item 14 principal accounting fees services information required item 14 included proxy statement caption “ratification selection independent registered public accounting firm” incorporated herein reference part iv item 15 item 14 principal accounting fees services information required item 14 included proxy statement caption “ratification selection independent registered public accounting firm” incorporated herein reference part iv item 15 item 14 principal accounting fees services information required item 14 included proxy statement caption “ratification selection independent registered public accounting firm” incorporated herein reference part iv item 15 item 7 management’s discussion analysis financial condition results operations following discussion analysis financial condition results operations read conjunction financial statements related notes related management’s discussion analysis financial condition results operations included annual report form 10k overview clinicalstage biopharmaceutical company focused development commercialization novel therapies cardiopulmonary diseases initial focus cardiopulmonary indications lead product candidate pb2452 novel reversal agent antiplatelet drug ticagrelor developing reversal antiplatelet effects ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure based feedback fda intend seek approval pb2452 united states accelerated approval process completed phase 2a clinical trial pb2452 observed immediate complete reversal ticagrelor’s antiplatelet activity within five minutes following initiation infusion sustained reversal 20 hours developing pb2452 sfj pursuant sfj agreement sfj agreement sfj agreed pay us 1200 million support clinical development pb2452 term sfj agreement primary responsibility clinical development regulatory activities pb2452 united states european union sfj primary responsibility clinical development regulatory activities pb2452 china japan provide clinical trials operations support european union fda granted breakthrough therapy designation pb2452 april 2019 ema granted pb2452 prime designation february 2020 based feedback fda intend submit bla potential accelerated approval based interim analysis first approximately 100 patients treated phase 3 trial approximately 50 patients uncontrolled major lifethreatening bleeding approximately 50 patients requiring urgent surgery invasive procedure recently commenced pivotal phase 3 clinical trial based 18month estimated enrollment timeline first 100 patients phase 3 trial targeting submit bla pb2452 second half 2022 support full approval patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure fda recommended enrollment 200 total patients phase 3 trial submit bla data first 100 patients intend complete phase 3 trial establish postapproval registry accordance fda requirements chmp ema also generally agreed proposed development plan pb2452 second product candidate pb1046 onceweekly fusion protein currently phase 2b clinical trial treatment pah pb1046 utilizes elp technology also serves engine preclinical pipeline temporarily paused enrollment new patients trial precaution minimize potential exposure patient population high risk serious illness covid19 however also informed investigators may continue dosing pb1046 performing assessments current trial participants deem appropriate activities permitted respective institutions additionally continue identify new trial sites future initiation although targeting report results trial fourth quarter 2020 believe covid19 outbreak temporarily prevent us able initiate new trial sites enroll new patients likely delaying ability report results trial 2021 also developing preclinical product candidate pb6440 treatmentresistant hypertension retain worldwide commercial rights product candidates limited operating history since inception 2002 operations focused developing clinical preclinical product candidates proprietary elp technology organizing staffing company business planning raising capital establishing intellectual property portfolio conducting clinical trials preclinical studies product candidates approved sale generated revenue product sales since inception financed operations primarily sale equity debt securities term loans svb westriver 2018 received 607 million aggregate net proceeds ipo sale series convertible preferred stock 40 million borrowings term loan svb april 2019 received 463 million net proceeds underwritten public offering common stock may 2019 received additional 25 million term loan svb westriver 2019 loan october 2019 received additional 50 million 2019 loan january 2020 entered sfj agreement pursuant sfj agreed provide us 1200 million funding support clinical development pb2452 march 2020 sfj paid us initial 100 million sfj pay us additional 800 million cost reimbursements followed six equal quarterly payments beginning quarter ending september 30 2020 quarter ending december 31 2021 additional 300 million upon achievement specified clinical development milestones respect ongoing phase 3 clinical trial pb2452 since inception incurred significant operating losses net loss 392 million year ended december 31 2019 december 31 2019 accumulated deficit 1622 million expect continue incur significant expenses operating losses foreseeable future anticipate expenses increase substantially connection ongoing activities • continue ongoing clinical trials pb2452 pb1046 well initiate complete additional clinical trials needed • seek expand geographical reach sfj agreement corresponding clinical development support fees incur • pursue regulatory approvals pb2452 reversal agent antiplatelet drug ticagrelor pb1046 treatment pah • develop pb6440 treatmentresistant hypertension • seek discover develop additional clinical preclinical product candidates • scale clinical regulatory capabilities • establish commercialization infrastructure scale external manufacturing distribution capabilities commercialize product candidates may obtain regulatory approval including pb2452 pb1046 • adapt regulatory compliance efforts incorporate requirements applicable marketed products • maintain expand protect intellectual property portfolio • hire additional clinical manufacturing scientific personnel • add operational financial management information systems personnel including personnel support product development planned future commercialization efforts • incur additional legal accounting expenses operating public company recent developments codevelopment agreement sfj january 2020 entered sfj agreement sfj pursuant sfj agreed pay us 1200 million support clinical development pb2452 march 2020 sfj paid us initial 100 million sfj fund 800 million development expenses end 2021 additional 300 million based us meeting specific predefined clinical milestones pb2452 term sfj agreement primary responsibility clinical development regulatory activities pb2452 united states european union sfj primary responsibility clinical development regulatory activities pb2452 china japan provide clinical trials operations support european union refer item 1 business subheading business license codevelopment agreements codevelopment agreement pb2452 sfj pharmaceuticals annual report pb6440 asset purchase agreement january 2020 entered asset purchase agreement viamet selenity acquire assets intellectual property rights related pb6440 novel oral aldosterone synthase inhibitor plan develop treatmentresistant hypertension refer item 1 business subheading business license codevelopment agreements viamet asset purchase agreement annual report commencement pivotal phase 3 clinical trial pb2452 recently commenced pivotal phase 3 clinical trial based feedback fda intend submit bla potential accelerated approval based interim analysis first approximately 100 patients treated phase 3 trial approximately 50 patients uncontrolled major lifethreatening bleeding approximately 50 patients requiring urgent surgery invasive procedure submit bla data first 100 patients intend complete phase 3 trial establish postapproval registry accordance fda requirements financial overview components operating results revenue grant revenue grant revenue derived government grants support efforts specific research projects recognize grant revenue reasonable assurance compliance conditions grant reasonable assurance grant revenue received revenue collaborative agreement revenue collaborative agreement derived agreement collaboration partner immunoforge co ltd immunoforge granted immunoforge license develop certain compound indications exchange upfront license payment eventbased payments subject immunoforge’s achievement specified development regulatory salesbased milestones addition entitled royalties products collaboration commercialized recognize revenue upfront amounts license transferred immunoforge development milestones fees recognized revenue probable amount result significant reversal revenue future salesbased milestones royalties cannot recognized underlying sales occur research development expense research development expense consists expenses incurred connection discovery development product candidates expense research development costs incurred expenses include • expenses incurred agreements contract research organizations cros well investigative sites consultants conduct clinical trials preclinical studies • manufacturing supply scaleup expenses cost acquiring manufacturing preclinical clinical trial supply potential commercial supply including manufacturing validation batches • clinical development support fees incur related sfj agreement • outsourced professional scientific development services • employeerelated expenses include salaries benefits stockbased compensation • expenses relating regulatory activities • laboratory materials supplies used support research activities research development activities central business model product candidates later stages clinical development generally higher development costs earlier stages clinical development primarily due increased size duration laterstage clinical trials expect research development expense increase significantly next several years increase personnel costs including stockbased compensation conduct laterstage clinical trials pb2452 pb1046 develop pb6440 conduct preclinical studies clinical trials prepare regulatory filings receive regulatory approval one product candidates prepare commercialization efforts successful development product candidates highly uncertain time cannot reasonably estimate know nature timing costs efforts necessary complete remainder development product candidates ever material net cash inflows may commence candidates uncertainty due numerous risks uncertainties associated duration cost clinical trials vary significantly life project result many factors including • delays regulators institutional review boards authorizing us investigators commence clinical trials ability negotiate agreements clinical trial sites contract research organizations • ability secure adequate supply product candidates trials • number clinical sites included trials • length time required enroll suitable patients • number patients ultimately participate trials • number doses patients receive • side effects associated product candidates • duration patient followup • results clinical trials expenditures subject additional uncertainties including terms timing regulatory approvals expense filing prosecuting defending enforcing patent claims intellectual property rights may never succeed achieving regulatory approval product candidates may obtain unexpected results clinical trials may elect discontinue delay modify clinical trials product candidates change outcome variables respect development product candidate could mean significant change costs timing associated development product candidate example fda regulatory authorities require us conduct clinical trials beyond currently anticipate experience significant delays enrollment clinical trials could required expend significant additional financial resources time completion clinical development product commercialization take several years millions dollars development costs general administrative expense general administrative expense consists principally salaries related costs personnel executive administrative functions including stockbased compensation travel expenses recruiting expenses general administrative expense includes professional fees legal accounting taxrelated services insurance costs anticipate general administrative expense increase continue operate public reporting company continue develop pb2452 pb1046 pb6440 future product candidates believe increases likely include increased costs director officer liability insurance costs related hiring additional personnel increased fees outside consultants lawyers accountants also expect incur increased costs comply corporate governance internal controls investor relations disclosure similar requirements applicable public reporting companies interest expense interest expense consists interest expense convertible promissory notes term loan following conversion convertible promissory notes shares redeemable convertible series preferred stock august 2018 longer recognize interest convertible promissory notes recognize interest term loan svb westriver change fair value warrant derivative liabilities change fair value warrant derivative liabilities reflects revaluation reporting date redeemable convertible preferred stock warrants conversion option convertible promissory notes respectively following conversion convertible promissory notes preferred stock august 2018 conversion outstanding shares preferred stock common stock corresponding conversion outstanding preferred stock warrants common stock warrants connection closing ipo october 2018 longer remeasure warrant liability derivative liability periods following closing ipo license codevelopment agreements medimmune limited license agreement november 2017 entered medimmune license medimmune pursuant medimmune license medimmune granted us exclusive worldwide license certain patent rights owned controlled medimmune develop commercialize medimmune licensed products treatment palliation diagnosis prevention human disorder condition medimmune license paid medimmune upfront fee 01 million also required pay medimmune quarterly fees relating technical services provided medimmune 180 million clinical regulatory milestone fees 10 million incurred second quarter 2019 500 million commercial milestone fees midsingle digit lowteen royalty percentages net sales medimmune licensed products subject reduction specified circumstances addition medimmune license offers option thirdparty product storage costs inception medimmune license december 31 2019 incurred costs 16 million medimmune license codevelopment agreement sfj pharmaceuticals january 2020 entered sfj agreement pursuant sfj provide us funding support global development pb2452 reversal agent antiplatelet drug ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure sfj agreement sfj agreed pay us 1200 million support clinical development pb2452 sfj paid us initial 100 million march 2020 obtained consent silicon valley bank svb grant sfj security interest assets owned controlled us necessary manufacture use sale pb2452 sfj pay us additional 800 million cost reimbursements followed six equal quarterly payments beginning quarter ending september 30 2020 quarter ending december 31 2021 additional 300 million upon achievement specified milestones respect clinical development pb2452 term sfj agreement primary responsibility clinical development regulatory activities pb2452 united states european union sfj primary responsibility clinical development regulatory activities pb2452 china japan provide clinical trials operational support european union terms sfj agreement following fda approval bla pb2452 pay sfj initial payment 50 million additional 3250 million aggregate seven additional annual payments ema national regulatory authority certain european countries approve bla pb2452 pay sfj initial payment 50 million additional 2050 million aggregate seven additional annual payments either pmda japan nmpa china approves marketing application pb2452 pay sfj initial payment 10 million additional 590 million aggregate eight additional annual payments within 120 days following approval bla pb2452 one jurisdictions described right option make onetime cash payment sfj buy portion future unpaid approval payments jurisdiction ie us approval payments eu approval payments japanchina approval payments applicable price reflecting midsingledigit discount rate within 120 days following change control company successor right option make onetime cash payment sfj buy portion future unpaid approval payments jurisdictions bla pb2452 approved prior change control price reflecting midsingledigit discount rate provided sfj previously assigned right receive payments third party event successor shall right following termination sfj agreement continue develop pb2452 obtain bla approval united states european union japan china make applicable approval payments jurisdiction sfj agreement terminated less payments made upon termination except terminate sfj agreement sfj’s failure make payment us due sfj terminates sfj agreement due material adverse event defined sfj agreement obligation make approval payments would reduced 50 duke license agreement october 2006 entered duke license duke recently amended april 2019 pursuant duke license duke granted us exclusive worldwide license certain patent rights owned controlled duke nonexclusive worldwide license certain knowhow duke develop commercialize duke licensed products relating elps duke license paid duke upfront fee 37000 additional fees connection amendments duke license 02 million additional licensing fees 02 million consideration license rights granted us initially issued duke 24493 shares common stock reached certain stipulated equity milestone reached october 2007 obligated issue additional shares common stock duke time aggregate ownership represented 75 issued outstanding capital stock also required pay duke 22 million regulatory clinical milestone fees 04 million commercial milestone fees low singledigit royalty percentages net sales duke licensed products minimum aggregate royalty payments 02 million payable following achievement certain commercial milestones greater 03 million low doubledigit percentage fees receive third party consideration forming strategic alliance respect certain patent rights covered duke license also must pay duke first 10 million nonroyalty payments receive sublicensee thereafter low doubledigit percentage additional nonroyalty payments receive subject certain conditions inception duke license december 31 2019 incurred royalty costs 03 million duke license also required apply prosecute maintain united states foreign patent rights duke license wacker license agreement april 2019 entered license agreement wacker license agreement wacker biotech gmbh wacker pursuant wacker granted us exclusive license certain wacker’s intellectual property rights use wacker’s proprietary e coli strain manufacture pb2452 worldwide outside specified asian countries commercialize pb2452 approved manufactured us behalf using wacker’s proprietary e coli strain throughout world right grant sublicenses license subject certain conditions specified wacker license agreement terms agreement required pay fixed nominal perunit royalty subject adjustment annual license fee fixed euro amount low mid six digits agreement force indefinite period time upon expiration royalty obligations license considered fully paid convert nonexclusive license either party may terminate wacker license agreement breach cured within specified number days incurred 02 million costs wacker license agreement year ended december 31 2019 viamet asset purchase agreement january 2020 entered pb6440 agreement viamet pharmaceuticals holdings llc whollyowned subsidiary selenity therapeutics bermuda ltd sellers pursuant acquired assets intellectual property rights related sellers’ proprietary cyp11b2 inhibitor compound formerly known se6440 vt6440 certain cyp11b2 inhibitor compounds covered patent rights acquired us pb6440 agreement together compounds terms pb6440 agreement paid sellers upfront fee 01 million upon closing transaction required pay sellers 51 million upon achievement certain development intellectual property milestones respect certain product candidates contain compound 1425 million upon achievement certain commercial milestones respect approved product contains compound low midsingle digit royalty percentages net sales approved products contain compound subject customary reductions offsets specified circumstances incurred 01 million costs pb6440 agreement year ended december 31 2019 results operations comparison years ended december 31 2019 2018 following table summarizes results operations years ended december 31 2019 2018 thousands revenue grant revenue 18 million year ended december 31 2019 compared 07 million year ended december 31 2018 increase due higher costs qualified grant reimbursement sbir grants development pb1046 year ended december 31 2019 began incurring costs qualified grant reimbursement august 2018 continued incur costs throughout 2019 revenue collaborative agreement 06 million year ended december 31 2019 compared zero year ended december 31 2018 increase 06 million related revenue agreement immunoforge entered 2019 research development expense research development expense 309 million year ended december 31 2019 compared 155 million year ended december 31 2018 increase 155 million primarily attributable increased clinical drug production activities related pb2452 increased personnel costs due additional headcount increased costs associated general research efforts increased clinical activity related pb1046 following table summarizes research development expense functional area years ended december 31 2019 2018 thousands following table summarizes research development expense product candidate years ended december 31 2019 2018 thousands general administrative expense general administrative expense 112 million year ended december 31 2019 compared 49 million year ended december 31 2018 increase 63 million primarily attributable increase professional services related consulting services legal services increase personnel expense due additional headcount additional expenses associated public company interest income interest income 16 million year ended december 31 2019 compared 04 million year ended december 31 2018 increase 12 million attributable higher balances cash equivalents 2019 interest expense interest expense 11 million year ended december 31 2019 compared 39 million year ended december 31 2018 interest expense year ended december 31 2019 attributable interest 2019 loan interest expense year ended december 31 2018 primarily attributable interest borrowings pursuant convertible promissory notes outstanding 2018 notes converted shares redeemable convertible series stock august 2018 change fair value derivative liability change fair value derivative liability resulted expense year ended december 31 2019 compared 07 million expense year ended december 31 2018 conversion option related convertible promissory notes subject remeasurement reporting period changes fair value recorded statement operations convertible promissory notes converted redeemable convertible preferred stock august 2018 upon sale series redeemable convertible preferred stock accordingly longer remeasure fair value derivative liability liquidity capital resources since inception generated revenue product sales incurred net losses negative cash flows operations financed operations since inception primarily public offerings common stock private placements convertible debt convertible preferred stock borrowings term loans future periods expect receive 1200 million sfj agreement october 2017 entered loan security agreement svb loan svb provided could borrow 75 million august 2018 received 177 million net proceeds sale series redeemable convertible preferred stock concurrent financing outstanding convertible promissory notes accrued interest thereon converted 21 million shares series redeemable convertible preferred stock october 2018 completed ipo common stock resulted issuance sale 99 million shares common stock public offering price 500 per share generating net proceeds approximately 430 million deducting underwriting discounts commissions offering costs upon closing ipo outstanding shares redeemable convertible preferred stock converted aggregate 132 million shares common stock march 2019 entered 2019 loan svb westriver pursuant could borrow 150 million issuable three separate tranches december 31 2019 drawn three tranches 2019 loan amounts 75 million 25 million 50 million april 2019 completed underwritten public offering common stock resulted issuance sale aggregate 4124475 shares common stock public offering price 1200 per share generating net proceeds 463 million deducting underwriting discounts commissions offering costs december 2019 filed shelf registration statement form s3 2019 shelf registration statement became effective january 2020 2019 shelf registration statement permits offering issuance sale us maximum aggregate offering price 2000 million common stock preferred stock debt securities warrants one offerings combination ii offering issuance sale us maximum aggregate offering price 600 million common stock may issued sold “atthemarket” sales agreement atm citigroup global markets inc william blair company llc securities sold 2019 shelf registration statement january 2020 entered sfj agreement pursuant sfj agreed provide funding support development pb2452 reversal agent antiplatelet drug ticagrelor pursuant sfj agreement sfj agreed pay us 1200 million including initial payment 100 million paid march 2020 additional 800 million cost reimbursements followed six equal quarterly payments beginning quarter ending september 30 2020 quarter ending december 31 2021 additional 300 million upon achievement specific clinical development milestones respect ongoing phase 3 clinical trial pb2452 december 31 2019 cash equivalents 740 million following table summarizes cash flows periods set forth thousands operating activities net cash used operating activities 396 million year ended december 31 2019 use cash primarily related net loss 392 million adjusted noncash charges primarily related 14 million stockbased compensation expense 05 million noncash interest expense 24 million change operating assets liabilities change operating assets liabilities principally due 20 million increase prepaid expense assets increase receivables 10 million partially offset 08 million increase accounts payable result increased clinical activities ongoing clinical trials pb2452 pb1046 net cash used operating activities 171 million year ended december 31 2018 use cash primarily related net loss 238 million adjusted noncash charges primarily related 37 million noncash interest expense 07 million change fair value derivative liability 20 million change operating assets liabilities change operating assets liabilities principally due 33 million increase accounts payable accrued expenses partially offset 10 million increase prepaid expenses result increased clinical activities ongoing clinical trials pb2452 pb1046 investing activities net cash used investing activities 10 million purchase property equipment year ended december 31 2019 net cash used investing activities 01 million purchase property equipment year ended december 31 2018 financing activities net cash provided financing activities 535 million year ended december 31 2019 due primarily receipt 463 million net proceeds april 2019 underwritten public offering borrowings 81 million 2019 loan partially offset 09 million partial repayment svb loan net cash provided financing activities 648 million year ended december 31 2018 consisting primarily 430 million net proceeds initial public offering 177 million issuance series redeemable convertible preferred stock 40 million proceeds svb loan funding requirements date generated revenues commercial sale approved drug products expect generate substantial revenue least next several years fail complete development product candidates timely manner fail obtain regulatory approval ability generate future revenue compromised know generate revenue product candidates expect generate significant revenue unless obtain regulatory approval commercialize product candidates expect expenses increase connection ongoing activities particularly continue research development continue initiate clinical trials seek marketing approval product candidates addition obtain approval product candidates expect incur significant commercialization expenses related sales marketing manufacturing distribution anticipate need substantial additional funding connection continuing operations unable raise capital needed attractive terms could forced delay reduce eliminate research development programs future commercialization efforts believe existing cash equivalents december 31 2019 addition 100 million received march 2020 800 million anticipated proceeds receive pursuant sfj agreement sufficient fund operating expenses capital requirements second half 2021 intend devote existing cash equivalents advance clinical preclinical development programs based estimates assumptions may prove wrong may use available capital resources sooner currently expect numerous risks uncertainties associated development commercialization product candidates unable estimate amounts increased capital outlays operating expenditures necessary complete development product candidates future capital requirements depend many factors including • progress results ongoing planned future clinical trials pb2452 pb1046 pb6440 preclinical programs • timing amount payments receive sfj agreement • scope progress results costs preclinical development laboratory testing clinical trials future product candidates may decide pursue • extent develop inlicense acquire product candidates technologies • number development requirements product candidates may pursue • costs timing outcome regulatory review product candidates • costs timing future commercialization activities including product manufacturing marketing sales distribution product candidates receive marketing approval • revenue received commercial sales product candidates receive marketing approval • ability establish collaborations commercialize pb1046 united states • ability establish collaborations commercialize pb2452 pb1046 product candidates outside united states • costs timing preparing filing prosecuting patent applications maintaining enforcing intellectual property rights defending intellectual propertyrelated claims identifying potential product candidates conducting preclinical studies clinical trials timeconsuming expensive uncertain process takes many years complete may never generate necessary data results required obtain marketing approval achieve product sales addition product candidates approved may achieve commercial success commercial revenues derived sales product candidates expect commercially available near term future commercial revenue derived sales products expect commercially available several years accordingly need continue rely additional financing achieve business objectives adequate additional financing may available us acceptable terms extent raise additional capital sale equity convertible debt securities terms equity securities debt may restrict ability operate future debt financing equity financing available may involve agreements include covenants limiting restricting ability take specific actions incurring additional debt making capital expenditures entering profitsharing arrangements declaring dividends raise additional funds government private grants collaborations strategic alliances marketing distribution licensing arrangements third parties may required relinquish valuable rights technologies future revenue streams research programs product candidates grant licenses terms may favorable us ability raise additional capital may