CytomX Therapeutics
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549 FORM 10-K (Mark One)☒☒ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended December 31, 2018OR☐☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from to Commission File Number 001-37587 CytomX Therapeutics, Inc.(Exact Name of Registrant as Specified in Its Charter) Delaware 27-3521219(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 151 Oyster Point Boulevard, Suite 400South San Francisco, California 94080(Address of principal executive offices) (Zip Code)(650) 515-3185(Registrant’s telephone number, including area code)3 Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registeredCommon Stock, $0.00001 par value The Nasdaq Global Select MarketSecurities registered pursuant to Section 12(g) of the Act:None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ☒Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☒ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financialaccounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒As of June 30, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, the aggregate market value of the registrant’s common stock held by non-affiliates of the registrant was approximately $876.4 million, based on the closing price of the registrant’s common stock on Nasdaq Global Select Market on June 30, 2018 of $22.86per share. Shares of the registrant’s common stock held by each officer and director and each person known to the registrant to own 10% or more of the outstanding common stock ofthe registrant have been excluded in that such persons may be deemed affiliates. This determination of affiliate status is not a determination for other purposes.As of January 31, 2019, 45,111,282 shares of the registrant’s common stock, $0.00001 par value per share, were outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the registrant’s definitive proxy statement to be filed for its 2019 Annual Meeting of Stockholders are incorporated by reference into Part III hereof. Such proxy statementwill be filed with the Securities and Exchange Commission within 120 days of the end of the fiscal year covered by this Annual Report on Form 10-K. CYTOMX THERAPEUTICS, INC.ANNUAL REPORT ON FORM 10-KTABLE OF CONTENTS Page PART I ITEM 1. Business 3 ITEM 1A. Risk Factors 36 ITEM 1B. Unresolved Staff Comments 72 ITEM 2. Properties 73 ITEM 3. Legal Proceedings 73 ITEM 4. Mine Safety Disclosures 73 PART II ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 74 ITEM 6. Selected Financial Data 75 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 77 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 91 ITEM 8. Financial Statements and Supplementary Data 92 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 128 ITEM 9A. Controls and Procedures 128 ITEM 9B. Other Information 129 PART III ITEM 10. Directors, Executive Officers of the Registrant and Corporate Governance Matters 130 ITEM 11. Executive Compensation 130 ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 130 ITEM 13. Certain Relationships and Related Transactions, and Director Independence 130 ITEM 14. Principal Accounting Fees and Services 130 PART IV ITEM 15. Exhibits and Financial Statement Schedules 131 ITEM 16. Form 10-K Summary 134 Signatures 135  Forward-Looking StatementsThis Annual Report on Form 10-K contains certain forward-looking statements that involve risks and uncertainties. These forward-looking statements reflectour current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made throughthe use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,”“estimate,” “intend,” “plan,” “projection,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words orphrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates andprojections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertainand beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject torisks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-lookingstatements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-lookingstatements.A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including thosefactors identified in “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the following: •our expectations regarding the potential benefits, activity, effectiveness and safety of our product candidates and therapeutics developedutilizing our Probody platform technology; •the initiation, timing, progress and results of our ongoing clinical trials, research and development programs, preclinical studies, andInvestigational New Drug application (“IND”), Clinical Trial Application, New Drug Application (“NDA”), Biologics License Application(“BLA”) and other regulatory submissions; •the timing of the completion of our ongoing clinical trials and the timing and availability of clinical data from such clinical trials; •our ability to identify and develop additional product candidates; •our dependence on collaborators for developing, obtaining regulatory approval for and commercializing product candidates in thecollaboration; •our or a collaborator’s ability to obtain and maintain regulatory approval of any of our product candidates; •our receipt and timing of any milestone payments or royalties under any research collaboration and license agreements or arrangements; •our expectations and beliefs regarding the evolution of the market for cancer therapies and development of the immuno-oncology industry; •the rate and degree of market acceptance of any approved products candidates; •the commercialization of any approved product candidates; •our ability to establish and maintain collaborations and retain commercial rights for our product candidates in such collaborations; •the implementation of our business model and strategic plans for our business, technologies and product candidates; •our estimates of our expenses, ongoing losses, future revenue and capital requirements; •our ability to obtain additional funds for our operations; •our or any collaborator’s ability to obtain and maintain intellectual property protection for our technologies and product candidates and ourability to operate our business without infringing the intellectual property rights of others; •our reliance on third parties to conduct our preclinical studies or any future clinical trials; •our reliance on third-party supply and manufacturing partners to supply the materials and components for, and manufacture, our research anddevelopment, preclinical and clinical trial product supplies; 1 •our ability to attract and retain qualified key management and technical personnel; •our ability to secure and maintain licenses of intellectual property to protect our technologies and product candidates; •our financial performance; and •developments relating to our competitors or our industry.Any forward-looking statements in this Annual Report on Form 10-K reflect our current views with respect to future events or to our future financialperformance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to bematerially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Factors that may causeactual results to differ materially from current expectations include, among other things, those listed under Part I, Item 1A. Risk Factors and discussedelsewhere in this Annual Report on Form 10-K. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Exceptas required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes availablein the future.This Annual Report on Form 10-K also contains estimates, projections and other information concerning our industry, our business and the markets forcertain drugs and therapeutic biologics, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certainmedical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actualevents or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtainedthese industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and generalpublications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived.Except where the context otherwise requires, in this Annual Report on Form 10-K, “we,” “us,” “our” and the “Company” refer to CytomX Therapeutics, Inc.TrademarksThis Annual Report on Form 10-K includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks andtrade names included in this Annual Report on Form 10-K are the property of their respective owners. 2 PART IItem 1.BusinessOverviewWe are a clinical-stage, oncology-focused biopharmaceutical company with a vision of transforming lives with safer, more effective therapies. We arepioneering a novel class of investigational antibody therapeutics, based on our Probody™ technology platform, for the treatment of cancer. The Probodytherapeutic approach is designed to more specifically target antibody therapeutics to the tumor microenvironment and minimize drug activity in healthytissue and in circulation. We believe this approach has the potential to make meaningful enhancements to the combined efficacy and safety profile ofantibody therapeutics, known as the “therapeutic window” and also to enable new targeted therapies. We believe that Probody therapeutics have thepotential to create or widen the therapeutic window for certain antibody therapeutics, allowing for the development of new approaches to the treatment ofcancer. We are utilizing our Probody Platform to develop a pipeline, shown below, of potential best-in-class immunotherapies against clinically-validatedtargets and potential first-in-class therapeutics against novel, difficult to drug targets. Furthermore, we believe the Probody therapeutic approach has thepotential to enable safer, more effective combination therapy for cancer. CytomX pipeline of Probody Therapeutics We believe there is a significant opportunity in localizing antibody therapeutics to the tumor microenvironment, and therefore the market opportunity forProbody therapeutics could be large. Cancer is the second leading cause of mortality in the United States and accounts for nearly one in every five deaths.Early cancer research and treatment relied on relatively non-specific and highly toxic small molecule chemotherapies. Over the last twenty years, a newparadigm of cancer treatment has emerged that is focused on more targeted therapies, including monoclonal antibody modalities, which represent some of themost effective and top-selling therapies on the market today. In 2017, half of the top 10 best-selling drugs on the market were monoclonal antibodies. Morerecently, immuno-oncology has emerged as a promising new field of cancer therapy that aims to enhance anti-tumor immune responses by, for example,overcoming suppressive mechanisms that cancer cells have developed to evade the immune system. In addition, new classes of monoclonal antibody-basedtherapeutics have also reached the market. These new classes include Antibody Drug Conjugates (“ADCs”), bispecific antibodies, and Chimeric AntigenReceptor (“CAR”) based cellular therapies. We have demonstrated that our Probody therapeutic technology can be applied to many antibody modalities,including antibodies against immuno-oncology targets, ADCs, and bispecific antibodies, and therefore we believe that significant opportunities exist forCytomX to develop and capture market share with innovative anti-cancer treatments.Our most advanced product candidate is CX-072, a wholly owned Probody therapeutic targeting programmed cell death ligand 1 (“PD-L1”), a clinically andcommercially validated immuno-oncology target. In normal physiology, PD-L1 plays a role in suppressing the immune system in healthy tissue, preventingautoimmunity. Tumors can co-opt this inhibitory function by upregulating PD-L1 expression and evading anti-cancer immune surveillance. Inhibitors of thePD-L1 pathway have therefore been designed and developed that restore anti-cancer immune surveillance and such inhibitors have demonstrated anti-canceractivity in a wide variety of cancer types. Regulatory approval has been granted for PD-L1 inhibitors and/or programmed cell death 1 (“PD-1”) inhibitors in awide range of cancers, including advanced melanoma, renal cell cancers, non-small cell lung cancer, and bladder cancers.3 While PD-L1 inhibitors have been shown to enhance anti-cancer immunity, systemic administration of inhibitors of the PD-L1 pathway can result inimpairment of normal immune tolerance of healthy tissues, and severe immune-related toxicities can emerge. These toxicities can be particularly seriouswhen PD-L1 inhibitors are combined with other anti-cancer agents. Our PD-L1 Probody therapeutic, CX-072, is designed to uncouple the anti-cancer activityof PD-L1 inhibitors from the associated autoimmune toxicities by inhibiting PD-L1 in the tumor microenvironment with minimal engagement in healthytissue. We are currently evaluating CX-072 in a Phase 1/2 study that we call PROCLAIM-CX-072. This study is designed to assess the safety, activity, andtranslational biology of CX-072 as a single agent and in combination with other anticancer therapies. We disclosed initial clinical proof of concept data onCX-072 at various oncology conferences in 2018. In February 2019, we disclosed additional clinical safety and efficacy data on CX-072 at a Research andDevelopment Day hosted by CytomX management (“CytomX R&D Day”).Our second most advanced product candidate is CX-2009, a wholly owned Probody Drug Conjugate (“PDC”) directed against CD166, a novel drugtarget. Probody Drug Conjugates are CytomX-designed Probody therapeutic versions of a class of drugs called Antibody ADCs, which are antibodies thathave been conjugated to a small molecule cytotoxic agent via a labile chemical linker. Several ADCs have been approved for the treatment of cancer in theUnited States and elsewhere, including Kadcyla™, which targets HER2 positive metastatic breast cancer, and Adcetris™, which targets CD30 in ClassicalHodgkin Lymphoma. To avoid target-related toxicity, traditional ADCs have historically been limited to targeting proteins that are expressed highly intumors, but that are also absent or poorly expressed in healthy tissues. Very few cancer-associated proteins have this desired profile. Because our Probodytherapeutics are designed to minimize binding of potent anti-cancer therapy to normal tissues, we believe we can address a new class of targets with attractivemolecular features that were previously unsuitable because of high expression on normal tissues. CD166 is an example of this kind of target. CD166 is highlyand homogenously expressed in multiple different tumors types, which makes it an attractive target for a Probody drug conjugate therapeutic; however, thehigh expression of CD166 on normal tissues makes this a difficult target to drug with a traditional ADC. CX-2009 is our Probody therapeutic directed toCD166 and conjugated to a cytotoxic agent. CX-2009 is currently in the dose escalation portion of a Phase 1/2 study that we call PROCLAIM-CX-2009. InFebruary 2019, we disclosed initial clinical data on CX-2009 at the CytomX R&D Day.In addition to our wholly owned programs, we have entered into several strategic collaborations with leading oncology-focused pharmaceutical companies,such as AbbVie Inc., through its subsidiary AbbVie Ireland Unlimited Company (“AbbVie”), Amgen, Inc. (“Amgen”) and Bristol-Myers Squibb Company(“BMS”). The most advanced program from our partnerships is a CTLA-4 Probody therapeutic which BMS is currently advancing through the dose escalationphase of a Phase 1/2 clinical trial. We are also treating patients in PROCLAIM-CX-2029, a Phase 1/2 clinical study for CX-2029, a PDC targeting the highlyexpressed target, CD71 that we have partnered with AbbVie.In October 2018, we filed an investigational new drug application (“IND”) on CX-188, a wholly owned Probody therapeutic targeting PD-1, a clinically andcommercially validated anti-cancer target. The CX-188 IND was cleared by the FDA in November 2018. Due to a recent program and portfolio prioritization,we have decided to indefinitely postpone clinical trials for CX-188. We may elect to initiate clinical trials for CX-188 in the future.We have also extended our Probody platform to the new and promising modality of T-cell engaging bispecific antibodies (“TCBs”). TCBs are a highlypotent therapeutic modality, designed to direct the activity of cytotoxic T-cells to tumors. TCBs such as Blincyto®, a CD19-directed TCB commercializedby Amgen, have shown clinical activity in hematologic malignancies, but development of TCBs for solid tumor indications is proving challenging. Due totheir high potency, TCBs can target normal tissues with low antigen expression, resulting in significant on-target, off-tumor toxicity that can limit dosing tolow levels. As a result, it has been difficult to reach the level of drug exposure required for efficacy without excessive toxicity. We believe that the Probodyplatform is potentially capable of localizing the activity of TCBs to the tumor microenvironment and avoid on-target, off-tumor toxicity. Our most advancedprogram in the TCB modality is an Epidermal Growth Factor Receptor-CD3 (“EGFR-CD3”) T-cell bispecific, which is currently in lead optimization stage,and partnered with Amgen. Our broad Probody therapeutic technology platform and lead product candidates are supported by more than a decade of thorough scientific research andstrong intellectual property. We are a leader in the emerging field of localizing antibody therapeutics to the tumor microenvironment, as evidenced by ourpatent estate of approximately 100 issued patents (some of which are co-owned with a third party) and 250 pending patent applications (some of which areco-owned with a third party). We also have an exclusive license from University of California, Santa Barbara (“UCSB”) to three patent families coveringscreening tools to identify masks and substrates.4 The successful development of our product candidates involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies andtrials may not be predictive of future trial results. This is due to the numerous risks and uncertainties associated with the development of product candidates.If our Probody therapeutic technology and product candidates generally prove to be ineffective, unsafe or commercially unviable, it would have a materialand adverse effect on our business, financial condition, results of operations and prospects. See “Risk Factors” for a discussion of the risks and uncertaintiesassociated with our product candidates and our research and development projects. Our Corporate StrategyWe are utilizing our proprietary and differentiated Probody platform to develop a leading pipeline of novel, innovative anti-cancer therapies to improve thelives of people with cancer and to build a long-term, multi-product, commercial stage biotechnology company. We aim to achieve this goal by: •Applying the Probody platform to discover and develop potentially differentiated, best-in-class monoclonal antibody-based cancerimmunotherapies for which we believe we can make meaningful enhancements to the therapeutic window. Our wholly owned PD-L1 Probodytherapeutic (CX-072) and partnered CTLA-4 Probody therapeutic (BMS 986249) are our most advanced programs in this class of targets. •Applying the Probody platform to discover and develop potentially first-in-class therapies against targets we believe could have therapeuticbenefits within oncology but have not yet been drugged because of broad expression in healthy tissue. Our wholly owned CD-166 ProbodyDrug Conjugate (CX-2009) and partnered CD-71 Probody Drug Conjugate (CX-2029) are our most advanced programs in this class of targets. •Applying our Probody platform to develop novel and improved combination therapies with the potential to improve outcomes for cancerpatients. For example, we are studying CX-072, our PD-L1 Probody therapeutic, in combination with the CTLA-4 inhibitor, Yervoy® in ourongoing Phase 1/2 clinical trial. •Applying our Probody platform to enable new potent therapeutic antibody and cell therapy formats, thereby positioning ourselves at thecutting edge of anti-cancer therapeutic research and development. For example, we are collaborating on a Probody therapeutic version of anEGFR-CD3 T-cell engaging Probody bispecific with Amgen. •Partnering with leading biopharmaceutical companies to access capital, additional resources and expertise, as well as increase the number ofProbody therapeutic candidates being advanced into clinical trials. To date, we have formed several strategic collaborations, including withAbbVie, Amgen, BMS, ImmunoGen Inc. (“ImmunoGen”) and others. •Accessing technologies or programs that can complement our Probody platform and our pipeline through licenses or acquisitions. Forexample, in early 2019 we acquired certain linker-toxin and bispecific technologies from an affiliate of Astellas Pharma, Inc. to complementour Probody platform. •Fostering a unique culture of execution, alignment and accountability centered around our vision, mission and values.5 Our Probody PlatformLocalization of therapeutic antibody activity within disease tissue is of increasing interest in the biopharmaceutical industry due to the desire to maximizethe activity of antibody-based drugs whilst reducing their toxicities. At CytomX, we call our approach to therapeutic antibody localization our Probodyplatform. A Probody therapeutic consists of three components: an active anti-cancer antibody, a mask for the antibody, and a protease-cleavable linker whichconnects the mask to the antibody. The mask is a peptide designed to disguise the active binding site of the antibody to prevent the therapeutic from bindingto the target present on healthy tissue. Probody therapeutics are produced as a single protein by standard antibody production methodology. The followinggraphic depicts the three components of a Probody therapeutic: Depiction of the structure of a Probody therapeutic and a protease interacting with the Probody to cleave the linker and activate the moleculeWhen a Probody therapeutic enters a tumor, it encounters proteases, which are enzymes that cleave proteins and have increased activity in the tumormicroenvironment. The proteases in the tumor cleave the linker, releasing the mask and allowing the antibody to bind to the target on the tumor. Thefollowing graphic depicts the activation of a Probody therapeutic by proteases: Depiction of how a Probody therapeutic is designed to enter the tumor microenvironment (left), be activated by protease cleavage to remove the mask (middle), thereby enablingthe released antibody to bind to the tumor target (right)6 Proteases play an essential role in many aspects of normal physiology, such as digestion of food in the gastrointestinal tract, wound healing and metabolicfunction. However, uncontrolled protease activity can lead to destruction of essential proteins and tissues. Therefore, proteases are normally very tightlyregulated by multiple mechanisms, with only small amounts of extracellular protease activity being detectable in healthy tissues. In contrast, it has been welldocumented that proteases are not only present, but also activated, in virtually all types of tumors, playing a key role in tumor growth, invasion andmetastasis. Probody therapeutics are designed to be activated in this protease-rich tumor microenvironment, but not in healthy tissue where proteases areunder tight control as depicted in the figure below: Probody therapeutics are designed to remain masked and inactive in healthy tissue (right) but be unmasked and activated in diseased tissue, such as in tumors (left)Probody therapeutics are designed to limit toxicity that can arise from the binding of an antibody to a target in healthy tissues while preserving biologicalactivity in the tumor where it is desired. We and our partners have demonstrated the applicability of our Probody platform across multiple monoclonalantibody modalities, including cancer immunotherapy, ADCs, and T-cell-recruiting bispecifics.We have designed protease-cleavable linkers so that several activated proteases within the tumor microenvironment can cleave them. Using this approach, webelieve Probody therapeutics can be cleaved and activated by at least one protease across a large number of tumor types. This concept has been validated bythe translational data that we have generated from clinical studies for our CX-072 and CX-2009 programs, which suggests that Probody therapeutics aresufficiently activated in the tumor microenvironment, and once activated, behave like the underlying parenteral antibody. We have also presented initialclinical data for our CX-072 and CX-2009 programs that indicate that the Probody therapeutic remains sufficiently masked, and therefore inert, in systemiccirculation. These features of the Probody platform, now validated with clinical data, suggest that we can potentially develop differentiated therapies whichcan widen therapeutic window for validated targets such as PD-L1 and enable a therapeutic window for broadly expressed targets such as CD166.Key Advantages of Our Probody PlatformWe believe that our Probody Platform provides the following key advantages: •A novel therapeutic antibody class enabled by our proprietary platform. We believe we have a differentiated technology platform that givesus a substantial competitive advantage supported by more than a decade of research and strong intellectual property. •Potential to improve the therapeutic window of antibody-based therapeutics. By engineering our therapeutics to selectively activate in thetumor microenvironment, our Probody product candidates have the potential to improve safety and tolerability. •Ability to combine more effectively with other therapies. We believe the therapeutic window and tumor specificity of our candidates havepotential to reduce the dose-limiting toxicities observed in combination therapies and thus enable new combinations with other cancertherapies that are difficult or impossible to use.7 •Applicability across many molecular targets. We believe that our technology addresses many different molecular targets expressed by manydifferent kinds of tumors—including targets that are difficult to address because they are also expressed on healthy tissue—because Probodytherapeutics are designed to have limited interaction with non-cancerous tissues. •Versatility across antibody modalities. We believe that our technology can be applied to most antibody-based therapies, including novelpotent modalities like ADCs, T-cell-recruiting bispecific antibodies.Our Lead Product CandidatesWe are leveraging our Probody platform to build a leading pipeline of innovative and differentiated anti-cancer therapies. We currently retain worldwidedevelopment and commercialization rights to our two most advanced Probody therapeutics in the clinic, CX-072 and CX-2009. In addition, we havemultiple partnered development programs including BMS 986249, an anti-CTLA-4 Probody program with BMS, and CX-2029, an anti-CD71 PDC programin collaboration with AbbVie. CX-072 (PD-L1 Probody therapeutic)Overview and Limitations of Existing TherapiesOur most advanced product candidate is CX-072, a wholly owned Probody therapeutic targeting PD-L1, a clinically and commercially validated cancertarget. The PD pathway consists principally of two targets: PD-1, which is typically expressed on T-cells, and PD-L1, which is typically expressed on thetumor cells as well as on healthy tissue. In healthy tissue, PD-1 and PD-L1 work together to negatively regulate immune response and maintain tolerancebetween the immune system and healthy tissue. Tumors, however, upregulate PD-L1 to evade immune surveillance by the host’s immune system. Therefore,development of antibodies against PD-1 and PD-L1 have become a key focal point in cancer drug development, with three PD-1 antibodies nivolumab(Opdivo™), pembrolizumab (Keytruda™), and cemiplimab (Libtayo™) and three PD-L1 antibodies atezolizumab (Tecentriq™), durvalumab (Imfinzi™), andavelumab (Bavencio™) approved as of February 2018, with many other PD pathway inhibitors in clinical development. In addition to assessment as singleagents, PD-1 and PD-L1 antibodies have been studied extensively as the centerpiece of oncology combination therapies. According to the Cancer ResearchInstitute, as of November 2017, there were in excess of 1,000 combination studies ongoing with a PD-1 or PD-L1 therapeutic. While inhibitors of the PD-L1 and/or PD-1 pathway offer the potential for clinical benefit in patients with a wide-variety of cancer types, there are a numberof risks imposed by administration of these agents. According to U.S. Labels for Opdivo, Keytruda, Tecentriq, Bavencio, and Imfinzi, the most common sideeffects (defined as either >15% or >20%, depending upon the agent) that were observed with commercially available anti-PD-L1 and anti-PD-1 agentsinclude: fatigue, decreased appetite, nausea, vomiting, diarrhea, dyspnea, constipation, cough, musculoskeletal pain, back pain, abdominal pain, arthralgia,urinary tract infection, upper respiratory tract infection, peripheral edema, infusion-related reaction, rash, asthenia, pruritus, headache, and pyrexia.Based on our analysis of publicly available data, we believe that while in general, the addition of second or third combination partners to PD-L1 or PD-1inhibitors can result in increased anti-cancer activity, there is often a corresponding increase in the toxicity of these combinations. For example, according tothe New England Journal of Medicine, the most common adverse reactions (greater than or equal to 20%) in patients with melanoma receiving nivolumabwith ipilimumab were fatigue, rash, diarrhea, nausea, and pruritus. In some cases, administration of an inhibitor of the PD-L1 pathway with another type ofanti-cancer agent in combination have resulted in severe toxicities that have prevented further development of the combination. In these cases, the toxicitylevels caused by the multiple agents in the periphery creates an unacceptable risk to patients, despite the potential for synergy of efficacy in the tumor. We believe that a locally activated Probody therapeutic targeting PD-L1 has the potential to maintain the anti-tumor activity of the PD pathway blockadewhilst reducing the autoimmunity that results from blocking such pathway systemically. As such, we believe that CX-072 has the potential to enablecombination therapies that cannot be appropriately dosed because of synergistic toxicity, and ultimately that CX-072 may have the potential to play animportant role in combination PD therapy. CX-072 may also ultimately prove to be a safer monotherapy than existing PD inhibitors which could havespecific applications in certain clinical settings.CX-072 Pre-Clinical DataCX-072 is derived from a CytomX discovered, phage-derived, fully human PD-L1 antibody that has high affinity binding to PD-L1 according to a standardbinding assay. Using our proprietary technology, we have developed a Probody therapeutic that is effectively masked when active proteases are absent butcan be specifically activated by one of several tumor-associated proteases. 