage royalties on worldwide net sales of the applicable products. As of September 30, 2020, we have $136,000 remaining in current deferred revenue on our Condensed Consolidated Balance Sheets.
9. Stockholders’ Equity
Securities Offerings
In July 2020, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) for a private placement with a select group of institutional investors, pursuant to which we sold 5,139,610 units (the “Common Units”) and 790,710 units (the “Prefunded Warrant Units”), for an aggregate purchase price of $60.0 million. Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of common stock (the “Common Stock Warrants”), and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common stock (the “Prefunded Warrants”) plus 0.3 Common Stock Warrants. The Prefunded Warrant Units and the Common Units are collectively referred to as the “Units” and each Unit has a purchase price of $10.1175. Pursuant to the terms of the Securities Purchase Agreement, we issued warrants to purchase 1,779,096 shares of common stock with an exercise price of $12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of $0.001 per share. We incurred $3.7 million in financing costs associated with the Securities Purchase Agreement, which was netted against the proceeds within additional-paid-in-capital on our accompanying Condensed Consolidated Balance Sheets.
The issuance of the securities sold under the Securities Purchase Agreement have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements. We filed a registration statement with the SEC covering the resale of the shares of common stock issuable in connection with the Securities Purchase Agreement and upon exercise of the warrants.
In June 2018, we entered into an equity distribution agreement, (“Equity Distribution Agreement”), with Piper Jaffray & Co., (“Piper Jaffray”), pursuant to which we may sell shares of our common stock through an “at the market” equity offering program for up to $50.0 million in gross cash proceeds. Under the Equity Distribution Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. We will be unable to sell shares under the Equity Distribution Agreement until a prospectus supplement relating to any sales under the Equity Distribution Agreement is filed with the SEC. As of September 30, 2020, no sales under our Equity Distribution Agreement have occurred.
Equity Incentive Plans
On January 1, 2020, in connection with our 2018 Equity Incentive Plan (the “2018 Plan”) annual increase provision, a total of 929,394 additional shares were automatically added to the shares authorized under the 2018 Plan. In June 2020, in conjunction with our annual meeting of stockholders, our stockholders approved an additional increase of 743,515 shares authorized under our 2018 Plan.
During the nine months ended September 30, 2020 we issued stock option grants totaling 1,196,950 shares with a weighted average exercise price of $3.95 per share were issued to eligible employees and board members.
Also in January 2020, we issued 156,328 shares of RSUs at a grant date fair value of $3.23 per share to certain employees in lieu of cash incentive compensation. Half of the shares underlying each RSU vested on June 30, 2020, with the remaining half scheduled to vest on December 31, 2020, subject to each grantee’s continued employment or service to the Company on the applicable vesting dates. In addition, upon a change in control as defined in the 2018 Plan, any unvested shares underlying the RSU will immediately vest.
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Stock-Based Compensation Expense 
We use the Black-Scholes option pricing model to estimate the fair value of stock options granted at the grant date. The fair value of RSUs is equal to the closing stock price on the date of grant. We recognize the fair value of stock-based compensation as compensation expense over the requisite service period, which is the vesting period. Stock-based compensation is classified in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as follows (in thousands): 
 Three Months Ended
September 30,
Nine Months Ended
September 30,
 2020201920202019
 (unaudited)
Employee:
Research and development$462 $438 $1,687 $1,200 
General and administrative501 370 1,473 1,001 
Non-Employee:
Research and development8 16 26 56 
General and administrative2 1 5 4 
Total stock-based compensation expense$973 $825 $3,191 $2,261 
10. Income Taxes
We are subject to income taxes in the United States and Australia and our effective tax rate is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. Each quarter an estimate of the annual effective tax rate is updated should we revise our forecast of earnings based upon our operating results. If there is a change in the estimated effective annual tax rate, a cumulative adjustment is made. Our effective tax rate for the nine months ended September 30, 2020 and 2019 was (0.03)% and 0.00%, respectively. The difference between the effective tax rate of (0.03)% for the nine months ended September 30, 2020, the effective tax rate of 0.00% for the nine months ended September 30, 2019, and the U.S. federal statutory rate of 21% was primarily due to recognizing a full valuation allowance on deferred tax assets. 