adversely impacted potential worsening global economic conditions recent disruptions volatility credit financial markets united states worldwide resulting ongoing covid19 pandemic offbalance sheet arrangements periods presented currently offbalance sheet arrangements defined sec rules regulations critical accounting policies significant judgments estimates management’s discussion analysis financial condition results operations based financial statements prepared accordance united states generally accepted accounting policies gaap preparation financial statements requires us make estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities dates balance sheets reported amounts expenses reporting periods accordance gaap evaluate estimates judgments ongoing basis significant estimates include assumptions used determination accrued research development costs base estimates historical experience various factors believe reasonable circumstances results form basis making judgments carrying value assets liabilities readily apparent sources actual results may differ estimates different assumptions conditions believe following accounting policies critical judgments estimates used preparation financial statements see note 2 financial statements appearing elsewhere annual report discussion significant accounting policies accrued research development expense majority operating expenses date incurred research development activities part process preparing financial statements required estimate expenses resulting obligations contracts vendors consultants research organizations connection conducting clinical preclinical activities financial terms contracts subject negotiations vary contract may result payment flows match periods materials services provided contracts reflect preclinical study clinical trial expenses financial statements matching expenses period services efforts expended account expenses according progress preclinical study clinical trial measured timing various aspects preclinical study clinical trial related activities accrual estimates determined review underlying contracts along preparation financial models taking account discussions research key personnel progress preclinical studies clinical trials services conducted course preclinical study clinical trial adjust rate expense recognition actual results differ original estimates recent accounting pronouncements see note 2 financial statements appearing elsewhere annual report information concerning recent accounting pronouncements jobs act transition period april 2012 jobs act enacted section 107 jobs act provides “emerging growth company” take advantage extended transition period provided section 7a2b securities act complying new revised accounting standards thus emerging growth company delay adoption certain accounting standards would otherwise apply private companies irrevocably elected avail extended transition period result adopt new revised accounting standards relevant dates adoption standards required public companies process evaluating benefits relying exemptions reduced reporting requirements jobs act subject certain conditions emerging growth company may rely certain exemptions including without limitation providing auditor’s attestation report system internal controls financial reporting pursuant section 404b sarbanesoxley act ii complying requirement may adopted public company accounting oversight board remain emerging growth company earliest occur 1 last day fiscal year ending december 31 2023 end fiscal year following fifth anniversary completion initial public offering b total annual gross revenues least 107 billion c deemed “large accelerated filer” rules sec means market value common stock held nonaffiliates exceeds 700 million prior june 30th 2 date issued 10 billion nonconvertible debt prior threeyear period “smaller reporting company” may continue qualify even longer qualify emerging growth company accordingly may provide less public disclosure larger public companies including inclusion two years audited financial statements two years related selected financial data management’s discussion analysis financial condition results operations disclosure result information provide stockholders may different might receive public reporting companies hold equity interests effect inflation significant impact net sales revenues income continuing operations 2019 2018 item 7a item 7 management’s discussion analysis financial condition results operations following discussion analysis financial condition results operations read conjunction financial statements related notes related management’s discussion analysis financial condition results operations included annual report form 10k overview clinicalstage biopharmaceutical company focused development commercialization novel therapies treat orphan diseases initial focus cardiopulmonary indications lead product candidate pb2452 novel reversal agent antiplatelet drug ticagrelor developing treatment patients experiencing major bleeding require urgent surgery recently completed phase 1 clinical trial pb2452 healthy subjects intend initiate phase 2b clinical trial healthy older subjects first half 2019 second product candidate pb1046 onceweekly fusion protein currently phase 2b clinical trial treatment pulmonary arterial hypertension pah pb1046 utilizes proprietary halflife extending elastinlike polypeptide elp technology also serves engine preclinical pipeline limited operating history since inception 2002 operations focused developing clinical preclinical product candidates proprietary elp technology organizing staffing company business planning raising capital establishing intellectual property portfolio conducting clinical trials preclinical studies product candidates approved sale generated revenue product sales since inception funded operations sale equity debt securities term loans silicon valley bank svb westriver innovation lending fund viii lp westriver 2018 received 607 million aggregate net proceeds initial public offering sale series convertible preferred stock 40 million net proceeds borrowings term loan svb december 31 2018 cash equivalents 610 million believe existing cash equivalents sufficient fund operating expenses capital requirements second quarter 2020 see “liquidity capital resources” since inception incurred significant operating losses net loss 238 million year ended december 31 2018 december 31 2018 accumulated deficit 1229 million expect continue incur significant expenses operating losses foreseeable future anticipate expenses increase significantly connection ongoing activities • continue ongoing clinical trials pb2452 pb1046 well initiate complete additional clinical trials needed • pursue regulatory approvals pb2452 reversal agent antiplatelet drug ticagrelor pb1046 treatment pah • seek discover develop additional clinical preclinical product candidates • scale clinical regulatory capabilities • establish commercialization infrastructure scale external manufacturing distribution capabilities commercialize product candidates may obtain regulatory approval including pb2452 pb1046 • adapt regulatory compliance efforts incorporate requirements applicable marketed products • maintain expand protect intellectual property portfolio • hire additional clinical manufacturing scientific personnel • add operational financial management information systems personnel including personnel support product development planned future commercialization efforts • incur additional legal accounting expenses operating public company financial overview components operating results grant revenues grant revenues derived government grants support efforts specific research projects recognize grant revenue reasonable assurance compliance conditions grant reasonable assurance grant revenue received research development expense research development expense consists expenses incurred connection discovery development product candidates expense research development costs incurred expenses include • expenses incurred agreements contract research organizations cros well investigative sites consultants conduct clinical trials preclinical studies • manufacturing supply scaleup expenses cost acquiring manufacturing preclinical clinical trial supply potential commercial supply including manufacturing validation batches • outsourced professional scientific development services • employeerelated expenses include salaries benefits stockbased compensation • expenses relating regulatory activities • laboratory materials supplies used support research activities research development activities central business model product candidates later stages clinical development generally higher development costs earlier stages clinical development primarily due increased size duration laterstage clinical trials expect research development expense increase significantly next several years increase personnel costs including stockbased compensation conduct laterstage clinical trials pb2452 pb1046 conduct preclinical studies clinical trials prepare regulatory filings product candidates successful development product candidates highly uncertain time cannot reasonably estimate know nature timing costs efforts necessary complete remainder development ever material net cash inflows may commence product candidates uncertainty due numerous risks uncertainties associated duration cost clinical trials vary significantly life project result many factors including • delays regulators institutional review boards authorizing us investigators commence clinical trials ability negotiate agreements clinical trial sites contract research organizations • ability secure adequate supply product candidates trials • number clinical sites included trials • length time required enroll suitable patients • number patients ultimately participate trials • number doses patients receive • side effects associated product candidates • duration patient followup • results clinical trials expenditures subject additional uncertainties including terms timing regulatory approvals expense filing prosecuting defending enforcing patent claims intellectual property rights may never succeed achieving regulatory approval product candidates may obtain unexpected results clinical trials may elect discontinue delay modify clinical trials product candidates change outcome variables respect development product candidate could mean significant change costs timing associated development product candidate example food drug administration fda regulatory authorities require us conduct clinical trials beyond currently anticipate experience significant delays enrollment clinical trials could required expend significant additional financial resources time completion clinical development product commercialization take several years millions dollars development costs general administrative expense general administrative expense consists principally salaries related costs personnel executive administrative functions including stockbased compensation travel expenses recruiting expenses general administrative expense includes professional fees legal accounting taxrelated services insurance costs anticipate general administrative expense increase result increased payroll expanded infrastructure higher consulting legal taxrelated services associated maintaining compliance stock exchange listing sec requirements accounting investor relations costs director officer insurance premiums associated public company anticipate additional costs services increase general administrative expense interest expense interest expense consists interest expense convertible promissory notes term loan change fair value warrant derivative liabilities change fair value warrant derivative liabilities reflects revaluation reporting date redeemable convertible preferred stock warrants conversion option convertible promissory notes respectively subsequent conversion outstanding shares preferred stock common stock connection closing initial public offering october 2018 longer required remeasure warrant liability periods following closing initial public offering additionally august 2018 previously outstanding convertible promissory notes converted sale issuance series redeemable preferred stock longer required remeasure conversion option periods following closing financing license agreements medimmune limited november 2017 entered exclusive license agreement medimmune license medimmune limited medimmune wholly owned subsidiary astrazeneca plc pursuant medimmune license medimmune granted us exclusive worldwide license certain patent rights owned controlled medimmune develop commercialize products covered medimmune license medimmune licensed products treatment palliation diagnosis prevention human disorder condition medimmune license paid medimmune upfront fee 01 million also required pay medimmune quarterly fees relating technical services provided medimmune 180 million clinical regulatory milestone fees 500 million commercial milestone fees midsingle digit lowteen royalty percentages net sales medimmune licensed products subject reduction specified circumstances addition medimmune license offers option thirdparty product storage costs december 31 2018 paid 05 million medimmune license duke university october 2006 entered exclusive license agreement duke license duke university duke recently amended may 2017 pursuant duke license duke granted us exclusive worldwide license certain patent rights owned controlled duke nonexclusive worldwide license certain knowhow duke develop commercialize products covered duke license duke licensed products relating elps duke license paid duke upfront fee 37000 additional fees connection amendments duke license 02 million additional licensing fees 02 million consideration license rights granted us initially issued duke 24493 shares common stock reached certain stipulated equity milestone reached october 2007 obligated issue additional shares common stock duke time aggregate ownership represented 75 issued outstanding capital stock also required pay duke 22 million regulatory clinical milestone fees 04 million commercial milestone fees low singledigit royalty percentages net sales duke licensed products minimum aggregate royalty payments 02 million payable following achievement certain commercial milestones greater 03 million low doubledigit percentage fees receive third party consideration forming strategic alliance respect certain patent rights covered duke license also must pay duke first 10 million nonroyalty payments receive sublicensee thereafter low doubledigit percentage additional nonroyalty payments receive december 31 2018 paid amounts duke license also required apply prosecute maintain us foreign patent rights duke license results operations comparison years ended december 31 2018 2017 following table summarizes results operations years ended december 31 2018 2017 thousands grant revenues grant revenues 07 million year ended december 31 2018 incurred allowable costs qualifying reimbursement government grants receive grant revenues year ended december 31 2017 research development expense research development expense 155 million year ended december 31 2018 compared 62 million year ended december 31 2017 increase 92 million primarily attributable increased costs associated preclinical clinical development activities largely related pb2452 pb1046 following table summarizes research development expense functional area years ended december 31 2018 2017 thousands following table summarizes research development expense product candidate years ended december 31 2018 2017 thousands general administrative expense general administrative expense 49 million year ended december 31 2018 compared 23 million year ended december 31 2017 increase 25 million primarily attributable increase professional services including legal marketing consulting services 14 million increase employee compensation expense 07 million increase insurance expenses 03 million increase business travelrelated expenses 02 million interest expense interest expense 39 million year ended december 31 2018 compared 27 million year ended december 31 2017 increase 12 million partially attributable additional 81 million borrowings pursuant convertible promissory notes entered october 2017 additionally entered term loan october 2017 pursuant borrowed 35 million november 2017 20 million april 2018 20 million august 2018 also contributed increase interest expense year change fair value warrant liability change fair value warrant liability resulted income 11000 year ended december 31 2018 compared income 10 million year ended december 31 2017 preferred stock warrants subject remeasurement reporting period changes fair value recorded statement operations outstanding preferred stock warrants converted common stock warrants upon completion initial public offering change fair value derivative liability change fair value derivative liability 07 million expense year ended december 31 2018 compared 01 million expense year ended december 31 2017 conversion option related convertible promissory notes subject remeasurement reporting period changes fair value recorded statement operations convertible promissory notes converted redeemable convertible preferred stock august 2018 upon sale series redeemable convertible preferred stock liquidity capital resources since inception generated revenue product sales incurred net losses negative cash flows operations financed operations since inception primarily sales equity debt securities borrowings term loans svb westriver december 31 2018 cash equivalents 610 million october 2017 loan agreement svb october 2017 entered loan security agreement svb loan svb provided could borrow 75 million issuable three separate tranches growth capital advances 35 million 20 million 20 million available upon achievement certain clinical regulatory milestones drew tranches november 2017 april 2018 august 2018 respectively maturity date svb loan june 1 2020 extended december 31 2020 drew third tranche svb loan interestonly july 31 2018 extended december 31 2018 drew third tranche addition interest principal payments required make final payment equal 7 original aggregate principal amount growth capital advances option prepay less borrowed amounts provided would obligated pay prepayment fee equal 30 outstanding principal balance applicable growth capital advances prepayment made prior first anniversary effective date svb loan b 20 outstanding principal balance applicable growth capital advances prepayment made second anniversary effective date svb loan c 10 outstanding principal balance applicable growth capital advances prepayment made second anniversary effective date svb loan march 25 2019 repaid outstanding principal balance accrued portion final payment svb loan full using tranche 2019 loan described march 2019 loan agreement svb westriver march 25 2019 entered term loan agreement 2019 loan svb westriver pursuant may borrow 150 million issuable three separate tranches advances 75 million tranche issued upon execution 2019 loan 25 million tranche b available issued may 31 2019 50 million tranche c draw upon achievement certain regulatory milestones tranche c milestones maturity date 2019 loan march 1 2023 terms 2019 loan make interestonly payments december 31 2019 tranche b rate equal greater prime rate plus 100 defined 2019 loan 65 followed amortization period 39 months equal monthly payments principal plus interest amounts paid full interestonly period automatically extended june 30 2020 achieve tranche c milestones followed amortization period 33 months equal monthly payments principal plus interest amounts paid full addition substitution regular monthly payments principal plus accrued interest required make final payment equal 6 aggregate principal amount advances maturity date agreed issue svb westriver warrants purchase aggregate 37606 shares common stock draw tranche aggregate 12131 shares common stock draw tranche b aggregate 24462 shares common stock draw tranche c exercise price lower average closing price common stock previous ten days trading closing price day prior funding warrants immediately exercisable upon issuance expire ten years date issuance upon execution 2019 loan drew 75 million tranche repaid outstanding principal balance accrued portion final payment svb loan full also issued warrants purchase 18803 shares common stock svb westriver exercise prices 473 per share obligations 2019 loan secured first priority security interest substantially current future assets excluding intellectual property also obligated comply various customary covenants including restrictions ability encumber intellectual property assets convertible promissory notes january 2017 october 2017 issued 147 million convertible promissory notes 2017 notes holders series c1 redeemable convertible preferred stock 2017 notes bore interest rate 8 2017 notes stated maturity date march 31 2018 october 2017 noteholders entered subordination agreement svb pursuant noteholders agreed would demand receive payment 2017 notes amounts owed svb loan repaid full june 1 2020 august 2018 2017 notes converted concurrent sale series redeemable convertible preferred stock december 31 2018 cash equivalents 610 million following table summarizes cash flows periods set forth thousands operating activities net cash used operating activities 171 million year ended december 31 2018 use cash primarily related net loss 238 million adjusted noncash charges primarily related 37 million noncash interest expense 07 million change fair value derivative liability 20 million change operating assets liabilities change operating assets liabilities principally due 33 million increase accounts payable accrued expenses partially offset 10 million increase prepaid expenses result increased clinical activities ongoing clinical trials pb2452 pb1046 net cash used operating activities 83 million year ended december 31 2017 use cash primarily related net loss 102 million adjusted noncash charges principally related 27 million noncash interest expense 10 million change fair value warrant liability investing activities net cash used investing activities 01 million purchase property equipment year ended december 31 2018 net cash used investing activities 02 million purchase property equipment year ended december 31 2017 financing activities net cash provided financing activities 648 million year ended december 31 2018 consisting primarily 430 million net proceeds initial public offering 177 million issuance series redeemable convertible preferred stock 40 million issuance term loan svb net cash provided financing activities 182 million year ended december 31 2017 consisting net proceeds issuance convertible promissory notes term loan svb funding requirements date generated revenues commercial sale approved drug products expect generate substantial revenue least next several years fail complete development product candidates timely manner fail obtain regulatory approval ability generate future revenue compromised know generate revenue product candidates expect generate significant revenue unless obtain regulatory approval commercialize product candidates expect expenses increase connection ongoing activities particularly continue research development continue initiate clinical trials seek marketing approval product candidates addition obtain approval product candidates expect incur significant commercialization expenses related sales marketing manufacturing distribution anticipate need substantial additional funding connection continuing operations unable raise capital needed attractive terms could forced delay reduce eliminate research development programs future commercialization efforts believe existing cash equivalents sufficient fund operating expenses capital requirements second quarter 2020 intend devote existing cash equivalents advance clinical preclinical development programs based estimates assumptions may prove wrong may use available capital resources sooner currently expect numerous risks uncertainties associated development commercialization product candidates unable estimate amounts increased capital outlays operating expenditures necessary complete development product candidates future capital requirements depend many factors including • progress results ongoing planned future clinical trials pb2452 pb1046 preclinical programs • scope progress results costs preclinical development laboratory testing clinical trials future product candidates may decide pursue • extent develop inlicense acquire product candidates technologies • number development requirements product candidates may pursue • costs timing outcome regulatory review product candidates • costs timing future commercialization activities including product manufacturing marketing sales distribution product candidates receive marketing approval • revenue received commercial sales product candidates receive marketing approval • ability establish collaborations commercialize pb1046 united states • ability establish collaborations commercialize pb2452 pb1046 product candidates outside united states • costs timing preparing filing prosecuting patent applications maintaining enforcing intellectual property rights defending intellectual propertyrelated claims identifying potential product candidates conducting preclinical studies clinical trials timeconsuming expensive uncertain process takes many years complete may never generate necessary data results required obtain marketing approval achieve product sales addition product candidates approved may achieve commercial success commercial revenues derived sales product candidates expect commercially available near term future commercial revenue derived sales products expect commercially available several years accordingly need continue rely additional financing achieve business objectives adequate additional financing may available us acceptable terms extent raise additional capital sale equity convertible debt securities terms equity securities debt may restrict ability operate future debt financing equity financing available may involve agreements include covenants limiting restricting ability take specific actions incurring additional debt making capital expenditures entering profitsharing arrangements declaring dividends raise additional funds government private grants collaborations strategic alliances marketing distribution licensing arrangements third parties may required relinquish valuable rights technologies future revenue streams research programs product candidates grant licenses terms may favorable us offbalance sheet arrangements periods presented currently offbalance sheet arrangements defined sec rules regulations critical accounting policies significant judgments estimates management’s discussion analysis financial condition results operations based financial statements prepared accordance us generally accepted accounting policies gaap preparation financial statements requires us make estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities dates balance sheets reported amounts expenses reporting periods accordance gaap evaluate estimates judgments ongoing basis believe following accounting policies critical judgments estimates used preparation financial statements see note 2 financial statements appearing elsewhere annual report discussion significant accounting policies accrued research development expense majority operating expenses date incurred research development activities part process preparing financial statements required estimate expenses resulting obligations contracts vendors consultants research organizations connection conducting clinical preclinical activities financial terms contracts subject negotiations vary contract may result payment flows match periods materials services provided contracts reflect preclinical study clinical trial expenses financial statements matching expenses period services efforts expended account expenses according progress preclinical study clinical trial measured timing various aspects preclinical study clinical trial related activities accrual estimates determined review underlying contracts along preparation financial models taking account discussions research key personnel progress preclinical studies clinical trials services conducted course preclinical study clinical trial adjust rate expense recognition actual results differ original estimates recent accounting pronouncements see note 2 financial statements appearing elsewhere annual report information concerning recent accounting pronouncements jobs act transition period april 2012 jobs act enacted section 107 jobs act provides “emerging growth company” take advantage extended transition period provided section 7a2b securities act complying new revised accounting standards thus emerging growth company delay adoption certain accounting standards would otherwise apply private companies irrevocably elected avail extended transition period result adopt new revised accounting standards relevant dates adoption standards required public companies process evaluating benefits relying exemptions reduced reporting requirements jobs act subject certain conditions emerging growth company may rely certain exemptions including without limitation providing auditor’s attestation report system internal controls financial reporting pursuant section 404b sarbanesoxley act ii complying requirement may adopted public company accounting oversight board remain emerging growth company earliest occur 1 last day fiscal year ending december 31 2023 end fiscal year following fifth anniversary completion initial public offering b total annual gross revenues least 107 billion c deemed “large accelerated filer” rules sec means market value common stock held nonaffiliates exceeds 700 million prior june 30th 2 date issued 10 billion nonconvertible debt prior threeyear period effect inflation significant impact net sales revenues income continuing operations 2018 2017 item 7a item 7 management’s discussion analysis financial condition results operations following discussion analysis financial condition results operations read conjunction financial statements related notes related management’s discussion analysis financial condition results operations included annual report form 10k overview clinicalstage biopharmaceutical company focused development commercialization novel therapies cardiopulmonary diseases lead product candidate bentracimab also known pb2452 novel reversal agent antiplatelet drug ticagrelor developing reversal antiplatelet effects ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure based feedback united states food drug administration fda intend seek approval bentracimab united states accelerated approval process completed phase 2a clinical trial bentracimab observed immediate complete reversal ticagrelor’s antiplatelet activity within five minutes following initiation infusion sustained reversal 20 hours second product candidate pemziviptadil also known pb1046 onceweekly fusion protein currently phase 2b clinical trial treatment pulmonary arterial hypertension pah pemziviptadil utilizes proprietary halflife extending elastinlike polypeptide elp technology also serves engine preclinical pipeline also developing preclinical product candidate pb6440 treatmentresistant hypertension retain worldwide commercial rights product candidates advance clinical programs bentracimab pemziviptadil site activations patient enrollment remain close contact clinical research organizations clinical sites suppliers attempt assess impacts covid19 may clinical trials current timelines consider whether implement appropriate mitigating measures help lessen impacts time however cannot fully forecast scope impacts covid19 may ability initiate trial sites enroll assess patients supply study drug report trial results developing bentracimab pursuant codevelopment agreement sfj agreement sfj pharmaceuticals x ltd sfj pharmaceuticals group company sfj agreement sfj agreed pay us 1200 million support clinical development bentracimab term sfj agreement primary responsibility clinical development