Alder Biopharmaceuticals Inc Annual Report 2014

FY2014 Annual Report · Alder Biopharmaceuticals Inc

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Redefining Relief

2 0 1 4 A N N U A L R E P O R T

Phase 2b: A targeted approach
to preventing migraines.

A NTI-C GR P
M ONO CLONAL
A NTIB ODY

ALD403 is our novel monoclonal antibody targeted to calcitonin gene-related peptide, or CGRP, for migraine
prevention. CGRP is a validated target that is believed to play a key role in migraine. Approximately 36 million
Americans suffer from migraines although only 22.3 million have been clinically diagnosed. Migraine is a signif-
icant cause of disability, typically characterized by rapid onset and affecting individuals in their prime working
years between the ages of 20 and 50. This is a highly motivated demographic that seeks migraine therapy with a
long-lasting response.

Safety and efficacy. In a recently completed proof-of-concept trial with patients who had an average of nine migraine
days per month, 27 percent of the patients treated with ALD403 were completely migraine-free during the first
month. By the third month, that number had increased to 41 percent of patients who were 100 percent migraine
free. Overall, ALD403 reduced migraine days by at least one-half in 61 percent of patients. ALD403 had a similar
level of safety to placebo and was well tolerated.

DEAR ALDER STOCKHOLDER,

The last 12 months have been an exciting time for Alder.
We completed our initial public offering (IPO) in May 2014,
raising net proceeds of USD $80.3 million, and started
trading on the NASDAQ under the ticker symbol ALDR.
We announced positive data for both of our lead programs,
ALD403 and clazakizumab, and selected our third hu-
manized monoclonal antibody drug candidate, ALD1613,
for clinical development. In January 2015, we completed
a follow-on public offering that raised an additional USD
$190.7 million. The net result is that, today, we believe Alder
is a well-positioned biopharmaceutical company. We have
operating capital in place, clinical and preclinical programs
underway, and global rights to three internally discovered,
proprietary novel monoclonal antibody clinical candidates.

Our mission is to discover and develop therapeutics that
will meaningfully transform the way diseases are treated.
Toward that end, we’re focusing heavily on our lead clinical
candidate, ALD403, a novel monoclonal antibody that
blocks the calcitonin gene-related peptide (CGRP). We
believe ALD403 has the potential to completely prevent
migraines and alleviate suffering for millions of people
worldwide. In a recently completed proof-of-concept trial
published in Lancet Neurology, 27 percent of patients treat-
ed with ALD403 were completely migraine-free during the
first month of the study. By the third month, 41 percent of
patients in the study were 100 percent migraine free.

We feel that migraine is a significant unmet medical need.
It affects people in their prime working years, generally be-
tween the ages of 20 and 50. Over 12 million U.S. migraine
patients are severely afflicted, suffering five or more migraine
days per month. Preventive therapy for these patients pres-
ents a strong opportunity for Alder since few therapeutic
options exist today.

We believe another unmet need is Cushing’s disease, an
orphan disease driven by long-term exposure to cortisol
as a result of increased expression of Adrenocorticotropic
Hormone (ACTH), resulting in serious morbidity and
high mortality for those with pituitary tumors. ALD1613,

Alder BioPharmaceuticals, Inc. 2014 Annual Report Page 2

a novel monoclonal antibody, targets the root of Cushing’s
disease by inhibiting ACTH. We plan to advance ALD1613
through IND-enabling toxicology studies this year and
commence a Phase 1 trial in 2016.

Our pipeline also includes clazakizumab, which inhibits
the pro-inflammatory cytokine interleukin-6 (IL-6). We
have completed Phase 2b clinical studies with clazakizumab
in both rheumatoid arthritis (RA) and psoriatic arthritis
(PsA), and are seeking a partner to continue its clinical
development in autoimmune and inflammatory diseases.

Our clinical successes and proprietary technologies
have prompted us to continue to expand our antibody
therapeutic pipeline even further. We plan to pursue op-
portunities where we believe we have a favorable advantage
in developing first-in-class and best-in-class therapeutics.
In particular, we are setting our sights on disease areas where
monoclonal antibodies have not previously played a role in
disease management.

As we move forward to meet these ambitious goals, we
would like to thank our many significant stakeholders who
helped make this landmark year possible. Special thanks to
our stockholders, directors, employees, physicians and, of
course, the patients in our trials. Every day, we work to live
up to your trust in us.

Today, we believe Alder is well capitalized and well posi-
tioned to develop and commercialize truly novel therapeutic
antibodies with the potential to meaningfully transform
current treatment paradigms. We look forward to reporting
even more progress in the future.

Sincerely,

Randall C. Schatzman, Ph.D.

President and Chief Executive Officer

OUR PIPELINE

ALD403 Millions of
people worldwide suffer
from migraines. We
believe there is a need
for a new migraine ther-
apy that is long lasting,
safe, effective, and has
reduced side effects
compared to currently
available therapies.

Our goal at Alder is to build an enduring, diversified biopharmaceutical company. We intend
to leverage our expertise in discovery, development, and commercialization to bring first-in-
class and best-in-class monoclonal antibody therapeutics to patients who are underserved by
current therapies.

PROGRAM

INDICATION

PRE
CLINICAL

PHASE 1

PHASE 2

PHASE 3

EXPECTED NEXT EVENT

P H A S E O F D E V E L O P M E N T

Migraine

ALD403 (anti-CGRP)

Migraine
Prevention

Inflammation

Clazakizumab (anti-IL-6)

PsA

Preclinical Programs

ALD1613 (anti-ACTH)

Cushing’s
Disease

3 additional preclinical
stage programs

Multiple

Topline Phase 2
Chronic Migraine data
in 2H 2015

Initiate 2nd Phase 2b
in 1H 2015

Complete follow-on RA
Phase 2b in 1H 2015

Identify a clinical
development partner
for both indications

Initiate Phase 1
in 2016

Select candidates

Our pipeline includes internally discovered humanized antibodies in various stages of clinical
development as well as multiple programs in discovery.

Alder BioPharmaceuticals, Inc. 2014 Annual Report Page 3

ALD1613

Preclinical: Treatment
for Cushing’s Disease

A NTI-ACTH
M ONOC LON AL
A NTIB ODY

Alder discovered ALD1613, a genetically
engineered monoclonal antibody designed
specifically to inhibit Adrenocorticotropic
Hormone, or ACTH, for the treatment of
Cushing’s disease. This disease is driven by
long-term exposure to cortisol as a result of
increased expression of ACTH produced by a
pituitary tumor.

Existing treatments offer temporary relief
of limited symptoms. We believe our novel,
mechanism-based approach offers important ad-
vantages in safety and efficacy over the current
standard of care. Current medicines have signifi-
cant side effects and provide limited relief; surgery
is commonly employed and typically provides tran-
sient results. We believe these limitations indicate a
clear need for new therapy with ALD1613, which
targets ACTH to diminish the overproduction of
cortisol with a potentially better safety profile.

Symptoms of Cushing’s disease

Psychological dysfunction

Emotional/cognitive difficulties

Sleep disorders

Hirsutism or balding

Headache, vertigo, blurry vision

Round, red, full face (moon face)

Acne

Buffalo hump (extra fat
deposit on back of neck)

Diabetes (hyperglycemia)

Cardiac hypertrophy
(hypertension)

Dyslipidemia

Adrenal tumor or hyperplasia

Edema

Thin, wrinkled skin/bruising

Abdominal striae

Males: Gynecomastia

Pituitary
gland/tumor

+ ACTH

+ Cortisol

Adrenal
glands

Fatigue/weakness

Skin changes

Poor wound healing (ulcers)

Purpura

Females: Menstrual irregularities

Obesity around the trunk

Upper body obesity

Thin extremities

Protein/muscle wasting

GI distress

Increased urination

Osteoporosis

Clazakizumab

Phase 2b: Rheumatoid
& Psoriatic Arthritis

A NTI-I L-6
M ONO CLONAL
A NTIB ODY

Clazakizumab is a novel monoclonal antibody that inhibits the pro-inflammatory cytokine interleukin-6, or IL-6,
and is being developed for both rheumatoid arthritis (RA) and psoriatic arthritis (PsA). IL-6 is a protein associated
with acute and chronic inflammation and is believed to initiate an acute immune response and the production of
antibodies. IL-6 may also contribute to bone destruction. We estimate that the rheumatoid arthritis therapy market
had more than USD $12 billion in worldwide sales in 2012 and will grow to $15 billion by 2016. We believe there
is an opportunity to position clazakizumab as an option for first-line biologic therapy for the treatment of RA by
demonstrating superior disease control rates versus a biologic standard of care in Phase 3 trials.

Alder BioPharmaceuticals, Inc. 2014 Annual Report Page 4

MISSIO N

2014 10-K >

Our mission at Alder is to help alleviate human suffering by generating
better and safer antibody therapeutics through novel technologies. We
do this by using our proprietary technologies to uniquely identify, develop,
produce, and market our own antibody therapeutics. The work being done
at Alder today will potentially help those who suffer from migraine, autoim-
mune diseases, inflammatory diseases, orphan diseases, and other conditions.

Alder BioPharmaceuticals, Inc. 2014 Annual Report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
(cid:95) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(cid:3)

(cid:133)

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE
TRANSITION PERIOD FROM TO

For the fiscal year ended December 31, 2014
OR

Commission File Number 001-36431

Alder BioPharmaceuticals, Inc.

(Exact name of Registrant as specified in its Charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
11804 North Creek Parkway South
Bothell, WA
(Address of principal executive offices)

90-0134860
(I.R.S. Employer
Identification No.)

98011
(Zip Code)

Registrant’s telephone number, including area code: (425) 205-2900

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class
Common Stock, $0.0001 par value per share

Name of Exchange on Which Registered
The NASDAQ Stock Market LLC
(The NASDAQ Global Market)

Securities registered pursuant to Section 12(g) of the Act:
None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES (cid:133) NO (cid:95)
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES (cid:133) NO (cid:95)
Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. YES (cid:95) NO (cid:133)
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File
required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the Registrant was required to submit and post such files). YES (cid:95) NO (cid:133)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be
contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. (cid:95)
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definition of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
(Check one):
Large accelerated filer

Accelerated filer

(cid:133)

(cid:95) (Do not check if a smaller reporting company)

Smaller reporting company
Non-accelerated filer
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES (cid:133) NO (cid:95)
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the
shares of common stock on The NASDAQ Stock Market on June 30, 2014, was $202,240,332. Excludes an aggregate of 20,726,920 shares of the
registrant’s common stock held as of such date by officers, directors and stockholders that the registrant has concluded are or were affiliates of the
registrant. Exclusion of such shares should not be construed to indicate that the holder of any such shares possesses the power, direct or indirect, to
direct or cause the direction of the management or policies of the registrant or that such person is controlled by or under common control with the
registrant.
The number of shares of Registrant’s Common Stock outstanding as of March 6, 2015 was 37,923,916.
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference from the registrant’s definitive proxy statement to be filed with the Securities and Exchange
Commission pursuant to Regulation 14A, not later than 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, in
connection with the Registrant’s 2015 Annual Meeting of Stockholders (the “2015 Proxy Statement”).

(cid:133)

Alder BioPharmaceuticals, Inc.

Annual Report on Form 10-K

For the Year Ended December 31, 2014

INDEX

PART I ................................................................................................................................................................................................
Item 1.
Business ......................................................................................................................................................................
Item 1A. Risk Factors ................................................................................................................................................................
Unresolved Staff Comments .......................................................................................................................................
Item 1B.
Properties ....................................................................................................................................................................
Item 2.
Legal Proceedings .......................................................................................................................................................
Item 3.
Mine Safety Disclosures .............................................................................................................................................
Item 4.
PART II ...............................................................................................................................................................................................

Item 5.

Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of

Page
3
3
30
55
55
55
55
56

Equity Securities ....................................................................................................................................................
Selected Consolidated Financial Data .........................................................................................................................
Item 6.
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ......................................
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ....................................................................................
Financial Statements and Supplementary Data ...........................................................................................................
Item 8.
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure .....................................
Item 9A. Controls and Procedures .............................................................................................................................................
Other Information .......................................................................................................................................................
Item 9B.
PART III ..............................................................................................................................................................................................
Directors, Executive Officers and Corporate Governance ..........................................................................................
Executive Compensation ............................................................................................................................................
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters ...................
Certain Relationships and Related Transactions, and Director Independence ............................................................
Principal Accountant Fees and Services .....................................................................................................................

56
58
59
72
73
98
98
98
99
99
99
99
99
99
PART IV ............................................................................................................................................................................................. 100
100
101

Exhibits and Financial Statement Schedules ...............................................................................................................
Signatures ...................................................................................................................................................................

Item 10.
Item 11.
Item 12.
Item 13.
Item 14.

Item 15.

In this Annual Report on Form 10-K, “we,” “our,” “us,” “Alder,” and “the Company” refer to Alder BioPharmaceuticals, Inc. and, where appropriate,
its consolidated subsidiaries. “Alder” and the Alder logo are the property of Alder BioPharmaceuticals, Inc. This report contains references to our
trademarks and to trademarks belonging to other entities. Solely for convenience, trademarks and trade names referred to in this report may appear
without the ® or ™ symbols, but such references are not intended to indicate, in any way, that their respective owners will not assert, to the fullest
extent under applicable law, their rights thereto. We do not intend our use or display of other companies’ trade names or trademarks to imply a
relationship with, or endorsement or sponsorship of us by, any other companies.

PART I

Forward-Looking Information

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act

of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are based on
our management’s beliefs and assumptions and on information currently available to our management. All statements other than
statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating to future
events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by
terminology such as “may,” “might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,”
“potential,” “intend” or “continue,” the negative of terms like these or other comparable terminology, and other words or terms of
similar meaning in connection with any discussion of future operating or financial performance. These statements are only predictions.
All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us on the date
hereof, and we assume no obligation to update any such forward-looking statements. Any or all of our forward-looking statements in
this document may turn out to be wrong. Actual events or results may differ materially. Our forward-looking statements can be
affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties and other factors. We discuss many
of these risks, uncertainties and other factors in this Annual Report on Form 10-K in greater detail under the heading “Item 1A—Risk
Factors.” We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Item 1.

Business

We are a clinical-stage biopharmaceutical company that discovers, develops and seeks to commercialize therapeutic antibodies

with the potential to meaningfully transform current treatment paradigms. We have developed a proprietary antibody platform
designed to select antibodies that have the potential to maximize efficacy as well as speed of onset and durability of therapeutic
response. In addition, we believe our ability to efficiently manufacture antibodies using our yeast-based manufacturing technology,
MabXpress, allows us to target diseases that traditionally have not been addressed by antibodies. We believe the clinical data obtained
in our development program for ALD403 exhibits the potential of this product candidate to transform the way physicians treat
migraine prevention. ALD403 was discovered by Alder scientists, has achieved clinical proof-of-concept for high frequency migraine
and we have initiated a Phase 2b dose-ranging trial for the preventative treatment of chronic migraines in preparation for progression
to Phase 3 trials if supported by the data. If approved, we intend to commercialize ALD403 on our own in the United States. Our
second program, Clazakizumab, also known as ALD518, is designed to block the pro-inflammatory cytokine IL-6 and has completed
one Phase 2b clinical study and is currently in a second Phase 2b clinical study. We are seeking a new partner to continue the
development of Clazakizumab and we believe there is an opportunity to position Clazakizumab as an option for first-line biologic
therapy for treatment of rheumatoid arthritis by demonstrating superior disease control rates versus biologic standard of care. We
estimate that the rheumatoid arthritis therapy market had more than $12 billion in worldwide sales in 2012 and will grow to
$15 billion by 2016. Finally, our third development program, ALD1613 for treatment of Cushing’s Disease, presents an orphan
disease opportunity and is at a preclinical stage of development.

ALD403 is our novel monoclonal antibody targeted to calcitonin gene-related peptide, or CGRP, for migraine prevention.
CGRP is a validated target that is believed to play a key role in migraine. We are developing ALD403 for the prevention of migraine,
and in a recent proof-of-concept trial, treatment with ALD403 resulted in 16% of patients with high frequency migraine achieving
complete remission from their migraines. Approximately 36 million Americans suffer from migraines; however, only 22.3 million
migraine sufferers have been clinically diagnosed. Migraine is a significant cause of disability, generally affecting individuals between
the ages of 20 and 50, which are prime working years. The Migraine Research Foundation estimates U.S. employers lose more than
$13 billion each year as a result of 113 million lost work days due to migraine. We believe the area of critical unmet need in migraine
is preventive therapy with improved efficacy and tolerability to treat patients who have five or more migraine days per month. For the
12.6 million U.S. migraine patients who are candidates for migraine prevention, there are few therapeutic options to manage their
disease. We believe this group of migraine patients is highly motivated to seek new treatments due to the limited success of current
therapies.

We have completed a three month double blind, randomized, placebo-controlled proof-of-concept trial of ALD403 in 163
patients suffering from five to 14 migraine days per month, or high frequency migraine. In this trial, a single intravenous, or IV, dose
of ALD403 completely prevented migraines in 16% of patients over the entire three month period versus zero with placebo,
representing a statistically significant reduction (p<0.001). Furthermore, ALD403 reduced migraine days by at least half in 61% of
patients. ALD403 had a similar level of safety to placebo and was well tolerated and our trial had a dropout rate of less than 5%. In
October 2014, we initiated a Phase 2b dose-ranging trial of an IV formulation of ALD403 in 600 patients suffering from greater than
15 migraine days per month, or chronic migraine. The primary endpoint in the trial is the change in migraine days between ALD403
and placebo as judged by the difference in the responder rates at week 12. We expect primary endpoint data from this trial in the
second half of 2015. In the first half of 2015, we plan to initiate a second Phase 2b dose-ranging trial of ALD403 for the treatment of

high frequency migraine sufferers with the primary endpoint being the change in migraine days between ALD403 and placebo as
judged by the difference in the responder rates at week 12. We believe ALD403 has the potential to address the unmet need in the
migraine prevention market and as such represents a substantial market opportunity. We plan to build a 75 to 100 person sales force
targeting high-prescribing neurologists and headache centers in the United States, if ALD403 is approved, and to seek one or more
partners to develop and commercialize ALD403 outside the United States.

Clazakizumab is a novel monoclonal antibody that inhibits the pro-inflammatory cytokine interleukin-6, or IL-6, and is being

developed for both rheumatoid arthritis, or RA, and psoriatic arthritis, or PsA. IL-6 is a protein associated with acute and chronic
inflammation and is believed to initiate an acute immune response and the production of antibodies. IL-6 may also contribute to bone
destruction. In November 2009, we entered into a license and collaboration agreement with Bristol-Myers Squibb, or BMS, under
which we granted BMS worldwide exclusive rights to develop and commercialize Clazakizumab for all indications other than cancer.
On August 29, 2014, BMS notified us that it had elected to terminate the license and collaboration agreement effective as of
December 29, 2014, at which time all rights to Clazakizumab were returned to us. The decision by BMS to terminate the agreement
was the result of an internal BMS portfolio review process wherein BMS determined that Clazakizumab did not warrant further
investment based on other priorities in their pipeline. Under the terms of the agreement until June 29, 2015, BMS continues to be
responsible for the costs of ongoing clinical studies that were initiated prior to August 29, 2014, including the Phase 2b dose-ranging
trial. We are seeking a new partner to continue the development of Clazakizumab in autoimmune and inflammatory disease. The RA
treatment market is currently dominated by a class of drugs that target tumor necrosis factor alpha, or anti-TNFs, such as Humira or
Enbrel. Nevertheless, anti-TNFs are associated with low rates of disease remission and the response to these agents is not typically
durable. The American College of Rheumatology, or ACR, has recommended that treatment of RA should be directed at achieving
remission in patients or low disease activity if remission cannot be achieved. In a completed Phase 2b trial, the rates of disease
remission of Clazakizumab plus methotrexate were numerically higher than those treated with Humira plus methotrexate.
Methotrexate, or MTX, is one of the most commonly used medicines for the treatment of RA. MTX may decrease pain and swelling
of RA and may delay or decrease damage to joints. MTX in combination with biologics has been shown to be more effective than
MTX alone. We estimate that the rheumatoid arthritis therapy market had more than $12 billion in worldwide sales in 2012 and will
grow to $15 billion by 2016. Phase 2b dose-ranging trials are ongoing in preparation for progression to Phase 3 trials if supported by
the data. Based on current plans, we expect to announce data from an ongoing Phase 2b dose-ranging clinical trial of Clazakizumab in
RA patients in the first half of 2015. We believe there is an opportunity to position Clazakizumab as an option for first-line biologic
therapy for the treatment of RA by demonstrating superior disease control rates versus a biologic standard of care in Phase 3 trials.

ALD1613 is a genetically engineered monoclonal antibody discovered by us that was designed specifically to inhibit
Adrenocorticotropic Hormone, or ACTH, for the treatment of Cushing’s Disease. This disease is driven by long-term exposure to
cortisol as a result of increased expression of ACTH produced by a pituitary tumor. Chronic, excessive exposure to cortisol induces a
wide range of clinical features including: obesity, protein wasting, diabetes, dyslipidemia, hypertension, psychological dysfunction,
and osteoporosis. Surgery is commonly employed in this population it provides a transient solution so there remains a significant need
for new therapy despite available pharmacotherapy. The current medicines have significant side effect issues and provide limited
efficacy. We believe that a novel, mechanism-based approach to address Cushing’s Disease using a monoclonal antibody targeted to
ACTH that diminishes the overproduction of cortisol with a sound safety profile would provide a significant advantage over the
current standard of care and provide an important new therapeutic option to both patients and physicians. ALD1613 is currently at a
preclinical stage of development.

Our proprietary antibody platform leverages three technologies for the selection, humanization and manufacturing of

monoclonal antibodies. We focus on protein targets that have biology which has been validated by prior scientific or clinical research,
specifically ligands, which are circulating proteins, rather than receptors, which are their fixed docking sites. We believe this strategy
can lead to fewer drug doses at lower concentrations, while potentially minimizing off target activity and associated side-effects. To
date we have discovered all of our product candidates in-house with a technology we call antibody selection, or ABS. This versatile
technology allows us to identify the best site to inhibit on a particular target ligand and select an antibody that has both a high affinity
and specificity for the target. We have pioneered a process that humanizes rabbit antibodies to produce antibodies that are greater than
95% human. However, unlike fully-human antibodies, we specifically design our antibodies to lack certain sugars in an effort to
minimize the body’s recognition of such antibodies as foreign, thereby limiting infusion reactions as well as maximizing durability of
the therapeutic response.

Our yeast-based proprietary manufacturing technology, MabXpress, offers distinct advantages over traditional mammalian cell

culture approaches widely used in the manufacturing of antibodies. We are able to efficiently and reproducibly manufacture large
quantities of high-quality antibodies. This is in contrast to mammalian cell culture approaches that are generally characterized by
extended production times, costly media, risk of viral contamination and a lack of uniformity of the end product. Our proprietary
manufacturing processes are designed to produce antibodies on a significantly larger scale than traditional antibody manufacturing
processes. Together, these technologies have enabled us to progress to proof-of-concept in the clinic significantly faster than
traditional programs which rely on mammalian cells for manufacturing.

Our founders and executive management team have held senior positions at leading biotechnology and pharmaceutical

companies, possess over 100 years of combined experience across drug discovery and development and members of our management
team have been involved in bringing several drugs to market. Prior to our founding, members of our senior management team
occupied prominent roles at Celltech, a biotech company that was subsequently acquired by UCB. Our management team’s role in the
discovery and development of the monoclonal antibodies, Cimzia and romosozumab, exemplifies their approach of pursuing novel
intervention strategies. While the efficacy of an antibody was previously assumed to be related to both the binding and killing of the
target cell, Cimzia demonstrated in RA patients that antibodies blocking TNF did not need to have cell-killing function to be effective.
In osteoporosis, UCB’s romosozumab, partnered with Amgen, shows significant promise in being the first bone-building injectable
antibody in what is currently a market served predominantly by oral therapeutics. Our combined experience led us to establish our
proprietary platform that we believe enables us to develop best-in-class antibodies to transform current treatment paradigms.

Our Strategy

We aim to build an enduring, diversified biopharmaceutical company. We intend to leverage our expertise in discovery,

development and commercialization to bring first-in-class and best-in-class monoclonal antibody therapeutics to patients who are
underserved by current therapies.

Key elements of our strategy include:

(cid:121) Advance and commercialize ALD403 for the prevention of migraine. We plan to commercialize both an infusion and an

injectable formulation of ALD403. We have initiated a Phase 2b dose-ranging trial in chronic migraine sufferers and intend
to initiate a second Phase 2b dose-ranging trial in high frequency migraine patients in the first half of 2015. Data from these
two dose-ranging trials will be used in order to identify the appropriate dose level and dosing frequency for pivotal Phase 3
trials. Subject to confirmatory Phase 2b data, we plan to initiate pivotal Phase 3 trials in 2016 that are designed to obtain
regulatory approval in the United States and to support regulatory filings in Europe for ALD403 for the treatment of patients
with high frequency migraine and chronic migraine. We plan to build a 75 to 100 person sales force targeting high-
prescribing neurologists and headache centers in the United States, if ALD403 is approved, and to seek one or more partners
to develop and commercialize ALD403 outside the United States.

(cid:121) Seek a partner to advance and commercialize Clazakizumab as an option for first-line biologic therapy in autoimmune and
inflammatory disease. We are seeking a partner to continue the development of Clazakizumab as an option for autoimmune
and inflammatory disease therapy.

(cid:121) Advance ALD1613 for the treatment of Cushing’s Disease. We plan to advance ALD1613 through IND enabling toxicology

studies in 2015 and commence a Phase 1 clinical study in patients with Cushing’s Disease in 2016.

(cid:121) Leverage our technology platform to discover future product candidates for areas of unmet need. We have been evaluating

four programs with the view of advancing at least one candidate into the clinic in 2016 for a disease indication where
therapeutic antibodies have not previously played a therapeutic role. We recently designated ALD1613 as the candidate to
advance to IND enabling studies for the treatment of Cushing’s Disease. We will continue to enhance our technologies to
discover optimized product candidates that can be manufactured efficiently on a very large scale. We may seek to monetize
our technology platform by consummating partnerships with leading biotechnology and pharmaceutical companies. We also
intend to continue to deploy capital to selectively develop our own portfolio of product candidates.

(cid:121) Build a leading biopharmaceutical company to transform current treatment paradigms. We have brought together a group of

world class scientists and drug developers that, when coupled with our proprietary technologies, allow us to discover,
develop and commercialize antibody-based therapeutics that have the potential to change the lives of patients suffering from
many types of disease. We intend to establish targeted commercialization and marketing capabilities for our products in the
United States.

Product Candidates

Our pipeline includes three internally discovered humanized monoclonal antibodies, all unpartnered, as well as preclinical

programs targeting additional indications that are in the discovery phase.

Phase of Development

Pre-
Clinical

Phase 1

Phase 2

Phase 3

Last
Completed
Event

Expected
Next
Event

Initiated Phase 2b in
chronic migraine in
Q4 2014

Initiate 2nd Phase 2b in
high frequency migraine
in first half of 2015

Phase 2b completed
in first half
of 2013
Phase 2 data presented
at ACR 2014
in Q4 2014

Follow on Phase 2b
to be completed
in first half of 2015

TBD

Preclinical
evaluation
ongoing

Initiate Phase I in
2016 for ALD1613

Program

Indication

Migraine:

ALD403 (α-CGRP):

Migraine

Inflammation:

Clazakizumab (αIL-6):

Preclinical Stage:

ALD1613 + 3
additional programs:

Rheumatoid
Arthritis

Psoriatic
Arthritis

Cushing’s Disease
+ Multiple

ALD403

ALD403 is a genetically engineered monoclonal antibody that targets CGRP for prevention of migraine. CGRP is a small

protein that is involved in the transmission and heightened sensitivity to pain experienced in migraine. Drugs that block the CGRP
pathway have been long sought after as a novel way to treat migraine. Small molecules, such as Merck’s Telcagepant, established that
blocking CGRP could provide abortive treatment for migraine. By building on prior CGRP experiences, we believe there is
compelling rationale to support the development of ALD403 for the prevention of migraine.

Migraine is a common neurological disorder that is characterized by over-excitability of specific areas of the brain. Migraine

symptoms are debilitating and include intense sharp or throbbing pain, which is commonly accompanied by nausea, vomiting and high
sensitivity to light and sound. For those individuals afflicted with nausea and vomiting, these symptoms can make taking oral
medications challenging or ineffective. The duration of a migraine can span from hours to days and when symptoms become severe,
migraine sufferers often seek treatment through emergency room visits. According to a 2012 report by the U.S. Agency for Healthcare
Research and Quality, headaches accounted for 2.1 million visits to the emergency room annually. Migraines can severely restrict
normal activities and often require bed rest, making holding a job or maintaining a normal lifestyle difficult. The Migraine Research
Foundation estimates U.S. employers lose more than $13 billion each year as a result of 113 million lost work days due to migraine.

The Migraine Research Foundation estimates that 36 million Americans suffer from migraines. It is estimated that there are

22.3 million migraine sufferers who have been diagnosed. According to the American Migraine Foundation, migraine is three times
more common in women than men and migraine affects 30% of women over a lifetime. Migraine is most common between the ages
of 20 and 50 in both men and women. We divide migraine frequency into low frequency, high frequency and chronic. We characterize
low frequency migraine as zero to four migraine days per month, high frequency migraine as five to 14 migraine days per month and
chronic migraine as 15 or more migraine days per month. Approximately 12.6 million patients, or 56% of diagnosed migraine
sufferers, are candidates for migraine prevention therapy.

U.S. Migraine Population 36 Million

13.7 Million
Undiagnosed
38%

22.3 Million
Diagnosed
62%

12.6 Million
Candidates
for Prevention
56%

9.7 Million
Not Candidates
for Prevention
44%

We believe the area of critical unmet need in migraine is for preventive therapies with improved efficacy and tolerability to treat

the individuals with high frequency and chronic migraine. Indications for preventive migraine medications may include:

(cid:121) frequency of migraine attacks greater than two per month with disability that lasts three or more days per month;

(cid:121) abortive medications fail or are overused;

(cid:121) symptomatic medications (e.g. analgesics or anti-emetics) are contraindicated or ineffective; or

(cid:121) migraine variants such as those that effect motor function, or hemiplegic migraine, or migraines producing profound

disruption or risk of permanent neurologic injury.

Current treatments are ineffective for many of these patients and side-effects severely limit their use. We believe, in the

presence of a more effective treatment, patients who have previously abandoned therapy will again seek treatment.

Current Therapies

Migraine treatment involves abortive and preventive therapy. Abortive medications aim to reverse, or at least stop, the

progression of a migraine once it has started. Preventive medications, which are given even in the absence of a migraine, aim to
reduce the frequency and severity of the migraine attack, make acute attacks more responsive to abortive medications and may
improve the patient’s quality of life to a greater degree than abortive medications alone.

Abortive Medications. Numerous abortive medications are used for migraine. The choice for an individual patient depends on

the severity of the attacks, associated symptoms, such as severity of pain, incidence of nausea and vomiting, and the patient’s
treatment response. Patients most commonly use a non-steroidal anti-inflammatory drug, a 5-hydroxytryptamine–1 agonists, or
triptans, or a combination of both to abort a migraine. Triptans are most effective when taken early during a migraine and may be
repeated in two hours as needed, with a maximum of two doses daily. Triptans are not recommended for use more than three days a
week because overuse can lead to increased frequency of migraines and medication overuse headache. Approximately 30% to 50% of
patients respond to triptans and there is a high rate of recurrence of migraine within 24 hours. To avoid the development of medication
overuse headache, patients are limited to no more than 10 doses of triptans in any one month, which may be insufficient to treat
patients with high frequency or chronic migraines. This limitation can also be problematic for migraine patients who suffer from
nausea and vomiting and cannot keep triptans in their systems. In addition to these limitations, triptans are also contraindicated for
patients with existing, or at risk of, coronary artery disease.

Preventive Medications. Currently, preventive medications approved for migraine include beta blockers, such as propranolol,

topiramate, sodium valproate, and botulinum toxin, or Botox.

In patients with high frequency and chronic migraine, beta blockers, topiramate and sodium valproate are commonly used.
These medications are often not well-tolerated by patients because of adverse events such as cognitive impairment, nausea, fatigue and
sleep disturbance. In clinical trials, complete responses, or a 100% reduction in migraine days or episodes, with topiramate were less
than 6%. In the affected patient population, predominantly women of child-bearing age, the association of these agents with poor
pregnancy outcomes and fetal abnormalities can limit their use.

Botox is only approved in patients with 15 or more migraine days per month, or chronic migraine. Approximately 47% of

Botox-treated patients experience a 50% reduction in either migraine days per month or migraine frequency per month within six
months, which leaves more than half of patients inadequately treated. In Phase 3 trials, Botox did not report any complete responses.
In addition, the dosing regimen requires approximately 31 subcutaneous injections at various sites on the head and neck which is
repeated every 12 weeks if the patient has a therapeutic response.

Unmet Need

According to the U.S. Agency for Healthcare Research and Quality, only about 12% of adults with high frequency or chronic

migraine take preventive medications. According to the American Migraine Foundation, medication side-effects often limit the use of
migraine medications. We believe there is a need for a new therapy that is long lasting, safe, effective and has reduced side-effects
compared to currently available therapies, and that can either prevent migraines completely or reduce the frequency to a level where
patients can find adequate relief from existing abortive medications. Such a therapy could provide benefit for both patients on existing
therapies and patients who have abandoned therapy.

Our Solution

We are developing ALD403 as a highly potent, long-acting therapeutic that modulates the activity of CGRP for the prevention

of migraine in patients with high frequency or chronic migraine. Based on clinical trials data from our proof-of-concept trial, ALD403
provides substantial relief to patients with high frequency with no observed tolerability or safety issues. The high selectivity and low
off-target action, the long half-life and favorable dosing options of ALD403, suits this treatment setting where compounds need
robust, safe and sustained benefit for the patient seeking treatment. We are developing both an infusion and an infectable formulation
in order to provide options for less frequent dosing of the therapy and accommodate patients’ preferred method of administration. In
our proof-of-concept trial in high frequency migraine patients with an average of nine migraine days per month, approximately 27% of
patients using ALD403 experienced a complete response, with no migraines in the first month. Furthermore, the majority of patients
had a statistically significant reduction in migraine days per month; for example, 61% of all treated patients had a reduction in
migraine days by at least half. We believe reductions of this magnitude can shift the disease into a range of migraine days that can be
managed with abortive medications. In addition, to date we have not observed any differences in safety data between ALD403 and
placebo.

Other CGRP Directed Therapeutics

There are no currently approved medications that target CGRP. Small molecule CGRP inhibitors, such as Merck’s Telcagepant,
established that blocking CGRP was effective as an abortive treatment for migraine. However, these small molecules, which have very
different properties than ALD403, had side-effects and toxicity issues that curtailed their development. The Merck experience
clinically validated CGRP biology as a target for migraine but suggested a different strategy for intervention to be utilized to avoid
off-target toxicity issues. By building on prior experiences of other companies targeting the CGRP pathway and our own efficacy data
in the prevention of high frequency migraine, we believe there is compelling rationale to continue the development of a highly
selective antibody, such as ALD403, for the prevention of migraine. In clinical trials of ALD403 to date, involving more than 160
subjects, we have not observed any significant side-effects or toxicity issues.

There are a number of compounds in different phases of development that are targeting CGRP biology. These are summarized

below.

Compound

Company Target

Stage of Development

Efficacy Results

ALD403

Alder

CGRP

LBR101/
PF-04427429

Teva
(Labrys)

CGRP

LY-2951742

Lilly
(Arteaus)

CGRP

Proof-of-Concept—High
frequency migraine
Phase 2b—Chronic migraine
dose-ranging
Phase 2b—High frequency
migraine dose-ranging

Phase 2—High frequency
episodic migraine
Phase 2—Chronic migraine

Phase 2a—Frequent episodic
migraine proof-of-concept
Phase 2b—Episodic migraine
dose-ranging
Phase 2—Osteoarthritis

AMG-334

Amgen

CGRP-R Phase 2—Dose-ranging in high
frequency migraine
Phase 1—Efficacy, safety,
tolerability and pharmacokinetics
in women with hot flashes
associated with menopause

Effective in treating high
frequency migraines
Trial commenced in October
2014
Trial expected to be commenced
in first half of 2015

Not available; study on-going
Not available; study on-going

Effective in treating high
frequency migraines

Not available; study on-going
Not available; study ongoing

Not yet announced

Not available; study on-going

AMG-334

Amgen

CGRP-R Phase 2—Dose-ranging in chronic

Not available; study on-going

migraine

Clinical Trials

ALD403 has been evaluated in two clinical trials and two ongoing clinical trials. The table below summarizes the clinical trials

completed to date or ongoing and the planned Phase 2b trial.

Trial

ALD403
ALD403
ALD403
ALD403
ALD403

Stage of Development

Phase 1
Proof-of-Concept Trial
Phase 1
Phase 2b
Phase 2b

Trial Population

Healthy Subjects
High Frequency Migraine
Healthy Subjects
Chronic Migraine
High Frequency Migraine

Study
Locations

Australia
United States
Australia
Various
TBD

Active/Placebo

67/37
81/82
36/24
480/120
TBD

Trial
Status

Completed
Completed
On-going
On-going
Planned

Completed Proof-of-Concept Trial. Our most recently completed clinical trial of ALD403 was a single dose, double-blind,

placebo-controlled, randomized proof-of-concept trial to evaluate the safety, pharmacokinetics and efficacy of ALD403 in patients
with high frequency migraine. Pharmacokinetics, or PK, measures the amount of a specific drug in the body over a period of time, and
includes the process of absorption, distribution, metabolism and excretion of the drug. Approximately 80 patients each received one
dose of ALD403 in the clinical trial.