8 We completed extensive preclinical testing comparing either CX-072 or a surrogate PD-L1 Probody therapeutic to its antibody parent, the results of whichare reflected in in the figure below: 4. Comparison of PD-L1 Probody therapeutic versus antibody parent In this experiment, CX-072 (shown in blue) demonstrated similar anti-tumor activity as its underlying antibody parent in traditional mouse syngeneic tumormodels (as illustrated in Figure A). In addition, CX-072 concentrated in the tumor similarly to the parental antibody (as illustrated in Figure B). Figure Cdemonstrates the potential for CX-072 to avoid the activation of systemic autoimmunity using the non-obese diabetic (“NOD”) mouse model as anexperimental system. NOD mice are bred to develop spontaneous autoimmune diabetes, which is exacerbated by systemic inhibition of the PD-1 pathway. Asexpected, a single dose of the PD-L1 antibody (shown in green) resulted in more than half of the treated mice developing diabetes, while mice treated withthe same dose of the Probody therapeutic (shown in blue) remained diabetes free. As Figure D shows, the antibody saturated circulating, peripheral T-cells ata low concentration, while binding of the Probody therapeutic was significantly reduced. The differentiated profile that we observed in these preclinical data,along with the results of our GLP toxicity study, supported our decision to advance CX-072 into clinical trials following the clearance of an IND applicationby the FDA. Our PROCLAIM Clinical Trial Design and Umbrella Protocol PROCLAIM (Probody Clinical Assessment In Man) is an international umbrella clinical program for Phase 1/2 evaluation of all Probody therapeutics whosedevelopment is sponsored by CytomX. PROCLAIM centers around a core protocol that includes all of the common elements of a typical Phase 1/2 designwithout reference to an experimental drug. Each PROCLAIM module supplements the core and focuses exclusively on Probody-specific elements (e.g.background, guidance on patient selection and care). We refer to the CX-072 module as PROCLAIM-CX-072. 9 PROCLAIM-CX-072 Clinical ProgramPROCLAIM-CX-072 is evaluating tolerability and preliminary antitumor activity of multiple doses of CX-072 as a monotherapy or as a combination therapywith ipilimumab (BMS’ Yervoy) or vemurafenib (Roche’s Zelboraf) in patients with advanced, unresectable solid tumors or lymphoma. The figure belowdescribes the design and status, as of February 2019, for PROCLAIM-CX-072. Design of the PROCLAIM-CX-072 Phase 1/2 clinical trialMonotherapy and Ipilumumab Combination Dose Escalation Clinical DataEnrollment of Part A1, A2, and Part B of the PROCLAIM-CX-072 clinical study began in 2017. The primary goals of Part A, A2, and B were to explore andvalidate the clinical performance and potential of the Probody as described in the figure below, namely, to demonstrate that the Probody therapeutic: 1.Demonstrates anti-cancer activity in a range of tumor types 2.Results in an improved safety profile, particularly in combination with other anticancer agents 3.Is activated in the tumor tissue 4.Is masked in systemic circulation Key elements of the Probody platform validated to date in PROCLAIM-CX-072 Initial clinical data from PROCLAIM-CX-072 were presented at the American Society of Clinical Oncology (“ASCO”), the European Society of MedicalOncology (“ESMO”) and the Society for Immunotherapy of Cancer (“SITC”) in 2018 and at the CytomX R&D Day in 2019. Part A enrolled patients whowere PD agent naïve and were either ineligible to receive or did not have access to PD-1 or PD-L1 agents for their disease. We did not pre-select patientsbased on their PD-L1 status in this arm. As such, we enrolled a broad range of tumor types in Part A, including patients with tumors that were not necessarilyexpected to respond to PD-L1 therapy. Part A2 of the clinical trial also enrolled patients with a broad range of cancer types, with enrollment restricted tothose patients whose tumors are PD-L1 positive based on the commercially available DAKO assay. As with Part A, the tumor types enrolled into Part A2 werenot necessarily expected to respond to CX-072. Part A2 also required mandatory collection of tumor biopsies from patients which were analyzed as part ofour translational program. Part B was designed to evaluate CX-072 in combination with ipilumumab, a CTLA-4 antibody commercialized by BMS. Part Cwas designed to evaluate CX-072 in combination vemurafenib, a BRAF inhibitor commercialized by Roche. We aim to present preliminary data from Part Cin 2019.10 Anti-Cancer Activity – Results of Dose EscalationPreliminary monotherapy dose escalation data, shown in the figure below, describes the activity of CX-072 as a single agent. This waterfall plot, presented atESMO and developed with an August 3, 2018 data cut, shows that among 38 evaluable patients who received CX-072, objective responses by ResponseEvaluation Criteria in Solid Tumors (“RECIST”) version 1.1 were observed in 3 (8%) patients, all treated at doses greater than or equal to 3 mg/kg: PD-L1negative triple negative breast cancer (confirmed partial response (cPR); 10 mg/kg), thymic cancer (unconfirmed partial response (“uPR”); 3 mg/kg), andcervical cancer (uPR; 10 mg/kg). Stable disease was observed in 15 (39%) patients for an overall disease control rate of 47%. For the 18 patients whoreceived CX-072 doses greater than or equal to 3 mg/kg, objective responses were observed in 3 of 18 patients (17%) and the disease control rate was 61%.Decreased target lesions were observed in 14 of 37 patients (38%) of all evaluable patients with measurable disease at baseline and in 10 of 17 patients (59%)of the subset of patients who received doses greater than or equal to 3 mg/kg of CX-072. Waterfall Plot from PROCLAIM-CX-072 (Data Cut-off August 3rd 2018) At the CytomX R&D Day in February 2019, we presented follow-up data from the dose escalation, focusing on doses greater than or equal to 3 mg/kg in thedose escalation study as of a February 6, 2019 data cut, as shown below. Of 24 efficacy evaluable patients treated with doses greater than or equal to 3mg/kgof CX-072, 4/24 (17%) objective responses were observed, including 1 confirmed partial response, 2 unconfirmed partial responses in patients who are nolonger on study and 1 unconfirmed partial response in a patient whose confirmation scan is pending. Additionally, 12 (50%) patients demonstrated tumorshrinkage or no change. From these results, we can conclude that CX-072 has anti-cancer activity. Waterfall Plot from PROCLAIM-CX-072 at doses ≥ 3 mg/kg (Data Cut-off February 6, 2019) Following thorough analysis of data from Parts A and A2, we selected 10 mg/kg as the dose for initial Part D cohort expansion studies, which we initiated in2018. This dose was chosen because: •We observed anti-cancer activity at and below 10 mg/kg in our dose escalation studies •The 10 mg/kg dose of CX-072 has a favorable safety profile (described below)11 •Translational data suggests that, at this dose, more than 98% of PD-L1 receptor in the tumor is occupied by CX-072 •All patients treated at the 10 mg/kg dose achieved and maintained targeted drug exposure. Moreover, satisfactory drug exposure was achievedregardless of whether patients showed evidence of anti-drug antibodies (observed in 8 of 13 patients as of December 2018) Part B of PROCLAIM-CX-072 was designed to assess the combination of CX-072 with ipilimumab dosed at its full labeled dose (3 mg/kg every 3 weeks forfour cycles). We have also explored higher doses of ipilimumab in Part B. Preliminary clinical data from Part B of PROCLAIM-CX-072 is shown in the figure below. As of the February 6, 2019 data cutoff for CytomX R&D Day, of19 patients evaluable for efficacy, four (21%) patients experienced confirmed objective responses. Three of the four confirmed responses remained on drug asof the data cutoff, including 1 confirmed complete response (82 weeks) and 2 confirmed partial responses (59 and 64 weeks). Duration of Response in Patients Treated with CX-072 + ipilimumab 12 Anticancer Activity – Preliminary Results of Monotherapy Cohort Expansions In 2018, we initiated monotherapy cohort expansions studies (Part D of PROCLAIM-CX-072) in eight distinct cancer types: undifferentiated pleiomorphicsarcoma, thymic epithelial cancer, triple negative breast cancer (TNBC), anal squamous cell cancer (SCC), cutaneous squamous cell cancer (cSCC), Merkelcell tumor, small bowel carcinoma and cancers with high tumor mutational burden. At the CytomX R&D Day in February 2019, we presented initial clinicaldata in the four of those eight indications: cSCC, TNBC, SCC and UPS. As the waterfall below shows, preliminary data from 34 efficacy evaluable patientsshowed a preliminary pattern of anti-cancer activity generally consistent with historical data for other PD inhibitors. Percent Change from Baseline in Sum of Target Lesion Measurements, by Cancer Classification in Part D. + denotes PD-L1 positive, defined as tumor proportion score ≥1% ofmembranous staining based on DAKO PD-L1 IHC 22C3 pharmDx Improved Safety ProfileOf 50 patients evaluable for safety in the four cancers (TNBC, UPS, Anal SCC, cSCC) tested as of the data cutoff date for Part D, CX-072 as monotherapy wasgenerally well tolerated, with 21 (42.0%) patients experiencing a Grade 3/4 treatment-emergent adverse event (TEAE), 2 (4%) patients experiencing a Grade3/4 treatment-related adverse events (TRAE), 2 (4%) patients experiencing a Grade 3/4 immune-related adverse events (irAE) and no discontinuation fortreatment-related toxicity. These data compare favorably to historical controls where the rate of Grade 3/4 TRAEs in patients receiving PD-pathway inhibitorsand TRAEs leading to discontinuation are 15% and 8%, respectively. Combining a PD pathway inhibitor with another anti-cancer agent often results in significantly greater toxicity than monotherapy alone. One example ofsuch synergistic toxicity is the combination of nivolumab (a PD-1 inhibitor marketed by Bristol Myers Squibb as Opdivo) and ipilimumab. According todata reported in the New England Journal of Medicine (Larkin et al., NEJM, July 2015), combination of nivolumab at 1 mg/kg and ipilimumab at 3mg/kgresulted in Grade 3/4 TRAEs in 55% of the patients treated and drug discontinuations in 36% of the patients treated. In Part B of PROCLAIM-CX-072, we tested doses of CX-072 from 0.3 mg/kg to 10 mg/kg with a combination of ipilimumab at 3 mg/kg. The maximumtolerated dose (MTD) was defined as the combination of 3 mg/kg of ipilimumab and 10 mg/kg of CX-072. Of the 27 patients treated with CX-072 incombination with ipilimumab, all with the full ipilimumab dose of 3 mg/kg or above, the combination was generally well tolerated. As of the February 6,2019 data cutoff, 14 (51.9%) patients reported a Grade 3/4 TEAE and 7 (26%) patients reported a Grade 3/4 TRAE. No patients experienced a Grade 3/4 irAEin the 3 mg/kg ipilimumab plus 10 mg/kg of CX-072 arm. These data generally compare favorably with historical controls described above.13 Activation of CX-072 in Tumor Tissue The efficacy of CX-072 described above suggests that the molecule is active in the tumor microenvironment. To further explore the activation of CX-072 inpatient tumors, we developed several proprietary assays to measure Probody mask removal in the tumor. Biopsies were obtained from a subset ofPROCLAIM-CX-072 patients during screening at either 3-5 days after the first dose or after 4-6 weeks of CX-072 therapy. The presence of protease activity,CX-072 cleavage and activation, and measures of biological activity were assessed within tumors. Results showed that protease activity was detected in the majority of patient biopsy samples (15 of 18 (83%)). Further, CX-072 was cleaved and activatedwithin tumors, with the total amount of activated CX-072 increasing with dose. Doses of ≥ 3 mg/kg of CX-072 were estimated to achieve ≥ 98% PD-L1 targetoccupancy in patient tumors and attained concentrations that are associated with efficacy in a preclinical model. 7 of 12 evaluable patient biopsies showedan increase in tumor infiltration of CD8+ T cells, consistent with the inhibition of the PD-1/PD-L1 signaling pathway. Stability of CX-072 in Systemic CirculationProbody therapeutics are designed to be masked and therefore inert outside of the tumor microenvironment. Through proprietary assays that CytomX havedeveloped, we are able to measure the proportion of Probody that is intact and therefore masked in systemic circulation. Results from a preliminary single-dose pharmacokinetic analysis of single-agent CX-072 suggest that, as designed, CX-072 circulates predominantly as the intact masked prodrug across alldose levels (for example, 96% intact at 30 mg/kg). Further, CX-072 is only minimally influenced by target mediated drug disposition at low doses,suggesting that masking is effective in blocking interaction with PD-L1 in the periphery.Taken together, the clinical data for CX-072 available as of February 6, 2019 support the Probody therapeutic hypothesis and underscore that Probodytherapeutics may have a unique molecular and clinical pharmacology that has the potential to translate into significant benefits for cancer patients. CX-2009 (CD166 Probody Drug Conjugate) ProgramOur second most advanced product candidate is CX-2009, a wholly owned Probody Drug Conjugate directed against CD166, a novel and difficult to drugtarget. Probody Drug Conjugates are unique, CytomX-designed Probody therapeutic versions of a class of drugs called Antibody Drug Conjugates (ADCs),which are antibodies that have been conjugated to a small molecule cytotoxic agent via a labile chemical linker. Several ADCs have been approved for thetreatment of cancer in the United States and elsewhere, including Kadcyla™, which targets HER2 positive metastatic breast cancer, and Adcetris™, whichtargets CD30 in Classical Hodgkin Lymphoma. To avoid target-related toxicity, traditional ADCs have historically been limited to targeting proteins thatare expressed highly in tumors, but that are also absent or poorly expressed in healthy tissues. Very few cancer-associated proteins have this desiredprofile. Because our Probody therapeutics are designed to minimize binding of potent anti-cancer therapy to normal tissues, we believe we can address a newclass of targets with attractive features that were previously unsuitable because of expression on normal tissues. We have a broad research program at CytomXaimed at discovering and validating this new class of targets and CD166 is the first such target for which we advanced a PDC product candidate into clinicaltrials. CD166 is highly and homogenously expressed in multiple different tumors types, which makes it an attractive target for a Probody drug conjugatetherapeutic; however, the high expression of CD166 on normal tissues makes this a difficult target to drug with a traditional ADC. CX-2009 is our Probodytherapeutic directed to CD166 and conjugated to a cytotoxic agent. CX-2009 is currently in the dose escalation portion of a Phase 1/2 study that we callPROCLAIM-CX-2009.14 CX-2009 Pre-Clinical DataCX-2009 is derived from a CytomX discovered and humanized CD166 antibody that exhibits high affinity binding to CD166. Using our proprietarytechnology, we used this antibody to engineer a Probody therapeutic targeting CD166 that is designed to be masked when active proteases are absent but canbe specifically activated by any one of several different tumor-associated proteases. Furthermore, through our license with ImmunoGen, we have gainedaccess to the potent microtubule inhibiting payload DM4 which we conjugated to the anti-CD166 Probody, resulting in CX-2009; a Probody DrugConjugate designed to bind to CD166 specifically in the tumor microenvironment.We have completed multiple preclinical efficacy studies for CX-2009 and demonstrated tumor regressions at doses that we believed may be achievable inclinical trials. Preclinical efficacy data along with immunohistochemical staining (IHC) that demonstrates high expression of CD166 in these tumors, isshown in the figures below. In these figures, tumor growth curves are shown in mice-bearing HCC1806 xenograft tumors (triple negative breast cancer), H292xenograft tumors (lung cancer), or an Ovarian patient-derived tumor model. Mice treated with CX-2009 (squares) are compared to either a control withouttreatment (circles) or an ADC to CD166 (triangles). The figures indicate that CX-2009 led to greater tumor growth regression than control, and similar tumorgrowth regression as the ADC. Examples of pre-clinical anti-tumor activity of a CD166-directed ADC (red) and CX-2009 (blue) in mouse models Doses of CX-2009 up to 15 mg/kg were tested in non-human primate toxicology studies. The findings were consistent with the off-target, non-specifictoxicity typically seen with other DM4-based ADCs that target other proteins. CX-2009 was advanced into human clinical trials on the basis of the anti-tumor activity and safety and tolerability observed in these preclinical studies and the clearance of an IND application by the FDA.PROCLAIM-CX-2009 Clinical ProgramPROCLAIM CX-2009 is an ongoing Phase 1/2 clinical trial evaluating the tolerability and preliminary antitumor activity of CX-2009 as a monotherapy,which we initiated in June 2017. We are focusing this study in seven tumor types that have high CD166 expression: breast carcinoma, castration-resistantprostate carcinoma, cholangiocarcinoma, endometrial carcinoma, epithelial ovarian carcinoma, head and neck squamous cell carcinoma and non-small celllung carcinoma. The figure below describes the design and status of PROCLAIM-CX-2009. Design and status of PROCLAIM-CX-2009 Phase 1/2 clinical trialCX-2009 Target Levels in Cancer PatientsAs part of our patient screening in PROCLAIM-CX-2009, we are evaluating the expression of CX-2009 across cancer patients. Of the 250 patients screenedas of January 28, 2019, 167 had tumor biopsies where at least 50% of the biopsied cells expressed 3+ membrane expression of CD166, validating the highand homogenous expression of the target in cancer patients.15 Initial Clinical ResultsAs of the February 6th, 2019 data cutoff for the CytomX R&D day, 76 patients were treated at doses ranging from 0.25 to 10 mg/kg of CX-2009 every 3weeks. Preliminary data from 46 efficacy evaluable patients demonstrated evidence of anti-cancer activity observed at doses of greater than or equal to 4mg/kg. Tumor shrinkage was observed in 16 (34.8%) patients in multiple tumor types with 5 unconfirmed partial responses (2 each in ovarian and breastcancers and one in head and neck cancer). Of note, comparable levels of anti-cancer activity was observed in patients who were PD-pathway inhibitor naiveor resistant, respectively. The graph below shows the activity of CX-2009 at doses of 4 mg/kg and higher. CX-2009 was generally well tolerated and the MTD was not reached. As of the February 6, 2019 data cut off, with 47 (61.8%) patients experiencing a Grade3/4 TEAEs and 23 (30.3%) patients experienced a Grade 3/4 TRAE. The most common adverse event observed was ocular toxicity, an anticipated toxicityassociated with the DM4 payload. Other Grade 3/4 TRAEs included liver function test abnormalities, gastrointestinal disorders and nervous system disorders.Dose optimization is underway to further to inform dose selection. Ocular toxicity prophylaxis has been introduced to this dose optimization phase. Collaboration Product Candidates in the ClinicWe are actively developing additional Probody therapeutics in the clinic in collaboration with other companies.BMS-986249, a CTLA-4 Probody Therapeutic in Collaboration with BMSAs part of our strategic oncology collaboration, BMS has advanced BMS-986249, a CTLA-4 Probody therapeutic, into a Phase 1/2 clinical trial. CTLA-4 isan immune checkpoint protein involved in regulating T-cell activation. BMS is currently marketing a CTLA-4 monoclonal antibody, Yervoy®, that has beenapproved for the treatment of unresectable or metastatic melanoma. CTLA-4 antibodies have been shown to lead to T-cell activation towards tumor antigens,which is the basis for its anti-tumor effect, and towards self-antigens, which may be the basis for the autoimmune toxicities associated with CTLA-4antibodies therapies. The FDA approval for ipilimumab has a black box warning about potential severe and fatal immune-related adverse events. We believethat our CTLA-4 Probody therapeutic may be able to effectively localize the CTLA-4 antibody activity to the tumor microenvironment, thereby limitingsystemic toxicities normally seen with Yervoy. We believe that BMS is the optimal strategic partner for our CTLA-4 Probody therapeutic given theirexpertise in cancer immunotherapy and their success with Yervoy.At various scientific congresses in 2017 and 2018, BMS presented pre-clinical efficacy and safety data on BMS-986249. For example, at the 2018 KeystoneDrugs as Antibodies Conference, BMS scientists presented preclinical efficacy data that showed that BMS-986249 demonstrates comparable anti-tumoractivity to ipilumumab in preclinical models. At the Society of Immunotherapy of Cancer meeting in 2017, BMS scientists presented preclinical data thatshowed that cynomologous monkeys treated with BMS-986249 demonstrated reduced peripheral T-cell activation compared to ipilumumab. In addition, BMS scientists presented data on the toxicity profile BMS-986249 and ipilumumab at the AACR-EORTC-NCI meeting in 2017. BMS scientistsconcluded that the highest non-severely toxic dose (“HNSTD”) of BMS-986249 was 50 mg/kg, while the HNSTD of ipilumumab was determined to be 10mg/kg. The efficacy data, along with the peripheral T-cell activation data and the widened safety window suggests that BMS-986249 has the potential towiden the therapeutic window of ipilumumab. BMS-986249 is currently in a Phase 1/2 clinical study that is being conducted by BMS.16 CX-2029, a CD71 Probody Drug Conjugate in Collaboration with AbbVieWe are collaborating with AbbVie on the development of CX-2029, a CD71 Probody Drug Conjugate (“CD71-PDC”). CD71, also known as transferrinreceptor 1 (“TfR1”), is a protein that is essential for iron uptake in dividing cells, is highly expressed in a number of solid and hematologic cancers and hasattractive molecular properties for efficient delivery of cytotoxic payloads to tumor cells. The combination of high expression in tumors and ubiquitousexpression in normal tissues makes CD71 a difficult target for conventional ADCs, but potentially a good candidate for development of PDCs.In preclinical efficacy models, we have demonstrated that CX-2029 is highly efficacious in many cell line and patient-derived xenograft models thatrepresent many different cancer types. In our pre-clinical assessment of CD71-PDCs, we assessed activity in 42 pre-clinical models. We observed tumorregression or stasis in 30 of 42 models (71%) and tumor growth inhibition in 10 of 42 models (24%), demonstrating a wide-ranging pre-clinical anti-tumoractivity profile for CD71-PDCsWe have also compared the toxicity profile of a CD71 Antibody Drug Conjugate (“CD71-ADC”) to a CD71-PDC. As the figure below shows, a single dose ofthe CD71-ADC resulted in a significant decrease in the number of neutrophils, a type of infection-fighting cell, in the blood in cynomologus monkeys(squares), while the CD71-PDC at the same dose did not (triangles). Neutrophil counts in monkeys treated with CD71 ADC or PDCTaken together, we believe that CX-2029 has the potential to create a therapeutic window for a CD71 targeting therapeutic. CX-2029 is currently beingstudied in a Phase 1/2 clinical trial (PROCLAIM-CX-2029) that is being conducted by CytomX. Preclinical Product CandidatesWe are actively pursuing the application of our Probody platform technology to multiple other product candidates. These include other product candidatesdirected against other immunotherapy targets, additional first-in-class PDC product candidates, and T-Cell Engaging bispecific product candidates. Beloware selected examples of product candidates that we are pursuing.CX-188, PD-1 Probody TherapeuticWe have advanced CX-188, our wholly-owned PD-1 Probody therapeutic to the clinical stage. PD-1 is the receptor for the PD-L1 ligand responsible forinhibiting T-cell activation. It is the target for various immuno-oncology products, including nivolumab (Opdivo) and pembrolizumab (Keytruda). As withPD-L1, inhibiting PD-1 elicits T-cell anti-tumor responses in a variety of different cancers, and also induces systemic autoimmunity and toxicity. In 2018 wefiled an IND for CX-188 and the IND was cleared by the FDA in November 2018. We have decided to indefinitely postpone clinical trials for CX-188 due toprogram and portfolio prioritization. We may elect in the future to initiate clinical trials for CX-188.Probody T-Cell Engaging Bispecific Platform We believe that our Probody platform can be applied to T-cell engaging bispecific antibodies (“TCBs”). TCBs are a highly potent therapeutic modality,designed to direct the activity of cytotoxic T-cells to tumors. TCBs such as Blincyto, a CD19-directed TCB commercialized by Amgen, have shown clinicalactivity in hematologic malignancies, but development of TCBs for solid tumor indications is proving challenging. Due to their high potency, TCBs cantarget normal tissues with low antigen expression, resulting in significant on-target, off-tumor toxicity that can limit dosing to low levels. As a result, it hasbeen difficult to reach the level of drug exposure required for efficacy without excessive toxicity. Therefore, novel methods are needed to enable the potentanti-tumor activity of TCBs while limiting toxicity due to cytokine release and the resulting damage to healthy tissues.17 Our most advanced asset in this modality is a T cell-engaging Bispecific Probody therapeutic (“Pb-TCB”) targeting EGFR and CD3. In in vitro preclinicalstudies, we have demonstrated that the unmasked EGFR-CD3 TCB (diamonds) can exhibit potent dose-dependent tumor cell killing, while the maskedEGFR-CD3 Pb-TCB (filled squares) reduced cytotoxicity by more than 100,000-fold, as shown in the figure below. A TCB which does not bind EGFR (opensquares) does not kill tumor cells, demonstrating that the activity of the TCB is target dependent. Cytotoxicity of HT-29 tumor cells induced by unmasked, active EGFR-CD3 bispecific antibody (red) and by masked EGFR-CD3 bispecific Probody therapeutic (blue). An inactivecontrol is shown in blue squaresHowever, in established tumor models, we have demonstrated that Pb-TCBs can induce tumor regressions. As the figure below shows, in the HT29 xenograftmodel, the Pb-TCB at 0.5 mg/kg (open squares) demonstrated significant anti-tumor activity, and at 1.5 mg/kg (closed squares) was able to induce completetumor regression. A control treated with inactive PBS buffer (“PBS”) is also shown (circles). Example of pre-clinical anti-tumor activity of a Probody TCB at 2 different doses (microgram/kg) in a mouse model, compared to vehicle control (PBS, black). Asterisks indicatestatistical significance compared to control.18 In nonhuman primates, the EGFR-CD3 Pb-TCB has a significantly higher maximum tolerated dose than the unmasked TCB. Cynomologus monkeys wereable to tolerate a dose of 4,000 microgram/kg of the Pb-TCB, while the maximum tolerated dose of the unmasked TCB was 60 microgram/kg. Furthermore, asshown in the figure below, the tolerated exposure of the Pb-TCB (blue symbols) was greater than 10,000-fold higher than that of the unmasked TCB (redsymbols). Concentration in plasma over time of 60 or 180 micrograms/kg single dose of an unmasked, active EGFR-CD3 TCB (red) and of 2000 micrograms/kg as a single dose of amasked EGFR-CD3 Probody therapeutic TCB (blue).Taken together, we believe our Probody Platform has the potential to enable the development of T-cell engaging bispecific therapeutics against broadlyexpressed targets such as EGFR. Our EGFR-CD3 Pb-TCB program is partnered with Amgen, and as of February 2019, is in the pre-clinical lead optimizationstage.Our CollaborationsWe believe that the Probody platform has broad applicability across a number of targets and antibody formats. We have leveraged strategic partnering to (a)extend the reach of our therapeutic opportunity and (b) bring in significant non-dilutive capital into the Company. Since 2013, we have entered intocollaborations with AbbVie, Amgen, BMS and ImmunoGen, among others, to enable development of certain Probody therapeutics. In constructing each ofthese collaborations, our primary objectives were to collaborate with leading biopharmaceutical players to validate the potential of Probody therapeutics, togain meaningful near-term funding and/or technology access to enable advancement of CytomX’s wholly owned Probody therapeutics pipeline, broaden thenumber of Probody therapeutics that ultimately reach the clinic, and to retain significant milestones, royalties, and in some cases product rights, for long termupside.AbbVie Ireland Unlimited CompanyIn April 2016, we entered into two agreements with AbbVie, a CD71 Co-Development and Licensing Agreement (the “CD71 Agreement”) and a DiscoveryCollaboration and Licensing Agreement (the “Discovery Agreement” and together with the CD71 Agreement the “AbbVie Agreements”). Under the terms ofthe CD71 Agreement, we and AbbVie are co-developing CX-2029, a Probody Drug Conjugate (“PDC”) against CD71, and we are responsible for pre-clinicaland early clinical development. AbbVie will be responsible for later development and commercialization, with global late-stage development costs sharedbetween the two companies. We will assume 35% of the net profits or net losses related to later development unless we opt-out. If we opt-out fromparticipation of co-development of CX-2029, AbbVie will have sole right and responsibility for the further development, manufacturing andcommercialization of such CX-2029.Under the CD71 Agreement, we received an upfront payment of $20.0 million in April 2016, and we are eligible to receive up to $470.0 million indevelopment, regulatory and commercial milestone payments and royalties on ex-US sales in the high teens to low twenties if we participate in the co-development of the CX-2029 subject to a reduction in such royalties if we opt-out from the co-development of the CD71 PDC. Our share of later stage co-development costs for CX-2029 is capped, provided that AbbVie may offset our co-development cost above the capped amounts from future payments suchas milestone payments and royalties.Under the terms of the Discovery Agreement, AbbVie receives exclusive worldwide rights to develop and commercialize PDC against up to two targets, oneof which was selected in March 2017. We shall perform research services to discover the Probody therapeutics and create PDCs for the nominatedcollaboration targets. From that point, AbbVie shall have sole right and responsibility for development and commercialization of products comprising orcontaining such PDCs (“Discovery Licensed Products”).19 Under the Discovery Agreement, we received an upfront payment of $10.0 million in April 2016 and may receive an additional payment upon the selectionby AbbVie of the second target and the satisfaction of certain performance conditions under the CD71 Agreement. AbbVie has not selected the second target,but the performance conditions under the CD71 Agreement were met in September 2016. We are also eligible to receive up to $275.0 million in targetnomination, development, regulatory and commercial milestone payments and royalties in the high single to low teens from commercial sales of anyresulting PDCs. Amgen, Inc.In September 2017, we entered into a Collaboration and License Agreement (the “Amgen Agreement”) with Amgen. Pursuant to the Amgen Agreement, wereceived an upfront payment of $40.0 million in October 2017. Concurrent with the entry into the Amgen Agreement, Amgen purchased 1,156,069 shares ofour common stock for $20.0 million.Under the terms of the Amgen Agreement, we and Amgen are co-developing a Probody T-cell engaging bi-specific therapeutic targeting EGFR (“EGFRProducts”). We are responsible for early-stage development of EGFR Products and all related costs (up to certain pre-set costs and certain limits based onclinical study size). Amgen will be responsible for late-stage development, commercialization, and all related costs of EGFR Products. Following early-stagedevelopment, we will have the right to elect to participate financially in the global co-development of EGFR Products with Amgen, during which we wouldbear certain of the worldwide development costs for EGFR Products and Amgen would bear the rest of such costs (the “EGFR Co-Development Option”). Ifwe exercise our EGFR Co-Development Option, we will share in somewhat less than 50% of the profit and losses from sales of such EGFR Products in theU.S., subject to certain caps, offsets, and deferrals. If we choose not to exercise our EGFR Co-Development Option, we will not bear any