regulatory activities bentracimab united states european union sfj primary responsibility clinical development regulatory activities bentracimab china japan provide clinical trials operations support european union march 2020 commenced pivotal reverseit trial global multicenter nonrandomized openlabel trial plan enroll total 200 ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure primary endpoints trial reversal antiplatelet effects ticagrelor intravenous infusion bentracimab measured verifynow® prutest® biomarker achievement clinical hemostasis enrolled patients currently enrolling patients united states european union canada trial fda granted breakthrough therapy designation bentracimab april 2019 european medicines agency ema granted bentracimab priority medicines prime designation february 2020 based feedback fda intend submit biologics license application bla potential accelerated approval based interim analysis first approximately 100 patients treated reverseit trial targeting approximately one half patients enrolled uncontrolled major lifethreatening bleeding approximately one half require urgent surgery invasive procedure submit bla data first 100 patients intend complete reverseit trial establish postapproval registry accordance fda requirements committee medicinal products human use chmp ema also generally agreed proposed clinical development plan bentracimab enrolled half first approximately 100 patients needed support bla submission nearly date required urgent surgery invasive procedure attempting accelerate enrollment patients uncontrolled major lifethreatening bleeding including working increase number enrolling clinical trial sites united states canada european union believe broader site footprint increase probability enrolling patients first approximately 100 patients enrolled reverseit trial measured verifynow prutest biomarker described expect complete enrollment first 100 patients reverseit trial mid2021 targeting submit bla bentracimab mid2022 although timelines could impacted continued scope duration covid19 pandemic limited operating history since inception 2002 operations focused developing clinical preclinical product candidates proprietary elp technology organizing staffing company business planning raising capital establishing intellectual property portfolio conducting clinical trials preclinical studies product candidates approved sale generated revenue product sales since inception financed operations primarily sale equity debt securities term loans silicon valley bank svb westriver innovation lending fund viii lp westriver april 2019 received 463 million net proceeds underwritten public offering common stock may 2019 received additional 25 million term loan svb westriver 2019 loan october 2019 received additional 50 million 2019 loan january 2020 entered sfj agreement pursuant sfj agreed provide us 1200 million funding support clinical development bentracimab december 31 2020 sfj provided funding paid amounts behalf aggregate amount 471 million sfj agreement addition expect sfj fund reimburse additional 429 million clinical trial costs expenses sfj also provide additional 300 million funding upon achievement specified clinical development milestones respect ongoing reverseit trial bentracimab since inception incurred significant operating losses net loss 986 million year ended december 31 2020 december 31 2020 accumulated deficit 2607 million expect continue incur significant expenses operating losses foreseeable future anticipate expenses increase substantially connection ongoing activities •continue ongoing clinical trials bentracimab pemziviptadil well initiate complete additional clinical trials needed •seek expand geographical reach sfj agreement corresponding clinical development support fees incur •pursue regulatory approvals bentracimab reversal agent antiplatelet drug ticagrelor pemziviptadil treatment pah •develop pb6440 treatmentresistant hypertension •seek discover develop additional clinical preclinical product candidates •scale clinical regulatory capabilities •establish commercialization infrastructure scale external manufacturing distribution capabilities commercialize product candidates may obtain regulatory approval including bentracimab pemziviptadil •adapt regulatory compliance efforts incorporate requirements applicable marketed products •maintain expand protect intellectual property portfolio •hire additional clinical manufacturing scientific personnel •add operational financial management information systems personnel including personnel support product development possible future commercialization efforts •incur additional legal accounting expenses operating public company recent development march 2021 entered supply agreement biovectra inc manufacture supply bulk drug substance bentracimab commercial distribution following regulatory approval terms supply agreement biovectra committed maintaining capacity manufacture agreed number batches product per year although free contract third parties manufacture bentracimab refer item 1 business subheading business license codevelopment agreements biovectra supply agreement annual report financial overview components operating results revenue grant revenue grant revenue derived government grants support efforts specific research projects recognize grant revenue reasonable assurance compliance conditions grant reasonable assurance grant revenue received revenue collaborative agreement revenue collaborative agreement derived agreement collaboration partner immunoforge co ltd immunoforge granted immunoforge license develop certain compound indications exchange upfront license payment eventbased payments subject immunoforge’s achievement specified development regulatory salesbased milestones addition entitled royalties products collaboration commercialized recognize revenue upfront amounts license transferred immunoforge development milestones fees recognized revenue probable amount result significant reversal revenue future salesbased milestones royalties cannot recognized underlying sales occur research development expense research development expense consists expenses incurred connection discovery development product candidates expense research development costs incurred expenses include •expenses incurred agreements contract research organizations cros well investigative sites consultants conduct clinical trials preclinical studies •manufacturing supply scaleup expenses cost acquiring manufacturing preclinical clinical trial supply potential commercial supply including manufacturing validation batches •clinical development support fees incur related sfj agreement •outsourced professional scientific development services •employeerelated expenses include salaries benefits stockbased compensation •expenses relating regulatory activities •laboratory materials supplies used support research activities research development activities central business model product candidates later stages clinical development generally higher development costs earlier stages clinical development primarily due increased size duration laterstage clinical trials expect research development expense increase significantly next several years increase personnel costs including stockbased compensation conduct laterstage clinical trials bentracimab pemziviptadil develop pb6440 conduct preclinical studies clinical trials prepare regulatory filings receive regulatory approval one product candidates prepare commercialization efforts successful development product candidates highly uncertain time cannot reasonably estimate know nature timing costs efforts necessary complete remainder development product candidates ever material net cash inflows may commence candidates uncertainty due numerous risks uncertainties associated duration cost clinical trials vary significantly life project result many factors including •delays regulators institutional review boards authorizing us investigators commence clinical trials ability negotiate agreements clinical trial sites contract research organizations •our ability secure adequate supply product candidates trials •the number clinical sites included trials •the length time required enroll suitable patients •the number patients ultimately participate trials •the number doses patients receive •any side effects associated product candidates •the impacts covid19 pandemic ability initiate trial sites enroll assess patients supply study drug report trial results •the duration patient followup •the results clinical trials expenditures subject additional uncertainties including terms timing regulatory approvals expense filing prosecuting defending enforcing patent claims intellectual property rights may never succeed achieving regulatory approval product candidates may obtain unexpected results clinical trials may elect discontinue delay modify clinical trials product candidates change outcome variables respect development product candidate could mean significant change costs timing associated development product candidate example fda regulatory authorities require us conduct clinical trials beyond currently anticipate experience significant delays enrollment clinical trials could required expend significant additional financial resources time completion clinical development product commercialization take several years millions dollars development costs general administrative expense general administrative expense consists principally salaries related costs personnel executive administrative functions including stockbased compensation travel expenses recruiting expenses general administrative expense includes professional fees legal accounting taxrelated services insurance costs anticipate general administrative expense increase continue operate public reporting company continue develop bentracimab pemziviptadil pb6440 future product candidates believe increases likely include increased costs director officer liability insurance costs related hiring additional personnel increased fees outside consultants lawyers accountants also expect incur increased costs comply corporate governance internal controls investor relations disclosure similar requirements applicable public reporting companies loss remeasurement development derivative liability loss remeasurement development derivative liability reflects revaluation reporting date development derivative liability based present value estimated consideration received estimated consideration paid pursuant contractual terms sfj agreement determined fair value liability remeasured end quarter level 3 derivative change fair value recorded condensed statements operations interest expense interest expense consists interest expense term loan svb westriver license codevelopment agreements medimmune limited license agreement november 2017 entered exclusive license agreement medimmune license medimmune limited medimmune wholly owned subsidiary astrazeneca plc pursuant medimmune license medimmune granted us exclusive worldwide license certain patent rights owned controlled medimmune develop commercialize products covered medimmune license medimmune licensed products treatment palliation diagnosis prevention human disorder condition medimmune license paid medimmune upfront fee 01 million also required pay medimmune quarterly fees relating technical services provided medimmune 180 million clinical regulatory milestone fees 30 million incurred december 31 2020 500 million commercial milestone fees midsingle digit lowteen royalty percentages net sales medimmune licensed products subject reduction specified circumstances addition medimmune license offers option thirdparty product storage costs inception medimmune license december 31 2020 incurred costs 36 million medimmune license codevelopment agreement sfj pharmaceuticals january 2020 entered sfj agreement pursuant sfj provides us funding support global development bentracimab reversal agent antiplatelet drug ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure march 2020 obtained consent silicon valley bank svb grant sfj security interest assets owned controlled us necessary manufacture use sale bentracimab sfj agreement sfj agreed pay us 1200 million support clinical development bentracimab inception sfj agreement december 31 2020 sfj provided funding paid amounts behalf aggregate amount 471 million addition expect sfj fund reimburse additional 429 million clinical trial costs expenses pursuant sfj agreement sfj also provide additional 300 million funding upon achievement specified milestones respect clinical development bentracimab term sfj agreement primary responsibility clinical development regulatory activities bentracimab united states european union sfj primary responsibility clinical development regulatory activities bentracimab china japan provide clinical trials operational support european union terms sfj agreement following fda approval bla bentracimab pay sfj initial payment 50 million additional 3250 million aggregate seven additional annual payments ema national regulatory authority certain european countries approve bla bentracimab pay sfj initial payment 50 million additional 2050 million aggregate seven additional annual payments either pmda japan nmpa china approves marketing application bentracimab pay sfj initial payment 10 million additional 590 million aggregate eight additional annual payments within 120 days following approval bla bentracimab one jurisdictions described right option make onetime cash payment sfj buy portion future unpaid approval payments jurisdiction ie us approval payments eu approval payments japanchina approval payments applicable price reflecting midsingledigit discount rate within 120 days following change control company successor right option make onetime cash payment sfj buy portion future unpaid approval payments jurisdictions bla bentracimab approved prior change control price reflecting midsingledigit discount rate provided sfj previously assigned right receive payments third party event successor shall right following termination sfj agreement continue develop bentracimab obtain bla approval united states european union japan china make applicable approval payments jurisdiction sfj agreement terminated less payments made upon termination except terminate sfj agreement sfj’s failure make payment us due sfj terminates sfj agreement due material adverse event defined sfj agreement obligation make approval payments would reduced 50 duke license agreement october 2006 entered exclusive license agreement duke university duke recently amended april 2019 duke license pursuant duke license duke granted us exclusive worldwide license certain patent rights owned controlled duke nonexclusive worldwide license certain knowhow duke develop commercialize products covered duke license duke licensed products relating elps duke license paid duke upfront fee 37000 additional fees connection amendments duke license 02 million additional licensing fees 02 million consideration license rights granted us initially issued duke 24493 shares common stock reached certain stipulated equity milestone reached october 2007 obligated issue additional shares common stock duke time aggregate ownership represented 75 issued outstanding capital stock also required pay duke 22 million regulatory clinical milestone fees 04 million commercial milestone fees low singledigit royalty percentages net sales duke licensed products minimum aggregate royalty payments 02 million payable following achievement certain commercial milestones greater 03 million low doubledigit percentage fees receive third party consideration forming strategic alliance respect certain patent rights covered duke license also must pay duke first 10 million nonroyalty payments receive sublicensee thereafter low doubledigit percentage additional nonroyalty payments receive subject certain conditions inception duke license december 31 2020 incurred royalty costs 03 million duke license also required apply prosecute maintain us foreign patent rights duke license wacker license agreement april 2019 entered license agreement wacker license agreement wacker biotech gmbh wacker pursuant wacker granted us exclusive license certain wacker’s intellectual property rights use wacker’s proprietary e coli strain manufacture bentracimab worldwide outside specified asian countries commercialize bentracimab approved manufactured us behalf using wacker’s proprietary e coli strain throughout world right grant sublicenses license subject certain conditions specified wacker license agreement terms agreement required pay fixed nominal perunit royalty subject adjustment annual license fee fixed euro amount low mid six digits agreement force indefinite period time upon expiration royalty obligations license considered fully paid convert nonexclusive license either party may terminate wacker license agreement breach cured within specified number days inception wacker license agreement december 31 2020 incurred 05 million costs viamet asset purchase agreement january 2020 entered pb6440 agreement viamet pharmaceuticals holdings llc whollyowned subsidiary selenity therapeutics bermuda ltd sellers pursuant acquired assets intellectual property rights related sellers’ proprietary cyp11b2 inhibitor compound formerly known se6440 vt6440 certain cyp11b2 inhibitor compounds covered patent rights acquired us pb6440 agreement together compounds terms pb6440 agreement paid sellers upfront fee 01 million upon closing transaction required pay sellers 51 million upon achievement certain development intellectual property milestones respect certain product candidates contain compound 1425 million upon achievement certain commercial milestones respect approved product contains compound low midsingle digit royalty percentages net sales approved products contain compound subject customary reductions offsets specified circumstances incurred 01 million costs pb6440 agreement year ended december 31 2020 biovectra supply agreement march 2021 entered supply agreement biovectra agreement biovectra inc biovectra manufacture supply biovectra bulk drug substance bentracimab commercial distribution following regulatory approval obtained terms biovectra agreement biovectra committed maintaining capacity manufacture agreed number batches product year committed purchase specified minimum number batches product per year minimum annual commitment although free contract third parties manufacture bentracimab pay supply price per batch product determined manufacturing process product validated accordance biovectra agreement validation plus cost certain consumables raw materials thirdparty testing pursuant minimum annual commitments obligated purchase minimum approximately 140 million batches product years 2022 2023 ii approximately 370 million batches product 2024 iii approximately 480 million batches product years 2025 2031 event purchase applicable minimum annual commitment given year obligated make payment biovectra amount equal thenapplicable supply price per batch multiplied difference minimum annual commitment year number batches product actually purchased year minimum shortfall payment except event biovectra unable deliver number batches ordered us year event certain serious extended failures biovectra supply product quantities ordered us given year minimum annual commitment year potentially one subsequent years subject reduction obligation make minimum shortfall payment year potentially one subsequent years waived right reduce minimum annual commitments year 2026 subsequent years specified maximum percentage per year able obtain regulatory approval products incorporating bentracimab one us europe biovectra agreed discuss good faith amendment biovectra agreement reflect decreased requirements product impacts supply price reflect lower volume commitments results operations comparison years ended december 31 2020 2019 following table summarizes results operations years ended december 31 2020 2019 thousands revenue grant revenue 03 million year ended december 31 2020 compared 18 million year ended december 31 2019 decrease due lower amounts available grant reimbursement government grants year ended december 31 2020 received 28 million funding available small business innovation research grants received national institutes health support clinical development pemziviptadil treatment pah revenue collaborative agreement zero year ended december 31 2020 compared 06 million year ended december 31 2019 decrease 06 million related revenue received agreement immunoforge entered 2019 research development expense research development expense 721 million year ended december 31 2020 compared 309 million year ended december 31 2019 increase 412 million primarily attributable increases clinical drug production activities related bentracimab pemziviptadil personnel costs due additional headcount costs associated general research efforts following table summarizes research development expense functional area years ended december 31 2020 2019 thousands following table summarizes research development expense product candidate years ended december 31 2020 2019 thousands general administrative expense general administrative expense 131 million year ended december 31 2020 compared 112 million year ended december 31 2019 increase 19 million primarily attributable increases personnel expense due additional headcount directors officers liability insurance professional services related consulting legal services loss remeasurement derivative liability loss remeasurement derivative liability 125 million year ended december 31 2020 liability initially recorded present value estimated consideration received estimated consideration paid pursuant contractual terms sfj agreement determined fair value derivative liability subsequently remeasured year end level 3 derivative interest income interest income 02 million year ended december 31 2020 compared 16 million year ended december 31 2019 decrease 13 million attributable higher balances cash equivalents higher interest rates 2019 interest expense interest expense 14 million year ended december 31 2020 compared 11 million year ended december 31 2019 increase 04 million attributable increased borrowings 2020 2019 loan liquidity capital resources since inception generated revenue product sales incurred net losses negative cash flows operations financed operations primarily public offerings common stock private placements convertible debt convertible preferred stock borrowings term loans future periods expect sfj provide additional 729 million funding pursuant sfj agreement 300 million eligible receive upon achievement specified milestones respect clinical development bentracimab december 31 2020 cash equivalents 281 million march 2019 entered 2019 loan svb westriver pursuant could borrow 150 million issuable three separate tranches december 31 2020 drawn three tranches 2019 loan amounts 75 million 25 million 50 million april 2019 completed underwritten public offering common stock resulted issuance sale aggregate 4124475 shares common stock public offering price 1200 per share generating net proceeds 463 million deducting underwriting discounts commissions offering costs december 2019 filed shelf registration statement form s3 2019 shelf registration statement became effective january 2020 2019 shelf registration statement permits offering issuance sale us maximum aggregate offering price 2000 million common stock preferred stock debt securities warrants one offerings combination ii offering issuance sale us maximum aggregate offering price 600 million common stock may issued sold “atthemarket” sales agreement atm program citigroup global markets inc william blair company llc year ended december 31 2020 raised gross proceeds 29 million pursuant atm program sale 561848 shares common stock weightedaverage price 541 per share 1971 million common stock remaining sold 2019 shelf registration statement 571 million may sold atm program january 2020 entered sfj agreement pursuant sfj agreed provide funding support development bentracimab reversal agent antiplatelet drug ticagrelor sfj agreement sfj agreed pay us 1200 million support clinical development bentracimab inception sfj agreement december 31 2020 sfj provided funding paid amounts behalf aggregate amount 471 million addition expect sfj fund reimburse additional 429 million clinical trial costs expenses also eligible receive additional 300 million funding upon achievement specific clinical development milestones respect ongoing reverseit trial bentracimab following table summarizes cash flows periods set forth thousands operating activities net cash used operating activities 600 million year ended december 31 2020 use cash primarily related net loss 986 million addition 43 million change operating assets liabilities use cash partially offset noncash expenses primarily 270 million research development expenses paid behalf sfj 125 million loss remeasurement development derivative liability 22 million stockbased compensation change operating assets liabilities principally due 84 million increase prepaid expenses result drug manufacturing payments related bentracimab partially offset increases 19 million accrued expenses 10 million accounts payable 12 million decrease receivables due timing receipt grant revenue net cash used operating activities 396 million year ended december 31 2019 use cash primarily related net loss 392 million adjusted noncash charges primarily related 14 million stockbased compensation expense 05 million noncash interest expense 24 million change operating assets liabilities change operating assets liabilities principally due 20 million increase prepaid expense assets increase receivables 10 million partially offset 08 million increase accounts payable result increased clinical activities ongoing clinical trials bentracimab pemziviptadil investing activities net cash used investing activities 14 million purchase property equipment acquisition intellectual property rights year ended december 31 2020 net cash used investing activities 10 million purchase property equipment year ended december 31 2019 financing activities net cash provided financing activities 155 million year ended december 31 2020 due primarily receipt 152 million sfj agreement 29 million proceeds sales atm program partially offset 27 million repayments longterm debt net cash provided financing activities 535 million year ended december 31 2019 due primarily receipt 463 million net proceeds april 2019 underwritten public offering borrowings 81 million 2019 loan partially offset 09 million partial repayment svb loan funding requirements date generated revenues commercial sale approved drug products expect generate substantial revenues least next several years fail complete development product candidates timely manner fail obtain regulatory approval ability generate future revenue compromised cannot guarantee generate revenue product candidates expect generate significant revenue unless obtain regulatory approval commercialize product candidates expect expenses increase connection ongoing activities particularly continue research development continue initiate clinical trials seek marketing approval product candidates addition obtain approval product candidates expect incur significant commercialization expenses related sales marketing manufacturing distribution anticipate need substantial additional funding connection continuing operations unable raise capital needed attractive terms could forced delay reduce eliminate research development programs future commercialization efforts experienced net losses negative cash flows operations december 31 2020 accumulated deficit 2607 million expect continue incur net losses least next several years believe existing cash equivalents december 31 2020 addition 429 million clinical trial costs expenses expect sfj fund reimburse sufficient fund operating expenses capital requirements 12 months date issuance financial statements included annual report form 10k factors raise substantial doubt ability continue going concern see risk factorsthe auditors opinion audited financial statements fiscal year ended december 31 2020 included annual report form 10k contains explanatory paragraph relating substantial doubt ability continue going concern sfj agreement sfj may elect business related bentracimab transferred sfj remedy going concern condition within periods specified agreement ability share revenues commercialization bentracimab materially adversely affected” intend devote existing cash equivalents advance clinical preclinical development programs based estimates assumptions may prove wrong may use available capital resources sooner currently expect numerous risks uncertainties associated development commercialization product candidates unable estimate amounts increased capital outlays operating expenditures necessary complete development product candidates plan address liquidity needs pursuit additional funding combination equity debt financings government thirdparty financing marketing distribution agreements collaborations strategic alliances licensing agreements assurance able obtain additional funding acceptable terms able secure adequate additional funding required make reductions certain spending extend current funds unable raise adequate funds may liquidate assets may delay reduce scope eliminate development programs clinical trials may also delay development commercialization products license third parties rights commercialize products technology would otherwise seek commercialize sfj agreement fail remedy going concern condition within periods specified agreement sfj may elect business related bentracimab transferred sfj business related bentracimab transferred sfj share revenues commercialization bentracimab sfj received 300 return investment bentracimab entitled midsingledigit royalty net sales bentracimab united states certain european countries sfj received aggregate 500 return investment bentracimab entitled midsingledigit royalty net sales bentracimab rest world factors could harm operating results future prospects future capital requirements depend many factors including •the progress results ongoing planned future clinical trials bentracimab pemziviptadil pb6440 preclinical programs •the timing amount payments receive sfj agreement •the scope progress results costs preclinical development laboratory testing clinical trials future product candidates may decide pursue •the extent develop inlicense acquire product candidates technologies •the number development requirements product candidates may pursue •the costs timing outcome regulatory review product candidates •the costs timing future commercialization activities including product manufacturing marketing sales distribution product candidates receive marketing approval •the revenue received commercial sales product candidates receive marketing approval •our ability establish collaborations commercialize pemziviptadil united states •our ability establish collaborations commercialize bentracimab pemziviptadil product candidates outside united states •the costs timing preparing filing prosecuting patent applications maintaining enforcing intellectual property rights defending intellectual propertyrelated claims identifying potential product candidates conducting preclinical studies clinical trials timeconsuming expensive uncertain process takes many years complete may never generate necessary data results required obtain marketing approval achieve product sales addition product candidates approved may achieve commercial success commercial revenues derived sales product candidates expect commercially available near term future commercial revenue derived sales products expect commercially available several years accordingly need continue rely additional financing achieve business objectives adequate additional financing may available us acceptable terms extent raise additional capital sale equity convertible debt securities terms equity securities debt may restrict ability operate future debt financing equity financing available may involve agreements include covenants limiting