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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 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, 2022
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 8, 2022, the registrant had 45,914,433 shares of common stock, $0.001 par value per share, outstanding.



ALPINE IMMUNE SCIENCES, INC.
FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 2022
 
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. “TIP” and “SIP are registered trademarks and the Company logo is a trademark 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.
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.
We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to develop and commercialize therapeutic candidates, impact our cash position, increase our expenses, and present significant distractions to our management.
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.
We depend on our information technology systems and any failure of these systems could harm our business.
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.
Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.



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, 2022December 31, 2021
Assets(unaudited) 
Current assets:  
Cash and cash equivalents$126,625 $67,907 
Short-term investments122,237 94,396 
Accounts receivable382 25,000 
Prepaid expenses and other current assets3,995 4,710 
Total current assets253,239 192,013 
Restricted cash, noncurrent254 254 
Property and equipment, net1,608 1,716 
Operating lease, right-of-use asset8,381 8,837 
Long-term investments28,016 52,866 
Deferred tax asset101 214 
Total assets$291,599 $255,900 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$3,240 $3,349 
Accrued liabilities13,744 9,417 
Deferred revenue, current46,210 51,773 
Operating lease liability, current718 617 
Current portion of long-term debt4,547 4,622 
Total current liabilities68,459 69,778 
Deferred revenue, noncurrent30,803 50,830 
Operating lease liability, noncurrent10,328 11,009 
Long-term debt 3,380 
Total liabilities109,590 134,997 
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value per share; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; zero shares issued and outstanding at September 30, 2022 and December 31, 2021
  
Common stock, $0.001 par value per share; 200,000,000 shares authorized at September 30, 2022 and December 31, 2021; 45,261,618 shares issued and 44,011,151 shares outstanding at September 30, 2022; 31,444,746 shares issued and 30,194,279 shares outstanding at December 31, 2021
44 30 
Treasury stock, at cost; 1,250,467 shares at September 30, 2022 and December 31, 2021
  
Additional paid-in capital388,731 287,345 
Accumulated other comprehensive loss(1,669)(273)
Accumulated deficit(205,097)(166,199)
Total stockholders’ equity182,009 120,903 
Total liabilities and stockholders’ equity$291,599 $255,900 
 
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,
 2022202120222021
 (unaudited)
Collaboration revenue$8,367 $8,516 $27,288 $18,913 
Operating expenses:
Research and development17,589 18,309 51,487 43,380 
General and administrative4,610 3,470 13,579 10,016 
Total operating expenses22,199 21,779 65,066 53,396 
Loss from operations(13,832)(13,263)(37,778)(34,483)
Other income (expense):
Interest expense(105)(203)(389)(638)
Interest income664 52 1,123 166 
Other expense  (72) 
Loss before taxes(13,273)(13,414)(37,116)(34,955)
Income tax expense (80)(1,782)(211)
Net loss$(13,273)$(13,494)$(38,898)$(35,166)
Comprehensive income (loss):
Unrealized loss on investments(307)(17)(1,385)(1)
Unrealized gain (loss) on foreign currency translation7 (13)(11)(37)
Comprehensive loss$(13,573)$(13,524)$(40,294)$(35,204)
Weighted-average shares used to compute basic and diluted net loss per share31,574,358 24,724,442 31,559,886 24,169,993 
Basic and diluted net loss per share$(0.42)$(0.55)$(1.23)$(1.45)
 
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 Income (Loss)
Accumulated DeficitTotal
Stockholders’ Equity
 SharesAmountSharesAmount
Balance, December 31, 202130,194,279 $30 1,250,467 $ $287,345 $(273)$(166,199)$120,903 
Stock-based compensation— — — — 2,289 — — 2,289 
Issuance of common stock under equity incentive plans100,155 — — — 550 — — 550 
Unrealized loss on investments— — — — — (774)— (774)
Unrealized loss on foreign currency translation— — — — — (14)— (14)
Net loss— — — — — — (7,527)(7,527)