costs of later stagedevelopment. We are eligible to receive up to $455.0 million in development, regulatory, and commercial milestone payments for EGFR Products, androyalties in the low-double digit to mid-teen percentage of worldwide commercial sales, provided that if we exercise our EGFR Co-Development option, weshall only receive royalties in the low-double digit to mid-teen percentage of commercial sales outside of the United States.Amgen also has the right to select a total of up to three targets, including the two additional targets discussed below. We and Amgen will collaborate in theresearch and development of Probody T-cell engaging bi-specifics products directed against such targets. Amgen has selected one such target (the “AmgenOther Product”). If Amgen exercises its option within a specified period of time, it can select two such additional targets (the “Amgen Option Products” and,together with the Amgen Other Product, the “Amgen Products”). Except with respect to preclinical activities to be conducted by us, Amgen will beresponsible, at its expense, for the development, manufacture, and commercialization of all Amgen Products. If Amgen exercises all of its options andadvances all three of the Amgen Products, we are eligible to receive up to $950.0 million in upfront, development, regulatory, and commercial milestonesand tiered high single-digit to low-teen percentage royalties.We have the option to select, from programs specified in the Amgen Agreement, an existing pre-clinical stage T-cell engaging bispecific product from theAmgen pre-clinical pipeline. We will be responsible, at our expense, for converting this program to a Probody T-cell engaging bispecific product, andthereafter, be responsible for development, manufacturing, and commercialization of the product (“CytomX Product”). Amgen is eligible to receive up to$203.0 million in development, regulatory, and commercial milestone payments for the CytomX Product, and tiered mid-single digit to low double-digitpercentage royalties.Bristol-Myers Squibb CompanyIn May 2014, we and BMS entered into a Collaboration and License Agreement (the “BMS Agreement”) to discover and develop compounds for use inhuman therapeutics aimed at multiple immuno-oncology targets using our Probody therapeutic technology.Under the terms of the BMS Agreement, we granted BMS exclusive worldwide rights to develop and commercialize Probody therapeutics for up to fouroncology targets, two of which were selected upon the execution of the BMS Agreement. Pursuant to the BMS Agreement, we received an upfront paymentof $50.0 million and were initially entitled to receive contingent payments of up to an aggregate of $1,217.0 million in development, regulatory andcommercial milestone payments, which can be reduced by any such payments received or by any termination of targets being pursued. We are entitled toroyalty payments in the mid-single digit to low double digits percentage from potential future sales. We also receive research and development servicefees. BMS has terminated certain targets from the BMS Agreement, as described below.In January 2016, BMS selected the third target pursuant to the BMS Agreement and paid us $10.0 million. In December 2016, BMS selected the fourth andits final target pursuant to the BMS Agreement and paid us $15.0 million. In December 2016, BMS selected BMS-986249, a CTLA-4 Probody therapeutic, asa clinical candidate pursuant to the BMS Agreement, which triggered a $2.0 million pre-clinical milestone payment to us. In November 2017, BMS receivedacceptance of the IND for BMS-986249 from the FDA, which triggered a $10.0 million milestone payment to us.20 In March 2017, we and BMS entered into Amendment Number 1 to Extend Collaboration and License Agreement (the “Amendment”). The Amendmentgrants BMS exclusive worldwide rights to develop and commercialize Probody therapeutics for up to six additional oncology targets and two non-oncologytargets.Under the terms of the Amendment, we will continue to collaborate with BMS to discover and conduct preclinical development of Probody therapeuticsagainst targets selected by BMS.Pursuant to the Amendment, we received an upfront payment of $200.0 million and we will be eligible to receive up to an aggregate of $3,586.0 million asfollows: (i) up to $116.0 million in development milestone payments per target or up to $928.0 million if the maximum of eight targets are selected for thefirst product modality; (ii) up to $124.0 million in milestone payments for the first commercial sale in various territories for up to three indications per targetprogram or up to $992.0 million if the maximum of eight targets are selected for the first product modality; (iii) up to $60.0 million in sales milestonepayments per target or up to $480.0 million if maximum of eight targets are selected for the first product modality; and (iv) up to $56.3 million indevelopment milestone payments or up to $450.0 million if the maximum of eight targets are selected for the second product modality; (v) up to $62.0million in milestone payments for the first commercial sale in various territories for up to three indications per target program or up to $496.0 million if themaximum of eight targets are selected for the second product modality; (iii) up to $30.0 million in sales milestone payments per target or up to $240.0million if maximum of eight targets are selected for the second product modality. We are also entitled to tiered mid-single to low double-digit percentageroyalties from potential future sales.In January 2019, BMS provided us notification of termination of three of the targets in the BMS Agreement. We are still in the process of evaluating therelated financial impact. The termination of these targets does not affect BMS-986249, which, as of February 2019, continues to be explored in a Phase 1/2clinical study that is being conducted by BMS. The termination of these targets also does not affect the Amendment, which remains in full force and effect. ImmunoGen, Inc.In January 2014, CytomX and ImmunoGen entered into the Research Collaboration Agreement (the “ImmunoGen Research Agreement”). The ImmunoGenResearch Agreement provides us with the right to use ImmunoGen’s ADC technology in combination with our Probody therapeutic technology to create aPDC directed at one specified target under a research license, and to subsequently obtain an exclusive, worldwide development and commercializationlicense to use ImmunoGen’s ADC technology to develop and commercialize such PDCs. Under the agreement, we provided ImmunoGen with the rights toCytomX’s Probody therapeutic technology to create PDCs directed at two targets under the research license and to subsequently obtain exclusive, worldwidedevelopment and commercialization licenses to develop and commercialize such PDCs. In February 2016, we exercised our option to obtain a developmentand commercialization license for CX-2009 pursuant to the terms of the ImmunoGen Research Agreement (the “CX-2009 License”). In February 2017,ImmunoGen exercised its option to obtain a development and commercialization license for the first of its two targets. ImmunoGen discontinued thisprogram in July 2017 and substitution rights for this program terminated in February 2017. ImmunoGen exercised its second option to obtain a developmentand commercialization license pursuant to the ImmunoGen Research Agreement (the “ImmunoGen 2017 License”) for a target, epithelial cell adhesionmolecule (EPCAM), in December 2017 and continues research work on this program.Under the terms of the ImmunoGen Research Agreement, both we and ImmunoGen were required to perform research activities on behalf of the other party forno monetary consideration. Each party is solely responsible for the development, manufacturing and commercialization of any products resulting from theexclusive development and commercialization license obtained by such party under the agreement. In consideration for the ImmunoGen 2017 License, weare entitled to receive up to $30.0 million in development and regulatory milestone payments per the research program target, up to $50.0 million in salesmilestone payments per target and royalties in the mid-single digit percentage on the commercial sales of any resulting product. In consideration for the CX-2009 License, ImmunoGen is entitled to receive up to $60.0 million in development and regulatory milestone payments, up to $100.0 million in salesmilestone payments and royalties in the mid to high single digits percentage on the commercial sales of any resulting product. In August 2017, we made amilestone payment of $1.0 million to ImmunoGen for the first patient dosing with CX-2009.Pfizer PDC CollaborationIn May 2013, we entered into a collaboration with Pfizer for up to four targets which was terminated in March 2018.21 ManufacturingOur Probody therapeutic candidates are designed to be produced as fully recombinant antibody prodrugs. Our Probody therapeutic candidates are alsodesigned to maintain the manufacturability benefits of antibodies and leverage well established technologies used for antibody production. We conduct cellline development and process development both in-house and in collaboration with contract development and manufacturing organizations (“CMO”). CMOsare responsible for manufacturing of drug substance and clinical drug product materials.Our lead Chinese hamster ovary cell line has been successfully used for manufacturing several antibodies and requires minimal process optimization toestablish a process to support early phase manufacturing. We utilize well established production steps typically part of a platform manufacturing process forantibodies. The CMO we have selected has a strong track record in manufacturing therapeutic biologics, including antibodies. All activities from cell linedevelopment to formulated drug product are performed at one location to maintain aggressive timelines and minimize delays that can result from engagingmultiple parties for manufacturing. Similarly, for our PDC projects we have selected CMOs with strong expertise in clinical/commercial drug conjugatemanufacturing and with capabilities for toxin conjugation and fill-finish. Furthermore, our two lead PDC programs incorporate toxin payloads that have anestablished clinical and regulatory history. To date, we have been able to successfully manufacture CX-072, CX-2009 and CX-2029 for our ongoing early stage clinical trials. However, in order toconduct later stage clinical trials of our product candidates, including CX-072, CX-2009 and CX-2029, and eventually, if approved, commercial products, wewill need to manufacture them in larger quantities. We, or any manufacturing partners, may be unable to successfully increase the manufacturing scale andcapacity for any of our product candidates in a timely or cost-effective manner, or at all. For example, we are currently working with our CMOs to change ourmanufacturing processes and formulations as well as scaling up for large drug manufacturing capability and to increase the term of stability for CX-072 drugproduct for late stage clinical trials and commercialization. However, we may have to start late stage trials with our early clinical trial drug product andswitch to the late stage or commercial drug product mid trial. In such event, the FDA will require us to complete bridging studies to compare the earlier stagematerial with the late stage or commercial material to assure comparability between the earlier trial material and the late stage or commercialmaterial. Changing the formulation and scale up process is a complicated and difficult task. While we believe we can complete the process successfully,there can be no assurances that the changes we make to the drug product and manufacturing process will be successful or completed in a timely manner orthat the FDA will not require additional development steps or studies from those we believe are necessary. If we are unable scale up our manufacturingcapabilities with respect to CX-072 or any of our other product candidates, increase the life of drug stability of CX-072 or such other product candidates, orsuccessfully complete the FDA’s bridging requirements, we may not be able to successfully obtain FDA approval and commercialize CX-072 or such otherproduct candidates in a timely manner or at all.The supply chain for the manufacturing of our product candidates is complicated and can involve many parties. We do not own manufacturing facilities forproducing such supplies and rely on third-party contract manufacturers to manufacture our clinical trial and preclinical study product supplies. Our clinicaltrial manufacturing contractors and suppliers are our sole source for their respective manufacturing and supplies. Failure of any of these contractors couldaffect our ability to have clinical trial material available when needed. This could result in a substantial delay of our clinical trials. For example, for each ofCX-072 CX-2009 and CX-2029, our manufacturing supply chain includes several contract manufacturers, and failure by any of these manufacturers couldresult in interruptions of our clinical studies. We do not have any long-term contracts and we do not currently have an alternative to any of our third-partycontract manufacturers. Consequently, there can be no assurance that our preclinical and clinical development product supplies will not be limited,interrupted, or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of any of our third-party contractmanufacturers could require significant effort and expertise because there may be a limited number of qualified replacements. In addition, we may encounterissues with transferring technology to a new third-party manufacturer, and we may encounter regulatory delays if we need to move the manufacturing of ourproducts from one third-party manufacturer to another. For example, we were dependent on ImmunoGen under our collaboration for certain steps in themanufacturing of clinical quantities of CX-2009. At the end of 2018, ImmunoGen closed their clinical manufacturing facility in Norwood, MA. This siteprovided clinical manufacturing support for the CX-2009 program. We have initiated the transfer of the drug substance manufacturing process fromImmunoGen to a contract manufacturer, where we have an existing relationship and with expertise in the manufacture of antibody drug conjugates at aclinical and commercial scale. To date, the manufacturing transfer process is still ongoing and has not yet been completed. However, there can be noassurances that we will not experience a disruption to the supply of CX-2009 in connection with such transfer or that the transfer will be successful. 22 In-LicensesLicense from UCSBIn August 2010, we entered into an agreement with UCSB, that grants us an exclusive license, with the right to sublicense, under the patent rights owned byUCSB covering mask and screening technologies relating to the identification and discovery of pro-protein biologics, including masks and substrates, for theidentification of pro-proteins, for use in the fields of therapeutics, in vivo diagnostics, and prophylactics (the “UCSB Agreement”). The UCSB Agreementalso grants us an exclusive license, with the right to sublicense, under UCSB’s interest in certain patent rights we co-own with UCSB covering Probodyantibodies and other pro-proteins in the fields of therapeutics, in vivo diagnostics and prophylactics.We had no upfront payment obligations under the agreement. We are obligated to pay to UCSB royalties on net sales of licensed products in the low singledigit percentages, subject to annual minimum amounts as well as certain reductions. We are required to make milestone payments to UCSB on theaccomplishment of certain milestones totaling up to $1,075 million for each of the first two indications for each licensed product consisting of a molecule orcompound covered by the licensed patent rights. We were also obligated to make a payment to UCSB upon the first occurrence of an IPO or change ofcontrol. If the Company sublicenses its rights under the UCSB Agreement, it must pay UCSB a percentage of our total sublicense revenues ranging from themid-single to mid-teen percentages, which total amount would be first reduced by the aggregate amount of certain research and development relatedexpenses incurred by the Company and other permitted deductions.License from ImmunoGen In February 2016, we exercised our option to obtain a worldwide, exclusive, sublicensable license from ImmunoGen for development and commercializationof products directed against the target selected by us under our research collaboration agreement with ImmunoGen. See the description of the licenseagreement set forth under the caption “Our Collaborations—ImmunoGen, Inc.” in this Item 1 of this Annual Report on Form 10-K. CompetitionThe biotechnology and biopharmaceutical industries, and the immuno-oncology subsector, are characterized by rapid evolution of technologies, fiercecompetition and strong defense of intellectual property. Any product candidates that we successfully develop and commercialize will have to compete withexisting therapies and new therapies that may become available in the future. While we believe that our proprietary Probody platform and scientific expertisein the field of biologics and immuno-oncology provide us with competitive advantages, a wide variety of institutions, including large biopharmaceuticalcompanies, specialty biotechnology companies, academic research departments and public and private research institutions, are actively developingpotentially competitive products and technologies. We face substantial competition from biotechnology and biopharmaceutical companies developingbiopharmaceutical products, particularly with respect to in immuno-oncology therapeutics, where competition is intense and rapidly evolving. Thesecompetitors generally fall within the following categories:Masking and conditional activation: Several companies, including Akriveia, Amgen, Amunix, BioAtla, Halozyme, Harpoon, Maverick Therapeutics,Pandion Therapeutics, Revitope, and Roche are exploring antibody masking and/or conditional activation strategies, which could compete with our ProbodyPlatform.Cancer immunotherapies: Cancer immunotherapy is one of the most competitive and fastest growing segments of the pharmaceutical industry. Almost everylarge pharmaceutical company is developing cancer immunotherapies, including Amgen, AstraZeneca PLC, BMS, Celgene, GlaxoSmithKline plc, Merck &Co., Inc., Novartis AG, Pfizer, Roche Holding Ltd and Sanofi SA. In addition, many large and mid-sized biotech companies such as BeiGene Incyte,TESARO, Inc., Nektar, and Alkermes have ongoing efforts in cancer immunotherapy. Finally, numerous small companies are also working in the space.Antibody drug conjugates: Several large pharmaceutical companies, such as AbbVie, Daiichi Sankyo, Pfizer, Roche, and Takeda are developingADCs. Three mid-sized companies, ImmunoGen, Seattle Genetics, and Immunomedics are also leaders in this space. Finally, numerous small companieshave ongoing efforts in the space.T-cell engaging bispecifics: Several large pharmaceutics companies, such as Amgen, Novartis, and Roche, have on-going efforts in the space of TCBs. Inadditional, several mid-sized biotech companies such as Macrogenics and Xencor have ongoing efforts in TCBs. Finally, numerous small companies haveongoing efforts in the space.23 Many of our competitors, either alone or with strategic partners, have substantially greater financial, technical and human resources than we do. Accordingly,our competitors may be more successful than us in obtaining approval for treatments and achieving widespread market acceptance, rendering our treatmentsobsolete or non-competitive. Accelerated merger and acquisition activity in the biotechnology and biopharmaceutical industries may result in even moreresources being concentrated among a smaller number of our competitors. These companies also compete with us in recruiting and retaining qualifiedscientific and management personnel, establishing clinical study sites and patient registration for clinical studies and acquiring technologies complementaryto, or necessary for, our programs. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborativearrangements with large and established companies. Our commercial opportunity could be substantially limited in the event that our competitors developand commercialize products that are more effective, safer, less toxic, more convenient or less expensive than our comparable products. In geographies that arecritical to our commercial success, competitors may also obtain regulatory approvals before us, resulting in our competitors building a strong market positionin advance of our products’ entry. We believe the factors determining the success of our programs will be the efficacy, safety and convenience of our productcandidates.Intellectual PropertyWe strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially important to our business, includingseeking, maintaining, and defending patent rights, whether developed internally or licensed from third parties. Our policy is to seek to protect our proprietaryposition by, among other methods, pursuing and obtaining patent protection in the United States and in jurisdictions outside of the United States related toour proprietary technology, inventions, improvements, platforms and product candidates that are important to the development and implementation of ourbusiness. Our patent portfolio is intended to cover, but is not limited to, our technology platforms, our product candidates and components thereof, theirmethods of use and processes for their manufacture, our proprietary reagents and assays, and any other inventions that are commercially important to ourbusiness. We also rely on trade secret protection of our confidential information and know-how relating to our proprietary technology, platforms and productcandidates, continuing innovation, and in-licensing opportunities to develop, strengthen, and maintain our proprietary position in our Probody platform andproduct candidates. We expect to rely on data exclusivity, market exclusivity, patent term adjustment and patent term extensions when available. Ourcommercial success may depend in part on our ability to obtain and maintain patent and other proprietary protection for our technology, inventions, andimprovements; to preserve the confidentiality of our trade secrets; to maintain our licenses to use intellectual property owned or controlled by third parties;to defend and enforce our proprietary rights, including our patents; to defend against and challenge the assertion by third parties of their purportedintellectual property rights; and to operate without the unauthorized infringement of valid and enforceable patents and other proprietary rights of thirdparties.We believe that we have a strong global intellectual property position and substantial know-how and trade secrets relating to our Probody therapeutictechnology, platform and product candidates. Our patent portfolio as of February 15, 2019 contains at least 100 issued patents (some of which are co-ownedwith a third party) and 250 pending patent applications (some of which are co-owned with a third party). We have exclusively licensed UCSB’s interest in theco-owned patent family covering Probody and other pro-protein technology in the fields of therapeutics, in vivo diagnostics and prophylactics.These patents and patent applications include claims directed to: •Probody platform and PDC platform; •Other pro-protein platforms; •Probody conjugates and conjugation methods to produce PDCs; •Bispecific and other multispecific Probody therapeutics, including T-cell-recruiting bispecific Probody therapeutics; •Protease-cleavable linkers, e.g., serine protease- and/or MMP-cleavable linkers; •Improved display systems for peptide display, e.g., to identify masks, substrates, and other proteins; •Cancer immunotherapy Probody therapeutics, e.g., PD-L1, PD-1, and CTLA-4 Probody therapeutics, as well as related novel antibodies andcombination therapies; •Probody drug conjugates, e.g., CD-166, CD-71 (transferrin receptor), CD49c (integrin alpha 3), and CD147 PDCs, as well as related Probodytherapeutics, novel antibodies and ADCs; •Probody therapeutics to other targets, e.g., EGFR, Jagged, and IL6R Probody therapeutics, as well as related PDCs, novel antibodies and ADCs; •Antibodies that bind Probody therapeutics, e.g., anti-mask and anti-Probody antibodies;24 •Antibodies that bind key targets; •Antibodies that bind the active site of uPA protease; •Compositions and methods to discriminate between intact Probody therapeutics and activated versions thereof, as well as other translationassays; •Methods to produce intact Probody therapeutics; and •Methods to use any of the above-referenced compounds and compositions.In addition, we have exclusively licensed a patent portfolio of patent families from UCSB patents and patent applications that cover compositions andmethods related to screening for and identification of masks and protease-cleavable linkers that we incorporate into our Probody therapeutics.As for the Probody platform, product candidates and processes we develop and commercialize, in the normal course of business, we intend to pursue, whereappropriate, patent protection or trade secret protection relating to compositions, methods of manufacture, assay methods, methods of use, treatment ofindications, dosing and formulations. We may also pursue patent protection with respect to product development processes and technology.We continually assess and refine our intellectual property strategy as we develop new platform technologies and product candidates. To that end, we areprepared to file additional patent applications if our intellectual property strategy requires such filings, or where we seek to adapt to competition or seizebusiness opportunities. Further, we are prepared to file patent applications, as we consider appropriate under the circumstances, relating to the newtechnologies that we develop. In addition to filing and prosecuting patent applications in the United States, we often file counterpart patent applications inthe European Union and in additional countries where we believe such foreign filing is likely to be beneficial, including but not limited to any or all ofAustralia, Brazil, Canada, China, Europe, Hong Kong, India, Indonesia, Israel, Japan, Malaysia, Mexico, New Zealand, Russia or Eurasian PatentOrganization, Singapore, South Africa and South Korea.Our currently issued patents will likely expire on dates ranging from 2028 to 2035, unless we receive patent term extension or adjustment as might beavailable under applicable law. If patents are issued on our pending patent applications, the resulting patents are projected to expire on dates ranging from2028 to 2039, unless we receive patent term extension or adjustment. However, the actual protection afforded by a patent varies on a product-by-productbasis, from country-to-country, and depends upon many factors, including the type of patent, the scope of its coverage, the availability of regulatory-relatedextensions, the availability of legal remedies in a particular country, and the validity and enforceability of the patent.All of our patents and patent applications are subject to risks and uncertainties under U.S. and foreign law. For a more comprehensive discussion of risksrelated to our proprietary technology, inventions, improvements, platforms and product candidates, please see the section entitled “Risk Factors—RisksRelated to Intellectual Property.”We intend to file applications for trademark registrations in connection with our product candidates in various jurisdictions, including the U.S. The USPTOpreviously accepted the PROBODY mark under an intent-to-use trademark application. Because we were unable to show use for that mark within three yearsof acceptance, the mark became abandoned. We have re-filed for trademark protection of the PROBODY mark with the USPTO. We also have filed fortrademark protection of the CYTOMX and IHZ marks as well as the CytomX Logo with the USPTO. Both the PROBODY and IHZ marks were allowed by theUSPTO in 2016. The PROBODY mark was registered in class 5 by the USPTO in 2017.We also rely on trade secret protection for our confidential and proprietary information. It is our policy to require our employees, consultants, outsidescientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment orconsulting relationships with us. In the case of employees, the agreements provide that all inventions conceived by the individual, and which are related toour current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietaryinformation, are our exclusive property. In many cases our confidentiality and other agreements with consultants, outside scientific collaborators, sponsoredresearchers and other advisors require them to assign or grant us licenses to inventions they invent as a result of the work or services they render under suchagreements or grant us an option to negotiate a license to use such inventions.25 Government Regulation and Product ApprovalGovernmental authorities in the U.S., at the federal, state and local level, and other countries extensively regulate, among other things, the research,development, testing, manufacture, labeling, packaging, promotion, storage, advertising, distribution, marketing and export and import of products such asthose we are developing. Our therapeutic candidates must be approved by the FDA through the NDA or BLA process before they may be legally marketed inthe U.S. and will be subject to similar requirements in other countries prior to marketing in those countries. The process of obtaining regulatory approvals andthe subsequent compliance with applicable federal, state, local and foreign statutes and regulations require the expenditure of substantial time and financialresources.U.S. Government RegulationIn the U.S., the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act (“FDCA”) and, in the case of therapeutic biologics, the Public HealthServices Act (“PHSA”), and implementing regulations. Failure to comply with the applicable U.S. requirements at any time during the product developmentor approval process, or after approval, may subject an applicant to administrative or judicial sanctions, any of which could have a material adverse effect onus. These sanctions could include: •refusal to approve pending applications; •withdrawal of an approval; •imposition of a clinical hold; •warning or untitled letters; •seizures or administrative detention of product; •total or partial suspension of production or distribution; or •injunctions, fines, disgorgement, or civil or criminal penalties.NDA and BLA approval processesThe process required by the FDA before a therapeutic may be marketed in the U.S. generally involves the following: •completion of nonclinical laboratory tests, animal studies and formulation studies conducted according to good laboratory practices (“GLPs”),and other applicable regulations; •submission to the FDA of an IND, which must become effective before human clinical trials may begin; •performance of adequate and well-controlled human clinical trials according to good clinical practices (“GCPs”), to establish the safety andefficacy of the product candidate for its intended use; •submission to the FDA of an NDA or BLA; •satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product candidate is produced to assessreadiness for commercial manufacturing and conformance to the manufacturing-related elements of the application, to conduct a data integrityaudit, and to assess compliance with current good manufacturing practices (“cGMPs”) to assure that the facilities, methods and controls areadequate to preserve the product candidate’s identity, strength, quality and purity; and •FDA review and approval of the NDA or BLA.Once a biopharmaceutical candidate is identified for development, it enters the preclinical or nonclinical testing stage. Nonclinical tests include laboratoryevaluations of product chemistry, toxicity and formulation, as well as animal studies. An IND sponsor must submit the results of the nonclinical tests,together with manufacturing information and analytical data, to the FDA as part of the IND. Some nonclinical testing may continue even after the IND issubmitted. In addition to including the results of the nonclinical studies, the IND will also include a protocol detailing, among other things, the objectives ofthe clinical trial, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated if the first phase lends itself to an efficacydetermination. The IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day time period, places the IND onclinical hold. