Calithera Biosciences
Annual Report 2015

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2015OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934 FOR THE TRANSITION PERIOD FROM TOCommission File Number 001-36644 CALITHERA BIOSCIENCES, INC.(Exact name of Registrant as specified in its Charter) Delaware 27-2366329( State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 343 Oyster Point Blvd., Suite 200South San Francisco, CA 94080(Address of principal executive offices) (Zip Code)Registrant’s telephone number, including area code: (650) 870-1000 Securities registered pursuant to Section 12(b) of the Act:Common Stock, Par Value $0.0001 Per Share The NASDAQ Global Select Market(Title of each class) (Name of each exchange on which registered) Securities registered pursuant to section 12(g) of the Act: NoneIndicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES ¨ NO xIndicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES ¨ NO xIndicate 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 1934during 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 filingrequirements for the past 90 days. YES x NO ¨Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requiredto 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 thatthe Registrant was required to submit and post such files). YES x NO ¨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 becontained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Annual Report onForm 10-K or any amendment to this Annual Report on Form 10-K. xIndicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See thedefinition 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 xNon-accelerated filer ¨ (Do not check if a small reporting company) Small reporting company ¨Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO xThe aggregate market value of the registrant’s common stock held by non-affiliates of the registrant as of the last business day of the registrant’s mostrecently completed second fiscal quarter was approximately $79.3 million, based on the closing price of the registrant’s common stock on the NASDAQGlobal Select Market of $7.14 per share. The number of shares of Registrant’s Common Stock outstanding as of March 7, 2016 was 18,410,965.DOCUMENTS INCORPORATED BY REFERENCEPortions of the Registrant’s Definitive Proxy Statement relating to the 2016 Annual Meeting of Stockholders will be filed with the Securities and ExchangeCommission within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K and are incorporated by reference into Part III ofthis Annual Report on Form 10-K.  Table of Contents PagePART I Item 1. Business 2Item 1A. Risk Factors 24Item 1B. Unresolved Staff Comments 44Item 2. Properties 44Item 3. Legal Proceedings 44Item 4. Mine Safety Disclosures 44 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 45Item 6. Selected Financial Data 47Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 48Item 7A. Quantitative and Qualitative Disclosures About Market Risk 56Item 8. Financial Statements and Supplementary Data 57Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 77Item 9A. Controls and Procedures 77Item 9B. Other Information 77 PART III Item 10. Directors, Executive Officers and Corporate Governance 78Item 11. Executive Compensation 78Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 78Item 13. Certain Relationships and Related Transactions, and Director Independence 78Item 14. Principal Accounting Fees and Services 78 PART IV Item 15. Exhibits, Financial Statement Schedules 79 Signatures 80 1 CAUTIONARY INFORMATION REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K for the year ended December 31, 2015, contains forward-looking statements within the meaning of Section 27Aof the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act,which are subject to the “safe harbor” created by those sections, concerning our business, operations, and financial performance and condition as well asour plans, objectives, and expectations for business operations and financial performance and condition. Any statements contained herein that are not ofhistorical facts may be deemed to be forward-looking statements. You can identify these statements by words such as “anticipate,” “assume,” “believe,”“could,” “estimate,” “expect,” “intend,” “may,” “plan,” “should,” “will,” “would,” and other similar expressions that are predictions of or indicate futureevents and future trends. These forward-looking statements are based on current expectations, estimates, forecasts, and projections about our business andthe industry in which we operate and management's beliefs and assumptions and are not guarantees of future performance or development and involveknown and unknown risks, uncertainties, and other factors that are in some cases beyond our control. As a result, any or all of our forward-lookingstatements in this Annual Report on Form 10-K may turn out to be inaccurate. Factors that could materially affect our business operations and financialperformance and condition include, but are not limited to, those risks and uncertainties described herein under “Item 1A - Risk Factors.” You are urged toconsider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on the forward-lookingstatements. The forward-looking statements are based on information available to us as of the filing date of this Annual Report on Form 10-K. Unlessrequired by law, we do not intend to publicly update or revise any forward-looking statements to reflect new information or future events or otherwise. Youshould, however, review the factors and risks we describe in the reports we will file from time to time with the Securities and Exchange Commission, or theSEC, after the date of this Annual Report on Form 10-K.PART IItem 1. Business.OverviewWe are a clinical-stage pharmaceutical company focused on discovering and developing novel small molecule oncology drugs directed againsttumor and immune cell targets that control key metabolic pathways in the tumor microenvironment. Tumor metabolism and immuno-oncology haveemerged as promising new fields for cancer drug discovery, and recent clinical successes with therapeutic agents in each field have demonstrated thepotential to create fundamentally new therapies for cancer patients. We are developing agents that take advantage of the unique metabolic requirements oftumor cells and cancer-fighting immune cells such as cytotoxic T-cells. Our lead product candidate, CB-839, is an internally discovered, first-in-class oralinhibitor of glutaminase, a critical enzyme in tumor cells. CB-839 has been shown to have activity in animals alone and, when given in combination, toenhance the activity of both conventional approved therapies and recently approved immuno-oncology agents. We are currently evaluating CB‑839 in threePhase 1 clinical trials in solid and hematological tumors. CB-839 administered as a single agent has resulted in clinical responses in renal cell cancer andacute myeloid leukemia and clinical benefit in several other tumor types. We are currently enrolling patients in a series of combination drug Phase 1b cohortsin specific solid tumor types and AML. We are also planning to evaluate the immune-enhancing activity of CB-839 in a separate Phase 1/2 trial beginning in1H16. Our second product candidate, CB-1158, is a first-in-class oral inhibitor of arginase, an enzyme that depletes the amino acid arginine, a key metabolicnutrient for T-cells. A Phase 1 clinical trial with CB-1158 will be initiated in the second half of 2016, following the filing of an Investigational New Drug, orIND, application in mid-year. We also have ongoing research efforts that are focused on discovering additional product candidates against novel tumormetabolism and immunology targets.Our lead product candidate, CB-839, takes advantage of the pronounced dependency many cancers have on the nutrient glutamine for growth andsurvival. CB-839 inhibits glutaminase, an enzyme required by cancer cells to utilize glutamine effectively. In preclinical studies, CB-839 demonstratedbroad antitumor activity in tumor cell lines, inhibited the growth of human tumors in animal models and was well tolerated in toxicity studies. CB-839 wasalso synergistic with several approved cancer therapeutics that are part of the current standard of care.Inhibition of glutaminase also results in accumulation of glutamine, the substrate of glutaminase, in tumors. Glutamine, which is frequently depletedin the tumor microenvironment due to avid uptake by tumor cells, has been shown to be an important nutrient for T-cell growth. Administration of CB-839to tumor-bearing animals substantially enhances the anti-tumor activity of checkpoint inhibitors, potentially by restoring the levels of glutamine in thetumor microenvironment and thereby enabling T-cells to proliferate. Checkpoint inhibitors, including the approved agents nivolumab (marketed as Opdivo)and pembrolizumab (marketed as Keytruda), are a class of immuno-oncology (I-O) agents directed against programmed death protein-1 (PD-1) or programmeddeath ligand-1 (PD-L1) that promote the activation and tumor-killing properties of the patient’s own immune cells, such as cytotoxic T-cells. CB-8392 could potentially have a “one-two punch” in the treatment of cancer by first starving the tumor cell and second facilitating the activation of T-cells in thenutrient-deprived tumor microenvironment. We are currently conducting three Phase 1 clinical trials of CB-839 in the United States in patients with solid tumors, leukemia, non-Hodgkin’slymphoma and multiple myeloma. The purpose of these trials is to evaluate the safety of CB-839 both as a single agent and in combination with approvedtherapies and to seek preliminary evidence of efficacy. CB-839 has been well tolerated across all three Phase 1 studies when administered twice-daily (BID).An initial observation of Grade 3/4 increases in liver function enzymes was reduced to a rate of <2% with the current regimen. Single agent objectiveresponses have been observed in two patients, one with metastatic renal cell cancer (a Partial Response, or PR) and one with acute myeloid leukemia (aComplete Response with incomplete recovery of peripheral blood counts, or CRi). Furthermore, 60% of patients with renal cell cancer have had stabledisease or better, with several patients remaining on study. Stable disease in renal cell cancer patients has often been long lasting, ranging from 63 days tomore than 17 months. We have initiated enrollment of patients receiving CB-839 in expansion cohorts in combination with approved standard of caretherapies in a number of solid and hematological malignancies. These have been selected based on strong preclinical data showing significantly improvedactivity of these compounds in combination with CB-839 in vitro and in vivo. Preclinical data of CB-839 in combination with anti-PD-1 and anti-PD-L1 hasled to the design of a Phase 1/2 study with a checkpoint inhibitor to begin in 1H16. Pending input from the U.S. Food and Drug Administration, or the FDA,on the results of our Phase 1 trials, we plan to initiate one or more randomized, placebo-controlled Phase 2 clinical trials, likely in 2017, to study CB-839 incombination with approved conventional therapies and/or checkpoint inhibitors.We believe CB-839 has the potential to be an important new therapeutic agent with a novel mechanism of action for the treatment of a broad rangeof cancers and is the only selective glutaminase inhibitor currently in clinical trials. Our clinical program seeks to identify cancers that will be most sensitiveto CB-839 to allow the greatest benefit for patients and to pursue the most efficient path to regulatory approval. We currently retain all commercial rights toCB-839 and have been granted a U.S. patent which includes composition of matter coverage for CB-839 through 2032.Our second product candidate, CB-1158, is a potent and selective orally bioavailable inhibitor of the enzyme arginase. Arginase depletes arginine,a nutrient that is critical for the activation and proliferation of the body’s cancer-fighting immune cells, such as cytotoxic T-cells and natural killer (NK)-cells. During normal activation of the immune system, arginase, which is expressed by suppressive myeloid immune cells, plays an important role in haltingT-cell proliferation. But in many tumors, including lung, gastrointestinal, bladder, renal cancer and acute myeloid leukemia, arginase-expressing myeloidcells accumulate and maintain an immunosuppressive environment, blocking the ability of T-cells and NK-cells to kill cancer cells. We believe thatinhibitors of arginase can promote an anti-tumor immune response by restoring arginine levels, thereby allowing activation of the body’s own immune cells,including cytotoxic T-cells and NK-cells. In December 2014, we entered into an exclusive global license agreement with Mars Symbioscience grantingCalithera rights to research, develop and commercialize Symbioscience’s portfolio of arginase inhibitors. Calithera has developed an orally bioavailablesmall molecule, CB-1158, which is a potent inhibitor of arginase. The compound has single agent activity in animals that is mediated by T-cells and NK cellsof the immune system and it enhances the activity of other I-O agents in vivo in animal studies.We have a third program directed towards the development of inhibitors of the tumor metabolism target hexokinase II. A defining characteristic ofmost cancer cells is their increased uptake of glucose. Cancer cells use glucose in a different manner than normal cells, but an obligate first step in all glucoseutilizing pathways is phosphorylation of glucose by the enzyme hexokinase. Due to their higher glucose needs, cancer cells frequently increase the level ofthis critical enzyme, specifically the isoform hexokinase II. We believe inhibitors of hexokinase II will significantly impede the ability of cancer cells tosurvive and proliferate and may lead to new approaches in treating cancer. Our new program in hexokinase II inhibitors was in-licensed from TransTechPharma and we seek to identify and advance a drug candidate into clinical development. We will provide additional details on our development plans andtimelines in the near future as we undertake pre-clinical studies to profile our portfolio of hexokinase II inhibitors.Our StrategyOur goal is to build a leading independent biopharmaceutical company. We intend to leverage our expertise to discover, develop andcommercialize cancer therapies targeting tumor and immune cell metabolism pathways to treat patients with unmet medical needs. We intend to achieve ourgoal by:Pursuing a clinical development program for CB-839 that takes advantage of its unique mechanism of action and its ability to combine withapproved therapies including immuno-oncology therapies. CB-839 is an inhibitor of glutaminase, a tumor metabolism target that, based on our preclinicalstudies with cancer cell lines and animal tumor models, has been shown to be important for growth and survival of tumors across a broad range of tumortypes. Due to CB-839’s novel mechanism of action, preclinical synergistic activity with existing anti-cancer agents, responses in renal cell cancer and AMLand favorable clinical safety profile to date, we believe CB-839 has the potential to treat various cancers when used in combination with approved therapies.We plan to pursue a broad development program for CB-839 focused on three distinct and significant opportunities:3 ·CB-839 in combination with conventional approved agents in triple-negative breast cancer, renal cell, lung and colorectal cancers, ·CB-839 in combination with azacitidine in acute myeloid leukemia and ·CB-839 in combination with a checkpoint inhibitor in renal cell cancer, lung cancer and melanoma.Each of the combinations we are testing has strongly supportive preclinical data and pre-established go/no go criteria. Several of the combinationagents have very low expected response rates on their own in the patient population being tested; therefore, it is anticipated that these trials will inform thedesign of subsequent Phase 2 or 3 randomized, placebo-controlled trials with conventional or I-O agents. We will select indications for further clinicaldevelopment of CB-839 with the goal of obtaining regulatory approvals in the United States and the European Union. We believe this broad productdevelopment program provides the best opportunity to maximize the commercial value of CB-839.Pursuing efficient clinical development programs to enable rapid regulatory approval of CB-839. We are currently conducting three Phase 1trials of CB-839 in solid and hematological tumors, with a fourth trial in renal cell cancer, non-small cell lung cancer and melanoma beginning in 1H16. Weare evaluating CB-839 together with conventional or I-O agents in specific tumor types that we believe may be most sensitive based on the results of ourpreclinical studies. Some of these tumor types may offer the potential for rapid development pathways. In addition, we have identified certain biomarkers thatmay predict which patients will be sensitive to treatment with CB-839 in combination with specific agents.Maximizing the commercial value of CB-839. We currently retain full global development, marketing and commercialization rights for CB-839and we expect to maintain those rights in the near future. As we further develop CB-839, we may seek partners to maximize the commercial opportunity ofCB‑839 outside the United States.Advancing CB-1158, our first-in-class arginase inhibitor, into Phase 1. We plan to file an IND in mid-2016 to enable a Phase 1 study of CB-1158alone and in combination with checkpoint inhibitors. Arginase is an enzyme that depletes arginine, which is a naturally occurring amino acid that is criticalfor the activation and proliferation of the body’s cancer-fighting cytotoxic T-cells and NK cells. By inhibiting arginase with CB-1158, we can prevent thedepletion of arginine and enhance the tumor killing activity of cytotoxic T-cells and NK-cells. Advancing our first-in-class hexokinase II inhibitor into clinical development. We have expanded our portfolio of pre-clinical programs andfurther leveraged our expertise in tumor metabolism with the licensing of inhibitors of hexokinase II, which we believe is the first and rate-limiting enzyme inthe pathway that enables cancer cells to convert glucose to energy and building blocks that feed cancer cell growth. We believe we can rapidly advancehexokinase II inhibitors into the clinic to become our third potential first-in-class therapy for cancer patients.Further developing our pipeline by leveraging our expertise in tumor biology, drug discovery and clinical development. Our team has significantexpertise in the discovery, development and approval of small molecule oncology drugs. In addition, we have accumulated significant experience andunderstanding of tumor metabolism and tumor immunology and are applying our medicinal chemistry capabilities to identify small molecules that exploitthese pathways. We plan to continue to leverage our expertise to discover and develop additional product candidates, advance those product candidatesthrough clinical testing, and, if approved, ultimately commercialize meaningful therapies for patients with cancer.4 Our Research and Development ProgramsThe following table summarizes our ongoing and planned clinical trials through 2016 for our lead programs in tumor metabolism and tumorimmunology. We also intend to develop additional product candidates from our research and discovery efforts in these fields.The Evolution of Cancer Therapeutic AgentsCancer is characterized by the uncontrolled growth of aberrant cells in the body, leading to the invasion of essential organs and often death. Unlikenormal cells, which grow only in response to carefully regulated signals from the body, cancer cells are able to proliferate largely without external signals.Cancer cells have gained this ability as the result of genetic alterations that change protein expression or function. Invasive tumors, also known as metastatictumors, which are the greatest threat to patients, typically have multiple mutations, deletions or amplifications of genes encoding key proteins that regulatecell growth. These alterations allow the cancer cell to grow, invade other tissues, and avoid recognition and destruction by the body’s immune system.Initially, the pharmacological treatment of cancer utilized non-specific cytotoxic agents that targeted all rapidly dividing cells, including normalcells. These non-specific cytotoxic agents have anti-tumor effects but their use is often limited by severe toxicities. As the understanding of the proteins andpathways that enable cancer cells to thrive has evolved, newer more targeted agents have been developed that block specific proteins that are activated incancer cells. Targeted therapies are often highly effective for cancers that are driven by a single mutated protein, known as a driver mutation. However, use oftargeted agents for tumors bearing multiple deleterious mutations has been less successful. Furthermore, certain proteins such as Ras and Myc, which arefrequently mutated or activated in cancer and are clear driver mutations, are targets for which a drug has yet to be developed. This has created a need toidentify additional fundamental differences between cancer cells and normal cells in order to find new drugs that broadly affect critical growth and survivalmechanisms in cancer cells.Tumor metabolism and tumor immunology represent two emerging fields for the development of therapeutics that can address the challengespresented in treating cancers with multiple mutations or with mutations that are difficult to inhibit. Certain fundamental changes in the metabolic pathwaysof cancer cells are observed in many cancer types with different mutational backgrounds. Therapeutic agents that can take advantage of these changes inmetabolism have the potential to act broadly against many cancers. Similarly, genetically diverse tumor types have developed mechanisms to escapedestruction by the body’s immune system. Pharmacological activation of the immune system with agents such as ipilimumab (marketed as Yervoy) andnivolumab (marketed as Opdivo), has resulted in favorable outcomes in melanoma, non-small cell lung cancer and renal cell cancer. Long-term, durableresponses have been seen in many patients. We believe additional opportunities exist to develop novel therapeutics that can further enhance the cancer-fighting ability of the immune system, either as single agents, or in combination with approved therapeutics.Rationale for Targeting Tumor Cell MetabolismCancer cells acquire the ability to grow rapidly and spread to new sites in the body by accumulating genetic alterations in important genes thatcontrol growth and survival. These same genetic changes also result in altered metabolic pathways within the cancer cells that fuel the high demand forenergy and the production of new proteins, lipids, RNA and DNA needed for rapid5 proliferation. We and others have observed that many types of cancer cells develop a unique dependence on specific metabolic pathways upon which normalcells are not reliant. Accordingly, when these metabolic pathways are blocked, cancer cells are essentially starved of critical nutrients and stop growing ordie, whereas normal cells are largely unaffected.Alterations in the fundamental metabolic pathways of tumors often cause a dramatic rise in the uptake of the nutrients glucose and glutamine asshown in the diagram below. This has been directly demonstrated in cancer patients by the use of glucose and glutamine-related tumor imaging agents.Uptake of these agents is often significantly greater in tumor tissue than in surrounding normal tissue. We believe this enhanced uptake of glucose andglutamine by tumors occurs because of their greater need for these nutrients for growth and survival.The primary goal of drugs targeting tumor metabolism pathways is to take advantage of cancer-specific nutrient dependencies to block cancergrowth. Changes in cellular metabolism are remarkably consistent across many tumor types, yet fundamentally different from normal cells, providing thepotential to develop broadly applicable agents that target these altered pathways, but have less toxicity than standard cytotoxic agents.Rationale for Targeting Immune Cell MetabolismThe immune system has evolved in higher organisms to recognize self from non-self. Immune surveillance is the process whereby the bodyidentifies pathogens as well the abnormal cells that are infected with viruses or have become cancerous. The immune system has a number of mechanisms thatrecognize differences between cell surface components on abnormal cells that are new or are modified from those of normal cells. Upon recognition of“foreign” cells, a number of processes are activated to allow the direct attack and clearance of abnormal cells. However, excessive or inappropriate activationof the immune system can have negative consequences such as autoimmune disease, inflammation, and rejection of a fetus. Compensatory inhibitorymechanisms have evolved to control excessive inflammatory activity by dampening the immune stimulation. These immunostimulatory andimmunoinhibitory mechanisms provide a constant balance that is thought to result, under most circumstances, in the identification and clearance of infectedor cancerous cells without excessive stimulation. Mutated cells that successfully evade immune surveillance do so, in part, by blocking or reducingimmunostimulatory and/or enhancing immunoinhibitory activities. Immuno-oncology therapies are in development that interfere with mechanisms thattumors have used to evade immune surveillance. Immune checkpoint proteins including PD‑1, PD-L1 and CTLA-4 are specific molecules on tumor cells andT-cells that reduce the ability of T-cells to accomplish cytotoxic killing of tumor cells. Antibodies to PD-1, PD-L1 and CTLA-4, known as checkpointinhibitors, block these molecules and allow T‑cells to become activated and to kill tumor cells. These agents have allowed substantial, long-term benefit to asubset of patients.Activated T-cells have specific nutritional requirements that are often not available within the tumor microenvironment including, in specifictumors, tryptophan, glutamine, and arginine, as shown in the diagram below. Each of these nutrients is depleted within the microenvironment by a differentmechanism. Tryptophan is depleted by the action of indolamine dioxygenase, or IDO, an enzyme found in dendritic cells, certain other immune cells, andoccasionally in tumors themselves. Glutamine depletion results from the avid uptake of this amino acid by tumor cells that have a very high requirement ofthis nutrient for growth and survival. Arginine6 is cleared directly from the tumor environment by arginase secreted from myeloid-derived suppressor cells, or MDSCs, and neutrophils. The end result ofeach of these mechanisms has been shown to be loss of T-cell or NK-cell activation and/or proliferation, resulting in the blunting of the immune response totumor cells.Calithera is developing agents that are aimed at supporting the nutritional needs of T-cells and NK cells for glutamine and arginine, allowing theproliferation and activation of quiescent T-cells. This program is analogous to the effect of IDO on the availability of tryptophan in the tumormicroenvironment. We plan to evaluate both CB-839 and CB-1158 in combination with immune therapies during clinical development. Our ProgramsOur Glutaminase Program—a Dual Tumor Metabolism and Immuno-Oncology TargetIt has been understood for more than 50 years that most cancer cells require glutamine to thrive. Removal of glutamine leads to a substantialreduction in cell growth or induces cell death in glutamine-dependent cancer cells. Normal cells do not show this pronounced dependence on glutamine.This contrast has prompted significant interest in discovering and developing novel anti-cancer agents that can inhibit glutamine utilization.Our preclinical studies, as well as those conducted by other researchers, have identified the enzyme glutaminase as a critical choke point in theutilization of glutamine by cancer cells. We have shown in our preclinical studies that the cell lines most sensitive to glutamine withdrawal are also the mostsensitive to glutaminase inhibitors. Glutaminase is highly expressed in glutamine-dependent cancer cells and is more highly expressed in many humantumors than in normal tissues.Glutaminase converts glutamine to glutamate, an amino acid required by cells for several essential functions. Many cancer cells, unlike normalcells, are dependent upon the enzyme glutaminase to make sufficient amounts of glutamate to grow and survive. This higher dependency upon theglutaminase pathway is likely due to an alternate use of the tricarboxylic acid, or TCA, cycle in cancer cells. The TCA cycle, which is sometimes referred toas the Krebs cycle, is a set of chemicals and chemical reactions that cells use to generate energy. As shown in the diagram above, normal cells primarily useglucose to feed the TCA cycle. In contrast, cancer cells divert many glucose-derived metabolites and several of the chemicals of the TCA cycle to makecellular building blocks to fuel their rapid growth. This depletes chemicals in the TCA cycle and requires the cancer cell to supply more glutamate into theTCA cycle, through a molecule called alpha-ketoglutarate, or α-KG, to replenish these chemicals. Glutaminase inhibition in tumors implanted in animalsleads to marked reduction in downstream metabolic intermediates including amino acids, nucleotides and glutathione. This supports our hypothesis thatinhibitors of glutaminase can selectively target tumor cells by virtue of their increased dependence on glutaminase to convert glutamine to glutamate toresupply the TCA cycle, which is necessary to support growth and survival.Dysregulated growth factor receptors and associated downstream signaling pathways in tumor cells are known to act in part to increase glucoseutilization. Since these pathways are the targets of a number of approved targeted cancer therapeutic agents, we believe it is possible to rationally combinesuch agents with a glutaminase inhibitor to block the two main nutrients that promote cancer cell growth, thereby providing an enhanced therapeutic benefit.As part of the mechanism for mounting an effective immune response, activated T-cells switch their metabolism to enable rapidproliferation. During this period of expansion, T-cell metabolism resembles the metabolism of cancer cells, and the need for both glucose and glutamineincreases markedly. The expression of the checkpoint PD-1 on T-cells following activation inhibits the uptake and utilization of glucose and blocks rapidproliferation. The checkpoint inhibitors that block PD-L1 or PD-1 restore the ability of T-cells to utilize glucose. However, T-cells require both glucose andglutamine to proliferate. When tumor-bearing animals7 are treated with CB-839, there is a 4-8-fold increase in tumor levels of glutamine. We believe that this accumulation of glutamine has the indirect effect ofsupplying T-cells and NK cells with a much needed nutrient. Since T-cell proliferation, unlike cancer cell proliferation, is not strongly inhibited by CB-839,we believe that combining CB-839 with inhibitors of the PD-L1/PD-1 checkpoint will support the full activation and expansion of cytotoxic immune cells inthe nutrient-deprived tumor microenvironment and enhance anti-tumor responses.Our Glutaminase Inhibitor CB-839CB-839 is a potent, selective, reversible and orally bioavailable inhibitor of human glutaminase. CB-839 binds to a unique site on glutaminasethat is distinct from the site that binds glutamine, thereby reducing the potential for undesirable side effects due to inhibition of other enzymes and receptorsthat bind glutamine. In our preclinical studies, CB-839 has been shown to halt the growth of or kill cancer cells across a range of tumor types. The compoundhas demonstrated antitumor activity in several different tumor models in animals. In addition, CB-839 has shown strong synergy with immunomodulatoryagents and several kinase inhibitors that target growth factor pathways. In preclinical toxicology studies, CB-839 was well tolerated in animals at dosesabove those shown to inhibit tumor growth. CB-839 has been well-tolerated in Phase 1 studies when administered as a single agent and has shown objectiveresponses in renal cell cancer and acute myeloid leukemia. We believe that CB-839 is the only selective glutaminase inhibitor currently in clinical trials.Preclinical Activity of CB-839In our preclinical studies, CB-839 demonstrated antiproliferative and cell killing activity across a panel of tumor cell lines. This same panel of celllines was also tested for growth or cell death when glutamine was removed from the incubation medium. There was a strong correlation between the responseto CB-839 and the effect of glutamine withdrawal. We believe that these results provide evidence for the critical role of glutaminase in the utilization ofglutamine to drive tumor cell growth and survival. We also evaluated the metabolic changes that resulted from inhibition of glutaminase in the same panel ofcell lines. In the glutamine-dependent cancer cells treated with CB-839, the conversion of glutamine to glutamate was blocked, leading to the accumulationof glutamine and the depletion of glutamate. The loss of cellular glutamate further results in a reduction in downstream metabolites that provide energy andbuilding blocks for the cell, including TCA cycle intermediates, amino acids, and the antioxidant glutathione. We believe that the reduction of the level ofthese and other metabolites is responsible for the anti-tumor activity observed with CB-839. In tumors implanted in animals, we also observed a 4-8-foldincrease in the tumor concentration of glutamine, the substrate of glutaminase. Because many tumor cells consume large quantities of glutamine, animportant nutrient for T-cells and NK cells, the tumor microenvironment is thought to be severely depleted of this nutrient. We believe that T-cells and NKcells benefit indirectly from treatment with CB-839 by the increased availability of glutamine in the tumor microenvironment.At plasma concentrations of CB-839 of 300 nM or above, maximal effects on glutamine and glutamate levels in tumors were observed. In contrast,normal tissues in the same animals showed only small changes in the levels of glutamine and glutamate, despite exposure to high levels of CB-839. Webelieve that normal cells and tissues can utilize other pathways to produce glutamate, whereas most tumor cells have been genetically re-wired to be highlyreliant on glutaminase as their principal source of glutamate. This provides a potential explanation for why high doses of CB-839 are well-tolerated inanimals.In addition to showing single agent activity across a wide range of cells from different tumor types, CB-839 also acted synergistically whencombined with drugs that target the Ras/Raf and PI3K/mTOR branches of growth factor signaling pathways. The two agents acting together have a greatereffect on the growth and survival of tumor cells than either agent used separately. CB-839 was synergistic with the epidermal growth factor receptor, orEGFR, inhibitor erlotinib (marketed as Tarceva) in NSCLC cells, with the multikinase inhibitors sunitinib (marketed as Sutent), sorafenib (marketed asNexavar), trametinib (marketed as Mekinist), selumetinib (in development) and pazopanib (marketed as Votrient) and the mTOR inhibitors everolimus(marketed as Afinitor) and temsirolimus (marketed as Toricel) in renal cell carcinoma, or RCC, cells, and with the MEK inhibitor trametinib (marketed asMekinist) and the AKT inhibitor MK-2206 (in development by Merck) in multiple cancer cell types. We believe these synergistic activities likely result fromthe fact that, as depicted in the diagram below, growth factor pathways control tumor metabolism and ultimately tumor cell dependence on glutamine andglucose.8 CB-839 also acted synergistically when combined with I-O drugs that inhibited the PD-1/PD-L1 immune cell checkpoint. CB-839 significantlyincreased the number of tumor regressions observed in syngeneic mice bearing CT-26 colorectal tumors when used in combination with an anti-PD-1checkpoint inhibitor, as shown in the figure below. Similar activity was observed when an anti-PD-L1 checkpoint inhibitor was used in combination withCB-839. These results are consistent with in vitro studies on T-cells indicating that high levels of