You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this annual report. This discussion and analysis contains forward-looking statements based upon our current beliefs, plans and expectations that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under "Risk Factors" or in other parts of this annual report. 81
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Overview
We are a clinical-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing therapeutics in the disease areas of immunology, inflammation and oncology. We are developing seralutinib for the treatment of pulmonary arterial hypertension, or PAH. InDecember 2022 , we announced positive topline results from the Phase 2 TORREY Study in PAH patients. Upon completion of the 24-week blinded portion of the Phase 2 TORREY Study, patients were able to enroll into an open-label extension trial. We anticipate reporting results from this ongoing open-label extension trial in the middle of 2023.We expect to initiate a Phase 3 program in PAH in the second half of 2023. We are developing GB5121 for the treatment of relapsed / refractory primary CNS lymphoma, or PCNSL, and we commenced enrolling healthy volunteers in a Phase 1 clinical trial in the second quarter of 2021, and we commenced the Phase 1b/2 STAR CNS Study in relapsed / refractory PCNSL and other rare CNS malignancies in the fourth quarter of 2022. Based upon the benefit / risk profile observed to date and a prioritization of resources to support the seralutinib program, we have decided to pause enrollment in the Phase 1b/2 STAR CNS Study. We plan to discuss available data with the study's Data Review Committee to determine next steps. We are developing GB7208 for the treatment of multiple sclerosis. GB7208 is currently undergoing preclinical testing. We also have multiple preclinical programs at various stages of development in the therapeutic areas of immunology, inflammation and oncology. We have assembled a deeply experienced and highly skilled group of industry veterans, scientists, clinicians and key opinion leaders from leading biotechnology and pharmaceutical companies, as well as leading academic centers from around the world. Our employees are a team of highly dedicated, passionate individuals who pride themselves on a culture of respect, humility, transparency, inclusion, dedication, collaboration and fun. Our ultimate goal is to enhance and extend the lives of patients. We were incorporated inOctober 2015 and commenced operations in 2017. To date, we have focused primarily on organizing and staffing our company, business planning, raising capital, identifying, acquiring and in-licensing our product candidates and conducting preclinical studies and clinical trials. We have funded our operations primarily through equity and debt financings. We raised$1,062.1 million fromOctober 2017 throughDecember 31, 2022 through the sale of Series A and B convertible preferred stock financings, issuance of convertible notes, proceeds from our IPO completed inFebruary 2019 , proceeds from our Credit Facility, proceeds from our concurrent underwritten public offerings of 5.00% convertible senior notes due 2027, or the 2027 Notes, and our common stock inMay 2020 and proceeds from a private placement of our common stock inJuly 2022 . As ofDecember 31, 2022 , we had$255.7 million in cash, cash equivalents and marketable securities. We have incurred significant operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future. For the years endedDecember 31, 2022 and 2021, our net loss was$229.4 million and$234.0 million , respectively. As ofDecember 31, 2022 , we had an accumulated deficit of$1,032.2 million . We expect our expenses and operating losses will increase substantially as we conduct our ongoing and planned clinical trials, continue our research and development activities and conduct preclinical studies, and seek regulatory approvals for our product candidates, as well as hire additional personnel, protect our intellectual property and incur additional costs associated with being a public company. In addition, as our product candidates progress through development and toward commercialization, we will need to make milestone payments to the licensors and other third parties from whom we have in-licensed or acquired our product candidates, including seralutinib. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending in particular on the timing of our clinical trials and preclinical studies and our expenditures on other research and development activities. We do not expect to generate any revenue from product sales unless and until we successfully complete development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years. If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Accordingly, until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate our product candidate development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
COVID-19 Pandemic
As we continue to actively advance our programs, we are in close contact with our principal investigators and clinical sites and continue to assess any impacts of the ongoing COVID-19 global pandemic on our drug manufacturing, nonclinical activities, clinical trials, expected timelines and costs on an ongoing basis. In addition, while we are continuing the clinical trials
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we have underway in sites across the globe, COVID-19 precautions and related staffing shortages at sites and key vendors have delayed, such as the temporary closure of enrollment in 2020 at certain sites in our ongoing Phase 2 trial for seralutinib in PAH, and may continue to delay completion of our current and future trials and may directly or indirectly impact the timeline for data readouts, initiation of, as well as monitoring, data collection and analysis and other related activities for some of our current and future clinical trials. In light of the COVID-19 pandemic, and consistent with theFDA's updated industry guidance for conducting clinical trials, clinical trials may be deprioritized in favor of treating patients who have contracted the virus or to prevent the spread of the virus. The direct and indirect impacts of COVID-19 on our business could alter our forecasted timelines, which could have a material adverse effect on our business, results of operations and financial condition. We will continue to evaluate the impact of the COVID-19 pandemic on our business.