Differences in the change in mean migraine days per month was the approvable endpoint for the pivotal clinical trials of Botox
and topiramate, which have been approved for preventive migraine therapy. The primary endpoint for our proof-of-concept trial was
the difference between ALD403 and placebo in the change of mean migraine days per month from baseline to weeks five through
eight following one dose of ALD403. As illustrated in the figure below, in the trial, one dose of ALD403 produced a rapid and durable
reduction in migraine days that was statistically significant when compared to placebo, in terms of both change in migraine days per
month (p=0.03) and the magnitude of the change in migraine days prevented across all patients (p<0.001) at the primary endpoint of
eight weeks. The reduction in migraine days per month was also statistically significant across the entire combined three month trial
period (p=0.0078).

In this trial, the “p” values were statistical calculations to determine whether the effects of ALD403 were significant in
comparison to placebo based on pre-specified statistical targets. We specified that any result less than p=0.05 would be significant.
This trial was designed to provide statistically significant results. Phase 3 trials will be needed to confirm the significant findings of
the proof-of-concept trial in order to support regulatory approvals.

ALD403 1000 mg IV versus Placebo IV as a Single Dose

e
n

i
l
e
s
a
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m
o
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f

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)

M
E
S
-
/
+
(
n
a
e
M

-2

-4

-6

-8

Placebo IV (Number of patients=82)

ALD403 1000mg IV (Number of patients=81)

Primary Endpoint

p<0.001

p=0.03

p=0.06

Months 1-3 combined: p=0.0078

Time (weeks)

As illustrated in the table below, 16% of patients receiving a single dose of ALD403 achieved complete response versus 0% on

placebo over the entire 12 week trial. In any four week period of the trial (weeks 1-4, 5-8 or 9-12), approximately 75% of patients
achieved a 50% reduction, 45% or more achieved a 75% reduction and 27% or more achieved a 100% reduction in migraine days. We
believe measuring response rates, or the magnitude of the change in migraine days prevented across patients, provides an important
measure of patient benefit to prescribing physicians and patients. For example, telling a patient that he or she has a one in six chance
of achieving a complete response, meaning no migraines, can be easier to relate to than reduction of mean migraine days per month.

Number (Percentage) of Patients Achieving a 50%, 75% and 100%
Reduction in Migraine Days During Weeks 1-4, 5-8, and 9-12

Time Period

Percent Reduction
Migraine Days

Placebo IV ALD403 1000 mg IV

p-value

Weeks 1-4 ........................................................ Number of Evaluable Patients

50%
75%
100%

Weeks 5-8 ........................................................ Number of Evaluable Patients

50%
75%
100%

Weeks 9-12 ...................................................... Number of Evaluable Patients

50%
75%
100%

Weeks 1-12 ...................................................... Number of Evaluable Patients

50%
75%
100%

80
40 (50.0)
19 (23.8)
4 (5.0)

80
43 (53.8)
28 (35.0)
12 (15.0)

78
52 (66.7)
24 (30.8)
13 (16.7)

76
25 (32.9)
7 (9.2)
0

76
57 (75.0)
39 (51.3)
21 (27.6)

78
59 (75.6)
35 (44.9)
21 (26.9)

73
55 (75.3)
39 (53.4)
30 (41.1)

68
41 (60.3)
22 (32.4)
11 (16.2)

p=0.0011
p=0.0003
p<0.0001

p=0.0032
p=0.1347
p=0.0493

p=0.1603
p=0.0039
p=0.0008

p=0.0006
p=0.0004
p=0.0001

The following figure presents data from patients who achieved a 50%, 75% and 100% reduction in migraines at all-time points

in the trial. ALD403 provided a statistically significant reduction versus placebo in migraines at all response levels in these patients
(p<0.001).

Percentage of Patients with 50%, 75% and 100% Reduction in Migraine Days
Over the Entire Three Month Period of the Trial

p<0.001

100

s
t
n
e
i
t
a
P
f
o
e
g
a
t
n
e
c
r
e
P

Placebo IV (Number of patients=82)
ALD403 1000mg IV (Number of patients=81)

p<0.001

50% response

75% response

100% response

ALD403 was well-tolerated and adverse events were comparable in terms of type and frequency across ALD403 and placebo

groups. In addition, there were no differences between ALD403 treatment and placebo groups with respect to adverse events,
cardiovascular measures or laboratory safety data.

Patients in this trial were followed for an additional three months for a total of six months (24 weeks) follow-up. The percentage

of patients achieving a 50, 75 or 100% response for the entire 24 week duration of follow-up was similar as observed for the first 12
weeks indicating that the response to a single dose of ALD403 was durable and long lasting.

Percentage of Patients with 50%, 75% and 100% Reduction in Migraine Days
Over the Entire Three and Six Month Periods

p<0.001

12 wks

p<0.001

24 wks

p<0.001

12 wks

Placebo IV 12 wks. (number of patients=82)
ALD403 1000mg IV 12 wks. (number of patients=81)
Placebo IV 24 wks. (number of patients=82)
ALD403 1000mg IV 24 wks. (number of patients=81)
p<0.002

24 wks

p<0.001

12 wks

p<0.002

24 wks

100

s
t
n
e
i
t
a
P
f
o

e
g
a
t
n
e
c
r
e
P

50% response

75% response

100% response

Reduction in Migraine Days for Three and Six Months is Similar

Comparison of ALD403 and Arteaus LY-2951742 Clinical Trial Data

The following table compares data from our proof-of-concept trial of ALD403 with data recently published in Lancet Neurology

by the American Academy of Neurology from a separate clinical trial of LY-2951742. LY-2951742 is a monoclonal antibody that,
like ALD403, targets the CGRP ligand.

Category & target ................................................................ Monoclonal antibody to

CGRP ligand

ALD403

LY-2951742

Monoclonal antibody to
CGRP ligand

Patient migraine days .......................................................... 5 to 14 migraines per month

4 to 14 migraines per month

Dosing/Formulation ............................................................ Single 1,000 mg dose IV

Biweekly 150 mg doses SQ

Decrease in number (percentage) of migraine days per

month ............................................................................. At 8 weeks:

ALD403: 5.6 (66%)
Placebo: 4.6 (52%)

100% reduction in percentage of migraine days

per month ....................................................................... At 12 weeks:

ALD403: 41%
Placebo: 17%

Responder analysis (reduction of migraine days) weeks

1-12 inclusive ................................................................. 50% reduction:
ALD403: 61%
Placebo: 33%

At 12 weeks:
LY-2951742: 4.2 (62.5%)
Placebo: 3 (42%)

At 12 weeks:
LY-2951742: 33%
Placebo: 17%

Not reported

75% reduction:
ALD403: 33%
Placebo: 9%

100% reduction:
ALD403: 16%
Placebo: 0%

Other adverse event data ..................................................... No difference in type or frequency

compared to placebo

Upper respiratory tract infections,
abdominal pain and injection site
pain as compared to placebo

The following figure compares the mean change in headache days from our proof-of-concept trial of ALD403 with data reported

in Lancet Neurology for LY-2951742. ALD403 is already at peak effect by month one whereas LY-2951742 requires two months to
reach peak effect.

Alder ALD4031

Lilly LY-29517422

e
n

i
l

e
s
a
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o
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f
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n
a
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a
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M

s
y
a
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a
r
g
m

f
o
r
e
b
m
u
n

-1

-2

-3

-4

-5

-6

Placebo i.v. (n=82)

ALD403 1000mg i.v. (n=81)

-3.9

-5.6

-4.6

-5.6

e
n

i
l

e
s
a
b
m
o
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f
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-4.6

-5.6

s
y
a
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f
o
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b
m
u
n

-1

-2

-3

-4

-5

-6

Placebo s.c. EOW (n=110)

LY2951742 150mg s.c. EOW (n=107)

-2.9

-4.3

-3.0

-4.2

-2.3

-3.7

Time (weeks)

1Dodick et al. Lancet Neurology, October 2014
2Dodick et al. Lancet Neurology, August 2014

This comparison is not based on data resulting from a head-to-head trial and is not a direct comparison. Different protocol
designs, trial designs, patient selection and populations, number of patients, trial endpoints, trial objectives and other parameters that
are not the same between the relevant trials may lead to bias in the results causing comparisons of results from different trials to be
unreliable. Any such comparisons would not be permitted by the FDA to support an application for approval to market ALD403.

Completed Phase 1 Clinical Trial. The first clinical trial of ALD403 consisted of three parts:

(cid:121) Part A: The first part was a single dose, placebo-controlled, randomized, ascending dose trial to determine the safety,

tolerability and pharmacokinetics of IV administered ALD403 in healthy volunteers and migraine patients. Fifty-five subjects
received one IV dose (dose range: 1 – 1000 mg) of ALD403. ALD403 was well-tolerated and there were no differences
exhibited in any safety measure, including laboratory safety parameters, between subjects who received ALD403 and
subjects who received placebo at any dose level. ALD403 displayed a long half-life of approximately 32 days for the 1000
mg dose and linear pharmacokinetics for doses ranging from 1 to 1000 mg. Pharmacodynamic effects characterized by a
dose-related inhibition of vasodilation induced by topically applied capsaicin were observed in subjects receiving IV
administration of ALD403 and persisted through 84 days post-treatment. Pharmacodynamics describe the biochemical and
physiological effects of a specific drug on the body and the relationship between drug concentration and effect.

(cid:121) Part B: In the second part, we demonstrated that ALD403 can be used safely in combination with triptans, the dominant

abortive treatment for low frequency migraines. When ALD403 was administered and then followed by triptan
administration, no changes in systolic or diastolic blood pressure or other safety parameters were noted beyond these when
triptans were given alone.

(cid:121) Part C: In the third part, as illustrated in the following figure, our subcutaneous, or SQ, formulation of ALD403 was 70.3%

bioavailable when compared to IV and the pharmacodynamics, or PD, effect was similar to that of IV in magnitude, duration
and speed of onset of its effect.

IV PK (100mg)

SQ PK (100mg)

SQ PD (100mg)

IV PD (100mg)

Number of patients=6

Number of patients=12

Number of patients=6

Number of patients=12

Clinical Development Plan

In October 2014, we initiated a Phase 2b dose ranging, double blind, randomized, placebo-controlled trial (four dose levels, with
approximately 120 patients per group) of an IV formulation in patients with chronic migraine. We expect to have initial data from this
Phase 2b trial in the second half of 2015. In addition, we intend to initiate a second Phase 2b dose ranging, double blind, randomized,
placebo-controlled trial in patients with high frequency migraine in the first half of 2015. Data from these two dose-ranging trials will
be used in order to identify the appropriate dose level and dosing frequency to take forward into pivotal Phase 3 trials in 2016. The
main efficacy endpoints in both trials will be the responder analysis (patents achieving 50%, 75% and 100% reduction in migraine
days per month) and mean difference in migraine days per month.

We currently hold an IND for ALD403 for the treatment of migraine, which was submitted in December 2012 and remains active.

If we generate positive Phase 2b data, we plan to conduct Phase 3 trials in both high frequency and chronic migraine patients utilizing
both formulations as appropriate.

Commercial Strategy

In the United States, due to the severity of the disease, patients with high frequency or chronic migraine seek preventive treatment

from neurologists and pain specialists. By the time a high frequency or chronic migraine patient begins prevention therapy, the patient
may have experienced any or all of increased headache frequency, nonresponse to abortive therapy and significant migraine-related
disability. Neurologists prescribe preventive therapies more often than do primary care physicians and pain specialists across all
headache frequencies. For example, in the case of topiramate, a leading preventive migraine medication, despite representing only 9%
of the doctors prescribing anti-migraine medications, neurologists account for almost half of all the prescriptions written for topiramate.
Given the referral patterns for migraine and the need for improved patient care, the American Migraine Foundation has initiated a
program to establish headache centers in major cities across the United States. We plan to build a 75 to 100 person sales force targeting
the high-prescribing neurologists and headache centers in the United States, if ALD403 is approved, and to seek one or more partners to
develop and commercialize ALD403 outside the United States.

We intend to commercialize both an infusion and an injectable formulation in order to optimize rapidity of onset, sustained

delivery of efficacy and patient choice. We are currently evaluating the timing of studies for these formulations as part of our pivotal
Phase 3 trial strategy. The injectable allows for self-administration, which provides patients convenience and greater control over the
treatment of their disease. In addition, we believe that an infusion formulation that allows for more infrequent dosing may provide an
alternative for patients to determine how their disease is managed. An infusion formulation also may be preferable for neurologists for a
number of reasons, including enabling better monitoring of treatment. Neurologists have access to IV delivery infrastructure, including
infusion centers, which they currently use to deliver therapies for diseases such as multiple sclerosis.

Clazakizumab

Clazakizumab is a humanized monoclonal antibody that binds to and inhibits IL-6. IL-6 is an important driver of the

inflammatory response and is implicated in the transition from acute to chronic inflammation. Chronic inflammation is a notable feature
of several diseases, including RA and PsA. IL-6 is implicated in the pathogenesis of RA as it has been shown to be the main driver that
stimulates the immune system to increase tissue destruction and joint damage. IL-6 also drives the systemic symptoms in RA patients,
which include flu-like symptoms such as malaise and fatigue. Targeting IL-6 is an established approach for the treatment of RA as
evidenced by the use of Genentech’s Actemra for this patient population.

Rheumatoid Arthritis

RA is a chronic inflammatory disorder that principally attacks joints. Approximately 2.4 million patients, predominantly women,
suffer from RA in the United States. RA affects the lining of joints, causing a painful swelling that can eventually result in bone erosion
and joint deformity. It also leads to stiffness and redness in the joints. RA may also have general effects such as fatigue and cause
damage to organs, such as the lungs and the cardiovascular system. Uncontrolled RA also is associated with substantial morbidity and
mortality.

We estimate that global sales of RA therapies was more than $12 billion in 2012 and will grow to $15 billion by 2016.

Non-Anti-TNFs
$3.3B

Anti-TNFs
$9.0B

Current Therapies

Methotrexate, or MTX, is an immunosuppressive drug initially developed for cancer and was approved for treatment of RA in

1988. MTX continues to play a role in first-line therapy for the approximately 50% of RA patients who initially respond to MTX, even
though it is associated with side-effects including nausea, abdominal pain and serious lung and liver toxicities. A major advancement
in treatment of RA began in 1998 with the approval of the first biologic therapy. Biologic therapies involve the use of antibodies or
other proteins produced by living organisms to treat disease and represent a significant improvement in patient care. Biologic therapy
of RA is currently dominated by the anti-TNF class, which, when administered in combination with MTX, reduces inflammation and
structural damage to the joints. There is increasing recognition that treating patients with biologic therapy early on in the course of
their disease delays irreversible structural damage to joints. Since anti-TNFs came on the market, their utilization has increased and
they have changed the treatment paradigm for RA.

Current Treatment Paradigm. Anti-TNFs are currently the standard of care for first- and second-line biologic therapies for RA

patients who have an inadequate response to MTX alone. Anti-TNFs are often prescribed in combination with MTX for those
inadequate responders who are able to tolerate MTX. Anti-TNFs have shown benefit in reducing both symptoms of RA and joint
destruction. However, there is a significant need for therapies that deliver a greater degree of efficacy than anti-TNFs, given both the
debilitating symptoms and irreversible joint damage caused by RA. Approximately one-third of RA patients do not adequately
respond to anti-TNFs and are typically referred to as anti-TNF inadequate responders. In addition, anti-TNFs are associated with low
rates of disease remission and the response to these agents is not typically durable. As a result, anti-TNFs lead to therapeutic cycling,
where an anti-TNF inadequate responder is switched to another anti-TNF. A significant number of patients treated with an anti-TNF
will be cycled to their second and third anti-TNF within 24 months of anti-TNF therapy initiation. Therapeutic cycling is a serious
issue for patients because the efficacy of each successive drug is not known typically for several months, which contributes to
progression of disease and continued irreversible structural joint damage. The ACR has recommended a higher goal for treatment of
RA that focuses on achieving remission or if remission cannot be achieved, low disease activity.

Other New Therapies. Genentech’s Actemra, an anti-IL-6 receptor antibody, BMS’s Orencia, a CTLA4Ig Fc fusion protein,

Biogen Idec and Genentech’s Rituxan, an anti-CD20 antibody, and Pfizer’s tofacitinib, an oral JAK kinase inhibitor, are all approved
for use in RA patients. All except tofacitinib, which was approved in November 2012, have reported annual sales of approximately
$900 million or greater. They all may be used as second-line or third-line therapies in the TNF inadequate responder population.
Orencia was recently shown to be non-inferior to Humira in terms of ACR20 efficacy in a head-to-head trial, which may drive more
use as first-line biologic therapy. Based on reported sales, tofacitinib has had low uptake to date, which we believe is due in part to its
safety profile, and it was rejected at all dose levels by the European Medicines Agency.

Future Treatment Paradigm. Unlike the approach taken by the other biologic therapies under development for the anti-TNF

inadequate responders, we are seeking to position Clazakizumab as an option for first-line biologic therapy for RA. We believe that a
new biologic therapy that demonstrates superior disease control to an anti-TNF and has strong durability presents an opportunity to
change the current treatment paradigm to one of first-line use of biologics that have the potential to stop disease progression in more
patients. The following diagram depicts the current and our anticipated future treatment paradigm of treating patients with a goal of
achieving remission or lowest possible disease activity.

Diagnosis

MTX

First-line Biologic
Therapy

Second-line Biologic
Therapy

Clazakizumab

Non-Anti-TNF

Anti-TNF

+/- MTX

Non- or partial
responder

Cycling of agents
due to lack of efficacy
or lack of durability

Remission
Achieved

Measurements of RA Disease. The severity of RA disease can be assessed using several indices as recommended by ACR: the

ACR criteria, the DAS28 and the CDAI.

The ACR criteria measures improvement in tender or swollen joint counts and includes other parameters which take into
account the patient’s and physician’s assessment of disability. These clinical disease activity parameters are combined to form
composite percentages of clinical response that are known as ACR20, ACR50, and ACR70. An ACR20 score represents a 20%
improvement in these criteria and is considered a modest improvement in a patient’s disease. The ACR20 is currently the regulatory
bar by which new therapeutics in RA are approved by the FDA. An ACR50 score and ACR70 score represents a 50% and 70%
improvement in the clinical response criteria, respectively, and are considered evidence of clinically meaningful improvements in a
patient’s disease. We believe physicians are looking for agents which deliver at least an ACR50 or ACR70 level of benefit to their
patients.

Two other highly discriminating scoring systems for RA include the Disease Activity Score, or DAS, and the Clinical Disease
Activity Index, or CDAI. As with the ACR score, both the DAS28-CRP and the CDAI are composite indices that quantify a patient’s
degree of improvement. The DAS provides a number between zero and 10, indicating how active the RA is at that moment. A patient
who has a DAS28-CRP score of less than 2.6 is considered to have achieved disease remission. The CDAI has range from 0 to 76. A
patient is considered to be in CDAI remission if they have a CDAI score of equal to or less than 2.8. With each measure, remission
means the patient experiences little or no disease activity and is the ultimate objective for every RA patient.

Today the efficacy bar for treatment success is moving: rather than being satisfied with modest improvements in disease
activity, such as an ACR20, the ACR has set low disease activity and remission as the new target for RA therapies. These more
stringent outcomes can be assessed using newer measures such as ACR70, DAS28-CRP remission and CDAI remission.

Comparative Efficacy. We believe the current approved anti-TNFs and non-anti-TNFs have demonstrated in clinical trials,
broadly, similar efficacy based on ACR and DAS28 scores, when used in combination with MTX, which is standard of care. The
following table compares data from representative anti-TNFs, the leading non-anti-TNF, Orencia and the only approved IL-6 agent,
Actemra.

Response and Remission Rates
in Methotrexate Inadequate Responders at Six Months
(Placebo + MTX Response in Brackets)

Representative Approved Anti-TNFs ..........................................

Representative Approved Non-anti-TNFs ...................................

Humira + MTX
Remicade + MTX
Enbrel + MTX

Orencia + MTX
Actemra + MTX

(anti-IL-6R)

Response Rates (%)

Remission
Rates (%)
ACR20 ACR50 ACR70 DAS28 <2.6
68 (39) 49 (18) 19 (7)
59 (42) 37 (20) 24 (9)
71 (27) 39 (3) 15 (0)

23.7
25.2
30

68 (40) 40 (17) 20 (7) Not Reported
59 (27) 44 (11) 22 (2)

16.3

Our Solution

We believe there is an opportunity to position Clazakizumab as an option for first-line biologic therapy for the treatment of RA
by demonstrating superior disease control rates versus a biologic standard of care in Phase 3 trials. In the completed Phase 2b clinical
trial, the ACR70 and rates of disease remission of Clazakizumab and Humira were:

Clazakizumab 25mg + MTX .................................................................
Clazakizumab 100mg + MTX ...............................................................
Clazakizumab 200mg + MTX ...............................................................
Humira + MTX ......................................................................................

Remission Rates (%)

ACR70 (%)
27.1
38.3
30.0
18.6

DAS28-CRP < 2.6
49.2
41.7
41.7
23.7

CDAI ≤2.8
15.3
20.0
20.0
8.5

ACR70 and remission rates were not specified as primary endpoints in the Phase 2b trial so an additional trial would be needed

to confirm these findings.

We believe demonstrating superior disease control rates for Clazakizumab versus a biologic standard of care in a head-to-head

trial would be valued by physicians who are choosing the best first-line RA therapy for their patients.

Other IL-6 Inhibitors in Development

There have been two main approaches to targeting IL-6 biology, targeting the ligand or the receptor. Clazakizumab targets the
ligand. Because the concentration of IL-6 receptor is 1000-fold higher than the ligand, we believe by targeting the ligand we may be
able to disrupt IL-6 biology by administering relatively low levels of drug.

Late Stage IL-6 Inhibitors

Compound

Company

Target

Formation

Dosing

Stage of
Development

Usage

Clinical Program

Sarilumab ........................ Regeneron /

Receptor Subcutaneous Q2 week

Phase 3

With MTX DMARD-IR and Second-line after anti-TNF

Sanofi

Sirukumab ...................... Janssen

Ligand

Subcutaneous Q2 week /

Phase 3

With MTX DMARD-IR and Second-line after anti-TNF and monotherapy

J&J / GSK

Q4 week

Clazakizumab ................. BMS

Ligand

Subcutaneous Q4 week

Phase 2b

With MTX First-line and DMARD-IR

Clinical Trials

To date, an aggregate of nine human clinical trials of Clazakizumab have been conducted or initiated by BMS and us,
collectively involving over 1,000 patients, including Phase 1 and Phase 2 trials in healthy volunteers and patients with RA, PsA and
cancer. In general, the safety profile of Clazakizumab has been the same or better than other RA therapies and is consistent with the
known pharmacology of an IL-6 inhibitor. We believe these trials have also demonstrated that Clazakizumab has the potential to be
superior to Humira.

Completed Phase 2b Clinical Trial in RA. BMS has completed a randomized, double-blind, placebo-controlled, dose-ranging

trial including Humira as an active comparator. Approximately 418 patients were randomized to one of seven treatment arms: five
Clazakizumab doses (three in combinations with MTX, two monotherapy), placebo in combination with MTX, and Humira in
combination with MTX. Patients were dosed monthly for 24 weeks with a 24 week extension and open-label extension as well at a
common fixed dose. Patients randomized to Clazakizumab monotherapy received MTX after week 24. The primary objective of the
trial was to compare the efficacy of Clazakizumab versus placebo on a background of MTX as assessed by ACR20 response rates.

The trial met the primary endpoint with a greater proportion of patients achieving an ACR20 response at week 12 in all

Clazakizumab treatment arms as compared to placebo, in combination with MTX. At week 24, all Clazakizumab treatment groups and
the Humira treatment group had numerically higher percentage of patients achieving an ACR20, ACR50 and ACR70 score. In
addition, remission rates as judged by a DAS28-CRP score < 2.6 or CDAI score ≤ 2.8 were numerically favorable to placebo in all
treatment groups.

Response Rates and Remission Rates in BMS’s Phase 2b Trial at 24 Weeks

Treatment Arm

Placebo + MTX ........................................................................
Claza 25 mg + MTX ................................................................
Claza 100 mg + MTX ..............................................................
Claza 200 mg + MTX ..............................................................
Claza 100 mg + placebo ...........................................................
Claza 200 mg + placebo ...........................................................
Humira + MTX ........................................................................

Number
of
Patients

Response Rates(%)

Remission Rates(%)

ACR20

ACR50

ACR70

DAS28-
CRP < 2.6

CDAI ≤ 2.8

61
59
60
60
60
59
59

39.3
83.1
63.3
66.7
58.3
57.6
67.8

18.0
47.5
45.0
43.3
36.7
33.9
49.2

6.6
27.1
38.3
30.0
16.7
25.4
18.6

13.1
49.2
41.7
41.7
28.3
35.6
23.7

1.6
15.3
20.0
20.0
6.7
6.8
8.5

The safety profile of Clazakizumab at 24 weeks exhibited rates of adverse events that were similar across all Clazakizumab

arms (ranging from 83.1% to 96.7%), compared to 59% and 74.6% for the MTX and Humira arms, respectively. The rates of serious
adverse events, or SAEs, ranged from 8.3% to 13.6% in the Clazakizumab arms versus 3.3% for MTX and 5.1% for Humira + MTX.
The most frequent SAEs were serious infections. Rates of serious infections ranged from 1.7% to 5.1% in the Clazakizumab arms
versus 0% for MTX and 3.4% for Humira + MTX. Additionally, the Clazakizumab arms exhibited increases in mean total cholesterol
without changes in HDL/LDL ratio, increases in hemoglobin, increases in liver function tests and decreases in neutrophils, a type of
white blood cell, and platelets, which are expected from IL-6 inhibition. Clazakizumab arms also exhibited low rates of
immunogenicity and lacked serious infusion reactions.

Completed Phase 2a Clinical Trial in RA. Efficacy and remission rates of Clazakizumab in the Phase 2a trial conducted by us
and the Phase 2b trial conducted by BMS are consistent. In addition, the safety profile for Clazakizumab in both trials was consistent.
Prior to our collaboration agreement with BMS, we assessed the clinical efficacy of Clazakizumab in moderate to severe RA in a
parallel-group, double-blind, randomized, placebo-controlled, 16 week trial. Clazakizumab was administered intravenously in patients
with active RA with an inadequate response to MTX. A total of 132 patients were enrolled, of which 127 received at least one dose of
trial drug and 116 received two doses of trial drug. Patients were randomized to receive two intravenous infusions of Clazakizumab
80, 160, 320 mg or placebo on day one and at week eight. In all treatment groups, patients continued to take a stable dose of MTX.
The demographic and other baseline characteristics were balanced across treatment groups. The trial met the primary endpoint with a
greater proportion of patients achieving an ACR20 response at week 12, with 81.3%, 70.6%, and 82.1% of patients in the
Clazakizumab 80, 160, and 320 mg groups, respectively, compared with 27.3% in the placebo group (p>0.0005 for each comparison
to placebo). A greater proportion of patients in the Clazakizumab groups compared with placebo also achieved ACR50 and ACR70
responses. Furthermore, there were additional incremental increases in ACR50 and ACR70 response rates between weeks 12 and 16.
In this trial, the “p” values were statistical calculations to determine whether the effects of Clazakizumab were significant in
comparison to placebo based on pre-specified statistical targets. We specified that any result less than p=0.05 would be significant.

Response Rates and Remission Rates in Our Phase 2a Trial at 16 Weeks

Placebo + MTX ...........................................................................

Treatment Arm

Claza 80 mg IV every 8 wks + MTX ..........................................

Number
of
Patients

Claza 160 mg IV every 8 wks + MTX ........................................

Claza 320 mg IV every 8 wks + MTX ........................................

Response Rates(%)

Remission Rates(%)

ACR20

ACR50

ACR70

DAS28-
CRP < 2.6

75
(p=0.0026)

41
(p=0.028)

22
(p=0.082)

13.8
(p=0.002)

65
(p=0.028)

41
(p=0.029)

18
(p=0.258)

28.1
(p=0.0001)

82
(p=0.005)

50
(p=0.005)

43
(p=0.0015)

44
(p=0.0001)

Ongoing Clinical Trials in RA. BMS is currently conducting a Phase 2b, dose-ranging clinical trial of Clazakizumab designed to

determine the safety and efficacy of Clazakizumab in RA patients who are anti-TNF inadequate responders. Approximately 140
patients taking background MTX have been enrolled and randomized to one of four dose groups: 1, 5, 25 mg Clazakizumab or
placebo. Patients receive monthly subcutaneous injections. The primary objective of the trial is to compare the efficacy of
Clazakizumab plus MTX in reducing signs and symptoms of RA as assessed by change in the baseline DAS28-CRP at 12 weeks of
treatment. The trial is now fully enrolled and BMS continues to be responsible for all costs of this clinical trial through June 29, 2015.
We expect top line data from this study during the first half of 2015. We filed an IND for Clazakizumab in November 2008, which
was subsequently transferred to BMS. BMS filed an IND for Clazakizumab in May 2011. Both INDs remain active and BMS is
obligated to transfer to us the IND that BMS filed in May 2011.

Other Indications

We believe that Clazakizumab has the potential for further development as a therapeutic agent for one or more additional
diseases where high levels of IL-6 are believed to play a role, such as PsA. As a result of the termination of our agreement with BMS,
we have regained worldwide rights for all clinical and other product development activities and for manufacturing Clazakizumab.

Psoriatic Arthritis. PsA is a form of arthritis that affects some people who have psoriasis, a skin condition characterized by red
patches of skin topped with silvery scales. PsA often strikes earlier in life than RA, affecting patients as early as their 20s. Most PsA
patients have concurrent joint pain, stiffness and swelling, as well as skin lesions. PsA is clinically distinct from RA, but causes
similar significant morbidity and mortality. Despite the relatively small PsA incidence, the worldwide sales of PsA biologic therapies
totaled $1.7 billion in 2011, with anti-TNFs representing 89% of the market. By contrast to RA, there are only three anti-TNF
therapies approved for the treatment of PsA: Enbrel, Humira and Simponi. Anti-TNFs are ineffective for approximately 33% of PsA
patients and an additional 20% of PsA patients become anti-TNF inadequate responders over time, resulting in therapeutic cycling and
joint destruction. PsA patients have fewer options for follow-on treatment than RA patients.

BMS completed a Phase 2b, dose-ranging clinical trial of Clazakizumab in PsA that was designed to determine the safety,

efficacy and dose response of Clazakizumab in patients with active PsA who have had an inadequate response to nonsteroidal anti-
inflammatory drugs and non-biologic disease-modifying anti-rheumatic drugs, or DMARDs. Approximately 150 patients taking a
stable dose of background MTX were randomized to one of four dose groups: 25, 100, or 200 mg Clazakizumab or placebo. Patients
received monthly subcutaneous injections for six months. The primary objective of the trial was to compare the efficacy of
Clazakizumab in reducing the signs and symptoms of PsA as assessed by ACR20 response rates. BMS initiated the trial in December
2011 and presented data from the trial in November 2014. Clazakizumab met the primary endpoint of the study, ACR20 response rate
at week 16 versus placebo. At week 16, ACR20 response rates were 29.3, 46.3, 52.4 and 39% for placebo, and 25, 100 and 200 mg
Clazakizumab, respectively.

Other Prior Clinical Trials. We have completed five clinical trials in cancer indications where tumors secrete high levels of IL-
6, which may promote resistance to treatment, increase the rate of metastatic spread, and lead to anemia, fatigue and weight loss. One
hundred ninety-eight patients have received at least one dose of Clazakizumab in these trials. Clazakizumab has a safety profile in
cancer patients comparable to the safety profile in the auto-immune patients studied to date. We currently hold an IND for
Clazakizumab for the treatment of cancer, which was submitted in October 2010 and is inactive. Due to our prioritization of our
ALD403 program, we are not currently pursuing further development of Clazakizumab in cancer at this time. We may resume
development of Clazakizumab in cancer indications in the future.

Strategy

We are seeking a partner to continue the development of Clazakizumab and in the event that we do not find a partner, the

development of Clazakizumab could be significantly delayed or result in the discontinuation of the development of Clazakizumab.

ALD1613

ALD1613 is a genetically engineered monoclonal antibody discovered by us that was designed specifically to inhibit ACTH for

the treatment of Cushing’s Disease. This disease is driven by long-term exposure to cortisol as a result of increased expression of
ACTH produced by a pituitary tumor. Chronic, excessive exposure to cortisol induces a wide range of clinical features including:
obesity, protein wasting, diabetes, dyslipidemia, hypertension, psychological dysfunction, and osteoporosis. Surgery is commonly
employed in this population; however, it provides a transient solution so there remains a significant need for new therapy despite
available pharmacotherapy. The current medicines have significant side effect issues and provide limited efficacy. We believe a novel,
mechanism-based approach to address Cushing’s Disease using a monoclonal antibody targeted to ACTH that diminishes the
overproduction of cortisol with a sound safety profile would provide a significant advantage over the current standard of care and
provide an important new therapeutic option to both the patient and physician. ALD1613 is currently at a preclinical stage of
development.

Preclinical Pipeline

We are actively working to expand our antibody therapeutic pipeline in opportunities where our technology provides favorable

development advantage in areas of unmet medical need, seeking both first-in-class and best-in-class therapeutics. We prioritize targets
that meet the criteria of either genetic validation or clinical demonstration that they play a central role in the disease state. We recently
designated ALD1613 as the candidate to advance to IND enabling studies for the treatment of Cushing’s Disease. We are continuing
to evaluate additional potential candidates that represent diverse opportunities in indications that may be eligible for orphan
designations and/or indications where monoclonal antibodies have not previously played a role in the treatment paradigm such as our
ALD403 program for migraine prevention.

Technology Platform

We have developed a proprietary antibody platform to select antibodies that not only maximizes efficacy, but also speed of

onset and durability of therapeutic response. In addition, our ability to efficiently manufacture antibodies allows us to target diseases
that traditionally have not been addressed by antibodies. Our antibody platform accomplishes this by utilizing three technologies:

(cid:121) ABS, which allows us to discover antibodies that are optimized for therapeutic efficacy;

(cid:121) rabbit humanization, which allows us to limit side-effects and maximize durability; and

(cid:121) MabXpress, which allows us to efficiently and reproducibly manufacture large quantities of antibodies.

We also believe these technologies allow us to address a number of critical development priorities early, thereby reducing our

development cost and timeline.

Antibody Discovery and Candidate Selection Technology

Antibodies are produced by the immune system in humans and other warm-blooded animals. They are naturally generated to
help defend and protect from disease and infections. Antibodies are produced and secreted by specialized antibody producing cells
called B cells. Traditionally, rodents have been used as the source of therapeutic antibodies. To find these antibodies, we remove the B
cells from the spleen and fuse to a cancer cell. The combined cancer and B cell, or a “hybridoma,” is able to live longer than normal B
cells would alone. Generally, this process has trouble recovering the desired therapeutic antibody due to its low efficiency.
Collectively this limits the ability to identify high-quality antibody therapeutics with optimal therapeutic properties.

We discover all of our product candidates in-house with a technology we call ABS. As a precursor to discovery, we choose to

target freely-circulating proteins, such as ligands, which are critical to the disease biology and are part of well understood disease
pathways. We believe this strategy can lead to fewer drug doses at lower concentrations, while potentially minimizing off target
activity and associated side-effects. The clinical relevance of these proteins is highly validated by prior scientific or clinical research.

Our ABS technology has been successfully applied to a wide cross section of therapeutic targets that range from small

biologically active peptides to more traditional monoclonal antibody targets. ABS allows us to rapidly evaluate all the B cells in a host
and identify the key subset of cells that produce the antibody responsible for the desired therapeutic effect. We believe one of our
competitive advantages is our proprietary method to keep these B cells alive while we exhaustively screen them. This is an iterative
process that allows us to identify the rare antibodies that possess the ideal qualities needed to be a successful therapeutic, for example
manufacturability, therapeutic stability, durability and favorable safety.

Our Antibody Selection Process

Our ABS technology has been applied in all our preclinical and clinical programs and led to the selection of our lead product
candidate, ALD403, as well as Clazakizumab and ALD1613. We also use our ABS technology to provide bio-analytical support for
all our product candidates in the clinic.

Antibody Humanization and Therapeutic Design

Antibodies derived from non-human sources elicit a natural rejection response, and if left unchanged when injected into
humans, are removed rapidly and quickly lose their therapeutic effect. Common sources of antibodies include mice and rats, which
have antibodies that are structurally different from humans and need to be altered to be more human-like.

Historically it is a complex and difficult undertaking to convert rodent antibodies into human therapeutics that retain all the

original rodent antibody properties. This is a highly iterative process that is both time and labor intensive and is fraught with
significant failure.

We have pioneered the use of rabbit antibodies as the starting materials for our product candidates. Compared to rodent antibody

humanization, our rabbit antibody humanization results in more human-like antibodies that maintain their original properties and are
faster to produce. As a result, our process requires fewer iterations to complete humanization. Using our proprietary technology, we
consistently generate antibody therapeutics that are greater than 95% human in terms of their sequence content. However, unlike fully-
human antibodies, we specifically design our antibodies to lack certain sugars in order to further minimize the body’s recognition of
such antibodies as foreign, thereby limiting infusion reactions, as well as maximizing durability of the therapeutic response. Our
technology results in product candidates that are well-tolerated by patients.