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before clinical trials can begin. A clinical hold may occurat any time during the life of an IND and may affect one or more specific studies or all studies conducted under the IND.26 All clinical trials must be conducted under the supervision of one or more qualified investigators in accordance with GCPs. They must be conducted underprotocols detailing the objectives of the trial, dosing procedures, research subject selection and exclusion criteria and the safety and effectiveness criteria tobe evaluated. Each protocol, and any subsequent material amendment to the protocol, must be submitted to the FDA as part of the IND, and progress reportsdetailing the status of the clinical trials must be submitted to the FDA annually. Sponsors also must report to the FDA serious and unexpected adversereactions in a timely manner, any clinically important increase in the rate of a serious suspected adverse reaction over that listed in the protocol orinvestigation brochure or any findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the productcandidate. An institutional review board (“IRB”) at each institution participating in the clinical trial must review and approve the protocol before a clinicaltrial commences at that institution and must also approve the information regarding the trial and the consent form that must be provided to each researchsubject or the subject’s legal representative, monitor the study until completed and otherwise comply with IRB regulations. There are also requirementsgoverning the reporting of ongoing clinical trials and completed clinical trial results to public registries.Human clinical trials are typically conducted in three sequential phases that may overlap or be combined. •Phase 1—The product candidate is initially introduced into healthy human subjects and tested for safety, dosage tolerance, absorption,metabolism, distribution and elimination. In the case of some therapeutic candidates for severe or life-threatening diseases, such as cancer,especially when the product candidate may be inherently too toxic to ethically administer to healthy volunteers, the initial human testing isoften conducted in patients. •Phase 2—Clinical trials are performed on a limited patient population intended to identify possible adverse effects and safety risks, topreliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. •Phase 3—Clinical trials are undertaken to further evaluate dosage, clinical efficacy and safety in an expanded patient population atgeographically dispersed clinical study sites. These studies are intended to establish the overall risk-benefit ratio of the product and provide anadequate basis for product labeling.A pivotal study is a clinical study that adequately meets regulatory agency requirements for the evaluation of a product candidate’s efficacy and safety suchthat it can be used to justify the approval of the product. Generally, pivotal studies are also Phase 3 studies but may be Phase 2 studies if the trial designprovides a reliable assessment of clinical benefit, particularly in situations where there is an unmet medical need. Human clinical trials are inherentlyuncertain, and Phase 1, Phase 2 and Phase 3 testing may not be successfully completed. The FDA or the sponsor may suspend a clinical trial at any time for avariety of reasons, including a finding that the research subjects or patients are being exposed to an unacceptable health risk. Similarly, an IRB can suspendor terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the productcandidate has been associated with unexpected serious harm to patients.During the development of a new product candidate, sponsors are given opportunities to meet with the FDA at certain points; specifically, prior to thesubmission of an IND, at the end of Phase 2 and before a BLA or NDA is submitted. Meetings at other times may be requested. These meetings can provide anopportunity for the sponsor to share information about the data gathered to date and for the FDA to provide advice on the next phase of development.Sponsors typically use the meeting at the end of Phase 2 to discuss their Phase 2 clinical results and present their plans for the pivotal Phase 3 clinical trialthat they believe will support the approval of the new therapeutic. If a Phase 3 clinical trial is the subject of discussion at the end of Phase 2 meeting with theFDA, a sponsor may be able to request a Special Protocol Assessment (“SPA”), the purpose of which is to reach agreement with the FDA on the Phase 3clinical trial protocol design and analysis that will form the primary basis of an efficacy claim.Post-approval trials, sometimes referred to as “Phase 4” clinical trials, may be conducted after initial marketing approval. These trials are used to gainadditional experience from the treatment of patients in the intended therapeutic indication. In certain instances, FDA may mandate the performance of such“Phase 4” clinical trials.According to published guidance on the SPA process, a sponsor that meets the prerequisites may make a specific request for a SPA and provide informationregarding the design and size of the proposed clinical trial. The FDA is supposed to evaluate the protocol within 45 days of the request to assess whether theproposed trial is adequate, which evaluation may result in discussions and a request for additional information. A SPA request must be made before theproposed trial begins, and all open issues must be resolved before the trial begins. Although the FDA will assess protocols that have already begun, theseassessments will not be subject to the 45-day review applicable to SPAs. If a written agreement is reached, it will be documented and made part of the record.The agreement will be binding on the FDA and may not be changed by the sponsor or the FDA after the trial begins except with the written agreement of thesponsor and the FDA or if the FDA determines that a substantial scientific issue essential to determining the safety or efficacy of the product candidate wasidentified after the testing began.27 Concurrent with clinical trials, sponsors usually complete additional animal safety studies, develop additional information about the chemistry and physicalcharacteristics of the product candidate and finalize a process for manufacturing commercial quantities of the product candidate in accordance with cGMPrequirements. The manufacturing process must be capable of consistently producing quality batches of the product candidate and the manufacturer mustdevelop methods for testing the quality, purity and potency of the product candidate. To help reduce the risk of the introduction of adventitious agents withuse of biological products, the PHSA emphasizes the importance of manufacturing control for products whose attributes cannot be precisely defined. Themanufacturing process must be capable of consistently producing quality batches of the product candidate and, among other criteria, the sponsor mustdevelop methods for testing the identity, strength, quality, potency and purity of the final biological product. Additionally, appropriate packaging must beselected and tested, and stability studies must be conducted to demonstrate that the biological product candidate does not undergo unacceptabledeterioration over its shelf life. Additionally, for both NDA and BLA products, appropriate packaging must be selected and tested, and stability studies mustbe conducted to demonstrate that the product candidate does not undergo unacceptable deterioration over its proposed shelf-life.The results of product development, nonclinical studies and clinical trials, along with descriptions of the manufacturing process, analytical tests and othercontrol mechanisms, proposed labeling and other relevant information are submitted to the FDA as part of an NDA or BLA requesting approval to market theproduct.Under the Prescription Drug User Fee Act (“PDUFA”) as amended, each BLA or NDA must be accompanied by a significant user fee. The FDA adjusts thePDUFA user fees on an annual basis. PDUFA also imposes an annual product fee for products and an annual establishment fee on facilities used tomanufacture prescription biological or drug products. Fee waivers or reductions are available in certain circumstances, such as where a waiver is necessary toprotect the public health, where the fee would present a significant barrier to innovation, or where the applicant is a small business submitting its first humantherapeutic application for review.Within 60 days following submission of the application, the FDA reviews a BLA or NDA submitted to determine if it is substantially complete before theagency accepts it for filing. The FDA may refuse to file any BLA or NDA that it deems incomplete or not properly reviewable at the time of submission andmay request additional information. In this event, the BLA or NDA must be resubmitted with the additional information. The resubmitted application also issubject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review of the BLA orNDA. The FDA reviews the BLA to determine, among other things, whether the proposed product is safe, potent, and/or effective for its intended use, and hasan acceptable purity profile, and in the case of an NDA, whether the product is safe and effective for its intended use, and in each case, whether the product isbeing manufactured in accordance with cGMP. The FDA may refer applications for novel products or products that present difficult questions of safety orefficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and a recommendation as to whether theapplication should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers suchrecommendations carefully when making decisions.During the product approval process, the FDA also will determine whether a risk evaluation and mitigation strategies (“REMS”) plan is necessary to assurethe safe use of the product. If the FDA concludes a REMS plan is needed, the sponsor of the BLA or NDA must submit a proposed REMS plan. The FDA willnot approve a BLA or NDA without a REMS plan, if required. The FDA has authority to require a REMS plan under the Food and Drug AdministrationAmendments Act of 2007 (the “FDAAA”) when necessary to ensure that the benefits of a drug or therapeutic biologic outweigh the risks. In determiningwhether a REMS plan is necessary, the FDA must consider the size of the population likely to use the drug or therapeutic biologic, the seriousness of thedisease or condition to be treated, the expected benefit of the drug or therapeutic biologic, the duration of treatment, the seriousness of known or potentialadverse events, and whether the drug or therapeutic biologic is a new molecular entity. A REMS plan may be required to include various elements, such as amedication guide or patient package insert, a communication plan to educate health care providers of the risks, limitations on who may prescribe or dispensethe drug or therapeutic biologic, or other measures that the FDA deems necessary to assure the safe use of the drug or therapeutic biologic. In addition, theREMS plan must include a timetable to assess the strategy at 18 months, three years, and seven years after the strategy’s approval.The FDA may also require a REMS plan for a drug or therapeutic biologic that is already on the market if it determines, based on new safety information, thata REMS plan is necessary to ensure that the product’s benefits outweigh its risks.Before approving a BLA or NDA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless itdetermines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of theproduct within required specifications. Additionally, before approving a BLA or NDA, the FDA will typically inspect one or more clinical sites to assure thatthe clinical trials were conducted in compliance with IND trial requirements and GCP requirements. To assure cGMP and GCP compliance, an applicant mustincur significant expenditure of time, money and effort in the areas of training, record keeping, production and quality control.28 Notwithstanding the submission of relevant data and information, the FDA may ultimately decide that the BLA or NDA does not satisfy its regulatory criteriafor approval and deny approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret thesame data. If the agency decides not to approve the BLA or NDA in its present form, the FDA will issue a complete response letter that describes all of thespecific deficiencies in the BLA or NDA identified by the FDA. The deficiencies identified may be minor, for example, requiring labeling changes, or major,for example, requiring additional clinical trials. Additionally, the complete response letter may include recommended actions that the applicant might take toplace the application in a condition for approval. If a complete response letter is issued, the applicant may either resubmit the BLA or NDA, addressing all ofthe deficiencies identified in the letter, or withdraw the application.Even if a product receives regulatory approval, the approval may be significantly limited to specific indications and dosages or the indications for use mayotherwise be limited, which could restrict the commercial value of the product. Further, the FDA may require that certain contraindications, warnings orprecautions be included in the product labeling. The FDA may impose restrictions and conditions on product distribution, prescribing, or dispensing in theform of a risk management plan, or otherwise limit the scope of any approval. In addition, the FDA may require post marketing clinical trials, sometimesreferred to as “Phase 4” clinical trials, designed to further assess a biological product’s safety and effectiveness, and testing and surveillance programs tomonitor the safety of approved products that have been commercialized.Companion DiagnosticsThe FDA issued a final guidance document in July 2014 addressing agency policy in relation to in vitro companion diagnostic tests. The guidance explainsthat for some drugs and therapeutic biologics, the use of a companion diagnostic test is essential for the safe and effective use of the product, such as whenthe use of a product is limited to a specific patient subpopulation that can be identified by using the test. According to the guidance, the FDA generally willnot approve such a product if the companion diagnostic is not also approved or cleared for the appropriate indication, and accordingly the therapeuticproduct and the companion diagnostic should be developed and approved or cleared contemporaneously. However, the FDA may decide that it is appropriateto approve such a product without an approved or cleared in vitro companion diagnostic device when the drug or therapeutic biologic is intended to treat aserious or life-threatening condition for which no satisfactory alternative treatment exists and the FDA determines that the benefits from the use of a productwith an unapproved or uncleared in vitro companion diagnostic device are so pronounced as to outweigh the risks from the lack of an approved or cleared invitro companion diagnostic device. The FDA encourages sponsors considering developing a therapeutic product that requires a companion diagnostic torequest a meeting with both relevant device and therapeutic product review divisions to ensure that the product development plan will product sufficientdata to establish the safety and effectiveness of both the therapeutic product and the companion diagnostic. Because the FDA’s policy on companiondiagnostics is set forth only in guidance, this policy is subject to change and is not legally binding.Expedited Review and ApprovalThe FDA has various programs, including Fast Track, priority review, accelerated approval and breakthrough therapy designation, which are intended toexpedite or simplify the process for reviewing therapeutic candidates, or provide for the approval of a product candidate on the basis of a surrogate endpoint.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 that the time period for FDA review or approval will be lengthened. Generally, therapeutic candidates that are eligible for these programsare those for serious or life-threatening conditions, those with the potential to address unmet medical needs and those that offer meaningful benefits overexisting treatments. For example, Fast Track is a process designed to facilitate the development and expedite the review of therapeutic candidates to treatserious or life-threatening diseases or conditions and fill unmet medical needs. Priority review is designed to give therapeutic candidates that offer majoradvances in treatment or provide a treatment where no adequate therapy exists an initial review within eight months as compared to a standard review time oftwelve months.Although Fast Track and priority review do not affect the standards for approval, the FDA will attempt to facilitate early and frequent meetings with a sponsorof a Fast Track designated product candidate and expedite review of the application for a product candidate designated for priority review. Acceleratedapproval, which is described in Subpart H of 21 CFR Part 314, provides for an earlier approval for a new product candidate that is (1) intended to treat aserious or life-threatening disease or condition; (2) generally provides a meaningful advantage over available therapies; and (3) demonstrates an effect oneither a surrogate endpoint that is reasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversiblemorbidity or mortality (“IMM”) and is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity orprevalence of the condition and the availability or lack of alternative treatments. A surrogate endpoint is a laboratory measurement or physical sign used asan indirect or substitute measurement representing a clinically meaningful outcome. As a condition of approval, the FDA may require that a sponsor of aproduct candidate receiving accelerated approval perform post-marketing studies to verify and describe the predicted effect on irreversible morbidity ormortality or other clinical endpoint, and the product may be subject to accelerated withdrawal procedures.29 In the Food and Drug Administration Safety and Innovation Act (the “FDASIA”), which was signed into law in July 2012, the U.S. Congress encouraged theFDA to utilize innovative and flexible approaches to the assessment of therapeutic candidates under accelerated approval. The law required the FDA to issuerelated guidance and also promulgate confirming regulatory changes. In May 2014, the FDA published a final Guidance for Industry titled “ExpeditedPrograms for Serious Conditions—Drugs and Biologics,” which provides guidance on FDA programs that are intended to facilitate and expeditedevelopment and review of new therapeutic candidates as well as threshold criteria generally applicable to concluding that a product candidate is a candidatefor these expedited development and review programs.In addition to the Fast Track, accelerated approval and priority review programs discussed above, the FDA’s “Expedited Programs” guidance also describesthe Breakthrough Therapy designation. The FDA defines a Breakthrough Therapy as a therapeutic that is intended, alone or in combination with one or moreother therapeutics, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the therapeutic may demonstratesubstantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early inclinical development. A therapeutic designated as a Breakthrough Therapy is eligible for accelerated approval. The FDA must take certain actions, such asholding 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 qualifies for one or more of these programs, the FDA may later decide that the product no longer meets the conditions for qualification ordecide that the time period for FDA review or approval will not be shortened. A request for Breakthrough Therapy designation should be submittedconcurrently with, or as an amendment to, an IND, but ideally no later than the end of Phase 2 meeting.Patent Term Restoration and Marketing ExclusivityDepending upon the timing, duration and specifics of FDA approval of the use of our therapeutic candidates, some of our U.S. patents may be eligible forlimited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, referred to as the Hatch-Waxman Act. The Hatch-Waxman Act permits a patent restoration term of up to five years as compensation for patent term lost during product development and the FDA regulatoryreview process. However, patent term restoration cannot extend the remaining term of a patent beyond a total of 14 years from the product candidate’sapproval date. The patent term restoration period is generally one half of the time between the effective date of an IND and the submission date of an NDA,plus the time between the submission date of an NDA and the approval of that application, except that the review period is reduced by any time during whichthe applicant failed to exercise due diligence. Only one patent applicable to an approved product candidate is eligible for the extension and the applicationfor extension must be made prior to expiration of the patent. The USPTO, in consultation with the FDA, reviews and approves the application for any patentterm extension or restoration. In the future, we intend to apply for restorations of patent term for some of our currently owned or licensed patents to add patentlife beyond their current expiration date, depending on the expected length of clinical trials and other factors involved in the submission of the relevantNDA.Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year periodof non-patent marketing exclusivity within the U.S. to the first applicant to gain approval of an NDA for a new chemical entity. A product candidate is a newchemical entity if the FDA has not previously approved any other new product candidate containing the same active moiety, which is the molecule or ionresponsible for the action of the product candidate substance. During the exclusivity period, the FDA may not accept for review an abbreviated new drugapplication (an “ANDA”), or a 505(b)(2) NDA submitted by another company for another version of such product candidate where the applicant does not ownor have a legal right of reference to all the data required for approval. However, an application may be submitted after four years if it contains a certificationof patent invalidity or non-infringement of one of the patents listed with the FDA by the innovator NDA holder. The FDCA also provides three years ofmarketing exclusivity for an NDA, or supplement to an existing NDA, if new clinical investigations, other than bioavailability studies, that were conductedor sponsored by the applicant are deemed by the FDA to be essential to the approval of the application. Examples of such new clinical investigations includethose with respect to new indications, dosages or strengths of an existing product candidate. This three-year exclusivity covers only the modification forwhich the product received approval on the basis of the new clinical investigations and does not prohibit the FDA from approving ANDAs for productcandidates containing the active agent for the original indication or condition of use. Five-year exclusivity will not delay the submission or approval ofanother company’s full NDA. However, an applicant submitting a full NDA would be required to conduct or obtain a right of reference to all of the preclinicalstudies and adequate and well-controlled clinical trials necessary to demonstrate safety and effectiveness.The Biologics Price Competition and Innovation Act (the “BPCIA”) amended the PHSA to authorize the FDA to approve similar versions of innovativebiologics, commonly known as biosimilars. A competitor seeking approval of a biosimilar must file an application to establish its molecule as highly similarto an approved innovator biologic, among other requirements. The BPCIA, however, bars the FDA from approving biosimilar applications for 12 years afteran innovator biological product receives initial marketing approval.30 Orphan Drug DesignationUnder the Orphan Drug Act, the FDA may grant Orphan Drug Designation to therapeutic candidates intended to treat a rare disease or condition, which isgenerally a disease or condition that affects either (1) fewer than 200,000 individuals in the U.S., or (2) more than 200,000 individuals in the U.S. and forwhich there is no reasonable expectation that the cost of developing and making available in the U.S. a product candidate for this type of disease orcondition will be recovered from sales in the U.S. for that product candidate. Orphan Drug Designation must be requested before submitting an NDA. Afterthe FDA grants Orphan Drug Designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan DrugDesignation does not convey any advantage in or shorten the duration of the regulatory review and approval process.If a product candidate that has Orphan Drug Designation subsequently receives the first FDA approval for the disease for which it has such designation, theproduct candidate is entitled to orphan product exclusivity, which means that the FDA may not approve any other applications to market the same productcandidate for the same indication, except under limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval ofone of our therapeutic candidates for seven years if a competitor obtains approval of the same product candidate as defined by the FDA or if our productcandidate is determined to be contained within the competitor’s product candidate for the same indication or disease.In addition, the orphan drug credit is available for qualifying costs incurred between the date the FDA designates a drug as an orphan drug and the date theFDA approves the drug. The recent tax reform legislation, which was signed into law on December 22, 2017, reduced the amount of the qualified clinicalresearch costs for a designated orphan product that a sponsor may claim as a credit from 50% to 25%.Pediatric Exclusivity and Pediatric UseUnder the Best Pharmaceuticals for Children Act (the “BPCA”), certain therapeutic candidates may obtain an additional six months of exclusivity if thesponsor submits information requested in writing by the FDA, referred to as a Written Request, relating to the use of the active moiety of the productcandidate in children. Although the FDA may issue a Written Request for studies on either approved or unapproved indications, it may only do so where itdetermines that information relating to that use of a product candidate in a pediatric population, or part of the pediatric population, may produce healthbenefits in that population.In addition, the Pediatric Research Equity Act (“PREA”), requires a sponsor to conduct pediatric studies for most therapeutic candidates and biologics, for anew active ingredient, new indication, new dosage form, new dosing regimen or new route of administration. Under PREA, original NDAs, BLAs andsupplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safetyand effectiveness of the product candidate for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for eachpediatric subpopulation for which the product candidate is safe and effective. The sponsor or FDA may request a deferral of pediatric studies for some or all ofthe pediatric subpopulations. A deferral may be granted for several reasons, including a finding that the product candidate or biologic is ready for approvalfor use in adults before pediatric studies are complete or that additional safety or effectiveness data needs to be collected before the pediatric studies begin.The law requires the FDA to send a PREA Non-Compliance letter to sponsors who have failed to submit their pediatric assessments required under PREA,have failed to seek or obtain a deferral or deferral extension or have failed to request approval for a required pediatric formulation. It further requires the FDAto post the PREA Non- Compliance letter and sponsor’s response.As part of the FDASIA, the U.S. Congress made a few revisions to the BPCA and PREA, which were slated to expire on September 30, 2012, and made bothlaws permanent.Post-Approval RequirementsOnce an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements is not maintained or if problems occur after theproduct candidate reaches the market. Later discovery of previously unknown problems with a product candidate may result in restrictions on the productcandidate or even complete withdrawal of the product candidate from the market. After approval, some types of changes to the approved product candidate,such as adding new indications, manufacturing changes and additional labeling claims, are subject to further FDA review and approval. In addition, the FDAmay under some circumstances require testing and surveillance programs to monitor the effect of approved therapeutic candidates that have beencommercialized, and the FDA under some circumstances has the power to prevent or limit further marketing of a product candidate based on the results ofthese post-marketing programs.31 Any therapeutic candidates manufactured or distributed by us pursuant to FDA approvals are subject to continuing regulation by the FDA, including, amongother things: •record-keeping requirements; •reporting of adverse experiences with the product candidate; •providing the FDA with updated safety and efficacy information; •product sampling and distribution requirements; •notifying the FDA and gaining its approval of specified manufacturing or labeling changes; and •complying with FDA promotion and advertising requirements, which include, among other things, standards for direct-to-consumeradvertising, restrictions on promoting products for uses or in-patient populations that are not described in the product’s approved labeling,limitations on industry-sponsored scientific and educational activities and requirements for promotional activities involving the internet.Therapeutic manufacturers and other entities involved in the manufacture and distribution of approved therapeutic products are required to register theirestablishments with the FDA and certain state agencies and are subject to periodic unannounced inspections by the FDA and some state agencies forcompliance with cGMPs and other laws. The FDA periodically inspects manufacturing facilities to assess compliance with cGMP, which imposes extensiveprocedural, substantive and record-keeping requirements. In addition, changes to the manufacturing process are strictly regulated, and, depending on thesignificance of the change, may require FDA approval before being implemented. FDA regulations would also require investigation and correction of anydeviations from cGMP and impose reporting and documentation requirements upon us and any third-party manufacturers that we may decide to use if ourproduct candidates are approved. Accordingly, manufacturers must continue to expend time, money and effort in the area of production and quality controlto maintain compliance with cGMP and other aspects of regulatory compliance.New Legislation and RegulationsFrom time to time, legislation is drafted, introduced and passed in Congress that could significantly change the statutory provisions