both glucose and glutamine are required for full activationand proliferation of T-cells. Anti PD-1 is known to increase glucose utilization in T-cells, and we believe that CB-839, by blocking tumor consumption ofglutamine, increases the concentration of glutamine in the tumor microenvironment to further activate and stimulate the proliferation of T-cells and NK cells.In IND-enabling toxicity studies in rats and monkeys, CB-839 was well tolerated in both species, with no dose limiting toxicities observed ineither study. The plasma concentration of CB-839 measured at the highest dose in rats in these studies was greater than ten-fold above the 300 nMconcentration required in mice to achieve maximal effects on glutamine and glutamate levels in tumors and suppress tumor growth. In independent studies,CB-839 was shown to distribute broadly to all tissues except the brain, indicating that glutaminase could be strongly inhibited in normal tissues withoutcausing any major toxicological effects.Phase 1 Clinical Trials with CB-839Trial DesignIn February 2014, we initiated three Phase 1 clinical trials to assess the safety and tolerability of CB-839 in patients with solid and hematologicaltumors. CX-839-001 enrolled patients with solid tumors, CX-839-002 enrolled patients with multiple myeloma or non-Hodgkin’s lymphoma, and CX-839-003 enrolled patients with acute myeloid or acute lymphocytic leukemia. Each9 trial had a dose escalation stage, to identify the optimal dose of CB-839, and an expansion stage, in which cohorts of additional patients with specific tumortypes were enrolled to further evaluate the safety of CB-839 and to seek preliminary evidence of efficacy. In addition to single agent cohorts, in 2015 we alsoinitiated enrollment in six Phase 1b combination cohorts, one in which CB-839 is being combined with paclitaxel in patients with triple-negative breastcancer, a second in which CB-839 is combined with everolimus (marketed as Afinitor) in renal cell cancer (RCC), a third in which CB-839 is combined witherlotinib (marketed as Tarceva) in patients with EFGR-mutated non-small cell lung cancer (NSCLC), a fourth in which CB-839 is combined withdexamethasone in patients with multiple myeloma, a fifth in which CB-839 is combined with pomalidomide (marketed as Pomalyst) and dexamethasone inpatients with multiple myeloma, and a sixth in which CB-839 is combined with azacitidine (marketed as Vidaza) in front-line acute myeloidleukemia. Initial data from our single agent trials and from our combination trial in multiple myeloma were presented in 2015 and we expect to provideadditional data from our combination trials in mid-2016. A Phase 1/2 trial, CX-839-004 will be initiated in 1H16 allowing treatment of CB-839 incombination with nivolumab in renal cell cancer, melanoma, and non-small cell lung cancer patients. An investigator sponsored trial at Case WesternReserve University is also planned to start in 2016 and will be enrolling colorectal cancer patients with a PIK3CA mutation for treatment with a combinationof CB-839 and capecitabine. The CB‑839 combination studies are summarized in the table below. CB-839 Phase 1 Trial StatusAs of the third quarter of 2015, we enrolled a total of 155 patients across the three ongoing trials, including 138 patients who received CB-839 as asingle agent and 17 patients who received CB-839 in combination with other agents. Most patients in these trials were relapsed and refractory to multipleapproved therapies. During the dose escalation stage of these trials, CB-839 was administered orally on a TID (three times a day) schedule and monitored theblood levels of CB-839 and the extent of glutaminase inhibition in blood platelets and tumors. Drug concentration generally increased with dose, andincreasing concentrations of CB-839 in blood were correlated with increasing inhibition of glutaminase in blood platelets. The half-life of CB-839 in bloodwas approximately four hours and dosing with food enabled the dose schedule to be modified to a BID (twice-daily) regimen. Pharmacodynamic assaysindicated that most of the patients on the 600 mg BID and higher dose level maintained drug exposures sufficient to allow continuous platelet glutaminaseinhibition in excess of 90%, a degree of inhibition sufficient for maximal inhibition of tumor growth in animal models. Inhibition of glutaminase activity intumor biopsy samples from patients in early dose cohorts during dose escalation also demonstrated strong inhibition (75-96%). Based upon the successfulpharmacokinetic and pharmacodynamic evaluation of twice-daily dosing in the solid tumor trial, the 600 mg BID dose was chosen for evaluation in thesingle agent and combination expansion cohorts on all three studies. The dose of 800mg BID is being further evaluated as a monotherapy and incombinations.CB-839 has been generally well tolerated across all three studies using doses up to 1000 mg TID or BID. A maximum tolerated dose has not beendefined to date on any of the studies. The primary treatment-related toxicities with monotherapy CB-839 that have been observed to date on the CX-839-001study (N=98) include fatigue, gastrointestinal events (nausea, vomiting, and constipation), elevations in liver function tests (LFTs) and photophobia. Themajority of these adverse events have been mild to10 moderate (Grade 1/2) in severity. Treatment-related elevations in LFTs have generally been asymptomatic and rapidly reversible upon holding studytreatment; the frequency of Grade 3 or greater occurrences have been reduced following the implementation of BID administration (1.5%; N=66) compared tothe TID schedule (16%, N=32) . A similar safety profile has been observed on the CX-839-002 and -003 trials with the exception of a greater incidence oftreatment emergent hematological toxicities, generally not considered treatment related.CB-839 Phase 1b Expansion Cohorts in Specific Tumor TypesWe chose to focus enrollment of single agent and combination expansion cohorts in renal cell carcinoma, triple-negative breast cancer, non-smallcell lung cancer, acute myelogenous leukemia, multiple myeloma, and several rare cancers with mutations in TCA cycle enzymes. These tumor typesrepresent areas with significant unmet medical needs, and, based on our preclinical mechanism of action and efficacy studies as single agent and intherapeutic combinations, we believe that they may be particularly attractive indications for further development. The enrollment status of the single agentexpansion cohorts is depicted in the diagram below.Recently, we also agreed to support an investigator-sponsored Phase 1b study in colorectal cancer patients bearing a PIK3CA mutation to be led byDrs. Jennifer Eads, Alok Khorana and Neal Meropol at Case Western Reserve University. Renal Cell Carcinoma (RCC)According to the National Cancer Institute, renal cell carcinoma is diagnosed in approximately 61,560 people each year in the United States.Approximately 50% of renal cell carcinoma patients will require chemotherapy at some point to treat their metastatic disease.Most patients with clear cell RCC lack the tumor suppressor gene VHL. Preclinical studies by academic researchers have shown that VHL-deficientcell lines have an increased requirement for glutamine due to a loss of ability to make fatty acids from glucose. Accordingly, we believe that most patientswith RCC tumors will have increased susceptibility to inhibition of glutaminase with CB‑839. In RCC cell lines and in animal studies with human RCCtumors implanted in immunocompromised mice, we have demonstrated both single agent activity of CB-839 and activity in combination with approvedmulti-kinase inhibitors and mTOR inhibitors. CB-839 itself also induces suppression the nutrient-sensing mTOR pathway, likely due to a reduction incellular amino acids and other key nutrients.We are currently evaluating single agent CB-839 in an RCC cohort in the dose expansion stage of our solid tumor Phase 1 clinical trial CX-839-001. As of November 1, 2015, 15 efficacy-evaluable RCC patients were treated with single agent CB-839 on the BID dosing schedule. One patient achieved aPartial Response (PR) with a substantial decrease in target lesions (32%), including a dramatic improvement in the patient’s extensive lymphadenopathy. Atotal of 9 patients (60%) showed Stable Disease or better. The11 median time to progression in all RCC patients treated was 3.8 months with several patients remaining on study. We are currently enrolling a separate cohortof patients who are receiving CB-839 in combination with the mTOR inhibitor everolimus. We expect to report initial data from this cohort in 2016.Triple-Negative Breast Cancer (TNBC)According to the American Cancer Society, over 230,000 new cases of invasive breast cancer will be diagnosed in the United States andapproximately 40,000 women will die from the disease in 2016. Between 10% and 20% of newly diagnosed cases of breast cancer are classified as triple-negative breast cancer. TNBC is a subset of breast cancer that lacks the estrogen receptor, the progesterone receptor, and the HER2 receptor. TNBC patientshave relatively few treatment options since they lack expression of the targets for hormone- and HER2-based therapeutics. TNBC tends to have a higher rateof metastasis, recurs sooner following first line treatment and has a poorer prognosis and a lower overall survival rate than other subtypes of breast cancer.Our preclinical data support the development of CB-839 in TNBC either as a single agent or in combination with standard of care taxanes. Themajority of TNBC tumor cell lines we tested underwent cell death in response to CB-839 whereas ER- and HER2-positive breast cancer cell lines wererelatively resistant. Sensitivity to CB-839 in TNBC cells was directly correlated with the level of glutaminase expression, making glutaminase expression apotential companion diagnostic in the clinic. CB-839 had anti-tumor activity as a single agent against human breast cancer tumors implanted in animals andin combination with paclitaxel, CB-839 enhanced activity and prevented the re-growth of the tumor following discontinuation of paclitaxel dosing.In the Phase 1 trial CX-839-001, we enrolled an expansion cohort of refractory TNBC patients treated with CB-839 as a single agent. One patientshowed a 23% decrease in target lesions and has remained on study for over 15 months. Of 19 efficacy-evaluable TNBC patients treated with single agentCB-839, 3 patients (15%) maintained Stable Disease lasting over 4 months. We are enrolling a separate cohort of patients who are receiving CB-839 incombination with paclitaxel. We expect to report initial data from this cohort in 2016.Non-Small Cell Lung Cancer (NSCLC)According to the American Cancer Society, an estimated 221,200 new cases of lung cancer will be diagnosed in the United States in 2016. Lungcancer typically presents relatively late in its clinical course, when locally directed therapy, such as surgery and radiation, is not curative. The treatment oflocally advanced and metastatic lung cancer is a significant unmet medical need.Most primary NSCLC tumors have been shown to have elevated glutaminase expression and the majority of NSCLC cell lines that we haveevaluated were sensitive to the anti-proliferative or cell-killing effects of CB-839. NSCLC cell lines expressing KRAS and EGFR mutations were found to beparticularly sensitive to the effects of CB-839 administered as a single agent. We also observed synergistic activity with erlotinib in EGFR-mutated NSCLCcell lines and a combination of CB-839 and erlotinib in EGFR-mutated NSCLC tumors implanted in mice completely suppressed tumor growth. We arecurrently evaluating single agent CB-839 in NSCLC patients with KRAS-mutant tumors. We are also evaluating the combination of CB-839 and erlotinib ina cohort of NSCLC patients with EGFR-mutated tumors who have failed ongoing therapy with erlotinib. We also plan to enroll NSCLC patients in thecombination study of CB-839 and the anti-PD-1 agent nivolumab (see below).Tumors with TCA Cycle Driver MutationsThere are rare tumors with driver mutations that inactivate two different TCA cycle enzymes, fumarate hydratase (mutated in rare renal cancers) andsuccinate dehydrogenase (mutated in rare GIST, renal, and pheochromocytomas), leading to accumulation of abnormally high levels of fumarate andsuccinate. In addition to FH and SDH, there are rare tumors with activating mutations in the enzyme isocitrate dehydrogenase (IDH, mutated in somechondrosarcoma, cholangiocarcinoma AML and glioma tumors)) that lead to the accumulations of 2-hydroxyglutarate. Fumarate, succinate and 2-hydroxyglutarate are drivers of tumor formation when they accumulate at abnormally high levels. Published third-party studies indicate that glutaminemetabolism is important in the synthesis of fumarate, succinate and 2-hydroxyglutarate. Therefore, we enrolled patients with tumors carrying one of thesemutations on a single agent cohort to test the potential efficacy of CB-839.As of November 1, 2015, 14, 5 and 4 patients with IDH, SDH and FH mutations, respectively, received CB-839 as a single agent on the BID dosingschedule in the solid tumor trial. Four of 11, 2 of 3, and 2 of 4 evaluable patients in each group, respectively, had Stable Disease lasting up to 9, 4 and 4months, with some patients still on study. Future development in these rare patient populations is challenging as there are no approved therapies for thesetumor types, making it difficult to formulate a combination therapy for further development.12 Acute Myelogenous Leukemia (AML)The American Cancer Society estimates that approximately 18,860 new cases of AML, most of which will be in adults, will be diagnosed in theUnited States in 2014. AML is a cancer of the myeloid white blood cells in the bone marrow that in most cases quickly moves into the blood. The incidenceof AML dramatically increases after the age of 55, and given the shift in demographics in the population in the Western hemisphere, it is likely that anincreased number of elderly individuals will be diagnosed with this form of cancer. About 40% of AML patients are young enough and fit enough toundergo bone marrow transplantation for their AML, half of whom will experience complete remission. Those that are not cured, and the 60% of AMLpatients who are elderly or unfit for transplant, have a very poor prognosis. The median survival for elderly patients with AML is less than a year and worsens continuously with advancing age to as low as one month forthose who are older than 85 years of age. Complications, hospitalizations and deaths from cytopenias, or reductions in the number of certain blood cells, arecommon among the elderly with AML. Over the past two decades, many compounds have been evaluated in elderly patients with AML, but due tosignificant toxicities and/or lack of efficacy, none has been approved to date. Single agent CB-839 has anti-proliferative and pro-apoptotic activity against a set of AML cell lines with diverse genetics, and enhances theactivity of azacitidine when used as a combination therapy. As of November 9, 2015, 26 relapsed and refractory leukemia patients (25 with AML, 1 with ALL) received CB-839 as a single agent on the Phase1 CX-839-003 trial. The median age of the AML patients was 75 years. Two AML patients had evidence of blast reductions, with one of the patients, whohad been on study for over 15 months, achieving a CRi. Five patients remained on study for at least 4 cycles. We are currently enrolling a combinationstudy of CB-839 and azacitidine in frontline elderly patients who are not eligible for transplant or high-dose chemotherapy.Multiple MyelomaMultiple myeloma is a hematological malignancy characterized by the proliferation of monoclonal plasma cells in the bone marrow, the presenceof monoclonal immunoglobulin, or M protein, in the blood and/or urine, as well as bone disease, kidney disease, and immunodeficiency. The AmericanCancer Society estimates that there will be approximately 26,850 new cases of myeloma diagnosed in the United States in 2015.CB-839 has anti-proliferative activity and induces cell death in a subset of myeloma cell lines. This activity was enhanced when CB-839 wascombined with lenalidomide (marketed as Revlimid) or pomalidomide (marketed as Pomalyst), two approved immunomodulatory drugs used to treatmyeloma. CB-839 has single agent anti-tumor activity in mice bearing myeloma tumors and, when combined with either lenalidomide or pomalidomide, hadlong-lasting efficacy that led to complete suppression of myeloma tumor growth.Patients with myeloma were evaluated in the dose escalation and expansion stage of the CX-839-002 Phase 1 trial. In the dose escalation andexpansion stages of this trial, 9 myeloma patients were treated with increasing doses of single agent CB-839 and in the expansion phase, 5 patients weretreated with CB-839 and dexamethasone, and 4 patients were treated with CB-839 and pomalidomide and dexamethasone. Three of the monotherapy patientsremained on study for longer than three months with one of those patients remaining on study for longer than 7 months with Stable Disease. One of theheavily pre-treated patients receiving CB-839 with pomalidomide and dexamethasone had a clinically significant reduction in myeloma markers, includingserum free light chain and urine M-protein.After evaluating the patients we have treated to date, in the context of other new therapies being developed in a highly competitive environment,myeloma is currently not a priority indication for further development of CB-839.PIK3CA-mutated Colorectal Carcinoma (CRC)The oncogene PIK3CA, which encodes the p110α catalytic subunit of phosphatidylinositol-3-kinase α, is one of the most frequently mutatedoncogenes in human cancers. Mutations in PIK3CA are found in approximately 10-20% CRC, which will result in between 13,000 and 26,000 new casesdiagnosed in the United States in 2016.An academic research group at Case Western Reserve University demonstrated that single agent CB-839 inhibits the growth of CRCs with PIK3CAmutations in immunocompromised mice, but CRC tumors with a normal PIK3CA gene were not inhibited. Remarkably, the combination of CB-839 with 5-florouracil induced complete and long-lasting tumor regressions in animals bearing PIK3CA mutant CRC tumors, but not tumors with normal PIK3CA,suggesting that this combinational therapy may be a unique and effective approach in the clinic. These investigators are planning to initiate an Investigator-sponsored clinical trial in 1H16 to be overseen by Drs. Jennifer Eads, Alok Khorana and Neal Meropol and at Case Western.13 Immuno-Oncology Evaluation of CB-839 with NivolumabCell lines and tumors that are treated with CB-839 in vitro or in vivo, respectively, have been shown to have a substantial increase in the content ofglutamine. We believe that inhibition of glutaminase in the tumor results in a substantial increase in the concentration of glutamine in the tumormicroenvironment and that this glutamine supports the growth and proliferation of cytotoxic T-cells and NK cells that reside within the tumor. Combinationof CB-839 with anti-PD-1 or anti-PD-L1 in mice results in a doubling of the number of animals with complete tumor regressions.CX-839-004 is a Phase 1/2 clinical trial of CB-839 in combination with the PD-1 inhibitor nivolumab which will be initiated in 1H16 in patientswith RCC, melanoma, and NSCLC. In this trial, we will be evaluating patients who are currently receiving checkpoint inhibitor therapy but have aninadequate response to ongoing therapy as well as patients who are naïve to checkpoint inhibitor therapy.Our Arginase Inhibitor ProgramTumors have evolved a number of strategies to avoid recognition and destruction by the immune system. One key mechanism is throughsuppression of cytotoxic T-cells that would otherwise attack and kill the cancer cells. Arginine is an amino acid that is fundamental to the function ofcytotoxic T-cells. Without arginine, tumor specific cytotoxic T-cells fail to activate, proliferate, and mount an effective anti-tumor response.In response to tumor-secreted factors, myeloid-derived suppressor cells, or MDSCs, and neutrophils accumulate in the tumor and secrete theenzyme arginase, resulting in depletion of arginine from the tumor microenvironment. Depletion of systemic arginine due to elevated levels of arginase hasbeen observed by other researchers in renal cell carcinoma and acute myeloid leukemia. In addition, significant infiltration by arginase-expressing myeloidcells has been observed in many solid tumor types including lung, colorectal and other tumor types. We have confirmed that arginase-expressing MDSCs arefound by immunohistochemistry, or IHC, in a wide range of tumor types including non-small cell lung (both adenocarcinoma and squamous types),gastrointestinal and bladder cancers as shown in the diagram below. Arginase enzyme levels are elevated 3- to 30-fold in the plasma of cancer patients acrossa wide range of malignancies.We believe that arginase inhibitors can promote an anti-tumor immune response by restoring arginine levels, thereby allowing activation of thebody’s cytotoxic T-cells. A similar process exists whereby cytotoxic T-cells are blocked from activation through depletion of the amino acid tryptophan.Indoleamine 2,3-dioxygenase, or IDO, a tryptophan metabolizing enzyme, depletes tryptophan from the tumor microenvironment resulting in suppression ofT-cell function. Several clinical trials of IDO inhibitors are currently ongoing and early clinical results with epacodostat (an IDO inhibitor from IncyteCorporation) have demonstrated combination activity with ipilimumab (anti CTLA-4) and anti-PD-1 antibodies. 14 CB-1158: Our Arginase InhibitorWe have identified CB-1158 and a portfolio of other small molecule arginase inhibitors that show high potency and oral bioavailability. CB-1158inhibits arginase 1 and 2 with IC50 values of 100 and 275 nM, respectively. In our preclinical studies, we have shown that CB‑1158 reverses the anti-proliferative activity that is observed with human T-cells when they are co-cultured with purified human neutrophils or cancer patient-derived MDSCs.CB‑1158 has no cytotoxic activity on cancer cells and does not directly affect the proliferation of T-cells or NK cells in culture.CB-1158 has single agent anti-tumor activity in syngeneic mouse tumor models that has been demonstrated to act through an immune mechanism.The compound reduces the growth rate of mouse melanoma and lung tumors in immunocompetent mice when administered as a single agent. This effect canbe partially blocked by treating mice with antibodies that clear CD8+ T-cells or NK cells (or when tumors are grown in immunocompromised SCID mice).Tumor reduction in mice is associated with increases in tumor levels of cytokines and chemokines that suggest a shift to a pro-inflammatory state.CB-1158 also enhances the activity of checkpoint inhibitors in the mouse breast cancer 4T1 model. In this model, checkpoint inhibitors includinganti-PD-1 and anti-CTLA-4 have no effect even when administered together. CB-1158 has anti-tumor activity in this model when added to a combination ofanti-PD-1 and anti-CTLA-4; furthermore, we observed a 75% decrease in the number of lung metastases that were observed when CB-1158 was added to thisregimen. We believe that these results support the hypothesis that the checkpoint inhibitors are inactive in this model due in part to lack of arginine supplyand not to inherent tumor resistance.In preclinical toxicology studies, CB-1158 was well tolerated in rats and monkeys at doses and drug exposures that are well above those whichprovide maximal inhibition of tumor growth. In mid-2016, we plan to submit an IND application to the FDA to enable the initiation of Phase 1 trials inpatients with solid tumors both as a single agent and in combination with a checkpoint inhibitor(s). We believe that CB-1158 is the only arginase inhibitor inpreclinical development.Arginase License Agreement In December 2014, we entered into an exclusive license agreement, or the Arginase License Agreement, with Mars, Inc., by and through its MarsSymbioscience division, or Symbioscience, under which we have been granted the exclusive, worldwide license rights to develop and commercializeSymbioscience’s portfolio of arginase inhibitors for use in human healthcare. Under the Arginase License Agreement, we are responsible for the worldwidedevelopment and commercialization of the licensed products at our cost, are required to use commercially reasonable efforts with respect to suchdevelopment and commercialization activities, and must meet certain general diligence obligations. We hold the first right to prosecute and to enforce alllicensed rights under the Arginase Licenses Agreement throughout the world, and Symbioscience will retain certain step-in enforcement rights. Under theexclusivity provisions of the Arginase License Agreement, each party agrees not to develop any other arginase inhibitors for use in human healthcare outsideof the scope of the Arginase License Agreement. Our Second Program in Tumor Metabolism: Hexokinase IIHexokinase II- An essential pathway in the cancer cell utilization of glucose. A defining characteristic of most cancer cells is their increaseduptake of glucose. This phenomenon forms the basis for the widely used tumor imaging procedure known as 18F-2-deoxyglucose (FDG)/PET. Tumors takeup more FDG, a radioactive glucose analog, than the surrounding normal tissue and this differential can be visualized with PET imaging. Not only do tumors take up more glucose, but they also utilize the nutrient in a unique way. Tumors convert glucose into lactic acid in a processknown as aerobic glycolysis, or the “Warburg effect”, a route rarely utilized in normal cells. This unique uptake and processing of glucose by tumors relativeto normal tissue creates an opportunity to selectively target tumors by cutting off their ability to use this fuel.Hexokinase is the first enzyme in the pathway that enables cancer cells to convert glucose to energy to fuel cancer cell growth. Due to their higherglucose needs, cancer cells frequently increase the level of this critical enzyme, specifically the isoform hexokinase II. Overexpression of hexokinase II isassociated with more aggressive and invasive tumors. Pre-clinical studies in mice have confirmed that the reduction of hexokinase II activity through geneticdeactivation (siRNA knockdown studies) results in a significant reduction of tumor growth. We believe inhibitors of hexokinase II will significantly impedethe ability of cancer cells to survive and proliferate.Hexokinase License AgreementIn March 2015, we entered into a License and Research agreement, or the Hexokinase License Agreement, with High Point Pharmaceuticals, LLCand TransTech Pharma LLC, or collectively, TransTech, under which we obtained an exclusive, worldwide license to develop and commercializeTransTech’s hexokinase II inhibitors. Except for the research program funded by us at TransTech, we are responsible for the worldwide development andcommercialization of the licensed products at our cost, are required to use commercially reasonable efforts with respect to such development andcommercialization activities, and must meet certain15 specified diligence obligations. We hold the first right to prosecute and to enforce all licensed patents under the Hexokinase License Agreement throughoutthe world, and TransTech will retain certain step-in enforcement rights.Intellectual PropertyOur commercial success depends in large part on our ability to obtain and maintain intellectual property protection for our product candidates,including CB-839 and our preclinical compounds, and our core technologies. Our policy is to seek to protect our intellectual property position by, amongother methods, filing U.S. and foreign patent applications related to the technology, inventions and improvements that are important to the development andimplementation of our business strategy. We also rely on trade secrets, know-how and continuing technological innovation to develop and maintain ourproprietary position.We file patent applications directed to our product candidates, preclinical compounds and related technologies to establish intellectual propertypositions on these compounds and their uses in disease. We are seeking patent protection for the use of biomarkers to identify patients most likely to benefitfrom treatment with our product candidates. As of December 31, 2015, we own two issued U.S. patents and approximately 64 pending U.S. and foreign patentapplications in the following foreign jurisdictions: Argentina, Australia, Brazil, Canada, China, the Eurasian Patent Organization, Europe, Hong Kong, India,Israel, Japan, Mexico, New Zealand, Singapore, South Africa, South Korea and Taiwan. We expect that these patents and patent applications, if issued, wouldexpire between April 2031 and October 2036.As of December 31, 2015, the intellectual property portfolio for our glutaminase inhibitor program, which includes CB-839, included two issuedU.S. patents, both of which expire in 2032, claiming compositions of matter and methods of treating cancer with CB-839. We also have ten pending U.S.patent applications and 52 corresponding pending PCT and foreign patent applications directed to compositions of matter for CB-839 and related chemicalcompounds, as well as methods of using these compounds. These pending patent applications also include three pending U.S. patent applications relating tomethods for measuring various biomarkers in cancer patients to identify patients suitable for treatment with glutaminase inhibitors. We expect that thesepatents and patent applications, if issued, would expire between November 2032 and October 2036.The intellectual property portfolio for our arginase inhibitor program, which includes CB-1158, includes issued patents and pending patentapplications that we have exclusively licensed from Symbioscience as well as pending patent applications that we own. This portfolio includes 4 issued U.S.patents, 5 pending U.S. patent applications, 45 corresponding pending foreign patent applications, and four issued foreign patents directed to variousarginase inhibitors and therapeutic methods of using the compounds. We expect that these patents and patent applications, if issued, would expire betweenApril 2031 and October 2036.In March 2015, we exclusively licensed from TransTech the intellectual property portfolio for our hexokinase II inhibitor program. This portfoliocomprises one pending patent application directed to compositions of matter for hexokinase II inhibitors and therapeutic methods of using the compounds.We expect that the patent applications, if issued, would expire in June 2036.ManufacturingWe do not own or operate, and currently have no plans to establish, any manufacturing facilities. We currently rely, and expect to continue to rely,on third parties to manufacture clinical supplies of CB-839. CB-839 is an organic compound of low molecular weight. Our third-party contract manufacturersare currently producing CB-839 for use in our clinical trials utilizing reliable and reproducible synthetic processes and common manufacturing techniques.We obtain our supplies from manufacturers on a purchase order basis and do not have any long-term arrangements. In addition, we do not currently havearrangements in place for bulk drug substance or drug product services of CB-839. We intend to identify and qualify additional manufacturers to providebulk drug substance and drug product services prior to submission of a new drug application to the FDA if necessary to ensure sufficient commercialquantities of CB-839. We also intend to rely upon third-party contract manufacturers to provide us with clinical supplies for our arginase and hexokinase IIinhibitor programs and for our other research and discovery programs.Research and DevelopmentWe have and will continue to make substantial investments in research and development. Our research and development expenses totaled $23.7million, $16.4 million, and $9.9 million in 2015, 2014 and 2013, respectively.In the ordinary course of business, we enter into agreements with third parties, such as contract research organizations, medical institutions, clinicalinvestigators and contract laboratories, to conduct our clinical trials and aspects of our research and preclinical testing. These third parties provide projectmanagement and monitoring services and regulatory consulting and investigative services.16 CompetitionThe pharmaceutical and biotechnology industries are characterized by rapidly advancing technologies, intense competition and a strong emphasison proprietary products. While we believe that our technology, development experience and scientific knowledge provide us with competitive advantages,we face potential competition from many different sources, including major pharmaceutical, specialty pharmaceutical and biotechnology companies,academic institutions and governmental agencies and public and private research institutions. Any product candidates that we successfully develop andcommercialize will compete with existing therapies and new therapies that may become available in the future.Our principal competitors in the field of tumor metabolism include Advanced Cancer Therapeutics, LLC, Aeglea Biotherapeutics, Inc., AgiosPharmaceuticals, Inc., AstraZeneca plc, Bayer Pharma AG, Celgene Corporation, Cornerstone Pharmaceuticals, Inc., Eli Lilly and Company, FormaTherapeutics Holdings, LLC, GlaxoSmithKline plc, Merck KGaA, Novartis International AG, Pfizer Inc., Quantum Pharmaceuticals, 3-V Biosciences, Inc.,Rhizen Pharmaceuticals SA, Roche Holdings, and its subsidiary Genentech Inc., Sprint Biosciences, and Takeda Pharmaceutical Co. Ltd. Our principalcompetitors in the field of tumor immunology include AstraZeneca plc, Boehringer Ingelheim GmbH, Bristol-Myers Squibb Company, CureTech Ltd., EliLilly and Company, Merck KGaA,, Fortress Biotech, Inc., GlaxoSmithKline plc, Incyte Corporation, iTeos Therapeutics SA, Merck & Co., NewLink GeneticsCorporation, Novartis International AG, Ono Pharmaceuticals, Co., Ltd, Pfizer Inc., Roche Holdings AG, Sanofi-aventis Groupe, Takeda Company Limited,and TG Therapeutics, Inc.The most common methods of treating patients with cancer are surgery, radiation and drug therapy, including chemotherapy, hormone therapy andtargeted drug therapy. There are a variety of available drug therapies marketed for cancer. In many cases, these drugs are administered in combination toenhance efficacy. Any product candidates we develop will compete with many existing drug and other therapies. To the extent they are ultimately used incombination with or as an adjunct to these therapies, our product candidates will not be competitive with them. Some of the currently approved drugtherapies are branded and subject to patent protection, and others are available on a generic basis. Many of these approved drugs are well establishedtherapies and are widely accepted by physicians, patients and third-party payors. In general, although there has been considerable progress over the past fewdecades in the treatment of cancer and the currently marketed therapies provide benefits to many patients, these therapies all are limited to some extent intheir efficacy and frequency of adverse events, and none are successful in treating all patients. As a result, the level of morbidity and mortality from cancerremains high.In addition to currently marketed therapies, there are also a number of therapeutics in late stage clinical development to treat cancer. Thesetherapeutics in development may provide efficacy, safety, convenience and other benefits that are not provided by currently marketed therapies. As a result,they may provide significant competition for any product candidate for which we may obtain market approval.Many of our competitors may have significantly greater financial resources and expertise in research and development, manufacturing, preclinicaltesting, conducting clinical trials, obtaining regulatory approvals and marketing approved therapeutics than we do. Mergers and acquisitions in thepharmaceutical, biotechnology and diagnostic industries may result in even more resources being concentrated among a smaller number of our competitors.These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites andpatient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. Smaller or early stage companiesmay also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.The key competitive factors affecting the success of CB-839 and any future product candidates we develop, if approved, are likely to be theirefficacy, safety, synergy with other approved therapies, convenience, price and the availability of reimbursement from government and other third-partypayors.Our competitors may develop and commercialize therapeutics that are safer, more effective, have fewer or less severe side effects, are moreconvenient or are less expensive than any therapeutics that we may develop. Our competitors also may obtain FDA or other regulatory approval for theirtherapeutics more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we areable to enter the market. In addition, our ability to compete may be affected in many cases by insurers or other third-party and government programs seekingto control healthcare costs.Government RegulationGovernment authorities in the United States, at the federal, state and local level, and in other countries extensively regulate, among other things,the research, development, testing, manufacture, including any manufacturing changes, packaging, storage, recordkeeping, labeling, advertising, promotion,distribution, marketing, post-approval monitoring and reporting, import and export of pharmaceutical products, such as those we are developing.17 United States Drug Approval ProcessIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The process ofobtaining regulatory approvals and the subsequent compliance with appropriate federal, state, local and foreign statutes and regulations requires theexpenditure of substantial time and financial resources. Failure to comply with the applicable United States requirements at any time during the productdevelopment process, approval process or after approval, may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’srefusal to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and untitled letters, productrecalls, product seizures, total or partial suspension of production or distribution injunctions, fines, refusals of government contracts, restitution,disgorgement of profits or civil or criminal penalties.The process required by the FDA before a drug may be marketed in the United States generally involves the following: ·contract manufacturing expenses, primarily for the production of clinical supplies; ·completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, orGLP, regulations; ·submission to the FDA of an IND, which must become effective before human clinical trials may begin; ·approval by an independent institutional review board, or IRB, at each clinical site before each trial may be initiated; ·performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safetyand efficacy of the proposed drug for each indication; ·submission to the FDA of a new drug application, or NDA; ·satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliancewith current good manufacturing practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate topreserve the drug’s identity, strength, quality and purity; and ·FDA review and approval of the NDA.Preclinical Studies and INDPreclinical studies include laboratory evaluation of product chemistry and formulation, as well as in vitro and animal studies to assess the potentialfor adverse events, and in some cases, to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations andrequirements, including GLP regulations for safety/toxicology studies. An IND sponsor must submit the results of the preclinical tests, together withmanufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, to the FDA as part of anIND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted. AnIND automatically becomes effective 30 days after receipt by the FDA, unless before that time, the FDA raises concerns or questions related to one or moreproposed clinical trials and places the trial on clinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before theclinical trial can begin. As a result, submission of an IND may not result in the FDA allowing clinical trials to commence.Clinical TrialsClinical trials involve the administration of the investigational new drug to human subjects under the supervision of qualified investigators inaccordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their informed consent in writingbefore their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the objectives of thestudy, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequentprotocol amendments must be submitted to the FDA as part of the IND. In addition, an IRB at each institution participating in the clinical trial must reviewand approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct continuing review. The IRB must review andapprove, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance withFDA regulations. Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health for publicdissemination at www.clinicaltrials.gov. Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:18 ·Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or condition and tested for safety,dosage tolerance, absorption, metabolism, distribution, excretion and, if possible, to gain an early indication of its effectiveness. ·Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluatethe efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. ·Phase 3: The drug is administered to an expanded patient population in adequate and well-controlled clinical trials to generate sufficient datato statistically confirm the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and toprovide adequate information for the labeling of the product.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and, more frequently, if serious adverseevents occur. Phase 1, Phase 2 and Phase 3 clinical trials may not be completed successfully within any specified period, or at all. Furthermore, the FDA or thesponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to anunacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted inaccordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients.Marketing ApprovalAssuming successful completion of the required clinical testing, the results of the preclinical studies and clinical trials, together with detailedinformation relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDArequesting approval to market the product for one or more indications. Under federal law, the submission of most NDAs is additionally subject to asubstantial application user fee, and the sponsor of an approved NDA is also subject to annual product and establishment user fees, which fees are typicallyincreased annually.The FDA conducts a preliminary review of all NDAs within the first 60 days after submission before accepting them for filing to determine whetherthey are sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event,the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it forfiling. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to specified performance goals in thereview of NDAs. Under these goals, the FDA has committed to review most such applications for non-priority products within 10 months, and mostapplications for priority review products, that is, drugs that the FDA determines represent a significant improvement over existing therapy, within six months.The review process may be extended by the FDA for three additional months to consider certain information or clarification regarding information alreadyprovided in the submission. The FDA may also refer applications for novel drugs or products that present difficult questions of safety or efficacy to anadvisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether the applicationshould be approved. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully whenmaking decisions.Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is manufactured. The FDA will not approve anapplication unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistentproduction of the product within required specifications. In addition, before approving an NDA, the FDA will typically inspect one or more clinical sites toassure compliance with GCP and integrity of the clinical data submitted.The testing and approval process requires substantial time, effort and financial resources, and each may take many years to complete. Data obtainedfrom clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or prevent regulatory approval.The FDA may not grant approval on a timely basis, or at all. We may encounter difficulties or unanticipated costs in our efforts to develop our productcandidates and secure necessary governmental approvals, which could delay or preclude us from marketing our products.After the FDA’s evaluation of the NDA and inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete responseletter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specific indications. A complete responseletter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsiderthe application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approvalletter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submissionof this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval and refuse to approvethe NDA. Even if the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings orprecautions be included in the product labeling, require that post-approval studies, including phase 4 clinical trials, be conducted to further assess a drug’ssafety after approval, require testing and surveillance programs to monitor the19 product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including RiskEvaluation and Mitigation Strategies, or REMs, which can materially affect the potential market and profitability of the product. The FDA may prevent orlimit further marketing of a product based on the results of post-market studies or surveillance programs. After approval, some types of changes to theapproved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements andFDA review and approval.Fast Track DesignationThe FDA is required to facilitate the development and expedite the review of drugs that are intended for the treatment of a serious or life-threatening condition for which there is no effective treatment and which demonstrate the potential to address unmet medical needs for the condition. Underthe fast track program, the sponsor of a new product candidate may request the FDA to designate the product for a specific indication as a fast track productconcurrent with or after the submission of the IND for the product candidate. The FDA must determine if the product candidate qualifies for fast trackdesignation within 60 days after receipt of the sponsor’s request.In addition to other benefits, such as the ability of the sponsor to use surrogate endpoints in the evaluation of the pivotal clinical trials and havemore frequent interactions with the FDA, the FDA may initiate review of sections of a fast track product’s NDA before the application is complete. Thisrolling review is available if the applicant provides and the FDA approves a schedule for the submission of the remaining information and the applicant paysapplicable user fees. However, the FDA’s time period goal for reviewing a fast track application does not begin until the last section of the NDA is submitted.In addition, the fast track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in theclinical trial process.Priority ReviewUnder FDA policies, a product candidate may be eligible for priority review, or review generally within a six-month time frame from the time acomplete application is received. Products regulated by the FDA’s Center for Drug Evaluation and Research, or CDER, are eligible for priority review if theyprovide a significant improvement compared to marketed products in the treatment, diagnosis or prevention of a disease. A fast track designated productcandidate would ordinarily meet the FDA’s criteria for priority review.Accelerated ApprovalUnder the FDA’s accelerated approval regulations, the FDA may approve a drug for a serious or life-threatening illness that provides meaningfultherapeutic benefit to patients over existing treatments based upon a surrogate endpoint that is reasonably likely to predict clinical benefit. In clinical trials, asurrogate endpoint is a measurement of laboratory or clinical signs of a disease or condition that substitutes for a direct measurement of how a patient feels,functions or survives. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. A product candidate approved on thisbasis is subject to rigorous post-marketing compliance requirements, including the completion of Phase 4 or post-approval clinical trials to confirm the effecton the clinical endpoint. Failure to conduct required post-approval trials, or confirm a clinical benefit during post-marketing studies, would allow the FDA towithdraw the drug from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject toprior review by the FDA.Breakthrough Therapy DesignationUnder the provisions of the Food and Drug Administration Safety and Innovation Act, or FDASIA, enacted in 2012, a sponsor can requestdesignation of a product candidate as a “breakthrough therapy.” A breakthrough therapy is defined as a drug that is intended, alone or in combination withone or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the product candidate maydemonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observedearly in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated approval. The FDA must take certain actions, suchas holding timely meetings and providing advice, intended to expedite the development and review of an application for approval of a breakthrough therapy.Even if a product candidate qualifies for one or more of these programs, the FDA may later decide that the product candidate no longer meets the conditionsfor qualification or decide that the time period for FDA review or approval will not be shortened.20 Orphan DrugsUnder the Orphan Drug Act, the FDA may grant orphan drug designation to drugs intended to treat a rare disease or condition, which is generallydefined as a disease or condition that affects fewer than 200,000 individuals in the United States. Orphan drug designation must be requested beforesubmitting an NDA. After the FDA grants orphan drug designation, the generic identity of the drug and its potential orphan use are disclosed publicly by theFDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The first NDAapplicant to receive FDA approval for a particular active ingredient to treat a particular disease with FDA orphan drug designation is entitled to a seven-yearexclusive marketing period in the United States for that product, for that indication. During the seven-year exclusivity period, the FDA may not approve anyother applications to market the same drug for the same orphan indication, except in limited circumstances, such as a showing of clinical superiority to theproduct with orphan drug exclusivity in that it is shown to be safer, more effective or makes a major contribution to patient care. Orphan drug exclusivitydoes not prevent the FDA from approving a different drug for the same disease or condition, or the same drug for a different disease or condition. Among theother benefits of orphan drug designation are tax credits for certain research and a waiver of the NDA application user fee.Pediatric Exclusivity and Pediatric UseUnder the Best Pharmaceuticals for Children Act (BPCA) certain drugs may obtain an additional six months of exclusivity, if the sponsor submitsinformation requested in writing by the FDA (a Written Request) relating to the use of the active moiety of the drug in children. The FDA may not issue aWritten Request for studies on unapproved or approved indications or where it determines that information relating to the use of a drug in a pediatricpopulation, or part of the pediatric population, may not produce health benefits in that population.In addition, the Pediatric Research Equity Act (PREA) requires a sponsor to conduct pediatric studies for most drugs and biologics, for a new activeingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, biologics license applicationand supplements thereto, must contain a pediatric assessment unless the sponsor has received a deferral or waiver. Unless otherwise required by regulation,PREA does not apply to any drug for an indication where orphan designation has been granted. The required assessment must assess the safety andeffectiveness of the product for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatricsubpopulation for which the product is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all of the pediatricsubpopulations. A deferral may be granted for several reasons, including a finding that the drug or biologic is ready for approval for use in adults beforepediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin. After April 2013, theFDA must send a non-compliance letter to any sponsor that fails to submit the required assessment, keep a deferral current or fails to submit a request forapproval of a pediatric formulation.As part of the FDASIA, the U.S. Congress made a few revisions to BPCA and PREA, which were slated to expire on September 30, 2012, and madeboth laws permanent.Overview of FDA Regulation of Companion DiagnosticsWe may seek to develop in vitro companion diagnostics for use in selecting the patients that we believe will respond to our therapeutics. In July2011, the FDA issued a draft guidance that states that if safe and effective use of a therapeutic product depends on an in vitro diagnostic, then the FDAgenerally will require approval or clearance of the diagnostic at the same time that the FDA approves the therapeutic product. When finalized, the guidancewould address issues critical to developing and obtaining approval or clearance for companion diagnostics and provide guidance as to when the FDA willrequire that the in vitro diagnostic, which is regulated as a medical device, and the drug be approved simultaneously. The FDA has yet to issue furtherguidance, and it is unclear whether it will do so, or what the scope would be. Nevertheless, although the draft guidance is not finalized, the FDA has alreadyrequired in vitro companion diagnostics intended to select the patients who will respond to cancer treatment to obtain approval simultaneously withapproval of the drug.Other Regulatory RequirementsAny drug manufactured or distributed by us pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including,among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reportingof adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims aresubject to prior FDA review and approval.The FDA may impose a number of post-approval requirements, including REMs, as a condition of approval of an NDA. For example, the FDA mayrequire post-marketing testing, including phase four clinical trials, and surveillance to further assess and monitor the product’s safety and effectiveness aftercommercialization. Regulatory approval of oncology products often requires that patients in clinical trials be followed for long periods to determine theoverall survival benefit of the drug.21 In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register theirestablishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliancewith cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDAregulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon us and anythird-party manufacturers that we may decide to use. Accordingly, manufacturers must continue to expend time, money and effort in the areas of productionand quality control to maintain cGMP compliance.Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or ifproblems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with manufacturing processes, or failure to comply with regulatory requirements, may result in revisions to theapproved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety risks or imposition of distribution orother restrictions under a Risk Evaluation andMitigation Strategy program. Other potential consequences include, among other things:• restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the market or product recalls;• fines, warning letters or holds on post-approval clinical trials;• refusal of the FDA to approve pending applications or supplements to approved applications, orsuspension or revocation of product license approvals;• product seizure or detention, or refusal to permit the import or export of products; or• consent decrees, injunctions or the imposition of civil or criminal penalties.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. Drugs may be promoted onlyfor the approved indications and in accordance with the provisions of the approved label. The FDA and other agencies actively enforce the laws andregulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted off label uses may be subject to significantliability.Additional ProvisionsIn addition to FDA restrictions on marketing of pharmaceutical products, several other types of state and federal laws have been applied to restrictcertain marketing practices in the pharmaceutical industry in recent years. These laws include anti-kickback statutes and false claims statutes. The federalhealthcare program anti-kickback statute prohibits, among other things, knowingly and willfully offering, paying, soliciting or receiving remuneration toinduce or in return for purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable underMedicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceuticalmanufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Violations of the anti-kickback statute are punishable byimprisonment, criminal fines, civil monetary penalties and exclusion from participation in federal healthcare programs. Although there are a number ofstatutory exemptions and regulatory safe harbors protecting certain common activities from prosecution or other regulatory sanctions, the exemptions andsafe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchases or recommendations may be subject toscrutiny if they do not qualify for an exemption or safe harbor.Federal false claims laws prohibit any person from knowingly presenting, or causing to be presented, a false claim for payment to the federalgovernment, or knowingly making, or causing to be made, a false statement to have a false claim paid. Recently, several pharmaceutical and other healthcarecompanies have been prosecuted under these laws for allegedly inflating drug prices they report to pricing services, which in turn were used by thegovernment to set Medicare and Medicaid reimbursement rates, and for allegedly providing free product to customers with the expectation that the customerswould bill federal programs for the product. In addition, certain marketing practices, including off-label promotion, may also violate false claims laws. Themajority of states also have statutes or regulations similar to the federal anti-kickback law and false claims laws, which apply to items and services reimbursedunder Medicaid and other state programs, or, in several states, apply regardless of the payor.Foreign RegulationIn order to market any product outside of the United States, we would need to comply with numerous and varying regulatory requirements of othercountries regarding safety and efficacy and governing, among other things, clinical trials, marketing authorization, commercial sales and distribution of ourproducts. Whether or not we obtain FDA approval for a product, we would need to obtain the necessary approvals by the comparable regulatory authorities offoreign countries before we can commence clinical trials or marketing of the product in those countries. The approval process varies from country to countryand can involve additional product testing and additional administrative review periods. The time required to obtain approval in other countries might differfrom22 and be longer than that required to obtain FDA approval. Regulatory approval in one country does not ensure regulatory approval in another, but a failure ordelay in obtaining regulatory approval in one country may negatively impact the regulatory process in others.New Legislation and RegulationsFrom time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing thetesting, approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations and policies are oftenrevised or interpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislativechanges will be enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of such changes, if any, may be.EmployeesAs of December 31, 2015, we had 44 full-time employees, including 16 employees with Ph.D. or M.D. degrees. Of these full-time employees, 32employees are engaged in research and development activities. None of our employees is represented by a labor union or covered by a collective bargainingagreement.FacilitiesWe occupy approximately 29,000 square feet of office and laboratory space in South San Francisco, California. In March 2016, we entered into anamendment to our lease for additional space which we expect will commence in December 2016 and to extend the lease term through January 2024, with anoption to extend another two years to January 2026. Approximately 4,500 square feet of laboratory space have been leased to another biotechnologycompany under a sublease agreement that expires in July 2016. We believe that our facility is sufficient to meet our current needs and that suitable additionalspace will be available as and when needed.Legal ProceedingsFrom time to time, we may become involved in litigation relating to claims arising from the ordinary course of business. Our management believesthat there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our results ofoperations, financial condition or cash flows.23 Item 1A.Risk Factors. Our business involves significant risks, some of which are described below. You should carefully consider these risks, as well as other information in thisAnnual Report on Form 10-K, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Conditionand Results of Operations.” The occurrence of any of the events or developments described below could harm our business, financial condition, results ofoperations, cash flows, the trading price of our common stock and our growth prospects. Additional risks and uncertainties not presently known to us orthat we currently deem immaterial may also impair our business operations.Risks Related to Our Financial Position and Need For Additional CapitalWe have incurred significant operating losses since our inception and anticipate that we will continue to incur substantial operating losses for theforeseeable future. We may never achieve or maintain profitability.Since our inception, we have incurred significant operating losses. Our net loss was $32.6 million, $21.7 million, and $12.4 million for 2015, 2014,and 2013, respectively. As of December 31, 2015, we had an accumulated deficit of $84.5 million. To date, we have financed our operations primarilythrough private placements of our preferred stock and our initial public offering in October 2014. We have devoted substantially all of our financial resourcesand efforts to research and development. We began Phase 1 clinical trials on our lead product candidate, CB-839, in early 2014 and expect that it will bemany years, if ever, before we receive regulatory approval and have a product candidate ready for commercialization. We expect to continue to incursignificant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year toyear. We anticipate that our expenses will increase substantially if and as we: ·advance further into clinical trials our existing clinical product candidate, CB-839, a glutaminase inhibitor for the treatment of solid andhematological tumors; ·continue the preclinical development of our arginase and hexokinase II inhibitor programs and advance candidates into clinical trials; ·identify additional product candidates and advance them into preclinical development; ·seek marketing approvals for our product candidates that successfully complete clinical trials; ·establish a sales, marketing and distribution infrastructure to commercialize any product candidates for which we obtain marketing approval; ·maintain, expand and protect our intellectual property portfolio; ·hire additional clinical, regulatory and scientific personnel; ·add operational, financial and management information systems and personnel, including personnel to support product development; and ·acquire or in-license other product candidates and technologies.To become and remain profitable, we must develop and eventually commercialize one or more products with significant market potential. This willrequire us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our product candidates,obtaining marketing approval for these product candidates, manufacturing, marketing and selling those product candidates for which we may obtainmarketing approval, and satisfying any post-marketing requirements. We may never succeed in these activities and, even if we do, may never generaterevenue that is significant or large enough to achieve profitability. We are currently only in Phase 1 clinical trials for CB-839 and in preclinical studies forour arginase and hexokinase II inhibitor programs. Our failure to become and remain profitable would decrease the value of the company and could impairour ability to raise capital, maintain our research and development efforts, expand our business or continue our operations. A decline in the value of ourcompany could also cause you to lose all or part of your investment.We will need substantial additional funding. If we are unable to raise capital when needed, we would be forced to delay, reduce or eliminate our productdevelopment programs or commercialization efforts.We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continueand initiate clinical trials of and seek marketing approval for our product candidates, specifically CB-839 and as we become obligated to make milestonepayments pursuant to our outstanding license agreements. In addition, if we obtain marketing approval for any of our product candidates, we expect to incursignificant commercialization expenses related to product sales, marketing, manufacturing and distribution of the approved product.24 Our future capital requirements will depend on many factors, including: ·the scope, progress, results and costs of drug discovery, preclinical development, laboratory testing and clinical trials for our productcandidates, in particular CB-839; ·the costs, timing and outcome of any regulatory review of our product candidate, CB-839; ·the cost of our arginase and hexokinase II inhibitor programs, and any other product programs we pursue; ·the costs and timing of commercialization activities, including manufacturing, marketing, sales and distribution, for any product candidatesthat receive marketing approval; ·the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defendingintellectual property-related claims; ·our ability to establish and maintain collaborations on favorable terms, if at all; and ·the extent to which we acquire or in-license other product candidates and technologies.Identifying potential product candidates and conducting preclinical studies and clinical trials are time consuming, expensive and uncertain processesthat take years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales for anyof our current or future product candidates. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenue, ifany, will be derived from sales of products that we do not expect to be commercially available for many years, if at all.Accordingly, we will need substantial additional funding in connection with our continuing operations and to achieve our goals. As of December 31,2015, we had cash, cash equivalents and investments of $71.9 million. We expect that our existing cash, cash equivalents, and investments will be sufficientto enable us to meet our current operating plan for at least the next 12 months. However, our existing cash and cash equivalents may prove to be insufficientfor these activities. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research anddevelopment programs or future commercialization efforts. Adequate additional financing may not be available to us on acceptable terms, or at all. Inaddition, we may seek additional financing due to favorable market conditions or strategic considerations, even if we believe we have sufficient funds for ouroperating plans.Raising additional capital may cause dilution to our stockholders restrict our operations or require us to relinquish rights to our technologies or productcandidates.Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity and debtfinancings, as well as entering into collaborations, strategic alliances and licensing arrangements. We do not currently have any committed external source offunds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and theterms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Debt financing, if available,may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capitalexpenditures or declaring dividends, and may be secured by all or a portion of our assets. If we raise funds by entering into collaborations, strategic alliancesor licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs orproduct candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financingsor through collaborations, strategic alliances or licensing arrangements when needed, we may be required to delay, limit, reduce or terminate our productdevelopment or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop andmarket ourselves.Our short operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.We were founded in March 2010 and our operations to date have been limited to organizing and staffing our company, business planning, raisingcapital, developing our technology, identifying potential product candidates, undertaking preclinical studies and commencing Phase 1 clinical trials of ourproduct candidate. We have one product candidate in Phase 1 clinical trials, and all of our other programs are in research and preclinical development. Wehave not yet demonstrated our ability to successfully complete any clinical trials, including large-scale, pivotal clinical trials required for regulatoryapproval of our product candidates, obtain marketing approvals, manufacture a commercial scale product, or arrange for a third party to do so on our behalf,or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes many years to develop one new product from thetime it is25 discovered to when it is commercially available. Consequently, any predictions made about our future success or viability may not be as accurate as theycould be if we had a longer operating history or if we had product candidates in advanced clinical trials.In addition, as a new business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown factors thatmay alter or delay our plans. We will need to transition from a company with a research focus to a company capable of supporting development activitiesand, if a product candidate is approved, a company with commercial activities. We may not be successful in any step in such a transition.Risks Related to Drug Discovery, Development and CommercializationOur approach to the discovery and development of product candidates that target tumor metabolism and tumor immunology is unproven and may neverlead to marketable products.Our scientific approach focuses on using our understanding of cellular metabolic pathways and the role of glutaminase and hexokinase in thesepathways, as well as the role of arginase in the anti-tumor immune response, to identify molecules that are potentially promising as therapies for cancerindications. Any product candidates we develop may not effectively modulate metabolic or immunology pathways. The scientific evidence to support thefeasibility of developing product candidates based on inhibiting tumor metabolism or impacting the anti-tumor immune response are both preliminary andlimited. Although preclinical studies suggest that inhibiting glutaminase and hexokinase can suppress the growth of certain cancer cells, to date no companyhas translated this mechanism into a drug that has received marketing approval. Even if we are able to develop a product candidate in preclinical studies, wemay not succeed in demonstrating the safety and efficacy of the product candidate in human clinical trials. Our expertise in cellular metabolic pathways, therole of glutaminase and hexokinase in these pathways, and the role of arginase in the anti-tumor immune response may not result in the discovery anddevelopment of commercially viable products to treat cancer.We are very early in our development efforts, which may not be successful.We have invested a significant portion of our efforts and financial resources in the identification of our most advanced products candidate, CB-839,which is being evaluated in three Phase 1 clinical trials and CB-1158, where we plan to file an IND in mid-2016. Our hexokinase II inhibitor program is inpreclinical development. Because of the early stage of our development efforts and our unproven and novel approach to discovery and development ofproduct candidates, we do not have a clearly defined clinical development path. It is also too early in our development efforts to determine whether ourproduct candidates will demonstrate single-agent activity or will be developed for use in combination with other approved therapies, or both. As a result, thetiming and costs of the regulatory paths we will follow and marketing approvals remain uncertain. Our ability to generate product revenue, which we do notexpect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of CB-839 and CB-1158. Thesuccess of CB-839, CB-1158 and our hexokinase II inhibitor programs and any other product candidates we may develop will depend on many factors,including the following: ·successful enrollment in, and completion of, clinical trials; ·demonstrating safety and efficacy; ·receipt of marketing approvals from applicable regulatory authorities; ·establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; ·obtaining and maintaining patent and trade secret protection and non-patent exclusivity for our product candidates; ·launching commercial sales of the product candidates, if and when approved, whether alone or selectively in collaboration with others; ·acceptance of the product candidates, if and when approved, by patients, the medical community and third-party payors; ·effectively competing with other therapies; ·a continued acceptable safety profile of the products following approval; and ·enforcing and defending intellectual property rights and claims.If we do not accomplish one or more of these goals in a timely manner, or at all, we could experience significant delays or an inability to successfullycommercialize our product candidates, which would harm our business.26 We may not be successful in our efforts to identify or discover potential product candidates.Our drug discovery efforts may not be successful in identifying compounds that are useful in treating cancer. Our research programs may initially showpromise in identifying potential product candidates, yet fail to yield product candidates for clinical development for a number of reasons. In particular, ourresearch methodology used may not be successful in identifying compounds with sufficient potency or bioavailability to be potential product candidates. Inaddition, our potential product candidates may, on further study, be shown to have harmful side effects or other negative characteristics.Research programs to identify new product candidates require substantial technical, financial and human resources. We may choose to focus ourefforts and resources on potential product candidates that ultimately prove to be unsuccessful. If we are unable to identify suitable compounds for preclinicaland clinical development, we will not be able to generate product revenue, which would harm our financial position and adversely impact our stock price.If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise producepositive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development andcommercialization of our product candidates.Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinical developmentand then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans. Clinical testing is expensive, difficultto design and implement, can take many years to complete and is uncertain as to outcome. A failure of one or more clinical trials could occur at any stage oftesting. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of aparticular clinical trial do not necessarily predict final results of that trial.Moreover, preclinical and clinical data are often susceptible to multiple interpretations and analyses. Many companies that have believed theirproduct candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval of their products.We may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent our ability to receive marketingapproval or commercialize our product candidates, including that: ·regulators or institutional review boards may not authorize us or our investigators to commence a clinical trial or conduct a clinical trial at aprospective trial site; ·we may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trialsites; ·clinical trials of our product candidates may produce negative or inconclusive results, and we may decide, or regulators may require us, toconduct additional clinical trials or abandon product development programs; ·the number of patients required for clinical trials of our product candidates may be larger than we anticipate; enrollment in these clinical trialsmay be slower than we anticipate, or participants may drop out of these clinical trials at a higher rate than we anticipate; ·our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, or atall; ·regulators or institutional review boards may require that we or our investigators suspend or terminate clinical research for various reasons,including noncompliance with regulatory requirements or a finding that the participants are being exposed to unacceptable health risks; ·the cost of clinical trials of our product candidates may be greater than we anticipate; and ·the supply or quality of our product candidates or other materials necessary to conduct clinical trials of our product candidates may beinsufficient or inadequate.If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we areunable 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 onlymodestly positive or if there are safety concerns, we may: ·be delayed in obtaining marketing approval for our product candidates; ·not obtain marketing approval at all;27 ·obtain approval for indications or patient populations that are not as broad as intended or desired; ·obtain approval with labeling that includes significant use or distribution restrictions or safety warnings, including boxed warnings; ·be subject to additional post-marketing testing requirements; or ·have the product removed from the market after obtaining marketing approval.Product development costs will also increase if we experience delays in testing or in receiving marketing approvals. We do not know whether anyclinical 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 shortenany periods during which we may have the exclusive right to commercialize our product candidates, could allow our competitors to bring products to marketbefore we do, and could impair our ability to successfully commercialize our product candidates, any of which may harm our business and results ofoperations.If we experience delays or difficulties in enrolling patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.We may not be able to initiate or continue clinical trials for our product candidates if we are unable to identify and enroll a sufficient number ofeligible patients to participate in these trials as required by the U.S. Food and Drug Administration, or FDA, or analogous regulatory authorities outside theUnited States. In addition, some of our competitors may have ongoing clinical trials for product candidates that would treat the same indications as ourproduct candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ productcandidates. Patient enrollment is also affected by other factors, including: ·severity of the disease under investigation; ·availability and efficacy of approved medications for the disease under investigation; ·eligibility criteria for the trial in question; ·perceived risks and benefits of the product candidate under study; ·efforts to facilitate timely enrollment in clinical trials; ·patient referral practices of physicians; ·the ability to monitor patients adequately during and after treatment; and ·proximity and availability of clinical trial sites for prospective patients.Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or may require us to abandon one or moreclinical trials altogether. Enrollment delays in our clinical trials may result in increased development costs for our product candidates, which would cause thevalue of our company to decline and limit our ability to obtain additional financing.If serious adverse effects or unexpected characteristics of our product candidates are identified during development, we may need to abandon or limit ourdevelopment of some or all of our product candidates.CB-839 is our only product candidate in Phase 1 clinical trials, all our other programs are in preclinical development and their risk of failure is high. Itis impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive marketing approval. If our productcandidates are associated with undesirable side effects or have characteristics that are unexpected, we may need to abandon their development or limitdevelopment to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptablefrom a risk-benefit perspective. Many agents that initially showed promise in early stage testing for treating cancer or other diseases have later been found tocause side effects that prevented further development of the agent.We are in early clinical trials with CB-839 and we have seen several adverse events deemed possibly or probably related to CB-839. As ofNovember 2015, a variety of adverse events, or AEs, have been reported. On the CX839-001 study, treatment-emergent Grade ≥ 3 AEs occurring in >5% ofpatients included increases in liver enzymes aspartate aminotransferase (AST) and alanine aminotransferase (ALT). With a change to twice daily dosing withfood, only one out of the 66 patients showed a Grade 3 liver enzyme increase. We have treated an insufficient number of patients to fully assess the safety ofCB-839 and, as our trials progress, we may experience more frequent or more severe adverse events. Our ongoing trials for CB-839 may fail due to safety28 issues, and we may need to abandon development of CB-839. Our arginase and hexokinase II inhibitor programs may fail due to preclinical or clinical safetyissues, causing us to abandon or delay the development of a product candidate from these programs.We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indicationsthat may be more profitable or for which there is a greater likelihood of success.We have limited financial and managerial resources. As a result, we may forego or delay pursuit of opportunities with other product candidates or forother indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viablecommercial products or profitable market opportunities. Our spending on current and future research and development programs and product candidates forspecific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for aparticular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements incases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.Even if any of our product candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, thirdparty payors and others in the medical community necessary for commercial success.If any of our product candidates receive marketing approval, they may nonetheless fail to gain sufficient market acceptance by physicians, patients,third party payors and others in the medical community for us to achieve commercial success. For example, current cancer treatments like chemotherapy andradiation therapy for certain diseases and conditions are well established in the medical community, and doctors may continue to rely on these treatments. Ifour product candidates do not achieve an adequate level of acceptance, we may not generate significant product revenue to become profitable. The degree ofmarket acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including: ·the efficacy and potential advantages compared to alternative treatments; ·our ability to offer any approved products for sale at competitive prices; ·convenience and ease of administration compared to alternative treatments; ·the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; ·the strength of marketing and distribution support; ·sufficient third-party coverage or reimbursement; and ·the prevalence and severity of any side effects.If, in the future, we are unable to establish sales and marketing capabilities or to selectively enter into agreements with third parties to sell and market ourproduct candidates, we may not be successful in commercializing our product candidates if and when they are approved.We do not have a sales or marketing infrastructure and have no experience in the sale, marketing or distribution of pharmaceutical products. Toachieve commercial success for any approved product for which we retain sales and marketing responsibilities, we must either develop a sales and marketingorganization or outsource these functions to other third parties. In the future, we may choose to build a focused sales and marketing infrastructure to sell someof our product candidates if and when they are approved.There are risks involved both with establishing our own sales and marketing capabilities and with entering into arrangements with third parties toperform these services. For example, recruiting and training a sales force is expensive and time consuming and could delay any product launch. If thecommercial launch of a product candidate 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 cannotretain or reposition our sales and marketing personnel.Factors that may inhibit our efforts to commercialize our product candidates on our own include: ·our inability to recruit and retain adequate numbers of effective sales and marketing personnel; ·the inability of sales personnel to obtain access to physicians or persuade adequate numbers of physicians to prescribe any future products; and ·unforeseen costs and expenses associated with creating an independent sales and marketing organization.29 If we enter into arrangements with third parties to perform sales, marketing and distribution services, our product revenue or the profitability of theseproduct revenue to us may be lower than if we were to market and sell any products that we develop ourselves. In addition, we may not be successful inentering 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 mayhave little control over such third parties, and any of them may fail to devote the necessary resources and attention to sell and market our productseffectively. If we do not establish sales and marketing capabilities successfully, either on our own or in collaboration with third parties, we will not besuccessful in commercializing our product candidates.We face substantial competition, which may result in others discovering, developing or commercializing products before or more successfully thanwe do.The development and commercialization of new drug products is highly competitive. We face competition with respect to our current productcandidates, and will face competition with respect to any product candidates that we may seek to develop or commercialize in the future, from majorpharmaceutical companies, specialty pharmaceutical companies and biotechnology companies worldwide. There are a number of large pharmaceutical andbiotechnology companies that currently market and sell products or are pursuing the development of products for the treatment of the cancer indications forwhich we are focusing our product development efforts. Some of these competitive products and therapies are based on scientific approaches that are thesame as or similar to our approach and others are based on entirely different approaches. Potential competitors also include academic institutions,government agencies and other public and private research organizations that conduct research, seek patent protection and establish collaborativearrangements for research, development, manufacturing and commercialization.We are developing our product candidates for the treatment of various cancers. There are a variety of available drug therapies marketed for cancer. Inmany cases, these drugs are administered in combination to enhance efficacy. Some of the currently approved drug therapies are branded and subject topatent protection, and others are available on a generic basis. Many of these approved drugs are well-established therapies and are widely accepted byphysicians, patients and third-party payors. Insurers and other third-party payors may also encourage the use of generic products. We expect that if ourproduct candidates are approved, they will be priced at a significant premium over competitive generic products. This may make it difficult for us to achieveour business strategy of using our product candidates in combination with existing therapies or replacing existing therapies with our product candidates.There are also a number of product candidates in preclinical and clinical development by third parties to treat cancer by targeting cellularmetabolism. Our principal competitors in the field of tumor metabolism include Advanced Cancer Therapeutics, LLC, Aeglea Biotherapeutics, Inc., AgiosPharmaceuticals, Inc., AstraZeneca plc, Bayer Pharma AG, Celgene Corporation, Cornerstone Pharmaceuticals, Inc., Eli Lilly and Company, FormaTherapeutics Holdings, LLC, GlaxoSmithKline plc, Merck KGaA, Novartis International AG, Pfizer Inc., Quantum Pharmaceuticals, 3-V Biosciences, Inc.,Rhizen Pharmaceuticals SA, Roche Holdings, and its subsidiary Genentech Inc., Sprint Biosciences, and Takeda Pharmaceutical Co. Ltd. Our principalcompetitors in the field of tumor immunology include AstraZeneca plc, Boehringer Ingelheim GmbH, Bristol-Myers Squibb Company, CureTech Ltd., EliLilly and Company, Merck KGaA,, Fortress Biotech, Inc., GlaxoSmithKline plc, Incyte Corporation, iTeos Therapeutics SA, Merck & Co., NewLink GeneticsCorporation, Novartis International AG, Ono Pharmaceuticals, Co., Ltd, Pfizer Inc., Roche Holdings AG, Sanofi-aventis Groupe, Takeda Company Limited,and TG Therapeutics, Inc.Our competitors may develop products that are more effective, safer, more convenient or less costly than any that we are developing or that wouldrender our product candidates obsolete or non-competitive. In addition, our competitors may discover biomarkers that more efficiently measure metabolicpathways than our methods, which may give them a competitive advantage in developing potential products. Our competitors may also obtain marketingapproval from the FDA or other regulatory authorities for their products sooner than we may obtain approval for ours, which could result in our competitorsestablishing a strong market position before we are able to enter the market. Many of our competitors have significantly greater financial resources andexpertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approvedproducts than we do. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentratedamong a smaller number of our competitors. Smaller and other early stage companies may also prove to be significant competitors, particularly throughcollaborative arrangements with large and established companies. These third parties may compete with us in recruiting and retaining qualified scientific andmanagement personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, ornecessary for, our programs.Even if we are able to commercialize any product candidates, these products may become subject to unfavorable pricing regulations, third-partyreimbursement practices or healthcare reform initiatives, which would harm our business.The regulations that govern marketing approvals, pricing and reimbursement for new drugs vary widely from country to country. In the United States,new and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtainingapprovals. Some countries require approval of the sale price of a drug before it can be30 marketed. In many countries, the pricing review period begins after marketing or product-licensing approval is granted. In some foreign markets, prescriptionpharmaceutical pricing remains subject to continuing governmental control even after initial marketing approval is granted. As a result, we might obtainmarketing approval for a drug in a particular country, but then be subject to price regulations that delay its commercial launch, possibly for lengthy timeperiods, and negatively impact the revenue we are able to generate from the sale of the drug in that country. Adverse pricing limitations may hinder ourability to commercialize and generate revenue from one or more product candidates, even if our product candidates obtain marketing approval.Our ability to commercialize any product candidates successfully also will depend in part on the extent to which reimbursement for these products andrelated treatments will be available from government health programs, private health insurers and other organizations. Government authorities and third-partypayors, such as private health insurers and health maintenance organizations, decide which medications they will pay for and establish reimbursement levels.A significant trend in the U.S. healthcare industry and elsewhere is cost containment. Government authorities and third-party payors have attempted tocontrol costs by limiting coverage and the amount of payment for particular medications. Increasingly, third-party payors are requiring that drug companiesprovide them with predetermined discounts from list prices and are challenging the prices charged for medical products. Reimbursement may not be availablefor any product that we commercialize and, if reimbursement is available, the level of reimbursement may not be sufficient. Reimbursement may impact thedemand for, or the price of, any product candidate for which we obtain marketing approval. If reimbursement is not available or is available only to limitedlevels, we may not be able to successfully commercialize any product candidate for which we obtain marketing approval.There may be significant delays in obtaining reimbursement for newly approved products, and coverage may be more limited than the purposes forwhich the product is approved by the FDA or similar regulatory authorities outside the United States. Moreover, eligibility for reimbursement does not implythat any product will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Interimreimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may not be made permanent. Reimbursement rates mayvary according to the use of the drug and the medical circumstances under which it is used, may be based on reimbursement levels already set for lower costproducts or procedures or may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts orrebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports of drugs fromcountries where they may be sold at lower prices than in the United States. Third-party payors often rely upon Medicare coverage policies and paymentlimitations in setting their own reimbursement policies. Our inability to promptly obtain coverage and profitable payment rates from both government-funded programs and private payors for any approved products that we develop could have a material adverse effect on our operating results, our ability toraise capital needed to commercialize our approved products and our overall financial condition.Product liability lawsuits against us could cause us to incur substantial liabilities and could limit the commercialization of any product candidates we maydevelop.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 evengreater risk if we commercially sell any products that we may develop after approval. If we cannot successfully defend ourselves against claims that ourproduct candidates caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in: ·decreased demand for any product candidates that we may develop; ·injury to our reputation and significant negative media attention; ·withdrawal of clinical trial participants; ·significant costs to defend any related litigation; ·substantial monetary awards to trial participants or patients; ·loss of revenue; and ·the inability to commercialize any products we may develop.Although we maintain product liability insurance coverage in the amount of up to $10.0 million per claim and in the aggregate, it may not beadequate to cover all liabilities that we may incur. We anticipate that we will need to increase our insurance coverage as we continue clinical trials and if wesuccessfully commercialize any products. Insurance coverage is increasingly expensive. We may not be able to maintain insurance coverage at a reasonablecost or in an amount adequate to satisfy any liability that may arise.31 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 couldharm 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, includingchemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generally contract with third parties for thedisposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injuryresulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also couldincur 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 in ourworkplace, including those resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. Wedo not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal ofbiological, chemical, hazardous or radioactive materials.In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Thesecurrent or future laws and regulations may impair our research, development or production efforts. Failure to comply with these laws and regulations also mayresult in substantial fines, penalties or other sanctions.Risks Related to Our Dependence on Third PartiesWe rely on third parties to conduct our clinical trials and some aspects of our research and preclinical testing, and those third parties may not performsatisfactorily, including failing to meet deadlines for the completion of such trials, research or testing.We currently rely and expect to continue to rely on third parties, such as contract research organizations, clinical data management organizations,medical institutions and clinical investigators, to conduct our clinical trials and to conduct some aspects of our research and preclinical testing. Any of thesethird parties may terminate their engagements with us at any time. If these third parties do not successfully carry out their contractual duties, meet expecteddeadlines 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 inobtaining, marketing approvals for our product candidates and will not be able to, or may be delayed in our efforts to, successfully commercialize our productcandidates. Furthermore, these third parties may also have relationships with other entities, some of which may be our competitors. If we need to enter intoalternative arrangements, it would delay our product development activities.Our reliance on these third parties for research and development activities will reduce our control over these activities but will not relieve us of ourresponsibilities. For example, we will remain responsible for ensuring that each of our clinical trials is conducted in accordance with the generalinvestigational plan and protocols for the trial. Moreover, the FDA requires us to comply with standards, commonly referred to as Good Clinical Practices, forconducting, recording and reporting the results of clinical trials to assure that data and reported results are credible and accurate and that the rights, integrityand confidentiality of trial participants are protected. We also are required to register ongoing clinical trials and post the results of completed clinical trialson a government sponsored database, available at www.clinicaltrials.gov, within certain timeframes. Failure to do so can result in fines, adverse publicity andcivil and criminal sanctions.We do not have any manufacturing facilities. We currently rely, and expect to continue to rely, on third party manufacturers for the manufacture of ourproduct candidates for preclinical studies and clinical trials and for commercial supply of any of these product candidates for which we obtain marketingapproval. To date, we have obtained materials for CB-839 for our Phase 1 trial from third-party manufacturers. We have engaged third party manufacturers toobtain the active ingredient for CB-839 for pre-clinical testing and clinical trials. We do not have a long-term supply agreement with any third-partymanufacturers, and we purchase our required drug supply on a purchase order basis.We may be unable to establish agreements with third-party manufacturers or to do so on acceptable terms. Even if we are able to establish agreementswith third-party manufacturers, reliance on third-party manufacturers entails additional risks, including: ·reliance on the third party for regulatory compliance and quality assurance; ·the possible breach of the manufacturing agreement by the third party; and ·the possible termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us.Third-party manufacturers may not be able to comply with current U.S. Good Manufacturing Practice requirements, or cGMPs, or similar regulatoryrequirements outside the United States. Our failure, or the failure of our third-party manufacturers, to comply32 with applicable regulations could result in sanctions being imposed on us, including fines, injunctions, civil penalties, delays, suspension or withdrawal ofapprovals, license revocation, seizures or recalls of product candidates, operating restrictions and criminal prosecutions, any of which could adversely affectsupplies of our product candidates and harm our business and results of operations.Any product that we may develop may compete with other product candidates and products for access to these manufacturing facilities. There are alimited number of manufacturers that operate under cGMPs and that might be capable of manufacturing for us.Any performance failure on the part of our existing or future manufacturers could delay clinical development or marketing approval. We do notcurrently have arrangements in place for redundant supply for bulk drug substances. If any one of our current contract manufacturers cannot perform asagreed, we may be required to replace that manufacturer. Although we believe that there are several potential alternative manufacturers who couldmanufacture our product candidates, we may incur added costs and delays in identifying and qualifying any such replacement.Our current and anticipated future dependence upon others for the manufacture of our product candidates or products may adversely affect our futureprofit margins and our ability to commercialize any product candidates that receive marketing approval on a timely and competitive basis.We also currently rely, and expect to continue to rely, on third parties to store and distribute drug supplies for our clinical trials. Any performancefailure on the part of these third parties could delay clinical development or marketing approval of our product candidates or commercialization of our drugs,producing additional losses and depriving us of potential revenue. Although we believe that there are several potential alternative third parties who couldstore and distribute drug supplies for our clinical trials, we may incur added costs and delays in identifying and qualifying any such replacement.We may seek to selectively establish collaborations, and, if we are unable to establish them on commercially reasonable terms, we may have to alter ourdevelopment and commercialization plans.Our drug development programs and the potential commercialization of our product candidates will require substantial additional cash to fundexpenses. For some of our product candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies for thedevelopment and potential commercialization of those product candidates.We may also be restricted under existing license agreements from engaging in research and development activities or entering into future agreementson certain terms with potential collaborators. For example, pursuant to our license agreement with Symbioscience, we have agreed not to develop any otherarginase inhibitors for use in human healthcare outside of the scope of that agreement. We face significant competition in seeking appropriate collaborators. Whether we reach a definitive agreement for a collaboration will depend, amongother things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the proposedcollaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA orsimilar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturingand delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership oftechnology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge and industry and market conditionsgenerally. The collaborator may also consider alternative product candidates for similar indications that may be available to collaborate on and whether sucha collaboration could be more attractive than the one with us for our product candidate.Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent businesscombinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.If we decide to collaborate with a third party in connection with any of our development programs or product candidates, we may not be able tonegotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development program or theproduct candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delayits potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development orcommercialization activities at our own expense. If we elect to increase our expenditures to fund development or commercialization activities on our own, wemay need to obtain additional capital, which may not be available to us on acceptable terms or at all. If we do not have sufficient funds, we may not be ableto further develop our product candidates or bring them to market and generate product revenue.33 To the extent we enter into any collaborations, we may depend on such collaborations for the development and commercialization of our productcandidates. If those collaborations are not successful, we may not be able to capitalize on the market potential of our product candidates.We may selectively seek third-party collaborators for the development and commercialization of our product candidates. Our current and any futurecollaborators for any collaboration arrangements include large and mid-size pharmaceutical companies, regional and national pharmaceutical companies andbiotechnology companies. Pursuant to these arrangements and any potential future arrangements, we will have limited control over the amount and timing ofresources that our collaborators dedicate to the development or commercialization of our product candidates. Our ability to generate revenue from thesearrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.Collaborations involving our product candidates pose many risks to us, including that: ·Collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations. ·Collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renewdevelopment or commercialization programs based on clinical trial results, changes in the collaborator’s strategic focus or available funding orexternal factors such as an acquisition that diverts resources or creates competing priorities. ·Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a productcandidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing. ·Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our productcandidates or products if the collaborators believe that competitive products are more likely to be successfully developed or can becommercialized under terms that are more economically attractive than ours. ·A collaborator with marketing and distribution rights to one or more product candidates or products may not commit sufficient resources to themarketing and distribution of such drugs. ·Collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as toinvite litigation that could jeopardize or invalidate our proprietary information or expose us to potential litigation. ·Disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercializationof our product candidates or products or that result in costly litigation or arbitration that diverts management attention and resources. ·We may lose certain valuable rights under circumstances identified in our collaborations if we undergo a change of control. ·Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development orcommercialization of the applicable product candidates. ·Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all. If afuture collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development orcommercialization program under such collaboration could be delayed, diminished or terminated.We have in-licensed portfolios of arginase inhibitors and hexokinase II inhibitors, respectively, as part of our efforts to develop product candidates forthese programs, and we are substantially dependent on these in-licenses for these programs. To the extent these in-licenses are terminated, our business maybe harmed.Risks Related to Our Intellectual PropertyRecent laws and rulings by U.S. courts make it difficult to predict how patents will be issued or enforced in our industry.Changes in either the patent laws or interpretation of the patent laws in the United States and other countries may have a significant impact on ourability to protect our technology and enforce our intellectual property rights. There have been numerous recent changes to the patent laws and to the rules ofthe United States Patent and Trademark Office, or the USPTO, which may have a significant impact on our ability to protect our technology and enforce ourintellectual property rights. For example, the Leahy-Smith America Invents Act, which was signed into law in 2011, includes a transition from a “first-to-invent” system to a “first-to-file” system, and changes the way issued patents are challenged. Certain changes, such as the institution of inter partes reviewproceedings, came into effect on September 16, 2012. Substantive changes to patent law associated with the America Invents Act may affect our34 ability to obtain patents, and, if obtained, to enforce or defend them in litigation or post-grant proceedings, all of which could harm our business.Furthermore, the patent positions of companies engaged in the development and commercialization of biologics and pharmaceuticals are particularlyuncertain. Two cases involving diagnostic method claims and “gene patents” have recently been decided by the Supreme Court. On March 20, 2012, theSupreme Court issued a decision in Mayo Collaborative Services v. Prometheus Laboratories, Inc., or Prometheus, a case involving patent claims directed tomeasuring a metabolic product in a patient to optimize a drug dosage amount for the patient. According to the Supreme Court, the addition of well-understood, routine or conventional activity such as “administering” or “determining” steps was not enough to transform an otherwise patent ineligiblenatural phenomenon into patent eligible subject matter. On July 3, 2012, the USPTO issued guidance indicating that process claims directed to a law ofnature, a natural phenomenon or an abstract idea that do not include additional elements or steps that integrate the natural principle into the claimedinvention such that the natural principle is practically applied and the claim amounts to significantly more than the natural principle itself should be rejectedas directed to non-statutory subject matter. On June 13, 2013, the Supreme Court issued its decision in Association for Molecular Pathology v. MyriadGenetics, Inc., or Myriad, a case involving patent claims held by Myriad Genetics, Inc. relating to the breast cancer susceptibility genes BRCA1 and BRCA2.Myriad held that isolated segments of naturally occurring DNA, such as the DNA constituting the BRCA1 and BRCA2 genes, is not patent eligible subjectmatter, but that complementary DNA, which is an artificial construct that may be created from RNA transcripts of genes, may be patent eligible.We cannot assure you that our efforts to seek patent protection for our technology and products will not be negatively impacted by the decisionsdescribed above, rulings in other cases or changes in guidance or procedures issued by the USPTO. We cannot fully predict what impact the Supreme Court’sdecisions in Prometheus and Myriad may have on the ability of life science companies to obtain or enforce patents relating to their products andtechnologies in the future.Moreover, although the Supreme Court has held in Myriad that isolated segments of naturally occurring DNA are not patent-eligible subject matter,certain third parties could allege that activities that we may undertake infringe other gene-related patent claims, and we may deem it necessary to defendourselves against these claims by asserting non-infringement and/or invalidity positions, or pay to obtain a license to these claims. In any of the foregoing orin other situations involving third-party intellectual property rights, if we are unsuccessful in defending against claims of patent infringement, we could beforced to pay damages or be subjected to an injunction that would prevent us from utilizing the patented subject matter. Such outcomes could harm ourbusiness.If we are alleged to infringe intellectual property rights of third parties, our business could be harmed.Our research, development and commercialization activities may be alleged to infringe patents, trademarks or other intellectual property rights ownedby other parties. Certain of our competitors and other companies in the industry have substantial patent portfolios and may attempt to use patent litigation asa means to obtain a competitive advantage. We may be a target for such litigation. Even if our pending patent applications issue, they may relate to ourcompetitors’ activities and may therefore not deter litigation against us. The risks of being involved in such litigation may also increase as we become morevisible as a public company and move into new markets and applications for our product candidates. There may also be patents and patent applications thatare relevant to our technologies or product candidates that are unknown to us. For example, certain relevant patent applications may have been filed but notpublished. If such patents exist, or if a patent issues on any of such patent applications, that patent could be asserted against us. Third parties could bringclaims against us that would cause us to incur substantial expenses and, if the claims against us are successful, could cause us to pay substantial damages,including treble damages and attorneys’ fees for willful infringement. The defense of such a suit could also divert the attention of our management andtechnical personnel. Further, if an intellectual property infringement suit were brought against us, we could be forced to stop or delay research, developmentor sales of the product that is the subject of the suit.As a result of infringement claims, or to avoid potential claims, we may choose or be compelled to seek intellectual property licenses from thirdparties. These licenses may not be available on acceptable terms, or at all. Even if we are able to obtain a license, the license would likely obligate us to paylicense fees or royalties or both, and the rights granted to us likely would be nonexclusive, which would mean that our competitors also could obtain licensesto the same intellectual property. Ultimately, we could be prevented from commercializing a product candidate and/or technology or be forced to cease someaspect of our business operations if, as a result of actual or threatened infringement claims, we are unable to enter into licenses of the relevant intellectualproperty on acceptable terms. Further, if we attempt to modify a product candidate and/or technology or to develop alternative methods or products inresponse to infringement claims or to avoid potential claims, we could incur substantial costs, encounter delays in product introductions or interruptions insales.35 We may become involved in other lawsuits to protect or enforce our patents or other intellectual property, which could be expensive and time-consuming,and an unfavorable outcome could harm our business.In addition to the possibility of litigation relating to infringement claims asserted against us, we may become a party to other patent litigation andother proceedings, including inter partes review proceedings, post-grant review proceedings, derivation proceedings declared by the USPTO and similarproceedings in foreign countries, regarding intellectual property rights with respect to our current or future technologies or product candidates or products.The cost to us of any patent litigation or other proceeding, even if resolved in our favor, could be substantial. Some of our competitors may be able to sustainthe costs of such litigation or proceedings more effectively than we can because of their substantially greater financial resources. Patent litigation and otherproceedings may also absorb significant management time. Uncertainties resulting from the initiation and continuation of patent litigation or otherproceedings could impair our ability to compete in the marketplace.Competitors may infringe or otherwise violate our intellectual property, including patents that may issue to or be licensed by us. As a result, we maybe required to file claims in an effort to stop third-party infringement or unauthorized use. Any such claims could provoke these parties to assertcounterclaims against us, including claims alleging that we infringe their patents or other intellectual property rights. This can be expensive, particularly fora company of our size, and time-consuming, and even if we are successful, any award of monetary damages or other remedy we may receive may not becommercially valuable. In addition, in an infringement proceeding, a court may decide that our asserted intellectual property is not valid or is unenforceable,or may refuse to stop the other party from using the technology at issue on the grounds that our intellectual property does not cover its technology. Anadverse determination in any litigation or defense proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly andcould put our patent applications at risk of not issuing.If the breadth or strength of our patent or other intellectual property rights is compromised or threatened, it could allow third parties to commercializeour technology or products or result in our inability to commercialize our technology and products without infringing third-party intellectual property rights.Further, third parties may be dissuaded from collaborating with us.Interference or derivation proceedings brought by the USPTO or its foreign counterparts may be necessary to determine the priority of inventions withrespect to our patent applications, and we may also become involved in other proceedings, such as re-examination proceedings, before the USPTO or itsforeign counterparts. Due to the substantial competition in the pharmaceutical space, the number of such proceedings may increase. This could delay theprosecution of our pending patent applications or impact the validity and enforceability of any future patents that we may obtain. In addition, any suchlitigation, submission or proceeding may be resolved adversely to us and, even if successful, may result in substantial costs and distraction to ourmanagement.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some ofour confidential information could be compromised by disclosure during this type of litigation. Moreover, intellectual property law relating to the fields inwhich we operate is still evolving and, consequently, patent and other intellectual property positions in our industry are subject to change and are oftenuncertain. We may not prevail in any of these suits or other efforts to protect our technology, and the damages or other remedies awarded, if any, may not becommercially valuable. During the course of this type of litigation, there could be public announcements of the results of hearings, motions or other interimproceedings or developments. If securities analysts or investors perceive these results to be negative, the market price for our common stock could besignificantly harmed.We may not be able to protect our intellectual property rights throughout the world, which could impair our competitive position.Filing, prosecuting, defending and enforcing patents on all of our technologies, product candidates and products throughout the world would beprohibitively expensive. As a result, we seek to protect our proprietary position by filing patent applications in the United States and in select foreignjurisdictions and cannot guarantee that we will obtain the patent protection necessary to protect our competitive position in all major markets. Competitorsmay use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export infringingproducts to territories where we may obtain patent protection but where enforcement is not as strong as that in the United States. These products may competewith our current and future products in jurisdictions where we do not have any issued patents, and our patent claims or other intellectual property rights maynot be effective or sufficient to prevent them from so competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legalsystems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection,which could make it difficult for us to stop the infringement of our patents or the marketing of competing products in violation of our proprietary rightsgenerally. The legal systems of certain countries make it difficult or impossible to obtain patent protection for pharmaceutical products and services.Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and could divert our efforts and attention from other aspectsof our business.36 If we are unable to protect the confidentiality of our trade secrets, our business and competitive position could be harmed.In addition to seeking patents for some of our technologies and product candidates, we also rely on trade secrets, including unpatented know-how,technology and other proprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to them, such as our employees, corporate collaborators, outside scientificcollaborators, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and invention assignment agreementswith our employees and consultants that obligate them to assign to us any inventions developed in the course of their work for us. However, we cannotguarantee that we have executed these agreements with each party that may have or have had access to our trade secrets or that the agreements we haveexecuted will provide adequate protection. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information,including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. As a result, we may be forced to bring claims against thirdparties, or defend claims that they bring against us, to determine ownership of what we regard as our intellectual property. Monitoring unauthorizeddisclosure is difficult and we do not know whether the procedures we have followed to prevent such disclosure are, or will be adequate. Enforcing a claim thata party illegally disclosed or misappropriated a trade secret is difficult, expensive and time-consuming, and the outcome is unpredictable. In addition, somecourts inside and outside the United States may be less willing or unwilling to protect trade secrets. If any of the technology or information that we protect astrade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technologyor information to compete with us. If any of our trade secrets were to be disclosed to, or independently developed by, a competitor, our competitive positionwould be harmed.If our trademarks and trade names are not adequately protected, we may not be able to build name recognition in our markets of interest, and our businessmay be harmed.Our trademarks or trade names may be challenged, infringed, circumvented, declared generic or determined to be infringing on other marks. As ameans to enforce our trademark rights and prevent infringement, we may be required to file trademark claims against third parties or initiate trademarkopposition proceedings. This can be expensive and time-consuming, particularly for a company of our size. In addition, in an infringement proceeding, acourt may decide that a trademark of ours is not valid or is unenforceable, or may refuse to stop the other party from using the trademark at issue. We may notbe able to protect our rights to these and other trademarks and trade names which we need to build name recognition by potential partners or customers in ourmarkets of interest. We do not currently have any registered trademarks in the United States. Any trademark applications in the United States and in otherforeign jurisdictions where we may file may not be allowed or may subsequently be opposed. In addition, other companies in the biopharmaceutical spacemay be using trademarks that are similar to ours and may in the future allege that our use of the trademark infringes or otherwise violates their trademarks.Over the long term, if we are unable to establish name recognition based on our trademarks and trade names, then we may not be able to compete effectivelyand our business may be harmed.Third parties may assert ownership or commercial rights to inventions we develop.Third parties may in the future make claims challenging the inventorship or ownership of our intellectual property. We have written agreements withcollaborators that provide for the ownership of intellectual property arising from our collaborations. In some instances, there may not be adequate writtenprovisions to address clearly the resolution of intellectual property rights that may arise from a collaboration. If we cannot successfully negotiate sufficientownership and commercial rights to the inventions that result from our collaborations, or if disputes otherwise arise with respect to the intellectual propertydeveloped in the course of a collaboration, we may be limited in our ability to capitalize on the market potential of these inventions.In addition, we may face claims by third parties that our agreements with employees, contractors or consultants obligating them to assign intellectualproperty to us are ineffective or are in conflict with prior or competing contractual obligations of assignment, which could result in ownership disputesregarding intellectual property we have developed or will develop and interfere with our ability to capture the commercial value of such inventions.Litigation may be necessary to resolve an ownership dispute, and if we are not successful, we may be precluded from using certain intellectual property, ormay lose our exclusive rights in that intellectual property. Either outcome could have an adverse impact on our business.Risks Related to Regulatory Approval of Our Product Candidates and Other Legal Compliance MattersIf we are not able to obtain, or if there are delays in obtaining, required regulatory approvals, we will not be able to commercialize, or will be delayed incommercializing, our product candidates, and our ability to generate revenue will be impaired.Our product candidates and the activities associated with their development and commercialization, including their design, testing, manufacture,safety, efficacy, recordkeeping, labeling, storage, approval, advertising, promotion, sale and distribution, are subject to comprehensive regulation by the FDAand other regulatory agencies in the United States and by comparable authorities in other countries. Failure to obtain marketing approval for a productcandidate will prevent us from commercializing the product37 candidate. We have not received approval to market any of our product candidates from regulatory authorities in any jurisdiction. We have only limitedexperience in filing and supporting the applications necessary to gain marketing approvals and expect to rely on third-party contract research organizationsto assist us in this process. Securing regulatory approval requires the submission of extensive preclinical and clinical data and supporting information to thevarious regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing regulatory approval alsorequires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the relevant regulatoryauthority. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects,toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use.The process of obtaining marketing approvals, both in the United States and elsewhere, is expensive, may take many years and can vary substantiallybased upon a variety of factors, including the type, complexity and novelty of the product candidates involved. We cannot assure you that we will everobtain any marketing approvals in any jurisdiction. Changes in marketing approval policies during the development period, changes in or the enactment ofadditional statutes or regulations or changes in regulatory review for each submitted product application may cause delays in the approval or rejection of anapplication. The FDA and comparable authorities in other countries have substantial discretion in the approval process and may refuse to accept anyapplication or may decide that our data is insufficient for approval and require additional preclinical or other studies, and clinical trials. In addition, varyinginterpretations of the data obtained from preclinical testing and clinical trials could delay, limit or prevent marketing approval of a product candidate.Additionally, any marketing approval we ultimately obtain may be limited or subject to restrictions or post-approval commitments that render the approvedproduct not commercially viable.Any product candidate for which we obtain marketing approval could be subject to marketing restrictions or withdrawal from the market, and we may besubject to penalties if we fail to comply with regulatory requirements or if we experience unanticipated problems with our products.Any product candidate for which we obtain marketing approval, along with the manufacturing processes, post-approval clinical data, labeling,advertising and promotional activities for such product, will be subject to continual requirements of and review by the FDA and other regulatory authorities.These requirements include submissions of safety and other post-marketing information and reports, registration and listing requirements, cGMPrequirements, quality assurance and corresponding maintenance of records and documents and requirements regarding the distribution of samples tophysicians and recordkeeping. Even if marketing approval of a product candidate is granted, the approval may be subject to limitations on the indicated usesfor which the product may be marketed or to the conditions of approval, or contain requirements for costly post-marketing testing and surveillance to monitorthe safety or efficacy of the medicine. The FDA closely regulates the postapproval marketing and promotion of drugs to ensure that they are marketed onlyfor the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’communications regarding off-label use and if we do not market our products for their approved indications, we may be subject to enforcement action for off-label marketing.In addition, later discovery of previously unknown problems with our products, manufacturers or manufacturing processes, or failure to comply withregulatory requirements, may result in, among other things: ·restrictions on such products, manufacturers or manufacturing processes; ·restrictions on the labeling, marketing, distribution or use of a product; ·requirements to conduct post-approval clinical trials; ·warning or untitled letters; ·withdrawal of the products from the market; ·refusal to approve pending applications or supplements to approved applications that we submit; ·recall of products; ·fines, restitution or disgorgement of profits or revenue; ·suspension or withdrawal of marketing approvals; ·refusal to permit the import or export of our products; ·product seizure; and ·injunctions or the imposition of civil or criminal penalties.38 Our relationships with customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse and other healthcare laws andregulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm and diminished profits and futureearnings.Healthcare providers, physicians and third-party payors play a primary role in the recommendation and prescription of any product candidates forwhich we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuseand other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell anddistribute our medicines for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include thefollowing: ·the federal healthcare anti-kickback statute prohibits, among other things, persons from knowingly and willfully soliciting, offering, receivingor providing remuneration, directly or indirectly, in cash or in kind, to induce or reward 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 and state healthcare programs such asMedicare and Medicaid; ·the federal False Claims Act imposes criminal and civil penalties, including civil whistleblower or qui tam actions, against individuals orentities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false or fraudulent ormaking a false statement to avoid, decrease or conceal an obligation to pay money to the federal government; ·the federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic andClinical Health Act, imposes criminal and civil liability for executing a scheme to defraud any healthcare benefit program and also imposesobligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individuallyidentifiable health information; ·the federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making anymaterially false statement in connection with the delivery of or payment for healthcare benefits, items or services; ·the federal transparency requirements under the Affordable Care Act requires manufacturers of drugs, devices, biologics and medical supplies toreport to the Department of Health and Human Services information related to physician payments and other transfers of value and physicianownership and investment interests; and ·analogous state laws and regulations, such as state anti-kickback and false claims laws, may apply to sales or marketing arrangements andclaims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some statelaws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevantcompliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related topayments to physicians and other health care providers or marketing expenditures.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantialcosts. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or caselaw involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or anyother governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, exclusionfrom government funded healthcare programs, such as Medicare and Medicaid, and the curtailment or restructuring of our operations. If any of the physiciansor other providers or entities with whom we expect to do business are found to be not in compliance with applicable laws, they may be subject to criminal,civil or administrative sanctions, including exclusions from government funded healthcare programs.Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our productcandidates and affect the prices we may obtain.In the United States and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regardingthe healthcare system that could prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect ourability to profitably sell any product candidates for which we obtain marketing approval.The Medicare Prescription Drug, Improvement, and Modernization Act of 2003, or Medicare Modernization Act, changed the way Medicare coversand pays for pharmaceutical products. The legislation expanded Medicare coverage for drug purchases by the elderly and introduced a new reimbursementmethodology based on average sales prices for physician-administered drugs. In addition, this legislation provided authority for limiting the number of drugsthat will be covered in any therapeutic class. Cost reduction initiatives and other provisions of this legislation could decrease the coverage and price that wereceive for any approved products.39 While the Medicare Modernization Act applies only to drug benefits for Medicare beneficiaries, private payors often follow Medicare coverage policy andpayment limitations in setting their own reimbursement rates. Therefore, any reduction in reimbursement that results from the Medicare Modernization Actmay result in a similar reduction in payments from private payors.More recently, in March 2010, President Obama signed into law the Affordable Care Act, a sweeping law intended to broaden access to healthinsurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for healthcare and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. Effective October 1,2010, the Affordable Care Act revises the definition of “average manufacturer price” for reporting purposes, which could increase the amount of Medicaiddrug rebates to states. Further, the new law imposes a significant annual fee on companies that manufacture or import branded prescription drug products.Substantial new provisions affecting compliance have also been enacted, which may affect our business practices with health care practitioners. We will notknow the full effects of the Affordable Care Act until applicable federal and state agencies issue regulations or guidance under the new law. Although it is tooearly to determine the effect of the Affordable Care Act, the new law appears likely to continue the pressure on pharmaceutical pricing, especially under theMedicare program, and may also increase our regulatory burdens and operating costs.Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities forpharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance orinterpretations will be changed, or what the impact of such changes on the marketing approvals of our product candidates, if any, may be. In addition,increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to morestringent product labeling and post-marketing testing and other requirements.Risks Related to Employee Matters and Managing GrowthOur future success depends on our ability to retain our senior management team and to attract, retain and motivate qualified personnel.We are highly dependent upon our senior management team, as well as the other principal members of our research and development teams. All of ourexecutive officers are employed “at will,” meaning we or they may terminate the employment relationship at any time. We do not maintain “key person”insurance for any of our executives or other employees. The loss of the services of any of these persons could impede the achievement of our research,development and commercialization objectives.Recruiting and retaining qualified scientific, clinical, manufacturing and sales and marketing personnel will also be critical to our success. We maynot be able to attract and retain these personnel on acceptable terms given the competition among numerous pharmaceutical and biotechnology companiesfor similar personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions. Inaddition, we rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development andcommercialization strategy. Our consultants and advisors may be employed by employers other than us and may have commitments under consulting oradvisory contracts with other entities that may limit their availability to us.We expect to expand our operations, and may encounter difficulties in managing our growth, which could disrupt our business.We expect to expand the scope of our operations, particularly in the areas of drug development, regulatory affairs and sales and marketing. To manageour anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities andcontinue to recruit and train additional qualified personnel. We may not be able to effectively manage the expected expansion of our operations or recruitand train additional qualified personnel. Moreover, the expected expansion of our operations may lead to significant costs and may divert our managementand business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.We may engage in acquisitions that could disrupt our business, cause dilution to our stockholders or reduce our financial resources.In the future, we may enter into transactions to acquire other businesses, products or technologies. Because we have not made any acquisitions to date,our ability to do so successfully is unproven. If we do identify suitable candidates, we may not be able to make such acquisitions on favorable terms, or at all.Any acquisitions we make may fail to strengthen our competitive position, and these transactions may be viewed negatively by customers or investors. Wemay decide to incur debt in connection with an acquisition or issue our common stock or other equity securities to the stockholders of the acquired company,which would reduce the percentage ownership of our existing stockholders. We could incur losses resulting from undiscovered liabilities of the acquiredbusiness that are40 not covered by the indemnification we may obtain from the seller. In addition, we may not be able to successfully integrate the acquired personnel,technologies and operations into our existing business in an effective, timely and non-disruptive manner. Acquisitions may also divert management attentionfrom day-to-day responsibilities, increase our expenses and reduce our cash available for operations and other uses. We cannot predict the number, timing orsize of future acquisitions or the effect that any such transactions might have on our operating results.Risks Related to Our Common StockThe trading price of our common stock is likely to 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. The stock market in general and the market for biotechnologycompanies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result ofthis volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by manyfactors, including: ·the success of competitive products or technologies; ·regulatory actions with respect to our product candidates or our competitors’ product and product candidates; ·announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures, collaborations or capitalcommitments; ·results of clinical trials of our product candidates or those of our competitors; ·regulatory or legal developments in the United States and other countries; ·developments or disputes concerning patent applications, issued patents or other proprietary rights; ·the recruitment or departure of key personnel; ·actual and anticipated fluctuations in our quarterly operating results ·the level of expenses related to any of our product candidates or clinical development programs; ·the results of our efforts to in-license or acquire additional products or product candidates; ·actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts; ·variations in our financial results or those of companies that are perceived to be similar to us; ·fluctuations in the valuation of companies perceived by investors to be comparable to us; ·inconsistent trading volume levels of our shares; ·announcement or expectation of additional financing efforts; ·sales of our common stock by us, our insiders or our other stockholders; ·changes in the structure of healthcare payment systems; ·market conditions in the pharmaceutical and biotechnology sectors; ·general economic, industry and market conditions; and ·the other factors described in this “Risk Factors” section.In addition, in the past, stockholders have initiated class action lawsuits against companies following periods of volatility in the market prices of thesecompanies’ stock. Such litigation, if instituted against us, could cause us to incur substantial costs and divert management’s attention and resources.Concentration of ownership of our common stock among our existing executive officers, directors and principal stockholders may prevent new investorsfrom influencing significant corporate decisions.Our executive officers, directors and current beneficial owners of 5% or more of our common stock, in the aggregate, beneficially own a significantpercentage of our outstanding common stock. These persons, acting together, will be able to significantly influence all matters requiring stockholderapproval, including the election and removal of directors and any merger or41 other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders.If securities or industry analysts do not publish research, or publish unfavorable research, about our business, our stock price and trading volume coulddecline.The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or ourbusiness, our market and our competitors. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our sharesor change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularlypublish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.We will incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies in the United States,which may harm our operating results.As a public company listed in the United States, we have and will continue to incur significant additional legal, accounting and other expenses. Inaddition, changing laws, regulations and standards relating to corporate governance and public disclosure, including regulations implemented by theSecurities and Exchange Commission, or the SEC, and the NASDAQ Select Global Market, may increase legal and financial compliance costs and make someactivities more time-consuming. These laws, regulations and standards are subject to varying interpretations, and as a result, their application in practice mayevolve over time as new guidance is provided by regulatory and governing bodies. We intend to invest resources to comply with evolving laws, regulationsand standards, and this investment may result in increased general and administrative expenses and a diversion of management’s time and attention fromrevenue-generating activities to compliance activities. If, notwithstanding our efforts to comply with new laws, regulations and standards, we fail to comply,regulatory authorities may initiate legal proceedings against us, and our business may be harmed.Further, failure to comply with these laws, regulations and standards might also make it more difficult for us to obtain certain types of insurance,including director and officer liability insurance, and we might be forced to accept reduced policy limits and coverage or incur substantially higher costs toobtain the same or similar coverage. The impact of these events could also make it more difficult for us to attract and retain qualified persons to serve on ourBoard of Directors, on committees of our Board of Directors or as members of senior management.We do not anticipate paying any cash dividends on our common stock so any returns will be limited to changes in the value of our common stock.We have never declared or paid cash dividends on our common stock. We currently intend to retain our future earnings, if any, to fund thedevelopment and growth of our business. In addition, the terms of any existing or future credit facility may restrict our ability to pay dividends. Any return tostockholders will therefore be limited to the increase, if any, of our stock price.We are an “emerging growth company,” and we expect to comply with the reduced disclosure requirements applicable to emerging growth companies,which could make our common stock less attractive to investors.We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act, enacted in April 2012, and for as long aswe continue to be an “emerging growth company,” we expect to take advantage of exemptions from various reporting requirements applicable to otherpublic companies but not to “emerging growth companies,” including, but not limited to, not being required to comply with the auditor attestationrequirements of Section 404, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptionsfrom the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments notpreviously approved. We will continue to be an “emerging growth company” until the earlier of (1) the last day of the fiscal year (a) following the fifthanniversary of the closing of our initial public offering in October 2014, (b) in which we have total annual gross revenue of at least $1.0 billion, or (c) inwhich 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 asof the prior June 30, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period. We cannotpredict if investors will find our common stock less attractive by our reliance on these exemptions. If some investors find our common stock less attractive asa result of our choices to reduce disclosure, there may be a less active trading market for our common stock, and our stock price may be more volatile.42 If we are unable to maintain proper and effective internal controls over financial reporting, the accuracy and timeliness of our financial reporting may beadversely affected.Effective internal controls are necessary for us to provide reliable financial reports and to protect from fraudulent, illegal or unauthorized transactions.If we cannot provide effective controls and reliable financial reports, our business and operating results could be harmed. We have in the past discovered, andmay in the future discover, areas of our internal controls that need improvement. We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, tofurnish a report by management on the effectiveness of our internal control over financial reporting as of December 31, 2015. Our independent registeredpublic accounting firm will not be required to attest to the effectiveness of our internal control over financial reporting until our first annual report required tobe filed with the SEC following the later of the date we are deemed to be a “large accelerated filer,” each as defined in the Exchange Act, or the date we are nolonger an “emerging growth company,” as defined in the JOBS Act. We have been required to disclose changes made in our internal control and procedureson a quarterly basis.If material weaknesses or control deficiencies occur in the future, we may be unable to report our financial results accurately on a timely basis, whichcould cause our reported financial results to be materially misstated and result in the loss of investor confidence and cause the market price of our commonstock to decline.Provisions in our corporate charter documents and under Delaware law may prevent or frustrate attempts by our stockholders to change our managementor hinder efforts to acquire a controlling interest in us, and the market price of our common stock may be lower as a result.There are provisions in our certificate of incorporation and bylaws that may make it difficult for a third party to acquire, or attempt to acquire, controlof our company, even if a change in control was considered favorable by our stockholders.Our charter documents also contain other provisions that could have an anti-takeover effect, such as: ·establishing a classified Board of Directors so that not all members of our Board of Directors are elected at one time; ·permitting the Board of Directors to establish the number of directors and fill any vacancies and newly created directorships; ·providing that directors may only be removed for cause; ·prohibits cumulative voting for directors; ·requiring super-majority voting to amend some provisions in our certificate of incorporation and bylaws; ·authorizing the issuance of “blank check” preferred stock that our Board of Directors could use to implement a stockholder rights plan; ·eliminating the ability of stockholders to call special meetings of stockholders; and ·prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders.Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law,which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the dateof the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in aprescribed manner. Any provision in our certificate of incorporation or our bylaws or Delaware law that has the effect of delaying or deterring a change incontrol could limit the opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that someinvestors are willing to pay for our common stock.Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantiallyall disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or ourdirectors, officers or employees.Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for anyderivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arisingpursuant to the Delaware General Corporation Law, our amended and restated certificate of incorporation or our bylaws; or any action asserting a claimagainst us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forumthat it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors,officers and other employees.43 If a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable inan action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our business and financial condition.Item 1B.Unresolved Staff Comments.None.Item 2.Properties.Our headquarters are located at 343 Oyster Point Blvd., Suite 200, South San Francisco, California 94080. In March 2016, we amended our lease andextended the lease term to January 2024, with an option to extend another two years to January 2026. We have subleased a portion of this laboratory space toanother biotechnology company under a two-year sublease agreement that expires in July 2016. We believe that our existing facilities are adequate for ourcurrent needs, as the facilities have sufficient laboratory space to house additional scientists to be hired as we expand.Item 3.Legal Proceedings.From time to time, we may become involved in legal proceedings relating to claims arising from the ordinary course of business. Our managementbelieves that there are currently no claims or actions pending against us, the ultimate disposition of which could have a material adverse effect on our resultsof operations, financial condition or cash flows.Item 4.Mine Safety Disclosures.Not applicable. 44 PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Price Range of Common StockOur common stock commenced trading on the NASDAQ Global Select Market under the symbol "CALA" on October 2, 2014. Prior to that date, therewas no public trading market for our common stock. The following table sets forth, for the periods indicated, the high and low reported sales prices of ourcommon stock as reported on the NASDAQ Global Select Market: High Low 2015 Fourth Quarter$10.90 $5.16 Third Quarter$10.59 $4.31 2nd Quarter$19.89 $6.61 1st Quarter$25.41 $12.31 2014 Fourth Quarter (Beginning Oct 2, 2014)$33.48 $6.51 As of March 7, 2016, there were approximately 40 holders of record of our common stock.Stock Price Performance GraphThe following stock performance graph compares our total stock return with the total return for (i) the NASDAQ Composite Index and the (ii) theNASDAQ Biotechnology Index for the period from October 2, 2014 (the date our common stock commenced trading on the NASDAQ Select Global Market)through December 31, 2015. The figures represented below assume an investment of $100 in our common stock at the closing price of $9.41 on October 2,2014 and in the NASDAQ Composite Index and the NASDAQ Biotechnology Index on October 2, 2014 and the reinvestment of dividends into shares ofcommon stock. The comparisons in the table are required by the SEC and are not intended to forecast or be indicative of possible future performance of ourcommon stock. 45 $100 investment in stock or indexTickerOctober 2, 2014 December 31, 2015 Calithera Biosciences, Inc.CALA$100.00 $81.40 NASDAQ Composite IndexIXIC$100.00 $113.03 NASDAQ Biotechnology IndexNBI$100.00 $125.91This graph shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject tothe liabilities under that Section, and shall not be deemed to be incorporated by reference into any of our filings under the Securities Act whether madebefore or after the date hereof and irrespective of any general incorporation language in any such filing.Dividend PolicyWe have never declared or paid cash dividends on our capital stock. We intend to retain all available funds and any future earnings, if any, to fund thedevelopment and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Any future determination relatedto dividend policy will be made at the discretion of our Board of Directors.Use of Proceeds from Registered SecuritiesOn October 7, 2014, we closed our initial public offering, or IPO, in which we issued and sold 8,000,000 shares of our common stock at a publicoffering price of $10.00 per share, for net proceeds of $71.6 million, after deducting underwriting discounts and commissions of $5.6 million and estimatedoffering expenses of $2.8 million payable by the Company. No payments for such expenses were made directly or indirectly to (i) any of our officers ordirectors or their associates, (ii) any persons owning 10% or more of any class of our equity securities, or (iii) any of our affiliates. The offer and sale of all ofthe shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-198355), which was declaredeffective by the SEC on October 1, 2014. Citigroup Global Markets and Leerink Partners acted as joint book-running managers for the offering. Wells FargoSecurities and JMP Securities acted as co-managers for the offering. Following the sale of the shares in connection with the closings of the IPO, the offeringterminated.We have been using and will continue to use the net offering proceeds to advance our product candidates through clinical trial programs and forworking capital and general corporate purposes. No such payments were made directly or indirectly by us to directors, officers or persons owning ten percentor more of our common stock.There has been no material change in the planned use of proceeds from our IPO as described in our prospectus dated October 1, 2014, filed with theSEC pursuant to Rule 424(b) under the Securities Act of 1933, as amended.Issuer Purchases of Equity SecuritiesNone.46 Item 6.Selected Financial Data. The statements of operations data for the years ended December 31, 2015, 2014 and 2013, and the balance sheet data as of December 31, 2015 and2014 are derived from our audited financial statements included elsewhere in this Annual Report on Form 10-K. The selected balance sheet data as ofDecember 31, 2013 is derived from our audited financial statements which are not included in this Annual Report on Form 10-K.Our historical results are not necessarily indicative of the results to be expected in the future. You should read the selected financial data below inconjunction with the section of this report entitled “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” andour financial statements and the related notes included in this Annual Report on Form 10-K. Year Ended December 31, 2015 2014 2013 Statements of Operation Data:(in thousands, except per share data) Operating expenses: Research and development$23,748 $16,367 $9,900 General and administrative 9,071 5,354 2,478 Total operating expenses 32,819 21,721 12,378 Loss from operations (32,819) (21,721) (12,378)Interest income, net 175 9 1 Net loss$(32,644) $(21,712) $(12,377)Net loss per share, basic and diluted$(1.81) $(4.67) $(131.53)Shares used in computing net loss per share, basic and diluted 18,045 4,652 94 Year Ended December 31, 2015 2014 2013 Balance Sheet Data:(in thousands) Cash, cash equivalents and investments$71,925 $101,969 $33,820 Working capital 68,662 99,742 32,825 Total assets 75,750 104,770 34,844 Convertible preferred stock — — 54,282 Accumulated deficit (84,498) (51,854) (30,142)Total stockholders' equity (deficit) 71,788 100,366 (20,813) 47 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations. Some of the statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are forward-lookingstatements. These forward-looking statements are based on management’s beliefs and assumptions and on information currently available to ourmanagement and involve significant elements of subjective judgment and analysis. Words such as “may,” “will,” “should,” “could,” “would,” “expect,”“plan,” “anticipate,” “believe,” “estimate,” “project,” “predict,” “potential,” “seek”“target,” “goals,”“intend,” variations of such words, and similarexpressions are intended to identify forward-looking statements. Our actual results and the timing of events may differ significantly from the resultsdiscussed in the forward-looking statements. Factors that might cause such a difference include those discussed under the caption “Special Note RegardingForward Looking Statements” and in “Risk Factors” and elsewhere in this Annual Report on Form 10-K. These and many other factors could affect ourfuture financial and operating results. We undertake no obligation to update any forward-looking statement to reflect events after the date of this AnnualReport on Form 10-K.OverviewWe are a clinical-stage pharmaceutical company focused on discovering and developing novel small molecule drugs directed against tumormetabolism and tumor immunology targets for the treatment of cancer. Tumor metabolism and tumor immunology have emerged as promising new fields forcancer drug discovery, and recent clinical successes with therapeutic agents in each field have demonstrated the potential to create fundamentally newtherapies for cancer patients. Our lead product candidate, CB-839, is an internally discovered, first-in-class inhibitor of glutaminase, a critical enzyme intumor metabolism. We are currently evaluating CB-839 in three Phase 1 clinical trials in solid and hematological tumors. Our lead preclinical program intumor immunology is directed at developing inhibitors of the enzyme arginase and may provide a first-in-class therapeutic agent for this novel target. Ourongoing research efforts are focused on discovering additional product candidates against novel tumor metabolism and immunology targets.The field of tumor metabolism seeks to exploit the unique ways in which cancer cells take up and utilize nutrients in order to grow and survive. Ourlead product candidate in tumor metabolism, CB-839, takes advantage of the pronounced dependency many cancers have on the nutrient glutamine forgrowth and survival. CB-839 inhibits glutaminase, an enzyme required by cancer cells to utilize glutamine effectively. We are currently conducting threePhase 1 clinical trials of CB-839 in the United States in patients with solid tumors, leukemias, lymphomas and multiple myeloma. The purpose of these trialsis to evaluate the safety of CB-839 both as a single agent and in combination with approved therapies and to seek preliminary evidence of efficacy. Pendinginput from the FDA on the results of our Phase 1 trials and Phase 2 trial protocols, we plan to initiate one or more Phase 2 clinical trials of CB-839 in 2016.We currently hold all commercial rights to CB-839.Our second program in tumor metabolism is focused on the hexokinase II enzyme. A defining characteristic of most cancer cells is their increaseduptake of glucose. Cancer cells use glucose in a different manner than normal cells, but an obligate first step in all glucose utilizing pathways isphosphorylation of glucose by the enzyme hexokinase. Due to their higher glucose needs, cancer cells frequently increase the level of this critical enzyme,specifically the isoform hexokinase II. We believe inhibitors of hexokinase II will significantly impede the ability of cancer cells to survive and proliferateand may lead to new approaches in treating cancer. Our new program in hexokinase II inhibitors was in-licensed from TransTech Pharma and we seek toidentify and advance a drug candidate into clinical development as quickly as possible. We will provide additional details on our development plans andtimelines in the near future as we undertake pre-clinical studies to profile our portfolio of hexokinase II inhibitors.The field of tumor immunology seeks to activate the body’s own immune system to attack and kill cancer cells. Our preclinical program in tumorimmunology is focused on developing selective inhibitors of the enzyme arginase. Arginase depletes arginine, a nutrient that is critical for the activation,growth and survival of the body’s cancer-fighting immune cells. We believe that inhibitors of arginase can promote an anti-tumor immune response byrestoring arginine levels, thereby allowing activation of the body’s cancer-fighting immune cells. We are currently optimizing arginase inhibitors with theaim of submitting an IND application to the FDA by mid-2016.Since our inception in 2010, we have devoted substantially all of our resources to identifying and developing CB-839, advancing our preclinicalprograms, conducting clinical trials and providing general and administrative support for these operations. We have not recorded revenue from product sales,collaboration activities or any other source. We have funded our operations to date primarily from the issuance and sale of convertible preferred stock and theinitial public offering, or IPO, of our common stock that occurred in October 2014. In connection with the IPO, we sold 8,000,000 shares of common stock forproceeds of $71.6 million net of underwriting discounts and commissions and offering expenses.We have never been profitable and have incurred net losses in each year since inception. Our net losses were $32.6 million, $21.7 million, and $12.4million for 2015, 2014, and 2013. As of December 31, 2015 we had an accumulated deficit of $84.5 million. Substantially all of our net losses have resultedfrom costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.48 We expect to continue to incur significant expenses and increasing operating losses over at least the next several years. We expect our expenses willincrease substantially in connection with our ongoing activities, as we: ·advance product candidates through clinical trials; ·pursue regulatory approval of product candidates; ·operate as a public company; ·continue our preclinical programs and clinical development efforts; ·continue research activities for the discovery of new product candidates; and ·manufacture supplies for our preclinical studies and clinical trials.Critical Accounting Polices and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have beenprepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The preparation of these financial statements requires usto make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dateof the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and onvarious other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carryingvalue of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions orconditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policiesrelate to the more significant areas involving management’s judgments and estimates.Accrued Research and Development CostsWe record accrued liabilities for estimated costs of our research and development activities conducted by third-party service providers, which includethe conduct of preclinical studies and clinical trials and contract manufacturing activities. We record the estimated costs of research and developmentactivities based upon the estimated amount of services provided but not yet invoiced, and include these costs in accrued liabilities in the balance sheet andwithin research and development expense in the statement of operations. These costs are a significant component of our research and development expenses.We record accrued expenses for these costs based on the estimated amount of work completed and in accordance with agreements established with these thirdparties.We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage ofcompletion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accruedbalance in each reporting period. As actual costs become known, we adjust our accrued estimates. Although we do not expect our estimates to be materiallydifferent from amounts actually incurred, our understanding of the status and timing of services performed, the number of patients enrolled, and the rate ofpatient enrollment may vary from our estimates and could result in us reporting amounts that are too high or too low in any particular period. Our accruedexpenses are dependent, in part, upon the receipt of timely and accurate reporting from clinical research organizations and other third-party service providers.To date, there have been no material differences from our accrued expenses to actual expenses.Stock-Based CompensationWe recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant,net of estimated forfeitures. We estimate the grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which isgenerally the vesting period of the respective awards.The Black-Scholes option-pricing model requires the use of highly subjective assumptions, which determine the fair value of stock-based awards.These assumptions include:Expected Term. Our expected term represents the period that our stock-based awards are expected to be outstanding and is determined using thesimplified method (based on the mid-point between the vesting date and the end of the contractual term).Expected Volatility. Since we have only been publicly traded for a short period and do not have adequate trading history for our common stock, theexpected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal tothe expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle, or area ofspecialty.49 Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periodscorresponding with the expected term of option.Expected Dividend. We have never paid dividends on our common stock and have no plans to pay dividends on our common stock. Therefore, weused an expected dividend yield of zero.In addition to the Black-Scholes assumptions, we estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue toevaluate the adequacy of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover behavior, and other factors. The impact fromany forfeiture rate adjustment would be recognized in full in the period of adjustment and if the actual number of future forfeitures differs from our estimates,we might be required to record adjustments to stock-based compensation in future periods.Prior to our IPO in October 2014, the fair value of the shares of common stock underlying our share-based awards were estimated on each grant date byour Board of Directors. In order to determine the fair value of our common stock underlying option grants, our Board of Directors considered, among otherthings, timely valuations of our common stock prepared by an unrelated third-party valuation firm in accordance with the guidance provide by the AmericanInstitute of Certified Public Accountants Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Given the absenceof a public trading market for our common stock, our Board of Directors exercised reasonable judgment and considered a number of objective and subjectivefactors to determine the best estimate of the fair value of our common stock, including our stage of development; progress of our research and developmentefforts; the rights, preferences and privileges of our preferred stock relative to those of our common stock; equity market conditions affecting comparablepublic companies and the lack of marketability of our common stock. After the closing of our IPO, our Board of Directors determines the fair value of eachshare of underlying common stock based on the closing price of our common stock as reported by the NASDAQ Select Global Market on the date of grant.Income TaxesAs of December 31, 2015, we had approximately $76.7 million and $48.0 million, respectively, of federal and state operating loss carryforwardsavailable to reduce future taxable income that will begin to expire in 2030 for federal and state tax purposes.As of December 31, 2015, we also had research and development tax credit carryforwards of approximately $2.4 million and $1.9 million,respectively, for federal and state purposes available to offset future taxable income tax. If not utilized, the federal carryforwards will expire in variousamounts beginning in 2030, and the state credits can be carried forward indefinitely.Utilization of the net operating loss carryforwards may be subject to a substantial annual limitation due to the ownership change limitations providedby the Internal Revenue Code of 1986, as amended, and similar state provisions. We have performed an analysis to determine whether an "ownership change"has occurred from inception to December 31, 2014. Based on this analysis, management has determined that there was an ownership change. The annuallimitation may result in the expiration of net operating losses and credits before utilization, however, we do not believe any of our net operating losses andresearch and development credits are limited by this potential ownership change.Financial Operations OverviewResearch and Development ExpensesResearch and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates.We recognize all research and development costs as they are incurred. Research and development expenses consist primarily of the following: ·employee-related expenses, which include salaries, benefits and stock-based compensation; ·expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf; ·laboratory and vendor expenses related to the execution of preclinical studies and clinical trials; ·contract manufacturing expenses, primarily for the production of clinical supplies; ·facilities and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation andamortization expense and other supplies; ·license fees and milestone payments related to our licensing agreements.50 The largest component of our total operating expenses has historically been our investment in research and development activities including theclinical development of our product candidates. We allocate to research and development expenses the salaries, benefits, stock-based compensation expense,and indirect costs of our clinical and preclinical programs on a program-specific basis, and we include these costs in the program-specific expenses. Thefollowing table shows our research and development expenses for 2015, 2014, and 2013: Year Ended December 31, 2015 2014 2013 (in thousands)Development candidate: CB-839 (Glutaminase inhibitor)$13,279 $12,381 $5,283 Preclinical and research: CB-839 (Glutaminase inhibitor) - - 3,849 Arginase inhibitors 9,329 3,461 - Other preclinical and research 1,140 525 768 Total preclinical and research 10,469 3,986 4,617 Total$23,748 $16,367 $9,900 We expect our research and development expenses will increase during the next few years as we advance our product candidates into and throughclinical trials, pursue regulatory approval of our product candidates, which will require a significant investment in contract manufacturing and inventorybuild-up related costs. In December 2014, we entered into an exclusive license agreement with Symbioscience to develop and commercialize their portfolioof arginase inhibitors and in March 2015, we entered into an exclusive license agreement with TransTech to develop and commercialize their hexokinase IIinhibitors. These license agreements will result in higher research and development expenses in the future.The process of conducting clinical trials necessary to obtain regulatory approval is costly and time consuming. We may never succeed in achievingmarketing approval for our product candidates. The probability of success of our product candidates may be affected by numerous factors, including clinicaldata, competition, manufacturing capability and commercial viability. As a result, we are unable to determine the duration and completion costs of ourresearch and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our productcandidates.General and Administrative ExpensesGeneral and administrative expenses consist of personnel costs, allocated expenses and other expenses for outside professional services, includinglegal, audit and accounting services. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of facilities andother allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation and amortization expense and othersupplies. We have incurred and expect to continue to incur additional expenses as a result of operating as a public company, including costs to comply withthe rules and regulations applicable to companies listed on a national securities exchange and costs related to compliance and reporting obligations pursuantto the rules and regulations of the SEC, particularly after we cease to be an “emerging growth company.” In addition, we have incurred and expect tocontinue to incur increased expenses associated with being a public company, including additional insurance, investor relations and other increases relatedto needs for additional human resources and professional services.51 Results of OperationsComparison of the Years Ended December 31, 2015 and 2014 Years Ended December 31, Change 2015 2014 $ % (in thousands, except percentages) Operating expenses: Research and development $23,748 $16,367 $7,381 45%General and administrative 9,071 5,354 3,717 69%Total operating expenses 32,819 21,721 11,098 51%Loss from operations (32,819) (21,721) (11,098) 51%Interest income, net 175 9 166 * Net loss $(32,644) $(21,712) $(10,932) 50% * Percentage not meaningful.Research and DevelopmentResearch and development expenses increased $7.4 million, or 45%, from $16.4 million for 2014 to $23.7 million for 2015. The increase was due toan increase of $3.0 million in personnel-related costs primarily as a result of higher headcount, salary increases and stock-based compensation expenses, anincrease of $2.5 million primarily related to increased preclinical development activities in our arginase inhibitors program, an increase of $1.3 million inclinical trial related expenses in connection with our CB-839 Phase 1 clinical trials, and an increase of $0.6 million related to our licensing arrangement forour hexokinase II inhibitors program.General and AdministrativeGeneral and administrative expenses increased $3.7 million, or 69%, from $5.4 million for 2014, to $9.1 million for 2015. The increase was due toan increase of $2.2 million in personnel-related costs as a result of higher headcount, salary increases and stock-based compensation expense, an increase of$1.3 million in professional services costs primarily related to legal and insurance costs associated with operating as a public company, and $0.2 million for apayment to a third party related to a terminated license arrangement.Comparison of the Years Ended December 31, 2014 and 2013 Year Ended December 31, Change 2014 2013 $ % (in thousands, except percentages) Operating expenses: Research and development $16,367 $9,900 $6,467 65%General and administrative 5,354 2,478 2,876 116%Total operating expenses 21,721 12,378 9,343 75%Loss from operations (21,721) (12,378) (9,343) 75%Interest income, net 9 1 8 * Net loss $(21,712) $(12,377) $(9,335) 75% * Percentage not meaningful.Research and DevelopmentResearch and development expenses increased $6.5 million, or 65%, from $9.9 million for 2013 to $16.4 million for 2014. The increase was due to anincrease of $3.5 million in clinical trial related expenses in connection with our CB-839 Phase 1 clinical trials which began enrolling patients in February2014, an increase of $1.9 million in personnel-related costs primarily as a result of higher52 headcount, an increase of $0.8 million in costs related to CB-839 development and manufacturing to support our Phase 1 clinical trials, and $0.3 millionrelated to our licensing arrangement for our arginase inhibitors program.General and AdministrativeGeneral and administrative expenses increased $2.9 million, or 116%, from $2.5 million for 2013, to $5.4 million for 2014. The increase was due to anincrease of $1.7 million in personnel-related costs as a result of higher headcount, salary increases and stock-based compensation expense, an increase of $0.6million in professional services costs primarily related to audit fees and an increase of $0.5 million in facility costs due to our office expansion in the secondhalf of 2013.Liquidity and Capital ResourcesAs of December 31, 2015, we had cash, cash equivalents and investments totaling $71.9 million. In connection with our IPO that closed in October2014, we received cash proceeds of $71.6 million, net of underwriters’ discounts and commissions and expenses paid by us. Prior to the IPO, our operationshave been financed primarily by net proceeds from the sale of shares of our preferred stock.In November 2015 we filed a registration statement on Form S-3 with the Securities and Exchange Commission which permits the offering, issuanceand sale by us of up to a maximum aggregate offering price of $150 million of our common stock. Up to $50 million of the maximum aggregate offering priceof $150 million may be issued and sold pursuant to an at-the-market offering program for sales of our common stock under a sales agreement with Cowen andCompany LLC, which would act as our sales agent and underwriter. As of December 31, 2015, we had not sold any securities pursuant to the shelf registrationstatement or our at-the-market offering program.Our primary uses of cash are to fund operating expenses, primarily research and development expenditures. Cash used to fund operating expenses isimpacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.We believe that our existing cash, cash equivalents and investments as of December 31, 2015 will be sufficient for us to meet our current operatingplan for at least the next twelve months. However, our forecast of the period of time through which our financial resources will be adequate to support ouroperations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. In order to complete the process ofobtaining regulatory approval for our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary tocommercialize our product candidates, if approved, we will require substantial additional funding.We have based our projections of operating capital requirements on assumptions that may prove to be incorrect and we may use all of our availablecapital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization ofpharmaceutical products, we are unable to estimate the exact amount of our operating capital requirements. Our future funding requirements will depend onmany factors, including, but not limited to: ·the timing and costs of our planned clinical trials for our product candidates; ·the timing and costs of our planned preclinical studies of our product candidates; ·our success in establishing and scaling commercial manufacturing capabilities; ·the number and characteristics of product candidates that we pursue; ·the outcome, timing and costs of seeking regulatory approvals; ·subject to receipt of regulatory approval, revenue received from commercial sales of our product candidates; ·the terms and timing of any future collaborations, licensing, consulting or other arrangements that we may establish; ·the amount and timing of any payments we may be required to make in connection with the licensing, filing, prosecution, maintenance,defense and enforcement of any patents or patent applications or other intellectual property rights; and ·the extent to which we in-license or acquire other products and technologies.53 We plan to continue to fund our operations and capital funding needs through equity and/or debt financing. We may also consider collaborations orselectively partnering for clinical development and commercialization. 