MabXpress Protein Expression

Historically, commercial manufacturing of large molecule proteins has posed a number of significant challenges. In particular,

the ability to efficiently, from a time and cost perspective, manufacture biologics has been a bottleneck to the development and
successful commercialization of these types of molecules. Furthermore, these inefficiencies have created a barrier to the use of
biologics for certain therapeutics. We express complex molecules like monoclonal antibodies in a simple microorganism with our
technology we call MabXpress. MabXpress addresses the previous inefficiencies in manufacturing, which we believe may allow us to
target diseases that traditionally have not been addressed by antibodies.

MabXpress is based on the expression of recombinant polypeptides including antibodies in diploid Pichia pastoris host yeast

strains. Recombinant polypeptides are manipulated forms of natural proteins generated through the use of various molecular
techniques to produce large quantities of proteins. Pichia pastoris has been widely used in commodity production, such as Purafine, a
product that is commonly used in waste water treatment. Pichia pastoris yields rapid production cycles, excellent scale-up
characteristics and success in production runs at up to 160,000 liters scale. This yeast strain is currently used to produce non-antibody
therapeutic proteins approved by the FDA, and which may provide an established framework for regulatory approval for our product
candidates.

We employ MabXpress to produce our product candidates, because it offers distinct time, scale and viral clearance advantages

over traditional mammalian cell culture approaches, such as Chinese Hamster Ovary, or CHO, as depicted in the table below.

Production Advantages of Using MabXpress

Characteristics

Pichia Pastoris

Cell line manufacture and release ....

Up to 1 month

Fermentation cycle time ...................

5-7 days

Maximum scale of production .........

Up to 160,000 liters

Viral clearance and validation of

viral clearance .............................

Not Applicable

CHO

6-9 months

15-30 days

Up to 25,000 liters

3-6 months

We have pioneered the use of this yeast to produce full-length therapeutic antibodies, which are the core products of our

business. The purification process makes use of industry standard methods, and has been scaled to a commercial level for
Clazakizumab. These antibodies have been engineered to enhance the fundamental properties of the product candidate. The process
results in antibody products which are similar from lot to lot and we specifically design our antibodies to lack certain sugars in an
effort to minimize the body’s recognition of such antibodies as foreign, and to improve product half-life thereby limiting infusion
reactions as well as maximizing durability of the therapeutic response.

During product candidate selection, we consider manufacturing attributes including efficiency, product stability, homogeneity

and scalability to commercial levels. We also select multiple back up antibodies all compatible with the final product candidate
profile. This supports rapid and successful delivery of product candidate supply and if an unforeseen production or stability problem
emerges, we are able to more efficiently transition to an alternate antibody. We have successfully implemented MabXpress in multiple
contract manufacturing facilities throughout the world. Upon successful transfer and subject to availability, our contract manufactures’
facilities can execute production runs in days compared to the weeks required by traditional mammalian production.

Collectively, our proprietary technologies enable rapid progression into human clinical trials. We were able to bring each of our

two product candidates, ALD403 and Clazakizumab, from discovery initiation against the disease target to dosing of patients in
clinical trials in 20 months.

Intellectual Property

Our success will significantly depend upon our ability to obtain and maintain patent and other intellectual property and
proprietary protection for our product candidates and antibody platform. For the specific antibody product candidates in all of our
programs, we seek to protect the candidate antibody and variants thereof, compositions containing the antibody, methods of
manufacturing the antibody, and the use of the antibody in treating human disease conditions where we or any future partner is
actively pursuing, or contemplate pursuing regulatory approval permitting the marketing of the antibody for use as a human
therapeutic agent. In addition to pursuing patent protection for our key technologies, we rely upon unpatented trade secrets, know-how
and continuing technological innovation to develop and maintain our competitive position.

We seek to protect our proprietary information, in part, by using confidentiality agreements with our collaborators, employees

and consultants and invention assignment agreements with our employees and selected consultants. Despite these measures, any of our
intellectual property and proprietary rights could be challenged, invalidated, circumvented, infringed or misappropriated, or such
intellectual property and proprietary rights may not be sufficient to permit us to take advantage of current market trends or otherwise
to protect competitive advantages. For more information, see the section of this Annual Report on Form 10-K titled “Risk Factors—
Risk Related to Intellectual Property.”

Clazakizumab

Our patents and patent applications relating to Clazakizumab have been broadly filed worldwide. Many of these applications

have issued in the United States and other countries and will expire between 2028 and 2031, or later if patent term extension applies.

We hold one U.S. patent with granted claims directed to the Clazakizumab antibody and compositions containing the

Clazakizumab antibody. This patent will expire in 2028 or later if patent term extension applies.

We hold one U.S. patent with granted claims directed to nucleic acids encoding Clazakizumab and methods of use thereof to

produce this antibody. This patent will expire in 2028.

We hold nine U.S. patents with granted claims broadly or specifically directed to the use of Clazakizumab and variants thereof,

alone or in combination, to treat or prevent human disease conditions associated with elevated IL-6. These patents will expire between
2028 and 2030, or later if patent term extension applies.

ALD403

Our patent applications relating to ALD403 have also been broadly filed worldwide. If these applications issue as patents, they

are estimated to expire in 2032.

We own, or co-own with exclusive rights, three patent families related to ALD403. Each family contains one pending U.S.

patent application, one international (PCT) application, and various foreign counterpart applications with claims directed to
compositions and methods of using ALD403 and variants thereof, alone or in combination to treat or prevent various human diseases
and conditions associated with elevated CGRP. Patents based on these applications, if granted, are expected to expire in 2032.

We have full ownership of the first ALD403 patent family, which relates to ALD403 compositions and methods for treating or

preventing various human disease conditions associated with elevated CGRP.

We are the co-owner and exclusive licensee of the second ALD403 patent family, which relates to ALD403 compositions and

methods for treating or preventing various human disease conditions associated with photophobia or light aversion.

We are the co-owner and exclusive licensee of the third ALD403 patent family, which relates to ALD403 compositions and

methods for treating or preventing various other human disease conditions associated with diarrhea.

ALD1613

We hold six U.S. patent applications related to ALD1613 and are actively filing additional U.S. applications. If these

applications issue as patents, they are estimated to expire in 2035.

Technologies

We hold three U.S. patents and numerous foreign patents related to MabXpress. Our MabXpress patents and patent applications

relate to the expression of heteropolymeric polypeptides, such as antibodies, in Pichia. These patents will expire between 2024 and
2026.

We have sought patent protection for our antibody discovery method, of which five foreign patents have been granted, and one

pending U.S. application and six foreign applications are under examination. These foreign patents will expire in 2027. A patent based
on the U.S. application, if issued, is expected to expire in 2027.

We also have sought patent protection for our proprietary method of humanizing rabbit antibodies. Three of these patents have
been granted in foreign territories and two U.S. and thirteen pending foreign patent applications are under examination. These foreign
patents will expire in 2028. Patents based on the U.S. applications, if issued, are expected to expire in 2028. Patents based on the
foreign applications, if issued, are expected to expire in 2028.

We also hold two granted U.S. patents claiming a yeast promoter sequence useful in the MabXpress technology. These patents

will expire in 2027.

Early Stage Programs

All programs where there is a potential at a later stage to transition into clinical candidate nomination are covered by pending
U.S. (non-provisional or provisional), international (PCT) or directly filed foreign patent applications. There are currently ten U.S.
patent applications and one granted U.S. patent that support these programs, and in some instances corresponding PCT and/or foreign
counterpart applications have been filed.

Technology Licenses

Keck Graduate Institute of Applied Life Sciences

In October 2004, we entered into a license agreement with Keck Graduate Institute of Applied Life Sciences, or Keck, under

which we obtained an exclusive, worldwide license to Keck’s patent rights in certain inventions, or the Keck patent rights, and
technology or the Keck technology, related to production and optimization of antibodies in yeast, including certain patents relating to
our ABS and MabXpress technologies. Under the license agreement, we are permitted to research, develop, manufacture and
commercialize products utilizing the Keck patent rights for all research and commercial uses, and to sublicense such rights. Keck
retained the right, on behalf of itself and other non-profit institutions, to use the Keck patent rights and Keck technology for
educational and research purposes and to publish information about the Keck patent rights and to further use the Keck technology for
purposes other than production and optimization of antibodies in yeast.

In consideration for the rights granted to us under the license agreement, we issued Keck an aggregate of 40,000 shares of our

common stock. As additional consideration, we are required to pay an annual license maintenance fee during the term of the
agreement.

The license agreement requires that we use commercially reasonable efforts to develop and commercialize one or more products

that are covered by the Keck patent rights. We may terminate the license agreement upon 30 days’ notice to Keck. Either party may
terminate the license agreement in the event of material breach of the license agreement which remains uncured after 90 days of
receiving written notice of such breach. Absent early termination, the license agreement will automatically terminate on a country-by-
country basis upon the expiration date of the longest-lived patent right included in the Keck patent rights.

Other

We also license intellectual property from certain other parties that we believe to be useful for the conduct of our business and

may enter into additional license agreements in the future.

Terminated Collaboration Agreement with Bristol-Myers Squibb

In November 2009, we entered into a license and collaboration agreement with BMS for the development and

commercialization of Clazakizumab and received an $85 million upfront payment. On August 29, 2014, we received written notice
that BMS had elected to terminate the license and collaboration agreement effective as of December 29, 2014, or the Termination
Date, at which time all rights to Clazakizumab were returned to us. The decision by BMS to terminate the agreement was the result of
an internal BMS portfolio review process wherein BMS determined that Clazakizumab did not warrant further investment based on
other priorities in their pipeline. Under the terms of the agreement, we granted BMS worldwide exclusive rights to develop and
commercialize Clazakizumab for all indications other than cancer. In addition to the $85 million upfront payment, BMS was
responsible for paying 100% of worldwide development costs for all indications, except cancer, and reimbursing us for certain clinical
supply and development costs. To date, in addition to the upfront payment, we have received two milestone payments totaling $18.5
million in the aggregate and we have been reimbursed for clinical supply and development costs of $26.9 million. We would have
been eligible to receive additional development-based, regulatory-based and sales-based milestone payments and tiered royalties on
net sales of Clazakizumab had the agreement not been terminated.

BMS continues to be responsible for all costs of the clinical trials through June 29, 2015 that were initiated prior to August 29,

2014. If any milestone event is achieved during the period between August 29, 2014 and the Termination Date, BMS will not be
obligated to pay the corresponding milestone payment. Effective on the Termination Date, all rights granted to BMS with respect to
Clazakizumab terminated and reverted to us, and BMS granted to us an exclusive license, with the right to grant sublicenses, under
certain BMS intellectual property solely to make, have made, use, import, export, offer for sale, and sell Clazakizumab. BMS is
obligated to transfer to us the Investigational New Drug Application that BMS filed for Clazakizumab with the U.S. Food and Drug
Administration and all material data related to Clazakizumab that has not previously been transferred to us. We have the right to
purchase all of BMS’ existing manufactured drug supply of Clazakizumab at cost.

We will be required to pay a low single-digit royalty to BMS on sales of Clazakizumab unless the regulatory approval of

Clazakizumab is not based in whole or in part upon data from BMS’s Phase 2b clinical trial(s) in rheumatoid arthritis and psoriatic
arthritis. Aside from those clinical trial expenses that BMS is obligated to pay after the Termination Date, we will be solely
responsible for performing and funding any new Clazakizumab development and clinical trial activities initiated after the Termination
Date. We are seeking a partner to continue the development of Clazakizumab and in the event that we do not find a partner, we expect
the development of Clazakizumab to be discontinued for the foreseeable future.

Manufacturing

We have adopted a manufacturing strategy of contracting with a variety of contract manufacturing organizations, or CMOs,
within North America and Europe for the manufacture of ALD403 and future product candidates. This has enabled us to produce
products under current good manufacturing practices, or cGMP, controls for our completed and planned clinical trials. A protocol of
methods has been established at these manufacturers along with specific testing facilities to generate sufficient information to inform
the appropriate regulatory authorities. We anticipate there will be continued interaction with additional CMOs as our product
candidates advance and we seek to expand our access to larger production facilities to supply clinical trials and commercialization. We
have identified multiple CMOs that we believe would be capable of implementing and validating the manufacturing process for
ALD403. If we secure a partner to continue the development of Clazakizumab, we would expect such partner to manage the
manufacturing process of Clazakizumab.

Competition

The development and commercialization of new therapeutic products is highly competitive. Our success will be based in part on

our ability to identify, develop and manage products that are safer, more efficacious and/or more cost-effective than alternative
therapies. We face competition with respect to our current product candidates, and will face competition with respect to product
candidates that we may seek to develop or commercialize in the future, from major pharmaceutical companies, specialty
pharmaceutical companies and biotechnology companies worldwide. In addition, our ability to compete may be affected in many
cases by insurers or other third-party payors seeking to encourage the use of biosimilar products, which are expected to become
available over the coming years. Many of our competitors are large pharmaceutical companies that will have a greater ability to reduce
prices for their competing drugs in an effort to gain market share and undermine the value proposition that we might otherwise be able
to offer to payors.

Potential competitors also include academic institutions, government agencies and other public and private research
organizations that conduct research, seek patent protection and establish collaborative arrangements for research, development,
manufacturing and commercialization. Many of these competitors are attempting to develop therapeutics for our target indications.

ALD403

ALD403, if approved, will compete with beta blockers that are approved for prevention of high frequency and chronic migraine

such as topiramate, marketed by Johnson & Johnson, propranolol, marketed by Wyeth, and sodium valproate, marketed by
Divalproex. In addition, Botox, marketed by Allergan, is approved for the prevention of chronic migraine and commonly prescribed
for high frequency migraine. We are also aware of several CGRP inhibiting therapies currently in development that could compete
with ALD403, including therapies using antibodies similar to ALD403 that are being developed by Amgen, Lilly and Teva (Labrys).
Furthermore, even though not as effective in treating high-frequency and chronic migraine, patients may be satisfied using cheaper
generic abortive medications such as triptans, which could limit ALD403 market penetration in the migraine prevention marketplace.

Clazakizumab

Clazakizumab, if approved, will compete with other biologic therapies including anti-TNFs and non-anti-TNFs. Anti-TNFs
include Humira, marketed by AbbVie, Enbrel, marketed by Amgen, and Remicade, marketed by Johnson & Johnson. Non-anti-TNFs
include Orencia, a CTLA4Ig Fc fusion protein, marketed by BMS and Actemra, an IL-6 inhibitor, marketed by Genentech. In
addition, we are aware of several other IL-6 therapies currently in development including Sarilumab which is being developed by
Regeneron and Sanofi, and Sirukumab which is being developed by Johnson & Johnson and GSK. Unless we or a future partner is
able to demonstrate superior disease control to a biologic standard of care and position Clazakizumab as an option for first line
biologic therapy, it will face significant competition in an increasingly crowded biologic therapy market. In addition, we expect that
by the time Clazakizumab could enter the marketplace, there may be several anti-TNF biosimilars on the market. The entry of such
products could potentially put pricing and access pressures on Clazakizumab.

The commercial opportunity for ALD403 or Clazakizumab could be reduced or eliminated if our competitors develop and
commercialize products that are safer, more effective, more convenient or less expensive than our product candidates or any other
product candidate that we may develop. Our competitors also may obtain FDA or other regulatory approval for their products more
rapidly than we may obtain approval for ours. In addition, our ability to compete may be affected because in many cases insurers or
other third-party payers seek to encourage the use of generic products.

We believe that ALD403 and Clazakizumab have potential benefits over these competitive products as described in more detail
under “—Product Candidates—ALD403—Current Therapies” and “—Product Candidates—Clazakizumab—Current Therapies.” As a
result, we believe that ALD403 and Clazakizumab should be well placed to capture market share from competing products if
approved. However, even with those benefits, ALD403 and Clazakizumab may be unable to compete successfully against these
products. See “Risk Factors — Risks Related to Our Business and the Development and Commercialization of Our Product
Candidates.”

Government Regulation

The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial
requirements upon the clinical development, manufacture and marketing of biopharmaceutical products. These agencies and other
federal, state and local entities regulate research and development activities and the testing, manufacture, quality control, import,
export, safety, effectiveness, labeling, storage, distribution record keeping, approval, advertising and promotion of our products.

The process required by the FDA before product candidates may be marketed in the United States generally involves the

following:

(cid:121) submission of an investigational new drug application, or IND, which must become effective before clinical trials may begin;

(cid:121) adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic product

candidate for its intended purpose;

(cid:121) pre-approval inspection of manufacturing facilities for their compliance with cGMP and selected clinical investigations for

their compliance with Good Clinical Practices; and

(cid:121) FDA approval of a Biologics License Application, or BLA, to permit commercial marketing for particular indications for use.

The testing and approval process requires substantial time, effort and financial resources. Prior to commencing the first clinical
trial with a product candidate, we must submit an IND to the FDA. The IND automatically becomes effective 30 days after receipt by
the FDA, unless the FDA, within the 30-day time period, raises safety concerns or questions about the conduct of the clinical trial by
imposing a clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial
can begin. Submission of an IND may not result in FDA authorization to commence a clinical trial. A separate submission to the
existing IND must be made for each successive clinical trial conducted during product development. Furthermore, an independent
institutional review board for each medical center proposing to conduct the clinical trial must review and approve the plan for any
clinical trial and its informed consent form before the clinical trial commences at that center. Regulatory authorities or an institutional
review board or the sponsor may suspend a clinical trial at any time on various grounds, including a finding that the subjects or
patients are being exposed to an unacceptable health risk. Some studies also include a data safety monitoring board, which receives
special access to unblinded data during the clinical trial and may halt the clinical trial if it determines that there is an unacceptable
safety risk for subjects or other grounds, such as no demonstration of efficacy.

For purposes of BLA approval, human clinical trials are typically conducted in three sequential phases that may overlap.

(cid:121) Phase 1—Studies are initially conducted to test the product candidate for safety, dosage tolerance, absorption, metabolism

and distribution.

(cid:121) Phase 2—Studies are conducted with groups of patients with a specified disease or condition to provide enough data to

evaluate the preliminary efficacy, optimal dosages and dosing schedule and expanded evidence of safety. Multiple Phase 2
clinical trials may be conducted to obtain information prior to beginning larger and more expensive Phase 3 clinical trials.

(cid:121) Phase 3—Clinical trials are undertaken in large patient populations to further evaluate dosage, to provide statistically

significant evidence of clinical efficacy and to further test for safety in an expanded patient population at multiple clinical
trial sites. These clinical trials are intended to establish the overall risk/benefit ratio of the product and provide an adequate
basis for product approval.

(cid:121) Phase 4—The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-

called Phase 4 studies may be made a condition to be satisfied after approval. The results of Phase 4 studies can confirm the
effectiveness of a product candidate and can provide important safety information.

Concurrent with clinical trials, companies usually complete additional animal studies and must also develop additional

information about the biological characteristics of the product candidate as well as finalize a process for manufacturing the product in
commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing
quality batches of the product candidate and, among other things, must develop methods for testing the identity, strength, quality and
purity of the final product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to
demonstrate that the product candidate does not undergo unacceptable deterioration over its shelf life.

BLA Submission and Review by the FDA

The results of product development, nonclinical studies and clinical trials are submitted to the FDA as part of BLA. The
submission of BLA requires payment of a substantial User Fee to the FDA. The FDA may convene an advisory committee to provide
clinical insight on application review questions. The FDA reviews applications to determine, among other things, whether a product is
safe and effective for its intended use and whether the manufacturing controls are adequate to assure and preserve the product’s
identity, strength, quality and purity. Before approving an NDA or BLA, the FDA will inspect the facility or facilities where the
product is manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and facilities
are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications.
Once the BLA submission has been accepted for filing, the FDA typically takes one year to review the application and respond to the
applicant, which can take the form of either a Complete Response Letter or Approval. The review process is often significantly
extended by FDA requests for additional information or clarification. The FDA may delay or refuse approval of a BLA if applicable
regulatory criteria are not satisfied, require additional testing or information and/or require post-marketing testing and surveillance to
monitor safety or efficacy of a product. FDA approval of any BLA submitted by us will be at a time the FDA chooses. Also, if
regulatory approval of a product is granted, such approval may entail limitations on the indicated uses for which such product may be
marketed. Once approved, the FDA may withdraw the product approval if compliance with pre- and post-marketing regulatory
standards is not maintained or if problems occur after the product reaches the marketplace. In addition, the FDA may require Phase 4
post-marketing studies to monitor the effect of approved products, and may limit further marketing of the product based on the results
of these post-marketing studies.

The FDA has a fast track program that is intended to expedite or facilitate the process for reviewing new drugs and biological
products that meet certain criteria. Specifically, new drugs and biological products are eligible for fast track designation if they are
intended to treat a serious or life-threatening condition and demonstrate the potential to address unmet medical needs for the condition.
Fast track designation applies to the combination of the product and the specific indication for which it is being studied. For a fast
track product, the FDA may consider for review on a rolling basis sections of the BLA before the complete application is submitted, if
the sponsor provides a schedule for the submission of the sections of the BLA, the FDA agrees to accept sections of the BLA and
determines that the schedule is acceptable, and the sponsor pays any required user fees upon submission of the first section of the
BLA. A fast track designated product candidate may also qualify for priority review, under which the FDA reviews the BLA in a total
of eight months rather than 12 months time.

The FDA may also accelerate the approval of a designated breakthrough therapy, which is a therapy that is intended, alone or in
combination with one or more other drugs, to treat a serious or life-threatening disease or condition and preliminary clinical evidence
indicates that the therapy may demonstrate substantial improvement over existing therapies on one or more clinically significant
endpoints, such as substantial treatment effects observed early in clinical development. Sponsors may request the FDA to designate
a breakthrough therapy at the time of, or any time after, the submission of an IND. If the FDA designates a breakthrough therapy, it
must take actions appropriate to expedite the development and review of the application, which may include holding meetings with the
sponsor and the review team throughout the development of the therapy; providing timely advice to, and interactive communication
with, the sponsor regarding the development of the drug to ensure that the development program to gather the nonclinical and clinical
data necessary for approval is as efficient as practicable; involving senior managers and experienced review staff, as appropriate, in a
collaborative, cross-disciplinary review; assigning a cross-disciplinary project lead for the FDA review team to facilitate an efficient
review of the development program and to serve as a scientific liaison between the review team and the sponsor; and taking steps to
ensure that the design of the clinical trials is as efficient as practicable, when scientifically appropriate, such as by minimizing the
number of patients exposed to a potentially less efficacious treatment.

Fast track designation, priority review and breakthrough therapy designation do not change the standards for approval but may

expedite the development or approval process.

Post-Approval Requirements

Any products manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA,

including record-keeping requirements and reporting of adverse experiences. Biologic manufacturers and their subcontractors are
required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections
by the FDA and certain state agencies for compliance with cGMP, which impose certain procedural and documentation requirements
upon us and our third-party manufacturers. We cannot be certain that we or our present or future suppliers will be able to comply with
the cGMP regulations and other FDA regulatory requirements. If our present or future suppliers are not able to comply with these
requirements, the FDA may halt our clinical trials, require us to recall a product from distribution, or withdraw approval of the BLA.

The FDA closely regulates the marketing and promotion of biologics. A company can make only those claims relating to safety

and efficacy, purity and potency that are approved by the FDA. Failure to comply with these requirements can result in adverse
publicity, warning letters, corrective advertising and potential civil and criminal penalties. Physicians may prescribe legally available
products for uses that are not described in the product’s labeling and that differ from those tested by us and approved by the FDA.
Such off-label uses are common across medical specialties. Physicians may believe that such off-label uses are the best treatment for
many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA
does, however, restrict manufacturer’s communications on the subject of off-label use.

Healthcare and Reimbursement Regulation

Our sales, promotion, medical education and other activities following product approval, and certain activities prior to approval,
are and will be subject to regulation by numerous regulatory and law enforcement authorities in the United States in addition to FDA,
including potentially the Federal Trade Commission, the Department of Justice, the Centers for Medicare and Medicaid Services,
other divisions of the Department of Health and Human Services and state and local governments. Our current and future business
activities, including our future promotional and scientific/educational programs, may be subject to additional healthcare regulation and
enforcement by the federal government and by authorities in the states and foreign jurisdictions in which we conduct our business.
Such laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy and security and
physician sunshine laws and regulations, many of which may become more applicable if our product candidates are approved and we
begin commercialization.

Depending on the circumstances, failure to meet these applicable regulatory requirements can result in criminal prosecution,
fines or other penalties, injunctions, recall or seizure of products, total or partial suspension of production, denial or withdrawal of pre-
marketing product approvals, private “qui tam” actions brought by individual whistleblowers in the name of the government or refusal
to allow us to enter into supply contracts, including government contracts.

Sales of pharmaceutical products, when and if approved for marketing, depend significantly on the availability of third-party

coverage and adequate reimbursement. Third-party payors include government health administrative authorities, managed care
providers, private health insurers and other organizations. We anticipate third-party payors will cover, and provide adequate
reimbursement for, our products. However, these third-party payors are increasingly challenging the price and examining the cost-
effectiveness of medical products and services. In addition, significant uncertainty exists as to the coverage and reimbursement status
of newly approved healthcare products. We may need to conduct expensive clinical studies to demonstrate the comparative cost-
effectiveness of our products. The product candidates that we develop may not be considered cost-effective. It is time consuming and
expensive for us to seek reimbursement from third-party payors. Decreases in third-party reimbursement for our product candidates or
a decision by a third-party payor not to cover our product candidates could reduce physician usage of our products once approved and
have a material adverse effect on our sales, results of operations and financial condition. Coverage and adequate reimbursement may
not be available or sufficient to allow us to sell our products on a competitive and profitable basis.

The United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory
proposals to change the healthcare system in ways that could affect our ability to sell our products profitably. Among policy makers
and payers in the United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated
goals of containing healthcare costs, improving quality and/or expanding access. In the United States, the pharmaceutical industry has
been a particular focus of these efforts and has been significantly affected by major legislative initiatives, such as the PPACA.
Adoption of price controls and cost containment measures, and adoption of more restrictive policies in jurisdictions with existing
controls and measures, could further limit our net revenue and results.

Foreign Regulation

In addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and
commercial sales and distribution of our products to the extent we choose to develop or sell any products outside of the United States.
The approval process varies from country to country and the time may be longer or shorter than that required to obtain FDA approval.
The requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from country to
country.

In the European Union, or EU, member states require both regulatory clearances by the national competent authority and a

favorable ethics committee opinion prior to the commencement of a clinical trial. Under the EU regulatory systems, marketing
authorization applications may be submitted under either a centralized or decentralized procedure. The centralized procedure provides
for the grant of a single marketing authorization that is valid for all EU member states. It is compulsory for medicines produced by
certain biotechnological processes. Because our products are produced in that way, we would be subject to the centralized process.
Under the centralized procedure, pharmaceutical companies submit a single marketing authorization application to the EMA. Once
granted by the European Commission, a centralized marketing authorization is valid in all EU member states, as well as the EEA
countries Iceland, Liechtenstein and Norway. By law, a company can only start to market a medicine once it has received a marketing
authorization.

Employees

As December 31, 2014, we had 79 employees. Substantially all of our employees are in Bothell, Washington. None of our
employees are represented by a labor union or covered under a collective bargaining agreement. We consider our employee relations
to be good.

Corporate Information

We were incorporated in Delaware in May 2002 as Alder BioPharmaceuticals, Inc. Our headquarters are located at 11804 North

Creek Parkway South, Bothell, WA 98011, and our telephone number is (425) 205-2900. Our website address is www.alderbio.com.
The information contained in, or that can be accessed through, our website is not part of, and is not incorporated into, this Annual
Report on Form 10-K.

We file electronically with the Securities and Exchange Commission our Annual Reports on Form 10-K, Quarterly Reports on

Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934. We make available on our website at www.alderbio.com, free of charge, through a hyperlink on our
website, copies of these reports, as soon as reasonably practicable after electronically filing such reports with, or furnishing them to,
the Securities and Exchange Commission.

Item 1A. Risk Factors

You should carefully consider the following risk factors, in addition to the other information contained in this report on Form

10-K, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of
Operations” and our financial statements and related notes. If any of the events described in the following risk factors and the risks
described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This
report on Form 10-K also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ
materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in
this report.

Risks Related to Our Business and the Development and Commercialization of Our Product Candidates

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the

foreseeable future.

We are a clinical-stage biopharmaceutical company. We do not currently have any products approved for sale, and we continue
to incur significant research and development and general and administrative expenses. We have incurred significant operating losses
in the past and expect to incur substantial and increasing losses for the foreseeable future. Our net loss was $17.8 million and $20.6
million for the years ended December 31, 2012 and 2013, respectively. For the year ended December 31, 2014, we recognized $54.5
million in revenue relating to our collaboration agreement with BMS most of which was previously deferred, which resulted in net
income of $8.9 million for the year. However, our collaboration agreement with BMS has been terminated and, as a result, BMS will
no longer be responsible for ongoing clinical trials after June 29, 2015 and we will not receive additional revenue from BMS. As of
December 31, 2014, we had an accumulated deficit of $136.9 million.

To date, we have devoted substantially all of our efforts to research and development, including clinical trials, but have not
completed development or commercialized any product candidates. We anticipate that our expenses will increase substantially as we:

(cid:121) continue the research and development of our product candidates, including clinical trials of ALD403;

(cid:121) seek regulatory approvals for our product candidates that successfully complete clinical trials;

(cid:121) establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize ALD403

or any of our future product candidates if they receive regulatory approval; and

(cid:121) enhance operational, financial and information management systems and hire additional personnel, including personnel to
support development of our product candidates and, if a product candidate is approved, our commercialization efforts.

To be profitable in the future, we and any of our future collaborators must succeed in developing and eventually

commercializing products with significant market potential. This will require success in a range of activities, including advancing
product candidates, completing clinical trials of product candidates, obtaining regulatory approval for these product candidates and
manufacturing, marketing and selling those products for which regulatory approval is obtained. We are only in the preliminary stages
of some of these activities. We and any of our future collaborators may not succeed in these activities and may never generate
revenues that are sufficient to be profitable in the future.

Drug development is a highly speculative undertaking and involves a substantial degree of uncertainty. We have never

generated any revenues from product sales and may never be profitable.

We have devoted substantially all of our financial resources and efforts to developing our technology platform, identifying

product candidates and conducting preclinical studies and clinical trials for our product candidates. We are still in the early stages of
developing our product candidates and have not completed the development of any products. We have never generated revenues from
the sale of any products. Our ability to generate revenues and achieve profitability depends in large part on our ability, on our own or
with any of our future collaborators, to successfully complete the development of, obtain the necessary regulatory approvals for, and
commercialize our product candidates. We do not anticipate generating revenues from sales of products for the foreseeable future. Our
ability to generate future revenues from product sales depends on our and any of our future collaborators’ success in:

(cid:121) completing clinical development and obtaining regulatory approval for ALD403;

(cid:121) entering into collaboration agreements with third parties with respect to our product candidates, including ALD403 and
Clazakizumab, for their development and commercialization in the United States or in international markets, and the
continued financial and other support of these third parties under such collaboration agreements;

(cid:121) launching and commercializing ALD403, if approved, and successfully establishing sales, marketing and distribution

infrastructure;

(cid:121) obtaining regulatory approvals for future product candidates that we discover and successfully develop;

(cid:121) establishing and maintaining supply and manufacturing relationships with third parties;

(cid:121) obtaining coverage and adequate reimbursement from third-party payors; and

(cid:121) maintaining, protecting, expanding and enforcing our intellectual property, including intellectual property we license from

third parties.

Because of the numerous risks and uncertainties associated with biologic product development, we are unable to predict the

timing or amount of increased expenses and when we will be able to achieve or maintain profitability, if ever. In addition, our
expenses could increase beyond expectations if we are required by the U.S. Food and Drug Administration, or FDA, or foreign
regulatory agencies, to perform studies and trials in addition to those that we currently anticipate, or if there are any delays in our or
any of our future collaborators’ clinical trials or the development of any of our product candidates. If one or more of the product
candidates that we independently develop is approved for commercial sale, we anticipate incurring significant costs associated with
commercializing such product candidates.

The termination of our Clazakizumab collaboration agreement with BMS means that any further development of Clazakizumab

will require significant resources from another collaborator, and in the event that we do not find a collaborator, we expect the
development of Clazakizumab to be discontinued for the foreseeable future.

On August 29, 2014, BMS terminated our collaboration agreement for the development and commercialization of

Clazakizumab. The termination of this collaboration agreement became effective on December 29, 2014, and a new collaborator will
be responsible for funding any new Clazakizumab development and clinical trial activities undertaken after June 29, 2015. Any such
further development will require significant resources to develop and commercialize Clazakizumab, and we do not believe that such
further development is possible in the foreseeable future without a new collaborator. There are no assurances that we can find a new
collaborator or that the terms and timing of any such arrangements would be acceptable to us, or that any future collaborator will
continue to pursue development of Clazakizumab to commercialization. It can be expected that any future collaborator will have wide
discretion in determining the efforts and resources that it will apply to its partnership with us and therefore the timing and amount of
any development milestones, and downstream commercial milestones and royalties that we may receive under such partnership will
depend on, among other things, the efforts, allocation of resources and successful development and commercialization of
Clazakizumab. As a result, we could experience a significant delay in the Clazakizumab development process. If we determine instead
to discontinue the development of Clazakizumab, we will not receive any future return on our investment from that product candidate.

We will need additional funds to support our operations, and such funding may not be available to us on acceptable terms, or at

all, which would force us to delay, reduce or suspend our research and development programs and other operations or
commercialization efforts.

We are focused on the advancement of ALD403 through the clinical development process, as well as the evaluation of future
product candidates. The completion of the development and the potential commercialization of our product candidates, should they
receive regulatory approval, will require substantial funds. We will need to obtain substantial additional sources of funding to develop
ALD403 as currently contemplated. If such additional funding is not available on favorable terms or at all, we may need to delay or
reduce the scope of our ALD403 development program or grant rights in the United States, as well as outside the United States, to
ALD403 to one or more partners. As of December 31, 2014, we had $55.9 million in cash, cash equivalents and investments. In
January 2015, we completed an underwritten public offering in which we issued 6,900,000 shares of common stock, which included
900,000 shares the company issued pursuant to the underwriters’ exercise of their option to purchase additional shares, and received
approximately $190.7 in net proceeds, after deducing underwriting discounts and commissions of $12.2 million and offering expenses
of $0.6 million. We believe that our available cash, cash equivalents and investments, together with the net proceeds of our offering
in January 2015, will be sufficient to fund our anticipated level of operations, including our ALD403 development program, through
2016. However, our future financing requirements will depend on many factors, some of which are beyond our control, including the
following:

(cid:121) the rate of progress, recruitment and cost of our clinical trials and clinical success for ALD403 and any future product

candidates;

(cid:121) the timing of, and costs involved in, seeking and obtaining approvals from the FDA and other regulatory authorities;

(cid:121) the costs of commercialization activities if any of our product candidates, such as ALD403, receive regulatory approval,

including sales, marketing and distribution infrastructure;

(cid:121) the degree and rate of market acceptance of any products launched by us or any of our future collaborators;

(cid:121) our ability to enter into additional collaboration, licensing, commercialization or other arrangements and the terms and timing

of such arrangements; and

(cid:121) the emergence of competing technologies or other adverse market developments.

We do not have any material committed external source of funds or other support for our development efforts. Until we can
generate sufficient revenues to finance our cash requirements, which we may never do, we expect to finance future cash needs through
a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and
other marketing and distribution arrangements. Additional financing may not be available to us when we need it or it may not be
available on favorable terms. If we raise additional capital through marketing and distribution arrangements or other collaborations,
strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product
candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we
raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted,
and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise
additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions,
such as incurring additional debt, buying or selling assets, making capital expenditures or declaring dividends. If we are unable to
obtain adequate financing when needed, we may have to delay, reduce the scope of, suspend or eliminate one or more of our clinical
trials or research and development programs or our commercialization efforts.

In addition, our clinical trials for ALD403 may encounter manufacturing, enrollment or other issues that could cause our
development costs to increase more than we expect. We do not have sufficient cash to complete the clinical development of any of our
product candidates and will require additional funding in order to complete the development activities required for regulatory approval
of ALD403 or any future product candidates that we develop independently. We intend to prioritize our development efforts on
ALD403, both in terms of funding and attention of management and our organization. Because successful development of our product
candidates is uncertain, we are unable to estimate the actual funds we will require to complete research and development and
commercialize our product candidates.

Furthermore, we may seek additional capital due to favorable market conditions or strategic considerations even if we believe

we have sufficient funds for our current or future operating plans.

If ALD403 is not successfully commercialized, our business will be harmed.

We currently only have two product candidates in clinical trials. We have invested a significant portion of our efforts and
financial resources into the development of ALD403 to prevent migraines. As a result of termination of our collaboration agreement
with BMS, we will need to find a collaborator to invest significant resources into further development of Clazakizumab, as we do not
expect to continue the development of Clazakizumab without a collaborator. Our ability to generate revenues from products, which we
do not expect to occur for the foreseeable future, if ever, will depend heavily on the successful development, regulatory approval and
eventual commercialization of our product candidates. The success of these product candidates will depend on several factors,
including the following:

(cid:121) successful enrollment in, and completion of, clinical trials;

(cid:121) our ability to reach agreements with the FDA and other regulatory authorities on the appropriate regulatory path for approval

for ALD 403;

(cid:121) receipt of approvals from the FDA and similar regulatory authorities outside the United States for these product candidates;

(cid:121) establishing commercial manufacturing arrangements with third parties;

(cid:121) successfully launching sales, marketing and distribution of any product candidate that may be approved, whether alone or in

collaboration with others;

(cid:121) acceptance of any approved product by the medical community, third-party payors and patients and others involved in the
reimbursement process, such as the Centers for Medicare and Medicaid Services in the United States and the National
Institute of Clinical Excellence in the United Kingdom;

(cid:121) effectively competing with other therapies;

(cid:121) achieving a continued acceptable safety profile of the product following approval, including intellectual property we license

from third parties; and

(cid:121) obtaining, maintaining, enforcing and defending intellectual property rights and claims.