governing the testing,approval, manufacturing and marketing of products regulated by the FDA. In addition to new legislation, FDA regulations and policies are often revised orinterpreted by the agency in ways that may significantly affect our business and our products. It is impossible to predict whether further legislative changeswill be enacted or whether FDA regulations, guidance, policies or interpretations changed or what the effect of such changes, if any, may be.Regulation Outside of the U.S.In addition to regulations in the U.S., we will be subject to regulations of other jurisdictions governing any clinical trials and commercial sales anddistribution of our therapeutic candidates. Whether or not we obtain FDA approval for a product, we must obtain approval by the comparable regulatoryauthorities of countries outside of the U.S. before we can commence clinical trials in such countries and approval of the regulators of such countries oreconomic areas, such as the European Union, before we may market products in those countries or areas. The approval process and requirements governingthe conduct of clinical trials, product licensing, pricing and reimbursement vary greatly from place to place, and the time may be longer or shorter than thatrequired for FDA approval.Under European Union regulatory systems, a company can consider applying for marketing authorization in several European Union member states bysubmitting its marketing authorization application(s) under a centralized, decentralized or mutual recognition procedure. The centralized procedure providesfor the grant of a single marketing authorization that is valid for all European Union member states. The centralized procedure is compulsory for medicinesderived from biotechnology, orphan medicinal products, or those medicines with an active substance not authorized in the European Union on or before May20, 2004 intended to treat acquired immune deficiency syndrome (“AIDS”), cancer, neurodegenerative disorders or diabetes and optional for those medicinescontaining a new active substance not authorized in the European Union on or before May 20, 2004, medicines which are highly innovative, or medicines towhich the granting of a marketing authorization under the centralized procedure would be in the interest of patients at the European Union-level. Thedecentralized procedure provides for recognition by European Union national authorities of a first assessment performed by one of the member states. Underthis procedure, an identical application for marketing authorization is submitted simultaneously to the national authorities of several European Unionmember states, one of them being chosen as the “Reference Member State”, and the remaining being the “Concerned Member States”. The Reference MemberState must prepare and send drafts of an assessment report, summary of product characteristics and the labelling and package leaflet within 120 days afterreceipt of a valid marketing authorization application to the Concerned Member States, which must decide within 90 days whether to recognize approval. Ifany Concerned Member State does not recognize the marketing authorization on the grounds of potential serious risk to public health, the disputed pointsare eventually referred to the European Commission, whose decision is binding on all member states. The mutual recognition procedure is similar to thedecentralized procedure except that a medicine must have already received a marketing authorization in at least one of the member states, and that memberstate acts as the Reference Member State.32 As in the U.S., we may apply for designation of a product candidate as an orphan drug for the treatment of a specific indication in the European Union beforethe application for marketing authorization is made.Orphan drugs in the European Union enjoy economic and marketing benefits, including up to ten years of market exclusivity for the approved indicationunless another applicant can show that its product is safer, more effective or otherwise clinically superior to the orphan-designated product, the marketingauthorization holder is unable to supply sufficient quantity of the medicinal product or the marketing authorization holder has given its consent.Coverage and ReimbursementSales of our products will depend, in part, on the extent to which our products will be covered by third-party payors, such as government health programs,commercial insurance and managed healthcare organizations. These third-party payors are increasingly reducing reimbursements for medical products andservices. Additionally, the containment of healthcare costs has become a priority of federal and state governments and the prices of therapeutics have been afocus in this effort. The U.S. government, state legislatures and foreign governments have shown significant interest in implementing cost-containmentprograms, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net revenue andresults. If these third- party payors do not consider our products to be cost-effective compared to other therapies, they may not cover our products afterapproval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us to sell our products on a profitable basis.The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the “ACA”) has had asignificant impact on the health care industry. The ACA expanded coverage for the uninsured while at the same time containing overall healthcare costs.With regard to biopharmaceutical products, the ACA, among other things, addressed a new methodology by which rebates owed by manufacturers under theMedicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebatesowed by manufacturers under the Medicaid Drug Rebate Program and extended the rebate program to individuals enrolled in Medicaid managed careorganizations, established annual fees and taxes on manufacturers of certain branded prescription drugs, and a new Medicare Part D coverage gap discountprogram, in which manufacturers must agree to offer 50% point-of-sale discounts, which, through subsequent legislative amendments, will be increased to70% starting in 2019, off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for themanufacturer’s outpatient drugs to be covered under Medicare Part D.In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted that impact payment methodologiesand reimbursement amounts. On August 2, 2011, the Budget Control Act of 2011 among other things, created measures for spending reductions by Congress,which led to aggregate reductions to Medicare payments to providers of 2% per fiscal year starting in April 2013, and, due to subsequent legislativeamendments, will stay in effect through 2027 unless additional Congressional action is taken. On January 2, 2013, President Obama signed into law theAmerican Taxpayer Relief Act of 2012 (the “ATRA”) which among other things, also reduced Medicare payments to several types of providers, includinghospitals, imaging centers and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments toproviders from three to five years. Recently, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for theirmarketed products, which has resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency toproduct pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologiesfor drug products. For example, the 21st Century Cures Act changed the reimbursement methodology for infusion drugs and biologics furnished throughdurable medical equipment in an attempt to remedy over- and underpayment of certain products. Individual states in the United States have also becomeincreasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patientreimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases,designed to encourage importation from other countries and bulk purchasing.We expect that the current presidential administration and U.S. Congress will continue to seek to modify, repeal, or otherwise invalidate all, or certainprovisions of, the ACA. Since taking office, President Trump has continued to support the repeal of all or portions of the ACA. On October 12, 2017,President Trump issued an executive order that expands the use of association health plans and allows anyone to purchase short-term health plans thatprovided temporary, limited insurance. This executive order also calls for the halt of federal payments to health insurers for cost-sharing reductionspreviously available to lower-income Americans to afford coverage. There is still uncertainty with respect to the impact this executive order could have oncoverage and reimbursement for healthcare items and services covered by plans that were authorized by the ACA. In addition, most recently, the Tax Cutsand Jobs Act was enacted, which, among other things, removes penalties for not complying with the ACA’s individual mandate to carry health insurance. Wecannot predict the extent of the impact of any such changes on us.33 Finally, in some foreign countries, the proposed pricing for a product candidate must be approved before it may be lawfully marketed. The requirementsgoverning therapeutic pricing vary widely from country to country. For example, the European Union provides options for its member states to restrict therange of medicinal products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products forhuman use. A member state may approve a specific price for the medicinal product, or it may instead adopt a system of direct or indirect controls on theprofitability of the company placing the medicinal product on the market. There can be no assurance that any country that has price controls orreimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our product candidates.Historically, therapeutic candidates launched in the European Union do not follow price structures of the U.S. and generally tend to be significantly lower.Other Healthcare LawsWe may also be subject to healthcare regulation and enforcement by the federal government and the states and foreign governments where we may marketour product candidates, if approved. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, privacy andsecurity, physician sunshine and drug pricing transparency laws and regulations.The federal Anti-Kickback Statute prohibits, among other things, any person from knowingly and willfully offering, soliciting, receiving or providingremuneration, directly or indirectly, to induce either the referral of an individual, for an item or service or the purchasing or ordering of a good or service, forwhich payment may be made under federal healthcare programs such as the Medicare and Medicaid programs. The Anti-Kickback Statute is subject toevolving interpretations. In the past, the government has enforced the Anti-Kickback Statute to reach large settlements with healthcare companies based onsham consulting and other financial arrangements with physicians. A person or entity does not need to have actual knowledge of the statute or specific intentto violate it in order to have committed a violation. In addition, the government may assert that a claim including items or services resulting from a violationof the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the federal False Claims Act. The majority of states also have anti-kickback laws, which establish similar prohibitions and, in some cases, may apply to items or services reimbursed by any third-party payor, includingcommercial insurers.Additionally, the civil False Claims Act prohibits knowingly presenting or causing the presentation of a false, fictitious or fraudulent claim for payment tothe U.S. government, knowingly making, using, or causing to be made or used a false record or statement material to a false or fraudulent claim to the U.S.government, or from knowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the U.S. government. Actions under theFalse Claims Act may be brought by the Attorney General or as a qui tam action by a private individual in the name of the government. Violations of theFalse Claims Act can result in very significant monetary penalties and treble damages. The federal government is using the False Claims Act, and theaccompanying threat of significant liability, in its investigation and prosecution of pharmaceutical and biotechnology companies throughout the U.S., forexample, in connection with the promotion of products for unapproved uses and other sales and marketing practices. The government has obtained multi-million and multi-billion-dollar settlements under the False Claims Act in addition to individual criminal convictions under applicable criminal statutes.Given the significant size of actual and potential settlements, it is expected that the government will continue to devote substantial resources to investigatinghealthcare providers’ and manufacturers’ compliance with applicable fraud and abuse laws.The U.S. federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), created new federal criminal statutes that prohibit among otheractions, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private third-partypayors, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigation of a healthcareoffense, and knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement inconnection with the delivery of or payment for healthcare benefits, items or services. Similar to the federal Anti-Kickback Statute, a person or entity does notneed to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation.There has also been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. The ACA, amongother things, imposes new reporting requirements on drug manufacturers for payments made by them to physicians and teaching hospitals, as well asownership and investment interests held by physicians and their immediate family members. Failure to submit required information may result in civilmonetary penalties for all payments, transfers of value or ownership or investment interests that are not timely, accurately and completely reported in anannual submission. Certain states also mandate implementation of compliance programs and compliance with the pharmaceutical industry’s voluntarycompliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on drug manufacturer marketingpractices and/or require the tracking and reporting of pricing and marketing information as well as gifts, compensation and other remuneration or items ofvalue provided to physicians and other healthcare professionals and entities.34 We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, asamended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”) and their respective implementing regulations, includingthe final omnibus rule published on January 25, 2013, imposes specified requirements relating to the privacy, security and transmission of individuallyidentifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,”defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection withproviding a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities,business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courtsto enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws and non-US lawsand regulations (particularly EU laws regarding personal data relating to individuals based in Europe) govern the privacy and security of health informationin certain circumstances, many of which differ from each other in significant ways, thus complicating compliance efforts.EnvironmentOur third-party manufacturers are subject to inspections by the FDA for compliance with cGMP and other U.S. regulatory requirements, including U.S.federal, state and local regulations regarding environmental protection and hazardous and controlled substance controls, among others. Environmental lawsand regulations are complex, change frequently and have tended to become more stringent over time. We have incurred, and may continue to incur,significant expenditures to ensure we are in compliance with these laws and regulations. We would be subject to significant penalties for failure to complywith these laws and regulations.Our Company Origins and TeamOur Probody platform technology has its origins in work performed at the University of California, Santa Barbara (“UCSB”), by our scientific founderProfessor Patrick Daugherty. Since our inception, we have continued developing and adding to this technology and aspire to design a pipeline of Probodytherapeutics that will better the lives of cancer patients. We have assembled an experienced and talented group of individuals dedicated to the advancementof cancer care. Our chief executive officer, Dr. Sean McCarthy, leads a team that draws on robust experience in all phases of product discovery, clinicaldevelopment and commercialization. Our research and preclinical development team is led by Dr. Michael Kavanaugh, chief scientific officer, and includesrenowned and established researchers, and our clinical development team is led by Dr. Rachel Humphrey, chief medical officer. Our management teammembers have significant experience in oncology with previous experience at AstraZeneca, BMS, Chiron, Five Prime, Maxygen, Millennium, Novartis, SGXand other companies.EmployeesAs of December 31, 2018, we had 137 full-time employees and 2 part-time employees. Of these employees, 102 were primarily engaged in research anddevelopment activities.Corporate InformationOur operations commenced in February 2008 when our predecessor entity was formed. We were incorporated in Delaware in September 2010. We maintainour executive offices at 151 Oyster Point Blvd., Suite 400, South San Francisco, California 94080, and our main telephone number is (650) 515-3185.We were an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. Based on our public float at June 30, 2018, weceased to be an emerging growth company at December 31, 2018 and, accordingly, we are required to comply with the auditor attestation requirements ofSection 404 to include an opinion from our independent registered public accounting firm on the effectiveness of our internal controls over financialreporting for our 2018 Annual Report on Form 10-K.We view our operations and measure our business as one reportable segment operating in the United States. See Note 2 to our audited financial statementincluded elsewhere in this Annual Report on Form 10-K for additional information. Additional information required by this item is incorporated herein byreference to PART II. Item 6 of this Annual Report on Form 10-K.Our research and development expenses were $103.9 million, $92.3 million and $54.8 million for the years ended December 31, 2018, 2017 and 2016,respectively. Please see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Research and Development Expenses” foradditional detail regarding our research and development activities.We maintain a website at www.cytomx.com, which contains information about us. The information in, or that can be accessed through, our website is not partof this Annual Report on Form 10-K. Our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and amendments tothose reports are available, free of charge, on or through our website as soon as reasonably practicable after we electronically file such material with, orfurnish it to, the SEC. The SEC maintains an Internet site that contains reports, proxy and information statements and other information regarding our filingsat www.sec.gov. 35 PART II – OTHER INFORMATIONItem 1A.Risk FactorsYou should consider carefully the risks and uncertainties described below, together with all of the other information in this Annual Report on Form 10-K,including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Ifany of the following risks are realized, our business, financial condition, results of operations and prospects could be materially and adversely affected. Therisks described below are not the only risks facing the Company. Risks and uncertainties not currently known to us or that we currently deem to beimmaterial also may materially adversely affect our business, financial condition, results of operations and/or prospects.Risks Related to Our BusinessWe are a clinical-stage biopharmaceutical company with a limited operating history and have not generated any revenue from product sales. We have ahistory of losses, expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability, which couldresult in a decline in the market value of our common stock.We are a clinical-stage biopharmaceutical company with a limited operating history, developing a novel class of therapeutic antibody product candidates,based on our proprietary biologic Probody technology platform. Since our inception, we have devoted our resources to the development of Probodytherapeutics. We have had significant operating losses since our inception. As of December 31, 2018, and December 31, 2017, we had an accumulated deficitof $315.0 million and $219.5 million, respectively. Substantially all of our losses have resulted from expenses incurred in connection with our research anddevelopment programs and from general and administrative costs associated with our operations.Though we have developed our Probody platform, our technologies and product candidates are in early stages of development, and we are subject to the risksof failure inherent in the development of product candidates based on novel technologies. We have not yet demonstrated our ability to successfully completeany clinical trials, including large-scale, pivotal clinical trials, obtain regulatory approvals, arrange for a third party to manufacture a commercial scaleproduct candidate, or conduct sales and marketing activities necessary for successful commercialization. Typically, it takes many years to develop oneproduct candidate from the time it enters initial preclinical studies to when it is available for treating patients. Consequently, any predictions made about ourfuture success or viability may not be as accurate as they could be if we had a longer operating history. We will need to transition from a company with aresearch and development focus to a company capable of supporting commercial activities. We may not be successful in such a transition.Furthermore, we have never generated any revenue from product sales, and have not obtained regulatory approval for any of our product candidates. We alsodo not expect to generate any revenue from product sales for the foreseeable future, and we expect to continue to incur significant operating losses for theforeseeable future due to the cost of research and development, preclinical studies and clinical trials and the regulatory approval process for our productcandidates. We expect our net losses to increase substantially as we continue clinical development of our lead programs and advance additional programsinto clinical development. In particular, we expect our losses to increase substantially as we continue to enroll patients in our ongoing Phase 1/2 clinicaltrials of CX-072, our candidate directed against PD-L1, CX-2009, our PDC candidate directed against CD-166, CX-2029, and our PDC candidate directedagainst CD71 in collaboration with AbbVie Inc., and as we advance into later trials and new trials for other programs. However, the amount of our futurelosses is uncertain. Our ability to achieve profitability, if ever, will depend on, among other things, our, or our collaborators, successfully developing productcandidates, obtaining regulatory approvals to market and commercialize product candidates, manufacturing any approved products on commerciallyreasonable terms, establishing a sales and marketing organization or suitable third-party alternatives for any approved product and raising sufficient funds tofinance business activities. If we, or our collaborators, are unable to develop our technologies and commercialize one or more of our product candidates or ifsales revenue from any product candidate that receives approval is insufficient, we will not achieve profitability, which could have a material and adverseeffect on our business, financial condition, results of operations and prospects.We expect that we will need to raise substantial additional funds to advance development of our product candidates and we cannot guarantee that thisadditional funding will be available on acceptable terms or at all. Failure to obtain this necessary capital when needed may force us to delay, limit orterminate our product development and commercialization of our current or future product candidates.The development of biopharmaceutical product candidates is capital-intensive. To date we have used substantial funds to develop our technology andproduct candidates and will require significant funds to conduct our ongoing clinical trials as well as to further our research and development, preclinicaltesting and future clinical trials of additional product candidates, to seek regulatory approvals for our product candidates and to manufacture and market anyproducts that are approved for commercial sale. In addition, we have incurred and will continue to incur additional costs associated with operating as a publiccompany.36 As of December 31, 2018, we had $436.1 million in cash, cash equivalents and short-term investments. We believe that our existing capital resources will besufficient to fund our planned operations into 2021. Our future capital requirements and the period for which we expect our existing resources to support ouroperations may vary significantly from what we expect. Our monthly spending levels vary based on our ongoing clinical trials, new and ongoing researchand development and other corporate activities. For example, we expect our monthly spending to increase substantially as we continue to enroll patients inour ongoing Phase 1/2 clinical trials of CX-072, CX-2009, and CX-2029, and as we advance into later trials and new trials for other programs. Because thelength of time and activities associated with conducting our clinical trials and successfully researching and developing our product candidates is highlyuncertain, we are unable to estimate the actual funds we will require for development and, once any product candidate is approved, any subsequent marketingand commercialization activities.The timing and amount of our operating expenditures will depend largely on: •the scope, timing and progress of our ongoing clinical trials as well as any other preclinical and clinical development activities; •the number, size and type of clinical trials and preclinical studies that we may be required to complete for our product candidates, as well as thecost and time of such studies and trials; •the number, scope and prioritization of preclinical and clinical programs we decide to pursue; •the time and cost necessary to produce clinical supplies of our product candidates; •the time and cost necessary to scale our manufacturing capabilities following regulatory approval and commercial launch of any productcandidates. •the progress of the development efforts of parties with whom we have entered or may in the future enter into collaborations and research anddevelopment agreements; •the timing and amount of payments we may receive or are obligated to pay under our collaboration agreements and license agreements; •our ability to maintain our current licenses and research and development programs and to establish new collaboration arrangements; •the costs involved in prosecuting and enforcing patent and other intellectual property claims; •the cost and timing of regulatory approvals; and •our efforts to enhance operational systems and hire additional personnel, including personnel to support development and commercializationof our product candidates and satisfy our obligations as a public company.If we are unable to obtain funding on a timely basis or on acceptable terms, we may have to delay, reduce or terminate our research and developmentprograms and preclinical studies or clinical trials, limit strategic opportunities or undergo reductions in our workforce or other corporate restructuringactivities. We also could be required to seek funds through arrangements with collaborators or others that may require us to relinquish rights to some of ourtechnologies or product candidates that we would otherwise pursue on our own. We do not expect to realize revenue from sales of products or royalties fromlicensed products in the foreseeable future, if at all, and unless and until our product candidates are clinically tested, approved for commercialization andsuccessfully marketed. To date, we have financed our operations primarily through sales of our common stock, sale of our convertible preferred securitiesprior to our IPO and payments received under our collaboration agreements, including, most recently, the Collaboration and License Agreement that weentered into with Amgen in September 2017. We will be required to seek additional funding in the future and currently intend to do so through additionalcollaborations, public or private equity offerings or debt financings, credit or loan facilities or a combination of one or more of these funding sources. Ourability to raise additional funds will depend on financial, economic and other factors, many of which are beyond our control. Additional funds may not beavailable to us on acceptable terms or at all. If we raise additional funds by issuing equity securities, our stockholders will suffer dilution and the terms of anyfinancing may adversely affect the rights of our stockholders. In addition, as a condition to providing additional funds to us, future investors may demand,and may be granted, rights superior to those of existing stockholders. Debt financing, if available, is likely to involve restrictive covenants limiting ourflexibility in conducting future business activities, and, in the event of insolvency, debt holders would be repaid before holders of our equity securitiesreceived any distribution of our corporate assets.37 Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive offuture trial results. We may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development andcommercialization of our product candidates.As is the case with all oncology drugs, our product candidates in clinical development or preclinical development have a high risk of failure. We commencedenrollment of our Phase 1/2 clinical trial of CX-072, our candidate directed against PD-L1, for cancer and treated our first patient in January 2017. We alsoinitiated our Phase 1/2 clinical trial of CX-2009, our PDC candidate directed against CD-166, for cancer in June 2017, and initiated our Phase 1/2 clinicaltrial of CX-2029, our PDC candidate directed against CD71 in collaboration with AbbVie, for cancer in June 2018. In addition, Bristol-Myers SquibbCompany (“BMS”) commenced enrollment of a Phase 1/2 clinical trial for BMS-986249, a Probody therapeutic directed against CTLA-4, in 2018. It isimpossible to predict when or if any of our or our partner’s product candidates will prove effective and safe in humans or will receive regulatory approval.Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we or our partners must complete extensive clinicaltrials to demonstrate the safety and efficacy of our product candidates in humans. Commencement of clinical trials for programs beyond CX-072, CX-2009,CX-2029 and BMS-986249 is subject to finalizing the trial design and filing an IND or similar filing with the FDA or similar foreign regulatory authority. Inaddition, even if we file our IND or comparable submissions in other jurisdictions for these or other product candidates, the FDA or other regulatoryauthorities could disagree that we have satisfied their requirements to commence our clinical trials or disagree with our study design, which may require us tocomplete additional preclinical studies or amend our protocols or impose stricter conditions on the commencement of clinical trials and may delay ourability to begin Phase 1 clinical trials, causing an increase in the amount of time and expense required to develop our product candidates. As a result of theforegoing, the research and development, preclinical studies and clinical testing of any product candidate is expensive and can take many years to complete,and its outcome is inherently uncertain. Failure can occur at any time during the development process.Further, we or our collaborators may also experience delays in completing ongoing clinical trials, completing preclinical studies or initiating further clinicaltrials of our product candidates. We do not know whether our or our collaborators’ ongoing clinical trials or preclinical studies will be completed on scheduleor at all, or whether planned clinical trials or preclinical studies will begin on time, need to be redesigned, enroll patients on time or be completed onschedule, if at all. We or our collaborators may have insufficient internal resources to complete ongoing clinical trials or initiate clinical trials for our otherproduct candidates. The development programs for our product candidates may be delayed for a variety of reasons, including delays related to: •recruiting suitable patients to participate in a clinical trial; •developing and validating any companion diagnostic to be used in a clinical trial; •the FDA or other regulatory authorities requiring us to submit additional data or imposing other requirements before permitting us to initiate aclinical trial; •obtaining regulatory clearance to commence a clinical trial; •reaching agreement on acceptable terms with prospective contract research organization (“CROs”) and clinical trial sites, the terms of whichcan be subject to extensive negotiation and may vary significantly among different CROs and clinical trial sites; •obtaining institutional review board (“IRB”) approval at each clinical trial site; •having patients complete a clinical trial or return for post-treatment follow-up; •clinical trial sites deviating from trial protocol or dropping out of a trial; •adding new clinical trial sites; •manufacturing our product candidates in sufficient quality and quantity for use in clinical trials; or •collaborators electing to not pursue development and commercialization of our product candidates.In addition, the results of preclinical studies and early clinical trials of our product candidates may not be predictive of the results of later-stage clinical trials.Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through preclinical studiesand initial clinical trials. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lackof efficacy or safety profiles, notwithstanding promising results in earlier trials.38 Our product candidates are in early stages of development and may fail or suffer delays that materially and adversely affect their commercial viability. Ifwe are unable to advance our product candidates through clinical development, obtain regulatory approval and ultimately commercialize such productcandidates, or experience significant delays in doing so, our business will be materially harmed.We are very early in our development efforts, with only three product candidates, CX-072, CX-2009 and CX-2029, currently in early stage clinicaldevelopment. In addition, BMS is currently evaluating BMS-986249, a CTLA-4-directed Probody therapeutic in a Phase 1/2 clinical trial that it initiated inJanuary 2018. We have no products on the market and our ability to achieve and sustain profitability depends on obtaining regulatory approvals for andsuccessfully commercializing our product candidates, either alone or with third parties. Before obtaining regulatory approval for the commercial distributionof our product candidates, we or our collaborator must conduct extensive preclinical tests and clinical trials to demonstrate sufficient safety and efficacy ofour product candidates in patients.As a result, we may not have the financial resources to continue development of, or to modify existing or enter into new collaborations for, a productcandidate if we experience any issues that delay or prevent regulatory approval of, or our ability to commercialize, product candidates, including: •negative or inconclusive results from our clinical trials, the clinical trials of our collaborators or the clinical trials of others for productcandidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program; •product-related side effects experienced by participants in our clinical trials, the clinical trials of our collaborators or by individuals usingdrugs or therapeutic biologics similar to our product candidates; •delays in submitting INDs or comparable foreign applications or delays or failure in obtaining the necessary approvals from regulators tocommence a clinical trial, or a suspension or termination of a clinical trial once commenced; •conditions imposed by the FDA or comparable foreign authorities regarding the scope or design of our clinical trials; •delays in enrolling research subjects in clinical trials; •high drop-out rates of research subjects; •inadequate supply or quality of product candidate components or materials or other supplies necessary for the conduct of our clinical trials orthe clinical trials of our collaborators; •greater than anticipated clinical trial costs; •delay in the development or approval of companion diagnostic tests for our product candidates; •unfavorable FDA or other regulatory agency inspection and review of a clinical trial site; •failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations ina timely manner, or at all; •delays and changes in regulatory requirements, policy and guidelines, including the imposition of additional regulatory oversight aroundclinical testing generally or with respect to our technology in particular; or •varying interpretations of data by the FDA and similar foreign regulatory agencies.We could find that the therapeutics we or our collaborators pursue are not safe or efficacious or that the safety. Further, a clinical trial may be suspended orterminated by us, our collaborators, the IRBs of the institutions in which such trials are being conducted, the Data Safety Monitoring Board for such trial orby the FDA or other regulatory authorities due to a number of factors, including failure to conduct the clinical trial in accordance with regulatoryrequirements or our clinical protocols, inspection of the clinical trial operations or trial site by the FDA or other regulatory authorities resulting in theimposition of a clinical hold, unforeseen safety issues or adverse side effects, failure to demonstrate a benefit from using a drug or therapeutic biologic,changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial. Furthermore, we expect to rely onour collaborators, CROs and clinical trial sites to ensure proper and timely conduct of our clinical trials and while we expect to enter into agreementsgoverning their committed activities, we have limited influence over their actual performance.39 If we or our collaborators experience delays in the completion of, or termination of, any clinical trial of our product candidates, the commercial prospects ofour product candidates will be harmed, and our ability to generate product revenues or receive royalties from any of these product candidates will be delayed.In addition, any delays in completing our clinical trials will increase our costs, slow down our product development and approval process and jeopardize ourability to commence product sales and generate revenues. Furthermore, if one or more of our product candidates or our Probody therapeutic technologygenerally prove to be ineffective, unsafe or commercially unviable, the development of our entire platform and pipeline could be delayed, potentiallypermanently. Any of these occurrences may materially and adversely affect our business, financial condition, results of operations and prospects. In addition,many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatoryapproval of our product candidates.Our product candidates may cause undesirable side effects that could delay or prevent their regulatory approval, limit the commercial profile of anapproved label, or result in significant negative consequences following marketing approval, if any.Undesirable side effects caused by our product candidates could cause us, our collaborators or regulatory authorities to interrupt, delay or halt clinical trialsand could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other regulatory authorities. As is the case with alloncology drugs, there may be immediate or late side effects associated with the use of our product candidates (e.g. CX-072, CX-2009and CX-2029). Forexample, in June 2018 we announced initial clinical data on CX-072 at the Annual Meeting of the American Society of Clinical Oncology (“ASCO”) and inFebruary 2019 we announced updated clinical data regarding CX-072 and our first clinical data on CX-2009. While CX-072 has generally been welltolerated to date, there can be no guaranty that unexpected adverse events will not occur later in this trial or in other trials involving our product candidatesor the product candidates of our collaborators. The data described at ASCO show that the administration of monotherapy CX-072 was well tolerated with themajority of treatment-related adverse events (“TRAEs”) as Grade 1/2. However, Grade 3/4 TRAEs were reported in two patients (neutropenia andthrombocytopenia in a patient with thymic cancer (3 mg/kg) and transaminase elevation in a patient with breast cancer (30 mg/kg)) but both events weresuccessfully managed with therapeutic intervention including steroids and discontinuation of CX-072. In addition, the results showed that theadministration of CX-072 in combination with ipilimumab was well tolerated with the majority of TRAEs as Grade 1/2. Of the 16 treated patients, five (31%)reported a Grade 3/4 TRAE, a rate similar to that reported previously for 3 mg/kg ipilimumab monotherapy. These events included: Grade 3 colitis (n=1),Grade 3 dyspnea/pneumonitis (n=1), Grade 3 headache/Grade 3 hyponatremia (n=1), and Grade 3 amylase/Grade 4 lipase (n=1). A Grade 3 TRAE in onepatient was designated as non-treatment related post data cutoff. A dose limiting toxicity of Grade 3 dyspnea was reported in one patient. On October 22,2018, we presented follow-up data at the 2018 Annual Meeting of the European Society of Medical Oncology in Munich, Germany. In this presentation, wealso disclosed initial data on immune related adverse events (irAE) and infusion related reactions (IRR). Of the 46 patients treated, 3 (7%) developed Grade3/4 irAEs and 2 (4%) developed Grade 3/4 IRRs. Of the 20 patients treated in the combination with ipilimumab, 2 (10%) developed Grade 3/4 irAEs and 0(0%) developed Grade 3/4 IRRs.In February 2019, we announced updated data on the ongoing monotherapy clinical trial for CX-072 focused on our dose expansion cohort of 10mg/kg. While the safety data we reported at 10 mg/kg is trending toward a similar or better profile than data presented previously, that rate may change withtime as more patients are enrolled in the ongoing studies. We also reported at the 10 mg/kg dose an anti-drug antibody (“ADA”) rate of approximately 62%,The rate across all dose levels, including lower dose levels in our trial, is approximately 77% at the data cutoff. We do not believe this ADA is impacting ourability to reach targeted drug exposures. However, we cannot provide assurance that it will not later limit drug exposure or cause severe adverse events.In February 2019, we announced data on the ongoing clinical trial for CX-2009. While CX-2009 has been generally well tolerated to date, 23 / 76 (30.3%)patients experienced a Grade 3/4 TRAE. The most common adverse event observed was ocular toxicity, an anticipated toxicity associated with the DM4payload. Other Grade 3/4 TRAEs included liver function test abnormalities, gastrointestinal disorders and nervous system disorders. Currently, doseoptimization is underway to further to inform dose selection. The results of our future clinical trials or the clinical trials of our collaborators could reveal a high and unacceptable severity of adverse side effects and it ispossible that patients enrolled in such clinical trials could respond in unexpected ways. For instance, our Phase 1/2 clinical trial of CX-072 is beingconducted in patients with advanced cancers, including metastatic or locally advanced unresectable solid tumors or lymphomas, who have failed otherapproved therapies for their disease, and as such, it may be difficult to establish safety and efficacy in this type of patient population. In addition, certain armsof our clinical trial of CX-072 enroll patients with tumor types that are not known to be responsive to PD-L1 agents and therefore may be less likely to showeffectiveness. Because certain PD-1 and PD-L1 agents are already approved for the treatment of some tumor types, we cannot test CX-072 on those tumortypes and will not be able to obtain clinical information about how CX-072 acts in these tumors. Comparing safety and efficacy of CX-072 against other PD-L1 or PD-1 antibodies (either in development or in the market) may be difficult since our Phase 1/2 study is enrolling a different patient population thanother studies. Furthermore, a portion of our Phase 1/2 clinical trial of CX-072 includes the administration of CX-072 in combination with Yervoy(ipilimumab) or Zelboraf (vemurafenib), which could exacerbate immune system related adverse events, cause increased toxicity or otherwise lead tounexpected adverse events. The Phase 1/2 clinical trial of40 BMS-986249 being conducted by BMS includes the administration of the product candidate at relatively high dosage levels, which could further exacerbatesuch risks. In our Phase 1/2 clinical trials of CX-2009 and CX-2029, we are targeting CD-166 and CD71, respectively, targets that are broadly expressed onnormal tissue, which could create unacceptable toxicity or fail to result in anti-tumor activity. For instance, CD71, which is a metabolic protein with highlevels of expression in healthy tissues, and the consequences of targeting such protein in humans are unknown. Any future clinical trials of our productcandidates could face similar or heightened risks depending on the modality. In the event that our clinical trials or the clinical trials of our collaborators reveal these or other adverse side effects, our trials or the clinical trials of ourcollaborators could be suspended or terminated and the FDA or comparable foreign regulatory authorities could impose a clinical hold, order us to ceasefurther development of or deny approval of our product candidates for any or all targeted indications. Such side effects could also affect patient recruitmentor the ability of enrolled patients to complete the trial or result in potential product liability claims. In addition, any of these occurrences with respect to oneof our product candidates could negatively affect our or any collaborator’s ability to enroll patients and seek regulatory approval for other productcandidates that we have developed using our Probody platform, which could also result in a collaborator terminating any program utilizing our Probodyplatform and the termination of such collaborative relationship. Any of these occurrences may materially and adversely affect our business, financialcondition, results of operations and prospects. Further, clinical trials by their nature utilize a sample of the potential patient population. With a limitednumber of patients and limited duration of exposure, rare and severe side effects of our product candidates may only be uncovered with a significantly largernumber of patients exposed to the product candidate.In the event that any of our product candidates receives regulatory approval and we, our collaborators or others identify undesirable side effects caused bysuch product or any other Probody therapeutics, any of the following adverse events could occur, which could result in the loss of significant revenue to usand materially and adversely affect our results of operations and business: •regulatory authorities may withdraw their approval of the product or seize the product; •we or our collaborators may be required to recall the product or change the way the product is administered to patients; •additional restrictions may be imposed on the marketing of the particular product or the manufacturing processes for the product or anycomponent thereof; •we may be subject to fines, injunctions or the imposition of civil or criminal penalties; •regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication; •we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients; •we could be sued and held liable for harm caused to patients; •the product may become less competitive; and •our reputation may suffer.In addition, adverse side effects caused by any drugs utilizing the same or similar anti-bodies of our product candidates, or that are similar in nature to ourproduct candidates could delay or prevent regulatory approval of our product candidates, limit the commercial profile of an approved label for our productcandidates, or result in significant negative consequences following marketing approval.We believe that any of these events could prevent us from achieving or maintaining market acceptance of our product candidates and could substantiallyincrease the costs of commercializing our product candidates, if approved, and significantly impact our ability to successfully commercialize our productcandidates and generate revenues.If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed orprevented. We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligiblepatients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States. Patient enrollment, a significant factorin the timing of clinical trials, is affected by many factors, including: •the size and nature of the target patient population; •the eligibility criteria for the clinical trial; •the design of the clinical trial; •the availability of an appropriate genomic screening test;41 •the perceived risks and benefits of the product candidate under study; •the efforts to facilitate timely enrollment in clinical trials; •the patient referral practices of physicians; •the ability to monitor patients adequately during and after treatment; and •the proximity and availability of clinical trial sites for prospective patients.In addition, competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied inrelation to other available therapies, including any new drugs or therapeutic biologics that may be approved for the indications we are investigating, couldaffect our ability to enroll a sufficient number of eligible patients in our clinical trials. For example, in our Phase 1/2 clinical trial of CX-072, which isdirected against PD-L1, we are only permitted to enroll patients with cancer types for which there are no PD inhibitors available for sale. As there arecurrently several PD-1 and/or PD-L1 agents approved for a growing list of cancer types along with hundreds of clinical trials exploring the use of PD-1 andPD-L1 agents, there can be no assurance that patients will choose to enroll in our clinical trial. In addition, any arms of our Phase 1/2 clinical trial of CX-072for indications with small population sizes could be particularly difficult to enroll. Furthermore, the part of our Phase 1/2 clinical trial of CX-072 in whichpatients are treated with the combination of CX-072 and vemurafenib can only enroll those patients who do not have access to MEK inhibitors because theemerging standard of care in jurisdictions where MEK inhibitors are available in combination with a BRAF inhibitor (such as vemurafenib), which may havean impact on enrollment in this part of the trial. Our Phase 1/2 clinical trial of CX-2009 studies patients who have one of seven specific tumor types ratherthan patients suffering from any cancer, which may limit the rate of enrollment of the trial. As with the clinical trials of CX-072, our Phase 1/2 clinical trials ofCX-2009 and CX-2029 are also competing with hundreds of clinical trials with alternative anti-cancer drugs in a similar class (e.g. antibody drug conjugates),and certain arms of the clinical trial may be difficult to enroll due to the emerging standard of care for such indications in certain jurisdictions, including theUnited States. Any clinical trials of our product candidates initiated by our collaborators, including BMS’ ongoing Phase 1/2 clinical trial, face similar andadditional risks relating to enrollment. We or our collaborators could also encounter delays in the development of any of our product candidates ifprescribing physicians encounter unresolved ethical issues associated with enrolling patients in clinical trials of our product candidates in lieu of prescribingexisting treatments that have established safety and efficacy profiles. Any delays relating to patient enrollment could cause significant delays in the timingof our clinical trials or the clinical trials of our collaborators, which may materially and adversely affect our business, financial condition, results ofoperations and prospects.Our approach to the discovery and development of our therapeutic treatments is based on novel technologies that are unproven and may not result inmarketable products.We plan to continue to develop a pipeline of product candidates using our proprietary Probody platform. We believe that product candidates (includingcancer immunotherapies, PDCs and bispecific antibodies) identified with our product discovery platform may offer an improved therapeutic approach bytaking advantage of unique conditions in the tumor microenvironment, thereby reducing the dose-limiting toxic effects associated with traditional antibodyproducts, which can also attack healthy tissue. However, the scientific research that forms the basis of our efforts to develop product candidates based on ourProbody platform is ongoing, including the research resulting from our ongoing Phase 1/2 clinical trials for CX-072, CX-2009 and CX-2029.We may ultimately discover that our Probody platform and any product candidates resulting from it do not possess certain properties required for therapeuticeffectiveness or protection from toxicity. For example, when Probody therapeutics are administered to human subjects, protease levels in tumors may not besufficient and the peptide mask may not be cleaved, which would limit the potential efficacy of the antibody. In addition, if the peptide mask isinappropriately released, for example, due to an inflammatory disease, it may reduce the potential to limit toxicity of the anti-cancer agent or result inunforeseen events when administered in humans. Binding of the peptide mask to the antigen binding domain of the Probody may not be constant, whichcould lead to intermittent periods when the antigen binding domain or antibody portion is unmasked. Furthermore, Probody product candidates may notremain stable in the human body for the period of time required for the drug to reach and to bind to the target tissue. In addition, product candidates based onour Probody platform may demonstrate different chemical and pharmacological properties in patients than they do in laboratory studies. Although ourProbody platform and certain product candidates have demonstrated successful results in animal studies, they may not demonstrate the same chemical andpharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective or harmful ways. Our understanding of themolecular pharmacology of Probody therapeutics, that is, the precise manner and sequence in which they are activated and behave in vivo, is incomplete.Probody therapeutics are complex biological molecules and we are evaluating the performance of this new technology in cancer patients for the first time. Many specific elements of Probody therapeutic function may contribute their overall safety and efficacy profile including, but not limited to, the removal ofonly one mask from the dually masked antibody, the removal of both masks from the dually masked antibody, the binding strength of masks for theunderlying antibody, and the binding strength of the underlying antibody for its target. We have no direct structural evidence for how masks interact withantibodies. It may take many years before we develop a full understanding of Probody42 pharmacology, and we may never know precisely how they function in vivo. As with any new biologic or product developed on a novel platform, we have alimited understanding of the immunogenicity profile of Probody therapeutics. As a result, our Probody product candidates may trigger immune responses,such as ADA, that may inhibit the ability of the antibody to reach the target tissue, inhibit the ability of the antibody to bind to its target, cause adverse sideeffects in humans or cause hypersensitivity reactions. For example, we reported in February 2019 that in our ongoing CX-2019 trial at the 10 mg/kg dose, theanti-drug antibody (“ADA”) rate was approximately 62%. Across all dose levels, including lower dose levels in our trial, the rate is approximately 77% at thedata cutoff. We do not believe ADA is impacting our ability to reach targeted drug exposures. However, we cannot provide assurance that it will not laterlimit drug exposure or cause severe adverse events. Problems that are specific to our Probody platform may have an unfavorable impact on all of our productcandidates. As a result, we may never succeed in developing a marketable product and we may never become profitable, which would cause the value of ourcommon stock to decline.In addition, the scientific evidence to support the feasibility of developing product candidates against novel, difficult to drug targets, is both preliminary andlimited. For example, our understanding of the expression of CD166 in both healthy and diseased tissues is still developing. As a result, we cannot provideany assurance that we will be able to successfully identify and advance any product candidates to target novel, difficult to drug targets.We believe the only clinical experience that the FDA and foreign regulatory authorities have with Probody-based therapeutics in oncology comes from CX-072, CX-2009, CX-2029 and BMS-986249. We believe that the FDA and foreign regulatory authorities, have no clinical experience in other disease areas,and such limited experience may increase the complexity, uncertainty and length of the regulatory approval process for our product candidates and may keepus from commencing first-in-human trials in certain countries. As there is limited historical precedent for the regulatory clearance of Probody-basedtherapeutics in oncology, there is a higher degree of risk that the FDA or other regulatory authorities could disagree that we or our collaborators have satisfiedtheir requirements to commence clinical trials for some product candidates or disagree with our study designs, which may require us to complete additionalpreclinical studies or amend our protocols or impose stricter conditions on the commencement of clinical trials. In addition, local clinical practice in othercountries may affect whether we or our collaborators are able to initiate a clinical trial there. As a result, we and our collaborators may never receive approvalto market and commercialize any product candidate. Even if we or our collaborators obtain regulatory approval, the approval may be for targets, diseaseindications or patient populations that are not as broad as we or they intended or desired or may require labeling that includes significant use or distributionrestrictions or safety warnings. We or our collaborators may be required to perform additional or unanticipated clinical trials to obtain approval or be subjectto post-marketing testing requirements to maintain regulatory approval. If one or more of our product candidates or our Probody technology generally proveto be ineffective, unsafe or commercially unviable, our entire platform and pipeline would have little, if any, value, which would have a material and adverseeffect on our business, financial condition, results of operations and prospects.The market may not be receptive to our product candidates based on a novel therapeutic modality, and we may not generate any future revenue from thesale or licensing of product candidates.Even if regulatory approval is obtained for a product candidate, we may not generate or sustain revenue from sales of the product due to factors such aswhether the product can be sold at a competitive cost and whether it will otherwise be accepted in the market. The product candidates that we are developingare based on our Probody platform, which is a new technology and therapeutic approach. Market participants with significant influence over acceptance ofnew treatments, such as physicians and third-party payors, may not adopt a product or treatment based on our Probody platform and technologies, and wemay not be able to convince the medical community and third-party payors to accept and use, or to provide favorable reimbursement for, any productcandidates developed by us or our collaborators. This may be particularly true for any of our product candidates (including CX-072and BMS-986249) forwhich there are existing approved therapies, such as approved agents targeting PD-L1, PD-1, or CTLA-4. Market acceptance of our product candidates willdepend on, among other factors: •the timing of our receipt of any marketing and commercialization approvals; •the terms of any approvals and the countries in which approvals are obtained; •the safety and efficacy of our product candidates, including those being developed by our collaborators; •the prevalence and severity of any adverse side effects associated with our product candidates; •limitations or warnings contained in any labeling approved by the FDA or other regulatory authority; •the availability of effective companion diagnostics; •relative convenience and ease of administration of our product candidates;43 •the willingness of patients to accept any new methods of administration; •the success of our physician education programs; •the availability of adequate government and third-party payor reimbursement; •the pricing of our products, particularly as compared to alternative treatments; and •the availability of alternative effective treatments for the disease indications our product candidates are intended to treat and the relative risks,benefits and costs of those treatments.If any product candidate we commercialize fails to achieve market acceptance, it could have a material and adverse effect on our business, financialcondition, results of operations and prospects.We have entered, and may in the future seek to enter, into collaborations with third parties for the development and commercialization of our productcandidates using our Probody platform. If we fail to enter into such collaborations, or such collaborations are not successful, we may not be able tocapitalize on the market potential of our Probody platform and resulting product candidates.Since 2013, we have entered into collaborations with AbbVie, Amgen, BMS, ImmunoGen and Pfizer and others to develop certain Probody therapeutics. Wemay in the future seek third-party collaborators for development and commercialization of other therapeutic technologies or product candidates.Biopharmaceutical companies are our prior and likely future collaborators for any marketing, distribution, development, licensing or broader collaborationarrangements. With respect to our existing collaboration agreements, and what we expect will be the case with any future collaboration agreements, we haveand would expect to have limited control over whether such collaborations pursue the development of our product candidates or the amount and timing ofresources that such collaborators dedicate to the development or commercialization of our product candidates. For instance, in March 2018, Pfizer terminatedthe collaboration agreement we had entered into with them in May 2013. Such collaboration agreement had entitled Pfizer to nominate up to four researchtargets and since 2013, we had collaborated with Pfizer on three of such targets. However, no program was ever advanced beyond