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 financingcovenants that would restrict our operations. 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 ourbusiness, results of operations and future prospects.The following table summarizes our cash flows for the periods indicated: Year Ended December 31, 2015 2014 2013 (in thousands) Cash used in operating activities $(29,933) $(19,231) $(11,837)Cash used in investing activities $(66,776) $(486) $(173)Cash provided by financing activities $845 $87,866 $43,625Cash Flows from Operating ActivitiesCash used in operating activities for the year ended December 31, 2015 was $29.9 million, consisting of a net loss of $32.6 million, which was offsetby non-cash charges $0.9 million for depreciation and amortization expense and $3.3 million for stock-based compensation. The change in our net operatingassets and liabilities of $1.4 million was primarily due to the timing of payments for our clinical trial and manufacturing activities.Cash used in operating activities for the year ended December 31, 2014 was $19.2 million, consisting of a net loss of $21.7 million, which was offsetby non-cash charges $0.4 million for depreciation and amortization expense and $0.7 million for stock-based compensation. The change in our net operatingassets and liabilities was primarily due to a $1.5 million increase in prepaid expenses and other current assets primarily related to our prepayment of clinicaltrial activities and directors and officers liability insurance, a $2.6 million increase in accounts payable and accrued liabilities related to an increase in ourresearch and development activities, and a $0.4 million increase in deferred rent.Cash used in operating activities for 2013 was $11.8 million, consisting of a net loss of $12.4 million, which was offset in part by non-cash charges of$0.3 million for depreciation and amortization expense and $70,000 for stock-based compensation. The change in our net operating assets and liabilities wasdue to a $0.4 million increase in our accounts payable and accrued liabilities related to an increase in our research and development activities and an increaseof $0.3 million in prepaid expenses and other current assets related to our prepayment for clinical trial activities.Cash Flows from Investing ActivitiesCash used in investing activities for the year ended December 31, 2015 was $66.8 million and was related to the purchase of investments of $109.1million and purchase of property and equipment of $0.4 million, partially offset by the sale or maturity of investments of $42.8 million.Cash used in investing activities for the year ended December 31, 2014 was $0.5 million and was related the purchase of property and equipment of$0.6 million, offset by the reduction in restricted cash of $70,000. Purchases of property and equipment were primarily related to leasehold improvements inconnection with our office expansion.Cash used in investing activities for the year ended December 31, 2013, was related to our purchase of property and equipment of $0.2 million.Purchases of property and equipment were primarily related to the expansion of our laboratory and related equipment.Cash Flows from Financing ActivitiesCash provided by financing activities for the year ended December 31, 2015 was $0.8 million and was from the issuance of common stock upon theexercise of stock options and employee stock plan purchases.Cash provided by financing activities for the year ended December 31, 2014 was $87.9 million and was related to net proceeds of $71.6 million fromthe sale of our common stock, upon our initial public offering in October 2014, $16.0 million in net proceeds from the sale and issuance of preferred stock,and $0.3 million from the issuance of common stock upon the exercise of stock options.54 Cash provided by financing activities for the year ended December 31, 2013 was primarily related to net proceeds from the sale and issuance ofpreferred stock of $43.6 million.Contractual Obligations and Other CommitmentsThe following table summarizes our contractual obligations as of December 31, 2015: Payments Due By Period Contractual Obligations:Less Than 1 Year 1 to 3 Years 3 to 5 Years More Than 5 Years Total (In thousands) Operating lease obligations (1)$1,046 $3,887 $4,603 $7,676 $17,212 Less: sublease income (2) (92) - - - (92) Total contractual obligations (3)$954 $3,887 $4,603 $7,676 $17,120 1.Represents future minimum lease payments under the non-cancelable lease for our headquarters in South San Francisco, California, including all addendumsthrough March 2016 and assuming delivery of the additional space in December 2016. In March 2016, we entered into an addendum to our non-cancelablefacility lease agreement in South San Francisco, California for an additional 24,900 of office and laboratory space and to extend the lease term throughJanuary 2024. We expect to take delivery of the additional space in December 2016.The minimum lease payments above do not include any related commonarea maintenance charges or real estate taxes. 2.In September 2014, we entered into a non-cancelable sublease agreement for a portion of our facilities, through July 2016. 3.We enter into agreements in the normal course of business with organizations for collaborations or in-licensing arrangements, contract research organizationsfor clinical trials and vendors for preclinical studies and other services and products for operating purposes which are cancelable at any time by us, generallyupon 30 to 60 days prior written notice. These payments are not included in this table of contractual obligations.Off-Balance Sheet ArrangementsDuring 2015, 2014, and 2013 we did not have any off-balance sheet arrangements.JOBS Act Accounting ElectionWe are an “emerging growth company,” as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new orrevised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We haveirrevocably elected not to avail ourselves of this exemption from new or revised accounting standards, and, therefore, are subject to the same new or revisedaccounting standards as other public companies that are not emerging growth companies.Recent Accounting PronouncementsIn August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubtabout an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in thetiming and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for us for the 2016 annual period and with early adoptionpermitted. We will include the required disclosures in our December 31, 2016 annual financial statements to the extent that they are applicable.In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, or ASU No. 2015-17, which simplifies thepresentation of deferred income taxes. ASU No. 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent in a statement of financialposition. We early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. No prior periods were retrospectively adjusted.In February 2016, the FASB issued ASU 2016-02, Leases. The ASU requires management to recognize lease assets and lease liabilities by lessees forall operating leases. The ASU is effective for periods ending on December 15, 2018 and interim periods therein on a modified retrospective basis. We arecurrently assessing the impact the adoption of ASU 2016-02 will have on the financial statements.55 Item 7A.Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities. Our investment policyallows us to maintain a portfolio of cash equivalents and investments in a variety of high credit quality securities issued by the U.S. government, U.S.government-sponsored agencies and highly rated banks and corporations, subject to certain concentration limits. Our investment policy prohibits us fromholding auction rate securities or derivative financial instruments. As of December 31, 2015, we had cash, cash equivalents and investments of $71.9 million.A portion of our investments may be subject to interest rate risk and could fall in value if market interest rates increase. However, we believe that ourexposure to interest rate risk is not significant as the majority of our investments are short-term in duration and a 1% change in interest rates would not have asignificant impact on the total value of our portfolio. We actively monitor changes in interest rates. We had no outstanding debt as of December 31, 2015. 56 Item 8.Financial Statements and Supplementary Data. CALITHERA BIOSCIENCES, INC.INDEX TO FINANCIAL STATEMENTS PageReport of Independent Registered Public Accounting Firm 58Balance Sheets 59Statements of Operations 60Statements of Comprehensive Loss 61Statements of Convertible Preferred Stock and Stockholders’ Equity 62Statements of Cash Flows 63Notes to Financial Statements 64 57 Report of Independent Registered Public Accounting Firm The Board of Directors and Stockholders of Calithera Biosciences, Inc.We have audited the accompanying balance sheets of Calithera Biosciences, Inc. as of December 31, 2015 and 2014, and the related statements of operations,comprehensive loss, convertible preferred stock and stockholder’s equity (deficit) and cash flows for each of the three years in the period ended December 31,2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financialstatements based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engagedto perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reportingas a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting 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.In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Calithera Biosciences, Inc. atDecember 31, 2015 and 2014, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, inconformity with U.S. generally accepted accounting principles./s/ Ernst & Young LLPRedwood City, CaliforniaMarch 15, 2016 58 Calithera Biosciences, Inc.Balance Sheets(in thousands, except per share amounts) December 31, 2015 2014 Assets Current assets: Cash and cash equivalents$6,105 $101,969 Short-term investments 63,823 - Prepaid expenses and other current assets 2,567 1,894 Total current assets 72,495 103,863 Long-term investments 1,997 - Restricted cash 46 46 Property and equipment, net 931 861 Other assets 281 — Total assets$75,750 $104,770 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable$562 $693 Accrued liabilities 3,271 3,428 Total current liabilities 3,833 4,121 Deferred rent 129 270 Other non-current liabilities - 13 Total liabilities 3,962 4,404 Commitments and contingencies (Note 5) Stockholders’ equity: Preferred stock, $0.0001 par value per share, 10,000 shares authorized as of December 31, 2015 and 2014; no share issued and outstanding as of December 31, 2015 and 2014 - - Common stock, $0.0001 par value, 200,000 shares authorized as of December 31, 2015 and 2014; 18,232 and 17,943 shares issued and outstanding as of December 31, 2015 and 2014, respectively 2 2 Additional paid-in capital 156,353 152,218 Accumulated deficit (84,498) (51,854)Accumulated other comprehensive loss (69) - Total stockholders’ equity 71,788 100,366 Total liabilities and stock and stockholders’ equity$75,750 $104,770 See accompanying notes. 59 Calithera Biosciences, Inc.Statements of Operations(in thousands, except per share amounts) Year Ended December 31, 2015 2014 2013 Operating expenses: Research and development$23,748 $16,367 $9,900 General and administrative 9,071 5,354 2,478 Total operating expenses 32,819 21,721 12,378 Loss from operations (32,819) (21,721) (12,378)Interest income, net 175 9 1 Net loss (32,644) (21,712) (12,377)Net loss per share, basic and diluted$(1.81) $(4.67) $(131.53)Weighted average common shared used to compute net loss per share, basic and diluted 18,045 4,652 94See accompanying notes. 60 Calithera Biosciences, Inc.Statements of Comprehensive Loss(in thousands) Year Ended December 31, 2015 2014 2013 Net loss$(32,644) $(21,712) $(12,377)Other comprehensive loss: Net unrealized loss on available-for-sale securities (69) — — Total comprehensive loss$(32,713) $(21,712) $(12,377) 61 Calithera Biosciences, Inc.Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands, except per share amounts) Convertible Preferred Stock Common Stock AdditionalPaid-InCapital Accumulated Deficit OtherComprehensiveLoss TotalStockholders'Equity(Deficit) Shares Amount Shares Amount Balance at December 31, 2012 1,704 $10,722 58 $- $9,194 $(17,765) - $(8,571)Issuance of Series C convertiblepreferred stock for cash at $4.77per share in April 2013, net of$24 in issuance costs 1,823 8,676 - - - - - Issuance of Series D convertiblepreferred stock for cash at $8.41per share in October 2013, net of$115 in issuance costs 4,162 34,884 - - - - - Vesting of common stock issuedto founders - - 3 - - - - Exercise of stock options - - 100 - 65 - 65 Stock-based compensationexpense - - - - 70 - 70 Net loss - - - - - (12,377) (12,377)Balance at December 31, 2013 7,689 54,282 161 - 9,329 (30,142) - (20,813)Issuance of Series D convertiblepreferred stock for cash at $8.41per share in July 2014, net of $41in issuance costs 1,903 15,959 - - - - - - Conversion of preferred stock tocommon stock upon initialpublic offering (9,592) (70,241) 9,592 1 70,240 - - 70,241 Issuance of common stock inconnection with initial publicoffering, net of underwritingdiscounts, commissions andissuance costs - - 8,000 1 71,623 - - 71,624 Issuance of common stock tononemployees - - 21 - 54 - - 54 Vesting of common stock issuedto founders - - 1 - 1 - - 1 Exercise of stock options - - 168 - 282 - - 282 Stock-based compensationexpense - - - - 689 - - 689 Net loss - - - - - (21,712) (21,712)Balance at December 31, 2014 - - 17,943 2 152,218 (51,854) - 100,366 Exercise of stock options - - 219 - 365 - - 365 Issuance of common stock peremployee stock purchase plan - - 70 - 498 - - 498 Stock-based compensationexpense - - - - 3,272 - - 3,272 Net loss - - - - - (32,644) (32,644)Unrealized loss on available-for-sale securities - - (69) (69)Balance at December 31, 2015 - $- 18,232 $2 $156,353 $(84,498) $(69) $71,788 See accompanying notes.62 Calithera Biosciences, Inc.Statements of Cash Flows(in thousands) Year Ended December 31, 2015 2014 2013 Cash Flows From Operating Activities Net loss$(32,644) $(21,712) $(12,377)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 404 361 281 Amortization of premiums on investments 446 - - Stock-based compensation 3,272 689 70 (Gain) Loss on disposal of property and equipment (7) 2 5 Changes in operating assets and liabilities: Prepaid expenses and other current assets (673) (1,544) (282)Other assets (263) - - Accounts payable (131) 543 125 Accrued liabilities (196) 2,058 310 Deferred rent, non-current (141) 372 31 Net cash used in operating activities (29,933) (19,231) (11,837) Cash Flows From Investing Activities Purchases of investments (109,099) - - Proceeds from maturity of investments 42,764 - - Purchase of property and equipment (441) (556) (164)Change in restricted cash - 70 (9)Net cash used in investing activities (66,776) (486) (173) Cash Flows From Financing Activities Proceeds from issuance of common stock upon initial public offering, net - 71,625 — Net proceeds from issuance of convertible preferred stock - 15,959 43,560 Proceeds from stock option exercises and employee stock plan purchases 845 282 65 Net cash provided by financing activities 845 87,866 43,625 Net (decrease) increase in cash and cash equivalents (95,864) 68,149 31,615 Cash and cash equivalents at beginning of period 101,969 33,820 2,205 Cash and cash equivalents at end of period$6,105 $101,969 $33,820 Supplemental Disclosure of Non-Cash Investing and Financing Information: Unpaid amounts related to property and equipment purchases$26 $110 $— Services settled through the issuance of common stock$— $55 $— See accompanying notes. 63 Calithera Biosciences, Inc.Notes to Financial Statements1. Organization and Basis of PresentationCalithera Biosciences, Inc. (the “Company”) was incorporated in the State of Delaware on March 9, 2010. The Company is a clinical-stagebiopharmaceutical company focused on discovering and developing novel small molecule drugs directed against tumor metabolism and tumor immunologytargets for the treatment of cancer. The Company’s principal operations are based in South San Francisco, California, and it operates in one segment.LiquidityIn the course of its development activities, the Company has sustained operating losses and expects such losses to continue over the next severalyears. The Company’s ultimate success depends on the outcome of its research and development activities. The Company has incurred net losses fromoperations since inception and has an accumulated deficit of $84.5 million as of December 31, 2015. The Company intends to raise additional capitalthrough the issuance of additional equity, and potentially through strategic alliances with partner companies. However, if such financing is not available atadequate levels, the Company will need to reevaluate its operating plans. Management believes that the currently available resources will provide sufficientfunds to enable the Company to meet its operating plan for at least the next twelve months. However, if the Company’s anticipated operating results are notachieved in future periods, management believes that planned expenditures may need to be reduced in order to extend the time period over which the then-available resources would be able to fund the Company’s operations. 2. Summary of Significant Accounting PoliciesUse of EstimatesThe accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). Thepreparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of revenue andexpenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to clinical trial accrued liabilities,fair value of common stock, fair value of marketable securities, income taxes, and stock-based compensation. Management bases its estimates on historicalexperience and on various other market specific and relevant assumptions that management believes to be reasonable under the circumstances. Actual resultscould differ from those estimates.Cash and Cash EquivalentsThe Company considers all highly liquid investments with original maturities of three months or less at the time from the date of purchase to be cashequivalents. Cash equivalents, which consist primarily of amounts invested in money market accounts, are stated at fair value.InvestmentsAll investments have been classified as “available-for-sale” and are carried at estimated fair value as determined based upon quoted market prices orpricing models for similar securities. Management determines the appropriate classification of its investments at the time of purchase and reevaluates suchdesignation as of each balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive loss.Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest income,net. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is included in interest income, net.Restricted CashRestricted cash consists of money market funds held by the Company’s financial institution as collateral for the Company’s obligations under itsfacility lease for the Company’s corporate headquarters in South San Francisco, California.Concentration of Credit RiskFinancial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents, investments andrestricted cash. The Company invests in a variety of financial instruments and, by its policy, limits these financial64 instruments to high credit quality securities issued by the U.S. government, U.S. government-sponsored agencies and highly rated banks and corporations,subject to certain concentration limits. The Company’s cash, cash equivalents, investments and restricted cash are held by financial institutions in the UnitedStates that management believes are of high credit quality. Amounts on deposit may at times exceed federally insured limits.Property and EquipmentProperty and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is computed using thestraight-line method over the estimated useful lives of the respective assets. Depreciation and amortization begins at the time the asset is placed in service.Maintenance and repairs are charged to operations as incurred. Upon sale or retirement of assets, the cost and related accumulated depreciation andamortization are removed from the balance sheet and the resulting gain or loss is reflected in operations.The useful lives of property and equipment are as follows: Research and development 5 years Furniture and office equipment 5 years Computer equipment 3 years Software 3 years Leasehold improvements Shorter of remaining lease term or estimated useful life Impairment of Long-Lived AssetsThe Company evaluates its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstancesindicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount ofeach asset to the future undiscounted cash flows the asset is expected to generate over its remaining life. If the asset is considered to be impaired, the amountof any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. The Company has not recordedimpairment of any long-lived assets during any of the periods presented.Accrued Research and Development CostsThe Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, whichinclude the conduct of preclinical studies and clinical trials, and contract manufacturing activities. The Company records the estimated costs of research anddevelopment activities based upon the estimated amount of services provided but not yet invoiced, and include these costs in accrued liabilities in thebalance sheets and within research and development expense in the statements of operations. These costs are a significant component of the Company’sresearch and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance withagreements established with its third-party service providers. The Company makes significant judgments and estimates in determining the accrued liabilitiesbalance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any materialdifferences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled, and therate of patient enrollment may vary from the Company’s estimates, resulting in adjustments to expense in future periods. Changes in these estimates thatresult in material changes to the Company’s accruals could materially affect the Company’s results of operations.Research and Development CostsResearch and development costs are expensed as incurred and consist of salaries and benefits, stock-based compensation expense, laboratory suppliesand allocated facility costs, as well as fees paid to third parties that conduct certain research and development activities on the Company’s behalf. Amountsincurred in connection with license agreements are also included in research and development costs. Nonrefundable advance payments for goods or servicesto be rendered in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the relatedgoods are delivered or the services are performed.Deferred RentRent expense is recognized on a straight-line basis over the noncancelable term of the Company’s operating lease and, accordingly, the Companyrecords the difference between cash rent payments and the recognition of rent expense as a deferred rent65 liability. Incentives granted under the Company’s facility leases, including allowances to fund leasehold improvements, are deferred and are recognized asadjustments to rental expense on a straight-line basis over the term of the lease.Stock-Based CompensationStock-based awards issued to employees and directors, including stock options and employee stock purchase plans, are recorded at fair value as of thegrant date using the Black-Scholes option-pricing model and recognized as expense on a straight-line basis over the employee or director’s requisite serviceperiod (generally the vesting period). Because stock compensation expense is based on awards ultimately expected to vest, it is reduced by an estimate forfuture forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates.Income TaxesThe Company uses the liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based onthe differences between the financial reporting and the tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be ineffect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. Avaluation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s lackof earnings history, the net deferred tax assets have been fully offset by a valuation allowance.The Company recognizes benefits of uncertain tax positions if it is more likely than not that such positions will be sustained upon examination basedsolely on their technical merits, as the largest amount of benefit that is more likely than not to be realized upon the ultimate settlement. The Company’spolicy is to recognize interest and penalties related to the underpayment of income taxes as a component of income tax expense or benefit. To date, therehave been no interest or penalties charged in relation to the unrecognized tax benefits.Net Loss per ShareBasic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by theweighted average number of shares of common stock outstanding during the period without consideration of common stock equivalents. Since the Companywas in a loss position for all periods presented, basic net loss per share attributable to common stockholders is the same as diluted net loss per shareattributable to common stockholders for all periods as the inclusion of all potential common shares outstanding would have been anti-dilutive.Recent Accounting PronouncementsIn August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2014-15, Disclosure ofUncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubtabout an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in thetiming and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for the Company for the 2016 annual period and with earlyadoption permitted. The Company will include the required disclosures in our December 31, 2016 annual financial statements to the extent that they areapplicable.In November 2015, the FASB issued ASU No. 2015-17, Balance Sheet Classification of Deferred Taxes, or ASU No. 2015-17, which simplifies thepresentation of deferred income taxes. ASU No. 2015-17 requires that deferred tax assets and liabilities be classified as noncurrent in a statement of financialposition. The Company early adopted ASU 2015-17 effective December 31, 2015 on a prospective basis. No prior periods were retrospectively adjusted.In February 2016, the FASB issued ASU 2016-02, Leases. The ASU requires management to recognize lease assets and lease liabilities by lessees forall operating leases. The ASU is effective for periods ending on December 15, 2018 and interim periods therein on a modified retrospective basis. TheCompany is currently assessing the impact the adoption of ASU 2016-02 will have on the financial statements. 66 3. Fair Value MeasurementsFair value accounting is applied for all financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on arecurring basis (at least annually). Financial instruments include cash and cash equivalents, short-term investments, accounts payable and accrued liabilitiesthat approximate fair value due to their relatively short maturities.Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated withthe inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paidto transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on themeasurement date. The authoritative guidance on fair value measurements establishes a three tier fair value hierarchy for disclosure of fair valuemeasurements as follows:Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical orsimilar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data forsubstantially the full term of the related assets or liabilities; andLevel 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or nomarket data.A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair valuemeasurement. Where quoted prices are available in an active market, securities are classified as Level 1. The Company classifies money market funds as Level1. When quoted market prices are not available for the specific security, then the Company estimates fair value by using quoted prices for identical or similarinstruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can becorroborated by observable market data for substantially the full term of the assets. Where applicable, these models project future cash flows and discount thefuture amounts to a present value using market-based observable inputs obtained from various third party data providers, including but not limited to,benchmark yields, interest rate curves, reported trades, broker/dealer quotes and market reference data. The Company classifies its corporate notes and U.S.government agency securities as Level 2. Level 2 inputs for the valuations are limited to quoted prices for similar assets or liabilities in active markets andinputs other than quoted prices that are observable for the asset or liability. There were no transfers between Level 1 and Level 2 during the periods presented.The following table sets forth the fair value of our financial assets and liabilities, allocated into Level 1, Level 2 and Level 3, that was measured on arecurring basis (in thousands): December 31, 2015 Level 1 Level 2 Level 3 Total Financial Assets: Money market funds $5,548 $- $- $5,548 Corporate notes and commercial paper - 23,151 - 23,151 U.S. treasury securities - 4,329 - 4,329 U.S. government agency securities - 38,340 - 38,340 Total financial assets $5,548 $65,820 $- $71,368 December 31, 2014 Level 1 Level 2 Level 3 Total Financial Assets: Money market funds $102,015 $- $- $102,015 Total financial assets $102,015 $- $- $102,015 67 4. Balance Sheet ComponentsFinancial InstrumentsCash equivalents and investments, all of which are classified as available-for-sale securities, and restricted cash consisted of the following (inthousands): December 31, 2015 December 31, 2014 Cost UnrealizedGain Unrealized(Loss) EstimatedFairValue Cost UnrealizedGain Unrealized(Loss) EstimatedFair Value Money market funds$5,548 $- $- 5,548 $102,015 $- $- 102,015 Corporate notes and commercialpaper 23,186 - (35) 23,151 - - - - U.S. treasury securities 4,334 - (5) 4,329 - - - - U.S. government agency securities 38,369 - (29) 38,340 - - - - $71,437 $- $(69) $71,368 $102,015 $- $- $102,015 Classified as: Cash equivalents $5,502 $101,969 Short-term investments 63,823 - Long-term investments 1,997 - Restricted cash 46 46 Total cash equivalents andinvestments $71,368 $102,015 At December 31, 2015, the remaining contractual maturities of available-for-sale securities were less than two years. There have been no significantrealized gains or losses on available-for-sale securities for the periods presented. The Company does not intend to sell the investments that are in anunrealized loss position, and it is unlikely that the Company will be required to sell the investments before recovery of their amortized cost basis, which maybe maturity. The Company has also determined that the gross unrealized losses on our marketable securities at December 31, 2015 were temporary in nature.All marketable securities with unrealized losses at December 31, 2015 have been in a loss position for less than twelve months. There were no transfersbetween Level 1 and Level 2 during the periods presented. As of December 31, 2015, the Company had a total of $71.9 million in cash, cash equivalents andinvestments, which included $0.6 million in cash and $71.3 million in cash equivalents and investments.Property and Equipment, NetProperty and equipment, net consist of the following (in thousands): December 31, 2015 2014 Research and development equipment$1,833 $1,427 Furniture and office equipment 75 75 Computer equipment 249 211 Software 46 58 Leasehold improvements 326 321 Total property and equipment 2,529 2,092 Less: accumulated depreciation and amortization (1,598) (1,231)Property and equipment, net$931 $861 Property and equipment depreciation and amortization expense for the years ended December 31, 2015, 2014 and2013 was $404,000, $361,000 and $281,000, respectively.68 Accrued LiabilitiesAccrued liabilities consist of the following (in thousands): December 31, 2015 2014 Accrued bonus and payroll expenses$1,696 $1,476 Accrued professional and consulting services 153 490 Accrued clinical and manufacturing expenses 921 1,029 Accrued preclinical and research expenses 194 32 Other 307 401 Total accrued liabilities$3,271 $3,428 5. Commitments and ContingenciesFacilitiesIn July 2010, the Company entered into a lease agreement for office and laboratory facilities in South San Francisco, California. The lease commencedin November 2010 and initially expired one year after the commencement date. The Company entered into addendums to the lease agreement at variouspoints in time to add space to the arrangement and extend the lease term through June 2013.In February 2013, the Company entered into a non-cancelable facility lease agreement for office and laboratory facilities in South San Francisco,California. The lease commenced on July 2013 and expires two years after the commencement date. In October 2013, the Company signed an addendum tothe lease agreement for additional space and to extend the lease term through November 2017. The lease has a two-year renewal option prior to expiration. Inaddition the lease provides for a tenant improvement allowance of up to $230,000, which was fully utilized in 2014 and included in deferred rent. The leasehas rent escalation clauses through the lease term, as well as reduced rent on the additional space for the first 12 months. The Company recognizes rentexpense on a straight-line basis over the non-cancelable term of the lease. Under the terms of the lease agreement for its new South San Francisco facility, the Company provided the lessor with an irrevocable letter of credit inthe amount of $46,000. The lessor shall be entitled to draw on the letter of credit in the event of any uncured default by the Company under the terms of thelease.In March 2016, the Company entered into an addendum to its non-cancelable facility lease agreement in South San Francisco, California for anadditional 24,900 of office and laboratory space and to extend the lease term through January 2024. The Company expects to take delivery of the additionalspace in December 2016. The lease has a two-year renewal option prior to expiration. In addition, the addendum to the lease provides for an additionaltenant improvement allowance of up to $269,900. On the delivery date, the Company will be required to increase the amount of its existing letter of creditfrom $46,000 to $440,000 as a security deposit to the lease. Future aggregate minimum lease payments under the non-cancelable operating leases, including all addendums through March 2016 and assumingdelivery of the additional space in December 2016, are as follows (in thousands): Year ending December 31: 2016$1,046 2017 1,831 2018 2,056 2019 2,260 2020 2,342 Thereafter 7,677 Total$17,212 In September 2014, the Company entered into a non-cancelable sublease agreement for a portion of its facilities, through July 2016. Future annualminimum sublease proceeds as of December 31, 2015 (in thousands) are as follows:Year ending December 31: 2016$92 Total$9269 Expenses and income associated with the Company’s operating leases were as follows (in thousands): Year Ended December 31, 2015 2014 2013 Rent expense $ 1,365 $ 1,309 $ 866 Sublease income (243) (73) —IndemnificationsThe Company indemnifies each of its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is orwas serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws.The term of the indemnification period lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officeror director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director andofficer liability insurance. This insurance allows the transfer of risk associated with the Company’s exposure and may enable it to recover a portion of anyfuture amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, it has not recognized anyliabilities relating to these obligations for any period presented.Other MattersIn October 2014, the Company received an invoice of approximately $1.3 million relating to a contingent amount associated with a terminatedlicense agreement, incurred as a result of the closing of its IPO in October 2014. In June 2015, the Company agreed to make a payment of $0.2 million to thethird party, which was recorded in general and administrative expense in the statement of operations. As of December 31, 2015, there were no furtherobligations related to this matter. 