If we do not achieve one or more of these factors in a timely manner, or at all, we could experience significant delays or an

inability to successfully commercialize our product candidates, which would harm our business.

If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of the FDA or similar
regulatory authorities outside the United States or do not otherwise produce positive results, we may incur additional costs or
experience delays in completing, or ultimately be unable to complete, the development and commercialization of our product
candidates.

Before obtaining regulatory approval for the sale of our product candidates, we or any of our future collaborators must conduct

extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical trials are expensive,
difficult to design and implement, can take many years to complete and are uncertain as to outcome. A failure of one or more of such
clinical trials could occur at any stage of evaluation. The outcome of preclinical testing and early clinical trials may not be predictive
of the success of later clinical trials, and interim results of a clinical trial do not necessarily predict final results.

In some cases, we utilize novel mechanisms of action to treat diseases that have not previously been addressed by antibody

therapies. We or any of our future collaborators may experience numerous unforeseen events during, or as a result of, clinical trials
that could delay or prevent our or any of our future collaborators’ ability to receive regulatory approval or commercialize our product
candidates, including the following:

(cid:121) clinical trials of our product candidates may produce negative or inconclusive results, and we or any of our future

collaborators may decide, or regulators may require us, to conduct additional clinical trials or abandon product development
programs;

(cid:121) the number of patients required for clinical trials of our product candidates may be larger than we or any of our future

collaborators anticipate, enrollment in these clinical trials may be insufficient or slower than anticipated or patients may drop
out of these clinical trials at a higher rate than anticipated;

(cid:121) the cost of clinical trials of our product candidates may be greater than anticipated;

(cid:121) third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us or any of

our future collaborators in a timely manner, or at all;

(cid:121) we or any of our future collaborators might have to suspend or terminate clinical trials of our product candidates for various

reasons, including a finding that our product candidates have unanticipated serious side-effects or other unexpected
characteristics or that the patients are being exposed to unacceptable health risks;

(cid:121) regulators may not approve our or any of our future collaborators’ proposed clinical development plans;

(cid:121) regulators or institutional review boards may not authorize us, any of our future collaborators or our investigators to

commence a clinical trial or conduct a clinical trial at a prospective site;

(cid:121) regulators or institutional review boards may require that we, any of our future collaborators or our investigators suspend or

terminate clinical research for various reasons, including noncompliance with regulatory requirements; and

(cid:121) the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product

candidates may be insufficient or inadequate.

If we or any of our future collaborators are required to conduct additional clinical trials or other testing of our product

candidates beyond those currently contemplated, if we or any of our future collaborators are unable to successfully complete clinical
trials of our product candidates or other testing, if the results of these trials or tests are not positive or are only modestly positive or if
there are safety concerns, we or any of our future collaborators may:

(cid:121) be delayed in obtaining regulatory approval for our product candidates;

(cid:121) not obtain regulatory approval at all;

(cid:121) obtain regulatory approval for indications that are not as broad as intended;

(cid:121) have the product removed from the market after obtaining regulatory approval;

(cid:121) be subject to additional post-marketing testing requirements; or

(cid:121) be subject to restrictions on how the product is distributed or used.

Our product development costs will also increase if we experience delays in testing or approvals. We do not know whether any

clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. Significant clinical trial
delays also could shorten any periods during which we or any of our future collaborators may have the exclusive right to
commercialize our product candidates or allow our competitors to bring products to market before we or any of our future
collaborators do, which would impair our or any of our future collaborators’ ability to commercialize our product candidates and harm
our business and results of operations.

The results of clinical trials conducted at sites outside the United States may not be accepted by the FDA and the results or

clinical trials conducted at sites inside the United States may not be accepted by international regulatory authorities.

We have conducted, and may in the future choose to conduct, one or more of our clinical trials outside the United States.
Regions that are planned for inclusion in the ALD403 Phase 2b clinical trials include Australia, New Zealand and Canada. In addition,
through June 29, 2015, BMS will be conducting a Phase 2b trial of Clazakizumab in U.S. and international regions, which are planned
to include sites in Australia, Argentina, Europe, Japan, Mexico and South Africa. Although the FDA may accept data from clinical
trials conducted outside the United States, acceptance of this data is subject to certain conditions imposed by the FDA. For example,
the clinical trial must be well-designed and conducted and performed by qualified investigators in accordance with ethical principles.
The study population must also adequately represent the U.S. population, and the data must be applicable to the U.S. population and
U.S. medical practice in ways that the FDA deems clinically meaningful. Generally, the patient population for any clinical trials
conducted outside of the United States must be representative of the population for whom we intend to label the product in the United
States. In addition, while these clinical trials are subject to the applicable local laws, FDA acceptance of the data will be dependent
upon its determination that the trials also complied with all applicable U.S. laws and regulations. There can be no assurance the FDA
will accept data from trials conducted outside of the United States. If the FDA does not accept the data from our or BMS’s
international clinical trials, or if international regulatory authorities do not accept the data from our or BMS’s U.S. clinical trials, it
would likely result in the need for additional trials, which would be costly and time-consuming and could delay or permanently halt
the development of a product candidate.

The development and commercialization of biologic products is subject to extensive regulation, and we may not obtain

regulatory approvals for any of our product candidates.

The clinical development, manufacturing, labeling, packaging, storage, recordkeeping, advertising, promotion, export, import,
marketing and distribution and other possible activities relating to ALD403, Clazakizumab and any other product candidate that we
may develop in the future are subject to extensive regulation in the United States. Biologics, like ALD403 and Clazakizumab, require
the submission of a Biologics License Application, or BLA, to the FDA and such product candidates are not permitted to be marketed
in the United States until approval from the FDA of a BLA for that product has been obtained. A BLA must be supported by extensive
preclinical and clinical data, as well as extensive information regarding chemistry, manufacturing and controls, or CMC, sufficient to
demonstrate the safety, purity, potency and effectiveness of the applicable product candidate to the satisfaction of the FDA. We have
not submitted an application for approval or obtained FDA approval for any product. This lack of experience may impede our ability
to obtain FDA approval in a timely manner, if at all, for ALD403 and our future product candidates.

Regulatory approval of a BLA is not guaranteed, and the approval process is an expensive and uncertain process that may take
several years. The FDA and foreign regulatory entities also have substantial discretion in the approval process. The number and types
of preclinical studies and clinical trials that will be required for BLA approval varies depending on the product candidate, the disease
or the condition that the product candidate is designed to target and the regulations applicable to any particular product candidate.
Despite the time and expense associated with preclinical studies and clinical trials, failure can occur at any stage, and we could
encounter problems that require us to repeat or perform additional preclinical studies or clinical trials or generate additional CMC
data. The FDA and similar foreign authorities could delay, limit or deny approval of a product candidate for many reasons, including
because they:

(cid:121) may not deem the product candidate to be adequately safe or effective;

(cid:121) may not find the data from preclinical studies, clinical trials or CMC data to be sufficient to support a claim of safety and

efficacy;

(cid:121) may not approve the manufacturing processes or facilities associated with the product candidate;

(cid:121) may conclude that the long-term stability of the formulation of the drug product for which approval is being sought has been

sufficiently demonstrated;

(cid:121) may change approval policies or adopt new regulations; or

(cid:121) may not accept a submission due to, among other reasons, the content or formatting of the submission.

To market any biologics outside of the United States, we and any of our future collaborators must comply with the numerous
and varying regulatory and compliance related requirements of other countries. Approval procedures vary among countries and can
involve additional product testing and additional administrative review periods, including obtaining reimbursement and pricing
approval in select markets. The time required to obtain approval in other countries might differ from that required to obtain FDA
approval. The regulatory approval process in other countries may include all of the risks associated with FDA approval as well as
additional, presently unanticipated, risks. Regulatory approval in one country does not ensure regulatory approval in another, but a
failure or delay in obtaining regulatory approval in one country may negatively impact the regulatory process in others, including the
risk that our product candidates may not be approved for all indications requested and that such approval may be subject to limitations
on the indicated uses for which the product may be marketed.

We face substantial competition, and others may discover, develop or commercialize products before or more successfully than

we do.

The development and commercialization of new therapeutic products is highly competitive. We face competition with respect to

our current product candidates, and will face competition with respect to product candidates that we may seek to develop or
commercialize in the future, from major pharmaceutical companies, specialty pharmaceutical companies and biotechnology
companies worldwide. In addition, our ability to compete may be affected in many cases by insurers or other third-party payors
seeking to encourage the use of biosimilar products, which are expected to become available over the coming years. For example, if
approved, we expect that by the time Clazakizumab enters the marketplace, if at all, there may be several anti-TNF biosimilars on the
marketplace. The entry of such products could potentially put pricing pressure on Clazakizumab. In addition, many of our competitors
are large pharmaceutical companies that have a greater ability to reduce prices for their competing drugs in an effort to maintain or
gain market share and undermine the value proposition that drugs commercialized by us might otherwise be able to offer to payors.

Potential competitors also include academic institutions, government agencies and other public and private organizations that

conduct research, seek patent protection and establish collaborative arrangements for research, development, manufacturing and
commercialization. Many of these competitors are attempting to develop therapeutics for our target indications.

Currently in the United States, there are relatively few medications approved for the prevention of high frequency and chronic

migraines. Most of the medications used today are generics that are prescribed for abortive treatment of migraines. Botox is approved
for the prevention of chronic migraine but is also prescribed for high frequency migraine. There are also several other companies,
including Amgen, Lilly and Labrys Biologics, or Labrys, which was acquired by Teva Pharmaceutical Industries Ltd. in July 2014,
that have ongoing clinical trials for CGRP blocking therapies using monoclonal antibodies similar to ALD403. Other companies may
be in later stages of development than we are or may progress their product candidates through clinical trials faster than our product
candidates and, therefore, may obtain FDA or other regulatory approval for their products before we obtain approval for ours. For
example, we are aware that Amgen has initiated its Phase 2b clinical trial and may be able to initiate Phase 3 clinical trials as early as
2015.

Clazakizumab is currently being developed for the treatment of the autoimmune disorders rheumatoid arthritis, or RA, and
psoriatic arthritis, or PsA. Several large pharmaceutical and biotechnology companies currently market and sell biologics for the
treatment of RA, including BMS’s Orencia. The current standard of care for the treatment of RA after the immunosuppressive drug
methotrexate, or MTX, is biologic therapy. Currently the market for biologic therapy is dominated by anti-TNFs, primarily Humira
and Enbrel. In addition, there are several other agents currently in development, including monoclonal antibody therapies that
modulate IL-6-biology and other oral medications. As a result, marketing Clazakizumab may be difficult in this competitive market.

Many of our competitors, including a number of large pharmaceutical companies that compete directly with us, have
significantly greater financial resources and expertise in research and development, manufacturing, preclinical testing, conducting
clinical trials, obtaining regulatory approvals and marketing approved products than we do. Our competitors may develop products
that are more effective, safer, more convenient or less costly than any that we are developing or that would render our product
candidates obsolete or non-competitive. It is possible that our competitors might get FDA or other regulatory approval for their
products before us. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources
being concentrated among a smaller number of our competitors. Smaller or early stage companies may also prove to be significant
competitors, particularly through collaborative arrangements with large and established companies. These third parties compete with
us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient enrollment for
clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Delays in the enrollment of patients in our clinical trials could increase our development costs and delay completion of the trials

and delays in enrollment of patients in any of our future collaborators’ clinical trials could delay completion of any of our future
collaborators’ trials.

We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a
sufficient number of eligible patients to participate in these trials as required by the FDA or other regulatory authorities. Even if we
are able to enroll a sufficient number of patients in our clinical trials, if the pace of enrollment is slower than we expect, the
development costs for our product candidates may increase and the completion of our trials may be delayed or our trials could become
too expensive to complete.

For example, our Phase 2b clinical trial of ALD403 for the treatment of chronic migraine sufferers is expected to enroll

approximately 600 patients at more than 60 sites throughout the world and our planned Phase 2b clinical trial for ALD403 for the
treatment of high frequency migraine sufferers is expected to enroll approximately 400 patients at more than 70 sites throughout the
world. We have never previously conducted a trial of this magnitude and can provide no assurance that we will be able to enroll
patients at a sufficient pace to complete the clinical trials within our projected time frame. Completing future migraine trials will
require us to continue to activate new clinical trial sites and to enroll patients at forecasted rates at both new and existing clinical trial
sites. Our forecasts regarding the rates of clinical site activation and patient enrollment at those sites are based on a number of
assumptions, including assumptions based on experience with our last ALD403 clinical trial. However, there can be no assurance that
those forecasts will be accurate or that we will complete, following collection of six month data, our next ALD403 trials on schedule.
We anticipate obtaining primary endpoint data from the chronic migraine trial in the second half of 2015 and from the high frequency
trial in the first half of 2016. During the initial months of this planned clinical trial, the number of clinical sites activated and the
number of patients enrolled at each clinical site per month could be lower than we have forecasted and, as a result, we might need to
make a number of adjustments to the clinical trial plan, including increasing the number of clinical trial sites. We can provide no
assurance that those adjustments will be sufficient to enable us to complete the study within our anticipated time frame. If we
experience delays in enrollment, our ability to complete the study could be materially adversely affected.

While the Phase 2b, dose-ranging clinical trial for Clazakizumab in RA has been fully enrolled with approximately 140 patients,
any future collaborator will need to recruit over 1,000 patients at numerous sites throughout the world to complete the multiple Phase
3 trials that would be required by the FDA for approval of Clazakizumab in RA. There can be no assurance that any of our future
collaborators will commit the resources required to activate the number of trial sites, and enroll the number of patients, required to
complete these clinical trials in a timely manner or at all. Even if any of our future collaborators commit significant resources to
activating sites and enrolling RA patients, the pace of enrollment could be adversely affected by competition with other trials enrolling
RA patients. A slower pace of enrollment could increase the development costs for Clazakizumab which could adversely affect any of
our or our future collaborator’s commitment to developing Clazakizumab in RA, or at all.

If serious adverse side-effects are identified during the development of any of our product candidates, we or any of our future

collaborators may need to abandon development of that product candidate.

Our lead product candidates are still in clinical development and their risk of failure is high. It is impossible to predict when or if

any of our product candidates will prove effective and safe enough to receive regulatory approval.

With respect to ALD403, while we have observed few SAEs to date, ALD403 has only been evaluated in a limited number of

patients. The observed SAEs to date include inguinal hernia, kidney infection, transient ischemic attack, which is a precursor to stroke,
conversion disorder, which is a mental health condition in which a person has blindness, paralysis, or other nervous system symptoms
that cannot be explained by medical evaluation, chest pain, shortness of breath and wound infection. Each of these events was
observed a single time in the ALD403 trial, with no one patient exhibiting more than one SAE. The clinical investigator concluded
that all of these events were found to be unrelated to ALD403. We have observed some itching and redness injection-site reactions
(ISRs) in our Phase 1 study of a subcutaneous injection of ALD403. Additional studies or requirements from the FDA for future
studies may be necessary to address these ISRs.

To date, the safety profile observed in the Clazakizumab trials have been consistent with other previously approved anti-IL-6
inhibitors. The most frequent serious adverse events, or SAEs, for Clazakizumab were serious infections. Additionally, patients in
clinical trials for Clazakizumab exhibited increases in mean total cholesterol without changes in HDL/LDL ratio, increases in
hemoglobin, increases in liver function tests and decreases in neutrophils, a type of white blood cell, and platelets, which are expected
from IL-6 inhibition.

There can be no assurance that our planned trials for ALD403 or Clazakizumab will not fail due to safety issues. In such an

event, we might need to abandon development of ALD403 or Clazakizumab.

The manufacture of our product candidates is complex and we may encounter difficulties in production. If we or any of our
third-party manufacturers encounter such difficulties, our ability to provide supply of our product candidates for clinical trials or
our products for patients, if approved, could be delayed or stopped.

The process of manufacturing our products is complex, highly-regulated and subject to multiple risks. The manufacture of
biologics involves complex processes, including developing cells or cell systems to produce the biologic, growing large quantities of
such cells and harvesting and purifying the biologic produced by them. As a result, the cost to manufacture biologics is generally far
higher than traditional small molecule chemical compounds, and the biologics manufacturing process is less reliable and is difficult to
reproduce. Manufacturing biologics, such as ALD 403 and Clazakizumab, is highly susceptible to product loss due to contamination,
equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in
product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes
could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are
discovered in our product candidates or in the manufacturing facilities in which our product candidates are made, such manufacturing
facilities may need to be closed for an extended period of time to investigate and remedy the contamination. We utilize third-party
contract manufacturers to produce ALD403 and BMS currently also uses third-party contract manufacturers to produce Clazakizumab
using our proprietary yeast production technology.

The manufacturing facilities in which our product candidates are made could be adversely affected by equipment failures, labor

shortages, natural disasters, power failures and numerous other factors. There are risks associated with scaling-up manufacturing to
commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability
issues, lot consistency and timely availability of raw materials. Even if we or any of our future collaborators obtain regulatory
approval for any of our product candidates, there is no assurance that manufacturers will be able to manufacture the approved product
to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the requirements
for the potential launch of the product or to meet potential future demand. If our or any of our future collaborators’ manufacturers are
unable to produce sufficient quantities of an approved product for commercialization, commercialization efforts would be impaired,
which would have an adverse effect on our business, financial condition, results of operations and growth prospects.

ALD403 is currently produced for us by a third-party contract manufacturer using a small-scale process that would not support
commercialization of ALD403. We plan to transfer our manufacturing processes to a commercial manufacturer. Scaling up a biologic
manufacturing process is a difficult and uncertain task, and we may not be successful in transferring our production system or the
manufacturer may not have the necessary capabilities to complete the implementation and development process. If we are unable to
adequately validate or scale-up the manufacturing process for ALD403 with our current manufacturer, we will need to transfer to
another manufacturer and complete the manufacturing validation process, which can be lengthy. If we are able to adequately validate
and scale-up the manufacturing process for ALD403 or other product candidates with a contract manufacturer, we will still need to
negotiate with such contract manufacture an agreement for commercial supply and it is not certain we will be able to come to
agreement on terms acceptable to us.

Even though Clazakizumab has been administered to over 1,000 patients, the MabXpress production system is a non-traditional

antibody production platform and as we or any of our future collaborators produce product in commercial quantities, we or any such
collaborators may experience unforeseen safety or other manufacturing issues which would adversely affect the commercialization of
Clazakizumab.

Even if our product candidates receive regulatory approval, they may fail to achieve the degree of market acceptance by

physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

If any of our product candidates receive regulatory approval, they may nonetheless fail to gain sufficient market acceptance by

physicians, patients, healthcare payors and others in the medical community. The degree of market acceptance of our product
candidates, if approved for commercial sale, will depend on a number of factors, including the following:

(cid:121) the efficacy and potential advantages compared to alternative treatments;

(cid:121) the prevalence and severity of any side-effects;

(cid:121) the price we or any of our future collaborators charge for our products;

(cid:121) the availability of third-party coverage and adequate reimbursement;

(cid:121) the convenience and ease of administration compared to alternative treatments;

(cid:121) the willingness of the target patient population to try new therapies and of physicians to prescribe these new therapies; and

(cid:121) the size and effectiveness of our sales, marketing and distribution support.

If our product candidates are approved and do not achieve an adequate level of acceptance, we may not generate significant

product revenues and we may not become profitable on a sustained basis.

We currently have no sales or distribution personnel or infrastructure and only limited marketing capabilities. If we are unable

to develop a sales, marketing and distribution infrastructure on our own or through collaborations or other marketing
arrangements, we will not be successful in commercializing ALD403, Clazakizumab or any of our future products.

We do not currently have sales or distribution capabilities and have limited experience in the sale, marketing and distribution of

therapeutic products. To achieve commercial success for any approved product, we must either develop a sales and marketing
organization or outsource these functions to third parties. We plan to establish a sales force in the United States targeting high-
prescribing neurologists and headache centers and work with collaborators in international markets to commercialize ALD403
globally, if it is approved. We are seeking a new partner for development of Clazakizumab and may work with one or more additional
collaborators in the United States and international markets to commercialize Clazakizumab, if it is approved.

There are risks involved with both establishing our own sales and marketing capabilities and entering into arrangements with

third parties to perform these services. For example, recruiting and training a sales force is expensive and time-consuming and could
delay any product launch. If the commercial launch of a product for which we recruit a sales force and establish marketing capabilities
is delayed or does not occur for any reason, we would have prematurely or unnecessarily incurred these commercialization expenses.
This may be costly, and our investment would be lost if we do not have another product to sell in the same specialty market.

We also may not be successful entering into arrangements with third parties to sell and market our product candidates or may be
unable to do so on terms that are favorable to us. We likely will have little control over such third parties, and any of them may fail to
devote the necessary resources and attention to sell and market our products effectively and could damage our reputation. If we do not
establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not be
successful in commercializing our product candidates.

If we are able to commercialize any product candidates, the products may become subject to unfavorable pricing regulations,

third-party reimbursement practices or healthcare reform initiatives, thereby harming our business.

The regulations that govern marketing approvals, pricing and reimbursement for new therapeutic products vary widely from
country to country. Some countries require approval of the sale price of a product before it can be marketed. In many countries, the
pricing review period begins after marketing or product licensing approval is granted. In some foreign markets, prescription
pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we or
any of our future collaborators might obtain regulatory approval for a product in a particular country, but then be subject to price
regulations that delay commercial launch of the product and negatively impact the revenues we are able to generate from the sale of
the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in our products, even if our
product candidates obtain regulatory approval.

Our and any of our future collaborators’ ability to commercialize any products successfully also will depend in part on the
extent to which coverage and adequate reimbursement for these products and related treatments becomes available from government
health administration authorities, private health insurers and other third-party payors. Third-party payors decide which medications
they will cover and establish reimbursement levels. The primary focus in the U.S. healthcare industry and elsewhere is cost
containment. Government authorities and these third-party payors have attempted to control costs by limiting coverage and the amount
of reimbursement for particular medications. Increasingly, third-party payors are requiring that companies provide them with
predetermined discounts from list prices and are challenging the prices charged for medical products. We cannot be sure that
reimbursement will be available for any product that we or any of our future collaborators commercialize and, if reimbursement is
available, what the level of reimbursement will be. Reimbursement may impact the demand for, or the price of, any product for which
we or any of our future collaborators obtain approval. Obtaining coverage and adequate reimbursement for our products may be
particularly difficult because of the higher prices often associated with products administered under the supervision of a physician. If
reimbursement is not available or is available only to limited levels, we or any of our future collaborators may not be able to
successfully commercialize any product that has been approved.

There may be significant delays in obtaining reimbursement for approved products, and coverage may be more limited than the

purposes for which the product is approved by the FDA or regulatory authorities in other countries. Moreover, eligibility for
reimbursement does not imply that any product will be paid for in all cases or at a rate that covers our or any of our future
collaborators’ costs, including research, development, manufacture, sale and distribution. Interim payments for new products, if
applicable, may also not be sufficient to cover our or any of our future collaborators’ costs and may not be made permanent. Payment
rates may vary according to the use of the product and the clinical setting in which it is used, may be based on payments allowed for
lower cost products that are already reimbursed and may be incorporated into existing payments for other services. Net prices for

products may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any
future relaxation of laws that presently restrict imports of products from countries where they may be sold at lower prices than in the
United States. Private third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own
reimbursement policies. Our or any of our future collaborators’ inability to promptly obtain coverage and profitable payment rates
from both government funded and private payors for newly developed products could have a material adverse effect on our operating
results, our ability to raise capital needed to commercialize products and our overall financial condition.

We may not be successful in our efforts to use and enhance our proprietary antibody platform to create a pipeline of product

candidates and develop commercially successful products.

We are using our proprietary antibody platform for the selection and manufacturing of monoclonal antibodies. We used this
platform to create our two lead product candidates, ALD403 and Clazakizumab, as well as ALD1613 and the other future product
candidates that we are currently evaluating. We are at an early stage of development and our platform has not yet, and may never, lead
to approved or commercially successful products. Even if we are successful in continuing to build our pipeline, the future product
candidates that we evaluate may not be suitable for clinical development, including as a result of their harmful side-effects, limited
efficacy or other characteristics that make it unlikely such product candidates will receive regulatory approval or achieve commercial
success. If we do not successfully develop and commercialize product candidates using our proprietary antibody platform, we may not
be able to obtain product or collaboration revenues in future periods, which would harm our business and prospects.

Product liability lawsuits against us could cause us to incur substantial liabilities and to limit commercialization of any products

that we may develop.

We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and

will face an even greater risk if we commercially sell any products that we may develop. If we cannot successfully defend ourselves
against claims that our product candidates or products caused injuries, we will incur substantial liabilities. Regardless of merit or
eventual outcome, liability claims may result in:

(cid:121) decreased demand for any product candidates or products that we or any of our future collaborators may develop;

(cid:121) injury to our reputation and significant negative media attention;

(cid:121) withdrawal of patients from clinical trials or cancellation of trials;

(cid:121) significant costs to defend the related litigation;

(cid:121) substantial monetary awards;

(cid:121) loss of revenues; and

(cid:121) the inability to commercialize any products that we may develop.

We currently have $20 million in product liability insurance coverage for our clinical trials, which may not be adequate to cover
all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a
reasonable cost or in an amount adequate to satisfy any liability that may arise.

We may expend our limited resources to pursue a particular product candidate or disease and fail to capitalize on product

candidates or diseases that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we focus our research programs and product candidates for a
specific disease. As a result, we may forego or delay pursuit of opportunities with other product candidates or other diseases that may
later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable
commercial products or profitable market opportunities. Our spending on current and future research and development programs and
product candidates for specific diseases may not yield any commercially viable products.

If we do not accurately evaluate the commercial potential for a particular product candidate in the right disease, we may
relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it
would have been advantageous for us to retain sole development and commercialization rights.

If we do not successfully enter into future collaborations for the development and commercialization of product candidates our

business may be harmed.

We may choose to enter into collaboration agreements with third parties with respect to our product candidates, including

ALD403 and Clazakizumab, for their development and commercialization in the United States or in international markets. We will
have limited control over the amount and timing of resources that any of our future collaborators dedicate to the development or
commercialization of our product candidates. Our ability to generate revenues from these arrangements will depend in part on any
such collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates are subject to numerous risks, which may include the following:

(cid:121) collaborators have significant discretion in determining the efforts and resources that they will apply to a collaborations;

(cid:121) collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or
renew development or commercialization programs based on clinical trial results, changes in their strategic focus due to the
acquisition of competitive products, availability of funding or other external factors, such as a business combination that
diverts resources or creates competing priorities;

(cid:121) collaborators may delay clinical trials, provide insufficient funding for a clinical trial, stop a clinical trial, abandon a product
candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

(cid:121) collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our

products or product candidates;

(cid:121) a collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their

marketing and distribution;

(cid:121) collaborators may not properly maintain or defend our intellectual property rights or may use our intellectual property or
proprietary information in a way that gives rise to actual or threatened litigation that could jeopardize or invalidate our
intellectual property or proprietary information or expose us to potential liability;

(cid:121) disputes may arise between us and a collaborator that cause the delay or termination of the research, development or

commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention
and resources;

(cid:121) collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development

or commercialization of the applicable product candidates; and

(cid:121) collaborators may own or co-own intellectual property covering our products that results from our collaborating with them,

and in such cases, we would not have the exclusive right to commercialize such intellectual property.

Any termination, such as the termination by BMS of our Clazakizumab collaboration agreement, or disruption of any future

collaboration could result in delayed development of product candidates, increased cost to develop product candidates or termination
of development of a product candidate.

We rely on third parties to conduct and support our clinical trials, and those third parties may not perform satisfactorily,

including failing to meet deadlines for the completion of such trials.

We do not independently conduct clinical trials for our product candidates. We rely on third parties, such as contract research

organizations, or CROs, clinical data management organizations, medical institutions and clinical investigators, to perform this
function. Our reliance on these third parties for clinical development activities reduces our control over these activities but does not
relieve us of our responsibilities. Furthermore, some of the sites for our clinical trials are outside the United States. The performance
of these sites may be adversely affected by various issues, including less advanced medical infrastructure, lack of familiarity with
conducting clinical trials in accordance with U.S. standards, insufficient training of personnel, communication difficulties or change in
local regulations. We remain responsible for ensuring that each of our clinical trials is conducted in accordance with the general
investigational plan and protocols for the study. Moreover, the FDA requires us to comply with standards, commonly referred to as
good clinical practices, or GCP, for conducting, recording and reporting the results of clinical trials to assure that data and reported
results are credible and accurate and that the rights, integrity and confidentiality of patients in clinical trials are protected.
Furthermore, these third parties may also have relationships with other entities, including our competitors. If these third parties do not
successfully carry out their contractual duties, meet expected deadlines or conduct our clinical trials in accordance with regulatory
requirements or our stated protocols, we will not be able to obtain, or may be delayed in obtaining, regulatory approvals for our
product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our products.

We also rely on other third parties to store and distribute supplies for our clinical trials. Any performance failure on the part of

our existing or future distributors could delay clinical development or regulatory approval of our product candidates or
commercialization of our products, producing additional losses and depriving us of potential product revenues.

We rely on third-party contract manufacturing organizations, or CMOs, to manufacture and supply ALD403 and expect to rely
on CMOs to manufacture and supply Clazakizumab. If one of our suppliers or manufacturers fails to perform adequately or fulfill
our needs, we may be required to incur significant costs and devote significant efforts to find new suppliers or manufacturers and
may also face delays in the development and commercialization of our product candidates.

We currently do not own manufacturing facilities for clinical-scale manufacturing of our product candidates and we rely upon

third-party CMOs to manufacture and supply drug product for our clinical trials. The manufacture of pharmaceutical products in
compliance with the FDA’s current good manufacturing practices, or cGMP, requires significant expertise and capital investment,
including the development of advanced manufacturing techniques and process controls. Manufacturers of pharmaceutical products
often encounter difficulties in production, including difficulties with production costs and yields, quality control, including stability of
the product candidate and quality assurance testing, shortages of qualified personnel, as well as compliance with strictly enforced
cGMP requirements, other federal and state regulatory requirements and foreign regulations. If our manufacturers were to encounter
any of these difficulties or otherwise fail to comply with their obligations to us or under applicable regulations, our ability to provide
study drugs in our clinical trials would be jeopardized. Any delay or interruption in the supply of clinical trial materials could delay
the completion of our clinical trials, increase the costs associated with maintaining our clinical trial programs and, depending upon the
period of delay, require us to commence new trials at significant additional expense or terminate the trials completely.

All manufacturers of our product candidates must comply with cGMP requirements enforced by the FDA through its facilities

inspection program. These requirements include, among other things, quality control, quality assurance and the maintenance of
records and documentation. Manufacturers of our product candidates may be unable to comply with these cGMP requirements and
with other FDA, state and foreign regulatory requirements. The FDA or similar foreign regulatory agencies may also implement new
standards at any time, or change their interpretation and enforcement of existing standards for manufacture, packaging or testing of
products. We have little control over our manufacturers’ compliance with these regulations and standards. A failure to comply with
these requirements may result in fines and civil penalties, suspension of production, suspension or delay in product approval, product
seizure or recall or withdrawal of product approval. If the safety of any product supplied is compromised due to our manufacturers’
failure to adhere to applicable laws or for other reasons, we may not be able to obtain regulatory approval for or successfully
commercialize our products and we may be held liable for any injuries sustained as a result. Any of these factors could cause a delay
of clinical trials, regulatory submissions, approvals or commercialization of our product candidates, entail higher costs or impair our
reputation.

We currently rely on Fujifilm Diosynth Biotechnologies and Ajinomoto Althea Inc. to manufacture and provide us with clinical
supplies of ALD403. Our agreements do not provide for an entire supply of the drug product necessary for all anticipated clinical trials
or for full-scale commercialization. If we and our suppliers cannot agree to the terms and conditions for provision of the drug product
necessary for our clinical and commercial supply needs, or if either terminates their agreement in response to a breach by us or
otherwise becomes unable to fulfill its supply obligations, our clinical trials could be delayed until a qualified alternative supplier is
identified, the manufacturing process is qualified and validated and we have agreed on the terms and conditions for such alternative
supplier to supply product for us, which would delay the development and impair the commercialization of ALD403 and
Clazakizumab. ALD403 and Clazakizumab are biologics and therefore require complex production processes. Transferring the
production process to a new manufacturer would be particularly difficult, time-consuming and expensive and may not yield
comparable product. Although alternative sources of supply exist, the number of third-party suppliers with the necessary
manufacturing and regulatory expertise and facilities necessary to manufacture ALD403, Clazakizumab and any other product
candidates we may develop is limited, and may be expensive and take a significant amount of time to arrange for alternative suppliers.
New suppliers of any product candidate would be required to qualify under applicable regulatory requirements. Obtaining the
necessary FDA approvals or other qualifications under applicable regulatory requirements could result in a significant interruption of
supply and could require the new manufacturer to bear significant additional costs which may be passed on to us.

Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause

our operating results to fall below expectations or our guidance.

Our quarterly and annual operating results have fluctuated in the past and may fluctuate significantly in the future, which makes

it difficult for us to predict our future operating results. From time to time, we may enter into collaboration agreements with other
companies that include development funding and significant upfront and milestone payments, and we expect that amounts earned from
our collaboration agreements will continue to be an important source of our revenues. Accordingly, our revenues will depend on
development funding and the achievement of development and clinical milestones under any of our future collaboration arrangements,
as well as any potential future license agreements and sales of our products, if approved. These upfront and milestone payments may
vary significantly from period to period and any such variance could cause a significant fluctuation in our operating results from one
period to the next.

Our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be

difficult to predict, including the following:

(cid:121) the timing and cost of, and level of investment in, research and development activities relating to our product candidates,

which may change from time to time;

(cid:121) the cost of manufacturing our product candidates, which may vary depending on the quantity of production and the terms of

our agreements with manufacturers;

(cid:121) expenditures that we will or may incur to acquire or develop additional product candidates and technologies;

(cid:121) the level of demand for our product candidates, should they receive approval, which may vary significantly;

(cid:121) future accounting pronouncements or changes in our accounting policies;

(cid:121) the timing and success or failure of clinical trials for our product candidates or competing product candidates, or any other
change in the competitive landscape of our industry, including consolidation among our competitors or partners; and

(cid:121) the risk/benefit profile, cost and reimbursement policies with respect to our products candidates, if approved, and existing

and potential future drugs that compete with our product candidates.

The cumulative effects of these factors could result in large fluctuations and unpredictability in our quarterly and annual
operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not
rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failing
to meet the expectations of industry or financial analysts or investors for any period. If our revenues or operating results fall below the
expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market
are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price
decline could occur even when we have met any previously publicly stated revenues or earnings guidance we may provide.

Our future success depends on our ability to retain our senior executive officers and other key executives and to attract, retain

and motivate qualified personnel.

We are highly dependent on our senior executive officer and the other principal members of our executive and scientific teams,
particularly our President and Chief Executive Officer, Randall C. Schatzman, our Chief Scientific Officer, John A. Latham, our Chief
Business Officer, Mark J. Litton, our Senior Vice President, Translational Medicine, Jeffrey T.L. Smith, our Senior Vice President,
Finance, Larry K. Benedict and our Senior Vice President, Pharmaceutical Operations, Randal A. Hassler. The employment of our
executive officers is at-will and our executive officers may terminate their employment with us at any time. The loss of the services of
any of our senior executive officers could impede the achievement of our research, development and commercialization objectives.
Although we maintain “key person” insurance for Drs. Schatzman, Latham, Litton and Smith, any insurance proceeds we may receive
under our “key person” insurance would not adequately compensate us for the loss of their services.

Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel is also critical to our

success. We may not be able to attract and retain these personnel on acceptable terms given the competition among numerous
pharmaceutical and biotechnology companies for similar personnel. We also experience competition for the hiring of scientific and
clinical personnel from universities and research institutions. Although, to date, we have not experienced problems attracting and
retaining highly qualified personnel, our industry has experienced a high rate of turnover of management personnel in recent years. In
addition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and
development and commercialization strategy. Our consultants and advisors may be employed by third parties and have commitments
under consulting or advisory contracts with other entities that may limit their availability to us.

We expect to expand our development, regulatory affairs, sales and marketing and other capabilities, and as a result, we may

encounter difficulties in managing our growth, which could disrupt our operations.

As March 6, 2015, we had 85 employees. Over the next several years, if our product candidates receive marketing approval, we

expect to experience significant growth in the number of our employees and the scope of our operations, particularly in the areas of
drug development, regulatory affairs, sales and marketing and other functional areas, including finance, accounting and legal. For
example, if ALD403 is approved, we plan to build a 75 to 100 person sales force targeting high-prescribing neurologists and headache
centers in the United States. To manage our anticipated future growth, we must continue to implement and improve our managerial,
operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel. Due to our
limited financial resources and the limited experience of our management team in managing a company with such anticipated growth,
we may not be able to effectively manage the expansion of our operations or recruit and train additional qualified personnel. The
physical expansion of our operations may lead to significant costs and may divert our management and business development
resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or

incur costs that could harm our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory
procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of
hazardous and flammable materials, including chemicals and biological materials. Our operations also produce hazardous waste
products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of
contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we
could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs
associated with civil or criminal fines and penalties.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our

employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential
liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection
with our storage or disposal of biological, hazardous materials.

In addition, we may be required to incur substantial costs to comply with current or future environmental, health and safety laws
and regulations. These current or future laws and regulations may divert resources away from our research, development or production
efforts. Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

Business disruptions could harm our future revenues and financial condition and increase our costs and expenses.