As of September 30, 2020, we determined that, based on an evaluation of the four sources of income and all available evidence, both positive and negative, including our latest forecasts and cumulative losses in recent years, it was more likely than not that none of our deferred tax assets would be realized and therefore we continued to record a full valuation allowance. No current tax liability or expense has been recorded in the financial statements, with the exception of a minimal amount of state income tax refunded during the nine-month period ended September 30, 2020.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following management’s discussion and analysis of financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2019, included in our Annual Report on Form 10-K, or the “Annual Report”, filed with the SEC on March 30, 2020.
Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
 
our ability to identify, develop and commercialize additional products or product candidates;
our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;
our ability to obtain funding for our operations;
the implementation of our business model and strategic plans for our business and technology;
the timing of the commencement, progress and receipt of data from any of our preclinical and clinical trials;
the expected results of any preclinical or clinical trial and the impact on the likelihood or timing of any regulatory approval;
the scope of protection we are able to establish and maintain for intellectual property rights covering our technology and product candidates;
the anticipated impact of the COVID-19 pandemic on our business, research and clinical development plans and timeliness and results of operations;
the timing or likelihood of regulatory filings and approvals;
the therapeutic benefits, effectiveness and safety of our product candidates;
the rate and degree of market acceptance and clinical utility of any future products;
our ability to maintain and establish collaborations;
our ability to achieve milestones in our current and any future collaborations;
our expectations regarding market risk, including interest rate changes;
our expectations regarding the sufficiency of our cash and cash equivalents to fund operations for at least the next 12 months;
developments relating to our competitors and our industry; and
our expectations regarding licensing, acquisitions and strategic operations.

These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — Risk Factors, and elsewhere in this report. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.
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In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat cancer and autoimmune and inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins into differentiated, multi-targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and significantly improving outcomes in patients with serious diseases.
In June 2020, we entered into an Option and License Agreement with AbbVie Ireland Unlimited Company, or AbbVie, which grants AbbVie an exclusive option to take an exclusive license to our clinical candidate ALPN-101, a dual ICOS and CD28 antagonist intended for the treatment of autoimmune and inflammatory diseases. Preclinical studies with ALPN-101 have demonstrated efficacy in models of systemic lupus erythematosus, or SLE, graft versus host disease, or GVHD, arthritis, inflammatory bowel disease, multiple sclerosis, type 1 diabetes, and Sjögren’s syndrome. We have evaluated ALPN-101 in a Phase 1 healthy volunteer trial and plan to initiate an international Phase 2 study in adults with lupus. We have successfully received U.S. FDA IND clearance, and anticipate that the study will commence enrollment in the first half of 2021.
Our lead oncology program is ALPN-202, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer. Preclinical in vivo data have demonstrated monotherapy efficacy in tumor models superior to approved therapies. In addition, ALPN-202 has a unique immuno-modulatory profile and has demonstrated evidence of anti-tumor immunity in preclinical models. Based on ALPN-202’s efficacy in preclinical models and favorable nonclinical safety and development profile. In June 2020, we initiated NEON-1, a Phase 1 dose escalation and expansion study in patients with advanced malignancies and anticipate providing a study update in the first half of 2021.
    Our third development program is ALPN-303, a dual B-cell cytokine antagonist, designed for the treatment of B-cell mediated inflammation and autoimmune diseases. We are currently conducting additional nonclinical studies and manufacturing activities for ALPN-303 in anticipation of enabling clinical trials by the end of 2021.
Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cellular therapies, or ECT, such as chimeric antigen receptor T cells, or CAR-T, T cell receptor-engineered T cells, or TCR-T, and tumor infiltrating lymphocytes, or TILs. In May 2019, we signed a collaboration and license agreement with Adaptimmune Therapeutics plc, or Adaptimmune, to develop next-generation SPEAR™ T cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.
Our goal is to discover and develop modern therapies to treat patients with serious conditions such as cancer and inflammatory diseases. To achieve our goals, we intend to: 
aggressively move our lead inflammation/autoimmune program ALPN-101 through its development plan including a Phase 2 study for the treatment of SLE;
aggressively move our lead oncology program ALPN-202 through clinical development for the treatment of cancer;
aggressively move ALPN-303 through nonclinical development and into clinical studies for the treatment of B-cell mediated inflammation/autoimmune diseases; and
maximize the value of our pipeline and platform via potential partnering activities.