Components of Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products for the foreseeable future.
Operating expenses
Research and development
Research and development expenses relate primarily to preclinical and clinical development of our product candidates and discovery efforts, as well as our discontinued clinical product candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include or could include:
•salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals involved in research and development efforts;
•external research and development expenses incurred under agreements with contract research organizations, or CROs, investigative sites and consultants to conduct our clinical trials and preclinical and non-clinical studies;
•laboratory supplies;
•costs related to manufacturing our product candidates for clinical trials and preclinical studies, including fees paid to third-party manufacturers;
•costs related to compliance with regulatory requirements; and
•facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance, equipment and other supplies. Our direct research and development expenses consist principally of external costs, such as fees paid to CROs, investigative sites and consultants in connection with our clinical trials, preclinical and non-clinical studies, and costs related to manufacturing clinical trial materials. We deploy our personnel and facility related resources across all of our research and development activities. We track external costs and personnel expense on a program-by-program basis and allocate common expenses, such as facility related resources, to each program based on the personnel resources allocated to such program. Stock-based compensation and personnel and common expenses not attributable to a specific program are considered unallocated research and development expenses. We expect our research and development expenses for the foreseeable future to remain relatively flat as we continue the development of our product candidates and conduct discovery and research activities for our preclinical programs. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our product candidates due to the inherently unpredictable nature of preclinical and clinical development. Clinical and preclinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates to pursue and how much funding to direct to each product candidate on an ongoing basis in response to the results of ongoing and future 83
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preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate's commercial potential. We will need to raise substantial additional capital in the future.
Our clinical development costs may vary significantly based on factors such as:
•per patient trial costs;
•the number of trials required for approval;
•the number of sites included in the trials;
•the countries in which the trials are conducted;
•the length of time required to enroll eligible patients;
•the number of patients that participate in the trials;
•the number of doses that patients receive;
•the drop-out or discontinuation rates of patients;
•potential additional safety monitoring requested by regulatory agencies;
•the duration of patient participation in the trials and follow-up;
•the cost and timing of manufacturing our product candidates;
•the costs incurred as a result of the COVID-19 pandemic, including clinical trial delays;
•the phase of development of our product candidates; and
•the efficacy and safety profile of our product candidates.
In process research and development
In process research and development, or IPR&D, expenses include IPR&D acquired as part of an asset acquisition or in-license for which there is no alternative future use, are expensed as incurred. IPR&D expenses consist of our upfront and milestone payments made toPulmokine, Inc. , in connection with the in-license of seralutinib and upfront and milestone payments made in connection with the acquisition of certain preclinical programs.
General and administrative
General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation, for personnel in executive, finance and other administrative functions. Other significant costs include facility-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs. We expect our general and administrative expenses for the foreseeable future to remain relatively flat to support our current infrastructure and continued costs of operating as a public company. These expenses will likely include audit, legal, regulatory, and tax-related services associated with maintaining compliance with exchange listing andSEC requirements, director and officer insurance premiums, and investor relations costs associated with operating as a public company. Other income (expense), net Other income (expense), net consists of (1) interest income on our cash, cash equivalents and marketable securities, (2) sublease income, (3) interest expense related to our Credit Facility and our 2027 Notes, and (4) other miscellaneous income (expense).