Our operations could be subject to earthquakes, power shortages, telecommunications failures, floods, hurricanes, fires, extreme

weather conditions, medical epidemics and other natural or manmade disasters or business interruptions. The occurrence of any of
these business disruptions could harm our operations and financial condition and increase our costs and expenses. Our corporate
headquarters is located in Washington and certain clinical sites for our product candidates, operations of our existing and future
partners and suppliers are or will be located in Washington near major earthquake faults. The ultimate impact on us, our significant
partners, suppliers and our general infrastructure of being located near major earthquake faults and being consolidated in certain
geographical areas is unknown, but our operations and financial condition could suffer in the event of a major earthquake or other
natural or manmade disaster.

Marketing approval of our product candidates in international markets will subject us to additional costs and a variety of risks

associated with international operations.

We intend to pursue marketing approvals for our product candidates in international markets directly or with partners and will

be subject to additional costs and additional risks related to international operations, including:

(cid:121) different regulatory requirements for drug approvals in foreign countries;

(cid:121) reduced protection for intellectual property rights;

(cid:121) unexpected changes in tariffs, trade barriers and regulatory requirements;

(cid:121) economic weakness, including inflation or political instability in particular foreign economies and markets;

(cid:121) compliance with tax, employment, immigration and labor laws for employees living or traveling abroad;

(cid:121) foreign taxes, including withholding of payroll taxes;

(cid:121) foreign currency fluctuations, which could result in increased operating expenses and reduced revenues, and other obligations

incident to doing business in another country;

(cid:121) workforce uncertainty in countries where labor unrest is more common than in the United States;

(cid:121) production shortages resulting from any events affecting raw material supply or manufacturing capabilities abroad; and

(cid:121) business interruptions resulting from geopolitical actions, including war and terrorism, or natural disasters including

earthquakes, typhoons, floods and fires.

Our ability to use our net operating loss and tax credit carryforwards to offset future taxable income may be subject to certain

limitations.

As of December 31, 2014, we had U.S. net operating loss carryforwards, or NOLs, of $134.0 million, which may be used to

offset future taxable income or offset income taxes due. In addition, we have U.S. research and development tax credit carryforwards
of $6.5 million. These NOLs and tax credit carryforwards expire in various years beginning in 2024, if not utilized. Utilization of the
NOLs and tax credit carryforwards may be subject to an annual limitation due to historical or future ownership change rules pursuant
to Sections 382 and 383 of the Internal Revenue Code. We performed a section 382 ownership analysis through 2009 and determined
that an ownership change occurred in 2005. Based on the analysis performed, however, we do not believe that the Section 382 annual
limitation will impact our ability to utilize the tax attributes that existed as of the date of the ownership change in a material manner.
We have not completed a study to determine the impact of our January 2015 offering, our initial public offering, or IPO, our private
placement in 2012 or other transactions which have occurred since the 2009 analysis, on our NOLs and tax credit carryforwards under
Sections 382 and 383 of the Code. If we have experienced an ownership change in the past or will experience an ownership change as
a result of future changes in our stock ownership, some of which changes are outside our control, the tax benefits related to the NOLs
and tax credit carryforwards may be further limited or lost.

Our internal computer systems, or those of our CROs or other contractors or consultants, may fail or suffer security breaches,

which could result in a material disruption of our drug development programs.

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors

and consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and
telecommunication and electrical failures. While we have not experienced any such system failure, accident or security breach to date,
if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our drug
development programs. For example, the loss of clinical trial data from completed or ongoing clinical trials for any of our product
candidates could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the
data. To the extent that any disruption or security breach were to result in a loss of or damage to our data or applications, or
inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development of our product
candidates could be delayed.

We may engage in future acquisitions that increase our capital requirements, dilute our stockholders, cause us to incur debt or

assume contingent liabilities and subject us to other risks.

We may evaluate various strategic transactions, including licensing or acquiring complementary products, technologies or
businesses. Any potential acquisitions may entail numerous risks, including increased operating expenses and cash requirements,
assimilation of operations and products, retention of key employees, diversion of our management’s attention and uncertainties in our
ability to maintain key business relationships of the acquired entities. In addition, if we undertake acquisitions, we may issue dilutive
securities, assume or incur debt obligations, incur large one-time expenses and acquire intangible assets that could result in significant
future amortization expense. Moreover, we may not be able to locate suitable acquisition opportunities and this inability could impair
our ability to grow or obtain access to technology or products that may be important to the development of our business.

Risks Related to Intellectual Property

If we fail to comply with our obligations in our intellectual property licenses with third parties, we could lose license rights that

are important to our business.

We are a party to intellectual property license agreements with third parties. For example, we have a third-party royalty free

license associated with the Keck Graduate Institute for MabXpress, our yeast-based proprietary manufacturing technology. We may
enter into additional license agreements in the future. Our existing license agreements impose, and we expect that our future license
agreements will impose, various diligence, royalty payment, milestone payment, insurance and other obligations on us. If we fail to
comply with these obligations or our other obligations in our license agreements, our licensors may have the right to terminate these
agreements, in which event we may not be able to develop and market any product or use any platform technology that is covered by
these agreements. Termination of these licenses or reduction or elimination of our licensed rights may result in our having to negotiate
new or reinstated licenses with less favorable terms or our not having sufficient intellectual property rights to operate our business.
The occurrence of such events could materially harm our business.

Our ability to successfully commercialize our products may be impaired if we are unable to obtain and maintain effective

intellectual property rights for our proprietary antibody platform and product candidates.

Our success depends in large part on our and our licensors’ ability to obtain and maintain patent and other intellectual property

protection in the United States and in other countries with respect to our proprietary antibody platform and products. In some
circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the
patents or enforce the patents, covering technology or products that we license from third parties. Therefore, we cannot be certain that
these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business. In
addition, if third parties who license patents to us fail to maintain such patents, or lose rights to those patents, the rights we have
licensed may be reduced or eliminated. Because certain intellectual property rights are shared between us and any of our future
collaborators, it is possible that disputes may arise related to the distribution of those rights.

We have sought to protect our proprietary position by filing patent applications in the United States and abroad related to our

novel technologies and products that are important to our business. This process is expensive and time-consuming, and we may not be
able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible
that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection.
The standards that the United States Patent and Trademark Office, or USPTO, uses to grant patents are not always applied predictably
or uniformly and can change. Consequently, we cannot be certain as to whether pending patent applications will be allowed; and if
allowed, we cannot be certain as to the type and extent of patent claims that will be issued to us in the future. Our existing patents and
any future patents we obtain may not be sufficiently broad to prevent others from using our technologies or from developing
competing products and technologies.

The patent position of biotechnology and pharmaceutical companies generally is highly uncertain and involves complex legal
and factual questions for which legal principles remain unresolved. In recent years patent rights have been the subject of significant
litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our and our licensors’ patent rights are
highly uncertain. Our and our licensors’ pending and future patent applications may not result in patents being issued which protect
our technology or products or which effectively prevent others from commercializing competitive technologies and products. Changes
in either the patent laws or interpretation of the patent laws in the United States and other countries may diminish the value of our
patents or narrow the scope of our patent protection. The laws of foreign countries may not protect our rights to the same extent as the
laws of the United States. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent
applications in the United States and other jurisdictions are typically not published until 18 months after filing, or in some cases not at
all. Therefore, we cannot be certain that we or our licensors were the first to make the inventions claimed in our owned and licensed
patents or pending patent applications, or that we or our licensors were the first to file for patent protection of such inventions.

In March 2013, the United States converted to a first-to-file patent system under the recently enacted America Invents Act. With

this change, the United States patent system was brought into closer conformity with the patent systems of other countries, the vast
majority of which operate as first-to-file patent systems. Under the former system, and assuming the other requirements for
patentability were met, the first to conceive of the claimed invention was entitled to the patent. A number of our patents and patent
applications are subject to the first-to-invent system because they originated prior to the March 2013 cutoff. Under the new United
States system, and outside the United States, the first to file a patent application is entitled to the patent, with certain exceptions. A
number of our patents and patent applications are subject to the new first-to-file system in the United States because they originated
after the March 2013 cutoff. The full effect of these changes remains unclear as the USPTO endeavors to implement various
regulations concerning the new system. Furthermore, the courts have yet to address the vast majority of these provisions and the
applicability of the America Invents Act and new regulations on specific patents discussed herein have not been determined and would
need to be reviewed. We may become involved in opposition, interference, or derivation proceedings challenging our patent rights or
the patent rights of others, and the outcome of any proceedings are highly uncertain. An adverse determination in any such proceeding
could reduce the scope of, or invalidate, our patent rights, allow third parties to commercialize our technology or products and
compete directly with us, without payment to us, or result in our inability to manufacture or commercialize products without
infringing third-party patent rights. Even if our owned and licensed patent applications issue as patents, they may not issue in a form
that will provide us with any meaningful protection, prevent competitors from competing with us or otherwise provide us with any
competitive advantage. Our competitors may be able to circumvent our owned or licensed patents by developing similar or alternative
technologies or products in a non-infringing manner. The issuance of a patent is not conclusive as to its scope, validity or
enforceability, and our owned and licensed patents may be challenged in the courts or patent offices in the United States and abroad.
Such challenges may result in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop or
prevent us from stopping others from using or commercializing similar or identical technology and products, or limit the duration of
the patent protection of our technology and products. Given the amount of time required for the development, testing and regulatory
review of future product candidates, patents protecting such candidates might expire before or shortly after such candidates are
commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from
commercializing products similar or identical to ours or otherwise provide us with a competitive advantage.

We may become involved in lawsuits to protect or enforce our patents, which could be expensive, time-consuming and

unsuccessful.

Competitors may infringe our patents. To counter infringement or unauthorized use, we may be required to file infringement

claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of
ours is invalid or unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our
patents do not cover the technology in question. The standards that courts use to interpret patents are not always applied predictably or
uniformly and can change, particularly as new technologies develop. As a result, we cannot predict with certainty how much
protection, if any, will be given to our patents if we attempt to enforce them and they are challenged in court. An adverse result in any
litigation proceeding could put one or more of our patents at risk of being invalidated or interpreted narrowly. Inequitable conduct is
frequently raised as a defense during intellectual property litigation. It is believed that all parties involved in the prosecution of our
patent applications have complied with their duties of disclosure in the course of prosecuting our patent applications, however, it is
possible that legal claims to the contrary could be asserted if we were engaged in intellectual property litigation, and the results of any
such legal claims are uncertain due to the inherent uncertainty of litigation. If a court determines that any party involved in the
prosecution of our patents failed to comply with their duty of disclosure, the subject patent would be unenforceable. Furthermore,
because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of
our confidential information could be compromised by disclosure during this type of litigation.

Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of

which would be uncertain and could harm our business. In addition, we are currently involved in an opposition proceeding
involving the granted European patent of one of our potential competitors

Third parties may assert infringement claims against us, or other parties we have agreed to indemnify, based on existing patents

or patents that may be granted in the future. We are aware of third-party patents and patent applications containing granted claims
relating to CGRP antibodies and the therapeutic use of CGRP antibodies to treat conditions including migraine, including a European
patent held by Labrys. In July 2014, we, along with Eli Lilly and Company, filed an opposition to the Labrys European patent
requesting that such patent be revoked in its entirety. While, for the reasons set forth in our opposition, we believe this patent should
be revoked in its entirety, the ultimate outcome of the opposition remains uncertain. If the European Patent Office decides not to
revoke the Labrys European patent in its entirety, or only revokes certain claims of the patent, and any surviving claims are
determined to encompass our intended use of ALD403, we may not be able to commercialize ALD403 in the European Union for its
intended use, which could materially adversely affect our business, operating results and financial condition. Furthermore, since patent
applications are published some time after filing, and because applications can take several years to issue, there may be additional
currently pending third-party patent applications that are unknown to us, which may later result in issued patents. We may initiate
litigation or other legal proceedings with respect to other patents in the future. Because of the inevitable uncertainty in intellectual
property litigation, we could lose a patent infringement action asserted against us or opposition or other legal proceeding regardless of
our perception of the merits of the case. If we are found to infringe a third party’s intellectual property rights, we could be required to
obtain a license from such third party to continue developing and commercializing our products and technology. However, we may
not be able to obtain any required license on commercially reasonable terms or at all. Even if we are able to obtain a license, it may be
non-exclusive, thereby giving our competitors access to the same technologies licensed to us. We could be forced, including by court
order, to cease commercializing the infringing technology or product. In addition, in any such proceeding or litigation, we could be
found liable for monetary damages, including treble damages if we are found to have willfully infringed a patent, and attorneys’ fees.
A finding of infringement could prevent us from commercializing our product candidates or force us to cease some of our business
operations.

We may be unable to protect the confidentiality of our trade secrets, thus harming our business and competitive position.

In addition to our patented technology and products, we rely upon trade secrets, including unpatented know-how, technology

and other proprietary information to develop and maintain our competitive position, which we seek to protect, in part, by
confidentiality agreements with our employees, collaborators and consultants. We also have agreements with our employees and
selected consultants that obligate them to assign their inventions to us. However, it is possible that technology relevant to our business
will be independently developed by a person that is not a party to such an agreement. Furthermore, if the employees, consultants or
collaborators that are parties to these agreements breach or violate the terms of these agreements, we may not have adequate remedies
for any such breach or violation, and we could lose our trade secrets through such breaches or violations. Furthermore, our trade
secrets could be disclosed, misappropriated or otherwise become known or be independently discovered by our competitors. Our trade
secrets can be lost through their inadvertent or advertent disclosure to others. In addition, intellectual property laws in foreign
countries may not protect our intellectual property to the same extent as the laws of the United States. If our trade secrets are disclosed
or misappropriated, it would harm our ability to protect our rights and harm our business.

We may be subject to claims that our employees have wrongfully used or disclosed intellectual property of their former

employers. Intellectual property litigation or proceedings could cause us to spend substantial resources and distract our personnel
from their normal responsibilities.

Many of our employees were previously employed at universities or other biotechnology or pharmaceutical companies,

including our competitors or potential competitors. Although we try to ensure that our employees do not use the proprietary
information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or
disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s former employer.
Litigation may be necessary to defend against these claims. If we fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims,
litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses, and could
distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements
of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these
results to be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could
substantially increase our operating losses and reduce our resources available for development activities. We may not have sufficient
financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the
costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources.
Uncertainties resulting from the initiation and continuation of patent litigation or other intellectual property related proceedings could
impair our ability to compete in the marketplace.

Risks Related to Government Regulation

The regulatory approval process is expensive, time consuming and uncertain and may prevent us or our any of our future

collaboration partners from obtaining approvals for the commercialization of some or all of our product candidates.

Among other things, the research, testing, manufacturing, labeling, approval, selling, import, export, marketing and distribution

of drug products are subject to extensive regulation by the FDA and other regulatory authorities in the United States and other
countries, which regulations differ from country to country. Neither we nor any future collaboration partner is permitted to market our
product candidates in the United States until we receive approval of a BLA from the FDA. We have not submitted an application or
received marketing approval for any of our product candidates. Obtaining approval of BLA can be a lengthy, expensive and uncertain
process. In addition, failure to comply with FDA and other applicable U.S. and foreign regulatory requirements may subject us to
administrative or judicially imposed sanctions, including the following:

(cid:121) warning letters;

(cid:121) civil or criminal penalties and fines;

(cid:121) injunctions;

(cid:121) suspension or withdrawal of regulatory approval;

(cid:121) suspension of any ongoing clinical trials;

(cid:121) voluntary or mandatory product recalls and publicity requirements;

(cid:121) refusal to accept or approve applications for marketing approval of new drugs or biologics or supplements to approved

applications filed by us;

(cid:121) restrictions on operations, including costly new manufacturing requirements; or

(cid:121) seizure or detention of our products or import bans.

Prior to receiving approval to commercialize any of our product candidates in the United States or abroad, we and any of our

future collaboration partners must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of
the FDA and other regulatory authorities abroad, that such product candidates are safe and effective for their intended uses. Results
from preclinical studies and clinical trials can be interpreted in different ways. Even if we and any of our future collaboration partners
believe the preclinical or clinical data for our product candidates are promising, such data may not be sufficient to support approval by
the FDA and other regulatory authorities. Administering any of our product candidates to humans may produce undesirable side-
effects, which could interrupt, delay or cause suspension of clinical trials of our product candidates and result in the FDA or other
regulatory authorities denying approval of our product candidates for any or all targeted indications.

Regulatory approval of BLA is not guaranteed, and the approval process is expensive and may take several years. The FDA also

has substantial discretion in the approval process. Despite the time and expense exerted, failure can occur at any stage, and we could
encounter problems that cause us to abandon or repeat clinical trials, or perform additional preclinical studies and clinical trials. The
number of preclinical studies and clinical trials that will be required for FDA approval varies depending on the product candidate, the
disease or condition that the product candidate is designed to address and the regulations applicable to any particular product
candidate.

The FDA can delay, limit or deny approval of a product candidate for many reasons, including, but not limited to, the following:

(cid:121) a product candidate may not be deemed safe or effective;

(cid:121) FDA officials may not find the data from preclinical studies and clinical trials sufficient;

(cid:121) the FDA might not approve our or our third-party manufacturers’ processes or facilities; or

(cid:121) the FDA may change its approval policies or adopt new regulations.

If any of our product candidates fails to demonstrate safety and efficacy in clinical trials or does not gain regulatory approval,

our business will be harmed.

Even if we receive regulatory approval for a product candidate, we will be subject to ongoing regulatory obligations and

continued regulatory review, which may result in significant additional expense and subject us to penalties if we fail to comply with
applicable regulatory requirements.

Once regulatory approval has been granted, the approved product and its manufacturer are subject to continual review by the
FDA and/or non-U.S. regulatory authorities. Any regulatory approval that we or any of our future collaboration partners receive for
our product candidates may be subject to limitations on the indicated uses for which the product may be marketed or contain
requirements for potentially costly post-marketing follow-up trials to monitor the safety and efficacy of the product. In addition, if the
FDA and/or non-U.S. regulatory authorities approve any of our product candidates, we will be subject to extensive and ongoing
regulatory requirements by the FDA and other regulatory authorities with regard to the labeling, packaging, adverse event reporting,
storage, advertising, promotion and recordkeeping, among other things, for our products. In addition, manufacturers of our drug
products are required to comply with cGMP regulations, which include requirements related to quality control and quality assurance
as well as the corresponding maintenance of records and documentation. Furthermore, regulatory authorities must approve these
manufacturing facilities before they can be used to manufacture our drug products, and these facilities are subject to continual review
and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations. If we or a third party
discover previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems
with the facility where the product is manufactured, a regulatory authority may impose restrictions on that product, the manufacturer
or us, including requiring withdrawal of the product from the market or suspension of manufacturing. If we, our product candidates or
the manufacturing facilities for our product candidates fail to comply with regulatory requirements of the FDA and/or other non-U.S.
regulatory authorities, we could be subject to administrative or judicially imposed sanctions, including the following:

(cid:121) warning letters;

(cid:121) civil or criminal penalties and fines;

(cid:121) injunctions;

(cid:121) suspension or withdrawal of regulatory approval;

(cid:121) suspension of any ongoing clinical trials;

(cid:121) voluntary or mandatory product recalls and publicity requirements;

(cid:121) refusal to approve pending applications for marketing approval of new drugs or supplements to approved applications filed

by us;

(cid:121) restrictions on operations, including costly new manufacturing requirements; or

(cid:121) seizure or detention of our products or import bans.

The regulatory requirements and policies may change and additional government regulations may be enacted for which we may

also be required to comply. We cannot predict the likelihood, nature or extent of government regulation that may arise from future
legislation or administrative action, either in the United States or in other countries. If we are not able to maintain regulatory
compliance, we may not be permitted to market our future products and our business may suffer.

Failure to obtain regulatory approvals in foreign jurisdictions will prevent us from marketing our products internationally.

We or a future collaboration partner may market ALD403 and any future products in international markets. In order to market

our future products in the European Economic Area, or EEA, and many other foreign jurisdictions, we must obtain separate regulatory
approvals. Specifically, in the EEA, medicinal products can only be commercialized after obtaining a Marketing Authorization, or
MA.

Before granting the MA, the European Medicines Agency, or EMA, or the competent authorities of the member states of the

EEA make an assessment of the risk-benefit balance of the product on the basis of scientific criteria concerning its quality, safety and
efficacy.

We have had limited interactions with foreign regulatory authorities, and the approval procedures vary among countries and can

involve additional clinical testing, and the time required to obtain approval may differ from that required to obtain FDA approval.
Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries. Approval by the FDA does
not ensure approval by regulatory authorities in other countries, and approval by one or more foreign regulatory authorities does not
ensure approval by regulatory authorities in other foreign countries or by the FDA. However, a failure or delay in obtaining regulatory
approval in one country may have a negative effect on the regulatory process in others. The foreign regulatory approval process may
include all of the risks associated with obtaining FDA approval. We may not obtain foreign regulatory approvals on a timely basis, if
at all. We may not be able to file for regulatory approvals and even if we file we may not receive necessary approvals to
commercialize our products in any market.

Healthcare reform measures could hinder or prevent our product candidates’ commercial success.

In the United States, there have been and we expect there will continue to be a number of legislative and regulatory changes to
the healthcare system in ways that could affect our future revenues and profitability and the future revenues and profitability of our
potential customers. Federal and state lawmakers regularly propose and, at times, enact legislation that would result in significant
changes to the healthcare system, some of which are intended to contain or reduce the costs of medical products and services. For
example, one of the most significant healthcare reform measures in decades, the Patient Protection and Affordable Care Act, as
amended by the Health Care and Education Reconciliation Act, collectively, the PPACA, was enacted in 2010. The PPACA contains a
number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes and fraud and
abuse measures, all of which will impact existing government healthcare programs and will result in the development of new
programs. The PPACA, among other things:

(cid:121) imposes a non-deductible annual fee on pharmaceutical manufacturers or importers who sell “branded prescription drugs”;

(cid:121) increases the minimum level of Medicaid rebates payable by manufacturers of brand-name drugs from 15.1% to 23.1%;

(cid:121) requires collection of rebates for drugs paid by Medicaid managed care organizations;

(cid:121) requires manufacturers to participate in a coverage gap discount program, under which they must agree to offer 50% point-

of-sale discounts off negotiated prices of applicable branded drugs to eligible beneficiaries during their coverage gap period,
as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D; and

(cid:121) creates a process for approval of biologic therapies that are similar or identical to approved biologics.

While the U.S. Supreme Court upheld the constitutionality of most elements of the PPACA in June 2012, other legal challenges
are still pending final adjudication in several jurisdictions. In addition, Congress has also proposed a number of legislative initiatives,
including possible repeal of the PPACA. At this time, it remains unclear whether there will be any changes made to the PPACA,
whether to certain provisions or its entirety. We cannot assure that the PPACA, as currently enacted or as amended in the future, will
not adversely affect our business and financial results and we cannot predict how future federal or state legislative or administrative
changes relating to healthcare reform will affect our business.

In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. For example, the Budget

Control Act of 2011, among other things, created the Joint Select Committee on Deficit Reduction to recommend proposals in
spending reductions to Congress. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for
the years 2013 through 2021, which triggered the legislation’s automatic reduction to several government programs, including
aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that went into effect on April 1, 2013 and will
remain in effect through 2024 unless additional Congressional action is taken. On January 2, 2013, President Obama signed into law
the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several
providers, including hospitals, and increased the statute of limitations period for the government to recover overpayments to providers
from three to five years.

There have been and likely will continue to be legislative and regulatory proposals at the federal and state levels directed at
containing or lowering the cost of health care. We cannot predict the initiatives that may be adopted in the future or their full impact.
The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to
contain or reduce costs of health care may adversely affect:

(cid:121) our ability to set a price we believe is fair for our products;

(cid:121) our ability to generate revenues and achieve or maintain profitability; and

(cid:121) the availability of capital.

Furthermore, changes in regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to

reflect these changes. Amendments may require us to resubmit our clinical trial protocols to Institutional Review Boards for
reexamination, which may impact the costs, timing or successful completion of a clinical trial. In light of widely publicized events
concerning the safety risk of certain drug products, regulatory authorities, members of Congress, the Governmental Accounting
Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have
resulted in the recall and withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and
establishment of risk management programs that may, for instance, restrict distribution of drug products or require safety surveillance
and/or patient education. The increased attention to drug safety issues may result in a more cautious approach by the FDA to clinical
trials and the drug approval process. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the
FDA or other regulatory authorities more likely to terminate or suspend clinical trials before completion, or require longer or
additional clinical trials that may result in substantial additional expense and a delay or failure in obtaining approval or approval for a
more limited indication than originally sought.

Given the serious public health risks of high profile adverse safety events with certain drug products, the FDA may require, as a

condition of approval, costly risk evaluation and mitigation strategies, which may include safety surveillance, restricted distribution
and use, patient education, enhanced labeling, special packaging or labeling, expedited reporting of certain adverse events,
preapproval of promotional materials and restrictions on direct-to-consumer advertising.

If we fail to comply with healthcare laws, we could face substantial penalties and our business, operations and financial

condition could be adversely affected.

Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-

party payors, certain federal and state healthcare laws and regulations, including those pertaining to fraud and abuse and patients’
rights, are and will be applicable to our business. We could be subject to healthcare regulation by both the federal government and the
states in which we conduct our business. The laws that may affect our ability to operate include, without limitation:

(cid:121) the federal healthcare program Anti-Kickback Statute, which prohibits, among other things, any person or entity from

knowingly and willfully offering, soliciting, receiving or providing remuneration, directly or indirectly, in exchange for or to
induce either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which
payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs;

(cid:121) indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or

service, for which payment may be made under federal healthcare programs, such as the Medicare and Medicaid programs;

(cid:121) the federal False Claims Act, which prohibits, among other things, individuals or entities from knowingly presenting, or

causing to be presented, false claims, or knowingly using false statements, to obtain payment from the federal government,
and which may apply to entities like us which provide coding and billing advice to customers;

(cid:121) federal criminal laws that prohibit, among other things, executing a scheme to defraud any healthcare benefit program or

making false statements relating to healthcare matters;

(cid:121) the federal transparency requirements under the PPACA require certain manufacturers of drugs, devices, biologics and

medical supplies to report to the U.S. Department of Health and Human Services information related to physician payments
and other transfers of value and physician ownership and investment interests;

(cid:121) the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology
for Economic and Clinical Health Act, which governs the conduct of certain electronic healthcare transactions and protects
the security and privacy of protected health information; and

(cid:121) state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items

or services reimbursed by any third-party payor, including commercial insurers.

The PPACA, among other things, amends the intent requirement of the Federal Anti-Kickback Statute and criminal healthcare
fraud statutes. A person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it. In addition,
the PPACA provides that the government may assert that a claim including items or services resulting from a violation of the Federal
Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act.

If our operations are found to be in violation of any of the laws described above or any other governmental regulations that
apply to us, we may be subject to penalties, including administrative, civil and criminal penalties, damages, fines and the curtailment
or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring of our operations could adversely affect
our ability to operate our business and our financial results. Any action against us for violation of these laws, even if we successfully
defend against it, could cause us to incur significant legal expenses and divert our management’s attention from the operation of our
business. Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove
costly.

Risks Related to Ownership of Our Common Stock

Our stock price may be volatile, and purchasers of our common stock could incur substantial losses.

Our stock price has fluctuated in the past and is likely to be volatile in the future. From the date of our IPO through March 6,
2015, the reported sale price of our common stock has fluctuated between $9.50 and $32.30 per share. The stock market in general and
the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the
operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in
our common stock. The market price for our common stock may be influenced by many factors, including the following:

(cid:121) the success of competitive products or technologies;

(cid:121) results of clinical trials of our product candidates or those of our competitors;

(cid:121) regulatory or legal developments in the United States and other countries, especially changes in laws or regulations

applicable to our product candidates;

(cid:121) introductions and announcements of future product candidates by us, any of our future collaborators, or our competitors, and

the timing of these introductions or announcements;

(cid:121) actions taken by regulatory agencies with respect to our product candidates, clinical trials, manufacturing process or sales and

marketing terms;

(cid:121) variations in our financial results or those of companies that are perceived to be similar to us;

(cid:121) the success of our efforts to discover, acquire or in-license additional products or product candidates;

(cid:121) developments concerning our future collaborations, including but not limited to those with our sources of manufacturing

supply and our future collaborators;

(cid:121) manufacturing disruptions;

(cid:121) announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital

commitments;

(cid:121) developments or disputes concerning patents or other proprietary rights, including litigation matters and our ability to obtain

patent protection for our product candidates;

(cid:121) our ability or inability to raise additional capital and the terms on which we raise it;

(cid:121) the recruitment or departure of key personnel;

(cid:121) changes in the structure of healthcare payment systems;

(cid:121) market conditions in the pharmaceutical and biotechnology sectors;

(cid:121) actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our

common stock, other comparable companies or our industry generally;

(cid:121) trading volume of our common stock;

(cid:121) sales of our common stock by us or our stockholders;

(cid:121) changes in our board of directors or key personnel;

(cid:121) the expiration of contractual lock-up agreements;

(cid:121) changes in our capital structure, such as future issuances of debt or equity securities;

(cid:121) short sales, hedging and other derivative transactions involving our capital stock;

(cid:121) general economic, industry and market conditions in the United States and abroad;

(cid:121) other events or factors, including those resulting from war, incidents of terrorism or responses to these events; and

(cid:121) the other risks described in this “Risk Factors” section.

These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating
performance. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against
companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and
resources, which could harm our business.

Substantial future sales of shares of our common stock could cause the market price of our common stock to decline. This

could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock into the public market could occur at any time. These sales, or the

perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our
common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the
effect that such sales may have on the prevailing market price of our common stock. In connection with our January 2015 offering, our
officers, directors and certain of our stockholders have signed lock-up agreements with the underwriters under which they have agreed
that they will not, for a period ending April 8, 2015, directly or indirectly, offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale, or otherwise dispose of or hedge any of our shares of capital stock, any options or warrants to purchase
shares of our capital stock or any securities convertible into, or exchangeable for or that represent the right to receive shares of our
capital stock, subject to certain exceptions.

In addition, as of December 31, 2014, we had options outstanding that, if fully exercised, would result in the issuance of
2,485,222 shares of common stock. Following annual automatic increases in the number of reserved shares effective as of January 1,
2015, there were also 4,605,346 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan and
551,864 shares of common stock reserved for issuance under our 2014 Employee Stock Purchase Plan. The authorized number of
shares under both such benefit plans are subject to additional automatic annual increases in the number of shares of common stock
reserved for future issuance. All of the shares of common stock issuable pursuant to our equity compensation plans have been
registered for public resale under the Securities Act of 1933, as amended, or the Securities Act. Accordingly, these shares will be able
to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements.

Moreover, as of December 31, 2014, holders of an aggregate of up to approximately 18.9 million shares of our common stock
have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in
registration statements that we may file for ourselves or other stockholders.

If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business,

our stock price and trading volume could decline.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts

publish about us or our business. We do not have any control over these analysts. If one or more of the analysts who cover us
downgrade our stock or publish inaccurate or unfavorable research about our business, our stock price would likely decline. In
addition, if our operating results fail to meet the forecast of analysts, our stock price would likely decline. If one or more of these
analysts cease coverage of our company or fail to publish reports on us regularly, demand for our stock could decrease, which might
cause our stock price and trading volume to decline.

Our executive officers, directors and principal stockholders have the ability to control or significantly influence all matters

submitted to stockholders for approval.

As of January 31, 2015, our executive officers and directors and their respective affiliated stockholders who owned more than
5% of our outstanding common stock, in the aggregate, beneficially owned shares representing approximately 35.1% of our common
stock. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all
matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they
choose to act together, will control or significantly influence the election of directors and approval of any merger, consolidation or sale
of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on
terms that other stockholders may desire, which in turn could depress our stock price and may prevent attempts by our stockholders to
replace or remove the board of directors or management.

An active trading market for our common stock may not be maintained.

Our stock is currently traded on the NASDAQ Global Market, but we can provide no assurance that we will be able to maintain

an active trading market on the NASDAQ Global Market or any other exchange in the future. The trading volume of our common
stock has been and may continue to be limited. If an active market for our common stock is not maintained, it may be difficult for our
stockholders to sell shares purchased without depressing the market price for the shares or at all.

We are an “emerging growth company” and we cannot be certain if the reduced reporting requirements applicable to emerging

growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, which was

enacted in April 2012. For as long as we continue to be an emerging growth company, we intend take advantage of exemptions from
various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not
being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-
Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and
exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any
golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although
circumstances could cause us to lose that status earlier. We will remain an emerging growth company until the earlier of (1) the last
day of the fiscal year (a) in 2019, (b) in which we have total annual gross revenue of at least $1.0 billion or (c) in which we are
deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates exceeds $700
million as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt securities
during the prior three-year period. We cannot predict if investors will find our common stock less attractive because we may rely on
these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our
common stock and our stock price may suffer or be more volatile.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to

the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to avail ourselves of
this exemption, and, therefore, we are not subject to the same new or revised accounting standards as other public companies that are
not “emerging growth companies” until these standards apply to private companies.

Complying with the laws and regulations affecting public companies has increased and will increase our costs and the demands

on management and could harm our operating results.

As a public company, we are incurring significant legal, accounting and other expenses that we did not incur as a private

company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and NASDAQ impose numerous
requirements on public companies, including requiring changes in corporate governance practices. Also, the Exchange Act requires,
among other things, that we file annual, quarterly and current reports with respect to our business and operating results. Our
management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations.
These burdens may increase as new legislation is passed and implemented, including any new requirements that the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 may impose on public companies. These requirements have increased and will
continue to increase our legal, accounting, and financial compliance costs and have made and will continue to make some activities
more time consuming and costly. We estimate that we will incur approximately $1.5 million to $2.5 million in incremental costs per
year associated with being a publicly traded company, although it is possible that our actual incremental costs will be higher than we
currently estimate. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain
director and officer liability insurance, and in the future we may be required to accept reduced policy limits and coverage or to incur
substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to
attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial

reporting annually and the effectiveness of our disclosure controls and procedures quarterly. Section 404 of the Sarbanes-Oxley Act,
or Section 404, requires us to perform system and process evaluation and testing of our internal control over financial reporting to
allow management to report on, and our independent registered public accounting firm potentially to attest to, the effectiveness of our
internal control over financial reporting. As an “emerging growth company,” we expect to avail ourselves of the exemption from the
requirement that our independent registered public accounting firm attest to the effectiveness of our internal control over financial
reporting under Section 404. However, we may no longer avail ourselves of this exemption when we cease to be an “emerging growth
company.” When our independent registered public accounting firm is required to undertake an assessment of our internal control over
financial reporting, the cost of our compliance with Section 404 will correspondingly increase. Our compliance with applicable
provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on
compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements.
Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our
independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to
be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC
or other regulatory authorities, which would require additional financial and management resources.

Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a decline in the
market price of our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting
could have a material adverse effect on our stated operating results and harm our reputation. If we are unable to implement these
requirements effectively or efficiently, it could harm our operations, financial reporting, or financial results and could result in an
adverse opinion on our internal control over financial reporting from our independent registered public accounting firm.

Provisions in our corporate charter documents could make an acquisition of us more difficult and may prevent attempts by our

stockholders to replace or remove our current management.

Provisions in our corporate charter and our bylaws may discourage, delay or prevent a merger, acquisition or other change in

control of us that stockholders may consider favorable, including transactions in which stockholders might otherwise receive a
premium for their shares. These provisions could also limit the price that investors might be willing to pay in the future for shares of
our common stock, thereby depressing the market price of our common stock. In addition, these provisions may frustrate or prevent
any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace
members of our board of directors. Because our board of directors is responsible for appointing the members of our management team,
these provisions could in turn affect any attempt by our stockholders to replace current members of our management team. Among
others, these provisions include the following:

(cid:121) our board of directors is divided into three classes with staggered three-year terms which may delay or prevent a change of

our management or a change in control;

(cid:121) our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or the
resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of
directors;

(cid:121) our stockholders may not act by written consent or call special stockholders’ meetings; as a result, a holder, or holders,
controlling a majority of our capital stock would not be able to take certain actions other than at annual stockholders’
meetings or special stockholders’ meetings called by the board of directors, the chairman of the board or the chief executive
officer;

(cid:121) our certificate of incorporation does not provide for cumulative voting in the election of directors, which limits the ability of

minority stockholders to elect director candidates;

(cid:121) stockholders must provide advance notice and additional disclosures in order to nominate individuals for election to the

board of directors or to propose matters that can be acted upon at a stockholders’ meeting, which may discourage or deter a
potential acquiror from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise
attempting to obtain control of our company; and

(cid:121) our board of directors may issue, without stockholder approval, shares of undesignated preferred stock; the ability to issue
undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights
or preferences that could impede the success of any attempt to acquire us.

Provisions under Delaware law and Washington law could make an acquisition of our company more difficult, limit attempts by

our stockholders to replace or remove our current management and limit the market price of our common stock.

In addition to provisions in our corporate charter and our bylaws, because we are incorporated in Delaware, we are governed by

the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from
engaging in any of a broad range of business combinations with any holder of at least 15% of our capital stock for a period of three
years following the date on which the stockholder became a 15% stockholder. Likewise, because our principal executive offices are
located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain
circumstances now or in the future. These provisions prohibit a “target corporation” from engaging in any of a broad range of business
combinations with any stockholder constituting an “acquiring person” for a period of five years following the date on which the
stockholder became an “acquiring person.”

Item 1B. Unresolved Staff Comments

None.

Item 2.

Properties

Our corporate headquarters are located in Bothell, Washington, where we lease 36,654 square feet of office and laboratory space
pursuant to a lease agreement which expires in February 2017. This facility houses our research, clinical, regulatory, commercial and
administrative personnel. We believe that our existing facilities are adequate for our near-term needs. We believe that suitable
additional or alternative space would be available if required in the future on commercially reasonable terms.