6. Convertible Preferred Stock and Stockholders’ Equity (Deficit)Convertible Preferred StockAs of December 31, 2013, the Company had outstanding convertible preferred stock as follows (in thousands, except share amounts): Convertible Preferred Stock:Shares Authorized Shares Issued andOutstanding CarryingValues LiquidationPreference Series A 27,499 27,497 $2,786 $3,750 Series B 1,257,545 1,257,543 5,958 6,000 Series C 2,242,622 2,242,620 10,654 10,700 Series D 4,229,166 4,161,799 34,884 35,000 Total convertible preferred stock 7,756,832 7,689,459 $54,282 $55,450 In July 2014, the Company issued 1,902,583 shares of Series D convertible preferred stock at a price of $8.41 per share, with the same provisions ofpreviously issued Series D convertible preferred stock. Aggregate net proceeds were approximately $16.0 million.Immediately prior to the completion of the Company’s initial public offering (“ IPO”) in October 2014, all of the outstanding shares of convertiblepreferred stock automatically converted into 9,592,042 shares of common stock on a one-to-one basis.Initial Public OfferingIn October 2014, the Company completed an IPO of its common stock. In connection with its IPO, the Company issued and sold 8,000,000 shares ofits common stock, at a price to the public of $10.00 per share. As a result of the IPO, the Company received $71.6 million in net proceeds, after deductingunderwriting discounts and commissions of $5.6 million and offering expenses of $2.8 million paid by the Company.At the closing of the IPO, 9,592,042 shares of outstanding convertible preferred stock were automatically converted into 9,592,042 shares of commonstock with the related carrying value of $70.2 million reclassified to common stock and additional paid-in capital. In connection with the IPO, the Companyamended and restated its Amended and Restated Certificate of Incorporation to70 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 parvalue of $0.0001 per share. There were no shares of preferred stock outstanding at December 31, 2015 and 2014.Restricted StockIn March 2010, the Company entered into a restricted stock purchase agreement with two founders of the Company. The individuals purchased a totalof 17,416 shares of common stock for a total purchase price of $836. These agreements contain a repurchase option that gives the Company an irrevocableoption for a period of ninety days after the individual’s employment is terminated either voluntarily or involuntarily to repurchase the unvested restrictedstock at a price that is the lower of the original price per share paid by the founder for such stock or the fair value as of the date of such repurchase. Therestricted stock vested and the repurchase option lapsed over 48 months measured from the date that the first share of Series A was issued, which was June 17,2010. As of December 31, 2015, none of these shares remained subject to repurchase. 7. Equity Incentive Plans2010 PlanIn 2010, the Company adopted the 2010 Equity Incentive Plan (the “2010 Plan”). Under the 2010 Plan, shares of the Company’s common stock havebeen reserved for the issuance of stock options to employees, directors, and consultants under terms and provisions established by the Board of Directors.Under the terms of the 2010 Plan, options were granted at an exercise price not less than fair market value. For employees holding more than 10% of thevoting rights of all classes of stock, the exercise prices for incentive and nonstatutory stock options were not less than 110% of fair market value, asdetermined by the Board of Directors. The terms of options granted under the 2010 Plan did not exceed ten years. The vesting schedule of option grants wastypically four years.The Company granted options under the 2010 Plan until October 2014 when it was terminated as to future awards, although it continues to govern theterms of options that remain outstanding under the 2010 Plan.As of December 31, 2015, a total of 944,525 shares of common stock are subject to options outstanding under the 2010 Plan.2014 PlanIn September 2014, the Company’s Board of Directors and stockholders approved the 2014 Equity Incentive Plan (the “2014 Plan”) which becameeffective in October 2014, at which time the 2010 Plan was terminated. The 2014 Plan provides for the grant of stock options, other forms of equitycompensation, and performance cash awards. The number of shares of common stock reserved for issuance under the 2014 Plan will automatically increase onJanuary 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’scapital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the Company’s Board of Directors.As of December 31, 2015, a total of 1,689,075 shares of common stock were reserved for issuance under the 2014 Plan, of which 968,776 shares ofcommon stock are available for future grant.71 The following summarizes option activity (in thousands, except share and price per option data): Options Outstanding Number of Options Weighted-AverageExercise Price perOption AggregateValueIntrinsic Outstanding — December 31, 2012 244,928 $0.77 Options granted 725,161 $1.99 Options exercised (100,273) $0.64 Options cancelled (4,986) $1.05 Outstanding — December 31, 2013 864,830 $1.80 $769 Options granted 571,660 $5.24 Options exercised (168,523) $1.67 Options cancelled (57,047) $1.87 Outstanding — December 31, 2014 1,210,920 $3.44 $20,292 Options granted 707,099 $15.68 Options exercised (218,636) $1.67 Options cancelled (34,559) $7.12 Outstanding — December 31, 2015 1,664,824 $8.80 $3,831 Exercisable — December 31, 2015 346,720 $3.95 $1,320 Vested and expected to vest — December 31, 2015 1,630,878 $8.76 $3,777 The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exerciseprice of the options and the fair value of the Company’s common stock of $7.66 per share as of December 31, 2015.The weighted-average fair value per share of employee options granted during the years ended December 31, 2015, 2014 and 2013 were $11.47, $4.90and $1.44, respectively. The total fair value of options that vested during the years ended December 31, 2015, 2014 and 2013 was $1.1 million, $582,000and $60,000, respectively.As of December 31, 2015, the weighted-average remaining contractual life was 7.91 years and 8.52 years for exercisable options and vested andexpected to vest options, respectively.Stock-Based Compensation ExpenseTotal stock-based compensation recognized related to the 2010 Plan and 2014 Plan was as follows (in thousands): Year Ended December, 31 2015 2014 2013 Research and development$1,147 $275 $47 General and administrative 1,703 345 23 Total stock-based compensation$2,850 $620 $70 As of December 31, 2015, the total unrecognized compensation expense related to unvested options, net of estimated forfeitures, was $8.0 million,which the Company expects to recognize over an estimated weighted average period of 2.6 years.Prior to the Company’s IPO in October 2014, the fair value of the shares of common stock underlying stock options were historically determined bythe Company’s Board of Directors. Because there had been no public market for the Company’s common stock, the Board of Directors had determined fairvalue of the common stock at the time of grant of the option by considering a number of objective and subjective factors including important developmentsin the Company’s operations, valuations performed by an independent third party, sales of convertible preferred stock, actual operating results and financialperformance, the conditions in the biotechnology industry and the economy in general, the stock price performance and volatility of comparable publiccompanies, and the lack of liquidity of the Company’s common stock, among other factors.72 In each of the periods presented, the exercise price per share for each stock option was the same as the fair value of the Company’s common stock onthe date of grant.In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model and assumptions discussed below.Each of these inputs is subjective and generally requires significant judgment to determine.Expected Term—The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and isdetermined using the simplified method (based on the midpoint between the vesting date and the end of the contractual term).Expected Volatility—Since the Company has only been publicly traded for a short period and does not have adequate trading history for its commonstock, the expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over aperiod equal to the expected term of the stock option grants. The comparable companies were chosen based on their similar size, stage in the life cycle,or area of specialty.Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periodscorresponding with the expected term of option.Expected Dividend—The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore,the Company used an expected dividend yield of zero.The fair value of stock option awards was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions: Year Ended December 31, 2015 2014 2013 Expected term5.3 - 6.1 years 5.9 - 6.6 years 6.3 years Volatility74.8% - 89.7% 78.6 - 97.7% 87.1 - 96.0% Risk-free interest rate1.53% - 1.71% 0.9% - 2.3% 1.1 - 1.9% Expected dividend rate —% —% —%ESPPIn September 2014, the Company’s Board of Directors and stockholders approved the 2014 Employee Stock Purchase Plan (the “ESPP”) whichbecame effective in October 2014. The number of shares of common stock reserved for issuance under 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 stockoutstanding on December 31 of the preceding calendar year; (2) 250,000 shares of common stock; or (3) such lesser number as determined by the Company’sBoard of Directors.The ESPP allows eligible employees to purchase shares of the Company's common stock at a discount through payroll deductions of up to 15% oftheir eligible compensation, subject to certain plan limitations. The ESPP provides for 24-month offering periods with four 6-month purchase periods, and atthe end of each purchase period, employees are able to purchase shares at 85% of the lower of the fair market value of the Company's common stock on thefirst trading day of the offering period or on the last day of the purchase period. As of December 31, 2015, 69,614 shares of common stock have been issued toemployees participating in the ESPP and 299,702 shares were available for issuance under the ESPP. The ESPP is a compensatory plan as defined by theauthoritative guidance for stock compensation. As such stock-based compensation expense has been recorded for the year ended December 31, 2015.Total stock-based compensation expense recognized related to the ESPP was as follows (in thousands): Year Ended December 31, 2015 2014 2013 Research and development $ 258 $ 41 $ - General and administrative 164 28 - Total stock based compensation $ 422 $ 69 $ - 73 The Company used the following assumptions to estimate the fair value of stock offered under the ESPP for the years ended December 31, 2015 and2014: Year Ended December 31, 2015 2014 Expected term0.28 years to 1.83 years 0.37 years to 2.13 years Volatility59.9% - 78.3% 65.2% to 81.0% Risk-free interest rate0.02% - 0.50% 0.05% to 0.58% Expected dividend rate —% —% 8. Income TaxesNo provision for income taxes was recorded for the years ended December 31, 2015, 2014 and 2013. The Company has incurred net operating lossesfor all the periods presented. The Company has not reflected any benefit of such net operating loss carryforwards in the accompanying financial statements.The effective tax rate of the provision for income taxes differs from the federal statutory rate as follows: Year Ended December, 31 2015 2014 2013 Federal statutory income tax rate 34.0% 34.0% 34.0%State income taxes, net of federal benefit— 5.8 5.8 Federal and state tax credits 2.1 1.1 3.8 Other permanent differences (1.9) — — Change in valuation allowance (34.2) (40.9) (43.6) 0% 0% 0% The components of the deferred tax assets and liabilities are as follows (in thousands): Year Ended December, 31 2015 2014 Deferred tax assets: Net operating loss carryforwards$28,871 $19,323 Tax credits 2,193 1,512 Accrued liabilities 754 712 Stock based compensation 536 21 Other 509 241 Gross deferred tax assets 32,863 21,809 Valuation allowance (32,863) (21,809)Net deferred tax assets$- $-Due to the Company’s lack of earnings history, the deferred tax assets have been fully offset by a valuation allowance as of December 31, 2015 and2014. The valuation allowance increased by $11.1 million and $8.8 million during the years ended December 31, 2015 and 2014, respectively. ASC Topic740 requires that the tax benefit of deductible temporary differences of carryforwards be recorded as a deferred tax assets to the extent that managementassesses that realization is "more likely than not." Future realization of the tax benefit ultimately depends on the existence of sufficient taxable income withinthe carryback or carryforward period available under the tax law. The Company has set up the valuation allowance against the federal and state deferred taxassets because based on all available evidence, these deferred tax assets are not more likely than not to be realizable.As of December 31, 2015, the Company had approximately $76.7 million and $48.0 million, respectively, of federal and state operating losscarryforwards available to reduce future taxable income that will begin to expire in 2030 for federal and state tax purposes.As of December 31, 2015, the Company also had research and development tax credit carryforwards of approximately$2.4 million and $1.9 million,respectively, for federal and state purposes available to offset future taxable income tax. If not utilized, the federal carryforwards will expire in variousamounts beginning in 2030, and the state credits can be carried forward indefinitely.74 As a result of the Company's IPO in 2014, the Company triggered an "ownership change" as defined in Internal Revenue Code Section 382 and relatedprovisions. Sections 382 and 383 place a limitation on the amount of taxable income which can be offset by carryforward tax attributes, such as net operatinglosses or tax credits, after a change in control. Generally, after a change in control, a loss corporation cannot deduct carryforward tax attributes in excess ofthe limitation prescribed by Section 382 and 383. Therefore, certain of the Company's carryforward tax attributes may be subject to an annual limitationregarding their utilization against taxable income in future periods. However, the Company does not believe any of its net operating losses and research anddevelopment credits are limited by this ownership change in 2014.Uncertain Tax PositionsAs of December 31, 2015, the Company’s total unrecognized tax benefit was $1.7 million, of which none of the tax benefit, if recognized, would affectthe effective income tax rate due to the valuation allowance that currently offsets deferred tax assets. A reconciliation of the Company’s unrecognized taxbenefits for the years ended December 31, 2015, 2014 and 2013 is as follows (in thousands): Year Ended December, 31 2015 2014 2013 Balance at beginning of year$1,194 $773 $388 Additions based on tax positions related to current year 520 421 385 Balance at end of year$1,714 $1,194 $773The unrecognized tax benefits, if recognized and in absence of full valuation allowance, would increase our credit carryforwards and hence deferredtax assets. The Company does not expect the unrecognized tax benefits to change significantly over the next 12 months.Interest and penalties are zero, and the Company’s policy is to account for interest and penalties in tax expense on the statement of operations andcomprehensive loss. The Company files income tax returns in the U.S. federal and California tax jurisdictions. All periods since inception are subject toexamination by U.S. federal and California tax jurisdictions, none of which are currently under examination. 9. Net Loss per Common ShareSince the Company was in a loss position for all periods presented, basic net loss per share is the same as diluted net loss per share for all periods as theinclusion of all potential common shares outstanding would have been anti-dilutive. Potentially dilutive securities that were not included in the diluted pershare calculations because they would be anti-dilutive were as follows (in thousands): December 31, 2015 2014 2013 Options to purchase common stock 1,665 1,211 865 Common stock subject to repurchase — — 1 Convertible preferred stock — — 7,689 Total 1,665 1,211 8,555 10. Licensing AgreementsSymbioscience License AgreementIn December 2014, the Company entered into an exclusive license agreement with Mars, Inc., by and through its Mars Symbioscience division, orSymbioscience, under which the Company has been granted the exclusive, worldwide license rights to develop and commercialize Symbioscience’s portfolioof arginase inhibitors for use in human healthcare (Symbioscience License Agreement). Under the terms of the Symbioscience License Agreement, theCompany paid Symbioscience an upfront license fee of $0.3 million, which was recorded as research and development expense in 2014. For the years endedDecember 31, 2015 and 2014, the Company recognized expense related to its licensing arrangement with Symbioscience of $0.2 million and $0.3 million,respectively, which was recorded in research and development expense in the statement of operations.The Company may make future payments of up to $24.2 million contingent upon attainment of various development and regulatory milestones and$95.0 million contingent upon attainment of various sales milestones. Additionally, the Company will pay75 royalties on sales of the licensed product, if such product sales are ever achieved. If the Company develops additional licensed products, after achievingregulatory approval of the first licensed product, the Company would owe additional regulatory milestone payments and additional royalty payments basedon sales of such additional licensed products. TransTech License AgreementIn March 2015, the Company entered into a License and Research agreement with High Point Pharmaceuticals, LLC and TransTech Pharma LLC, orcollectively TransTech, under which the Company obtained an exclusive, worldwide license to develop and commercialize TransTech’s hexokinase IIinhibitors (TransTech License Agreement). Under the terms of the TransTech License Agreement, the Company paid TransTech an initial license fee of $0.6million, which was recorded in research and development expense in 2015. For the year ended December 31, 2015, the Company recognized expense relatedto its licensing arrangement with TransTech of $0.6 million in research and development expense in the statement of operations.The Company may pay potential development and regulatory milestone payments totaling up to $30.5 million for the first licensed product.TransTech is eligible for an additional $77.0 million in potential sales-based milestones, as well as royalty payments, at mid-single digit royalty rates, basedon tiered sales of the first commercialized licensed product. If the Company develops additional licensed products, after achieving regulatory approval of thefirst licensed product, the Company would owe additional regulatory milestone payments and additional royalty payments based on sales of such additionallicensed products. The Company will be responsible for the worldwide development and commercialization of the licensed products, at its cost. 11. Related Party TransactionsThe spouse of the Company’s Chief Executive Officer is the founder of a management consulting firm that provided services to the Company throughMarch 2013. For the years ended December 31, 2015, 2014 and 2013, the Company recognized zero, zero and $62,000, respectively, paid to thismanagement consulting firm, for consulting services which were primarily included in research and development expenses in the statements of operations. Asof December 31, 2015 and 2014, the Company had no outstanding liability to the management consulting firm.The spouse of one of the Company’s executive officers was a consultant who provided accounting services for the Company through May 2014. Forthe years ended December 31, 2015, 2014 and 2013, the Company recognized consulting services of zero, $61,000 and $91,000, respectively, within generaland administrative expenses in the statements of operations. As of December 31, 2015 and 2014, the Company had no outstanding liability to the individual. 12. Selected Quarterly Financial Data (Unaudited)Selected quarterly results from operations for the years ended December 31, 2015 and 2014 are as follows (in thousands, except per share amounts): 2015 Quarter End March 31, June 30, September 30, December 31, Operating expenses$7,867 $7,874 $8,950 $8,128 Net loss (7,858) (7,818) (8,900) (8,068)Basic and diluted net loss per common share$(0.44) $(0.44) $(0.49) $(0.44) 2014 Quarter End March 31, June 30, September 30, December 31, Operating expenses$4,150 $5,492 $5,241 6,838 Net loss (4,149) (5,491) (5,239) (6,833)Basic and diluted net loss per common share$(22.80) $(24.22) $(16.85) $(0.39) 76 Item 9.Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.None.Item 9A.Controls and Procedures.Evaluation of Disclosure Controls and ProceduresAs of December 31, 2015, management, with the participation of our Chief Executive Officer and Chief Financial Officer, performed an evaluation ofthe effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Ourdisclosure controls and procedures are designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act isrecorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that suchinformation is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, to allow timelydecisions regarding required disclosures.Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired controlobjective and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on thisevaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2015, the design and operation of our disclosurecontrols and procedures were effective at a reasonable assurance level.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined inExchange Act Rules 13a-15(f) and 15d-15(f). Our management conducted an evaluation of the effectiveness of our internal control over financial reporting asof December 31, 2015 based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission.Based on the results of its evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2015.Changes in Internal Control over Financial ReportingThere was no change in our internal control over financial reporting during the three months ended December 31, 2015 that have materially affected,or is reasonably likely to materially affect, our internal control over financial reporting.Attestation Report of the Registered Public Accounting FirmThis Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to an exemptionestablished by the JOBS Act for “emerging growth companies.”Item 9B.Other Information.None. 77 PART IIIItem 10.Directors, Executive Officers and Corporate Governance.Information required by this item will be contained in our definitive proxy statement to be filed with the Securities and Exchange Commission onSchedule 14A in connection with our 2016 Annual Meeting of Stockholders or the Proxy Statement, which is expected to be filed not later than 120 daysafter the end of our year ended December 31, 2015, under the headings “Executive Officers,” “Election of Directors,” “Information Regarding the Board ofDirectors and Corporate Governance,” and “ Section 16(a) Beneficial Ownership Reporting Compliance,” and is incorporated herein by reference.We have adopted a Code of Business Conduct and Ethics that applies to our officers, directors and employees which is available on our website atwww.calithera.com. The Code of Business Conduct and Ethics is intended to qualify as a “code of ethics” within the meaning of Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K. In addition, we intend to promptly disclose (1) the nature of any amendment to our Code of BusinessConduct and Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performingsimilar functions and (2) the nature of any waiver, including an implicit waiver, from a provision of our code of ethics that is granted to one of these specifiedofficers, the name of such person who is granted the waiver and the date of the waiver on our website in the future.Item 11.Executive Compensation.The information required by this item regarding executive compensation is incorporated by reference to the information set forth in the sections titled“Executive Compensation” in our Proxy Statement.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this item regarding security ownership of certain beneficial owners and management is incorporated by reference to theinformation set forth in the section titled “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement.Item 13.Certain Relationships and Related Transactions, and Director Independence.The information required by this item regarding certain relationships and related transactions and director independence is incorporated by referenceto the information set forth in the sections titled “Transactions with Related Parties” and “Election of Directors – Independence of the Board of Directors,”respectively, in our Proxy Statement.Item 14.Principal Accounting Fees and Services.The information required by this item regarding principal accountant fees and services is incorporated by reference to the information set forth in thesection titled “Principal Accountant Fees and Services” in our Proxy Statement. 78 PART IVItem 15.Exhibits, Financial Statement Schedules.(a) The following documents are filed as part of this report:1. Financial StatementsSee Index to Financial Statements at Item 8 herein.2. Financial Statement SchedulesAll schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.3. ExhibitsSee the Exhibit Index immediately following the signature page of this Annual Report on Form 10-K. 79 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report tobe signed on its behalf by the undersigned, thereunto duly authorized. Calithera Biosciences, Inc. Date: March 15, 2016 By: /s/ Susan M. Molineaux Susan M. Molineaux, Ph.D. President and Chief Executive OfficerPOWER OF ATTORNEYEach person whose individual signature appears below hereby authorizes and appoints Susan M. Molineaux and William D. Waddill, and each ofthem, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to actin his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file anyand all amendments to this Annual Report on Form 10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with theSecurities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each andevery act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully door cause to be done by virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons onbehalf of the Registrant in the capacities and on the dates indicated. Name Title Date /s/ Susan M. Molineaux President, Chief Executive Officer and Director March 15, 2016Susan M. Molineaux, Ph.D. (Principal Executive Officer) /s/ William D. Waddill Senior Vice President, Chief Financial Officer, Treasurerand Secretary March 15, 2016William D. Waddill (Principal Financial and Accounting Officer) /s/ Sunil Agarwal Director March 15, 2016Sunil Agarwal, M.D. /s/ Jonathan G. Drachman Director March 15, 2016Jonathan G. Drachman, M.D. /s/ Jean M. George Director March 15, 2016Jean M. George /s/ Deepa R. Pakianathan Director March 15, 2016Deepa R. Pakianathan, Ph.D. /s/ H. Ward Wolff Director March 15, 2016H. Ward Wolff 80 Exhibit Index Incorporation By ReferenceExhibitNumber Exhibit Description Form SEC File No. Exhibit Filing Date 3.1 Amended and Restated Certificate of Incorporation of the Registrant 8-K 001-36644 3.1 10/07/2014 3.2 Amended and Restated Bylaws of the Registrant S-1 333-198355 3.4 9/19/2014 4.1 Reference is made to Exhibits 3.1 through 3.2. 4.2 Form of common stock certificate of the Registrant. S-1 333-198355 4.1 9/25/2014 10.1 Amended and Restated Investor Rights Agreement, among the Registrant and certain of itssecurity holders, dated October 7, 2013, as amended. S-1 333-198355 10.1 8/25/2014 10.2 2014 Equity Incentive Plan. S-1 333-198355 10.4 9/25/2014 10.3 Form of Stock Option Grant Notice (2014 Equity Incentive Plan). S-1 333-198355 10.5 9/25/2014 10.4 2014 Employee Stock Purchase Plan. S-1 333-198355 10.6 9/25/2014 10.5 Employment Agreement between the Registrant and Susan Molineaux, dated June 1, 2010,as amended. S-1 333-198355 10.7 8/25/2014 10.6 Offer Letter between the Registrant and William Waddill, dated March 10, 2014. S-1 333-198355 10.8 8/25/2014 10.7 Employment Agreement between the Registrant and Mark Bennett, dated June 1, 2010. S-1 333-198355 10.9 8/25/2014 10.8 Employment Agreement between the Registrant and Eric Sjogren, dated June 1, 2010. S-1 333-198355 10.10 8/25/2014 10.9 Employment Agreement between the Registrant and Christopher Molineaux, dated April 8,2013. S-1 333-198355 10.11 8/25/2014 10.10 Offer Letter between the Registrant and Curtis Hecht, dated March 28, 2014. S-1 333-198355 10.12 8/25/2014 10.11 Form of Indemnification Agreement between the Registrant and each of its directors andexecutive officers. S-1 333-198355 10.13 9/19/2014 10.14 Lease between Are-Technology Center SSF, LLC and the Registrant, dated February 14,2013. S-1 333-198355 10.14 8/25/2014 10.15 Amendment to lease between Are-Technology Center SSF, LLC and the Registrant, datedOctober 30, 2013. S-1 333-198355 10.15 8/25/2014 10.16† Collaboration and License Agreement by and between the Registrant and Mars, Inc., datedDecember 9, 2014. 10-K 001-36644 10.16 3/27/2015 10.17† License and Research Agreement by and between Calithera Biosciences, Inc., High PointPharmaceuticals, LLC and TransTech Pharma LLC, dated as of March 5, 2015. 10-Q 001-36644 10.17 5/11/2015 23.1 Consent of Independent Registered Public Accounting Firm. 24.1 Power of Attorney (included on signature page to this Annual Report on Form 10-K). 31.1 Certifications of Principal Executive Officer pursuant to Rule 13a-14(a). 31.2 Certifications of Principal Financial Officer pursuant to Rule 13a-14(a). 32.1* Certification of Principal Executive Officer pursuant to Rule 13a-14(b) of the SecuritiesExchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer pursuant to Rule 13a-14(b) of the SecuritiesExchange Act of 1934, as amended, and 18 U.S.C. Section 1350, as adopted pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. 81 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. *The certifications attached as Exhibits 32.1 and 32.2 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities andExchange Commission and are not to be incorporated by reference into any filing of Calithera Biosciences, Inc. under the Securities Act of 1933, asamended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Annual Report on Form 10-K, irrespectiveof any general incorporation language contained in such filing.**Attached as Exhibit 101 to this Annual Report on Form 10-K formatted in XBRL (Extensible Business Reporting Language): (i) Balance Sheets, (ii) Statements of Operations, (iii) Statements of Comprehensive Income (Loss), (iv) Statements of Cash Flows, and (v) Notes to Financial Statements,tagged as blocks of text and including detailed tags.†Confidential treatment has been granted with respect to certain portions of this exhibit. Omitted portions have been filed separately with the Securitiesand Exchange Commission. 82Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-199126 and 333-204056)pertaining to the Calithera Biosciences, Inc. 2010 Equity Incentive Plan, the Calithera Biosciences, Inc. 2014 Equity Incentive Plan, andthe Calithera Biosciences, Inc. 2014 Employee Stock Purchase Plan and in the Registration Statement on Form S-3 (No. 333-207905) ofCalithera Biosciences, Inc. and in the related Prospectuses of our report dated March 15, 2016, with respect to the financial statementsof Calithera Biosciences Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2015./s/ Ernst & Young LLPRedwood City, CaliforniaMarch 15, 2016  Exhibit 31.1CERTIFICATIONSI, Susan M. Molineaux, certify that:1.I have reviewed this Annual Report on Form 10-K of Calithera Biosciences, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)): a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting. 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 15, 2016 /s/ Susan M. MolineauxSusan M. Molineaux, Ph.D.President and Chief Executive Officer  Exhibit 31.2CERTIFICATIONSI, William D. Waddill, certify that:1.I have reviewed this Annual Report on Form 10-K of Calithera Biosciences, Inc.; 2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by thisreport; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined inExchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)): a)designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to usby others within those entities, particularly during the period in which this report is being prepared;b)designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed underour supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles;c)evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;andd)disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’smost recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or isreasonably likely to materially affect, the registrant’s internal control over financial reporting. 5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): a)all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and b)any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting.Date: March 15, 2016 /s/ William D. WaddillWilliam D. WaddillSenior Vice President, Chief Financial Officer, Treasurer andSecretary  Exhibit 32.1CALITHERA BIOSCIENCES, INC.CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Calithera Biosciences, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2015, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, Susan M. Molineaux, President and Chief Executive Officer of theCompany, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of myknowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ Susan M. MolineauxSusan M. Molineaux, Ph.D.President and Chief Executive OfficerMarch 15, 2016This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of Calithera Biosciences, 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 the Form 10-K), irrespective of any general incorporation language contained in such filing. Exhibit 32.2CALITHERA BIOSCIENCES, INC.CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report of Calithera Biosciences, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2015, asfiled with the Securities and Exchange Commission on the date hereof (the “Report”), I, William D. Waddill, Senior Vice President, Chief Financial Officer,Treasurer and Secretary of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,that to the best of my knowledge: (1)The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. /s/ William D. WaddillWilliam D. WaddillSenior Vice President, Chief Financial Officer,Treasurer and SecretaryMarch 15, 2016This certification accompanies the Form 10-K to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to beincorporated by reference into any filing of Calithera Biosciences, 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 the Form 10-K), irrespective of any general incorporation language contained in such filing. 

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