Critical Accounting Policies and Estimates
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Our management's discussion and analysis of our financial condition and results of operations are based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States , or GAAP. The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions (See Note 2 to our consolidated financial statements).
Accrued expenses
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balance sheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise notified of the actual cost. We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. We periodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in our accrued research and development expenses include the costs incurred for services performed by our vendors in connection with research and development activities for which we have not yet been invoiced. We base our expenses related to research and development activities on our estimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the research and development expense. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or prepaid expense accordingly. Advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when the payment is made. Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Results of Operations for the Years Ended
The following table sets forth our selected statements of operations data for
the years ended
Years Ended December 31, 2022 vs 2021 2022 2021 Change (in thousands) Operating expenses: Research and development$ 170,919 $ 170,267 $ 652 In process research and development 65 75 (10) General and administrative 47,609 45,782 1,827 Total operating expenses 218,593 216,124 2,469 Loss from operations (218,593) (216,124) (2,469) Other income (expense) Interest income 1,583 761 822 Interest expense (13,880) (19,440) 5,560 Other income 1,512 799 713 Total other expense, net (10,785) (17,880) 7,095 Net loss$ (229,378) $ (234,004) $ 4,626 Operating Expenses 85
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Research and development
Research and development expenses were$170.9 million for the year endedDecember 31, 2022 , compared to$170.3 million for the year endedDecember 31, 2021 , for an increase of$0.7 million , which was primarily attributable to an increase of$23.1 million of costs associated with preclinical studies and clinical trials for GB5121 and an increase of$16.5 million of costs associated with preclinical studies and clinical trials for seralutinib; offset by a decrease of$20.9 million of costs associated with preclinical studies and clinical trials for terminated GB004 program, a decrease of$10.3 million of costs associated with preclinical studies for other programs, and a decrease of$7.7 million of costs associated with preclinical studies and clinical trials for other terminated programs.
The following table shows our research and development expenses by program for
the years ended
Years Ended December 31, 2022 2021 (in thousands) Seralutinib 62,983 46,490 GB5121 50,425 27,365 GB004 21,449 42,338 Other programs 33,378 43,692 Other terminated programs 2,684 10,382 Total research and development$ 170,919 $ 170,267
In process research and development
There were no significant IPR&D expenses for the years ended
General and administrative General and administrative expenses were$47.6 million for the year endedDecember 31, 2022 , compared to$45.8 million for the year endedDecember 31, 2021 , for an increase of$1.8 million , which was primarily attributable to a$5.1 million increase in stock-based compensation costs; offset by a decrease of$2.4 million of accrued costs associated with a settlement of outstanding securities litigation in 2021 and a$1.0 million decrease in insurance costs.
Other expense, net
Other expense, net was$10.8 million for the year endedDecember 31, 2022 , compared to other expense, net of$17.9 million for the year endedDecember 31, 2021 , for a decrease of$7.1 million , which was primarily attributable to a$5.6 million decrease in interest expense, an increase of$2.2 million of other income related to investment accretion and amortization and a$0.8 million increase in interest income earned on our cash, cash equivalents and marketable securities during the period; offset by a$1.1 million decrease in sublease income and a decrease of$0.5 million of other income.
Results of Operations for the Years Ended
The discussion of our financial condition and results of operations for the year endedDecember 31, 2020 and the comparison of 2021 and 2020 results included in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year endedDecember 31, 2021 is incorporated by reference into this MD&A.