Our operations to date have been limited to business planning, raising capital, developing our platform technology, identifying potential immunotherapy candidates, clinical development, and other research and development activities. To date, we have financed operations primarily through private placements of common stock and convertible preferred stock, funds received from license and research agreements, debt financing and assets acquired upon the close of our merger with Nivalis Therapeutics Inc., or Nivalis. We do not have any products approved for sale and have not generated any product sales. Since inception and through September 30, 2020, excluding amounts borrowed through debt financing, we have raised an aggregate of $242.1 million to fund operations, of which $79.9 million was from the sale of common stock and warrants, $49.2 million was from the sale of convertible preferred stock, $68.9 million was through our license and collaboration agreements, and $44.1 million in cash, cash equivalents, and marketable securities acquired through the merger with Nivalis. As of September 30, 2020, we had cash, cash equivalents, restricted cash, and short-term investments totaling $141.3 million.
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Our net loss was $6.1 million and $11.5 million for the three months ended September 30, 2020 and 2019, respectively, and $21.6 million and $35.7 million for the nine months ended September 30, 2020 and 2019, respectively. We expect to continue incurring significant expenses and operating losses for at least the next several years as we:
 
initiate and complete clinical trials for product candidates, including ALPN-101, a dual ICOS/CD28 antagonist program targeting autoimmune/inflammatory disorders, ALPN-202, a CD80 vIgD-Fc that mediates PD-L1-dependent CD28 costimulation and inhibits the PD-L1 and CTLA-4 checkpoints targeting cancer and ALPN-303, B-Cell Modulatory Variant TNF Receptor Domains, or vTDs designed to inhibit BAFF and APRIL. BAFF and APRIL are tumor necrosis factor (TNF) superfamily cytokines which play key roles in B-cell development, differentiation, and survival, contributing to the pathogenesis of B-cell-related autoimmune diseases like SLE;
contract to manufacture and perform additional process development for our product candidates; 
continue research and development efforts to build our pipeline beyond the current product candidates; 
maintain, expand, and protect our intellectual property portfolio; 
hire additional clinical, quality control, scientific, and management personnel; and 
add operational and financial personnel to support our product development efforts and operational capabilities applicable to operating as a public company.
We do not expect to generate product revenue unless and until we successfully complete development of, obtain marketing approval for and commercialize our product candidates, either alone or in collaboration with third parties. We expect these activities will take a number of years and our success in these efforts is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the regulatory approval and commercialization of any of our product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our operating activities through equity or debt financings, collaborations or licenses, capital lease transactions, or other available financing transactions. However, additional capital may not be available on reasonable terms, if at all, and if we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations.
Financial Overview
Collaboration Revenue
We derive our collaboration revenue primarily from our collaboration and licensing agreements. We may generate revenue in the future from research support or milestone payments received pursuant to our collaboration and licensing agreement with Adaptimmune, or the Adaptimmune Collaboration Agreement, or from our collaboration and license option agreement with AbbVie, or the AbbVie Agreement, or from payments from future license or collaboration agreements, product sales, or government contracts and grants. We expect any revenue we generate, if any, will fluctuate from quarter to quarter.
AbbVie Ireland Unlimited Company
In June 2020, we entered into the AbbVie Agreement for the development of ALPN-101. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to ALPN-101, or the License Option. The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting a Phase 2 study in SLE, based on an agreed-upon development plan, or the Development Plan. We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for ALPN-101 necessary to complete activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones, or the Alpine Development Milestones, up to an aggregate amount of $75.0 million. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon AbbVie’s achievement of certain development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-based cash milestones, collectively referred to as
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the AbbVie Milestones. Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments are fully constrained and were not included in the transaction price. We will re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
We recognized revenue from the AbbVie Agreement of $1.6 million for the three and nine months ended September 30, 2020. As of September 30, 2020, the remaining balance of the transaction price is $58.4 million and is recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
Adaptimmune Therapeutics plc
In May 2019, we entered into the Adaptimmune Collaboration Agreement with Adaptimmune, a clinical-stage biopharmaceutical company primarily focused on providing novel cell therapies to patients, particularly for the treatment of solid tumors, to develop next-generation SPEAR T cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. Under the Adaptimmune Collaboration Agreement, we are to perform certain research services and grant Adaptimmune an exclusive license to programs from our SIP and TIP technologies. In June 2019, under the terms of the Adaptimmune Collaboration Agreement, we received an upfront license payment of $2.0 million and as of September 30, 2020 we have received an additional $1.3 million in research support payments to fund ongoing programs. These payments were recorded as deferred revenue and will be recognized to revenue based on employee hours contributed to each performance obligation. Under the Adaptimmune Collaboration Agreement we have recognized revenue of $356,000 and $288,000 for the three months ended September 30, 2020, and 2019, respectively and $2.0 million and $431,000 for the for the nine months ended September 30, 2020 and 2019, respectively. In addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of up to $288.0 million, if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit royalties on worldwide net sales of the applicable products.