Item 3.

Legal Proceedings

From time to time, we may become involved in litigation relating to claims arising from the ordinary course of business. Our
management believes that there are currently no claims or actions pending against us, the ultimate disposition of which could have a
material adverse effect on our results of operations, financial condition or cash flows.

Item 4.

Mine Safety Disclosures

Not applicable.

PART II

Item 5.

Market for Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity
Securities

Our common stock is traded on The NASDAQ Global Market under the symbol “ALDR.” Trading of our common stock
commenced on May 8, 2014 in connection with our initial public offering. The following table sets forth, for the periods indicated, the
high and low sales prices for our common stock as reported on The NASDAQ Global Market.

Year ended December 31, 2014

Second quarter (beginning May 8, 2014) ............................. $
Third quarter ......................................................................... $
Fourth quarter ....................................................................... $

High

Low

22.95 $
20.64 $
30.35 $

9.50
11.19
10.52

Holders

As of March 6, 2015, there were approximately 27 holders of record of our common stock. The actual number of stockholders is

greater than this number of record holders and includes stockholders who are beneficial owners but whose shares are held in street
name by brokers and other nominees.

Dividends

We have never declared or paid, and do not anticipate declaring, or paying in the foreseeable future, any cash dividends on our

capital stock. Future determinations as to the declaration and payment of dividends, if any, will be at the discretion of our board of
directors and will depend on then existing conditions, including our operating results, financial conditions, contractual restrictions,
capital requirements, business prospects and other factors our board of directors may deem relevant.

Performance Graph

The following graph compares the performance of our common stock for the periods indicated with the performance of the

NASDAQ Composite Index and the NASDAQ Biotechnology Index. This graph assumes an investment of $100 on May 8, 2014 in
each of our common stock, the NASDAQ Composite Index and the NASDAQ Biotechnology Index, and assumes reinvestment of
dividends, if any. The stock price performance shown on the graph below is not necessarily indicative of future stock price
performance.

Comparison of Cumulative Total Return Among AlderBioPharmaceuticals, Inc.,
NASDAQ Composite Index and NASDAQ Biotechnology Index

$350.00

$300.00

$250.00

$200.00

$150.00

$100.00

$50.00

May-14

Jun-14

Jul-14

Aug-14

Sep-14

Oct-14

Nov-14

Dec-14

Alder BioPharmaceuticals

NASDAQ Composite Index

NASDAQ Biotechnology Index

This information under “Stock Performance Graph” is not deemed filed with the Securities and Exchange Commission and is
not to be incorporated by reference in any filing of Alder Biopharmaceuticals, Inc. under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K and
irrespective of any general incorporation language in those filings.

Use of Proceeds

On May 7, 2014, our registration statement on Form S-1 (No. 333-194672) was declared effective for our IPO. There has been
no material change in the planned use of proceeds from our IPO from that described in the prospectus filed with the SEC pursuant to
Rule 424(b)(4) under the Securities Act on May 8, 2014. As of December 31, 2014, we have used an estimated $24.4 million of the
proceeds from our IPO for working capital and other general corporate purposes. As of December 31, 2014, no portion of the proceeds
from our initial public offering have been paid by us directly or indirectly to any of our directors or officers (or their associates) or
persons owning ten percent or more of any class of our equity securities or to any other affiliates, other than payments in the ordinary
course of business to officers for salaries and bonuses, and payments to our directors for service on our Board of Directors. There has
been no material change in the planned use of proceeds from our IPO from that described in the prospectus filed with the SEC
pursuant to Rule 424(b)(4) under the Securities Act on May 8, 2014.

Item 6.

Selected Consolidated Financial Data

The following selected consolidated financial data is derived from our audited financial statements and should be read in
conjunction with, and is qualified in its entirety by, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations,” and Item 8, “Financial Statements and Supplementary Data” contained elsewhere in this Annual Report on
Form 10-K. The selected consolidated statements of operations data for the years ended December 31, 2014, 2013 and 2012 and
consolidated balance sheet data as of December 31, 2014 and 2013 have been derived from our audited consolidated financial
statements appearing elsewhere in this Annual Report on Form 10-K. The selected consolidated statements of operations data for the
year ended December 31, 2011 and consolidated balance sheet data as of December 31, 2012 and 2011 were derived from our audited
financial statements that are not included in this Annual Report on Form 10-K.

Consolidated statements of operations data:
Revenues
Collaboration and license agreements ................................................... $
Operating expenses
Research and development ....................................................................
General and administrative ...................................................................
Total operating expenses .................................................................
Income (loss) from operations .........................................................

Other income (expense)

Interest income ................................................................................
Other income ...................................................................................
Interest expense ...............................................................................
Other expense ..................................................................................
Total other income (expense) ........................................................
Net income (loss) ....................................................................... $
Net income (loss) per share – basic ....................................................... $
Net income (loss) per share – diluted .................................................... $
Weighted average number of common shares used in net income (loss)

Years Ended December 31,

2014

2013

2012

2011

(in thousands, except share and per share data)

54,705 $

18,796 $

20,067 $

21,822

33,439
12,462
45,901
8,804

44
60
—
—
104
8,908 $
0.43 $
0.30 $

31,883
7,674
39,557
(20,761 )

54
158
—
(64 )
148
(20,613 ) $
(21.14 ) $
(21.14 ) $

30,669
7,217
37,886
(17,819)

101
—
(88)
—
13
(17,806) $
(19.54) $
(19.54) $

28,291
6,642
34,933
(13,111)

92
—
(300)
—
(208)
(13,319)
(15.09)
(15.09)

per share – basic ............................................................................... 20,506,565

975,158

911,354

882,504

Weighted average number of common shares used in net income (loss)

per share – diluted ............................................................................ 29,427,287

975,158

911,354

882,504

Consolidated balance sheet data:
Cash, cash equivalents and investments ................................................ $
Working capital .....................................................................................
Total assets ............................................................................................
Total liabilities ......................................................................................
Convertible preferred stock ...................................................................
Common stock and additional paid in capital .......................................
Accumulated deficit ..............................................................................
Total stockholders' equity (deficit) .......................................................

As of December 31,

2014

2013

2012

2011

55,872 $
55,734
64,359
5,202
—
196,085
(136,906)
64,359

(in thousands)

23,227 $
2,457
26,739
58,727
111,374
2,443
(145,814 )
(143,362 )

59,373 $
39,938
64,654
76,664
111,374
1,820
(125,201)
(123,384)

52,402
29,537
59,090
97,566
67,638
1,283
(107,395)
(106,114)

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion and analysis together with the financial statements and the related notes to those
statements included elsewhere in this report. This discussion contains forward-looking statements that involve risks and uncertainties.
As a result of many factors, such as those set forth in the section of this report captioned “Risk Factors” and elsewhere in this report,
our actual results may differ materially from those anticipated in these forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company that discovers, develops and seeks to commercialize therapeutic antibodies

ALD403 is our novel monoclonal antibody targeted to calcitonin gene-related peptide, or CGRP, for migraine prevention. We

have completed a three month double blind, randomized, placebo-controlled proof-of-concept trial of ALD403 in 163 patients
suffering from five to 14 migraine days per month, or high frequency migraine. We have initiated a Phase 2b dose-ranging trial for the
preventative treatment of chronic migraines with an intravenous formulation and we plan to initiate a second Phase 2b trial in high
frequency migraines in the first half of 2015 with the goal of initiating pivotal Phase 3 trials in 2016.

Clazakizumab, also known as ALD518, is a novel monoclonal antibody that inhibits the pro-inflammatory cytokine interleukin-
6, or IL-6, for the treatment of both rheumatoid arthritis, or RA, and psoriatic arthritis, or PsA. In November 2009, we entered into a
license and collaboration agreement with BMS, under which we granted BMS worldwide exclusive rights to develop and
commercialize Clazakizumab for all indications other than cancer. On August 29, 2014, BMS notified us that it had elected to
terminate the license and collaboration agreement effective as of December 29, 2014, or the Termination Date, at which time all rights
to Clazakizumab were returned to us. Under the terms of the agreement, BMS continues to be responsible for the costs of ongoing
clinical studies, including the Phase 2b dose-ranging trial, through June 29, 2015. We are seeking a new partner to continue the
development of Clazakizumab in autoimmune and inflammatory disease.

We recently designated ALD1613 as a product candidate to advance to IND enabling studies for the treatment of Cushing’s
Disease. ALD1613 is currently at a preclinical stage of development. We are continuing to evaluate other programs disease indications
where therapeutic antibodies have not previously played a role. We will continue to enhance our technologies to discover optimized
product candidates that can be manufactured efficiently on a very large scale. We may seek to monetize our technology platform by
consummating partnerships with leading biotechnology and pharmaceutical companies. We also intend to continue to deploy capital to
selectively develop our own portfolio of product candidates.

We were incorporated in 2002 and have not generated any product revenue. Through December 31, 2014, our operations have

been primarily funded by $111.4 million in private placements of our convertible preferred stock, $80.3 million of net proceeds in our
IPO and $135.0 million in upfront payments, milestones and research and development payments from our collaborators and
government grants. In January 2015, we completed an underwritten public offering of 6,900,000 shares of common stock, including
900,000 shares we issued pursuant to the underwriters’ exercise of their option to purchase additional shares, at $29.50 per share, for
total net proceeds of $190.7 million, after deducing underwriting discounts and commissions of $12.2 million and offering expenses of
$0.6 million.

As of December 31, 2014, we had an accumulated deficit of $136.9 million. We expect to experience increasing operating
losses for the foreseeable future. We expect our expenses will increase substantially in connection with our ongoing activities, as we:

(cid:121) conduct clinical trials for ALD403;

(cid:121) continue to evaluate our preclinical programs and advance at least one additional product candidate into the clinic;

(cid:121) enhance our proprietary antibody platform and conduct discovery and preclinical activities;

(cid:121) manufacture antibodies for our preclinical programs and clinical trials;

(cid:121) seek regulatory approval for our product candidates; and

(cid:121) operate as a public company.

We will not generate revenues from product sales unless and until we or our future collaborators successfully complete
development and obtain regulatory approval for one or more of our product candidates, which we expect will take a number of years
and is subject to significant uncertainty. If we obtain regulatory approval for ALD403 or any future product candidate, we expect to
incur significant commercialization expenses related to sales, marketing, manufacturing and distribution to the extent that such costs
are not paid by future collaborators. We will need to obtain substantial additional sources of funding to develop ALD403 as currently
contemplated. If such additional funding is not available on favorable terms or at all, we may need to delay or reduce the scope of our
ALD403 development program or grant rights in the United States, as well as outside the United States, to ALD403 to one or more
partners.

Financial Operations Overview

Revenues

Substantially all of our revenues in 2014, 2013 and 2012 were derived from our collaboration with BMS. Upfront fees,
milestone payments and reimbursed clinical supply and development costs received under our collaboration agreements are deferred
and are recognized as revenues over the performance period using a time-based approach. As a result of the early termination of the
agreement with BMS, the performance period was adjusted to reflect the December 29, 2014 termination date, which accelerated the
recognition of revenue which had previously been deferred. In 2014, we recognized $54.2 million in revenue which previously had
been deferred as of December 31, 2013.

Revenues recognized and cash payments received under these agreements in 2014, 2013 and 2012 were as follows:

Revenues recognized:

Bristol-Myers Squibb:

Years Ended

December 31,

2014

2013

2012

(in thousands)

Amortization of deferred revenue from upfront

payments ................................................................. $
Recognition of milestone payments .............................
Recognition of reimbursed clinical supply

and development costs ............................................
Bristol-Myers Squibb total .....................................
Other collaborations ..........................................................
Total revenues recognized ...................................... $

35,403 $
7,706

12,133 $
2,642

12,167
3,690

11,431
54,540
165
54,705 $

3,921
18,696
100
18,796 $

4,111
19,968
99
20,067

Cash payments received:
Bristol-Myers Squibb:

Milestone payments ..................................................... $
Reimbursed clinical supply and development costs ....
Bristol-Myers Squibb total .....................................
Other collaborations ..........................................................
Total cash payments received ................................. $

— $
320
320
265
585 $

— $
355
355
-
355 $

3,500
2,257
5,757
100
5,857

We have not generated any revenues from the sale of products. In the future, we may generate revenues from product sales and
from collaboration agreements in the form of license fees, milestone payments, reimbursements for clinical supply and development
costs and royalties on product sales. We expect that any revenues we generate will fluctuate from quarter to quarter as a result of the
uncertain timing and amount of such payments and sales.

Research and Development Expenses

Research and development expenses represent costs incurred by us for the discovery and development of our product

candidates. The following items are included in research and development expenses:

(cid:121) external costs under agreements with clinical research organizations, or CROs, contract manufacturing organizations, or
CMOs, and other significant third-party vendors or consultants used to perform preclinical, clinical and manufacturing
activities;

(cid:121) internal costs including employee-related costs such as salaries, benefits, stock-based compensation expense, travel,

laboratory consumables and services for our research and development personnel; and

(cid:121) allocated facilities, depreciation, and other expenses, which include rent and maintenance of facilities, information

technology services and other infrastructure expenses.

We use our employee and infrastructure resources across multiple research and development programs directed toward
evaluating our monoclonal antibodies for selecting product candidates. We manage certain activities such as preclinical toxicology
studies, clinical trial operations and manufacture of product candidates through third-party CROs, CMOs or other third-party vendors.
We track our significant external costs by each product candidate. We also track our human resource efforts on certain programs for
purposes of billing our collaborators for time incurred at agreed upon rates. We do not, however, assign or allocate to individual
product candidates or development programs our internal costs and we group these internal research and development activities into
three categories:

Category

Description

Preclinical discovery and development .................. Research and development expenses incurred in activities substantially in support

of discovery of new targets through the selection of a single product candidate.
These activities encompass the discovery and translational medicine functions,
including pharmacokinetic and drug metabolism preclinical studies, toxicology
and early strain and assay development activities.

Pharmaceutical operations ...................................... Research and development expenses incurred related to manufacturing preclinical

study and clinical trial materials, including scale-up process development and
quality control activities.

Clinical development .............................................. Research and development expenses incurred related to Phase 1, Phase 2 and

Phase 3 clinical trials, including regulatory affairs activities.

Our research and development expenses during 2014, 2013 and 2012 were as follows:

Years Ended

December 31,

2013
(in thousands)

2012

2014

External costs:

ALD403 ..................................................... $
Clazakizumab ............................................

14,085 $
1,055

10,845 $
2,268

5,471
5,765

Unallocated internal costs:

Preclinical discovery and development .....
Pharmaceutical operations .........................
Clinical development .................................
Total research and development expenses ...... $

11,480
5,209
1,610
33,439 $

12,057
4,696
2,017
31,883 $

12,224
4,924
2,285
30,669

We plan to increase our research and development expenses for the foreseeable future as we continue the development of

ALD403 and evaluate the advancement of future product candidates into clinical development. We intend to seek a new partner for
the clinical development of Clazakizumab in autoimmune and inflammatory disease. The timing and amount of research and
development expenses incurred will depend largely upon the outcomes of current and future clinical trials for our product candidates
as well as the related regulatory requirements, manufacturing costs and any costs associated with the advancement of our preclinical
programs. We cannot determine with certainty the duration and completion costs of the current or future clinical trials of our product
candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of
factors, including:

(cid:121) the scope, rate of progress, and expense of our ongoing, as well as any additional, clinical trials and other research and

development activities;

(cid:121) future clinical trial results;

(cid:121) potential changes in government regulation; and

(cid:121) the timing and receipt of any regulatory approvals.

A change in the outcome of any of these variables with respect to the development of a product candidate could mean a

significant change in the costs and timing associated with the development of that product candidate.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation,

related to our executive, business development, intellectual property, finance, human resources and support functions. Other general
and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses,
travel expenses and professional fees for auditing, tax and legal services, including intellectual property related legal services. We
have incurred and expect to incur additional expenses as a result of being a public company, including expenses related to compliance
with the rules and regulations of the SEC, and those of the NASDAQ Stock Market LLC, or NASDAQ, additional insurance expenses,
investor relations activities and other administrative and professional services.

Other Income (Expense)

Other income consists primarily of interest income received on our cash, cash equivalents and investments, and refundable

Australian tax credits received by our wholly-owned Australian subsidiary. Other expense consists primarily of interest expense
related to a convertible promissory note which was outstanding until April 2012.

Results of Operations

Comparison of the Years Ended December 31, 2014 and 2013

The following table summarizes our results of operations for 2014 and 2013, together with the changes in those items in dollars

and as a percentage:

Revenues:
Collaboration and license agreements ................................ $
Operating expenses:

Research and development ...........................................
General and administrative ...........................................
Income (loss) from operations ......................................
Interest income ...................................................................
Other income ......................................................................
Other expense .....................................................................

Net income (loss) .......................................................... $

Years Ended

December 31,

2014

2013
(dollars in thousands)

Dollar change % change

54,705 $

18,796 $

35,909

191%

33,439
12,462
8,804
44
60
—
8,908 $

31,883
7,674
(20,761)
54
158
(64)
(20,613) $

1,556
4,788
29,565
(10 )
(98 )
64
29,521

5%
62%
142%
(19%)
(62%)
100%
143%

Revenues

Revenues recognized and cash payments received under our collaboration agreements were as follows:

Revenues recognized:

Bristol-Myers Squibb:

Amortization of deferred revenue from upfront

payments ..................................................................... $
Recognition of milestone payments ................................
Recognition of reimbursed clinical supply and

Years Ended

December 31,

2013
2014
(dollars in thousands)

Dollar change % change

35,403 $
7,706

12,133 $
2,642

23,270
5,064

192%
192%

development costs .......................................................
Bristol-Myers Squibb total .........................................
Other collaborations ..............................................................
Total revenues recognized ......................................... $

11,431
54,540
165
54,705 $

3,921
18,696
100
18,796 $

7,510
35,844
65
35,909

192%
192%
65%
191%

Cash payments received:
Bristol-Myers Squibb:

Reimbursed clinical supply and development costs ........ $
Bristol-Myers Squibb total .........................................
Other collaborations ..............................................................
Total cash payments received .................................... $

320 $
320
265
585 $

355 $
355
—
355 $

(35)
(35)
265
230

(10%)
(10%)
—
65%

Revenues for 2014 and 2013 were derived primarily from our collaboration agreement with BMS. In 2014, revenues increased
by $35.9 million compared to 2013, due primarily to the acceleration of recognition of revenue as a result of the early termination of
the BMS agreement. We will not recognize any additional future revenue under the BMS collaboration agreement.

Research and Development Expenses

Years Ended

December 31,

2014

2013
(dollars in thousands)

Dollar change % change

External costs:

ALD403 ........................................................................ $
Clazakizumab ................................................................

14,085 $
1,055

10,845 $
2,268

3,240
(1,213 )

Unallocated internal costs:

Preclinical discovery and development .........................
Pharmaceutical operations ............................................
Clinical development ....................................................
Total research and development expenses .......................... $

11,480
5,209
1,610
33,439 $

12,057
4,696
2,017
31,883 $

(577 )
513
(407 )
1,556

30%
(53%)

(5%)
11%
(20%)
5%

Research and development expenses increased by $1.6 million, or 5%, in 2014 compared to 2013. Costs incurred for ALD403
increased by $3.2 million, or 30% as we increased our expenditures for manufacturing drug supply and for conducting clinical trials
for the prevention of migraines. In 2013 we decided to discontinue our clinical trial in cancer for Clazakizumab which resulted in a
decrease of $1.2 million in the 2014 period. In December 2014, we regained the worldwide rights to Clazakizumab, for all indications
other than cancer, from BMS. BMS continues to be responsible until June 29, 2015 for all costs of the clinical trials that were initiated
by BMS prior to August 29, 2014. We plan to seek out a new partner to continue the clinical development of Clazakizumab in
autoimmune and inflammatory disease and we have the right to purchase all of BMS’ existing manufactured drug supply of
Clazakizumab.

Unallocated internal costs decreased by $0.5 million due to decreased activities related to our preclinical programs, and

decreases in personnel-related and other operating costs.

General and Administrative Expenses

General and administrative expenses increased by $4.8 million, or 62%, for 2014 compared to 2013. The increase was primarily
due to increases in legal and other fees related to our patent filings of $1.6 million, increases in other consulting and professional fees
to operate as a public company of $1.7 million and other increases in personnel related costs, business insurance and other
administrative costs of $1.5 million.

Interest Income

The decrease of $10,000 in interest income for 2014 compared to 2013 was due primarily to a decrease in the average interest

rate earned.

Other Income/(Other Expense)

Other income primarily represents incentive payments received by our Australian subsidiary from the Australian government for

eligible research and development expenditures in the prior calendar year. We received $45,000 in such incentive payments in 2014
and $158,000 in 2013. The decrease in the incentive payments received in 2014 was due to a lower level of eligible expenditures in
Australia in 2013 compared to expenditures in 2012. In 2014 we also recorded a gain on foreign currency of $15,000.

Comparison of the Years Ended December 31, 2013 and 2012

The following table summarizes our results of operations for 2013 and 2012, together with the changes in those items in dollars

and as a percentage:

Revenues:
Collaboration and license agreements ................................ $
Operating expenses:

Research and development ...........................................
General and administrative ...........................................
Income (loss) from operations ......................................
Interest income ...................................................................
Other income ......................................................................
Interest expense ..................................................................
Other expense .....................................................................

Net loss ......................................................................... $

Years Ended

December 31,

2013

2012
(dollars in thousands)

Dollar change % change

18,796 $

20,067 $

(1,271 )

(6%)

31,883
7,674
(20,761)
54
158
—
(64)
(20,613) $

30,669
7,217
(17,819)
101
—
(88)
—
(17,806) $

1,214
457
(2,942 )
(47 )
158
88
(64 )
(2,807 )

4%
6%
(17%)
(47%)
—
100%
—
(16%)

Revenues

Revenues recognized and cash payments received under our collaboration agreements were as follows:

Revenues recognized:

Bristol-Myers Squibb:

Amortization of deferred revenue from upfront

payments ..................................................................... $
Recognition of milestone payments ................................
Recognition of reimbursed clinical supply

and development costs ................................................
Bristol-Myers Squibb total .........................................
Other collaborations ..............................................................
Total revenues recognized ......................................... $

Cash payments received:
Bristol-Myers Squibb:

Milestone payments ......................................................... $
Reimbursed clinical supply and development costs ........
Bristol-Myers Squibb total .........................................
Other collaborations ..............................................................
Total cash payments received .................................... $

Years Ended

December 31,

2012
2013
(dollars in thousands)

Dollar change % change

12,133
$
2,642

3,921
18,696
100
18,796 $

— $
355
355
—
355 $

12,167 $
3,690

(34 ) — %
(28 %)

(1,048 )

4,111
19,968
99
20,067 $

(190 )
(1,272 )
1
(1,271 )

(5 %)
(6 %)
1 %
(6 %)

3,500
2,257
5,757
100
5,857 $

(3,500 )
(1,902 )
(5,402 )
(100 )
(5,502 )

(100 %)
(84 %)
(94 %)
(100 %)
(94 %)

Revenues for 2013 and 2012 were primarily associated with payments from BMS under our collaboration agreement. Revenues

decreased by $1.3 million, or 6%, from 2012 to 2013 due to a decrease in clinical supply and development costs billed to BMS.

Research and Development Expenses

Years Ended

December 31,

2013

Dollar change % change

2012
(dollars in thousands)

External costs:

ALD403 ........................................................................ $
Clazakizumab ................................................................

10,845 $
2,268

5,471 $
5,765

5,374
(3,497 )

Unallocated internal costs:

12,057
4,696
2,017
31,883 $

12,224
4,924
2,285
30,669 $

(167 )
(228 )
(268 )
1,214

98 %
(61 %)

(1 %)
(5 %)
(12 %)
4 %

Research and development expenses increased by $1.2 million, or 4%, in 2013 compared to 2012. External costs for ALD403
increased $5.4 million in 2013 compared to 2012, as we completed our Phase 1 clinical trial for ALD403 and transitioned to a larger
proof-of-concept clinical trial during 2013. External costs for Clazakizumab decreased by $3.5 million in 2013 compared to 2012 as
RA-related development costs decreased by $2.0 million and cancer-related development costs decreased by $1.5 million. We initiated
Phase 2 clinical trials in two cancer related indications during 2012 prior to our decision to discontinue the development of
Clazakizumab in cancer.

Unallocated internal costs decreased $0.7 million in 2013 compared to 2012. The decrease was primarily attributable to
decreased activities related to our preclinical programs of $0.9 million and a decrease in consulting fees of $0.3 million. Unallocated
internal costs also reflect an increase in personnel-related costs of $0.6 million.

General and Administrative Expenses

General and administrative expenses increased by $0.5 million, or 6%, to $7.7 million in 2013 compared to $7.2 million in

2012, due to an increase in personnel-related expenses of $0.4 million and an increase in professional fees of $0.1 million.

Interest Income

The decrease of $47,000 in interest income is primarily due to a decrease in average cash, cash equivalents and short-term

investments during 2013 compared to 2012.

Other Income

We recorded other income of $158,000 in 2013 related to an incentive payment received by our Australian subsidiary from the

Australian government for eligible research and development expenditures in 2012. We did not have any other income in 2012.

Interest Expense

We incurred interest expense of $88,000 related to a convertible promissory note in 2012. In April 2012, the principal amount

and accrued interest under the note was converted into Series D preferred stock. We did not incur any interest expense in 2013.

Other Expense

We recorded other expense of $64,000 in 2013 related to a loss on retirement of equipment of $43,000 and a loss on translation

of foreign currency of $21,000. We did not incur any other expense in 2012.

Liquidity and Capital Resources

Due to our significant research and development expenditures, we have generated significant operating losses from inception

through June 30, 2014, and we expect to incur significant operating losses in the future. We have funded our operations primarily
through sales of our convertible preferred stock, payments from our collaboration partners and proceeds from our initial public
offering, or IPO, which we completed in May 2014. As of December 31, 2014, we had available cash, cash equivalents and
investments of $55.9 million, which consisted of cash, money market funds and negotiable certificates of deposit. Cash in excess of
immediate requirements is invested with a view toward liquidity and capital preservation, and we seek to minimize the potential
effects of concentration and degrees of risk. In January 2015, we completed an underwritten public offering of 6,900,000 shares of
common stock, including 900,000 shares we issued pursuant to the underwriters’ exercise of their option to purchase additional shares,
at $29.50 per share, for total net proceeds of $190.7 million, after deducing underwriting discounts and commissions of $12.2 million
and offering expenses of $0.6 million.

We are currently focusing our resources on development of ALD403 and we are actively seeking a partner for Clazakizumab.
We plan to utilize any funds derived from such a partnership to further advance ALD403 and may also consider possible partnerships
for ALD403 or sources of equity financing. We believe that our available cash, cash equivalents and investments including the net
proceeds of our January 2015 offering will be sufficient to meet our projected operating requirements through 2016. We have based
this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently
expect. Furthermore, our operating plan may change, and we may need additional funds to meet operational needs and capital
requirements for product development and commercialization sooner than planned. We currently have no credit facility or committed
sources of capital. Because of the numerous risks and uncertainties associated with the development and commercialization of our
product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their
development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures
associated with our current and anticipated clinical trials. Our future funding requirements will depend on many factors, as we:

(cid:121) initiate or continue clinical trials of ALD403, our novel monoclonal antibody for prevention of migraine;

(cid:121) seek out a new partner to continue the development of Clazakizumab in autoimmune and inflammatory disease;

(cid:121) continue the research and development of our product candidates;

(cid:121) seek to discover additional product candidates;

(cid:121) seek regulatory approvals for our product candidates that successfully complete clinical trials;

(cid:121) establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize products

which receive regulatory approval;

(cid:121) incur additional costs associated with being a public company.

We plan to continue to fund our operations and capital funding needs through equity, debt financing and/or new collaborations.
The sale of additional equity would result in additional dilution to our stockholders. The incurrence of debt financing would result in
debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would
restrict our operations.

We are seeking a new partner for Clazakizumab and we may also consider partnering ALD403 for further clinical development

and commercialization. To the extent that we raise additional capital through marketing and distribution arrangements or other
collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our
product candidates, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be
favorable to us. If we do need to raise additional capital to fund our operations, funding may not be available to us on acceptable
terms, or at all. If we are not able to secure adequate additional funding we may be forced to make reductions in spending, extend
payment terms with suppliers, liquidate assets where possible, and/or suspend or curtail planned programs. Any of these actions could
harm our business, results of operations and future prospects.

Historical Cash Flow Trends

The following table summarizes our cash flows for the periods indicated:

Years Ended

December 31,

2014

2013

2012

(in thousands)

Net cash used in operating activities .......................... $ (47,657) $ (36,132 ) $
5,546
Net cash provided by (used in) investing activities ....
48
Net cash provided by financing activities ..................

(9,734)
80,982

(29,902 )
(1,507 )
37,905

Cash Used in Operating Activities

Net cash used in operating activities includes net income (loss), adjusted for non-cash charges, changes in deferred revenue and
changes in components of working capital. In 2014 our net income was $8.9 million, which included recognition of $54.3 million of
revenue which had previously been deferred. As a result of the $54.3 million decrease in the deferred revenue balance, other non-cash
charges including stock-based compensation of $1.3 million and an increase in prepaid and other assets of $5.2 million, our net cash
used in operating activities was $47.7 million in 2014. Net cash used in operating activities was $11.5 million higher in 2014
compared to 2013 in which net cash used in operating activities was $36.1 million and we had a net loss of $20.6 million. The
increase in net cash used in operating activities was due primarily to the amount of deferred revenue recognized.

Net cash used in operating activities was $36.1 million during 2013 compared to $29.9 million during 2012. The increase in net

cash used in operating activities in 2013 compared to 2012 was driven primarily by an increase in net loss of $2.8 million and a
change in deferred revenue caused by a $3.5 million milestone payment received in 2012. The remaining differences in cash flows
from operations primarily resulted from changes in accounts receivable.

Cash Provided by (Used in) Investing Activities

Net cash used in investing activities was $9.7 million in 2014 due primarily to purchases of investments, offset by maturities of

investments, and purchases of property and equipment. Net cash provided by investing activities was $5.5 million in 2013 due
primarily to the maturity of investments and decrease in restricted cash, offset in part by purchases of property and equipment.

Net cash provided by investing activities was $5.5 million during 2013 compared to cash used in investing activities of $1.5
million during 2012. The net cash provided by investing activities in 2013 was primarily the result of proceeds from maturities of
investments. The net cash used in investing activities in 2012 was primarily the result of purchases of $1.0 million of property and
equipment and $0.5 million in higher purchases of investments than proceeds from maturities of investments.

Cash Provided by Financing Activities

Net cash provided by financing activities in 2014 was $81.0 million due primarily to our IPO, in which we received proceeds of

$80.3 million net of underwriting discounts and commissions and $2.2 million in offering costs. In 2014, we also received $0.8
million from the exercise of stock options and purchases under the employee stock purchase plan. In 2013, cash provided by
financing activities of $48,000 was the result of stock option exercises. In 2012, cash provided by financing activities of $37.9 million
was primarily the result of proceeds from the issuance of our Series D convertible preferred stock.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements during 2014, 2013 and 2012.

Contractual Obligations

Our contractual obligations as of December 31, 2014 were as follows:

Total

Less Than

1 Year

1-3 Years
(in thousands)

3-5 Years

More Than

5 Years

Operating lease obligations(1) .............................................. $
License agreements(2) ..........................................................
Purchase obligations(3) ........................................................
Contract manufacturing obligations(4) .................................
Total contractual obligations ............................................... $

1,311 $
745
3,979
3,298
9,333 $

563 $
55
3,979
3,130
7,727 $

748 $
165
—
152
1,065 $

— $

150
—
16
166 $

—
375
—
—
375

(1) Represents future minimum lease payments under our non-cancelable operating lease. The minimum lease payments above do not

include any related common area maintenance charges or real estate taxes.

(2) Some of our licensing agreements obligate us to pay a royalty on net sales of products utilizing licensed technology. Such
royalties are dependent on future product sales and are not provided for in the table above as they are not estimable.

(3) We enter into agreements in the normal course of business with contract research organizations for clinical trials and with vendors
for preclinical research studies and other services and products for operating purposes which are cancelable at any time by us,
generally upon 30 days prior written notice. These payments are not included in this table of contractual obligations.

(4) Represents contractual obligations related to manufacturing our product candidates for use in our clinical trials, including long-

term stability studies.

Newly Adopted Accounting Pronouncements

For a discussion of recently issued accounting pronouncements, please see Note 2 to our consolidated financial statements,

which are included in this report.

JOBS Act

As an “emerging growth company,” the JOBS Act, allows us to delay adoption of new or revised accounting pronouncements

applicable to public companies until such pronouncements are made applicable to private companies. As a result, our financial
statements may not be comparable to the financial statements of issuers who are required to comply with the effective date for new or
revised accounting standards that are applicable to public companies.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial
statements, which have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The
preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenues
generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various
other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to the more significant areas involving management’s
judgments and estimates.

Revenue Recognition

We recognize revenues from collaboration, license or research service contract arrangements when persuasive evidence of an

arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collectability is
reasonably assured.

We evaluate multiple-element arrangements to determine (1) the deliverables included in the arrangement and (2) whether the

individual deliverables represent separate units of accounting or whether they must be accounted for as a single unit of accounting.
This evaluation involves subjective determinations and requires us to make judgments about the individual deliverables and whether
such deliverables are separable from the other aspects of the contractual relationship. Deliverables are considered separate units of
accounting provided that the delivered item has value to the customer on a standalone basis, and if the arrangement includes a general
right of return with respect to the delivered item, delivery or performance of the undelivered item is considered probable and
substantially in our control. In assessing whether an item has standalone value, we consider factors such as the research, development,
manufacturing and commercialization capabilities of the collaboration partner and the availability of the associated expertise in the
general marketplace. In addition, we consider whether the collaboration partner can use any other deliverable for its intended purpose
without the receipt of the remaining deliverable, whether the value of the deliverable is dependent on the undelivered item and
whether there are other vendors that can provide the undelivered items. For revenue arrangements entered into prior to January 1,
2011, we were also required to evaluate whether there was fair value of the undelivered elements in the arrangement. The deliverables
under our 2009 BMS collaboration agreement did not qualify as separate units of accounting and accordingly are accounted for as a
single unit of accounting.

The consideration received under an arrangement which contains separate units of accounting is allocated among the separate

units using the relative selling price method. We determine the estimated selling price for units of accounting within each arrangement
using vendor-specific objective evidence, or VSOE, of selling price, if available, third-party evidence, or TPE, of selling price if
VSOE is not available, or best estimate of selling price, or BESP, if neither VSOE nor TPE is available.

When we have substantive performance obligations under an arrangement accounted for as one unit of accounting, revenues are

recognized using either a time-based or proportional performance-based approach. When we cannot estimate the total amount of
performance obligations that are to be provided under the arrangement, a time-based method is used. Under the time-based method,
revenues are recognized over the arrangement’s estimated performance period based on the elapsed time compared to the total
estimated performance period. When we are able to estimate the total amount of performance obligations under the arrangement,
revenues are recognized using a proportional performance model. Under this approach, revenue recognition is based on costs incurred
to date compared to total expected costs to be incurred over the performance period as this is considered to be representative of the
delivery of service under the arrangement. Changes in estimates of total expected performance costs or service obligation time period
are accounted for prospectively as a change in estimate. Under both methods, revenues recognized at any point in time are limited to
the amount of noncontingent payments received or due.

We may also perform research and development activities on behalf of collaborative partners that are paid for by the
collaborators. For research and development activities which are not determined to be separate units of accounting based on the
criteria above, revenues for these research and development activities are recognized using the single unit of accounting method for
that collaborative arrangement. For research and development activities which are determined to be separate units of accounting,
arrangement consideration is allocated and revenues are recognized as services are delivered, assuming the general criteria for revenue
recognition noted above have been met. The corresponding research and development costs incurred under these contracts are
included in research and development expense in the consolidated statements of operations.

We generally invoice collaborators upon the completion of the effort, based on the terms of each agreement. Amounts earned,

but not yet collected from the collaborators, if any, are included in accounts receivable in the accompanying consolidated balance
sheets. Deferred revenue arises from payments received in advance of the culmination of the earnings process. Deferred revenue
expected to be recognized within the next 12 months is classified as a current liability. Deferred revenue will be recognized as revenue
in future periods when the applicable revenue recognition criteria have been met.

Accrued Research and Development Expenses

As part of the process of preparing financial statements, we are required to estimate and accrue expenses, the largest of which

are research and development expenses. Costs for certain development activities are recognized based on an evaluation of the progress
to completion of specific tasks using information and data provided to us by our vendors and our clinical sites. This process involves
the following:

(cid:121) communicating with our applicable personnel to identify services that have been performed on our behalf and estimating the
level of service performed and the associated cost incurred for the service when we have not yet been invoiced or otherwise
notified of actual cost;

(cid:121) estimating and accruing expenses in our financial statements as of each balance sheet date based on facts and circumstances

known to us at the time; and

(cid:121) periodically confirming the accuracy of our estimates with selected service providers and making adjustments, if necessary.

Examples of estimated research and development expenses that we accrue include:

(cid:121) fees paid to CROs in connection with preclinical and toxicology studies and clinical trials;

(cid:121) fees paid to clinical sites in connection with clinical trials.