Liquidity and Capital Resources
We have incurred substantial operating losses since our inception and expect to continue to incur significant operating losses for the foreseeable future and may never become profitable. As ofDecember 31, 2022 and 2021, we had an accumulated deficit of$1,032.2 million and$811.5 million , respectively. Our primary use of cash is to fund operating expenses, which consist primarily of research and development expenditures, and to a lesser extent, general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We may also use cash on hand to repurchase 2027 Notes through open-market transactions, including through a Rule 10b5-1 trading plan to facilitate open-market repurchases, or otherwise, from time to time. 86
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Under our license agreement withPulmokine , as well as our other license and acquisition agreements, we have payment obligations that are contingent upon future events such as our achievement of specified development, regulatory and commercial milestones and are required to make royalty payments in connection with the sale of products developed under those agreements. As ofDecember 31, 2022 , we were unable to estimate the timing or likelihood of achieving the milestones or making future product sales. Other contractual obligations include future payments under our Credit Facility, 2027 Notes and existing operating leases. From our inception through the year endedDecember 31, 2022 , our operations have been financed primarily by gross proceeds of$1,062.1 million from the sale of our convertible preferred stock, issuance of convertible notes, proceeds from our IPO, proceeds from our Credit Facility, proceeds from our concurrent underwritten public offerings of 2027 Notes and common stock, and proceeds from our private placement of common stock. As ofDecember 31, 2022 , we had cash, cash equivalents and marketable securities of$255.7 million . Cash in excess of immediate requirements is invested in accordance with our investment policy, primarily with a view to capital preservation and liquidity. OnMay 2, 2019 , we entered into a credit, guaranty and security agreement, as amended onSeptember 18, 2019 andJuly 2, 2020 , pursuant to which the lenders party thereto agreed to make term loans available to us for working capital and general business purposes, in a principal amount of up to$150.0 million in term loan commitments, including a$30.0 million term loan which was funded at the closing date, with the ability to access the remaining$120.0 million in two additional tranches (each$60.0 million ), subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions, or the Credit Facility. As ofDecember 31, 2022 , no tranches under the Credit Facility were available to be drawn. OnApril 10, 2020 , we filed a registration statement on Form S-3, or the 2020 Shelf Registration Statement, covering the offering from time to time of common stock, preferred stock, debt securities, warrants and units, which registration statement became automatically effective onApril 10, 2020 . OnMay 21, 2020 , we issued$200.0 million aggregate principal amount 5.00% convertible senior notes due 2027 in a registered public offering. The interest rate on the 2027 Notes is fixed at 5.00% per annum. Interest is payable semi-annually in arrears onJune 1 andDecember 1 of each year commencing onDecember 1, 2020 . The total net proceeds from the 2027 Notes, after deducting the underwriting discounts and commissions and other offering costs, were approximately$193.6 million . Concurrent with the registered underwritten public offering of the 2027 Notes, we completed an underwritten public offering of 9,433,963 shares of our common stock. We received net proceeds of$117.1 million , after deducting underwriting discounts and commissions and other offering costs. Our concurrent offerings of 2027 Notes and common stock were registered pursuant to the 2020 Shelf Registration Statement. OnMarch 3, 2022 , we filed a registration statement on Form S-3 covering the offering from time to time of common stock, preferred stock, debt securities, warrants and units, which registration statement became automatically effective onMarch 3, 2022 . OnJuly 15, 2022 , we completed a private placement of 16,649,365 shares of our common stock. The aggregate gross proceeds for the private placement were approximately$120.1 million , before deducting offering expenses. OnAugust 9, 2022 , we filed a registration statement on Form S-3 registering the resale of the shares of common stock issued in the private placement, which registration statement became automatically effective onAugust 9, 2022 . Additional information about our long-term borrowings is presented in Note 5 "Indebtedness" to the Notes to Consolidated Financial Statements included in Part II, Item 8, of this Form 10-K, herein by this reference. The following table shows a summary of our cash flows for each of the years shown below: Years Ended December 31, 2022 2021 2020 (in thousands) Net cash used in operating activities$ (187,032) $ (188,890) $ (176,360) Net cash provided by (used in) investing activities (1,035) (117,427) 215,342 Net cash provided by financing activities 117,090 3,329 312,540 Effect of exchange rate changes on cash, cash equivalents and restricted cash (517) (165) 9 Net (decrease) increase in cash, cash equivalents and restricted cash$ (71,494) $ (303,153) $ 351,531 87
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Operating activities
During the year endedDecember 31, 2022 , operating activities used approximately$187.0 million of cash, primarily resulting from a net loss of$229.4 million and payments against operating lease liabilities of$2.7 million , partially reduced by stock-based compensation expense of$42.6 million and amortization of operating lease right-of-use assets of$2.6 million . During the year endedDecember 31, 2021 , operating activities used approximately$188.9 million of cash, primarily resulting from a net loss of$234.0 million , partially reduced by stock-based compensation expense of$32.0 million , amortization of long-term debt discount and issuance costs of$6.7 million and accrued research and development expenses of$5.8 million . During the year endedDecember 31, 2020 , operating activities used approximately$176.4 million of cash, primarily resulting from a net loss of$243.4 million , partially reduced by stock-based compensation expense of$38.7 million , IPR&D expenses of$23.4 million and amortization of long-term debt discount and issuance costs of$3.9 million .