Balance, March 31, 202230,294,434 30 1,250,467  290,184 (1,061)(173,726)115,427 
Stock-based compensation— — — — 2,335 — — 2,335 
Issuance of common stock under equity incentive plans41,728 — — — 180 — — 180 
Unrealized loss on investments— — — — — (304)— (304)
Unrealized loss on foreign currency translation— — — — — (4)— (4)
Net loss— — — — — — (18,098)(18,098)
Balance, June 30, 202230,336,162 30 1,250,467  292,699 (1,369)(191,824)99,536 
Stock-based compensation— — — — 2,555 — — 2,555 
Issuance of common stock under equity incentive plans68,989 — — — 12 — — 12 
Unrealized loss on investments— — — — — (307)— (307)
Unrealized gain on foreign currency translation— — — — — 7 — 7 
Issuance of common stock in public offering, net of financing costs 13,606,000 14 — — 93,465 — — 93,479 
Net loss— — — — — — (13,273)(13,273)
Balance, September 30, 202244,011,151 $44 1,250,467 $ $388,731 $(1,669)$(205,097)$182,009 
Balance, December 31, 202023,803,183 $24 50,467 $ $177,947 $53 $(115,866)$62,158 
Stock-based compensation— — — — 1,597 — — 1,597 
Issuance of common stock under equity incentive plans78,955 — — — 202 — — 202 
Unrealized loss on investments— — — — — (5)— (5)
Unrealized loss on foreign currency translation— — — — — (15)— (15)
Net loss— — — — — — (10,643)(10,643)
Balance, March 31, 202123,882,138 24 50,467  179,746 33 (126,509)53,294 
Stock-based compensation— — — — 1,545 — — 1,545 
Issuance of common stock under equity incentive plans32,741 — — — 9 — — 9 
Unrealized gain on investments— — — — — 21 — 21 
Unrealized loss on foreign currency translation— — — — — (9)— (9)
Net loss— — — — — — (11,029)(11,029)
Balance, June 30, 202123,914,879 24 50,467  181,300 45 (137,538)43,831 
Issuance of common stock in Private Placement, net of offering costs6,489,357 6 — — 90,805 — — 90,811 
Exchange of common stock for prefunded warrants(1,200,000)(1)1,200,000 — 1 — —  
Stock-based compensation— — — — 1,638 — — 1,638 
Issuance of common stock under equity incentive plans13,456 — — — 69 — — 69 
Unrealized loss on investments— — — — — (17)— (17)
Unrealized loss on foreign currency translation— — — — — (13)— (13)
Net loss— — — — — — (13,494)(13,494)
Balance, September 30, 202129,217,692 $29 1,250,467 $ $273,813 $15 $(151,032)$122,825 

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,
 20222021
 (unaudited)
Operating activities  
Net loss$(38,898)$(35,166)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense7,179 4,780 
Amortization of premium/discount on investments634 602 
Depreciation expense452 482 
Non-cash interest expense145 213 
Loss on sale of property and equipment68  
Deferred income tax113 (61)
Changes in operating assets and liabilities:
Accounts receivable24,618  
Prepaid expenses and other current assets858 (1,500)
Operating lease, right-of-use asset456 421 
Accounts payable and accrued liabilities3,577 4,133 
Deferred revenue(25,590)26,086 
Operating lease liability(580)(509)
Net cash used in operating activities(26,968)(519)
Investing activities
Purchases of property and equipment(296)(69)
Purchase of investments(120,335)(99,957)
Maturities of investments115,182 51,831 
Net cash used in investing activities(5,449)(48,195)
Financing activities
Proceeds from sale of common stock and warrants, net of offering costs94,004 90,812 
Repayment of debt(3,600)(1,200)
Proceeds from exercise of stock options742 279 
Net cash provided by financing activities91,146 89,891 
Effect of exchange rate on cash and cash equivalents(11)(37)
Net increase in cash and cash equivalents and restricted cash58,718 41,140 
Cash and cash equivalents and restricted cash, beginning of period68,161 35,213 
Cash and cash equivalents and restricted cash, end of period$126,879 $76,353 
Supplemental Information
Cash paid for interest$262 $432 
 
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, 2022 and for the three and nine months ended September 30, 2022 and 2021 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 biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat inflammatory and autoimmune diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins into differentiated, multi-targeted therapeutics. We are seeking to create first- or best-in-class multifunctional immunotherapies via our unique protein engineering technologies to improve outcomes in patients with serious diseases. We were incorporated under the laws of the State of Delaware and are headquartered in Seattle, Washington.