We base our expense accruals related to clinical trials on our estimates of the services received and efforts expended pursuant to

contracts with multiple research institutions and CROs that conduct and manage clinical trials on our behalf. The financial terms of
these agreements vary from contract to contract and may result in uneven payment flows. Payments under some of these contracts
depend on factors, such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing service
fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If we do
not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of
these services, our actual expenses could differ from our estimates. For service contracts entered into that include a nonrefundable
prepayment for service the upfront payment is deferred and recognized in the consolidated statement of operations as the services are
rendered.

To date, we have not experienced significant changes in our estimates of accrued research and development expenses after a

reporting period. However, due to the nature of estimates, we cannot assure you that we will not make changes to our estimates in the
future as we become aware of additional information about the status or conduct of our clinical trials and other research activities.

Stock-Based Compensation

Stock-based compensation cost is measured on the grant date, based on the estimated fair value of the award using a Black-
Scholes pricing model and recognized as an expense over the employee’s requisite service period on a straight-line basis. We recorded
stock-based compensation expense of $1.3 million, $0.6 million and $0.5 million for 2014, 2013 and 2012, respectively. At
December 31, 2014, we had $4.3 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related
to stock option grants that will be recognized over a weighted-average period of 3.1 years. We expect to continue to grant stock
options pursuant to our 2014 Equity Incentive Plan and to allow employees to purchase shares of our common stock pursuant to our
2014 Employee Stock Purchase Plan, and to the extent that we do, our stock-based compensation expense recognized in future periods
will likely increase.

We account for stock-based compensation arrangements with non-employees using a fair value approach. The fair value of these

options is measured using the Black-Scholes option pricing model reflecting the same assumptions as applied to employee options in
each of the reported periods, other than the expected life, which is assumed to be the remaining contractual life of the option. The
compensation costs of these arrangements are subject to remeasurement over the vesting terms as earned.

Prior to our IPO, the fair value of our common stock underlying stock options was historically determined by our board of
directors, with assistance from management, based upon information available at the time of grant. Given the absence of a public
trading market for our common stock, and in accordance with the American Institute of Certified Public Accountants Practice Aid,
Valuation of Privately-Held-Company Equity Securities Issued as Compensation, or the Practice Aid, our board of directors exercised
reasonable judgment and considered numerous objective and subjective factors to determine the best estimate of the fair value of our
common stock at each grant date. Following our IPO, the fair value per share of our common stock for purposes of determining stock-
based compensation is the closing price of our common stock as reported on The NASDAQ Stock Market on the applicable grant date.

Key Assumptions

Our Black-Scholes option-pricing model requires the input of highly subjective assumptions, including the expected volatility of

the price of our common stock, the expected term of the option, risk-free interest rates, the expected dividend yield of our common
stock and, for the period prior to our IPO, the fair value of the underlying common stock. These estimates involve inherent
uncertainties and the application of management’s judgment. If factors change and different assumptions are used, our stock-based
compensation expense could be materially different in the future.

In determining the fair value of stock awards granted, the following weighted-average assumptions were used in the Black-

Scholes option pricing model for awards granted in the periods indicated:

2014

Volatility ..................... 66.1%
6.1
Expected term (years) .
Risk-free interest rate .. 1.9%
Dividend rate .............. 0.0%

Stock Options
Years Ended
December 31,
2013
69.3%
5.9
1.1%
0.0%

Employee Stock Purchase Plan
Year Ended
December 31,
2014
59.1%
0.6
0.1%
0.0%

2012
70.8%
6.1
0.9%
0.0%

Income Taxes

We use the asset and liability method of accounting for income taxes. Deferred income tax assets and liabilities are recognized

for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax basis. Deferred income tax assets and liabilities are measured using enacted tax rates expected to be
in effect when such assets and liabilities are recovered or settled. The effect on deferred income tax assets and liabilities of a change in
tax rates is recognized in the period that includes the enactment date. We determine deferred income tax assets including net operating
losses and liabilities, based on temporary differences between the book and tax bases of assets and liabilities. We believe that it is
currently more likely than not that our deferred income tax assets will not be realized, and as such, we have recorded a full valuation
allowance.

We utilize a two-step approach for evaluating uncertain tax positions. Step one, recognition, requires us to determine if the

weight of available evidence indicates that a tax position is more likely than not to be sustained upon audit, including resolution of
related appeals or litigation processes, if any. If a tax position is not considered “more likely than not” to be sustained, no benefits of
the position are recognized. If we determine that a position is “more likely than not” to be sustained, then we proceed to step two,
measurement, which is based on the largest amount of benefit which is more likely than not to be realized on effective settlement. This
process involves estimating our actual current tax exposure, including assessing the risks associated with tax audits, together with
assessing temporary differences resulting from the different treatment of items for tax and financial reporting purposes. If actual
results differ from our estimates, our net operating loss and credit carryforwards could be materially impacted.

We file U.S. federal income and Australia tax returns. We currently are not subject to any state income tax filings. To date, we

have not been audited by the Internal Revenue Service, Australian Tax Office or any state income tax authority.

As of December 31, 2014, our total deferred income tax assets were $51.5 million. Due to our history of losses and evaluation of
available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax
planning strategies, and the ability to carry back losses to prior years, we have determined that it is more likely than not that our
deferred income tax assets will not be realized, and therefore, the deferred income tax assets are fully offset by a valuation allowance
at December 31, 2014. The deferred income tax assets were primarily comprised of U.S. net operating loss carryforwards, or NOLs,
and tax credit carryforwards. As of December 31, 2014, we had U.S. net operating loss carryforwards of $134.0 million and federal
tax credit carryforwards of $6.5 million to offset future taxable income or offset income taxes due. These NOLs and tax credit
carryforwards expire beginning in 2024 through 2034, if not utilized.

Item 7A.

Quantitative and Qualitative Disclosures about Market Risk

The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize

income from our investments without assuming significant risk. To achieve our objectives, we maintain a portfolio of cash equivalents
and investments in a variety of securities of high credit quality. As of December 31, 2014, we had cash, cash equivalents and
investments of $55.9 million consisting of cash and money market accounts in highly rated financial institutions in the United States.
A portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However,
because our investments are primarily short-term in duration, we believe that our exposure to interest rate risk is not significant and a
1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor
changes in interest rates.

We contract for the conduct of certain clinical development activities with vendors in Australia and we contract for the conduct
of manufacturing activities in the United Kingdom. We made an aggregate of $8.2 million, $0.8 million, and $1.4 million in payments
to these foreign vendors during 2014, 2013 and 2012, respectively. We are subject to exposure due to fluctuations in foreign exchange
rates in connection with these agreements and with our cash balance held by our Australian subsidiary which is denominated in
Australian dollars. We generally transfer funds to our Australian subsidiary to fund operating needs within 30 days of disbursement.
For 2014, 2013 and 2012 the effect of the exposure to these fluctuations in foreign exchange rates was not material.

Item 8.

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
ALDER BIOPHARMACEUTICALS, INC.

Report of Independent Registered Public Accounting Firm ................................................................................................................. 74

Consolidated Balance Sheets ................................................................................................................................................................ 75

Consolidated Statements of Operations ................................................................................................................................................ 76

Consolidated Statements of Comprehensive Income (Loss) ................................................................................................................. 77

Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) ............................................................. 78

Consolidated Statements of Cash Flows ............................................................................................................................................... 79

Notes to Consolidated Financial Statements ......................................................................................................................................... 80

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Stockholders of
Alder BioPharmaceuticals, Inc.

In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of
comprehensive income (loss), of changes in convertible preferred stock and stockholders’ equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Alder BioPharmaceuticals, Inc. and its subsidiaries (the “Company”) at
December 31, 2014 and 2013, and the results of their operations and their cash flows for each of the three years in the period ended
December 31, 2014 in conformity with accounting principles generally accepted in the United States of America. These consolidated
financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.

/s/ PricewaterhouseCoopers LLP

Seattle, Washington
March 13, 2015

Alder BioPharmaceuticals, Inc.

Consolidated Balance Sheets

Assets
Current assets

Cash and cash equivalents ......................................................................................... $
Short-term investments ..............................................................................................
Accounts receivable ...................................................................................................
Prepaid expenses and other assets .............................................................................
Total current assets ...............................................................................................
Other assets .....................................................................................................................
Property and equipment, net ...........................................................................................
Total assets ........................................................................................................... $

Liabilities, convertible preferred stock and stockholders’ equity (deficit)
Current liabilities

Accounts payable ....................................................................................................... $
Accrued liabilities......................................................................................................
Deferred revenue .......................................................................................................
Deferred rent ..............................................................................................................
Total current liabilities .........................................................................................
Deferred revenue .............................................................................................................
Deferred rent ...................................................................................................................
Total liabilities .....................................................................................................
Commitments and contingencies (Note 14) ...................................................................
Convertible preferred stock; $0.0001 par value; no shares and 116,020,270
shares authorized, respectively; no shares and 20,914,137 shares issued
and outstanding, respectively .....................................................................................

Stockholders’ equity (deficit)

Common stock; $0.0001 par value; 200,000,000 and 140,000,000

shares authorized, respectively; 30,996,526 and 988,685 shares issued
and outstanding, respectively ................................................................................
Additional paid-in capital ..........................................................................................
Accumulated deficit ...................................................................................................
Accumulated other comprehensive income (loss) .....................................................
Total stockholders’ equity (deficit) ......................................................................
Total liabilities, convertible preferred stock and stockholders’ equity (deficit) ... $

December 31,

2014

2013

(in thousands, except share and per share data)

46,795 $
9,077
113
4,758
60,743
2,456
1,160
64,359 $

1,911 $
2,963
—
135
5,009
—
193
5,202

23,227
—
316
1,982
25,525
—
1,214
26,739

2,223
2,128
18,717
—
23,068
35,607
52
58,727

—

111,374

3
196,082
(136,906 )
(22 )
59,157
64,359 $

—
2,443
(145,814)
9
(143,362)
26,739

The accompanying notes are an integral part of these consolidated financial statements.

Alder BioPharmaceuticals, Inc.

Consolidated Statements of Operations

Revenues
Collaboration and license agreements ............................................................. $
Operating expenses
Research and development ..............................................................................
General and administrative .............................................................................
Total operating expenses ...........................................................................
Income (loss) from operations ...................................................................

Other income (expense)

Interest income ..........................................................................................
Other income .............................................................................................
Interest expense .........................................................................................
Other expense ............................................................................................
Total other income ...............................................................................
Net income (loss) ................................................................................. $
Net income (loss) per share – basic ................................................................. $
Net income (loss) per share – diluted .............................................................. $
Weighted average number of common shares used in net income (loss) per

Years Ended
December 31,
2012
2013
(in thousands, except share and per share data)

2014

54,705 $

18,796 $

20,067

33,439
12,462
45,901
8,804

44
60
—
—
104
8,908 $
0.43 $
0.30 $

31,883
7,674
39,557
(20,761 )

54
158
—
(64 )
148
(20,613 ) $
(21.14 ) $
(21.14 ) $

30,669
7,217
37,886
(17,819)

101
—
(88)
—
13
(17,806)
(19.54)
(19.54)

share – basic ...............................................................................................

20,506,565

975,158

911,354

Weighted average number of common shares used in net income (loss) per

share – diluted ............................................................................................

29,427,287

975,158

911,354

The accompanying notes are an integral part of these consolidated financial statements.

Alder BioPharmaceuticals, Inc.

Consolidated Statements of Comprehensive Income (Loss)

Years Ended

December 31,

2014

2013

2012

(in thousands)

Net income (loss) ............................................................................................ $
Other comprehensive income (loss):

Unrealized gain (loss) on securities available-for-sale, net of tax .............
Foreign currency translation income (loss), net of tax ...............................
Total other comprehensive income (loss) .......................................................
Comprehensive income (loss) ......................................................................... $

8,908 $

(20,613 ) $

(17,806)

(8)
(23)
(31)
8,877 $

—
12
12
(20,601 ) $

2
(3)
(1)
(17,807)

The accompanying notes are an integral part of these consolidated financial statements.

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7

Alder BioPharmaceuticals, Inc.

Consolidated Statements of Cash Flows

Operating activities
Net income (loss) ............................................................................................ $
Adjustments to reconcile net income (loss) to net cash used in operating

activities
Depreciation and amortization...................................................................
Loss on retirement of property and equipment ..........................................
Stock-based compensation .........................................................................
Interest expense related to convertible promissory note payable ...............
Changes in operating assets and liabilities

Accounts receivable .............................................................................
Prepaid expenses and other assets ........................................................
Accounts payable .................................................................................
Accrued liabilities ................................................................................
Deferred rent ........................................................................................
Deferred revenue ..................................................................................
Net cash used in operating activities ...............................................

Investing activities
Purchases of investments ................................................................................
Proceeds from maturities of investments ........................................................
Purchases of property and equipment .............................................................
Decrease in restricted cash ..............................................................................
Net cash provided by (used in) investing activities ........................

Financing activities
Proceeds from issuance of convertible preferred stock, net of stock issuance

costs ............................................................................................................
Proceeds from issuance of common stock, net of offering costs .....................
Deferred offering costs ....................................................................................
Proceeds from exercise of stock options and purchases under employee stock
purchase plan ..............................................................................................
Net cash provided by financing activities .......................................
Effect of exchange rate changes on cash .........................................................
Net increase (decrease) in cash and cash equivalents .....................

Cash and cash equivalents
Beginning of period ........................................................................................
End of period ................................................................................................... $

Supplemental disclosures:

Conversion of promissory note payable and accrued interest into

Years Ended

December 31,

2014

2013

2012

(in thousands)

8,908 $

(20,613 ) $

(17,806)

701
2
1,250
—

935
43
575
—

203
(5,196)
(312)
835
276
(54,324)
(47,657)

(11,045)
1,960
(649)
—
(9,734)

—
80,259
(36)

759
80,982
(23)
23,568

(188 )
1,053
303
142
(129 )
(18,253 )
(36,132 )

—
5,620
(193 )
119
5,546

—
—
—

48
48
12
(30,526 )

23,227
46,795 $

53,753
23,227 $

1,042
—
489
88

1,181
215
(223)
650
(149)
(15,389)
(29,902)

(8,025)
7,549
(1,031)
—
(1,507)

37,857
—
—

48
37,905
(3)
6,493

47,260
53,753

convertible preferred stock ................................................................... $
Conversion of convertible preferred stock into common stock ................. $

— $
111,374 $

— $
— $

5,879
—

The accompanying notes are an integral part of these consolidated financial statements.

Alder BioPharmaceuticals, Inc.

Notes to Consolidated Financial Statements

1. Nature of Business

Alder BioPharmaceuticals, Inc. (the “Company”) is a clinical-stage biopharmaceutical company that discovers, develops and

seeks to commercialize therapeutic antibodies with the potential to meaningfully transform current treatment paradigms. The
Company has developed a proprietary antibody platform designed to select and manufacture antibodies that have the potential to
maximize efficacy as well as speed of onset and durability of therapeutic response. The Company’s pipeline includes three internally
discovered humanized monoclonal antibodies, as well as preclinical programs targeting additional indications that are in the discovery
phase. The Company was incorporated in Delaware on May 20, 2002 and is located in Bothell, Washington.

Reverse Stock Split

On April 9, 2014, the Company filed a Certificate of Amendment to its Amended and Restated Certificate of Incorporation to

effect a 1-for-5.5 reverse stock split of its outstanding common stock and convertible preferred stock. The par value per share and the
authorized number of shares of common stock and preferred stock were not adjusted as a result of the reverse stock split. All issued
and outstanding shares of common stock and preferred stock, options to purchase common stock and related per share amounts
contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the reverse stock split for all
periods presented.

Initial Public Offering and January 2015 Stock Offering

In May 2014, the Company completed an initial public offering (“IPO”) of its common stock. In connection with its IPO, the

Company issued and sold 8,875,396 shares of its common stock, which included 875,396 shares the Company issued pursuant to the
underwriters’ partial exercise of their over-allotment option, at a price to the public of $10.00 per share. The Company’s shares of
common stock began trading on the NASDAQ Global Market on May 8, 2014. As a result of the IPO, the Company received
approximately $80.3 million in net proceeds, after deducting underwriting discounts and commissions of $6.2 million and offering
expenses of $2.2 million. At the closing of the IPO, 20,914,137 shares of outstanding convertible preferred stock were automatically
converted into 20,914,137 shares of common stock. Following the IPO, there were no shares of preferred stock outstanding.

In January 2015, the Company completed an underwritten public offering of 6,900,000 shares of common stock, including
900,000 shares we issued pursuant to the underwriters’ exercise of their option to purchase additional shares, at $29.50 per share, for
total net proceeds of $190.7 million, after deducing underwriting discounts and commissions of $12.2 million and offering expenses of
$0.6 million.

Liquidity

The Company had an accumulated deficit as of December 31, 2014. To date, the Company has funded its operations primarily
through sales of its convertible preferred stock, payments from its collaboration partners, and proceeds from its IPO, and will require
substantial additional capital for research and product development. The Company plans to continue to fund its operations and capital
funding needs through equity and/or debt financing, as well as new collaborations. In January 2015, the Company received $190.7
million in net proceeds from an underwritten public offering of its common stock. There are no assurances that the Company will be
able to raise sufficient amounts of funding in the future.

2. Summary of Significant Accounting Policies

Principles of Consolidation

The accompanying consolidated financial statements reflect the accounts of Alder BioPharmaceuticals, Inc. and its wholly-

owned subsidiaries, Alder BioPharmaceuticals Pty. Ltd. and AlderBio Holdings LLC. All inter-company balances and transactions
have been eliminated in consolidation. The consolidated financial statements have been prepared in conformity with United States
generally accepted accounting principles (“U.S. GAAP”).

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

Foreign Currency Translation

The financial statements of the Company’s subsidiaries with a functional currency other than the U.S. dollar have been

translated into the Company’s reporting currency, the U.S. dollar. The functional currency for the Company’s Australian subsidiary is
the Australian dollar and all assets and liabilities of the Australian subsidiary are translated using year-end exchange rates and
revenues and expenses are translated at average exchange rates for the year. Translation adjustments are reflected in the accumulated
other comprehensive income (loss) component of stockholders’ deficit. The Company generally transfers funds to the Australian
subsidiary to fund operating needs within 30 days of disbursement.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with original maturities of three months or less to be cash
equivalents. Cash and cash equivalents consist primarily of money market funds and are stated at cost, which approximates fair value.

Investments

Short-term investments consist of negotiable certificates of deposit. The Company classifies its securities as available-for-sale,

which are reported at estimated fair value with unrealized gains and losses included in accumulated other comprehensive income
(loss) in stockholders’ equity (deficit). Investments in securities with maturities of less than one year, or where management’s intent is
to use the investments to fund current operations, or to make them available for current operations, are classified as short-term
investments.

Realized gains and realized losses are included in interest income. Cost of investments for purposes of computing realized and

unrealized gains and losses are based on the specific identification method. Interest and dividends earned on all securities are included
in interest income.

Restricted Cash

Restricted cash consists of money market funds purchased as a security deposit for a letter of credit issued to the landlord in
connection with the Company’s office building lease. In September 2013, the Company entered into an amendment for its office
building lease and a letter of credit was no longer required under the lease.

Concentration of Credit Risk and Major Collaborators

The Company is exposed to credit risk from its deposits of cash and cash equivalents and restricted cash in excess of amounts

insured by the Federal Deposit Insurance Corporation.

One of the Company’s collaborators accounted for nearly 100% of total revenues for the years ended December 31, 2014, 2013

and 2012. This collaborator accounted for 100% of total accounts receivable as of December 31, 2014 and 21% of total accounts
receivable as of December 31, 2013.

Fair Value of Financial Instruments

The Company holds financial instruments that are measured at fair value which is determined according to a fair value hierarchy

that prioritizes the inputs and assumptions used, and the valuation techniques used to measure fair value. The three levels of the fair
value hierarchy are described as follows:

Level 1 .......................... Inputs are unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2 ..........................

Inputs are quoted prices for similar assets and liabilities in active markets or quoted prices for identical or
similar instruments in markets that are not active and model-derived valuations in which all significant
inputs and significant value drivers are observable in active markets.

Level 3 ..........................

Inputs are unobservable inputs based on the Company’s assumptions and valuation techniques used to
measure assets and liabilities at fair value. The inputs require significant management judgment or
estimation.

The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment and may

affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.

The Company established the fair value of its assets and liabilities using the price that would be received to sell an asset or paid

to transfer a liability in an orderly transaction between market participants at the measurement date and established a fair value
hierarchy based on the inputs used to measure fair value.

Property and Equipment

Property and equipment consists of laboratory equipment, computer equipment and software, leasehold improvements, and

furniture and fixtures. Property and equipment are stated at cost, net of accumulated depreciation and amortization. Depreciation and
amortization are computed using the straight-line method over the estimated useful lives of the depreciable assets.

Computer equipment and software .................................... 3 - 5 years
Laboratory equipment ....................................................... 4 years
Furniture and fixtures ........................................................ 5 years
Leasehold improvements ................................................... Shorter of asset’s useful life or remaining term of lease

Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation are removed from the accounts
and any resulting gain or loss is reflected in the statements of operations in the year of disposition. Additions and improvements that
increase the value or extend the life of an asset are capitalized. Repairs and maintenance costs are expensed as incurred.

Rent Expense, Deferred Rent and Leasehold Improvements

Rent expense for leases that provide free rent periods and scheduled rent increases during the lease term is recognized on a

straight-line basis over the term of the related lease. Leasehold improvements that are funded by landlord incentives or allowances
under operating leases are recorded as a component of deferred rent and are amortized as a reduction of rent expense over the term of
the related lease.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of long-lived assets in accordance with authoritative guidance on accounting for the
impairment or disposal of long-lived assets. The Company evaluates long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying value of these assets may not be recoverable. Such impairment is recognized in the event the
net book value of such assets exceeds their fair value. If the carrying value of the net assets assigned exceeds the fair value of the
assets, then the second step of the impairment test is performed in order to determine the implied fair value. No impairment of long-
lived assets occurred in the periods presented.

Segment and Geographic Information

Operating segments are identified as components of an enterprise about which separate discrete financial information is
available for evaluation by the chief operating decision makers, or decision making group, in making decisions on how to allocate
resources and assess performance. The Company’s chief operating decision makers are its chief executive officer and its board of
directors. The Company manages its business as one operating segment; however, the Company operates in two geographic regions:
United States (Bothell, WA) and Australia. Substantially all of the Company’s assets are located in, and revenues are generated in, the
United States.

Revenue Recognition

The Company recognizes revenues from collaboration, license or research service contract arrangements when persuasive

evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and
collectability is reasonably assured.

The Company evaluates multiple-element arrangements to determine (1) the deliverables included in the arrangement and
(2) whether the individual deliverables represent separate units of accounting or whether they must be accounted for as a single unit of
accounting. This evaluation involves subjective determinations and requires the Company to make judgments about the individual
deliverables and whether such deliverables are separable from the other aspects of the contractual relationship. Deliverables are
considered separate units of accounting provided that the delivered item has value to the customer on a standalone basis, and if the
arrangement includes a general right of return with respect to the delivered item, delivery or performance of the undelivered item is
considered probable and substantially in the Company’s control. In assessing whether an item has standalone value, the Company
considers factors such as the research, development, manufacturing and commercialization capabilities of the collaboration partner
and the availability of the associated expertise in the general marketplace. In addition, the Company considers whether the
collaboration partner can use any other deliverable for its intended purpose without the receipt of the remaining deliverable, whether
the value of the deliverable is dependent on the undelivered item and whether there are other vendors that can provide the undelivered
items. For revenue arrangements entered into prior to January 1, 2011, the Company was also required to evaluate whether there was
fair value of the undelivered elements in the arrangement. The deliverables under the 2009 Bristol-Myers Squibb (“BMS”)
collaboration agreement did not qualify as separate units of accounting and accordingly are accounted for as a single unit of
accounting.

The consideration received under an arrangement which contains separate units of accounting, is allocated among the separate
units using the relative selling price method. The Company determines the estimated selling price for units of accounting within each
arrangement using vendor-specific objective evidence, (“VSOE”), of selling price, if available, third-party evidence, (“TPE”), of
selling price if VSOE is not available, or best estimate of selling price, (“BESP”), if neither VSOE nor TPE is available.

When the Company has substantive performance obligations under an arrangement accounted for as one unit of accounting,

revenues are recognized using either a time-based or proportional performance-based approach. When the Company cannot estimate
the total amount of performance obligations that are to be provided under the arrangement, a time-based method is used. Under the
time-based method, revenues are recognized over the arrangement’s estimated performance period based on the elapsed time
compared to the total estimated performance period. When the Company is able to estimate the total amount of performance
obligations under the arrangement, revenues are recognized using a proportional performance model. Under this approach, revenue
recognition is based on costs incurred to date compared to total expected costs to be incurred over the performance period as this is
considered to be representative of the delivery of service under the arrangement. Changes in estimates of total expected performance
costs or service obligation time period are accounted for prospectively as a change in estimate. Under both methods, revenues
recognized at any point in time are limited to the amount of noncontingent payments received or due.

The Company may also perform research and development activities on behalf of collaborative partners that are paid for by the

collaborators. For research and development activities which are not determined to be separate units of accounting based on the
criteria above, revenues for these research and development activities are recognized using the single unit of accounting method for
that collaborative arrangement. For research and development activities which are determined to be separate units of accounting,
arrangement consideration is allocated and revenues are recognized as services are delivered, assuming the general criteria for revenue
recognition noted above have been met. The corresponding research and development costs incurred under these contracts are
included in research and development expense in the consolidated statements of operations.

The Company generally invoices its collaborators upon the completion of the effort, based on the terms of each agreement.

Amounts earned, but not yet collected from the collaborators, if any, are included in accounts receivable in the accompanying
consolidated balance sheets. Deferred revenue arises from payments received in advance of the culmination of the earnings process.
Deferred revenue expected to be recognized within the next 12 months is classified as a current liability. Deferred revenue will be
recognized as revenue in future periods when the applicable revenue recognition criteria have been met.

Accounts Receivable

Accounts receivable are stated at the amount management expects to collect from customers based on their outstanding invoices.
Management reviews accounts receivable regularly to determine if any receivable will potentially be uncollectible. Estimates are used
to determine the amount of allowance for doubtful accounts necessary to reduce accounts receivable to its estimated net realizable
value. At December 31, 2014 and 2013, no allowance for doubtful accounts was considered necessary.

Research and Development

Research and development expenses consist primarily of salaries and benefits, stock-based compensation, occupancy, materials

and supplies, contracted research, consulting arrangements and other expenses incurred to sustain the Company’s research and
development programs. Research and development costs are expensed as incurred. In-licensing fees and other costs to acquire
technologies that are utilized in research and development and that are not expected to have alternative future use are expensed when
incurred. For service contracts entered into that include a nonrefundable prepayment for service the upfront payment is deferred and
recognized in the consolidated statements of operations as the services are rendered.

Patent Costs

Costs related to filing and pursuing patent applications are expensed as incurred, as recoverability of such expenditures is

uncertain. These patent related legal costs are reported as a component of general and administrative expenses.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under the asset and liability method, deferred
income tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial
statement carrying amounts of existing assets and liabilities and their respective tax basis and are measured using the tax income rates
that will be in effect when the differences are expected to reverse. A valuation allowance is recorded when it is more likely than not
that some of the net deferred income tax asset will not be realized.

The Company determines whether a tax position is more likely than not to be sustained upon examination based on the technical

merits of the position. For tax positions meeting the more-likely-than-not threshold, the tax amount recognized in the financial
statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement with the
relevant tax authority.

Stock-Based Compensation

The Company recognizes stock-based compensation expense on stock awards granted to employees and members of the board

of directors based on their estimated grant date fair value using the Black-Scholes option pricing model. This Black-Scholes option
pricing model uses various inputs to measure fair value, including estimated market value of the Company’s underlying common
stock at the grant date, expected term, estimated volatility, risk-free interest rate and expected dividend yields of the Company’s
common stock. The Company recognizes stock-based compensation expense, net of estimated forfeitures, in the consolidated
statements of operations on a straight-line basis over the requisite service period. The Company applies an estimated forfeiture rate
derived from historical and expected future employee termination behavior. If the actual number of forfeitures differs from those
estimated by management, adjustments to compensation expense may be required in future periods.

For stock options granted to non-employees, the fair value of the stock options is estimated using the Black-Scholes option

pricing model. This model utilizes the estimated market value of the Company’s underlying common stock at the measurement date,
the contractual term of the option, estimated volatility, risk-free interest rates and expected dividend yields of the Company’s common
stock. The Company recognizes stock-based compensation expense, net of estimated forfeitures, in the consolidated statements of
operations on a straight-line basis over the requisite service period. Measurement of stock-based compensation is subject to periodic
adjustment for changes in the fair value of the award.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the change in equity of a business enterprise during a period from transactions, and
other events and circumstances from non-owner sources, and currently consists of net loss, changes in unrealized gains and losses on
available-for-sale securities and gains and losses on foreign currency translation related to the Company’s wholly-owned subsidiary in
Australia.

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (ASU) No. 2014-09,

Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in Accounting Standards
Codification 605, Revenue Recognition. This ASU stipulates that an entity should recognize revenue to depict the transfer of promised
goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and
cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from
costs incurred to obtain or fulfill a contract. This ASU is effective for annual reporting periods beginning after December 15, 2016,
including interim periods within that reporting period. Early adoption is not permitted, and retrospective application is required. The
Company is currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.

In June 2014, the FASB issued ASU No. 2014-12, Compensation – Stock Compensation. This ASU requires entities that grant
their employees share-based payments in which the terms of the award provide that a performance target that affects vesting and that
could be achieved after the requisite service period be treated as a performance condition. The ASU will become effective for annual
reporting periods beginning after December 15, 2015. The Company is currently evaluating the impact of the adoption of this ASU on
its consolidated financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Presentation of Financial Statements – Going Concern. This ASU
requires entities to evaluate for each annual and interim reporting period, whether there are conditions or events, considered in the
aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the
financial statements are issued (or within one year after the date that the financial statements are available to be issued when
applicable). The ASU will become effective for annual reporting periods beginning after December 15, 2016. The Company is
currently evaluating the impact of the adoption of this ASU on its consolidated financial statements.

As an “emerging growth company,” the Jumpstart our Business Startups Act, or the JOBS Act, allows the Company to delay

adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made
applicable to private companies. As a result, the Company’s financial statements may not be comparable to the financial statements of
issuers who are required to comply with the effective date for new or revised accounting standards that are applicable to public
companies.

The Company has reviewed other recent accounting pronouncements and concluded that they are either not applicable to the

business, or that no material effect is expected on the consolidated financial statements as a result of future adoption.

3. Net Income (Loss) Per Share

Basic net income (loss) per share is calculated by dividing net income (loss) by the weighted average common shares

outstanding during the period, without consideration for common stock equivalents. Diluted net income (loss) per share is calculated
by adjusting the weighted average common shares outstanding for the dilutive effect of common stock equivalents outstanding for the
period, determined using the treasury-stock method.

Numerator

Net income (loss) (in thousands) ............................................................ $

8,908 $ (20,613 ) $ (17,806)

Denominator

Years Ended
December 31,

2014

2013

2012

Weighted-average common shares outstanding –basic ........................... 20,506,565 975,158 911,354
—
Dilutive effect of common shares from preferred stock ......................... 7,276,974
—
7,854
Dilutive effect of common shares from employee stock purchase plan..
Dilutive effect of common shares from stock options ............................ 1,635,894
—
Weighted-average common shares outstanding –diluted ........................ 29,427,287 975,158 911,354
0.43 $ (21.14 ) $ (19.54)
0.30 $ (21.14 ) $ (19.54)

Net income (loss) per share-basic ................................................................ $
Net income (loss) per share-diluted.............................................................. $

—
—
—

The following weighted average numbers of convertible preferred stock and outstanding stock options were excluded from the
calculation of diluted net loss per share for 2014, 2013 and 2012 because including them would have had an anti-dilutive effect. The
convertible preferred stock numbers shown in the table are on a common stock equivalent basis.

Convertible preferred stock .......................................................................
Stock options .............................................................................................

Years Ended
December 31,
2013

2012

2014

— 20,914,137 19,228,691
209,460 2,161,274 1,953,519
209,460 23,075,411 21,182,210

4. Fair Value Disclosures

The following table presents the Company’s financial instruments by level within the fair value hierarchy:

As of December 31, 2014
Cash equivalents ...................................................................
Money market funds ....................................................... $

Short term investments

Fair Value Measurement Using

Level 1

Level 2

Level 3

Total

(in thousands)

46,113

—

— $

46,113

Negotiable certificates of deposit ....................................
$

—
46,113 $

9,077
9,077 $

—
— $

9,077
55,190

As of December 31, 2013
Cash equivalents

Money market funds ....................................................... $

22,238 $

— $

22,238

The Company’s negotiable certificates of deposit are valued using fair value measurements that are considered to be Level 2.

The investment custodian provides the Company with valuations of its securities portfolio. The primary source for the security
valuation is Interactive Data Corporation (“IDC”), which evaluates securities based on market data. IDC utilizes evaluated pricing
models that vary by asset class and include available trade, bid, and other market information. Generally, the methodology includes
broker quotes, proprietary models, vast descriptive terms and conditions databases, as well as extensive quality control programs. The
custodian utilizes proprietary valuation matrices for valuing all negotiable certificates of deposit.

Accounts receivable, accounts payable and accrued liabilities are carried at cost, which approximates fair value due to the short-

term nature of these financial instruments.

5. Short-term Investments

Short-term investments consisted of the following securities available-for-sale for the date indicated:

Amortized

Cost

Gross
unrealized

gains

Gross
unrealized

losses

(in thousands)

Fair

Value

Type of security as of December 31, 2014

Negotiable certificates of deposit maturing in one year

or less ......................................................................... $
Total available-for-sale securities ......................................... $

9,085 $
9,085 $

— $
— $

8 $
8 $

9,077
9,077

All short-term investments had a contractual maturity of one year or less.

The declines in value of these investments are primarily related to changes in interest rates and are considered to be temporary

in nature. The Company evaluates, among other things, the duration and extent to which the fair value of a security is less than its cost,
the financial condition of the issuer, and the intent to sell, or whether it is more likely than not that the Company will be required to
sell the security before recovery of the amortized cost basis. The Company’s realized gains and realized losses on sales of available-
for-sale securities were not material for the years ended December 31, 2014, 2013 and 2012. No securities have been in a continuous
unrealized loss position for more than 12 months as of December 31, 2014.

6. Prepaid Expenses and Other Assets

Prepaid expenses and other assets consisted of the following for the dates indicated:

December 31, December 31,

2014

2013

(in thousands)

Current assets:

Advance payments for research and development .. $
Prepaid insurance and other general

4,107 $

1,549

and administrative expenses ...............................
$

651
4,758 $

433
1,982

Long-term assets:

Advance payments for research and development .. $
Deferred offering costs ............................................
$

2,420 $
36
2,456 $

—
—
—

Deferred offering costs represent legal, accounting and other direct costs related to the Company’s efforts to raise capital

through an issuance of the Company’s common stock. These costs have been deferred through the completion of the January 2015
stock offering and were reclassified to additional paid-in capital as a reduction of the proceeds.

7. Property and Equipment

Property and equipment consisted of the following for the dates indicated:

Computer equipment and software ............................ $
Laboratory equipment ................................................
Furniture and fixtures .................................................
Leasehold improvements ...........................................

Less: Accumulated depreciation and amortization ....
$

December 31,

2014

2013

(in thousands)

1,062 $
4,728
357
1,602
7,749
(6,589)
1,160 $

833
4,599
357
1,321
7,110
(5,896 )
1,214

Depreciation and amortization expense totaled $0.7 million, $0.9 million and $1.0 million for the years ended December 31,

2014, 2013 and 2012, respectively.

8. Accrued Liabilities

Accrued liabilities consisted of the following for the dates indicated:

December 31, December 31,

2014

2013

(in thousands)

Compensation and benefits .......................................... $
Contracted research and development ..........................
Professional services and other ....................................
$

2,211 $
517
235
2,963 $

1,564
492
72
2,128

9. Collaboration and License Agreements

The Company has entered into various collaboration and license agreements with pharmaceutical and biotechnology companies.

Revenues recognized and cash payments received under these agreements were as follows:

Revenues recognized:

Bristol-Myers Squibb:

Year Ended

December 31,

2013
(in thousands)

2014

2012

Amortization of deferred revenue from upfront

payments ...................................................... $
Recognition of milestone payments ..................
Recognition of reimbursed clinical supply

35,403 $
7,706

12,133 $ 12,167
3,690

2,642

and development costs .................................
Bristol-Myers Squibb total ..........................
Other collaborations ...............................................
Total revenues recognized ........................... $

11,431
54,540
165
54,705 $

Cash payments received:
Bristol-Myers Squibb:

3,921

4,111
18,696 19,968
99
20,067

100
18,796 $

Milestone payments .......................................... $
Reimbursed clinical supply and development

costs ..............................................................
Bristol-Myers Squibb total ..........................
Other collaborations ...............................................
Total cash payments received ...................... $

— $

320

320
265
585 $

— $

3,500

355

2,257

355
-
355 $

5,757
100
5,857

Termination of License and Collaboration Agreement with Bristol-Myers Squibb

In November 2009, the Company entered into a license and collaboration agreement with Bristol-Myers Squibb, or BMS, for

the development and commercialization of Clazakizumab, an antibody product candidate for the treatment of rheumatoid arthritis,
psoriatic arthritis and cancer. Under the terms of the agreement, the Company received a non-refundable upfront payment of $85
million and granted BMS worldwide exclusive rights to develop and commercialize Clazakizumab for all indications other than
cancer. On August 29, 2014, the Company received written notice that BMS elected to terminate the license and collaboration
agreement effective as of December 29, 2014 (the “Termination Date”), at which time all rights to Clazakizumab were returned to the
Company.