restricting ability take specific actions incurring additional debt making capital expenditures entering profitsharing arrangements declaring dividends raise additional funds government private grants collaborations strategic alliances marketing distribution licensing arrangements third parties may required relinquish valuable rights technologies future revenue streams research programs product candidates grant licenses terms may favorable us ability raise additional capital may adversely impacted potential worsening global economic conditions recent disruptions volatility credit financial markets united states worldwide resulting ongoing covid19 pandemic offbalance sheet arrangements periods presented currently offbalance sheet arrangements defined sec rules regulations critical accounting policies significant judgments estimates management’s discussion analysis financial condition results operations based financial statements prepared accordance united states generally accepted accounting policies gaap preparation financial statements requires us make estimates judgments assumptions affect reported amounts assets liabilities disclosure contingent assets liabilities dates balance sheets reported amounts expenses reporting periods accordance gaap evaluate estimates judgments ongoing basis significant estimates include assumptions used determination accrued research development costs base estimates historical experience various factors believe reasonable circumstances results form basis making judgments carrying value assets liabilities readily apparent sources actual results may differ estimates different assumptions conditions believe following accounting policies critical judgments estimates used preparation financial statements see note 2 financial statements appearing elsewhere annual report discussion significant accounting policies accrued research development expense majority operating expenses date incurred research development activities part process preparing financial statements required estimate expenses resulting obligations contracts vendors consultants research organizations connection conducting clinical preclinical activities financial terms contracts subject negotiations vary contract may result payment flows match periods materials services provided contracts reflect preclinical study clinical trial expenses financial statements matching expenses period services efforts expended account expenses according progress preclinical study clinical trial measured timing various aspects preclinical study clinical trial related activities accrual estimates determined review underlying contracts along preparation financial models taking account discussions research key personnel progress preclinical studies clinical trials services conducted course preclinical study clinical trial adjust rate expense recognition actual results differ original estimates development derivative liability january 2020 entered sfj agreement pursuant sfj provides funding support global development bentracimab reversal agent antiplatelet drug ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure sfj agreement sfj agreed pay us 1200 million support clinical development bentracimab fda approves bla bentracimab agreed pay sfj initial payment 50 million additional 3250 million aggregate seven additional annual payments us approval payments ema national regulatory authorities certain european countries provide marketing approval bentracimab pay sfj initial payment 50 million additional 2050 million aggregate seven additional annual payments eu approval payments majority us approval payments eu approval payments made third anniversary seventh anniversary marketing approval applicable jurisdiction either pharmaceuticals medical devices agency pmda japan national medical products administration nmpa china provides marketing approval bentracimab pay sfj initial payment 10 million additional 590 million aggregate eight additional annual payments japanchina approval payments majority payments made fifth anniversary eighth anniversary marketing approval japanchina approval payments paid regardless receipt marketing approval japan china us approval payments eu approval payments japanchina approval payments proportionately adjusted event actual funding sfj lower greater 1200 million obligated make us approval payments receive marketing approval bentracimab fda eu approval payments receive marketing approval bentracimab ema national regulatory authority certain european countries japanchina approval payments receive marketing approval bentracimab either pmda nmpa account sfj agreement derivative instrument increases decreases consideration received repayments made respectively derivative adjusted reporting period estimated fair value derivative valued using scenariobased discounted cash flow method whereby scenario makes assumptions probability timing cash flows cash flows present valued using riskadjusted discount rate valuation method incorporates certain unobservable level 3 key inputs including probability timing funding ii probability timing achieving regulatory approvals iii cost borrowing 1600 plus risk free borrowing rate iv sfjs cost borrowing 250 plus risk free borrowing rate derivative presented liability balance sheet changes fair value recorded loss gain remeasurement development derivative liability statements operations actual results events differ materially estimates judgments assumptions used us applying policies reported financial condition results operations could materially affected recent accounting pronouncements see note 2 financial statements appearing elsewhere annual report information concerning recent accounting pronouncements jobs act transition period april 2012 jobs act enacted section 107 jobs act provides “emerging growth company” take advantage extended transition period provided section 7a2b securities act complying new revised accounting standards thus emerging growth company delay adoption certain accounting standards would otherwise apply private companies irrevocably elected avail extended transition period result adopt new revised accounting standards relevant dates adoption standards required public companies process evaluating benefits relying exemptions reduced reporting requirements jobs act subject certain conditions emerging growth company may rely certain exemptions including without limitation providing auditor’s attestation report system internal controls financial reporting pursuant section 404b sarbanesoxley act ii complying requirement may adopted public company accounting oversight board remain emerging growth company earliest occur 1 last day fiscal year ending december 31 2023 end fiscal year following fifth anniversary completion initial public offering b total annual gross revenues least 107 billion c deemed “large accelerated filer” rules sec means market value common stock held nonaffiliates exceeds 700 million prior june 30th 2 date issued 10 billion nonconvertible debt prior threeyear period “smaller reporting company” may continue qualify even longer qualify emerging growth company accordingly may provide less public disclosure larger public companies including inclusion two years audited financial statements two years related selected financial data management’s discussion analysis financial condition results operations disclosure result information provide stockholders may different might receive public reporting companies hold equity interests effect inflation significant impact net sales revenues income continuing operations 2020 2019 item 7a item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 7a quantitative qualitative disclosures market risk smaller reporting company defined rule 12b2 exchange act required provide information required item 8 item 8 financial statements supplementary data information required item 8 set forth financial statements included part iv item 15 annual report form 10k item 9 item 8 financial statements supplementary data information required item 8 set forth financial statements included part iv item 15 annual report form 10k item 9 item 8 financial statements supplementary data information required item 8 set forth financial statements included part iv item 15 annual report form 10k item 9 item 15 exhibits financial statement schedules a1 financial statements see index consolidated financial statements item 8 annual report form 10k phasebio pharmaceuticals inc contents report independent registered public accounting firm stockholders board directors phasebio pharmaceuticals inc opinion financial statements audited accompanying balance sheets phasebio pharmaceuticals inc company december 31 2019 2018 related statements operations redeemable convertible preferred stock stockholders’ equity deficit cash flows years ended related notes collectively financial statements opinion financial statements present fairly material respects financial position company december 31 2019 2018 results operations cash flows years ended conformity us generally accepted accounting principles change accounting principle discussed note 2 financial statements company changed method accounting leases january 1 2019 due adoption accounting standards update 201602 leases related amendments basis opinion financial statements responsibility company’s management responsibility express opinion financial statements based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud company required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion kpmg llp served company’s auditor since 2010 philadelphia pennsylvania march 30 2020 phasebio pharmaceuticals inc balance sheets thousands except share per share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements operations thousands except share per share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements redeemable convertible preferred stock stockholders’ equity deficit thousands except share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements cash flows thousands see accompanying notes financial statements phasebio pharmaceuticals inc notes financial statements 1 organization description business description business phasebio pharmaceuticals inc “company” incorporated delaware corporation january 10 2002 company clinicalstage biopharmaceutical company focused development commercialization novel therapies cardiopulmonary diseases company’s lead product candidate pb2452 novel reversal agent antiplatelet drug ticagrelor company developing reversal antiplatelet effects ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure company’s second product candidate pb1046 onceweekly fusion protein currently phase 2b clinical trial treatment pulmonary arterial hypertension pb1046 utilizes company’s proprietary halflife extending elastinlike polypeptide technology also serves engine future product pipeline candidates liquidity company experienced net losses negative cash flows operations since inception december 31 2019 accumulated deficit 1622 million company expects continue incur net losses least next several years december 31 2019 company cash equivalents 740 million working capital 703 million january 2020 company entered codevelopment agreement sfj agreement sfj pharmaceuticals x ltd sfj pharmaceuticals group company sfj pursuant sfj provide funding operational support clinical development pb2452 management believes existing cash equivalents december 31 2019 addition 100 million received march 2020 800 million anticipated proceeds company receive pursuant sfj agreement sufficient fund operating expenses capital requirements second half 2021 company currently effective shelf registration statement form s3 2019 shelf registration statement file securities exchange commission sec expires january 2023 2019 shelf registration statement currently permits offering issuance sale company aggregate offering price 2000 million common stock preferred stock debt securities warrants one offerings combination 600 million may offered issued sold atthemarket sales pursuant equity distribution agreement citigroup global markets inc william blair company llc equity distribution agreement securities sold 2019 shelf registration statement shares sold pursuant equity distribution agreement basis presentation accompanying financial statements prepared accordance united states generally accepted accounting principles “gaap” rules regulations sec reference notes applicable guidance meant refer gaap found accounting standards codification “asc” accounting standards updates “asu” promulgated financial accounting standards board “fasb” company manages operations single reportable segment purposes assessing performance making operating decisions 2 significant accounting policies use estimates preparation company’s financial statements requires management make estimates assumptions impact reported amounts assets liabilities revenues expenses disclosure contingent assets liabilities company’s financial statements accompanying notes significant estimates company’s financial statements relate valuation redeemable convertible preferred stock warrants prior initial public offering ipo conversion option convertible notes clinical trial accruals although estimates based company’s knowledge current events actions may undertake future actual results could differ materially estimates assumptions concentrations credit risk phasebio pharmaceuticals inc notes financial statements financial instruments potentially subject company significant concentrations credit risk consist primarily cash equivalents company maintains certain deposits federally insured financial institutions excess federally insured limits company could experience losses money market funds future cash equivalents company considers highly liquid investments original maturity date purchase three months less cash equivalents cash equivalents include cash readily available checking money market accounts restricted cash company restricted cash 20000 december 31 2018 held certificate deposit company’s bank secure company’s corporate credit card restriction removed june 2019 fair value financial instruments carrying amounts receivables prepaid expenses assets accounts payable accrued expenses current liabilities reasonable estimates fair value short maturity items based borrowing rates currently available company loans similar terms company believes fair values term loan operating lease liabilities corresponding rightofuse assets approximate respective carrying values property equipment property equipment recorded cost depreciated estimated useful lives assets three five years using straightline method leasehold improvements amortized shorter estimated useful lives lease term leases lease commencement company records lease liability based present value lease payments expected lease term including options extend lease company reasonably certain exercise company calculates present value lease payments using incremental borrowing rate companys leases provide implicit interest rate companys incremental borrowing rate lease rate interest would pay collateralized basis borrow amount equal lease payments similar terms lease commencement date company records corresponding rightofuse lease asset based lease liability adjusted lease incentives received initial direct costs paid lessor prior lease commencement date company may enter leases initial term 12 months less shortterm leases shortterm leases company records rent expense straightline basis record leases balance sheet company shortterm leases december 31 2019 2018 lease commencement company measures leases follows lease liability based present value remaining lease payments using discount rate determined lease commencement ii rightofuse lease asset based remeasured lease liability adjusted unamortized lease incentives received unamortized initial direct costs cumulative difference rent expense amounts paid lease agreement lease incentives received initial direct costs amortized straightline basis expected lease term rent expense recorded straightline basis expected lease term longlived assets company regularly reviews carrying value estimated lives longlived assets including property equipment rightofuse assets determine whether indicators impairment may exist warrant adjustments carrying values estimated useful lives determinants used evaluation include management’s estimate asset’s ability generate net positive cash flow future periods well strategic significance assets company’s business objectives impairment exist impairment loss would measured based extent estimated fair value less carrying value company recognize impairment losses years ended december 31 2019 2018 phasebio pharmaceuticals inc notes financial statements preferred stock warrant liability company previously issued freestanding warrants purchase shares redeemable convertible preferred stock since underlying redeemable convertible preferred stock classified outside permanent equity warrants classified liabilities accompanying balance sheet warrants classified liabilities recorded estimated fair value date issuance revalued subsequent balance sheet date fair value changes recognized increases reductions income expense accompanying statements operations company estimated fair value warrants using blackscholes optionpricing model connection company’s ipo october 2018 warrants either exercised converted warrants purchase common stock time liability reclassified stockholders’ equity preclinical clinical trial accruals company accrues expenses amounts incurred connection preclinical studies clinical trial activities performed third parties based upon estimates proportion work completed life individual trial subject enrollment rates accordance agreements clinical research organizations contract manufacturing organizations clinical trial sites company determines estimates reviewing contracts vendor agreements purchase orders discussions internal clinical personnel external service providers progress stage completion trials services agreedupon fee paid services however actual costs timing clinical trials highly uncertain subject risks may change depending upon number factors including company’s clinical development plan management makes estimates company’s accrued expenses balance sheet date company’s financial statements based facts circumstances known company time actual timing performance services level effort varies estimate company adjust accrual accordingly nonrefundable advance payments goods services including fees process development manufacturing distribution clinical supplies used future research development activities deferred recognized expense period related goods consumed services performed research development expense research development costs expensed incurred stockbased compensation company measures recognizes compensation expense stockbased compensation based estimated fair value date grant currently company’s stockbased awards consist stock options however future grants company’s equity compensation plan may also consist shares restricted stock restricted stock units stock appreciation rights performance awards performance units company also maintains employee stock purchase program may issue shares company estimates fair value stock options using blackscholes optionpricing model requires use estimates company recognizes stockbased compensation cost ratably vesting stock options straightline basis requisite service period award records forfeitures period occur blackscholes optionpricing model requires input subjective assumptions including riskfree interest rate fair value underlying common stock option grants prior ipo expected dividend yield company’s common stock expected volatility price company’s common stock expected term option estimates involve inherent uncertainties application management’s judgment factors change different assumptions used company’s stockbased compensation expense could materially different future income taxes company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities determined basis differences financial statements tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date phasebio pharmaceuticals inc notes financial statements company recognizes net deferred tax assets extent company believes assets likely realized making determination management considers available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income taxplanning strategies results recent operations management determines company would able realize deferred tax assets future excess net recorded amount management would make adjustment deferred tax asset valuation allowance would reduce provision income taxes company records uncertain tax positions basis twostep process whereby 1 management determines whether likely tax positions sustained basis technical merits position 2 tax positions meet morelikelythannot recognition threshold management recognizes largest amount tax benefit 50 likely realized upon ultimate settlement related tax authority company recognizes interest penalties related unrecognized tax benefits within income tax expense accrued interest penalties included within related tax liability line grant revenue grant revenue derived government grants support company’s efforts specific research projects company determined government agencies providing grants company customers company recognizes grant revenue reasonable assurance compliance conditions grant reasonable assurance grant revenue received revenue collaborative agreement company generates revenues payments received collaborative agreement collaboration agreements company recognizes revenue transfers promised goods services partners amount reflects consideration company expects entitled exchange goods services determine revenue recognition contracts partners company performs following five steps identifies promised goods services contract ii identifies performance obligations contract including whether distinct context contract iii determines transaction price including constraint variable consideration iv allocates transaction price performance obligations contract v recognizes revenue company satisfies performance obligations revenue collaborative agreements company generally collects upfront license payment collaboration partner also entitled receive eventbased payments subject collaboration partners achievement specified development regulatory salesbased milestones addition company generally entitled royalties products collaboration commercialized although agreements form structured collaborative agreements accounting purposes represent contracts partners subject accounting literature collaborative arrangements company grants collaboration partners license company’s intellectual property company develop assets jointly collaboration partner share significant risks development commercialization activities transaction price contract represents amount company entitled exchange providing goods services partner transaction price include amounts subject uncertainties unless probable significant reversal revenue uncertainty resolved apart upfront license payment fees company may earn collaborative agreements subject significant uncertainties product development achievement many eventbased development regulatory milestones may probable milestones actually achieved generally relates milestones obtaining marketing authorization approvals successful completion clinical trials respect development milestones eg dosing first patient clinical trial achievement could considered probable prior actual occurrence based progress towards commencement trial company include amounts subject uncertainties transaction price probable amount result significant reversal revenue future end reporting period company reevaluates probability achievement milestones related constraint necessary adjusts estimate overall transaction price agreements generally one type performance obligation license generally transferred time agreement inception allocation transaction price among multiple performance obligations required phasebio pharmaceuticals inc notes financial statements upfront amounts allocated licenses recognized revenue licenses transferred collaboration partners development milestones fees recognized revenue occurrence becomes probable net loss per share basic net loss per share calculated dividing net loss weightedaverage number common shares outstanding period diluted net loss per share computed dividing net loss weightedaverage number common shares common share equivalents outstanding period common stock equivalents included effect dilutive company’s potentially dilutive securities include redeemable convertible preferred stock warrants outstanding stock options company’s stock option plan excluded computation diluted net loss per share would antidilutive periods presented difference number shares used compute basic diluted shares outstanding due company’s net loss position following table sets forth outstanding potentially dilutive securities excluded calculation diluted net loss per share inclusion would antidilutive recent accounting pronouncements february 2016 fasb issued asu 201602 leases update amended current accounting guidance lease transactions new guidance lessee required recognize assets liabilities leases terms excess twelve months additionally certain qualitative quantitative disclosures required financial statements company adopted asu 201602 first quarter 2019 using modified retrospective transition method effective date permitted amendments asu 201811 result company required adjust comparative priorperiod financial information effects standard make new required lease disclosures periods date adoption company elected adopt package transition practical expedients therefore reassess 1 whether existing expired contracts contain lease 2 lease classification existing expired leases 3 accounting initial direct costs previously capitalized company elect practical expedient use hindsight leases existing adoption date company expect amendments asu 201801 land easement practical expedient effect financial statements company enter land easement arrangements adoption new leasing standards affect retained earnings components equity december 31 2018 upon adoption first quarter 2019 company recorded rightofuse assets corresponding lease liabilities 20 million august 2018 fasb issued asu 201813 fair value measurement disclosure framework topic 820 changes disclosure requirements fair value measurement updated guidance improves disclosure requirements fair value measurements updated guidance effective fiscal years interim periods within fiscal years beginning december 15 2019 early adoption permitted removed modified disclosures company currently assessing timing impact adopting updated provisions 3 fair value measurement fair value defined exit price representing amount would received sell asset paid transfer liability orderly transaction market participants measurement date fair value marketbased measurement determined based assumptions market participants would use pricing asset liability company classifies fair value measurements one following three categories disclosure purposes level 1 quoted prices active markets identical assets liabilities level 2 inputs level 1 prices similar assets liabilities directly indirectly observable marketplace phasebio pharmaceuticals inc notes financial statements level 3 unobservable inputs supported little market activity values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s cash equivalents classified using level 1 inputs within fair value hierarchy valued using quoted market prices broker dealer quotations alternative pricing sources reasonable levels price transparency none company’s nonfinancial assets liabilities recorded fair value nonrecurring basis transfers levels occurred periods presented following table summarizes company’s assets liabilities require fair value measurements recurring basis respective input levels based fair value hierarchy thousands following tables present activity preferred stock warrant liability derivative liability measured fair value using significant unobservable level 3 inputs year ended december 31 2018 thousands 4 property equipment following table presents composition property equipment net december 31 2019 2018 thousands phasebio pharmaceuticals inc notes financial statements 5 accrued expenses current liabilities following table presents composition accrued expenses current liabilities december 31 2019 2018 thousands 6 debt convertible promissory notes 2017 company issued 147 million convertible promissory notes “2017 notes” holders series c1 redeemable convertible preferred stock “series c1” 2017 notes bore interest rate 8 per annum upon subsequent equity financing least 100 million prior stated maturity date 2017 notes plus accrued interest would automatically convert shares stock issued company financing price equal 80 lowest issue price 2017 notes could converted variable number shares preferred stock accordingly company determined conversion provision redemption feature redemption feature evaluated embedded derivative bifurcated convertible promissory notes due substantial premium paid upon redemption accounted derivative instrument upon bifurcating redemption feature company recorded debt discount 30 million recognized interest expense term 2017 notes connection 2017 notes company issued warrants noteholders purchase 304397 shares series c1 warrants exercisable 012 per share expired upon earlier 1 date initial closing liquidation event defined 2 closing firm commitment underwritten initial public offering 3 january 2024 warrants exercised connection closing company’s ipo company recorded debt discount 17 million represented estimated fair value warrants upon issuance 2017 notes amortized interest expense term 2017 notes using effectiveinterest method august 2018 company sold 1842959 shares series redeemable preferred stock “series d” new existing investors price 9659 per share net proceeds 177 million issued warrants purchase 368582 shares series c1 exercise price 012 per share “series financing” concurrent series financing company’s previously outstanding 2017 notes including accrued interest thereon converted 2080209 shares series interest expense including debt discount related 2017 notes 34 million year ended december 31 2018 phasebio pharmaceuticals inc notes financial statements term loans october 2017 loan agreement silicon valley bank october 2017 company entered loan security agreement “svb loan” silicon valley bank “svb” pursuant company could borrow 75 million issuable three separate tranches “growth capital advances” 35 million “tranche a” 20 million “tranche b” 20 million “tranche c” growth capital advances available upon achievement certain clinical regulatory milestones terms svb loan amended company required make interestonly payments december 31 2018 followed amortization period 24 months equal monthly payments principal plus interest amounts paid full maturity date svb loan december 31 2020 connection svb loan company issued svb warrant purchase 49713 shares series c1 exercise price 9659 per share became exercisable common stock following ipo warrant immediately exercisable expires october 18 2027 company required make final payment equal 7 original aggregate principal amount growth capital advances maturity november 2017 company drew 35 million tranche company option prepay less borrowed amounts provided company would obligated pay prepayment fee equal 30 outstanding principal balance applicable growth capital advances prepayment made prior first anniversary effective date svb loan b 20 outstanding principal balance applicable growth capital advances prepayment made second anniversary effective date svb loan c 10 outstanding principal balance applicable growth capital advances prepayment made second anniversary effective date svb loan company repaid outstanding principal balance accrued portion final payment svb loan full using first tranche new term loan entered march 2019 loan march 2019 loan agreement silicon valley bank westriver innovation lending fund viii lp march 2019 company entered 2019 loan svb