As a result of the COVID-19 pandemic, many companies have experienced disruptions in their operations and in markets served. We have implemented temporary precautionary measures to 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, 2022. The full extent of the future impacts of the continuing COVID-19 pandemic on our operations is uncertain and may adversely impact our business, including our clinical trials.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying 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 condensed consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying condensed consolidated financial statements include those used for revenue recognition, accruals for clinical trial activities and other accruals, the potential outcome of uncertain tax positions that have been recognized in our condensed consolidated financial statements or tax returns, 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 condensed consolidated financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited. The 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 condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the year ended December 31, 2021 included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 17, 2022 (“Annual Report”). The results of our operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
Our 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. 
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.
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Restricted cash represents cash drawn on our line of credit used to establish collateral to support the security deposit on our operating lease 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.
Investments
Our 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 two years. These investments are classified as available-for-sale debt securities, which are recorded at fair value based on quoted prices in active markets. We classify our investments maturing within one year of the reporting date as short-term investments.
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 and 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 our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) using the specific-identification method.
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, 2022 partially reflects 13,606,000 shares of common stock sold in September 2022 through an underwritten public offering. Additionally, we issued 6,489,357 shares of our common stock pursuant to a private placement financing completed in September 2021 and 951,980 shares of our common stock issued in December 2021 pursuant to a private placement financing with Horizon Therapeutics Ireland DAC (“Horizon”). The increased number of shares issued during the periods presented impacts the year-over-year 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,
 20222021
 (unaudited)
Warrants to purchase common stock8,838,694 8,851,116 
Stock options and restricted stock units outstanding7,327,631 5,692,264 
Total16,166,325 14,543,380 
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4. Cash Equivalents and Investments
The amortized cost and fair value of our cash equivalents and investments are as follows (in thousands):
September 30, 2022
(unaudited)
Assets:Amortized CostGross unrealized gainsGross unrealized lossesFair market value
Money market funds$121,916 $ $ $121,916 
U.S. treasury bills53,660  (804)52,856 
Corporate debt securities and commercial paper98,215  (818)97,397 
Total$273,791 $ $(1,622)$272,169 
Classified as:
Cash equivalents$121,916 
Short-term investments122,237 
Long-term investments28,016 
Total$272,169 
 December 31, 2021
Assets:Amortized CostGross unrealized gainsGross unrealized lossesFair market value
Money market funds$50,277 $ $ $50,277 
U.S. treasury bills30,006 1 (100)29,907 
Corporate debt securities and commercial paper117,492 2 (139)117,355 
Total$197,775 $3 $(239)$197,539 
Classified as:
Cash equivalents$50,277 
Short-term investments94,396 
Long-term investments52,866 
Total$197,539 
All investments held as of September 30, 2022 and December 31, 2021 were classified as available-for-sale debt securities and had contractual maturities of less than two years. There were no realized gains and losses on these securities for the periods presented. The aggregate fair value of available-for-sale debt securities in an unrealized loss position as of September 30, 2022 and December 31, 2021 was $123.2 million and $83.0 million, respectively. Investments in a continuous unrealized loss position for more than twelve months related to our U.S. treasury bills, corporate debt securities and commercial paper, which had a carrying value of $26.0 million and gross unrealized losses of $0.5 million as of September 30, 2022 and none as of December 31, 2021. Our available-for-sale debt securities are invested in highly liquid funds with high credit ratings that have a final maturity of two years or less on the date of purchase. Unrealized losses on these investments were primarily due to changes in interest rates. We evaluated our investments that are in an unrealized loss position and believe it is more likely than not that we will hold these investments until maturity and will recover the amortized cost basis of these investments.
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.