Research and Development Expenses
We focus our resources on research and development activities, including the conduct of preclinical and clinical studies and product development and expense such costs as they are incurred. Our research and development expenses consist of:
employee-related expenses, including salaries, benefits, taxes, travel, and stock-based compensation expense for personnel in research and development functions;
expenses related to process development and production of product candidates paid to contract manufacturing organizations;
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costs associated with preclinical activities and regulatory operations, including the cost of acquiring, developing, and manufacturing research material;
clinical trials and activities related to regulatory filings for our product candidates; and
allocation of facilities, overhead, depreciation, and amortization of laboratory equipment and other expenses.
We incurred $6.2 million and $9.5 million in research and development expenses for three months ended September 30, 2020 and 2019, respectively, and $18.1 million and $30.0 million for the nine months ended September 30, 2020 and 2019, respectively. We expect our research and development expenses to increase for the foreseeable future as we continue to develop our platform and product candidates.
The successful development of our platform and product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:
the scope, rate of progress, expense, and results of clinical trials;
the scope, rate of progress, and expense of process development and manufacturing;
preclinical and other research activities; and
the timing of regulatory approvals.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents and other intellectual property, and allocation of facility and overhead costs.
We expect general and administrative expenses to increase as we expand infrastructure and continue to prosecute our patents and other intellectual property. Other increases could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.
Interest Expense
Interest expense consists primarily of interest associated with our term loan with Silicon Valley Bank and the amortization of the related debt discount. 
Interest Income
Interest income consists of interest earned on our cash, cash equivalents, and short-term investments.
Other Income
Other income consists primarily of a research and development tax credit received by our wholly-owned Australian subsidiary.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, 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, for so long as we are an “emerging growth company,” which is until as late as December 31, 2020, we will, among other things not be required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. After we cease to be an “emerging growth company” and for so long as we are not classified as an “accelerated filer” or “large
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accelerated filer” pursuant to SEC rules, we will continue to be exempt from the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.
Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. 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 readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are more fully described in Note 2 of the accompanying unaudited condensed consolidated financial statements and in Note 2 to the audited financial statements contained in our Annual Report on Form 10-K. There have been no significant or material changes in our significant accounting policies during the nine months ended September 30, 2020, as compared to those disclosed in our Annual Report except the following:
Recently Adopted Accounting Pronouncements
In November 2018, the FASB issued Accounting Standards Update, or ASU, No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses, as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures. We will continue to monitor the impact of the COVID-19 outbreak on expected credit losses.
For information regarding recent accounting pronouncements, see Note 2 of the Notes to Condensed Consolidated Financial Statements under Part I, Item 1 of this report.
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Results of Operations
Comparison of Three Months Ended September 30, 2020 and 2019
The following table summarizes our results of operations for the three months ended September 30, 2020 and 2019 (in thousands):
 Three Months Ended
September 30,
Increase/
(Decrease)
 20202019
 (unaudited)
Collaboration revenue$1,913 $289 $1,624 
Operating expenses: 
Research and development6,156 9,532 (3,376)
General and administrative2,728 2,467 261 
Total operating expenses8,884 11,999 (3,115)
Loss from operations(6,971)(11,710)4,739 
Other income (expense):
Interest expense(214)(66)(148)
Interest income11 301 (290)
Other income1,037 — 1,037 
Net loss$(6,137)$(11,475)$5,338