westriver innovation lending fund viii lp “westriver” pursuant company could borrow 150 million issuable three separate tranches “advances” 75 million “tranche 1” issued upon execution 2019 loan 25 million issued may 2019 “tranche 2” 50 million issued october 2019 “tranche 3” company required draw upon achievement certain regulatory milestones “tranche 3 milestones” maturity date 2019 loan march 1 2023 terms 2019 loan company make interestonly payments june 30 2020 respect tranche 1 tranche 2 tranche 3 rate equal greater prime rate plus 100 defined 2019 loan 65 followed amortization period 33 months equal monthly payments principal plus interest paid full addition substitution company’s regular monthly payments principal plus accrued interest company required make final payment equal 6 aggregate principal amount advances “final payment” maturity date upon execution 2019 loan draw tranche 1 company issued svb westriver warrants purchase aggregate 37606 shares common stock exercise price 473 per share may 2019 upon draw tranche 2 company issued svb westriver warrants purchase aggregate 12130 shares common stock exercise price 1086 per share october 2019 upon draw tranche 3 company issued svb westriver warrants purchase aggregate 24262 shares common stock exercise price 388 per share warrants immediately exercisable expire ten years date issuance upon execution 2019 loan company drew 75 million tranche 1 repaid outstanding principal balance accrued portion final payment svb loan company’s obligations 2019 loan secured firstpriority security interest substantially company’s current future assets company also obligated comply various customary covenants including restrictions company’s ability encumber intellectual property assets company recorded debt discount 04 million estimated fair value warrants debt issuance costs upon borrowing tranches 1 2 3 amortized interest expense term 2019 loan phasebio pharmaceuticals inc notes financial statements using effectiveinterest method interest expense including amortization debt discount related term debt totaled 11 million 06 million years ended december 31 2019 2018 respectively balance final payment liability 02 million december 31 2019 included longterm liabilities balance sheet company compliance covenants 2019 loan december 31 2019 based 39month amortization outstanding principal amounts 2019 loan following table sets forth year company’s required future principal payments december 31 2019 thousands 7 commitments contingencies legal proceedings company currently party litigation management aware pending threatened litigation company believes would materially affect company’s business operating results financial condition cash flows 8 leases company leases office research development facilities equipment various noncancellable operating lease agreements january 2010 company entered lease office laboratory space malvern pennsylvania “malvern lease” malvern lease commenced march 2010 amended extend term july 31 2018 september 30 2023 option extend lease additional three years lease contains escalating rent payments december 2018 company entered lease office space san diego california expires october 2022 december 31 2019 weighted average remaining lease term company’s leases 61 years weighted average discount rate used determine rightofuse assets corresponding operating lease liabilities 64 maturities operating lease liabilities december 31 2019 follows company recognizes rent expense operating leases straightline basis company accounts difference minimum lease payments straightline amount deferred rent records offset operating lease rightofuse assets rent expense 05 million 04 million years ended december 31 2019 2018 respectively phasebio pharmaceuticals inc notes financial statements 9 stockholders’ equity preferred stock company issued series 1 redeemable convertible preferred stock series 2 redeemable preferred stock series aa redeemable convertible preferred stock series b redeemable convertible preferred stock series c1 series c2 redeemable convertible preferred stock series c3 redeemable convertible preferred stock series convertible preferred stock collectively “preferred stock” upon closing ipo october 2018 shares preferred stock automatically converted aggregate 13225048 shares common stock initial public offering october 2018 company completed ipo common stock resulted issuance sale aggregate 9864666 shares common stock public offering price 500 per share generating net proceeds 430 million deducting underwriting discounts commissions offering costs april 2019 offering april 2019 company completed underwritten public offering common stock resulted issuance sale aggregate 4124475 shares common stock public offering price 1200 per share generating net proceeds 463 million deducting underwriting discounts commissions offering costs shelf registration statement december 2019 company filed 2019 shelf registration statement form s3 became effective january 2020 2019 shelf registration statement permits offering issuance sale company maximum aggregate offering price 2000 million common stock preferred stock debt securities warrants one offerings combination ii offering issuance sale company maximum aggregate offering price 600 million companys common stock may issued sold “atthemarket” sales pursuant equity distribution agreement securities sold 2019 shelf registration statement shares sold pursuant equity distribution agreement 10 stockbased compensation stock plans july 2018 company amended restated 2002 stock plan “2002 plan” reserve additional 800000 shares common stock issuance 2002 plan october 2018 company’s board directors stockholders adopted approved 2018 equity incentive plan “2018 plan” successor continuation 2002 plan 2018 plan became effective upon execution underwriting agreement related ipo october 17 2018 grants made 2002 plan initially maximum number shares company’s common stock may issued 2018 plan 3231626 shares december 31 2019 company 1221879 shares available grant 2018 plan number shares common stock reserved issuance 2018 plan automatically increase january 1 calendar year starting january 1 2019 january 1 2028 amount equal 3 total number shares company’s capital stock outstanding last day calendar month date automatic increase lesser number shares determined company’s board directors subject provision company added 862992 shares available grant 2018 plan effective january 1 2020 maximum number shares company’s common stock may issued exercise incentive stock options 2018 plan 9694878 phasebio pharmaceuticals inc notes financial statements following table summarizes stock option activity 2002 plan 2018 plan year ended december 31 2019 weightedaverage grant date fair value per share options granted 262 275 years ended december 31 2019 2018 respectively aggregate intrinsic value options exercised 10 million 02 million years ended december 31 2019 2018 respectively december 31 2019 total unrecognized compensation expense related unvested employee nonemployee stock option awards 32 million expected recognized expense weightedaverage period approximately 27 years october 2018 company’s board directors stockholders approved 2018 employee stock purchase plan “espp” espp became effective october 17 2018 purpose espp secure services new employees retain services existing employees provide incentives individuals exert maximum efforts toward company’s success company’s affiliates espp intended qualify “employee stock purchase plan” within meaning section 423 code united states employees espp authorizes issuance 196000 shares company’s common stock purchase rights granted company’s employees company’s designated affiliates number shares common stock reserved issuance automatically increase january 1 calendar year beginning january 1 2019 january 1 2028 lesser 1 total number shares company’s common stock outstanding last day calendar month date automatic increase 2 490000 shares provided date increase company’s board directors may determine increase less amount set forth clauses 1 2 subject provision company added 287664 shares available grant espp effective january 1 2020 december 31 2019 shares common stock purchased espp determining fair value stock options fair value grant stock options determined company using methods assumptions discussed certain inputs subjective generally require judgment determine expected termthe expected term stock options represents weighted average period stock options expected outstanding company uses simplified method estimating expected term simplified method calculates expected term average timetovesting contractual life options expected volatilitydue company’s limited operating history lack companyspecific historical implied volatility expected volatility assumption determined examining historical volatilities group industry peers whose share prices publicly available phasebio pharmaceuticals inc notes financial statements riskfree interest ratethe riskfree rate assumption based united states treasury instruments terms consistent expected term company’s stock options expected dividendthe company paid intend pay dividends common stock valuationdue absence public market trading company’s common stock prior ipo necessary estimate fair value common stock underlying stockbased grants performing fair value calculations using blackscholes option pricing model fair value common stock underlying stockbased grants assessed grant date board directors options purchase shares common stock granted exercise price per share less fair value per share common stock underlying options date grant absence public trading market company’s common stock company determined estimated fair value common stock using methodologies approaches assumptions consistent american institute certified public accountants “aicpa” audit accounting practice aid series valuation privately held company equity securities issued compensation “aicpa practice aid” fair value option estimated date grant using weighted average assumptions table stockbased compensation expense reported company’s statements operations years ended december 31 2019 2018 follows thousands 11 license agreements medimmune limited november 2017 company entered license agreement “medimmune license” medimmune limited “medimmune” medimmune whollyowned subsidiary astrazeneca plc “astrazeneca” pursuant terms medimmune license medimmune granted company exclusive global rights purpose developing commercializing products medimmune license “medimmune licensed product” consideration license rights granted medimmune company made upfront payment 01 million included research development expense year ended december 31 2017 company also obligated make series contingent milestone payments totaling aggregate 180 million upon achievement clinical development regulatory milestones year ended december 31 2019 company made 10 million milestone payment medimmune recorded research development expense addition company pay medimmune tiered royalties ranging midsingledigit lowteen percentages net sales medimmune licensed products additional payments 500 million aggregate commercial milestones company also must pay quarterly fees relating technical services provided medimmune license requires company cooperate medimmune commercial messaging pb2452 provides medimmune return rights pb2452 certain commercial diligence requirements achieved company addition medimmune license offers option phasebio pharmaceuticals inc notes financial statements thirdparty product storage costs company incurred insignificant amount thirdparty product storage costs years ended december 31 2019 2018 astrazeneca stockholder company duke university october 2006 company entered license agreement duke university “duke” amended “duke license” pursuant duke license duke granted company exclusive worldwide license certain patent rights nonexclusive license knowhow owned controlled duke develop commercialize products processes covered duke license “duke licensed products” duke license amended february 2016 allow duke use company’s technology area smallmolecule oncologics duke license worldwide sublicensable agreement remains full effect life lasttoexpire patents included patent rights estimated 2029 company required apply prosecute maintain united states foreign patent rights duke license company obligated pay 22 million upon achievement clinical development regulatory milestones 04 million upon achievement commercial milestones duke license may terminated duke company fails meet certain clinical development regulatory milestones within specified timeframes december 31 2019 company compliance development obligations company required use commercially reasonable efforts develop one products processes introduce commercial markets duke receive low singledigit royalty percentages net sales duke licensed products company sublicensee minimum aggregate royalties 02 million payable following company’s achievement certain commercial milestones sales duke licensed products services occurred since effective date december 31 2019 certain alliance fee payments greater 03 million low doubledigit percentage fees company receives third party consideration forming strategic alliance may required depending upon patent rights commercialized company pay duke first 10 million nonroyalty payments receives sublicensee thereafter specified percentage additional nonroyalty payments receives subject certain conditions duke receives revenue result license sublicense third party field smallmolecule oncologics pay company specified percentage amount revenue excess 10 million duke also stockholder company wacker april 2019 company entered license agreement “wacker license agreement” wacker biotech gmbh “wacker” pursuant wacker granted company exclusive license certain wacker’s intellectual property rights use wacker’s proprietary e coli strain manufacture pb2452 worldwide outside specified asian countries commercialize pb2452 approved manufactured company’s behalf using wacker’s proprietary e coli strain throughout world company right grant sublicenses license subject certain conditions specified wacker license agreement terms agreement company required pay fixed nominal perunit royalty subject adjustment annual license fee fixed euro amount low mid six digits agreement force indefinite period time upon expiration company’s royalty obligations license considered fully paid convert nonexclusive license either party may terminate wacker license agreement breach cured within specified number days company incurred 02 million costs wacker license agreement year ended december 31 2019 12 revenue grant revenue february 2018 company received small business innovation research “sbir” grants national institutes health aggregate amount 28 million support clinical development pb1046 treatment pulmonary arterial hypertension period february 17 2018 july 31 2020 connection sbir grants united states government receive nonexclusive royaltyfree license use technology company develops grants company recognized 18 million 07 million sbir grants year ended december 31 2019 2018 respectively phasebio pharmaceuticals inc notes financial statements revenue collaborative agreement april 2019 company entered agreement immunoforge co ltd “immunoforge” exclusive worldwide license pb1023 longacting recombinant glucagonlike peptide1 analogue treatment certain diseases including conditions related sarcopenia company received upfront payment 02 million upon execution contract 01 million certain scientific consulting services entitled receive 03 million within one year effective date agreement company eligible receive milestonebased payments midsingle digit royalty payments net sales licensed products percentage duke entitled receive pursuant duke license year ended december 31 2019 company recognized 06 million revenue related immunoforge agreement 13 income taxes company’s loss income taxes 392 million 238 million years ended december 31 2019 2018 respectively generated entirely united states company record current deferred income tax expense benefit years ended december 31 2019 2018 reconciliation income tax expense benefit amount computed applying statutory federal income tax rate loss operations summarized years ended december 31 2019 2018 respectively follows thousands significant components company’s deferred tax assets december 31 2019 2018 shown phasebio pharmaceuticals inc notes financial statements december 31 2019 2018 management assessed realizability net deferred tax assets evaluated need valuation allowance net deferred tax assets evaluation utilizes framework contained asc 740 income taxes whereby management considers available positive negative evidence balance sheet date determine whether portion company’s net deferred tax assets realized guidance valuation allowance must established net deferred tax assets morelikelythannot probability level 50 asset realized management followed guidance asc 740 states “a cumulative loss recent years significant piece negative evidence difficult overcome” concluded company’s net deferred tax assets realizable december 31 2019 2018 accordingly valuation allowance 500 million 368 million recorded offset net deferred tax assets change valuation allowance years ended december 31 2019 2018 increase 132 million increase 64 million respectively december 31 2019 company federal state net operating loss “nol” carryforwards 1490 million 1534 million respectively federal nols generated prior 2018 may used offset 100 future taxable income begin expire 2022 unless previously utilized federal nol generated post2017 574 million available offset 80 future taxable income may carried forward indefinitely pennsylvania nols may used offset 40 future taxable income begin expire 2029 unless previously utilized december 31 2019 company federal pennsylvania research development tax credit carryforwards totaling 38 million 04 million respectively federal pennsylvania research development tax credit carryforwards begin expire 2028 2029 respectively unless previously utilized december 31 2019 company also federal orphan drug credit carryforwards 42 million begin expire 2036 unless previously utilized december 31 2019 company generated combination research development credits orphan drug credits certain credits derived tax credit studies document qualified activities certain credits derived studies credits calculated study irs audit may disagree amount credits calculated studies ultimately performed credits may result adjustment specific credits internal revenue code utilization corporation’s net operating loss tax credit carryforwards may limited following greater 50 change ownership threeyear period unused annual limitation may phasebio pharmaceuticals inc notes financial statements carried forward future years balance net operating loss tax credit carryforward period rules prior ownership changes may created limitation company’s ability use certain tax carryforwards yearly basis additionally certain state operating losses may also limited including pennsylvania limits net operating loss carryforward utilization 40 apportioned taxable income company applies twostep approach recognizing measuring uncertain tax positions first step evaluate tax position recognition determining weight available evidence indicates likely position sustained audit including resolution related appeals litigation processes second step measure tax benefit largest amount 50 likely realized upon ultimate settlement income tax positions must meet likely recognition threshold effective date recognized upon adoption asc 740 subsequent periods interpretation also provides guidance measurement derecognition classification interest penalties accounting interim periods disclosure transition company files income tax returns united states federal jurisdiction various state jurisdictions tax years 2016 forward remain open examination federal tax purposes tax years 2016 forward remain open examination company’s significant state tax jurisdictions extent utilized future years’ tax returns net operating loss carryforwards december 31 2019 remain subject examination respective tax year closed following table summarizes activity related company’s gross unrecognized tax benefits years ended december 31 2019 2018 thousands due companys valuation allowance none unrecognized tax benefits recognized would affect companys effective tax rate december 31 2019 2018 company unrecognized tax benefits 26 million 18 million respectively company recognizes interest penalties related uncertain tax positions income tax expense years ended december 31 2019 2018 company accrue interest penalties uncertain tax positions company expect unrecognized tax benefits change significantly within next 12 months 14 employee retirement plan company employee retirement plan pursuant section 401k internal revenue code employees eligible participate provided meet requirements plan company required make matching contributions plan however 2019 company began making matching contributions company voluntarily contributed 01 million plan year ended december 31 2019 15 related party transactions described note 11 company party medimmune license astrazeneca parent company medimmune related party company 16 subsequent events codevelopment agreement pb2452 sfj pharmaceuticals january 2020 company entered sfj agreement pursuant sfj provide funding company support global development pb2452 reversal agent antiplatelet drug ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure sfj agreement sfj agreed pay company 1200 million support clinical development pb2452 march 2020 sfj phasebio pharmaceuticals inc notes financial statements paid company initial 100 million sfj pay company additional 800 million cost reimbursements followed six equal quarterly payments beginning quarter ending september 30 2020 quarter ending december 31 2021 additional 300 million upon achievement specified clinical development milestones respect companys clinical development pb2452 fda approves biologics license application pb2452 company agreed pay sfj initial payment 50 million additional 3250 million aggregate seven additional annual payments “us approval payments” ema national regulatory authorities certain european countries provide marketing approval pb2452 company pay sfj initial payment 50 million additional 2050 million aggregate seven additional annual payments “eu approval payments” majority us approval payments eu approval payments made third anniversary seventh anniversary marketing approval applicable jurisdiction either pharmaceuticals medical devices agency “pmda” japan national medical products administration “nmpa” china provide marketing approval pb2452 company pay sfj initial payment 10 million additional 590 million aggregate eight additional annual payments “japanchina approval payments” majority payments made fifth anniversary eighth anniversary marketing approval japanchina approval payments paid regardless receipt marketing approval japan china us approval payments eu approval payments japanchina approval payments proportionately adjusted event actual funding sfj lower greater 1200 million company obligated make us approval payments receive marketing approval pb2452 fda eu approval payments receive marketing approval pb2452 ema national regulatory authority certain european countries japanchina approval payments receive marketing approval pb2452 either pmda nmpa connection sfj agreement company issued sfj tenyear warrant exercisable 2200000 shares companys common stock exercise price 650 per share warrant exercisable follows 1100000 shares may exercised time effective date sfj agreement provided sfj may sell exercised shares one year effective date ii remaining 1100000 shares may exercised time sfj’s election results company’s phase 3 trial meet interim primary endpoint set forth phase 3 trial protocol sfj agreement company granted sfj security interest companys assets pertaining pb2452 sfj agreement also provides certain default provisions early payment provisions amendment medimmune license january 2020 connection company entering sfj agreement company entered amendment medimmune license pursuant medimmune consented potential assignment medimmune license transfer company’s business related pb2452 sfj event occurrence certain program transfer events ever occur viamet asset purchase agreement january 2020 company entered asset purchase agreement pb6440 agreement viamet pharmaceuticals holdings llc viamet whollyowned subsidiary selenity therapeutics bermuda ltd selenity together viamet sellers pursuant company acquired assets intellectual property rights related sellers proprietary cyp11b2 inhibitor compound formerly known se6440 vt6440 certain cyp11b2 inhibitor compounds covered patent rights acquired company pb6440 agreement together compounds company intends designate se6440 pb6440 company intends develop treatmentresistant hypertension terms pb6440 agreement company required pay viamet upfront fee 100000 upon closing transaction 51 million upon achievement certain development intellectual property milestones 1425 million upon achievement certain commercial milestones low midsingle digit royalty percentages net sales approved products consent amendment 2019 loan march 2020 connection company entering sfj agreement company entered consent first amendment first amendment 2019 loan svb westriver together lenders pursuant first amendment lenders consented companys entry sfj agreement required company obtain consent svb grant sfj security interest company’s assets owned controlled company necessary manufacture use sale pb2452 first amendment also provides event sfj agreement terminated company breached default sfj agreement giving effect applicable grace periods company grant lenders security interest amount unrestricted cash phasebio pharmaceuticals inc notes financial statements equal least aggregate outstanding balance obligations 2019 loan security prompt payment obligations connection first amendment company lenders concurrently entered intellectual property security agreement granting lenders security interest company’s intellectual property addition company svb capacity administrative agent collateral agent lenders sfj entered subordination agreement pursuant sfj’s liens right payment performance sfj agreement subordinated lenders’ liens right payment full 2019 loan a2 financial statement schedules financial statement schedules omitted required applicable required information included financial statements notes financial statements a3 exhibits exhibit index incorporated reference exhibit number exhibit title form file exhibit filing date 101pre xbrl taxonomy extension presentation linkbase document filed herewith indicates management contract compensatory plan † confidential treatment granted certain portions exhibit indicated asterisks information omitted filed separately securities exchange commission †† certain portions exhibit indicated asterisks omitted material would likely cause competitive harm phasebio pharmaceuticals inc publicly disclosed certifications furnished solely accompany quarterly report pursuant 18 usc section 1350 filed purposes section 18 securities exchange act 1934 amended incorporated reference filing registrant whether made date hereof regardless general incorporation language filing item 16 form 10k summary applicable signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized phasebio pharmaceuticals inc march 30 2020 john p sharp john p sharp chief financial officer behalf registrant capacity principal financial officer principal accounting officer know persons presents person whose signature appears constitutes appoints jonathan p mow john p sharp jointly severally true lawful attorneysinfact agents full power substitution resubstitution name place stead capacities sign annual report form 10k phasebio pharmaceuticals inc amendments thereto file exhibits thereto documents connection therewith securities exchange commission granting unto said attorneysinfact agents full power authority perform every act thing requisite necessary done premises hereby ratifying confirming said attorneysinfact agents substitute substitutes may lawfully cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated item 15 exhibits financial statement schedules a1 financial statements see index consolidated financial statements item 8 annual report form 10k phasebio pharmaceuticals inc contents report independent registered public accounting firm stockholders board directors phasebio pharmaceuticals inc opinion financial statements audited accompanying balance sheets phasebio pharmaceuticals inc company december 31 2018 2017 related statements operations redeemable convertible preferred stock stockholders’ equity deficit cash flows years ended related notes collectively financial statements opinion financial statements present fairly material respects financial position company december 31 2018 2017 results operations cash flows years ended conformity us generally accepted accounting principles basis opinion financial statements responsibility company’s management responsibility express opinion financial statements based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion kpmg llp served company’s auditor since 2010 philadelphia pennsylvania march 26 2019 phasebio pharmaceuticals inc balance sheets thousands except share per share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements operations thousands except share per share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements redeemable convertible preferred stock stockholders’ equity deficit thousands except share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements cash flows thousands see accompanying notes financial statements phasebio pharmaceuticals inc notes financial statements 1 organization description business description business phasebio pharmaceuticals inc “company” incorporated delaware corporation january 10 2002 company clinicalstage biopharmaceutical company focused development commercialization novel therapies treat orphan diseases initial focus cardiopulmonary indications company’s lead product candidate pb2452 novel reversal agent antiplatelet drug ticagrelor company developing treatment patients ticagrelor experiencing major bleeding event require urgent surgery company recently completed phase 1 clinical trial pb2452 healthy subjects intends initiate phase 2a clinical trial healthy older subjects first half 2019 company’s second product candidate pb1046 onceweekly fusion protein currently phase 2b clinical trial treatment pulmonary arterial hypertension pb1046 utilizes company’s proprietary halflife extending elastinlike polypeptide “elp” technology also serves engine future product pipeline candidates initial public offering october 22 2018 company completed initial public offering “ipo” common stock resulted issuance sale aggregate 9864666 shares common stock public offering price 500 per share generating net proceeds approximately 430 million deducting underwriting discounts commissions offering costs connection completion ipo thenoutstanding shares company’s redeemable convertible preferred stock converted aggregate 13200115 shares common stock upon completion ipo company’s certificate incorporation amended restated amended restated certificate incorporation company’s authorized capital stock consists 200000000 shares common stock par value 0001 per share 10000000 shares preferred stock par value 0001 per share reverse stock split october 2018 company effected 110634for1 reverse split outstanding common stock redeemable convertible preferred stock fractional shares issued connection stock split par value terms common stock affected stock split share per share amounts including stock options retroactively adjusted financial statements periods presented reflect reverse stock split exercise prices stock options retroactively adjusted financial statements periods presented reflect reverse stock split liquidity company experienced net losses negative cash flows operations since inception december 31 2018 accumulated deficit 1229 million company expects continue incur net losses least