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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, 2022 and December 31, 2021, cash of $4.7 million and $17.6 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, 2022
(unaudited)
Assets:Level 1Level 2Level 3Total
Money market funds$121,916 $ $ $121,916 
U.S. treasury bills52,856   52,856 
Corporate debt securities and commercial paper 97,397  97,397 
Total$174,772 $97,397 $ $272,169 
 December 31, 2021
Assets:Level 1Level 2Level 3Total
Money market funds$50,277 $ $ $50,277 
U.S. treasury bills29,907   29,907 
Corporate debt securities and commercial paper 117,355  117,355 
Total$80,184 $117,355 $ $197,539 
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 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, 2022December 31, 2021
(unaudited)
Prepaid research and development$2,723 $3,315 
Prepaid insurance547 454 
Prepaid other430 266 
Deferred financing 352 
Other receivables295 323 
Prepaid expenses and other current assets$3,995 $4,710 
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Accrued liabilities consist of the following (in thousands):
September 30, 2022December 31, 2021
(unaudited)
Research and development services$8,293 $5,536 
Employee compensation3,380 3,084 
Accrued taxes1,211 127 
Legal and professional fees 822 394 
Accrued other38 276 
Accrued liabilities$13,744 $9,417 
7. Long-term Debt
In August 2019, we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with Silicon Valley Bank (“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 consisted 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 prior loan and security agreement with SVB. 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 in July 2020.
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 extended to June 30, 2021 if we received 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 execution of the agreement with AbbVie Ireland Unlimited Company (“AbbVie”), discussed in detail in Note 9. As a result of the interest only extension, the Term Loans are 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, but not less than all, of the Term Loans subject to a prepayment fee equal to $75,000. Additionally, a final payment in the amount of 5.5% of the funded Term Loans is payable to SVB on 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 in our accompanying Condensed Consolidated Balance Sheets.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants. We were in compliance with our covenants as of September 30, 2022. As such, as of September 30, 2022, the classification of the loan is split between current and noncurrent based on the timing of payment obligations. As security for our 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 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 in our accompanying Condensed Consolidated Balance Sheets.
We recorded a total debt discount of $812,000 in connection with the Loan Agreement, which is being amortized to interest expense using the effective interest method over the repayment term of the loan. The unamortized discount included in long-term debt in our accompanying Condensed Consolidated Balance Sheets was $78,000 as of September 30, 2022. Interest expense associated with the amortization of the discount is recorded as non-cash interest expense on our accompanying Condensed Consolidated Statements of Cash Flows.
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Scheduled principal payments on our outstanding debt as of September 30, 2022 under our Loan Agreement, excluding final payment fees, are as follows (in thousands):
Total
Year ending December 31,(unaudited)
2022 (remainder of year)$1,200 
20232,800 
Total future principal payments$4,000 
8. Contingencies
Certain credits received related to our research and development expenditures and previously recorded within other income in our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) are subject to review by foreign taxing authorities. Upon reaching constructive agreement with the Australian Taxation Office during the quarter ended June 30, 2022, we recorded an estimated current foreign income tax provision of $1.3 million for the expected repayments, which is included within accrued liabilities on our accompanying Condensed Consolidated Balance Sheets.
9. 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, (“acazicolcept”). The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to acazicolcept (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 our 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 acazicolcept 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. In 2021, we received $45.0 million of the Alpine Development Milestones. 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 were fully constrained and were not initially included in the transaction price. In June 2021, we re-evaluated and updated the transaction price to include the achieved portion of the Alpine Development Milestones. We will continue to re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur. We expect to recognize the remaining deferred revenue over the remaining life of the Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
The License Option and the AbbVie Milestones were determined not 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
10


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.
Horizon
In December 2021, we entered into an exclusive license and collaboration agreement with Horizon (the “Horizon Agreement”) for the development and commercialization of up to four preclinical candidates generated from our unique discovery platform. The agreement includes licensing of one of our existing preclinical biologic therapeutic programs (the “Existing Program”), as well as a research partnership to jointly develop candidates for up to three additional autoimmune and inflammatory disease programs for other designated biological targets (the “Research Programs”). These candidates include previously undisclosed multi-specific fusion protein-based therapeutic candidates for autoimmune and inflammatory diseases. We will advance candidate molecules to predefined preclinical milestones while Horizon will be responsible for the respective costs and, ultimately, Horizon will assume responsibility for development and commercialization activities and costs.
In connection with the execution of the Horizon Agreement in December 2021, we entered into a stock purchase agreement under which Horizon purchased 951,980 shares of our common stock in a private placement for approximately $15.76 per share and aggregate proceeds of $15.0 million. The shares were sold at a 25% premium to the volume-weighted average share price of our common stock for a specified 30-day period prior to entering into the agreement. The fair value of the common stock issued to Horizon of $11.9 million was recorded to equity, based on the closing price of common stock on the effective date of the Horizon Agreement. For accounting purposes, the $3.1 million difference between the cash proceeds and the fair value of the common stock was treated as additional consideration attributable to the Horizon Agreement.