In addition to the upfront payment of $85 million, the Company received an aggregate of $18.5 million in milestone payments
from BMS and was reimbursed for clinical supply and development costs of $26.9 million. The Company recognized revenue relating
to the deliverables in the agreement as a single unit of accounting using a time-based proportional performance model. The
proportional performance model results in the recognition of the upfront license fee and other payments received under the
arrangement over the estimated performance period based on the passage of time. As a result of the termination of the agreement, the
estimated development period was adjusted to conclude as of the Termination Date, which was accounted for prospectively as a
change in accounting estimate. In 2014, the Company recognized revenue related to the BMS agreement in the amount of $54.5
million. The acceleration of revenue recognition as a result of the early termination of the collaboration agreement resulted in the
Company reporting net income for 2014.

BMS continues to be responsible until June 29, 2015 for all costs of the clinical trials that were initiated prior to August 29,
2014. On the Termination Date, all rights granted to BMS with respect to Clazakizumab terminated and reverted to the Company, and
BMS granted to our wholly owned subsidiary, AlderBio Holdings LLC (“AlderBio”), an exclusive license, with the right to grant
sublicenses, under certain BMS intellectual property solely to make, have made, use, import, export, offer for sale, and sell
Clazakizumab. BMS is obligated to transfer to the Company the Investigational New Drug Application that BMS filed for
Clazakizumab with the U.S. Food and Drug Administration and all material data related to Clazakizumab that has not previously been
transferred to the Company. The Company has the right to purchase all of BMS’ existing manufactured drug supply of Clazakizumab
at cost and, at the Company’s request, BMS is obligated to use diligent efforts to supply the Company with Clazakizumab until the
earlier of 20 months after December 29, 2014, or the date that the Company obtains an alternative source of supply.

The Company will be required to pay a low single-digit royalty to BMS on sales of Clazakizumab unless the regulatory approval

of Clazakizumab is not based in whole or in part upon data from BMS’s Phase 2b clinical trial(s) in rheumatoid arthritis and psoriatic
arthritis. Aside from those clinical trial expenses that BMS is obligated to pay after the Termination Date, the Company will be solely
responsible for performing and funding any new Clazakizumab development and clinical trial activities initiated after the Termination
Date, which could significantly delay or result in the discontinuation of the development of Clazakizumab.

Other Collaborations

The Company entered into an agreement with a biotechnology company to provide research services under specified work
plans. Payments received under this agreement were deferred and recognized as revenue in accordance with the Company’s revenue
recognition policy.

10. Common and Convertible Preferred Stock

There were 30,996,526 and 988,685 shares of common stock issued and outstanding as of December 31, 2014 and 2013,
respectively. In connection with the IPO, the Company amended and restated its Amended and Restated Certificate of Incorporation to
change the authorized capital stock to 200,000,000 shares designated as common stock and 10,000,000 shares designated as preferred
stock, all with a par value of $0.0001 per share.

The Company has reserved for future issuance the following number of shares of common stock:

Stock options outstanding .............................................................
Stock options available for grant ...................................................
Reserved for employee stock purchase plan .................................

December 31,
2014

2,485,222
3,365,485
241,899
6,092,606

Common Stock

Each share of common stock is entitled to one vote. The holders of common stock are also entitled to receive dividends

whenever funds are legally available and when declared by the board of directors, subject to the prior rights of holders of other classes
of stock outstanding.

Convertible Preferred Stock

Prior to the completion of the Company’s IPO, the Company issued Series A, Series B, Series C and Series D convertible

preferred stock (collectively, the “preferred stock”). The preferred stock contained a provision that upon a change of control of the
Company, the preferred stock was redeemable at the holder’s option and, therefore, the balances were classified outside of
stockholders’ equity (deficit) in the accompanying consolidated balance sheets. The shares of preferred stock were convertible at the
option of the holder at any time, or would automatically convert into shares of common stock at the effective conversion rate upon the
closing of an initial public offering in which the public offering proceeds exceeded $40 million, or upon the affirmative vote by
holders of at least two-thirds of the outstanding shares of preferred stock. No dividends were declared or paid.

In April 2012, the Company issued 5,819,559 shares of Series D convertible preferred stock at a price of $7.54 per share, or
$43.9 million in the aggregate, which included shares issued upon the conversion of a promissory note payable and accrued interest
thereon in the amount of $5.9 million and shares issued to related parties in the aggregate amount of $36.7 million. Cash proceeds, net
of issuance costs and the conversion of the promissory note payable, were $37.9 million.

In 2007, the Company issued 6,767,673 shares of Series C convertible preferred stock at a purchase price of $5.94 per share.

Cash proceeds, net of issuance costs, were $40.1 million.

In 2006 and 2007, the Company issued 4,556,638 shares of Series B convertible preferred stock at a purchase price of $3.58 per

share. Cash proceeds, net of issuance costs, were $16.2 million.

In 2005, the Company issued 3,770,267 shares of Series A convertible preferred stock at a purchase price of $3.16 per share,

which included shares issued upon conversion of notes payable and accrued interest thereon in the amount of $3.6 million. Cash
proceeds, net of issuance costs and the conversion of the promissory notes payable were $7.7 million.

At the closing of the IPO, 20,914,137 shares of outstanding convertible preferred stock were automatically converted into

20,914,137 shares of common stock. Following the IPO, there were no shares of preferred stock outstanding.

11. Stock-based Compensation

2014 Equity Incentive Plan

In April 2014, the Company’s stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”), which became effective
in May 2014 at which time the 2005 Stock Plan (the “2005 Plan”) was terminated. Until its termination, the 2005 Plan authorized the
issuance of up to 2,661,818 shares of the Company’s common stock pursuant to the exercise of stock options and other forms of
equity compensation. The 2014 Plan authorizes the grant of stock options, other forms of equity compensation, and performance cash
awards. The maximum number of shares of common stock that may be issued under the 2014 Plan is 3,963,757. In addition, the
number of shares of common stock reserved for issuance under the 2014 Plan will automatically increase on January 1 of each year,
beginning on January 1, 2015 and ending on and including January 1, 2024, by 4% of the total number of shares of the Company’s
capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s
board of directors. All options granted under both the 2005 Plan and the 2014 Plan have a maximum 10 year term and generally vest
and become exercisable over four years of continued employment or service as defined in each option agreement. A majority of the
unvested stock options will vest upon the sale of all or substantially all of the stock or assets of the Company. The board of directors
determines the option exercise price and may designate stock options granted as either incentive or nonstatutory stock options. The
Company generally grants stock options with exercise prices that equal or exceed the fair value of the common stock on the date of
grant.

At December 31, 2014, options to purchase up to 2,485,222 shares of common stock were outstanding and 3,365,485 shares
were reserved for future grants under the 2014 Plan. On January 1, 2015, an additional 1,239,861 shares of common stock became
available for future grants under the 2014 Plan.

Employee Stock Purchase Plan

In April 2014, the Company’s stockholders approved the 2014 Employee Stock Purchase Plan (the “ESPP”) which became

effective in May 2014. Under the ESPP, eligible employees can authorize payroll deductions for amounts up to the lesser of 15% of
their qualifying wages or the statutory limit under the U.S. Internal Revenue Code. The ESPP provides for offering periods of up to 27
months in duration. Each offering period is comprised of four consecutive purchase periods. The first offering period commenced on
May 7, 2014 with four purchase periods ending on the last trading days of November and May through May 2016. Subsequent
offering periods and purchase periods will begin on December 1 and June 1 of each year. Participants enrolled in an offering period
will continue in that offering period until the earlier of the end of the offering period or the reset of the offering period. A reset occurs
if the fair market value of the Company’s common shares on any purchase date is less than it was on the first day of the offering
period. Participants in an offering period will be granted the right to purchase common shares at a price per share that is 85% of the
lesser of the fair market value of the shares at (i) the first day of the offering period or (ii) the end of each purchase period within the
offering period. A maximum of 2,000 shares of common stock may be purchased by each participant at each of four purchase dates
during the offering period. The fair value of the ESPP options granted is determined using a Black-Scholes model and is amortized on
a straight-line basis. The initial number of shares of common stock that may be issued under the ESPP is 274,000 shares and the
number of shares reserved for the ESPP will increase automatically each year, beginning on January 1, 2015 and continuing through
and including January 1, 2024, by the lesser of (1) 1% of the total number of shares of common stock outstanding on December 31 of
the preceding calendar year; (2) 750,000 shares of common stock; or (3) such lesser number as determined by the Company’s board of
directors. In November 2014, we issued 32,101 shares of common stock under the ESPP at a purchase price of $8.50 per share. As of
December 31, 2014, 241,899 shares of common stock were reserved for future grants under the ESPP. On January 1, 2015, an
additional 309,965 shares of common stock became available for future grants under the ESPP.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock awards using various assumptions

that require management to apply judgment and make estimates, including:

Volatility

The expected volatility has been determined using a weighted-average of the historical volatilities of a representative group of

publicly traded biopharmaceutical companies for a period equal to the expected term of the option grant.

Expected Term

For purposes of determining the expected term of the options in the absence of sufficient historical data relating to stock-option

exercises, the Company uses the “simplified method” as prescribed by the Securities and Exchange Commission to estimate the
expected term of stock option grants. Under this approach, the weighted-average expected life is presumed to be the average of the
contractual term (10 years) and the vesting term (generally four years) of the Company’s stock options, taking into consideration
multiple vesting tranches and expectations of the future employee behavior.

Risk-free Rate

The risk-free interest rates used in the Black-Scholes option pricing model are based on the implied yield currently available for

U.S. Treasury securities with maturities similar to the expected term of the stock options being valued.

Dividends

The Company has not declared or paid any dividends and does not currently expect to do so in the foreseeable future, and

therefore uses an expected dividend yield of zero in the Black-Scholes option pricing model.

In determining the fair value of stock awards granted, the following weighted-average assumptions were used in the Black-

Scholes option pricing model for awards granted in the periods indicated:

Volatility .........................................
Expected term (years) .....................
Risk-free interest rate ......................
Dividend rate ...................................

2014
66.1%
6.1
1.9%
0.0%

Stock Compensation

Stock Options
Years Ended
December 31,
2013
69.3%
5.9
1.1%
0.0%

2012
70.8%
6.1
0.9%
0.0%

Employee Stock Purchase Plan
Year Ended
December 31,
2014
59.1%
0.6
0.1%
0.0%

The Company recognizes compensation expense for stock options granted to employees and directors for only the portion of

awards expected to vest, on a straight-line basis over the requisite service period. Management has applied an estimated forfeiture rate
that was derived from historical employee termination behavior. If the actual number of forfeitures differs from these estimates,
additional adjustments to compensation expense may be required in future periods.

The Company records stock-based compensation for awards to non-employees using a fair value measured determined using the

Black-Scholes option pricing model which reflects the same assumptions as applied to employee options in each of the reported
periods, except for the expected term, for which it uses the remaining contractual life of the option. Stock-based compensation
expense for non-employee awards is subject to remeasurement as the underlying equity instruments vest and is recognized as an
expense over the period during which services are received. In 2014 and 2013 the Company recognized $0.2 million and $28,000 of
expense, respectively, relating to stock options granted to non-employees.

The following table presents stock-based compensation expense included in the Company’s consolidated statements of

operations:

2014

Years Ended
December 31,
2013
(in thousands)

2012

Research and development ............................................................................ $
General and administrative ...........................................................................
$

701 $
549
1,250 $

286 $
289
575 $

254
235
489

As of December 31, 2014, the total unrecognized compensation cost relating to stock options was $4.3 million and will be

recognized on a straight-line basis over the weighted-average remaining service period of 3.1 years.

Stock option activity

A summary of the Company’s stock option activity and related information follows:

Weighted-
average

Aggregate

exercise

remaining contractual

intrinsic value

Outstanding at December 31, 2013 ............................................
Granted ..........................................................................................
Exercised .......................................................................................
Forfeited ........................................................................................
Outstanding at December 31, 2014 ............................................
Exercisable at December 31, 2014 .............................................
Vested and expected to vest at December 31, 2014...................

Shares
2,111,576 $
561,557
(186,207)
(1,704)
2,485,222 $
1,696,471 $
2,429,897 $

price per share

2.17
12.00
2.61
5.31
4.36
1.94
4.22

life (years)

(in thousands)
8,766

5.6 $

5.6 $
4.1 $
5.5 $

61,462
46,056
60,440

The following table summarizes the Company’s stock option values:

2014

Weighted-average fair value of option shares granted during the period ....... $
Total intrinsic value of stock options exercised ..............................................
Total fair value of stock options vested ..........................................................

12. Income Taxes

Loss before income taxes consisted of the following:

Years Ended
December 31,
2013
(in thousands, except per share data)
7.25 $

2012

2.18
120
345

2.39 $
90
702

2,590
683

Years Ended December 31,

2014

2013

2012

(in thousands)

Domestic .................................................................... $
Foreign .......................................................................
Income (loss) before income taxes ............................. $

8,826 $ (20,766 ) $
153
8,908 $ (20,613 ) $

(16,401 )
(1,405 )
(17,806 )

The effective income tax rate of the Company’s provision for income taxes differed from the federal statutory rate of 34% as

follows:

Years Ended December 31,

2014

2013

2012

Federal statutory income tax rate .............................
Foreign income tax rate differential .........................
Stock-based compensation .......................................
Research and development credits ...........................
Other ........................................................................
Change in valuation allowance ................................
Effective tax rate ......................................................

34.0%
0.0%
0.9%
(13.6%)
0.9%
(22.2%)
0.0%

34.0%
0.0%
(0.7%)
7.3%
0.0%
(40.6%)
0.0%

34.0 %
(0.3 %)
(0.7 %)
0.5 %
(0.2 %)
(33.3 %)
0.0 %

The Company’s net deferred income tax assets and liabilities are as follows:

December 31,

2014

2013

(in thousands)

Deferred income tax assets:

Net operating loss carryforwards ........................................ $
Deferred revenue ................................................................
Research and development credits .....................................
Other ...................................................................................
Total deferred income tax assets ...................................
Less: Valuation allowance .................................................
Net deferred income tax assets ...................................... $

44,906 $
—
5,873
671
51,450
(51,450)
— $

29,871
18,419
4,689
449
53,428
(53,428 )
—

At December 31, 2014, the Company had U.S. net operating loss carryforwards of $134.0 million, which may be used to offset
future taxable income. Of this amount, $1.9 million are related to excess tax benefits associated with stock option exercises which are
recorded directly to stockholder’s equity only when realized. The net operating loss carryforwards expire from 2025 to 2034 if not
utilized. In addition, the Company has U.S. research and development tax credit carryforwards of $6.5 million, which will expire from
2024 to 2034. The Company establishes reserves or reduces deferred tax assets to address potential uncertain tax positions that it
believes could be challenged by taxing authorities even though the Company believes the positions it has taken are appropriate. The
Company reviews the uncertain tax positions as circumstances warrant and adjusts them as events occur that affect the potential
liability for additional taxes. It is often difficult to predict the final outcome or timing of resolution of any particular tax matter.
Various events, some of which cannot be predicted, such as clarification of tax law by administrative or judicial means, may occur and
would require the Company to increase or decrease its uncertain tax positions and effective income tax rate.

In certain circumstances, where there is a change in control, utilization of net operating losses and tax credit carryforwards are

subject to certain limitations under Section 382 and 383 of the Internal Revenue Code of 1986, as amended. A change in control is
generally defined as a cumulative change of 50% or more in the ownership positions of certain stockholders during a rolling three year
period. The Company performed a Section 382 analysis through 2009 and determined that an ownership change occurred in 2005.
Based on the analysis performed, however, the Company does not believe that the Section 382 annual limitation will impact the
Company’s ability to utilize the tax attributes that existed as of the date of the ownership change in a material manner. Although a
formal Section 382 analysis has not been performed after 2009, the Company continues to monitor ownership change for purposes of
Section 382. As of December 31, 2014, the Company does not believe that another change in control has occurred since the ownership
change in 2005. If it is determined that an additional Section 382 ownership change has occurred, the net operating losses and tax
credit carryforwards may be subject to an additional limitation such that a portion may not be utilizable.

The Company records a valuation allowance to reduce deferred tax assets to the extent it believes more likely than not that a

portion of such assets will not be realized. In making such determinations, the Company considers all available positive and negative
evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and the
ability to carry back losses to prior years. Currently the Company believes that it is not more likely than not that it will realize its
current and long-term deferred tax assets. Accordingly, a valuation allowance has been recorded against the full value of the deferred
income tax assets.

The table below summarizes changes in the deferred tax valuation allowance:

Balance at
Beginning of
Year

Charged to
Costs and
Expenses

Write-offs

Balance at
End of Year

(in thousands)

Deferred income tax valuation allowance:
For year ended December 31, 2012 ....................................... $
For year ended December 31, 2013 .......................................
For year ended December 31, 2014 .......................................

39,132 $
45,068
53,428

5,936 $
8,360
(1,978)

— $
—
—

45,068
53,428
51,450

The Company determines whether a tax position is more likely than not to be sustained upon examination based on the technical

merits of the position in accordance with ASC 740. For tax positions meeting the more likely than not threshold, the tax amount
recognized in the financial statements is reduced by the largest benefit that has a greater than 50% likelihood of being realized upon
ultimate settlement with the relevant taxing authority.

The total balance of unrecognized gross tax benefits was as follows:

Years Ended December 31,

2014

2013

2012

(in thousands)

Unrecognized tax benefits at beginning of year ...................................... $
Additions based on tax positions taken in prior years .............................
Additions based on tax positions taken in the current year .....................
Unrecognized tax benefits at end of year ................................................ $

383 $
43
166
592 $

126 $
—
257
383 $

126
—
—
126

In addition to any uncertain tax positions, it is the Company’s policy to recognize potential accrued interest and/or penalties
related to such positions within income tax expense. For 2014, 2013 and 2012, the Company has not recognized any liability related to
uncertain tax positions and does not anticipate that the amount of existing unrecognized tax benefits will significantly change within
the next 12 months.

The Company is subject to U.S. federal income tax audit for tax years after 2010. However, carryforward attributes that were
generated prior to 2011 may still be adjusted by the taxing authority upon examination if the attributes have been or will be used in a
future period. The Company is also subject to examination of foreign returns tax years 2012 to present as the statute of limitations is
still open.

13. Defined Contribution Plan

The Company sponsors a defined contribution plan (the “401(k) Plan”) for its full time employees, with eligibility commencing

on the month following an employee’s date of hire. Employee contributions to the 401(k) Plan are based on a percentage of the
employee’s gross compensation, limited by Internal Revenue Service guidelines for such plans. The 401(k) Plan provides for
matching and discretionary contributions by the Company, which were $0.3 million for each of the years ended December 31, 2014,
2013 and 2012.

14. Commitments and Contingencies

The Company had contract manufacturing and purchase obligations totaling $7.3 million at December 31, 2014 related to

manufacturing its product candidates for use in clinical trials, including long-term stability studies.

The Company leases office space in two adjacent buildings in Bothell, Washington, for its research and development and

administrative activities. In September 2013, the Company and the landlord entered into an amendment to the lease under which,
among other things, the lease term was extended to February 28, 2017, the Company was given an option to lease additional space and
the Company was given an option to renew the lease for an additional three-year term at the market rates prevailing at the time of
renewal. Rent expense totaled $0.8 million for each of the years ended December 31, 2014, 2013 and 2012.

Future aggregate minimum payments under noncancelable operating leases as of the date indicated are as follows:

December 31,

2014

(in thousands)

Years Ending

2015 .......................................................................................
2016 .......................................................................................
2017 .......................................................................................
Total minimum lease payments ................................................... $

563
639
109
1,311

From time to time, the Company may become involved in litigation relating to claims arising from the ordinary course of
business. Management believes that there are currently no claims or actions pending against the Company, the ultimate disposition of
which could have a material adverse effect on the Company’s results of operations, financial condition or cash flows.

15. Condensed Quarterly Financial Data (unaudited)

The following table contains selected unaudited financial data for each quarter of 2014 and 2013. The unaudited information

should be read in conjunction with the Company’s financial statements and related notes included elsewhere in this report. The
Company believes that the following unaudited information reflects all normal recurring adjustments necessary for a fair presentation
of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any
future period.

2014

Total revenues ................................................ $
Net income (loss) ............................................
Net income (loss) per share – basic ................ $
Net income (loss) per share – diluted ............. $

2013

Total revenues ................................................ $
Net loss ...........................................................
Net loss per share – basic ............................... $
Net loss per share – diluted ............................. $

Three months ended

March 31,

June 30,

September 30,

December 31,

(in thousands, except per share data)

4,782 $
(5,395)
(5.38) $
(5.38) $

4,599 $
(5,682)
(5.89) $
(5.89) $

4,703 $
(7,401)
(0.40) $
(0.40) $

4,663 $
(5,147)
(5.27) $
(5.27) $

38,784 $
28,646
0.93 $
0.88 $

4,710 $
(5,909 )
(6.05 ) $
(6.05 ) $

6,436
(6,942)
(0.22)
(0.22)

4,824
(3,875)
(3.94)
(3.94)

16. Subsequent Events

In January 2015, the Company completed a underwritten public offering of offering of 6,900,000 shares of common stock,
including 900,000 shares we issued pursuant to the underwriters’ exercise of their option to purchase additional shares, at $29.50 per
share, for total net proceeds of $190.7 million, after deducing underwriting discounts and commissions of $12.2 million and offering
expenses of $0.6 million.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A.

Controls and Procedures

Evaluation of disclosure controls and procedures. Our management, with the participation of our Chief Executive Officer and
our Senior Vice President, Finance, our principal financial officer, have evaluated our disclosure controls and procedures (as defined
in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this Annual Report on
Form 10-K. Based on that evaluation, our Chief Executive Officer and our Senior Vice President, Finance, have concluded that, as of
the end of the period covered by this Annual Report on Form 10-K, our disclosure controls and procedures were, in design and
operation, effective.

Internal Control over Financial Reporting. This Annual Report on Form 10-K does not include a report of management’s
assessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a
transition period established by the rules of the SEC for newly public companies.

Changes in internal control over financial reporting. There were no changes in our internal control over financial reporting

during the quarter ended December 31, 2014 that have materially affected, or are reasonably likely to materially affect, our internal
control over financial reporting.

Inherent limitation on the effectiveness of internal control. The effectiveness of any system of internal control over financial

reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating,
and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal
control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute
assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you
that such improvements will be sufficient to provide us with effective internal control over financial reporting.

Item 9B. Other Information

Not applicable.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance

(1) The information required by this Item concerning our executive officers and our directors and nominees for director may be

found under the section entitled “Proposal No. 1—Election of Directors,” “Information Regarding the Board of Directors and
Corporate Governance,” “Information Regarding Committees of the Board of Directors” and “Executive Officers” appearing in the
2015 Proxy Statement. Such information is incorporated herein by reference.

(2) The information required by this Item concerning our code of ethics may be found under the section entitled “Information

Regarding the Board of Directors and Corporate Governance ” appearing in the 2015 Proxy Statement. Such information is
incorporated herein by reference.

(3) The information required by this Item concerning compliance with Section 16(a) of the Securities Exchange Act of 1934

may be found in the section entitled “Section 16(a) Beneficial Ownership Reporting Compliance” appearing in the 2015 Proxy
Statement. Such information is incorporated herein by reference.

Item 11.

Executive Compensation

The information required by this Item may be found under the sections entitled “Director Compensation” and “Executive

Compensation” and “Equity Compensation Plan Information” appearing in the 2015 Proxy Statement. Such information is
incorporated herein by reference.

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

(1) The information required by this Item with respect to security ownership of certain beneficial owners and management may
be found under the section entitled “Security Ownership of Certain Beneficial Owners and Management” appearing in the 2015 Proxy
Statement. Such information is incorporated herein by reference.

(2) The information required by this Item with respect to securities authorized for issuance under our equity compensation plans

may be found under the sections entitled “Equity Compensation Plan Information” appearing in the 2015 Proxy Statement. Such
information is incorporated herein by reference.

Item 13.

Certain Relationships and Related Transactions, and Director Independence

(1) The information required by this Item concerning related party transactions may be found under the section entitled
“Transactions with Related Persons” appearing in the 2015 Proxy Statement. Such information is incorporated herein by reference.

(2) The information required by this Item concerning director independence may be found under the sections entitled
“Information Regarding the Board of Directors and Corporate Governance— Independence of the Board of Directors” and
“Information Regarding Committees of the Board of Directors” appearing in the 2015 Proxy Statement. Such information is
incorporated herein by reference.

Item 14.

Principal Accountant Fees and Services

The information required by this Item may be found under the section entitled “Proposal No. 2—Ratification of Selection of

Independent Registered Public Accounting Firm” appearing in the 2015 Proxy Statement. Such information is incorporated herein by
reference.

PART IV

Item 15.

Exhibits, Financial Statement Schedules

(a)(1) Financial Statements—The financial statements filed as part of this Annual Report on Form 10-K are listed on the Index to
Consolidated Financial Statements in Item 8.

(a)(2) Financial Statement Schedules

All schedules are omitted because they are not applicable or the required information is shown in the financial statements or the notes
thereto.

(a)(3) Exhibits

The exhibits required by Item 601 of Regulation S-K are listed in paragraph (b) below.

(b) Exhibits.

The exhibits listed on the Exhibit Index (following the Signatures section of this report) are filed herewith or are incorporated by
reference to exhibits previously filed with the SEC.

100

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized.

SIGNATURES

ALDER BIOPHARMACEUTICALS, INC.

By: /s/ Randall C. Schatzman

Randall C. Schatzman, Ph.D.
President and Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1934, this Annual Report on Form 10-K has been signed by the following

persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Randall C. Schatzman
Randall C. Schatzman, Ph.D.

/s/ Larry K. Benedict
Larry K. Benedict

/s/ Stephen M. Dow
Stephen M. Dow

/s/ Peter Bisgaard
Peter Bisgaard

/s/ Gary Bridger
Gary Bridger, Ph.D.

/s/ Aaron Davidson
Aaron Davidson

/s/ A. Bruce Montgomery
A. Bruce Montgomery, M.D.

/s/ Deepa R. Pakianathan
Deepa R. Pakianathan, Ph.D.

/s/ Heather Preston
Heather Preston, M.D.

/s/ Clay B. Siegall
Clay B. Siegall, Ph.D.

President, Chief Executive Officer and
Director (Principal Executive Officer)
Senior Vice President, Finance
(Principal Financial and Accounting
Officer)

March 13, 2015

Chairman of the Board of Directors

March 13, 2015

Director

101

EXHIBIT INDEX

Exhibit
Number
3.1
3.2
4.1

4.2

Description

Amended and Restated Certificate of Incorporation.
Amended and Restated Bylaws.
Amended and Restated Investors’ Rights Agreement, dated

as of April 16, 2012, by and among Alder
BioPharmaceuticals, Inc. and certain of its stockholders.
Amendment No. 1 to Amended and Restated Investors’

Rights Agreement, dated as of April 7, 2014, by and among
Alder BioPharmaceuticals, Inc. and certain of its
stockholders.

4.3

Form of Common Stock Certificate.

10.1

Form of Indemnity Agreement between the Alder

10.2+
10.3+

BioPharmaceuticals, Inc. and its directors and officers.

2005 Stock Plan, as amended.
Forms of Notice of Stock Option Grant, Stock Option
Agreement and Exercise Notice and Restricted Stock
Purchase Agreement for 2005 Stock Plan.

10.4+
10.5 +

2014 Equity Incentive Plan.
Form of Stock Option Grant Notice and Option Agreement

10.6+
10.7+
10.8†

for the 2014 Equity Incentive Plan.
2014 Employee Stock Purchase Plan.
Form of Executive Severance Benefit Plan.
Collaboration and License Agreement by and among

AlderBio Holdings LLC, Alder BioPharmaceuticals, Inc.
and Bristol-Myers Squibb Company, dated November 6,
2009.

Incorporated by Reference

Form File No.
8-K
S-1
S-1

Exhibit Filing Date
001-36431
3.1
333-194672 3.5
333-194672 4.1

May 13, 2014
April 25, 2014
March 19, 2014

Filed
Herewith

S-1

333-194672 4.2

April 25, 2014

S-1

S-1
S-1

S-1
S-1
S-1

333-201201 4.3

December 22,

2014

333-194672

April 25, 2014

333-194672 10.2
333-194672 10.3

March 19, 2014
March 19, 2014

333-194672 10.4
333-194672 10.5

April 25, 2014
April 25, 2014

333-194672 10.6
333-194672 10.7
333-194672 10.8

May 1, 2014
April 25, 2014
May 1, 2014

10.9†

Addendum No. 1 to Collaboration and License Agreement

S-1

333-194672 10.9

May 1, 2014

10.10†

by and among AlderBio Holdings LLC, Alder
BioPharmaceuticals, Inc. and Bristol-Myers Squibb
Company, dated January 21, 2011.

Master Services Agreement by and between Alder
BioPharmaceuticals, Inc. and FUJIFILM Diosynth
Biotechnologies U.S.A., Inc., dated October 14, 2013.

S-1

333-194672 10.10

May 1, 2014

10.11†

License Agreement by and between Alder

S-1

333-194672 10.11

May 1, 2014

BioPharmaceuticals, Inc. and the Keck Graduate Institute of
Applied Life Sciences, dated October 15, 2004.

10.12

Lease by and between Alder BioPharmaceuticals, Inc. and

S-1

333-194672 10.12

March 19, 2014

RREEF American REIT II Corp. KK, dated August 5, 2005.

10.13

First Amendment to Lease by and between Alder

S-1

333-194672 10.13

March 19, 2014

BioPharmaceuticals, Inc. and RREEF American Reit II
Corp. KK, dated February 1, 2008.

10.14

Second Amendment to Lease by and between Alder

S-1

333-194672 10.14

March 19, 2014

BioPharmaceuticals, Inc. and KBS North Creek, LLC, as
successor-in-interest to RREEF American REIT II Corp.
KK, dated September 23, 2010.

10.15

Third Amendment to Lease by and between Alder

S-1

333-194672 10.15

March 19, 2014

10.16+

10.17+

BioPharmaceuticals, Inc. and KBS North Creek, LLC, as
successor-in-interest to RREEF American REIT II Corp.
KK, dated August 21, 2013.

Amended and Restated Offer Letter by and between Alder
BioPharmaceuticals, Inc. and Randall C. Schatzman, Ph.D.
dated as of July 19, 2005.

Amendment to Amended and Restated Offer Letter by and
between Alder BioPharmaceuticals, Inc. and Randall C.
Schatzman, Ph.D. dated as of April 13, 2012.

102

S-1

333-194672 10.16+

March 19, 2014

S-1

333-194672 10.17+

March 19, 2014

Exhibit
Number
10.18+

Description

Amended and Restated Offer Letter by and between Alder
BioPharmaceuticals, Inc. and John A. Latham, Ph.D., dated
as of July 19, 2005.

Incorporated by Reference

Form File No.
S-1

Exhibit Filing Date

333-194672 10.18+

March 19, 2014

10.19+

Amendment to Amended and Restated Offer Letter by and

S-1

333-194672 10.19+

March 19, 2014

between Alder BioPharmaceuticals, Inc. and John A.
Latham, Ph.D., dated as of April 13, 2012.

10.20+

Amended and Restated Offer Letter by and between Alder
BioPharmaceuticals, Inc. and Mark J. Litton, Ph.D., MBA,
dated as of July 19, 2005.

S-1

333-194672 10.20+

March 19, 2014

10.21+

Amendment to Amended and Restated Offer Letter by and

S-1

333-194672 10.21+

March 19, 2014

10.22+

10.23+

10.24†

between Alder BioPharmaceuticals, Inc. and Mark J. Litton,
Ph.D., MBA, dated as of April 13, 2012.

Amended and Restated Offer Letter by and between Alder
BioPharmaceuticals, Inc. and Jeffrey T.L. Smith, M.D.,
FRCP, dated as of July 19, 2005.

Amendment to Amended and Restated Offer Letter by and
between Alder BioPharmaceuticals, Inc. and Jeffrey T.L.
Smith, M.D., FRCP, dated as of April 13, 2012.
Master Product Development and Clinical Supply

Agreement by and between Alder BioPharmaceuticals, Inc.
and Althea Technologies, dated March 21, 2011.

S-1

333-194672 10.22+

March 19, 2014

S-1

333-194672 10.23+

March 19, 2014

S-1

333-194672 10.24

May 1, 2014

10.25

First Amendment to Master Product Development and

S-1

333-194672 10.25

May 1, 2014

S-1

333-194672 21.1

March 19, 2014

21.1
23.1

31.1

31.2

Clinical Supply Agreement between Alder
BioPharmaceuticals, Inc. and Althea Technologies, Inc.,
dated March 15, 2013

List of subsidiaries of the Registrant.
Consent of PricewaterhouseCoopers LLP, Independent

Registered Public Accounting Firm.

Certification of Principal Executive Officer Required Under
Rule 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as amended.

Certification of Principal Financial Officer Required Under
Rule 13a-14(a) and 15d-14(a) of the Securities Exchange
Act of 1934, as amended.

32.1*

Certification of Principal Executive Officer and Principal
Financial Officer Required Under Rule 13a-14(b) of the
Securities Exchange Act of 1934, as amended, and 18
U.S.C. §1350.
101.INS XBRL Instance Document.
101.SCH XBRL Taxonomy Extension Schema Document.
101.CAL XBRL Taxonomy Extension Calculation Linkbase

Document.

101.DEF XBRL Taxonomy Extension Definition Linkbase Document
101.LAB XBRL Taxonomy Extension Label Linkbase Document
101.PRE XBRL Taxonomy Extension Presentation Linkbase

Document

Filed
Herewith

X
X
X

+
†

Indicates a management contract or compensatory plan.
Pursuant to a request for confidential treatment, portions of this exhibit have been redacted from the publicly filed document and
have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities
Exchange Act of 1934..
Document has been furnished, is not deemed filed and is not to be incorporated by reference into any of the Company's filings
under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, irrespective of any general
incorporation language contained in any such filing.

103

CORPORATE INFORMATION

D
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Senior Management Team

Web Site

Randall C. Schatzman, Ph.D.
President and Chief Executive Officer

John A. Latham, Ph.D.
Chief Scientific Officer

Mark J. Litton, Ph.D., MBA
Chief Business Officer and Treasurer

www.alderbio.com

Transfer Agent & Registrar

American Stock Transfer & Trust Company, LLC

Shareholder Services

6201 15th Avenue, Brooklyn, NY 11219

Jeffrey T.L. Smith, M.D., FRCP
Senior Vice President, Translational Medicine

Larry K. Benedict
Senior Vice President, Finance

Randal A. Hassler
Senior Vice President, Pharmaceutical Operations

Legal Counsel

Cooley LLP

Seattle, Washington

Independent Auditors

Board of Directors

Stephen M. Dow, Chairman
General Partner; Sevin Rosen Funds

Peter Bisgaard
Partner; Novo Ventures (US) Inc.

Gary Bridger, Ph.D.
Executive Vice President, Research and
Development; Xenon Pharmaceuticals Inc.
Managing Director; Five Corners Capital Inc.

Aaron Davidson
Managing Director; H.I.G. BioVentures

A. Bruce Montgomery, M.D.
Founder/Chief Executive Officer; Cardeas Pharma

Deepa R. Pakianathan, Ph.D.
Managing Member; Delphi Ventures

Heather Preston, M.D.
Managing Director; TPG BioTech

Randall C. Schatzman, Ph.D.
President and Chief Executive Officer;
Alder BioPharmaceuticals, Inc.

Clay B. Siegall, Ph.D.
President, Chief Executive Officer and Chairman
of the Board of Directors; Seattle Genetics, Inc.

Corporate Headquarters

Alder BioPharmaceuticals, Inc.

11804 North Creek Parkway South

Bothell, WA 98011

(425) 205-2900

(425) 205-2901 Fax

info@alderbio.com

PricewaterhouseCoopers LLP

Seattle, Washington

Investor Relations

Stern Investor Relations, Inc.

New York, NY

Public Relations

Russo Partners

New York, NY

Annual Meeting

May 19, 2015, 10:00 a.m., at Cooley LLP

offices, Seattle, Washington.

Stock Listing

The Company’s common stock is traded

on the NASDAQ Global Market under the

symbol ALDR.

Stockholder Inquiries

Communications regarding transfer require-

ments, lost stock certificates or changes of

address should be directed to our Transfer

Agent. Inquiries regarding the Company and

its activities, or requests for a copy of finan-

cial documents such as the Annual Report

and the Form 10-K, may be directed to Stern

Investor Relations, Inc.

Alder BioPharmaceuticals, Inc. 2014 Annual Report

Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available
to our management. All statements other than statements of historical facts are “forward-looking statements” for purposes of these provisions, including those relating
to future events or our future financial performance and financial guidance. In some cases, you can identify forward-looking statements by terminology such as “may,”
“might,” “will,” “should,” “expect,” “plan,” “anticipate,” “project,” “believe,” “estimate,” “predict,” “potential,” “intend” or “continue,” the negative of terms like these or other
comparable terminology, and other words or terms of similar meaning in connection with any discussion of future operating or financial performance. These statements
are only predictions. All forward-looking statements included in this Annual Report on Form 10-K are based on information available to us on the date hereof, and we as-
sume no obligation to update any such forward-looking statements. Any or all of our forward-looking statements in this document may turn out to be wrong. Actual events
or results may differ materially. Our forward-looking statements can be affected by inaccurate assumptions we might make or by known or unknown risks, uncertainties
and other factors. We discuss many of these risks, uncertainties and other factors in this Annual Report on Form 10-K in greater detail under the heading “Item 1A—Risk
Factors.” We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

Alder BioPharmaceuticals, Inc.

11804 North Creek Parkway South, Bothell, WA 98011

NASDAQ: ALDR (425) 205-2900 www.alderbio.com