next several years december 31 2018 company cash equivalents 610 million working capital 581 million company believes existing cash equivalents sufficient fund operating expenses capital requirements second quarter 2020 basis presentation accompanying financial statements prepared accordance us generally accepted accounting principles “gaap” rules regulations securities exchange commission “sec” reference notes applicable guidance meant refer gaap found accounting standards codification “asc” accounting standards updates “asu” promulgated financial accounting standards board “fasb” certain nonsignificant reclassifications made conform prior period presentation company manages operations single reportable segment purposes assessing performance making operating decisions 2 significant accounting policies use estimates preparation company’s financial statements requires management make estimates assumptions impact reported amounts assets liabilities revenues expenses disclosure contingent assets liabilities company’s financial statements accompanying notes significant estimates company’s financial statements relate valuation redeemable convertible preferred stock warrants prior ipo conversion option convertible notes clinical trial accruals although estimates based company’s knowledge current events actions may undertake future actual results could differ materially estimates assumptions concentrations credit risk financial instruments potentially subject company significant concentrations credit risk consist primarily cash equivalents company maintains certain deposits federally insured financial institutions excess federally insured limits company could experience losses money market funds future cash equivalents company considers highly liquid investments original maturity date purchase three months less cash equivalents cash equivalents include cash readily available checking money market accounts restricted cash company restricted cash 20000 december 31 2018 2017 held certificate deposit company’s bank secure company’s corporate credit card fair value financial instruments carrying amounts accounts receivable prepaid expenses current assets accounts payable accrued expenses reasonable estimates fair value short maturity items based borrowing rates currently available company loans similar terms company believes fair value term loan approximates carrying value see note 6 property equipment property equipment recorded cost depreciated estimated useful lives assets three five years using straightline method leasehold improvements amortized shorter estimated useful lives lease term longlived assets company regularly reviews carrying value estimated lives longlived assets including property equipment determine whether indicators impairment may exist warrant adjustments carrying values estimated useful lives determinants used evaluation include management’s estimate asset’s ability generate net positive cash flow future periods well strategic significance assets company’s business objective impairment exist impairment loss would measured based extent estimated fair value less carrying value company recognized impairment losses years ended december 31 2018 2017 preferred stock warrant liability company previously issued freestanding warrants purchase shares redeemable convertible preferred stock since underlying redeemable convertible preferred stock classified outside permanent equity warrants classified liabilities accompanying balance sheet warrants classified liabilities recorded estimated fair value date issuance revalued subsequent balance sheet date fair value changes recognized increases reductions income expense accompanying statements operations company estimated fair value warrants using blackscholes option pricing model connection company’s ipo october 2018 warrants either exercised converted warrants purchase common stock time liability reclassified stockholders’ equity preclinical clinical trial accruals company accrues expenses preclinical studies clinical trial activities performed third parties based upon estimates proportion work completed life individual trial subject enrollment rates accordance agreements clinical research organizations clinical trial sites company determines estimates reviewing contracts vendor agreements purchase orders discussions internal clinical personnel external service providers progress stage completion trials services agreedupon fee paid services however actual costs timing clinical trials highly uncertain subject risks may change depending upon number factors including company’s clinical development plan management makes estimates company’s accrued expenses balance sheet date company’s financial statements based facts circumstances known company time actual timing performance services level effort varies estimate company adjust accrual accordingly nonrefundable advance payments goods services including fees process development manufacturing distribution clinical supplies used future research development activities deferred recognized expense period related goods consumed services performed research development expense research development costs expensed incurred stockbased compensation company measures recognizes compensation expense stockbased compensation based estimated fair value date grant currently company’s stockbased awards consist stock options however future grants company’s equity compensation plan may also consist shares restricted stock restricted stock units stock appreciation rights performance awards performance units company estimates fair value stock options using blackscholes optionpricing model requires use estimates company recognizes stockbased compensation cost ratably vesting stock options straightline basis requisite service period award blackscholes optionpricing model requires input subjective assumptions including riskfree interest rate fair value underlying common stock prior ipo expected dividend yield company’s common stock expected volatility price company’s common stock expected term option estimates involve inherent uncertainties application management’s judgment factors change different assumptions used company’s stockbased compensation expense could materially different future income taxes company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included financial statements method deferred tax assets liabilities determined basis differences financial statements tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date company recognizes net deferred tax assets extent company believes assets likely realized making determination management considers available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income taxplanning strategies results recent operations management determines company would able realize deferred tax assets future excess net recorded amount management would make adjustment deferred tax asset valuation allowance would reduce provision income taxes company records uncertain tax positions basis twostep process whereby 1 management determines whether likely tax positions sustained basis technical merits position 2 tax positions meet morelikelythannot recognition threshold management recognizes largest amount tax benefit 50 likely realized upon ultimate settlement related tax authority company recognizes interest penalties related unrecognized tax benefits within income tax expense accrued interest penalties included within related tax liability line grant revenues grant revenues derived government grants support company’s efforts specific research projects company determined government agencies providing grants company customers company recognizes grant revenue reasonable assurance compliance conditions grant reasonable assurance grant revenue received net loss per share basic net loss per share calculated dividing net loss weighted average number common shares outstanding period diluted net loss per share computed dividing net loss weighted average number common shares common share equivalents outstanding period common stock equivalents included effect dilutive company’s potentially dilutive securities include redeemable convertible preferred stock warrants outstanding stock options company’s stock option plan excluded computation diluted net loss per share would antidilutive periods presented difference number shares used compute basic diluted shares outstanding due company’s net loss position following table sets forth outstanding potentially dilutive securities excluded calculation diluted net loss per share inclusion would antidilutive recent accounting pronouncements february 2016 fasb issued asu 201602 leases update amends current accounting guidance lease transactions new guidance lessee required recognize assets liabilities leases excess twelve months additionally certain qualitative quantitative disclosures also required financial statements guidance effective public companies annual interim periods beginning december 15 2018 company adopt asu 201602 2019 upon adoption company expects record right use asset corresponding lease liability amount 15 million 25 million august 2016 fasb issued asu 201615 classification certain cash receipts cash payments topic 230 asu 201615 addresses eight specific cash flow issues objective reducing existing diversity practice certain cash receipts cash payments company adopted standard first quarter 2018 adoption impact company’s financial statements may 2017 fasb issued asu 201709 compensationstock compensation topic 718 scope modification accounting clarifies account change terms conditions sharebased payment award modification new guidance modification accounting required fair value vesting conditions classification award equity liability changes result change terms conditions company adopted guidance effective january 1 2018 adoption material impact company’s financial statements june 2018 fasb issued asu 201807 compensationstock compensation topic 718 improvements nonemployee sharebased payment accounting largely aligns accounting sharebased payment awards issued nonemployees accounting sharebased payment awards issued employees previous gaap accounting nonemployee sharebased payments differed applied employee awards particularly regard measurement date impact performance conditions new guidance 1 equityclassified sharebased payment awards issued nonemployees measured grant date instead previous requirement remeasure awards performance completion date 2 performance conditions compensation cost associated award recognized achievement performance condition probable rather upon achievement performance condition 3 current requirement reassess classification equity liability nonemployee awards upon vesting eliminated except awards form convertible instruments company adopted standard effective october 1 2018 adoption material impact company’s financial statements august 2018 fasb issued asu 201813 fair value measurement disclosure framework topic 820 changes disclosure requirements fair value measurement updated guidance improves disclosure requirements fair value measurements updated guidance effective fiscal years interim periods within fiscal years beginning december 15 2019 early adoption permitted removed modified disclosures company currently assessing timing impact adopting updated provisions 3 fair value measurement fair value defined exit price representing amount would received sell asset paid transfer liability orderly transaction market participants measurement date fair value marketbased measurement determined based assumptions market participants would use pricing asset liability company classifies fair value measurements one following three categories disclosure purposes level 1 quoted prices active markets identical assets liabilities level 2 inputs level 1 prices similar assets liabilities directly indirectly observable marketplace level 3 unobservable inputs supported little market activity values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s cash equivalents classified using level 1 inputs within fair value hierarchy valued using quoted market prices broker dealer quotations alternative pricing sources reasonable levels price transparency none company’s nonfinancial assets liabilities recorded fair value nonrecurring basis transfers levels occurred periods presented company estimated fair value redeemable convertible preferred stock warrants time issuance subsequent remeasurement using blackscholes option pricing model reporting date based following inputs riskfree interest rate expected dividend rate remaining contractual life warrants fair value underlying stock expected volatility price underlying common stock estimates based part subjective assumptions following table summarizes company’s assets liabilities require fair value measurements recurring basis respective input levels based fair value hierarchy thousands following weightedaverage assumptions used determining fair value preferred stock warrant liability valued using blackscholes option pricing model december 31 2017 following estimated fair values per share company’s underlying redeemable convertible preferred stock used determine estimated fair value preferred stock warrant liability following tables present activity preferred stock warrant liability derivative liability measured fair value using significant unobservable level 3 inputs year ended december 31 2017 2018 thousands 4 property equipment following table presents composition property equipment net december 31 2018 2017 thousands 5 accrued expenses following table presents composition accrued expenses december 31 2018 2017 thousands 6 debt convertible promissory notes january 2017 october 2017 company issued 147 million convertible promissory notes “2017 notes” holders series c1 redeemable convertible preferred stock “series c1” 2017 notes bore interest rate 8 per annum upon subsequent equity financing least 100 million prior stated maturity date 2017 notes plus accrued interest would automatically convert shares stock issued company financing price equal 80 lowest issue price 2017 notes could converted variable number shares preferred stock accordingly company determined conversion provision redemption feature redemption feature evaluated embedded derivative bifurcated convertible promissory notes due substantial premium paid upon redemption accounted derivative instrument upon bifurcating redemption feature company recorded debt discount 30 million recognized interest expense term 2017 notes connection 2017 notes company issued warrants noteholders purchase 304397 shares series c1 warrants exercisable 012 per share would expire upon earlier 1 date initial closing liquidation event defined 2 closing firm commitment underwritten initial public offering 3 january 2024 warrants exercised connection closing company’s ipo company recorded debt discount 17 million represents estimated fair value warrants upon issuance 2017 notes amortized interest expense term 2017 notes using effectiveinterest method august 2018 company sold 1842959 shares series redeemable preferred stock “series d” new existing investors price 9659 per share net proceeds 177 million issued warrants purchase 368582 shares series c1 exercise price 012 per share “series financing” concurrent series financing company’s previously outstanding 2017 notes including accrued interest thereon converted 2080209 shares series interest expense including debt discount related 2017 notes 34 million 27 million years ended december 31 2018 2017 respectively term loan october 2017 company entered loan security agreement “svb loan” silicon valley bank “svb” pursuant company could borrow 75 million issuable three separate tranches “growth capital advances” 35 million “tranche a” 20 million “tranche b” 20 million “tranche c” growth capital advances would become available upon achievement certain clinical regulatory milestones original terms svb loan company make interestonly payments june 30 2018 rate equal prime rate defined per svb loan interestonly period would extended december 31 2018 company borrowed remaining tranches followed amortization period 24 months equal monthly payments principal plus interest amounts paid full connection svb loan company issued svb warrant purchase 49713 shares series c1 exercise price 9659 per share warrant immediately exercisable expires october 18 2027 company required make final payment equal 7 original aggregate principal amount growth capital advances maturity november 2017 company drew 35 million tranche company option prepay less borrowed amounts provided company would obligated pay prepayment fee equal 30 outstanding principal balance applicable growth capital advances prepayment made prior first anniversary effective date svb loan b 20 outstanding principal balance applicable growth capital advances prepayment made second anniversary effective date svb loan c 10 outstanding principal balance applicable growth capital advances prepayment made second anniversary effective date svb loan april 2018 svb loan amended extend draw period tranche b tranche c april 30 2018 july 31 2018 respectively well extend interestonly period july 31 2018 would extended december 31 2018 company borrowed tranche b tranche c additionally capital growth advances would mature june 1 2020 however company draw tranche b tranche c maturity date would december 31 2020 april 30 2018 company borrowed 20 million tranche b july 2018 svb loan amended extend draw period tranche c august 31 2018 well extend interestonly period svb loan august 31 2018 would extended december 31 2018 company draw tranche c august 2018 company borrowed 20 million tranche c company’s obligations svb loan secured first priority security interest substantially current future assets owned intellectual property company also obligated comply various customary covenants including restrictions ability encumber intellectual property assets company recorded debt discount 04 million estimated fair value warrants debt issuance costs upon borrowing tranche b amortized interest expense term svb loan using effectiveinterest method december 31 2018 2017 company 75 million 35 million respectively outstanding principal svb loan 75 million 34 million respectively reflected balance sheet net debt discounts interest expense including amortization debt discount related term debt totaled 06 million 01 million years ended december 31 2018 2017 respectively company compliance covenants svb loan december 31 2018 march 25 2019 company repaid outstanding principal balance accrued portion final payment svb loan full see note 15 following table sets forth year company’s required future principal payments refinanced svb loan thousands 7 commitments contingencies operating leases company leases office research development facilities equipment various noncancellable operating lease agreements january 2010 company entered lease office laboratory space malvern pennsylvania “malvern lease” malvern lease commenced march 2010 amended extend term september 30 2023 lease contains escalating rent payments december 2018 company entered lease office space san diego california expires october 2022 company’s future minimum commitments noncancelable operating leases follows thousands company recognizes rent expense facility operating leases straightline basis company accounts difference minimum lease payments straightline amount deferred rent expense 04 million years ended december 31 2018 2017 legal proceedings company currently party litigation management aware pending threatened litigation company believes would materially affect company’s business operating results financial condition cash flows supply agreement company entered master services agreement “supply agreement” biovectra inc “biovectra” biovectra manufacture supply cgmpgrade quantities company’s pb2452 proprietary drug product “product” company’s potential pb2452 phase 3 clinical trial well work required support marketing authorization filing commercial supply agreement put place product approved fda biovectra responsible facility including performing work related procurement design project management installation assembly commissioning validation facility equipment financing costs associated building facility company responsible purchase certain equipment raw materials production process 8 preferred stock warrants company accounted warrants purchase shares redeemable convertible preferred stock liabilities exercisable redeemable instrument company continued adjust liability changes fair value warrants exercised converted common stock warrants following table summarizes outstanding redeemable convertible preferred stock warrants corresponding exercise price december 31 2017 august 2018 part series financing company issued warrants purchase 368582 shares series c1 redeemable convertible preferred stock “2018 series c1 warrants” exercise price 012 per share connection ipo october 2018 outstanding redeemable convertible preferred stock warrants either exercised converted common stock warrants 2018 stockholders exercised outstanding 2014 series b warrants convertible debt series c1 warrants 2018 series c1 warrants purchase aggregate 764034 shares company’s redeemable convertible preferred stock common stock weightedaverage exercise price 012 per share outstanding 2009 series b warrants term loan series c1 warrants automatically converted aggregate 75597 common stock warrants liability reclassified stockholders’ equity 9 redeemable convertible preferred stock stockholders’ deficit preferred stock company issued series 1 redeemable convertible preferred stock “series 1” series 2 redeemable preferred stock “series 2” series aa redeemable convertible preferred stock “series aa” series b redeemable convertible preferred stock “series b” series c1 series c2 redeemable convertible preferred stock “series c2” series c3 redeemable convertible preferred stock “series c3” series collectively “preferred stock” upon closing ipo october 22 2018 shares preferred stock automatically converted aggregate 13200115 shares common stock december 31 2017 authorized issued outstanding shares preferred stock carrying amounts liquidation values follows conversion shares preferred stock automatically converted aggregate 13200115 shares common stock upon closing ipo october 22 2018 10 stockbased compensation stock plans july 2018 company amended company’s amended restated 2002 stock plan “2002 plan” reserve additional 800000 shares common stock issuance 2002 plan october 2018 company’s board directors stockholders adopted approved 2018 equity incentive plan “2018 plan” successor continuation 2002 plan 2018 plan became effective upon execution underwriting agreement related ipo october 17 2018 grants made 2002 plan initially maximum number shares company’s common stock may issued 2018 plan 3231626 shares december 31 2018 company 1670921 shares available grant 2018 plan number shares common stock reserved issuance 2018 plan automatically increase january 1 calendar year starting january 1 2019 january 1 2028 amount equal 3 total number shares company’s capital stock outstanding last day calendar month date automatic increase lesser number shares determined company’s board directors subject provision company added 734948 shares available grant 2018 plan effective january 1 2019 maximum number shares company’s common stock may issued exercise incentive stock options 2018 plan 9694878 following table summarizes stock option activity 2002 plan 2018 plan year ended december 31 2018 weightedaverage grant date fair value per share options granted 275 100 years ended december 31 2018 2017 respectively aggregate intrinsic value options exercised 02 million 686 years ended december 31 2018 2017 respectively december 31 2018 total unrecognized compensation expense related unvested employee nonemployee stock option awards 16 million expected recognized expense weightedaverage period approximately 29 years october 2018 company’s board directors stockholders approved 2018 employee stock purchase plan “espp” espp became effective october 17 2018 purpose espp secure services new employees retain services existing employees provide incentives individuals exert maximum efforts toward company’s success company’s affiliates espp intended qualify “employee stock purchase plan” within meaning section 423 code us employees espp authorizes issuance 196000 shares company’s common stock purchase rights granted company’s employees company’s designated affiliates number shares common stock reserved issuance automatically increase january 1 calendar year beginning january 1 2019 january 1 2028 lesser 1 total number shares company’s common stock outstanding last day calendar month date automatic increase 2 490000 shares provided date increase company’s board directors may determine increase less amount set forth clauses 1 2 subject provision company added 244983 shares available grant espp effective january 1 2019 december 31 2018 shares common stock purchased espp determining fair value stock options fair value grant stock options determined company using methods assumptions discussed certain inputs subjective generally require judgment determine expected termthe expected term stock options represents weighted average period stock options expected outstanding company uses simplified method estimating expected term simplified method calculates expected term average timetovesting contractual life options expected volatilitydue company’s limited operating history lack companyspecific historical implied volatility expected volatility assumption determined examining historical volatilities group industry peers whose share prices publicly available riskfree interest ratethe riskfree rate assumption based us treasury instruments terms consistent expected term company’s stock options expected dividendthe company paid intend pay dividends common stock valuationdue absence public market trading company’s common stock prior ipo necessary estimate fair value common stock underlying stockbased grants performing fair value calculations using blackscholes option pricing model fair value common stock underlying stockbased grants assessed grant date board directors options purchase shares common stock granted exercise price per share less fair value per share common stock underlying options date grant absence public trading market company’s common stock company determined estimated fair value common stock using methodologies approaches assumptions consistent american institute certified public accountants “aicpa” audit accounting practice aid series valuation privately held company equity securities issued compensation “aicpa practice aid” fair value option estimated date grant using weighted average assumptions table stockbased compensation expense reported company’s statements operations years ended december 31 2018 2017 follows thousands 11 license agreements medimmune limited november 2017 company entered license agreement “medimmune license” medimmune limited “medimmune” medimmune wholly owned subsidiary astrazeneca plc pursuant terms medimmune license medimmune granted company exclusive global rights purpose developing commercializing products medimmune license “medimmune licensed product” consideration license rights granted medimmune company made upfront payment 01 million included research development expense year ended december 31 2017 company also obligated make series contingent milestone payments totaling aggregate 180 million upon achievement clinical development regulatory milestones december 31 2018 none clinical development regulatory filing milestones met addition company pay medimmune tiered royalties ranging midsingledigit lowteen percentages net sales medimmune licensed products additional payments 500 million aggregate commercial milestones company also must pay quarterly fees relating technical services provided medimmune license requires company cooperate medimmune commercial messaging pb2452 provides medimmune return rights pb2452 certain commercial diligence requirements achieved company addition medimmune license offers option thirdparty product storage costs december 31 2017 company incurred reimbursed medimmune 05 million thirdparty product storage costs company incurred insignificant amount thirdparty product storage costs year ended december 31 2018 astrazeneca plc stockholder company duke university october 2006 company entered license agreement duke university “duke” amended “duke license” pursuant duke license duke granted company exclusive worldwide license certain patent rights nonexclusive license knowhow owned controlled duke develop commercialize products processes covered duke license “duke licensed products” duke license amended february 2016 allow duke use company’s technology area smallmolecule oncologics duke license worldwide sublicensable agreement remains full effect life lasttoexpire patents included patent rights approximately 20 years company required apply prosecute maintain us foreign patent rights duke license company obligated pay 22 million upon achievement clinical development regulatory milestones 04 million upon achievement commercial milestones duke license may terminated duke company fails meet certain clinical development regulatory milestones within specified timeframes december 31 2018 company compliance development obligations company required use commercially reasonable efforts develop one products processes introduce commercial markets duke receive low singledigit royalty percentages net sales company sublicensee minimum aggregate royalties 02 million payable following company’s achievement certain commercial milestones sales duke licensed products services occurred since effective date december 31 2018 certain alliance fee payments greater 03 million low doubledigit percentage fees company receives third party consideration forming strategic alliance may required depending upon patent rights commercialized company pay duke first 10 million nonroyalty payments receives sublicensee thereafter specified percentage additional nonroyalty payments receives duke receives revenue result license sublicense third party field smallmolecule oncologics pay company specified percentage amount revenue excess 10 million duke also stockholder company 12 grant revenue february 2018 company received small business innovation research “sbir” grants national institutes health aggregate amount 28 million support clinical development pb1046 treatment pulmonary arterial hypertension period february 17 2018 july 31 2020 connection sbir grants us government receive nonexclusive royaltyfree license use technology company develops grants company recognized 07 million sbir grants year ended december 31 2018 company recognize grant revenues year ended december 31 2017 13 income taxes company’s loss income taxes 238 million 102 million years ended december 31 2018 2017 respectively generated entirely united states company record current deferred income tax expense benefit years ended december 31 2018 2017 reconciliation income tax expense benefit amount computed applying statutory federal income tax rate loss operations summarized years ended december 31 2018 2017 respectively follows thousands significant components company’s deferred tax assets december 31 2018 2017 shown december 31 2018 2017 management assessed realizability deferred tax assets evaluated need valuation allowance deferred tax assets evaluation utilizes framework contained asc 740 income taxes whereby management considers available positive negative evidence balance sheet date determine whether portion company’s deferred tax assets realized guidance valuation allowance must established deferred tax assets morelikelythannot probability level 50 asset realized management followed guidance asc 740 states “a cumulative loss recent years significant piece negative evidence difficult overcome” concluded company’s deferred tax assets realizable december 31 2018 2017 recorded valuation allowance 368 million 304 million respectively offset deferred tax assets change valuation allowance years ended december 31 2018 2017 increase 64 million decrease 71 million