Under the terms of the agreements, Horizon also paid us a non-refundable upfront payment of $25.0 million in the first quarter of 2022. In addition, we are eligible to receive up to $381.0 million per program, or up to approximately $1.5 billion in total, in future success-based payments related to development, regulatory and commercial milestones. Furthermore, we are eligible to receive tiered royalties from a mid-single digit percentage to a low double-digit percentage on global net sales. In addition to proceeds from the non-refundable upfront payment, we have recognized $446,000 in research and development support for ongoing programs through September 30, 2022.
For revenue recognition purposes, we determined the transaction price at inception was $28.1 million, which consists of the upfront payment of $25.0 million and the $3.1 million premium on the stock purchase, and that the Existing Program and each Research Program are distinct performance obligations. We allocated revenue to each performance obligation based on its relative stand-alone selling price. The future success-based payments related to development and regulatory milestones 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 are not initially included in the transaction price. We will continue to re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur. Any consideration related to commercial milestones and royalties will be recognized when the related sales occur.
Adaptimmune
In May 2019, we entered into a collaboration and licensing agreement with Adaptimmune Therapeutics plc (“Adaptimmune”) to develop next-generation SPEAR T cell products (the “Adaptimmune Agreement”). Under the Adaptimmune Agreement, 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.
Through September 30, 2022, we have recorded a total of $3.0 million in license payments under the terms of the Adaptimmune Agreement consisting of a $2.0 million upfront license payment received in June 2019 and an additional $1.0 million license fee upon Adaptimmune’s selection of an additional research program in June 2022. In addition, we have recorded $1.9 million in research support payments to fund ongoing programs through September 30, 2022. In addition, we are eligible for research support payments, one-time payments and downstream development and commercialization milestones of up to $288.0 million, if respective 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.
For revenue recognition purposes, licensing and research support fees billed under the agreement are being recorded as deferred revenue and recognized to revenue based on employee hours contributed to each performance obligation.
Contract balances and revenue recognition
We report contract assets resulting from unconditional rights to consideration related to upfront payments, and for completed but unpaid research and development services within accounts receivable in our accompanying Condensed Consolidated Balance Sheets. Contract liabilities, representing advance consideration for licensing rights bundled with research
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and development services and other promises for which the underlying performance obligations have not yet been satisfied, are reported as deferred revenue in our accompanying Condensed Consolidated Balance Sheets. Contract liabilities are presented as current and noncurrent based on estimated timing of when the underlying performance obligations will be met. Respective balances are as follows (in thousands):
September 30, 2022December 31, 2021
(unaudited)
Contract Assets$382 $25,000 
Contract Liabilities$77,013 $102,603 
We use cost-based input methods to measure progress towards completion of our performance obligations and to calculate the corresponding revenue to recognize under our contracts with customers each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for each combined performance obligation. Actual costs consist primarily of labor related to internal personnel and third-party contracts. Revenue is recognized based on the level of costs incurred relative to the total estimated costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligations. 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 obligations 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.
Collaboration revenue in our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss), disaggregated by customer, is as follows (in thousands):
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(unaudited)
AbbVie$6,632 $8,516 $17,155 $18,913 
Horizon1,279  9,535  
Adaptimmune456  598  
Total collaboration revenue$8,367 $8,516 $27,288 $18,913 
Revenue recognized during the period that was included in the opening contract liability balance was $26.3 million and $18.9 million for the nine months ended September 30, 2022 and 2021, respectively.
10. Stockholders’ Equity
Securities Offering and Financing Agreement
In September 2022, we sold 13,606,000 shares of our common stock in an underwritten public offering pursuant to our effective shelf registration statement on Form S-3 (File No. 333-256107), resulting in net proceeds of $93.5 million to us, after deducting underwriting discounts, commissions and estimated offering costs. Accrued legal and professional fees of $550,000 incurred in connection with the public offering have been recorded as a reduction to the $94.0 million cash proceeds within additional-paid-in-capital on our accompanying Condensed Consolidated Balance Sheets. An additional 1,903,282 shares of our common stock were sold pursuant to the underwriters’ partial exercise of their over-allotment option, with net proceeds of $13.1 million, after deducting underwriting discounts and commissions, received upon closing on October 4, 2022.