Investing activities
During the year endedDecember 31, 2022 , investing activities used approximately$1.0 million of cash, primarily resulting from the purchase of marketable securities of$238.0 million and the purchase of property and equipment of$0.4 million , partially offset by maturities of marketable securities of$237.5 million .
During the year ended
During the year endedDecember 31, 2020 , investing activities provided approximately$215.3 million of cash, primarily resulting from the sales and maturities of marketable securities of$349.2 million , partially offset by the purchase of marketable securities of$109.0 million and upfront and milestone payments of$23.4 million made to third parties in connection with the in-license or acquisition of our clinical and preclinical programs.
Financing activities
During the year endedDecember 31, 2022 , financing activities provided$117.1 million of cash, resulting from the proceeds from the private offering of$119.9 million , the proceeds from the exercise of stock options of$1.7 million , and from proceeds from the purchase of shares pursuant to our 2019 Employee Stock Purchase Plan, or ESPP, of$1.2 million , partially offset by the principal repayments of long-term debt of$5.8 million . During the year endedDecember 31, 2021 , financing activities provided$3.3 million of cash, resulting from the proceeds from the exercise of stock options of$2.0 million , and from the purchase of shares pursuant to the ESPP of$1.3 million . During the year endedDecember 31, 2020 , financing activities provided$312.5 million of cash, primarily resulting from the concurrent registered underwritten public offerings of 2027 Notes and common stock for net proceeds of$193.6 million and$117.1 million , respectively.
Funding requirements
Based on our current operating plan, we believe that our existing cash, cash equivalents and marketable securities, and access to our Credit Facility, will be sufficient to fund our operations into the second quarter of 2024. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the process of testing product candidates in clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Our future capital requirements will depend on many factors, including:
•the type, number, scope, progress, expansions, results, costs and timing of, our preclinical studies and clinical trials of our product candidates which we are pursuing or may choose to pursue in the future; 88
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•the costs and timing of manufacturing for our product candidates;
•the costs, timing and outcome of regulatory review of our product candidates;
•the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;
•our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;
•the costs associated with hiring additional personnel and consultants as our preclinical and clinical activities increase;
•the timing and amount of the milestone or other payments we must make to the licensors and other third parties from whom we have in-licensed our acquired our product candidates;
•the costs and timing of establishing or securing sales and marketing capabilities if any product candidate is approved;
•our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payors and adequate market share and revenue for any approved products;
•the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements;
•costs associated with any products or technologies that we may in-license or acquire; and
•any delays and cost increases that result from the COVID-19 pandemic or other epidemic diseases.
Until such time as we can generate substantial product revenues to support our cost structure, if ever, we expect to finance our cash needs through equity offerings, our Credit Facility, debt financings or other capital sources, including potentially collaborations, licenses and other similar arrangements.
However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise funds through collaborations, licenses and other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional capital when needed, we could be forced to delay, limit, reduce or terminate our product candidate development or future commercialization efforts or grant rights to develop and market our product candidates even if we would otherwise prefer to develop and market such product candidates ourselves.
Recent Accounting Pronouncements
See Note 2 to our consolidated financial statements included elsewhere in this annual report.
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