respectively december 31 2018 company federal pennsylvania net operating loss “nol” carryforwards 1119 million 1059 million respectively federal nols generated prior 2018 may used offset 100 future taxable income begin expire 2022 unless previously utilized federal nol generated 2018 204 million available offset 80 future taxable income may carried forward indefinitely pennsylvania nols may used offset 40 future taxable income begin expire 2029 unless previously utilized december 31 2018 company also federal pennsylvania research development tax credit carryforwards totaling 32 million 02 million respectively federal pennsylvania research development tax credit carryforwards begin expire 2028 2029 respectively unless previously utilized december 31 2018 company also federal orphan drug credit carryforwards 28 million begin expire 2036 unless previously utilized years december 31 2018 company generated combination research development credits orphan drug credits certain credits derived studies document qualified activities certain credits derived studies credits calculated study irs audit may disagree amount credits calculated studies ultimately performed credits may result adjustment specific credits internal revenue code utilization corporation’s net operating loss tax credit carryforwards may limited following greater 50 change ownership threeyear period unused annual limitation may carried forward future years balance net operating loss tax credit carryforward period rules prior ownership changes may created limitation company’s ability use certain tax carryforwards yearly basis additionally certain state operating losses may also limited including pennsylvania limits net operating loss carryforward utilization 35 40 2019 thereafter apportioned taxable income december 2017 us government enacted comprehensive tax legislation commonly referred tax cuts jobs act “tax act” tax act makes broad complex changes us tax code including limited reducing us federal corporate tax rate 35 percent 21 percent ii eliminating corporate alternative minimum tax “amt” changing existing amt credits realized iii creating new limitation deductible interest expense iv changing rules related uses limitations net operating carryforwards created tax years beginning december 31 2017 company applied guidance sec staff accounting bulletin 118 accounting enactmentdate effects act 2017 throughout 2018 december 31 2017 company completed accounting enactmentdate income tax effects act asc 740 income taxes related remeasurement deferred tax assets liabilities december 31 2018 company completed accounting enactmentdate income tax effects act adjustments made provisional amounts recorded december 31 2017 significant impact tax act companys consolidated financial statements reduction 110 million deferred tax assets related net operating losses deferred tax assets reduction offset change companys valuation allowance another significant impact tax act reduce applicable percentage used orphan drug credit tax years beginning december 31 2017 company applies twostep approach recognizing measuring uncertain tax positions first step evaluate tax position recognition determining weight available evidence indicates likely position sustained audit including resolution related appeals litigation processes second step measure tax benefit largest amount 50 likely realized upon ultimate settlement income tax positions must meet likely recognition threshold effective date recognized upon adoption asc 740 subsequent periods interpretation also provides guidance measurement derecognition classification interest penalties accounting interim periods disclosure transition company files income tax returns us federal jurisdiction various state jurisdictions tax years 2015 forward remain open examination federal tax purposes tax years 2015 forward remain open examination company’s significant state tax jurisdictions extent utilized future years’ tax returns net operating loss carryforwards december 31 2018 remain subject examination respective tax year closed following table summarizes activity related company’s gross unrecognized tax benefits years ended december 31 2018 2017 thousands due companys valuation allowance none unrecognized tax benefits recognized would affect companys effective tax rate december 31 2018 2017 company unrecognized tax benefits 18 million 13 million respectively company recognizes interest penalties related uncertain tax positions income tax expense years ended december 31 2018 2017 company accrue interest penalties uncertain tax positions company expect unrecognized tax benefits change significantly within next 12 months 14 related party transactions described note 11 company party medimmune license medimmune related party company 15 subsequent events march 25 2019 company entered term loan agreement “2019 loan” svb westriver innovation lending fund viii lp “westriver” pursuant company may borrow 150 million issuable three separate tranches “advances” 75 million tranche issued upon execution svb westriver loan agreement 25 million available issued may 31 2019 “tranche b” 50 million “tranche c” company draw upon achievement certain regulatory milestones “tranche c milestones” maturity date 2019 loan march 1 2023 terms 2019 loan company make interestonly payments december 31 2019 tranche b rate equal greater prime rate plus 100 defined 2019 loan 65 followed amortization period 39 months equal monthly payments principal plus interest amounts paid full interestonly period automatically extended june 30 2020 company achieves tranche c milestones followed amortization period 33 months equal monthly payments principal plus interest amounts paid full addition substitution company’s regular monthly payments principal plus accrued interest company required make final payment equal 6 aggregate principal amount advances maturity date company agreed issue svb westriver warrants purchase shares common stock draw tranche aggregate 12131 shares common stock tranche b aggregate 24262 shares common stock exercise price lower average closing price company’s common stock previous ten days trading closing price day prior funding warrants immediately exercisable upon issuance expire ten years date issuance upon execution 2019 loan company drew 75 million tranche repaid outstanding principal balance accrued portion final payment svb loan full company’s obligations 2019 loan secured first priority security interest substantially company’s current future assets excluding intellectual property company also obligated comply various customary covenants including restrictions company’s ability encumber intellectual property assets a2 financial statement schedules financial statement schedules omitted required applicable required information included financial statements notes financial statements a3 exhibits exhibit index filed herewith indicates management contract compensatory plan † confidential treatment granted certain portions exhibit indicated asterisks information omitted filed separately securities exchange commission †† certain portions exhibit indicated asterisks omitted material would likely cause competitive harm phasebio pharmaceuticals inc publicly disclosed certifications furnished solely accompany quarterly report pursuant 18 usc section 1350 filed purposes section 18 securities exchange act 1934 amended incorporated reference filing registrant whether made date hereof regardless general incorporation language filing item 16 form 10k summary applicable signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized phasebio pharmaceuticals inc march 26 2019 john sharp john sharp chief financial officer behalf registrant capacity principal financial officer principal accounting officer know persons presents person whose signature appears constitutes appoints jonathan p mow john sharp jointly severally true lawful attorneysinfact agents full power substitution resubstitution name place stead capacities sign annual report form 10k phasebio pharmaceuticals inc amendments thereto file exhibits thereto documents connection therewith securities exchange commission granting unto said attorneysinfact agents full power authority perform every act thing requisite necessary done premises hereby ratifying confirming said attorneysinfact agents substitute substitutes may lawfully cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated item 15 exhibits financial statement schedules a1 financial statements see index consolidated financial statements item 8 annual report form 10k phasebio pharmaceuticals inc contents report independent registered public accounting firm stockholders board directors phasebio pharmaceuticals inc opinion financial statements audited accompanying balance sheets phasebio pharmaceuticals inc company december 31 2020 2019 related statements operations stockholders’ deficit equity cash flows years ended related notes collectively financial statements opinion financial statements present fairly material respects financial position company december 31 2020 2019 results operations cash flows years ended conformity us generally accepted accounting principles going concern accompanying financial statements prepared assuming company continue going concern discussed note 1 financial statements company incurred recurring losses negative cash flows operations accumulated deficit 2607 million december 31 2020 raise substantial doubt ability continue going concern managements plans regard matters also described note 1 financial statements include adjustments might result outcome uncertainty basis opinion financial statements responsibility company’s management responsibility express opinion financial statements based audits public accounting firm registered public company accounting oversight board united states pcaob required independent respect company accordance us federal securities laws applicable rules regulations securities exchange commission pcaob conducted audits accordance standards pcaob standards require plan perform audit obtain reasonable assurance whether financial statements free material misstatement whether due error fraud company required engaged perform audit internal control financial reporting part audits required obtain understanding internal control financial reporting purpose expressing opinion effectiveness company’s internal control financial reporting accordingly express opinion audits included performing procedures assess risks material misstatement financial statements whether due error fraud performing procedures respond risks procedures included examining test basis evidence regarding amounts disclosures financial statements audits also included evaluating accounting principles used significant estimates made management well evaluating overall presentation financial statements believe audits provide reasonable basis opinion kpmg llp served company’s auditor since 2010 philadelphia pennsylvania march 15 2021 phasebio pharmaceuticals inc balance sheets thousands except share per share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements operations thousands except share per share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements stockholders’ deficit equity thousands except share amounts see accompanying notes financial statements phasebio pharmaceuticals inc statements cash flows thousands see accompanying notes financial statements phasebio pharmaceuticals inc notes financial statements 1 organization description business description business phasebio pharmaceuticals inc “company” incorporated delaware corporation january 10 2002 company clinicalstage biopharmaceutical company focused development commercialization novel therapies cardiopulmonary diseases company’s lead product candidate bentracimab also known pb2452 novel reversal agent antiplatelet drug ticagrelor company developing reversal antiplatelet effects ticagrelor patients uncontrolled major lifethreatening bleeding requiring urgent surgery invasive procedure company’s second product candidate pemziviptadil also known pb1046 phase 2 development treatment pulmonary arterial hypertension pah pemziviptadil utilizes company’s proprietary halflife extending elastinlike polypeptide technology also serves engine company’s preclinical pipeline company also developing preclinical product candidate pb6440 treatmentresistant hypertension going concern company experienced net losses negative cash flows operations december 31 2020 accumulated deficit 2607 million company expects continue incur net losses least next several years december 31 2020 company cash equivalents 281 million working capital 252 million january 2020 company entered codevelopment agreement sfj agreement sfj pharmaceuticals x ltd sfj pharmaceuticals group company sfj pursuant sfj provides funding operational support clinical development bentracimab management believes existing cash equivalents december 31 2020 addition 429 million clinical trial costs expenses company expects sfj fund reimburse pursuant sfj agreement sufficient fund operating expenses capital requirements 12 months date issuance financial statements factors raise substantial doubt companys ability continue going concern financial statements include adjustments might result outcome uncertainty sfj agreement company fails remedy going concern condition periods specified agreement sfj may elect companys business related bentracimab transferred sfj company plans address liquidity needs pursuit additional funding combination equity debt financings thirdparty financing marketing distribution arrangements collaborations strategic alliances licensing arrangements however assurance funding efforts successful regard company currently effective shelf registration statement form s3 2019 shelf registration statement file securities exchange commission sec expires january 2023 2019 shelf registration statement currently permits offering issuance sale company aggregate offering price 2000 million common stock preferred stock debt securities warrants one offerings combination 600 million may offered issued sold atthemarket sales pursuant equity distribution agreement citigroup global markets inc william blair company llc atm program year ended december 31 2020 company sold 561848 shares common stock pursuant atm program net proceeds 29 million december 31 2020 company 1971 million common stock remaining sold 2019 shelf registration statement 571 million may sold atm program company continuing assess effect covid19 pandemic may business operations extent covid19 may impact companys business operations depend future developments highly uncertain cannot predicted confidence geographic distribution disease time efficacy availability vaccines antiviral agents disease continued duration outbreak duration effect business disruptions shortterm effects ultimate effectiveness travel restrictions quarantines social distancing requirements business closures united states countries contain treat disease potential economic impact brought continued duration covid19 may difficult assess predict continued growing pandemic could result significant disruption global financial markets reducing companys ability access capital could future negatively affect liquidity addition recession market correction resulting spread covid19 could materially affect companys business value common stock basis presentation accompanying financial statements prepared accordance united states generally accepted accounting principles “gaap” rules regulations sec reference notes applicable guidance phasebio pharmaceuticals inc notes financial statements meant refer gaap found accounting standards codification “asc” accounting standards updates “asu” promulgated financial accounting standards board “fasb” company manages operations single reportable segment purposes assessing performance making operating decisions 2 significant accounting policies use estimates preparation company’s financial statements requires management make estimates assumptions impact reported amounts assets liabilities revenues expenses disclosure contingent assets liabilities company’s financial statements accompanying notes significant estimates company’s financial statements relate valuation development derivative liability clinical trial accruals although estimates based company’s knowledge current events actions may undertake future actual results could differ materially estimates assumptions concentrations credit risk financial instruments potentially subject company significant concentrations credit risk consist primarily cash equivalents company maintains certain deposits federally insured financial institutions excess federally insured limits company could experience losses money market funds future cash equivalents company considers highly liquid investments original maturity date purchase three months less cash equivalents cash equivalents include cash readily available checking money market accounts fair value financial instruments carrying amounts receivables prepaid expenses assets accounts payable accrued expenses current liabilities reasonable estimates fair value short maturity items based borrowing rates currently available company loans similar terms company believes fair values term loan operating lease liabilities corresponding rightofuse assets approximate respective carrying values development derivative liability development derivative liability recorded based present value estimated consideration received estimated consideration paid pursuant contractual terms sfj agreement determined fair value liability remeasured quarterly level 3 derivative change fair value recorded form gain loss remeasurement development derivative liability statements operations property equipment property equipment recorded cost depreciated estimated useful lives assets three five years using straightline method leasehold improvements amortized shorter estimated useful lives lease term leases lease commencement company records lease liability based present value lease payments expected lease term including options extend lease company reasonably certain exercise company calculates present value lease payments using incremental borrowing rate company’s leases provide implicit interest rate company’s incremental borrowing rate lease rate interest would pay collateralized basis borrow amount equal lease payments similar terms lease commencement date company records corresponding rightofuse lease asset based lease liability adjusted lease incentives received initial direct costs paid lessor prior lease commencement date company may enter phasebio pharmaceuticals inc notes financial statements leases initial term 12 months less “shortterm leases” shortterm leases company records rent expense straightline basis record leases condensed balance sheet company shortterm leases december 31 2020 2019 lease commencement company measures leases follows lease liability based present value remaining lease payments using discount rate determined lease commencement ii rightofuse lease asset based remeasured lease liability adjusted unamortized lease incentives received unamortized initial direct costs cumulative difference rent expense amounts paid lease agreement lease incentives received initial direct costs amortized straightline basis expected lease term rent expense recorded straightline basis expected lease term longlived assets company regularly reviews carrying value estimated lives longlived assets including property equipment rightofuse assets determine whether indicators impairment may exist warrant adjustments carrying values estimated useful lives determinants used evaluation include management’s estimate asset’s ability generate net positive cash flow future periods well strategic significance assets company’s business objectives impairment exist impairment loss would measured based extent estimated fair value less carrying value company recognize impairment losses years ended december 31 2020 2019 preclinical clinical trial accruals company accrues expenses amounts incurred connection preclinical studies clinical trial activities performed third parties based upon estimates proportion work completed life individual trial subject enrollment rates accordance agreements clinical research organizations contract manufacturing organizations clinical trial sites company determines estimates reviewing contracts vendor agreements purchase orders discussions internal clinical personnel external service providers progress stage completion trials services agreedupon fee paid services however actual costs timing clinical trials highly uncertain subject risks may change depending upon number factors including company’s clinical development plan management makes estimates company’s accrued expenses balance sheet date company’s condensed financial statements based facts circumstances known company time actual timing performance services level effort varies estimate company adjust accrual accordingly nonrefundable advance payments goods services including fees process development manufacturing distribution clinical supplies used future research development activities deferred recognized expense period related goods consumed services performed research development expense research development costs expensed incurred costs incurred obtaining technology licenses charged research development expense technology alternative future use stockbased compensation company measures recognizes compensation expense stockbased compensation based estimated fair value date grant currently company’s stockbased awards consist stock options however future grants company’s equity compensation plan may also consist shares restricted stock restricted stock units stock appreciation rights performance awards performance units company also maintains employee stock purchase program espp may issue shares company estimates fair value stock options shares issued espp using blackscholes optionpricing model requires use estimates company recognizes stockbased compensation cost ratably vesting stock options shares issue espp straightline basis requisite service period award records forfeitures period occur blackscholes optionpricing model requires input subjective assumptions including riskfree interest rate expected dividend yield company’s common stock expected volatility price company’s common stock expected term option estimates involve inherent uncertainties application phasebio pharmaceuticals inc notes financial statements management’s judgment factors change different assumptions used company’s stockbased compensation expense could materially different future income taxes company accounts income taxes asset liability method requires recognition deferred tax assets liabilities expected future tax consequences events included condensed financial statements method deferred tax assets liabilities determined basis differences financial statements tax basis assets liabilities using enacted tax rates effect year differences expected reverse effect change tax rates deferred tax assets liabilities recognized income period includes enactment date company recognizes net deferred tax assets extent company believes assets likely realized making determination management considers available positive negative evidence including future reversals existing taxable temporary differences projected future taxable income taxplanning strategies results recent operations management determines company would able realize deferred tax assets future excess net recorded amount management would make adjustment deferred tax asset valuation allowance would reduce provision income taxes company records uncertain tax positions basis twostep process whereby 1 management determines whether likely tax positions sustained basis technical merits position 2 tax positions meet morelikelythannot recognition threshold management recognizes largest amount tax benefit 50 likely realized upon ultimate settlement related tax authority company recognizes interest penalties related unrecognized tax benefits within income tax expense accrued interest penalties included within related tax liability line grant revenue grant revenue derived government grants support company’s efforts specific research projects company determined government agencies providing grants company customers company recognizes grant revenue reasonable assurance compliance conditions grant reasonable assurance grant revenue received revenue collaborative agreement company generates revenues payments received collaborative agreement collaboration agreements company recognizes revenue transfers promised goods services partners amount reflects consideration company expects entitled exchange goods services determine revenue recognition contracts partners company performs following five steps identifies promised goods services contract ii identifies performance obligations contract including whether distinct context contract iii determines transaction price including constraint variable consideration iv allocates transaction price performance obligations contract v recognizes revenue company satisfies performance obligations revenue collaborative agreements company generally collects upfront license payment collaboration partner also entitled receive eventbased payments subject collaboration partners achievement specified development regulatory salesbased milestones addition company generally entitled royalties products collaboration commercialized although agreements form structured collaborative agreements accounting purposes represent contracts partners subject accounting literature collaborative arrangements company grants collaboration partners license company’s intellectual property company develop assets jointly collaboration partner share significant risks development commercialization activities transaction price contract represents amount company entitled exchange providing goods services partner transaction price include amounts subject uncertainties unless probable significant reversal revenue uncertainty resolved apart upfront license payment fees company may earn collaborative agreements subject significant uncertainties product development achievement many eventbased development regulatory milestones may probable phasebio pharmaceuticals inc notes financial statements milestones actually achieved generally relates milestones obtaining marketing authorization approvals successful completion clinical trials respect development milestones eg dosing first patient clinical trial achievement could considered probable prior actual occurrence based progress towards commencement trial company include amounts subject uncertainties transaction price probable amount result significant reversal revenue future end reporting period company reevaluates probability achievement milestones related constraint necessary adjusts estimate overall transaction price agreements generally one type performance obligation license generally transferred time agreement inception allocation transaction price among multiple performance obligations required upfront amounts allocated licenses recognized revenue licenses transferred collaboration partners development milestones fees recognized revenue occurrence becomes probable net loss per share basic net loss per share calculated dividing net loss weightedaverage number common shares outstanding period diluted net loss per share computed dividing net loss weightedaverage number common shares common share equivalents outstanding period common stock equivalents included effect dilutive company’s potentially dilutive securities include outstanding stock options company’s stock option plan warrants issued time shares common stock potentially issued 2018 employee stock purchase plan espp excluded computation diluted net loss per share would antidilutive periods presented difference number shares used compute basic diluted shares outstanding due company’s net loss position following table sets forth outstanding potentially dilutive securities excluded calculation diluted net loss per share inclusion would antidilutive recent accounting pronouncements december 2019 fasb issued asu 201912 income taxes topic 740 simplifying accounting income taxes among things eliminates certain exceptions current rules regarding approach intraperiod tax allocations methodology calculating income taxes interim period clarifies accounting transactions result stepup tax basis goodwill standard becomes effective company first quarter 2021 adoption new standard material impact companys financial statements related disclosures august 2018 fasb issued asu 201813 fair value measurement disclosure framework topic 820 changes disclosure requirements fair value measurement among changes entities longer required disclose amount reasons transfers levels 1 2 fair value hierarchy required disclose range weighted average significant unobservable inputs used develop level 3 fair value measurements effective january 1 2020 company adopted asu material impact financial statements related disclosures 3 fair value measurement fair value defined exit price representing amount would received sell asset paid transfer liability orderly transaction market participants measurement date fair value phasebio pharmaceuticals inc notes financial statements marketbased measurement determined based assumptions market participants would use pricing asset liability company classifies fair value measurements one following three categories disclosure purposes level 1 quoted prices active markets identical assets liabilities level 2 inputs level 1 prices similar assets liabilities directly indirectly observable marketplace level 3 unobservable inputs supported little market activity values determined using pricing models discounted cash flow methodologies similar techniques well instruments determination fair value requires significant judgment estimation company’s cash equivalents classified using level 1 inputs within fair value hierarchy valued using quoted market prices broker dealer quotations alternative pricing sources reasonable levels price transparency none company’s nonfinancial assets liabilities recorded fair value nonrecurring basis transfers levels occurred periods presented fair value companys financial commitment sfj conjunction sfj agreement presented development derivative liability based level 3 inputs following table summarizes company’s assets liabilities require fair value measurements recurring basis respective input levels based fair value hierarchy thousands 4 property equipment following table presents composition property equipment net december 31 2020 2019 thousands depreciation expense 05 million 02 million years ended december 31 2020 2019 respectively 5 accrued expenses current liabilities phasebio pharmaceuticals inc notes financial statements following table presents composition accrued expenses current liabilities december 31 2020 2019 thousands 6 debt term loans october 2017 loan agreement silicon valley bank october 2017 company entered loan security agreement “svb loan” silicon valley bank “svb” pursuant company could borrow 75 million issuable three separate tranches “growth capital advances” 35 million “tranche a” 20 million “tranche b” 20 million “tranche c” november 2017 company drew 35 million tranche growth capital advances available upon achievement certain clinical regulatory milestones terms svb loan amended company required make interestonly payments december 31 2018 followed amortization period 24 months equal monthly payments principal plus interest amounts paid full maturity date svb loan december 31 2020 connection svb loan company issued svb warrant purchase 49713 shares series c1 exercise price 9659 per share became exercisable common stock following companys initial public offering october 2018 ipo warrant immediately exercisable expires october 18 2027 company required make final payment equal 7 original aggregate principal amount growth capital advances maturity company repaid outstanding principal balance accrued portion final payment svb loan full using first tranche new term loan entered march 2019 loan march 2019 loan agreement