In September 2022, we and Cowen and Company, LLC (“Cowen”) mutually terminated the sales agreement (the “Sales Agreement”) dated July 2, 2021.The Sales Agreement provided that we may sell shares of our common stock from time to time through an “at the market” equity offering for up to $75.0 million in gross cash proceeds, under which Cowen acted as the sales agent. No shares of our common stock were sold under the Sales Agreement. In connection with the termination of the Sales Agreement, we wrote off $488,000 of deferred financing costs to expense, which were previously included within prepaid expenses and other current assets on our accompanying Condensed Consolidated Balance Sheets.
Equity Incentive Plans
On January 1, 2022, in connection with our 2018 Equity Incentive Plan (the “2018 Plan”) annual increase provision, a total of 1,500,000 additional shares were automatically added to the shares authorized under the 2018 Plan.
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During the nine months ended September 30, 2022, we issued stock option grants totaling 1,891,150 shares with a weighted average exercise price of $10.99 per share and 3,750 shares of restricted stock units (“RSUs”) at a grant date fair value of $9.00 per share to eligible employees and board members.
Stock-Based Compensation Expense 
We use the Black-Scholes option pricing model to estimate the fair value of stock options 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 our Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as follows (in thousands): 
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(unaudited)
Research and development$1,558 $936 $4,212 $2,596 
General and administrative997 702 2,967 2,184 
Total stock-based compensation expense$2,555 $1,638 $7,179 $4,780 
11. 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 was 4.82% and 0.61% for the nine months ended September 30, 2022 and 2021, respectively.
The increase in our effective tax rate was primarily due to recognizing current income tax liabilities of $1.3 million during the quarter ended June 30, 2022, which was a result of a cumulative change to our foreign income tax provision for the activities of our wholly owned subsidiary, Alpine Immune Sciences Australia PTY LTD. Following notification of acceptance received during the quarter ended June 30, 2022 of Alpine Immune Sciences Australia PTY LTD’s tax return filed under a revised transfer pricing model for the six-months period ended December 31, 2019, the tax provisions for each open tax year have been recalculated using the same transfer pricing methodology underlying the accepted return. Additionally, consistent with the change to our transfer pricing methodology, we recorded $0.1 million of deferred tax expense resulting from a reduction to our deferred tax assets during the quarter ended June 30, 2022.
The increase in our effective tax rate during the nine months ended September 30, 2022 was also impacted by recognizing current domestic federal income tax liabilities of $0.4 million, which was a result of the mandatory capitalization of research and development expenses under Internal Revenue Code Section 174. As part of the Tax Cuts and Jobs Act of 2017 (TCJA), beginning with the 2022 tax year, expenses that are incurred for research and development in the U.S. will be capitalized and amortized over five years, and expenses that are incurred for research and experimentation outside the U.S. will be capitalized and amortized over 15 years.
The difference between the effective tax rate of 4.82% and the U.S. federal statutory rate of 21% for the nine months ended September 30, 2022, was primarily due to recognizing a full valuation allowance on our domestic deferred tax assets and partial valuation allowance on our foreign deferred tax assets, tax expense resulting from the acceptance of a Voluntary Disclosure Agreement with the Australian Taxation Office, and tax benefits relating to research and development tax credits.
The difference between the effective tax rate of 0.61% and the U.S. federal statutory rate of 21% for the nine months ended September 30, 2021, was primarily due to recognizing a full valuation allowance on our domestic deferred tax assets and partial valuation allowance on our foreign deferred tax assets.
As of September 30, 2022, we determined that, based on an evaluation of our 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 domestic deferred tax assets would be realized and therefore we continued to record a full domestic valuation allowance. As of September 30, 2022, we determined that it was more likely than not that only a portion of our foreign deferred tax assets would be realized and have recorded a partial foreign valuation allowance.
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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, 2021, included in our Annual Report on Form 10-K, or the “Annual Report”, filed with the SEC on March 17, 2022.
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 timelines 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 and general macroeconomic conditions;
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 b