silicon valley bank westriver innovation lending fund viii lp march 2019 company entered 2019 loan svb westriver innovation lending fund viii lp “westriver” pursuant company could borrow 150 million issuable three separate tranches “advances” 75 million “tranche 1” issued upon execution 2019 loan 25 million issued may 2019 “tranche 2” 50 million issued october 2019 “tranche 3” company required draw upon achievement certain regulatory milestones “tranche 3 milestones” maturity date 2019 loan march 1 2023 terms 2019 loan company made interestonly payments june 30 2020 respect tranche 1 tranche 2 tranche 3 rate equal greater prime rate plus 100 defined 2019 loan 65 followed amortization period 33 months equal monthly payments principal plus interest paid full addition substitution company’s regular monthly payments principal plus accrued interest company required make final payment equal 6 aggregate principal amount advances “final payment” maturity date upon execution 2019 loan draw tranche 1 company issued svb westriver warrants purchase aggregate 37606 shares common stock exercise price 473 per share may 2019 upon draw tranche 2 company issued svb westriver warrants purchase aggregate 12130 shares common stock exercise price 1086 per share october 2019 upon draw tranche 3 company issued svb westriver warrants purchase aggregate 24262 shares common stock exercise price 388 per share warrants immediately exercisable expire ten years date issuance phasebio pharmaceuticals inc notes financial statements upon execution 2019 loan company drew 75 million tranche 1 repaid outstanding principal balance accrued portion final payment svb loan company’s obligations 2019 loan secured firstpriority security interest substantially company’s current future assets company also obligated comply various customary covenants including restrictions company’s ability encumber intellectual property assets company compliance covenants 2019 loan december 31 2020 company recorded debt discount 04 million estimated fair value warrants debt issuance costs upon borrowing tranches 1 2 3 balance final payment liability 06 million december 31 2020 included longterm liabilities balance sheet debt discount final payment liability amortized interest expense term 2019 loan using effectiveinterest method interest expense including amortization debt discount related term debt final payment liability totaled 14 million 11 million years ended december 31 2020 2019 respectively following table sets forth year company’s required future principal payments december 31 2020 thousands 7 development derivative liability january 2020 company entered sfj agreement pursuant sfj agreed provide 1200 million funding project management services connection reverseit trial global phase 3 clinical trial bentracimab term sfj agreement company primary responsibility clinical development regulatory activities bentracimab united states european union sfj primary responsibility clinical development regulatory activities bentracimab china japan provide clinical trials operational support european union inception sfj agreement december 31 2020 sfj provided funding paid amounts companys behalf aggregate amount 471 million sfj agreement addition company expects sfj fund reimburse additional 429 million clinical trial costs expenses sfj also provide additional 300 million upon achievement specified milestones respect companys clinical development bentracimab united states food drug administration fda approves biologics license application bentracimab company agreed pay sfj initial payment 50 million additional 3250 million aggregate seven additional annual payments “us approval payments” european medicines agency ema national regulatory authorities certain european countries provide marketing approval bentracimab company pay sfj initial payment 50 million additional 2050 million aggregate seven additional annual payments “eu approval payments” majority us approval payments eu approval payments made third anniversary seventh anniversary marketing approval applicable jurisdiction either pharmaceuticals medical devices agency “pmda” japan national medical products administration “nmpa” china provides marketing approval bentracimab company pay sfj initial payment 10 million additional 590 million aggregate eight additional annual payments “japanchina approval payments” majority payments made fifth anniversary eighth anniversary marketing approval japanchina approval payments paid regardless receipt marketing approval japan china us approval payments eu approval payments japanchina approval payments proportionately adjusted event actual funding sfj lower greater 1200 million company obligated make us approval payments receive marketing approval bentracimab fda eu phasebio pharmaceuticals inc notes financial statements approval payments receive marketing approval bentracimab ema national regulatory authority certain european countries japanchina approval payments receive marketing approval bentracimab either pmda nmpa upon execution sfj agreement company issued sfj 2200000 common stock warrants exercise price 650 per share contractual term ten years warrants issued two tranches tranche b tranche represents 1100000 warrants immediately exercisable sfj provided sfj may sell exercised shares one year original warrant issuance date tranche b represents 1100000 warrants exercisable earlier achievement certain development milestones ii consummation acquisition defined sfj agreement warrants equityclassified valued 79 million issuance using probability adjusted blackscholes valuation technique company accounts sfj agreement derivative instrument increases decreases consideration received repayments made respectively derivative adjusted reporting period estimated fair value december 31 2020 derivative presented liability companys balance sheet changes fair value recorded within companys statement operations liability initially recorded value 21 million incorporates 100 million upfront payment sfj issuance companys common stock warrants sfj year ended december 31 2020 sfj provided additional funding paid amounts companys behalf aggregate amount 371 million development derivative liability subsequently remeasured december 31 2020 level 3 derivative change fair value resulted 125 million loss remeasurement development derivative liability statement operations year ended december 31 2020 derivative valued using scenariobased discounted cash flow method whereby scenario makes assumptions probability timing cash flows cash flows present valued using riskadjusted discount rate valuation method incorporates certain unobservable level 3 key inputs including probability timing funding ii probability timing achieving regulatory approvals iii companys cost borrowing 1600 plus risk free borrowing rate iv sfjs cost borrowing 250 plus risk free borrowing rate following table presents activity development derivative liability year ended december 31 2020 thousands 8 commitments contingencies legal proceedings company currently party litigation management aware pending threatened litigation company believes would materially affect company’s business operating results financial condition cash flows 9 leases company leases office research development facilities equipment various noncancellable operating lease agreements january 2010 company entered lease office laboratory space malvern pennsylvania “malvern lease” malvern lease commenced march 2010 amended extend term july 31 2018 september 30 2023 option extend lease additional three years lease contains escalating rent payments december 2018 company entered lease office space san diego california expires october 2022 june 2020 company entered lease additional office space malvern pennsylvania expires september 2023 december 31 2020 weightedaverage remaining lease term company’s leases phasebio pharmaceuticals inc notes financial statements 46 years weightedaverage discount rate used determine rightofuse assets corresponding operating lease liabilities 58 maturities operating lease liabilities december 31 2020 follows thousands company recognizes rent expense operating leases straightline basis rent expense 06 million 05 million years ended december 31 2020 2019 respectively 10 stockholders’ equity april 2019 offering april 2019 company completed underwritten public offering common stock resulted issuance sale aggregate 4124475 shares common stock public offering price 1200 per share generating net proceeds 463 million deducting underwriting discounts commissions offering costs shelf registration statement december 2019 company filed 2019 shelf registration statement form s3 became effective january 2020 2019 shelf registration statement permits offering issuance sale company maximum aggregate offering price 2000 million common stock preferred stock debt securities warrants one offerings combination ii offering issuance sale company maximum aggregate offering price 600 million companys common stock may issued sold “atthemarket” sales atm program year ended december 31 2020 company sold 561848 shares common stock pursuant atm program gross proceeds 29 million 11 stockbased compensation stock plans october 2018 company’s board directors stockholders adopted approved 2018 equity incentive plan “2018 plan” successor continuation amended restated 2002 stock plan 2002 plan grants made 2002 plan initially maximum number shares company’s common stock may issued 2018 plan 3231626 shares december 31 2020 company 1012857 shares available grant 2018 plan number shares common stock reserved issuance 2018 plan automatically increases january 1 calendar year starting january 1 2019 january 1 2028 amount equal 3 total number shares company’s capital stock outstanding last day calendar month date automatic increase lesser number shares determined company’s board directors subject provision company added 883257 shares available grant 2018 plan effective january 1 2021 phasebio pharmaceuticals inc notes financial statements following table summarizes stock option activity 2002 plan 2018 plan year ended december 31 2020 weightedaverage grant date fair value per share options granted 320 262 years ended december 31 2020 2019 respectively aggregate intrinsic value options exercised 01 million 10 million years ended december 31 2020 2019 respectively december 31 2020 total unrecognized compensation expense related unvested employee nonemployee stock option awards 46 million expected recognized expense weightedaverage period 24 years october 2018 company’s board directors stockholders approved espp purpose espp secure services new employees retain services existing employees provide incentives individuals exert maximum efforts toward company’s success company’s affiliates espp intended qualify “employee stock purchase plan” within meaning section 423 code united states employees initially espp authorized issuance 196000 shares company’s common stock purchase rights granted company’s employees company’s designated affiliates december 31 2020 company 666584 shares available issuance espp number shares common stock reserved issuance automatically increases january 1 calendar year beginning january 1 2019 january 1 2028 lesser 1 total number shares company’s common stock outstanding last day calendar month date automatic increase 2 490000 shares provided date increase company’s board directors may determine increase less amount set forth clauses 1 2 subject provision company added 294419 shares available issuance espp effective january 1 2021 march 2020 company began allowing eligible employees participate espp eligible employees granted rights purchase shares companys common stock funded payroll deductions cannot exceed 15 employees compensation espp generally provides 24month offering period includes four sixmonth purchase periods end purchase period eligible employees permitted purchase shares companys common stock 85 lower fair market value beginning offering period fair market value end purchase period espp considered compensatory plan company recorded stockbased compensation expense 01 million year ended december 31 2020 december 31 2020 62063 shares common stock purchased espp december 31 2020 total unrecognized compensation expense related espp 06 million expected recognized weightedaverage period approximately 12 years determining fair value stock options phasebio pharmaceuticals inc notes financial statements fair value grant stock options determined company using methods assumptions discussed certain inputs subjective generally require judgment determine expected termthe expected term stock options represents weightedaverage period stock options expected outstanding company uses simplified method estimating expected term simplified method calculates expected term average timetovesting contractual life options expected volatilitydue company’s limited operating history lack companyspecific historical implied volatility expected volatility assumption determined examining historical volatilities group industry peers whose share prices publicly available riskfree interest ratethe riskfree rate assumption based united states treasury instruments terms consistent expected term company’s stock options expected dividendthe company paid intend pay dividends fair value option estimated date grant using weightedaverage assumptions table stockbased compensation expense reported company’s statements operations years ended december 31 2020 2019 follows thousands 12 license agreements medimmune limited license agreement november 2017 company entered license agreement “medimmune license” medimmune limited “medimmune” medimmune whollyowned subsidiary astrazeneca plc “astrazeneca” pursuant terms medimmune license medimmune granted company exclusive global rights purpose developing commercializing products medimmune license “medimmune licensed product” company made contingent milestone payments 20 million 10 million years ended december 31 2020 2019 respectively obligated make remaining payments totaling aggregate 150 million upon achievement clinical development regulatory milestones addition company pay medimmune tiered royalties ranging midsingledigit lowteen percentages net sales medimmune licensed products additional payments 500 million aggregate commercial milestones company incurred royalty costs years ended december 31 2020 2019 company also must pay quarterly fees relating technical services provided medimmune license requires company cooperate medimmune commercial messaging bentracimab provides medimmune return rights bentracimab certain commercial diligence requirements achieved company addition medimmune license offers option thirdparty product storage costs company incurred thirdparty product storage costs years ended december 31 2020 2019 astrazeneca stockholder company phasebio pharmaceuticals inc notes financial statements duke license agreement october 2006 company entered license agreement duke university “duke” amended “duke license” pursuant duke license duke granted company exclusive worldwide license certain patent rights nonexclusive license knowhow owned controlled duke develop commercialize products processes covered duke license “duke licensed products” duke license amended february 2016 allow duke use company’s technology area smallmolecule oncologics duke license worldwide sublicensable agreement remains full effect life lasttoexpire patents included patent rights estimated 2030 company required apply prosecute maintain united states foreign patent rights duke license company obligated pay 22 million upon achievement clinical development regulatory milestones 04 million upon achievement commercial milestones duke license may terminated duke company fails meet certain clinical development regulatory milestones within specified timeframes december 31 2020 company compliance development obligations company required use commercially reasonable efforts develop one products processes introduce commercial markets duke receive low singledigit royalty percentages net sales duke licensed products company sublicensee minimum aggregate royalties 02 million payable following company’s achievement certain commercial milestones sales duke licensed products services occurred since effective date december 31 2020 certain alliance fee payments greater 03 million low doubledigit percentage fees company receives third party consideration forming strategic alliance may required depending upon patent rights commercialized company must pay duke first 10 million nonroyalty payments receives sublicensee thereafter specified percentage additional nonroyalty payments receives subject certain conditions duke receives revenue result license sublicense third party field smallmolecule oncologics pay company specified percentage amount revenue excess 10 million company incurred costs duke license year ended december 31 2020 03 million year ended december 31 2019 wacker license agreement april 2019 company entered license agreement “wacker license agreement” wacker biotech gmbh “wacker” pursuant wacker granted company exclusive license certain wacker’s intellectual property rights use wacker’s proprietary e coli strain manufacture bentracimab worldwide outside specified asian countries commercialize bentracimab approved manufactured company’s behalf using wacker’s proprietary e coli strain throughout world company right grant sublicenses license subject certain conditions specified wacker license agreement terms agreement company required pay fixed nominal perunit royalty subject adjustment annual license fee fixed euro amount low mid six digits agreement force indefinite period time upon expiration company’s royalty obligations license considered fully paid convert nonexclusive license either party may terminate wacker license agreement breach cured within specified number days company incurred 03 million 02 million costs wacker license agreement years ended december 31 2020 2019 respectively viamet asset purchase agreement january 2020 company entered purchase agreement pb6440 agreement viamet pharmaceuticals holdings llc whollyowned subsidiary selenity therapeutics bermuda ltd sellers pursuant company acquired assets intellectual property rights related sellers’ proprietary cyp11b2 inhibitor compound formerly known se6440 vt6440 certain cyp11b2 inhibitor compounds covered patent rights acquired company pb6440 agreement together compounds terms pb6440 agreement company paid sellers upfront fee 01 million upon closing transaction required pay sellers 51 million upon achievement certain development intellectual property milestones respect certain product candidates contain compound 1425 million upon achievement certain commercial milestones respect approved product contains compound low midsingle digit royalty percentages net sales approved products contain compound subject customary phasebio pharmaceuticals inc notes financial statements reductions offsets specified circumstances company incurred 01 million costs pb6440 agreement year ended december 31 2020 13 revenue grant revenue february 2018 company received small business innovation research “sbir” grants national institutes health aggregate amount 28 million support clinical development pemziviptadil treatment pulmonary arterial hypertension period february 17 2018 july 31 2020 connection sbir grants united states government receive nonexclusive royaltyfree license use technology company develops grants march 31 2020 company received 28 million funding available sbir grant company recognized 03 million 18 million sbir grants years ended december 31 2020 2019 respectively revenue collaborative agreement april 2019 company entered agreement immunoforge co ltd “immunoforge” exclusive worldwide license pb1023 longacting recombinant glucagonlike peptide1 analogue treatment certain diseases including conditions related sarcopenia company received upfront payment 02 million upon execution contract 01 million certain scientific consulting services entitled receive 03 million within one year effective date agreement company eligible receive milestonebased payments midsingle digit royalty payments net sales licensed products percentage duke entitled receive pursuant duke license company recognized zero 06 million revenue related immunoforge agreement years ended december 31 2020 2019 respectively 14 income taxes company’s loss income taxes 986 million 392 million years ended december 31 2020 2019 respectively generated entirely united states company record current deferred income tax expense benefit years ended december 31 2020 2019 reconciliation income tax expense benefit amount computed applying statutory federal income tax rate loss operations summarized years ended december 31 2020 2019 respectively follows thousands significant components company’s deferred tax assets december 31 2020 2019 shown thousands phasebio pharmaceuticals inc notes financial statements december 31 2020 2019 management assessed realizability net deferred tax assets evaluated need valuation allowance net deferred tax assets evaluation utilizes framework contained asc 740 income taxes whereby management considers available positive negative evidence balance sheet date determine whether portion company’s net deferred tax assets realized guidance valuation allowance must established net deferred tax assets morelikelythannot probability level 50 asset realized management followed guidance asc 740 states “a cumulative loss recent years significant piece negative evidence difficult overcome” concluded company’s net deferred tax assets realizable december 31 2020 2019 accordingly valuation allowance 781 million 500 million recorded offset net deferred tax assets change valuation allowance years ended december 31 2020 2019 increase 281 million increase 132 million respectively december 31 2020 company federal state net operating loss “nol” carryforwards 1851 million 1672 million respectively federal nols generated prior 2018 may used offset 100 future taxable income begin expire 2022 unless previously utilized limited provisions within tax law federal nol generated post2017 936 million may available offset 80 future taxable income may carried forward indefinitely unless limited provisions within tax law state nols begin expire 2029 unless previously utilized pennsylvania nols 1257 million may used offset 40 future taxable income per year december 31 2020 company federal state research development tax credit carryforwards totaling 45 million 04 million respectively federal state research development tax credit carryforwards begin expire 2028 2029 respectively unless previously utilized california research tax credit carryovers expire december 31 2020 company also federal orphan drug credit carryforwards 67 million begin expire 2036 unless previously utilized december 31 2020 company generated combination research development credits orphan drug credits certain credits derived tax credit studies document qualified activities certain credits derived studies credits calculated study irs audit may disagree phasebio pharmaceuticals inc notes financial statements amount credits calculated studies ultimately performed credits may result adjustment specific credits internal revenue code utilization corporation’s net operating loss tax credit carryforwards may limited following greater 50 change ownership threeyear period unused annual limitation may carried forward future years balance net operating loss tax credit carryforward period rules prior ownership changes may created limitation company’s ability use certain tax carryforwards yearly basis additionally certain state operating losses may also similarly limited company applies twostep approach recognizing measuring uncertain tax positions first step evaluate tax position recognition determining weight available evidence indicates likely position sustained audit including resolution related appeals litigation processes second step measure tax benefit largest amount 50 likely realized upon ultimate settlement income tax positions must meet likely recognition threshold effective date recognized upon adoption asc 740 subsequent periods interpretation also provides guidance measurement derecognition classification interest penalties accounting interim periods disclosure transition company files income tax returns united states federal jurisdiction various state jurisdictions tax years 2017 forward remain open examination federal tax purposes tax years 2017 forward remain open examination company’s significant state tax jurisdictions extent utilized future years’ tax returns net operating loss carryforwards december 31 2020 remain subject examination respective tax year closed following table summarizes activity related company’s gross unrecognized tax benefits years ended december 31 2020 2019 thousands due companys valuation allowance none unrecognized tax benefits recognized would affect companys effective tax rate december 31 2020 2019 company unrecognized tax benefits 33 million 26 million respectively company recognizes interest penalties related uncertain tax positions income tax expense years ended december 31 2020 2019 company accrue interest penalties uncertain tax positions company expect unrecognized tax benefits change significantly within next 12 months march 27 2020 unites states enacted coronavirus aid relief economic security act cares act cares act emergency economic stimulus package includes spending tax breaks strengthen united states economy fund nationwide effort curtail effect covid19 cares act provides sweeping tax changes response covid19 pandemic significant provisions expected impact companys financial statements include removal certain limitations utilization net operating losses increasing loss carryback period certain losses five years increasing ability deduct interest expense well amending certain provisions previously enacted tax cuts jobs act company doesnt believe cares act material impact financial position results operations cash flows 15 employee retirement plan company employee retirement plan pursuant section 401k internal revenue code employees eligible participate provided meet requirements plan company required make matching contributions plan however 2019 company began making matching contributions company voluntarily contributed 02 million 01 million plan years ended december 31 2020 2019 respectively phasebio pharmaceuticals inc notes financial statements 16 related party transactions described note 12 company party medimmune license astrazeneca parent company medimmune related party company 17 subsequent events march 2021 company entered supply agreement biovectra agreement biovectra inc biovectra manufacture supply biovectra bulk drug substance bentracimab commercial distribution following regulatory approval obtained terms biovectra agreement biovectra committed maintaining capacity manufacture agreed number batches product year company committed purchase specified minimum number batches product per year minimum annual commitment although company free contract third parties manufacture bentracimab company pay supply price per batch product determined manufacturing process product validated accordance biovectra agreement plus cost certain consumables raw materials thirdparty testing parties agreed initial supply price product within specified percentage estimated supply price set forth biovectra agreement remain firm second anniversary validation thereafter annual basis following second anniversary validation either party may propose adjustments supply price increases decreases based specified inflation rate subject maximum inflation adjustment per year biovectra may propose adjusting supply price beyond inflation rate document extraordinary increases decreases costs subject specified maximum percentage increase decrease per year pursuant minimum annual commitments company obligated purchase minimum approximately 140 million batches product years 2022 2023 ii approximately 370 million batches product 2024 iii approximately 480 million batches product years 2025 2031 event company purchase applicable minimum annual commitment given year company obligated make payment biovectra amount equal thenapplicable supply price per batch multiplied difference minimum annual commitment year number batches product company actually purchased year “minimum shortfall payment” except event biovectra unable deliver number batches ordered company year event certain serious extended failures biovectra supply product quantities ordered company given year company’s minimum annual commitment year potentially one subsequent years subject reduction company’s obligation make minimum shortfall payment year potentially one subsequent years waived company right reduce minimum annual commitments year 2026 subsequent years specified maximum percentage per year company able obtain regulatory approval products incorporating bentracimab one us europe biovectra company agreed discuss good faith amendment agreement reflect decreased requirements product impacts supply price reflect lower volume commitments initial term biovectra agreement commences effective date biovectra agreement continues tenth anniversary validation term biovectra agreement may extended additional oneyear periods upon mutual agreement parties either party may terminate biovectra agreement event uncured material breach party upon occurrence certain events insolvency party company may terminate biovectra agreement event certain regulatory compliance failures biovectra person employed retained perform services biovectra agreement ii subject payment termination fee biovectra amount decreases term biovectra agreement initial maximum midteens millions dollars zero event company decides unable pursue regulatory approval commercialization products incorporating bentracimab event termination company’s license bentracimab medimmune limited company may also terminate biovectra agreement without cause without payment termination fee upon 24 months’ notice following fifth anniversary regulatory approval product incorporating bentracimab either fda ema a2 financial statement schedules financial statement schedules omitted required applicable required information included financial statements notes financial statements a3 exhibits exhibit index incorporated reference exhibit number exhibit title form file exhibit filing date 101pre xbrl taxonomy extension presentation linkbase document filed herewith indicates management contract compensatory plan † confidential treatment granted certain portions exhibit indicated asterisks information omitted filed separately securities exchange commission †† certain portions exhibit indicated asterisks omitted material would likely cause competitive harm phasebio pharmaceuticals inc publicly disclosed certifications furnished solely accompany quarterly report pursuant 18 usc section 1350 filed purposes section 18 securities exchange act 1934 amended incorporated reference filing registrant whether made date hereof regardless general incorporation language filing item 16 form 10k summary applicable signatures pursuant requirements securities exchange act 1934 registrant duly caused report signed behalf undersigned thereunto duly authorized phasebio pharmaceuticals inc march 15 2021by john p sharp john p sharp chief financial officer behalf registrant capacity principal financial officer principal accounting officer know persons presents person whose signature appears constitutes appoints jonathan p mow john p sharp jointly severally true lawful attorneysinfact agents full power substitution resubstitution name place stead capacities sign annual report form 10k phasebio pharmaceuticals inc amendments thereto file exhibits thereto documents connection therewith securities exchange commission granting unto said attorneysinfact agents full power authority perform every act thing requisite necessary done premises hereby ratifying confirming said attorneysinfact agents substitute substitutes may lawfully cause done virtue hereof pursuant requirements securities exchange act 1934 report signed following persons behalf registrant capacities dates indicated