the lead optimization stagepursuant to the agreement, and Pfizer had previously elected not to select a fourth target and had decided to discontinue its epidermal growth factor receptorProbody Drug Conjugate. In July 2017, ImmunoGen discontinued the preclinical evaluation of one of its two programs being developed under ourcollaboration and in January 2019, BMS terminated its programs for three targets it had selected under our agreement with them. As a result, there can be noassurances that any of the programs covered by our existing or future collaborations will be developed further. Further, our ability to generate revenues fromour existing and future arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.Additionally, some of our collaborations may require us to share in certain development and commercialization expenses. If we cannot afford to share suchexpenses when required, our rights under such collaborations may be adversely affected, including potentially that our collaborator may terminate therelevant agreement.Overall, collaborations involving our product candidates currently pose, and will continue to pose, the following risks to us: •collaborators have significant discretion in determining the amount and timing of efforts and resources that they will apply to thesecollaborations, including, with respect to BMS, BMS-986249; •collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renewdevelopment or commercialization programs based on preclinical or clinical trial results, changes in the collaborators’ strategic focus oravailable funding or resources, or external factors such as an acquisition that diverts resources or creates competing priorities; •collaborators have significant discretion in designing any clinical trials they operate pursuant to our collaboration agreements, includingBMS’ ongoing Phase 1/2 clinical trial of BMS-986249, and may release data from such clinical trials, including with respect to our Probodytherapeutics, without consulting us; •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 and are not necessarilyrequired to give us information about their clinical data; •collaborators may independently develop, or develop with third parties, products that compete directly or indirectly with our productcandidate if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized underterms that are more economically attractive than ours; •collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing anddistribution of such product or products;44 •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 intellectual property or proprietary information or expose us to litigation or potentialliability; •collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability; •disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization ofour product candidate or that result in costly litigation or arbitration that diverts management attention and resources; and •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.As a result of the foregoing, our current and any future collaboration agreements may not lead to development or commercialization of our productcandidates in the most efficient manner or at all and may not result in the realization of the benefits we expected to achieve upon our entry into suchagreements. Any failure to successfully develop or commercialize our product candidates pursuant to our current or any future collaboration agreementscould have a material and adverse effect on our business, financial condition, results of operations and prospects.If our collaborators cease development efforts under our collaboration agreements, or if any of those agreements are terminated, these collaborations mayfail to lead to commercial products and we may never receive milestone payments or future royalties under these agreements.Substantially all of our revenue to date has been derived from our existing collaboration agreements, including, most recently, the Amgen Agreement that weentered into with Amgen in September 2017, and a significant portion of our future revenue and cash resources is expected to be derived from theseagreements or other similar agreements we may enter into in the future. Revenue from research and development collaborations depend upon continuation ofthe collaborations, reimbursement of development costs, the achievement of milestones and royalties, if any, derived from future products developed fromour research. If we are unable to successfully advance the development of our product candidates or achieve milestones, revenue and cash resources frommilestone payments under our collaboration agreements will be substantially less than expected.In addition, to the extent that any of our collaborators were to terminate a collaboration agreement, we may decide to independently develop these productcandidates to the extent we retain development rights. Such development could include funding preclinical or clinical trials, assuming marketing anddistribution costs and defending intellectual property rights. Alternatively, in certain instances, we may choose to abandon product candidates altogether.For instance, in March 2018, Pfizer terminated the collaboration agreement we had entered into with them in May 2013, and in January 2019, BMSterminated its programs for three targets it had selected under our agreement with them. Any of the foregoing could result in a change to our business planand have a material adverse effect on our business, financial condition, results of operations and prospects. If a collaboration is terminated, we would not beeligible to receive the milestone, royalty or other payments that would have been payable under the collaboration agreement.If we do not achieve our projected development and commercialization goals in the timeframes we announce and expect, the commercialization of any ofour product candidates may be delayed, and our business will be harmed.For planning purposes, we sometimes estimate the timing of the accomplishment of various scientific, clinical, regulatory and other product developmentobjectives. These milestones may include our expectations regarding the commencement or completion of scientific studies and clinical trials, thesubmission of regulatory filings, or commercialization objectives. From time to time, we may publicly announce the expected timing of some of thesemilestones, such as the completion of an ongoing clinical trial, the initiation of other clinical programs, receipt of marketing approval, or a commerciallaunch of a product. The achievement of many of these milestones may be outside of our control. All of these milestones are based on a variety ofassumptions which may cause the timing of achievement of the milestones to vary considerably from our estimates, including: •our available capital resources or capital constraints we experience; •the rate of progress, costs and results of our clinical trials and research and development activities, including the extent of scheduling conflictswith participating clinicians and collaborators; •our ability to identify and enroll patients who meet clinical trial eligibility criteria; •our receipt of approvals by the FDA and other regulatory authorities and the timing thereof; •other actions, decisions or rules issued by regulators;45 •our ability to access sufficient, reliable and affordable supplies of materials used in the manufacture of our product candidates; •our ability to manufacture and supply clinical trial materials to our clinical sites on a timely basis; •the efforts of our collaborators with respect to the commercialization of our products; and •the securing of, costs related to, and timing issues associated with, product manufacturing as well as sales and marketing activities.If we fail to achieve announced milestones in the timeframes we expect, the commercialization of any of our product candidates may be delayed, and ourbusiness and results of operations may be harmed.We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability todevelop and commercialize product candidates, impact our cash position, increase our expense and present significant distractions to our management.Since commencing operations, we have entered into several collaboration agreements, including, most recently, the Amgen Agreement that we entered intowith Amgen in September 2017. From time to time, we may consider strategic transactions, such as additional collaborations, acquisitions of companies, assetpurchases and out- or in-licensing of product candidates or technologies. In particular, we will evaluate and, if strategically attractive, seek to enter intoadditional collaborations, including with major biotechnology or biopharmaceutical companies. The competition for collaborators is intense, and thenegotiation process is time-consuming and complex. Any new collaboration may be on terms that are not optimal for us, and we may not be able to maintainany new collaboration if, for example, development or approval of a product candidate is delayed, sales of an approved product candidate do not meetexpectations or the collaborator terminates the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-recurring orother charges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management orbusiness. These transactions would entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business anddiversion of our management’s time and attention in order to manage a collaboration or develop acquired products, product candidates or technologies,incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration,acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitatingthe collaboration or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers orcustomers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business.Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described above, anytransactions that we do complete may be subject to the foregoing or other risks and have a material and adverse effect on our business, financial condition,results of operations and prospects. The termination by a collaborator of a collaboration may cause a decrease in the price of our stock. Conversely, anyfailure to enter any additional collaboration or other strategic transaction that would be beneficial to us could delay the development and potentialcommercialization of our product candidates and have a negative impact on the competitiveness of any product candidate that reaches market.If we are unable to successfully develop companion diagnostic tests for certain of our product candidates, or experience significant delays in doing so, wemay not realize the full commercial potential of our product candidates.Because we are focused on precision medicine, in which predictive biomarkers will be used to identify the right patients for our product candidates, webelieve that our success may depend, in part, on the development of companion diagnostic tests. To successfully develop a companion diagnostic test, wewould need to address a number of scientific, technical and logistical challenges. However, we have little experience in the development of companiondiagnostic tests and may not be successful in developing appropriate tests to pair with any of our product candidates. Companion diagnostic tests are subjectto regulation by the FDA and similar regulatory authorities outside the United States as medical devices and require separate regulatory approval prior tocommercialization. Given our limited experience in developing companion diagnostic tests, we could seek to rely on third parties to design, manufacture,obtain regulatory approval for any companion diagnostic tests for our product candidates. However, we and such collaborators may encounter difficulties indeveloping and obtaining approval for the companion diagnostic tests, including issues relating to selectivity/specificity, analytical validation,reproducibility, or clinical validation. Any delay or failure by us or our collaborators to develop or obtain regulatory approval of the companion diagnostictests could delay or prevent approval of our product candidates. As a result, our business would be harmed, possibly materially.46 We rely on third parties to conduct all of our clinical trials and certain of our preclinical studies and intend to continue to do so, and if such third partiesdo not perform as contractually required, fail to satisfy regulatory or legal requirements or miss expected deadlines, our development programs could bedelayed with material and adverse effects on our business, financial condition, results of operations and prospects.We do not have the ability to independently conduct clinical trials. As such, we currently rely and intend to continue to rely on third-party clinicalinvestigators, CROs, clinical data management organizations and consultants to help us design, conduct, supervise and monitor clinical trials of our productcandidates. As a result, we will have less control over the timing, quality and other aspects of our clinical trials than we would have had we conducted themon our own. These investigators, CROs and consultants are not our employees and we have limited control over the amount of time and resources that theydedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may drawtime and resources from our programs. The third parties with which we contract might not be diligent, careful or timely in conducting our preclinical studiesor clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful.If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their contractual duties,satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, our clinical developmentprograms could be delayed and otherwise adversely affected. In all events, we will be responsible for ensuring that each of our preclinical studies and clinicaltrials are conducted in accordance with the general investigational plan and protocols for the trial. The FDA requires preclinical studies to be conducted inaccordance with good laboratory practices (“GLPs”) and clinical trials to be conducted in accordance with good clinical practices (“GCPs”), including fordesigning, conducting, recording and reporting the results of preclinical studies and clinical trials to assure that data and reported results are credible andaccurate and that the rights, integrity and confidentiality of clinical trial participants are protected. Our reliance on third parties that we do not control willnot relieve us of these responsibilities and requirements. Any adverse development or delay in our clinical trials could have a material and adverse effect onour business, financial condition, results of operations and prospects.Because we have no long term contracts with and rely on third-party manufacturing and supply partners, most of which are sole source suppliers, oursupply of research and development, preclinical and clinical development materials may become limited or interrupted or may not be of satisfactoryquantity or quality.We rely on third-party contract manufacturers to manufacture our clinical trial and preclinical study product supplies. Most of our clinical trial manufacturingcontractors and suppliers are our sole source for their respective manufacturing and supplies. Failure of any of these contractors could put our ability to haveclinical trial material available when needed. This could result in a substantial delay of our clinical trials. For example, for each of CX-072 CX-2009 and CX-2029, our manufacturing supply chain includes several contract manufacturers, and failure by any of these manufacturers could result in interruptions of ourclinical studies. We do not own manufacturing facilities for producing such supplies and do not have any long term contracts and we do not currently havean alternative to any of our third-party contract manufacturers. There can be no assurance that our preclinical and clinical development product supplies willnot be limited, interrupted, or of satisfactory quality or continue to be available at acceptable prices. In particular, any replacement of any of our third-partycontract manufacturers could require significant effort and expertise because there may be a limited number of qualified replacements. In addition, we mayencounter issues with transferring technology to a new third-party manufacturer, and we may encounter regulatory delays if we need to move themanufacturing of our products from one third-party manufacturer to another. For example, we were dependent on ImmunoGen under our collaboration forcertain steps in the manufacturing of clinical quantities of CX-2009. At the end of 2018, ImmunoGen closed their clinical manufacturing facility in Norwood,MA. This site provided clinical manufacturing support for the CX-2009 program. We have initiated the transfer of the drug substance manufacturing processfrom ImmunoGen to CMO, where we have an existing relationship and which has expertise in the manufacture of antibody drug conjugates at a clinical andcommercial scale. To date, the manufacturing transfer process is still ongoing and has not yet been completed. However, there can be no assurances that wewill not experience a disruption to the supply of CX-2009 in connection with such transfer or that the transfer will be successful.The manufacturing process for a product candidate is subject to FDA and foreign regulatory authority review. Suppliers and manufacturers must meetapplicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply withregulatory standards, such as current Good Manufacturing Practices (“cGMPs”). In the event that any of our manufacturers fails to comply with suchrequirements or to perform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limitedor interrupted for other reasons, such as one of our manufacturers going out of business, we may be forced to manufacture the materials ourselves, for whichwe currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on reasonableterms, if at all. In some cases, the technical skills or technology required to manufacture our product candidates may be unique or proprietary to the originalmanufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist. These factorswould increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufactureour product candidates. If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilitiesand procedures that comply with quality standards and with all applicable regulations and guidelines. The delays associated with the verification of a newmanufacturer could negatively affect our ability to develop product candidates in a timely manner or within budget.47 We expect to continue to rely on third-party manufacturers if we receive regulatory approval for any product candidate. To the extent that we have existing,or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely mannerconsistent with contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or maintain third-party manufacturing for product candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our productcandidates successfully. We may find that our third-party manufacturer is unable to scale up the process in order to produce commercial quantities of ourproducts. Our or a third party’s failure to execute on our manufacturing requirements and comply with cGMPs could adversely affect our business in a numberof ways, including: •an inability to initiate or continue clinical trials of product candidates under development; •delay in submitting regulatory applications, or receiving regulatory approvals, for product candidates; •loss of the cooperation of a collaborator; •subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities; •requirements to cease distribution or to recall batches of our product candidates; and •in the event of approval to market and commercialize a product candidate, an inability to meet commercial demands for our products.The supply chain for the manufacturing of our product candidates is complicated and can involve many parties. This is especially the case for our clinicalstage Probody Drug Conjugates, CX-2009 and CX-2029. If we were to experience any supply chain issues, our product supply could be seriously disrupted.In addition, we expect the logistical challenges associated with our supply chain to grow more complex as additional product candidates commence anyclinical trials.We, or third-party manufacturers, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity,which would delay or prevent us from developing our product candidates and commercializing approved products, if any.It may prove more challenging than we anticipate to manufacture products that incorporate our Probody therapeutic technology. In order to conduct clinicaltrials of our product candidates, including our Phase 1/2 clinical trials for CX-072, CX-2009 and CX-2029, we will need to manufacture them in largequantities. To date we have been able to successfully manufacture CX-072, CX-2009 and CX-2029 for our ongoing early stage clinical trials. However, inorder to conduct later stage clinical trials of our product candidates, including CX-072, CX-2009 and CX-2029, and eventually, if approved, commercialproducts, we will need to manufacture them in larger quantities. We, or any manufacturing partners, may be unable to successfully increase themanufacturing scale and capacity for any of our product candidates in a timely or cost-effective manner, or at all. For example, we are currently working withour CMOs to change our manufacturing processes and formulations as well as scaling up for larger drug manufacturing capability and to increase the term ofstability for CX-072 drug product for late stage clinical trials and commercialization. However, we may have to start late stage trials with our early clinicaltrial drug product and switch to late stage or commercial drug product mid trial. In such event, the FDA will require us to complete bridging studies tocompare the earlier stage material with late stage or commercial material to assure comparability between the earlier trial material and the late stage orcommercial material. Changing formulation and scale up process is a complicated and difficult task. While we believe we can complete this processsuccessfully, there can be no assurances that the changes we make to the drug product and manufacturing process will be successful or completed in a timelymanner or that the FDA will not require additional development steps or studies from those we believe are necessary. If we are not able to scale up ourmanufacturing capabilities with respect to CX-072 or any of our other product candidates, increase the life of drug stability of CX-072 or such other productcandidates, or successfully complete the FDA’s bridging requirements, we may not be able to successfully obtain FDA approval and commercialize CX-072or such other product candidates in a timely manner or at all.Additionally, we were dependent on ImmunoGen under our collaboration for certain steps in the manufacturing of clinical quantities of CX-2009. At the endof 2018, ImmunoGen closed their clinical manufacturing facility in Norwood, Massachusetts, which provided clinical manufacturing support for the CX-2009 program. We have initiated the transfer of the drug substance manufacturing process from ImmunoGen to a contract manufacturer, where we have anexisting relationship and with expertise in the manufacture of antibody drug conjugates at a clinical and commercial scale. However, there can be noassurances that we will not experience a disruption to the supply of CX-2009 in connection with such transfer. To date, the manufacturing transfer process isstill ongoing and has not yet been completed. In addition, for CX-2029, the manufacturing of additional clinical quantities could be particularly difficultbecause we are relying on three different parties to manufacture supplies. If we, or any manufacturing partners, are unable to successfully scale up themanufacture of our product candidates in sufficient quality and quantity, the development, testing, and clinical trials of that product candidate may bedelayed or infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantlyharm our business.48 We may acquire assets or form strategic alliances in the future, and we may not realize the benefits of such acquisitions. As we continue to mature our Probody platform and our clinical stage pipeline, we may seek to acquire and/or in-license other oncology products, productcandidates, programs or companies that we consider complimentary to our efforts. Such efforts may never result in a transaction and any future growththrough acquisition or in-licensing will depend upon the availability of suitable products, product candidates, programs or companies for acquisition or in-licensing on acceptable prices, terms and conditions. Even if appropriate opportunities are available, we may not be able to acquire rights to them onacceptable terms, or at all. The competition to acquire or in-license rights to promising products, product candidates, programs and companies is fierce, andmany of our competitors are large, multinational pharmaceutical and biotechnology companies with considerably more financial, development andcommercialization resources, personnel, and experience than we have. In order to compete successfully in the current business climate, we may have to payhigher prices for assets than may have been paid historically, which may make it more difficult for us to realize an adequate return on any acquisition. Inaddition, even if we succeed in identifying promising products, product candidates, programs or companies, we may not have the ability to develop, obtainregulatory approval for and commercialize such opportunities, or the financial resources necessary to pursue them.Even if we are able to successfully identify and acquire or in-license new products, product candidates, programs or companies, we may not be able tosuccessfully manage the risks associated with integrating any products, product candidates, programs or companies into our business or the risks arising fromanticipated and unanticipated problems in connection with an acquisition or in-licensing. Further, while we seek to mitigate risks and liabilities of potentialacquisitions through, among other things, due diligence, there may be risks and liabilities that such due diligence efforts fail to discover, that are notdisclosed to us, or that we inadequately assess. Any failure in identifying and managing these risks and uncertainties effectively would have a materialadverse effect on our business. In any event, we may not be able to realize the anticipated benefits of any acquisition or in-licensing for a variety of reasons,including the possibility that a product candidate fails to advance to clinical development, proves not to be safe or effective in clinical trials, or fails to reachits forecasted commercial potential or that the integration of a product, product candidate, program or company gives rise to unforeseen difficulties andexpenditures. Any failure in identifying and managing these risks and uncertainties would have a material adverse effect on our business.In addition, acquisitions create other uncertainties and risks, particularly when the acquisition takes the form of a merger or other business consolidation. Wemay encounter unexpected difficulties, or incur unexpected costs, in connection with transition activities and integration efforts, which include: •high acquisition costs; •the need to incur substantial debt or engage in dilutive issuances of equity securities to pay for acquisitions; •the potential disruption of our historical business and our activities under our collaboration agreements; •the strain on, and need to expand, our existing operational, technical, financial and administrative infrastructure; •our lack of experience in late-stage product development and commercialization; •the difficulties in assimilating employees and corporate cultures; •the difficulties in hiring qualified personnel and establishing necessary development and/or commercialization capabilities; •the failure to retain key management and other personnel; •the challenges in controlling additional costs and expenses in connection with and as a result of the acquisition; •the need to write down assets or recognize impairment charges; •the diversion of our management’s attention to integration of operations and corporate and administrative infrastructures; and •any unanticipated liabilities for activities of or related to the acquired business or its operations, products or product candidates.If we fail to integrate or otherwise manage an acquired business successfully and in a timely manner, resulting operating inefficiencies could increase ourcosts more than we planned, could negatively impact the market price of our common stock and could otherwise distract us from execution of our strategy.Failure to maintain effective financial controls and reporting systems and procedures could also impact our ability to produce timely and accurate financialstatements.49 We may expend our limited resources to pursue a particular product candidate and fail to capitalize on product candidates that may be more profitable orfor which there is a greater likelihood of success.Because we have limited financial and managerial resources, we focus on specific product candidates, including CX-072, CX-2009 and CX-2029. As a result,we may forgo or delay pursuit of opportunities with other product candidates that later prove to have greater commercial potential. Our resource allocationdecisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future researchand development programs and product candidates for specific indications may not yield any commercially viable product candidates. If we do notaccurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidatethrough collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development andcommercialization rights to such product candidate.We may experience difficulties in managing our growth and expanding our operations successfully.We will need to grow our organization substantially to continue development and pursue the potential commercialization of CX-072, CX-2009 and CX-2029and our other product candidates, as well as function as a public company. As we increase the number of our product candidates entering and advancingthrough preclinical studies and clinical trials, we will need to expand our development, regulatory and manufacturing capabilities or contract with additionalorganizations to provide these capabilities for us. In addition, we expect our collaborations to require greater resources as the development of our productcandidates under such agreements progresses. In the future, we expect to also have to manage additional relationships with collaborators or partners,suppliers and other organizations. In particular, if the third-parties on which we currently rely are not capable of delivering services or supplies in a mannerthat is sufficient to meet our requirements as we expand our operations, we could be required to contract with new third parties and there can be no assurancesthat the services or supplies of such third parties will be available on commercially reasonable terms, or at all. Furthermore, our ability to manage ouroperations and future growth will require us to continue to increase headcount as well as improve our operational, financial and management controls,reporting systems and procedures. We may not be able to implement improvements to our management information and control systems in an efficient ortimely manner and may discover deficiencies in existing systems and controls.We face competition from entities that have developed or may develop product candidates for cancer, including companies developing novel treatmentsand technology platforms. If these companies develop technologies or product candidates more rapidly than we do or their technologies are more effective,our ability to develop and successfully commercialize product candidates may be adversely affected.The development and commercialization of drugs and therapeutic biologics is highly competitive. We compete with a variety of multinationalbiopharmaceutical companies and specialized biotechnology companies, as well as technology being developed at universities and other researchinstitutions. Our competitors have developed, are developing or will develop product candidates and processes competitive with our product candidates.Competitive therapeutic treatments include those that have already been approved and accepted by the medical community and any new treatments thatenter the market. We believe that a significant number of products are currently under development, and may become commercially available in the future,for the treatment of conditions for which we may try to develop product candidates. For instance, there is intense and rapidly evolving competition in thebiotechnology, biopharmaceutical and antibody and immunoregulatory therapeutics fields, and our competitors include larger and better fundedbiopharmaceutical, biotechnological and therapeutics companies. In addition, these companies compete with us in recruiting scientific and managerialtalent.We believe that while our Probody platform, its associated intellectual property and our scientific and technical know-how, give us a competitive advantagein this space, competition from many sources remains. The clinical development pipeline for cancer includes small molecules, antibodies and therapies froma variety of groups. In addition, numerous compounds are in clinical development for cancer treatment. As a result, our success will partially depend on ourability to develop and protect therapeutics that are safer and more effective than competing products. Our commercial opportunity and success will bereduced or eliminated if competing products that are safer, more effective, or less expensive than the therapeutics we develop or if we are unable to utilize ourProbody therapeutic technology to differentiate our Probody therapeutics from the products of our competitors. For instance, if any of our lead productcandidates, including CX-072, CX-2009 and CX-2029 are approved, they will compete with a range of therapeutic treatments that are either in developmentor currently marketed. A variety of oncology drugs and therapeutic biologics are currently on the market or in clinical development. The market forimmunotherapies like CX-072 is, in particular, highly competitive and the field is changing quickly. Given the amount of time required to successfullydevelop and obtain regulatory approval for each of our product candidates, it is therefore possible that by the time we obtain any such approval, if ever, andcommence sales, we may no longer be able to differentiate such product candidate from those of our competitors.50 We face substantial competition from pharmaceutical companies developing products in immuno-oncology, including companies, such as Amgen,AstraZeneca PLC, BMS, Celgene, GlaxoSmithKline plc, Merck & Co., Inc. Novartis AG, Pfizer, Roche Holding Ltd. and Sanofi SA. Many large and mid-sized biotech companies, including BeiGene, Incyte, TESARO, Inc., Nektar, and Alkermes have ongoing efforts in cancer immunotherapy. Finally, numeroussmall companies are also working in the space. Several companies, including Akriveia, Amgen, Amunix, BioAtla, Halozyme, Maverick Therapeutics,Pandion Therapeutics, Revitope, Roche, and Seattle Genetics are exploring antibody masking and/or conditional activation strategies, which could competewith our Probody Platform. We are also aware of several companies that are developing ADCs, such as AbbVie, Immunomedics, Pfizer, Roche Holding Ltd.And Takeda. In addition, two mid-sized companies, ImmunoGen and Seattle Genetics, Inc. are also leaders in the development of ADCs and we are aware ofnumerous small companies with ongoing efforts in this field. Furthermore, several large pharmaceutical companies, including Amgen, Novartis AG andRoche Holding Ltd., are developing T-cell engaging immunotherapies, and we are aware of several mid-sized biotech companies, such as Macrogenics andXencor, and small companies with ongoing efforts to develop T-cell engaging immunotherapies. Any of these companies may be well-capitalized and mayhave significant clinical experience. In addition, these companies include our collaborators.Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales and supply resources or experience than we do. If wesuccessfully obtain approval for any product candidate, we will face competition based on many different factors, including the safety and effectiveness ofour products, the ease with which our products can be administered and the extent to which patients accept relatively new routes of administration, the timingand scope of regulatory approvals for these products, the availability and cost of manufacturing, marketing and sales capabilities, price, reimbursementcoverage and patent position. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive ormarketed and sold more effectively than any products we may develop. Competitive products may make any products we develop less differentiated ornoncompetitive before we recover the expense of developing and commercializing our product candidates. Such competitors could also recruit ouremployees, which could negatively impact our level of expertise and our ability to execute our business plan.Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.Our success largely depends on the continued service of key management, advisors and other specialized personnel, including Sean A. McCarthy, D.Phil., ourpresident and chief executive officer, W. Michael Kavanaugh, M.D., our chief scientific officer and Rachel W. Humphrey, M.D., our chief medical officer. Theloss of one or more members of our management team or other key employees or advisors could delay our research and development programs and have amaterial and adverse effect on our business, financial condition, results of operations and prospects. The relationships that our key managers have cultivatedwithin our industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technicalpersonnel because of the highly technical nature of our product candidates and technologies and the specialized nature of the regulatory approval process.Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us atany time without penalty. Our future success will depend in large part on our continued ability to attract and retain other highly qualified scientific, technicaland management personnel, as well as personnel with expertise in clinical testing, manufacturing, governmental regulation and commercialization. We facecompetition for personnel from other companies, universities, public and private research institutions, government entities and other organizations,especially as job opportunities in the biotechnology industry have recently increased significantly in the San Francisco Bay Area.If any of our product candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distributioncapabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we will be unable to commercializesuccessfully any such future products.We currently have no sales, marketing or distribution capabilities or experience. If any of our product candidates is approved, we will need to developinternal sales, marketing and distribution capabilities to commercialize such products, which would be expensive and time-consuming, or enter intocollaborations with third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial andmanagerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration and compliance capabilities.If we rely on third parties with such capabilities to market our products or decide to co-promote products with collaborators, we will need to establish andmaintain marketing and distribution arrangements with third parties, and there can be no assurance that we will be able to enter into such arrangements onacceptable terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the efforts of the thirdparties and there can be no assurance that such third parties will establish adequate sales and distribution capabilities or be successful in gaining marketacceptance of any approved product. If we are not successful in commercializing any product approved in the future, either on our own or through thirdparties, our business, financial condition, results of operations and prospects could be materially and adversely affected.51 Our future growth may depend, in part, on our ability to operate in foreign markets, where we would be subject to additional regulatory burdens and otherrisks and uncertainties.Our future growth may depend, in part, on our ability to develop and commercialize our product candidates in foreign markets for which we may rely oncollaboration with third parties. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from theapplicable regulatory authority in that foreign market, and we may never receive such regulatory approval for any of our product candidates. To obtainseparate regulatory approval in many other countries we must comply with numerous and varying regulatory requirements of such countries regarding safetyand efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our product candidates, and we cannotpredict success in these jurisdictions. If we obtain approval of our product candidates and ultimately commercialize our product candidates in foreignmarkets, we would be subject to the risks and uncertainties, including the burden of complying with complex and changing foreign regulatory, tax,accounting and legal requirements and the reduced protection of intellectual property rights in some foreign countries. We may need to rely on third partiesto market, distribute and sell our products in foreign markets.Price controls imposed in foreign markets may adversely affect our future profitability.In some countries, particularly member states of the European Union, the pricing of prescription drugs is subject to governmental control. In these countries,pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can beconsiderable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political,economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has beenobtained. Reference pricing used by various European Union member states and parallel distribution, or arbitrage between low-priced and high-pricedmember states, can further reduce prices. In some countries, we or future collaborators may be required to conduct a clinical trial or other studies that comparethe cost-effectiveness of our Probody therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval.Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country ofpublication and other countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricingis set at unsatisfactory levels, our business, financial condition, results of operations or prospects could be materially and adversely affected. We currently donot know how the exit of the United Kingdom from the European Union will affect the pricing of prescription drugs, either in the United Kingdom or in theremaining European Union member states.Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could have a material and adverse effecton our business, financial condition, results of operations and prospects.We are exposed to significant product liability risks inherent in the development, testing, manufacturing and marketing of therapeutic treatments, includingas a result of the clinical testing of CX-072, CX-2009, CX-2029 and BMS-986249 and any other product candidates we or our collaborators may conductclinical trials for. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing product candidates,such claims could result in an FDA investigation of the safety and effectiveness of our product candidates, our manufacturing processes and facilities (or themanufacturing processes and facilities of our third-party manufacturer) or our marketing programs and potentially a recall of our products or more seriousenforcement action, limitations on the approved indications for which they may be used or suspension or withdrawal of approvals. Regardless of the merits oreventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, adiversion of management’s time and our resources, substantial monetary awards to trial participants or patients and a decline in our stock price. We currentlyhave insurance that we believe is appropriate for our stage of development and may need to obtain higher levels of insurance prior to marketing any of ourproduct candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial andproduct liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect usagainst losses caused by product liability claims that could have a material and adverse effect on our business, financial condition, results of operations andprospects.Our employees and independent contractors may engage in misconduct or other improper activities, including noncompliance with regulatory standardsand requirements.We are exposed to the risk of fraud or other misconduct by our employees or independent contractors. Misconduct by these parties could include intentionalfailures to comply with FDA regulations, provide accurate information to the FDA, comply with manufacturing standards we may establish, comply withfederal and state data privacy, security, fraud and abuse, and other healthcare laws and regulations, report financial information or data accurately or discloseunauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws andregulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range ofpricing,52 discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Activities subject to these lawscould also involve the improper use or misrepresentation of information obtained in the course of clinical trials, which could result in regulatory sanctionsand cause serious harm to our reputation. It is not always possible to identify and deter misconduct by employees and other third parties, and the precautionswe take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmentalinvestigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. Additionally, we are subject to the riskthat a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are notsuccessful in defending ourselves or asserting our rights, those actions could have a material and adverse effect on our business, financial condition, results ofoperations and prospects, including the imposition of significant fines or other sanctions.Our information technology systems, or those of our CROs or other contractors or consultants we may utilize, may fail, suffer disruptions or suffer securitybreaches, which could result in a material disruption of our product development programs.Our information technology and other internal infrastructure systems and those of our CROs and contractors and consultants, including corporate firewalls,servers, leased lines and connection to the Internet, face the risk of systemic failure and may be vulnerable to damage from computer viruses, unauthorizedaccess, natural disasters, terrorism, war and telecommunication and electrical failures. Such events could cause interruptions of our operations. For instance,the loss of data from any current or future clinical trial or data from any preclinical studies involving our product candidates could result in delays in ourdevelopment and regulatory filing efforts and significantly increase our costs. To the extent that any disruption or security breach were to result in a loss of,or damage to, our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability, recovery of our data could take aprolonged period of time, and the development of our research or product candidates could be delayed.Cybersecurity breaches could expose us to liability, damage our reputation, compromise our confidential information or otherwise adversely affect ourbusiness.We maintain sensitive company data on our computer networks, including our intellectual property and proprietary business information. We face a numberof threats to our networks from unauthorized access, security breaches and other system disruptions. Despite our security measures, our infrastructure may bevulnerable to attacks by hackers or other disruptive problems. Any such security breach may compromise information stored on our networks and may resultin significant data losses or theft of our intellectual property or proprietary business information. A cybersecurity breach could adversely affect our reputationand could result in other negative consequences, including disruption of our internal operations, increased cyber security protection costs, lost revenues orlitigation.If we do not comply with laws regulating the protection of the environment and health and human safety, our business could be adversely affected.Our research and development activities involve the use of hazardous materials and various chemicals. We maintain quantities of various flammable andtoxic chemicals in our facilities in South San Francisco, California that are required for our research and development activities. We are subject to federal,state and local laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. We believe our proceduresfor storing, handling and disposing these materials in our South San Francisco facilities comply with the relevant guidelines of South San Francisco, the stateof California and the Occupational Safety and Health Administration of the U.S. Department of Labor. Although we believe that our safety procedures forhandling and disposing of these materials comply with the standards mandated by applicable regulations, the risk of accidental contamination or injury fromthese materials cannot be eliminated. If an accident occurs, we could be held liable for resulting damages, which could be substantial. We are also subject tonumerous environmental, health and workplace safety laws and regulations, including those governing laboratory procedures, exposure to blood-bornepathogens and the handling of animals and biohazardous materials. Although we maintain workers’ compensation insurance to cover us for costs andexpenses we may incur due to injuries to our employees resulting from the use of these materials, this insurance may not provide adequate coverage againstpotential liabilities. We do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us in connection with ourstorage or disposal of biological or hazardous materials. Additional federal, state and local laws and regulations affecting our operations may be adopted inthe future. We may incur substantial costs to comply with, and substantial fines or penalties if we violate, any of these laws or regulations.53 Our current operations are concentrated in one location, and we or the third parties upon whom we depend may be adversely affected by earthquakes orother natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.Our current operations are located in our facilities in South San Francisco, California. Any unplanned event, such as flood, fire, explosion, earthquake,extreme weather condition, medical epidemics, power shortage, telecommunication failure or other natural or manmade accidents or incidents that result in usbeing unable to fully utilize our facilities, or the manufacturing facilities of our third-party contract manufacturers, may have a material and adverse effect onour ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Lossof access to these facilities may result in increased costs, delays in the development of our product candidates or interruption of our business operations.Earthquakes or other natural disasters could further disrupt our operations and have a material and adverse effect on our business, financial condition, resultsof operations and prospects. If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of ourheadquarters, that damaged critical infrastructure, such as our research facilities or the manufacturing facilities of our third-party contract manufacturers, orthat otherwise disrupted operations, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. Thedisaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incursubstantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, could have a material and adverse effecton our business. As part of our risk management policy, we maintain insurance coverage at levels that we believe are appropriate for our business. However,in the event of an accident or incident at these facilities, we cannot assure you that the amounts of insurance will be sufficient to satisfy any damages andlosses. If our facilities, or the manufacturing facilities of our third-party contract manufacturers, are unable to operate because of an accident or incident or forany other reason, even for a short period of time, any or all of our research and development programs may be harmed. Any business interruption may have amaterial and adverse effect on our business, financial condition, results of operations and prospects.Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject tointerpretation by the Financial Accounting Standards Board (“FASB”) and the SEC. A change in these policies or interpretations could have a significanteffect on our reported financial results, may retroactively affect previously reported results, could cause unexpected financial reporting fluctuations, and mayrequire us to make costly changes to our operational processes and accounting systems. For example, in May 2014, the FASB issued Accounting StandardsUpdate (“ASU”) 2014-09, Revenue from Contracts with Customers, which requires an entity to recognize the amount of revenue to which it expects to beentitled for the transfer of promised goods or services to customers. The ASU replaced most existing revenue recognition guidance in the U.S. GAAP when itbecame effective. The new standard was effective at the beginning of our fiscal year 2018 with early adoption permitted for our fiscal year 2017. Weevaluated the impact of ASU 2014-09 on our financial statements and adoption of the standard had a significant impact on our financial statements andretroactively affected the accounting treatment of transactions completed before adoption.Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “IRC”), if a corporation undergoes an “ownership change” (generallydefined as a greater than 50 percentage points change (by value) in the ownership of its equity over a rolling three-year period), the corporation’s ability touse its pre-change net operating loss carryforwards and certain other pre-change tax attributes to offset its post-change income and taxes may be limited.California has similar rules. We have performed an IRC Section 382 analysis and determined there was an ownership change in 2017, that resulted in Section382 limitations. The ownership change limited our ability to utilize net operating losses against taxable income in 2018 for both federal and California taxpurposes. The remaining net operating losses and credit will be available in future years before expiration during their respective carryforward periods. Wemay experience ownership changes in the future as a result of shifts in our stock ownership, some of which are outside our control, and our ability to utilizenet operating loss carryforwards could be limited by an “ownership change” as described above, which could result in additional increased tax liability to ourcompany.Recent U.S. tax legislation and future changes to applicable U.S. or foreign tax laws and regulations may have a material adverse effect on our business,financial condition and results of operations.We are subject to income and other taxes in the U.S. and foreign jurisdictions. Changes in laws and policy relating to taxes or trade may have an adverseeffect on our business, financial condition and results of operations. For example, the U.S. government recently enacted significant tax reform, and certainprovisions of the new law may adversely affect us. Changes include, but are not limited to, a federal corporate tax rate decrease from 34% to 21% for tax yearsbeginning after December 31, 2017, the transition of U.S. international taxation from a worldwide tax system to a more generally territorial system, and a one-time transition tax on the mandatory deemed repatriation of foreign earnings. The legislation is unclear in many respects and could be subject to potential54 amendments and technical corrections and will be subject to interpretations and implementing regulations by the Treasury and Internal Revenue Service, anyof which could mitigate or increase certain adverse effects of the legislation. In addition, it is unclear how these U.S. federal income tax changes will affectstate and local taxation. Generally, future changes in applicable U.S. or foreign tax laws and regulations, or their interpretation and application could have anadverse effect on our business, financial conditions and results of operations.Risks Related to Intellectual PropertyIf we are not able to obtain and enforce patent protection for our technologies or product candidates, development and commercialization of our productcandidates may be adversely affected. Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectualproperty rights of others, for our product candidates, methods used to manufacture our product candidates and methods for treating patients using our productcandidates, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights and to operate withoutinfringing upon the proprietary rights of others. We have a substantial number of issued patents and pending patent applications, some of which are co-owned with a third party, covering our Probody platforms and products as well as methods of use and production thereof; we have exclusively licensedUCSB’s interest in the patent family co-owned with UCSB that covers Probody and other pro-protein technology in the fields of therapeutics, in vivodiagnostics and prophylactics. In addition, we have exclusively licensed a patent portfolio of three patent families from UCSB that includes patents andpatent applications that cover compositions and methods related to the screening for and identification of the masks and protease-cleavable linkers that weincorporate into our Probody candidates. We may not be able to apply for patents on certain aspects of our product candidates in a timely fashion or at all.Our existing issued and granted patents and any future patents we obtain may not be sufficiently broad to prevent others from using our technology or fromdeveloping competing products and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents,that any of our issued or granted patents will not later be found to be invalid or unenforceable or that any issued or granted patents will include claims thatare sufficiently broad to cover our product candidates or to provide meaningful protection from our competitors. Moreover, the patent position ofbiotechnology and biopharmaceutical companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protectour proprietary rights from unauthorized use by third parties only to the extent that our current and future proprietary technology and product candidates arecovered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it maymaterially and adversely affect our position in the market.The U.S. Patent and Trademark Office (“USPTO”) and various foreign governmental patent agencies require compliance with a number of procedural,documentary, fee payment and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse ofa patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able toenter the market earlier than would otherwise have been the case. The standards applied by the USPTO and foreign patent offices in granting patents are notalways applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claimsallowable in biotechnology and biopharmaceutical patents. As such, we do not know the degree of future protection that we will have on our proprietaryproducts and technology. While we will endeavor to try to protect our product candidates with intellectual property rights such as patents, as appropriate, theprocess of obtaining patents is time-consuming, expensive and sometimes unpredictable.In addition, there are numerous recent changes to the patent laws and proposed changes to the rules of the USPTO that may have a significant impact on ourability to protect our technology and enforce our intellectual property rights. For example, the America Invents Act (“AIA”) enacted within the last severalyears involves significant changes in patent legislation. The Supreme Court has ruled on several patent cases in recent years, some of which cases eithernarrow the scope of patent protection available in certain circumstances or weaken the rights of patent owners in certain situations. The recent decision by theSupreme Court in Association for Molecular Pathology v. Myriad Genetics, Inc. precludes a claim to a nucleic acid having a stated nucleotide sequence thatis identical to a sequence found in nature and has not been modified. We currently are not aware of an immediate impact of this decision on our patents orpatent applications because we are developing product candidates that contain modifications, such as our Probody substrates and masks, that we believe arenot found in nature. However, this decision has yet to be clearly interpreted by courts and by the USPTO. We cannot assure you that the interpretations of thisdecision or subsequent rulings will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our ability toobtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisionsby the U.S. Congress, the federal courts and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weakenour ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future.55 Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter parties review, nullification or derivation actionin court or before patent offices or similar proceedings for a given period after allowance or grant, during which time third parties can raise objections againstsuch initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit thescope of the allowed or granted claims thus attacked, or may lose the allowed or granted claims altogether. In addition, there can be no assurance that: •Others will not or may not be able to make, use or sell compounds that are the same as or similar to our product candidates but that are notcovered by the claims of the patents that we own or license. •We or our licensors, or our collaborators are the first to make the inventions covered by each of our issued patents and pending patentapplications that we own or license. •We or our licensors, or our collaborators are the first to file patent applications covering certain aspects of our inventions. •Others will not independently develop similar or alternative technologies or duplicate any of our technologies without infringing ourintellectual property rights. •A third party may not challenge our patents and, if challenged, a court would hold that our patents are valid, enforceable and infringed. •Any issued patents that we own or have licensed will provide us with any competitive advantages, or will not be challenged by third parties. •We may develop additional proprietary technologies that are patentable. •The patents of others will not have a material or adverse effect on our business, financial condition, results of operations and prospects. •Our competitors do not conduct research and development activities in countries where we do not have enforceable patent rights and then usethe information learned from such activities to develop competitive products for sale in our major commercial markets.Other companies or organizations may challenge our or our licensors’ patent rights or may assert patent rights that prevent us from developing andcommercializing our products.Probody therapeutics are a relatively new scientific field. We have obtained grants and issuances of Probody therapeutic patents and have licensed one patentfamily comprising several of these patents from a third party on an exclusive basis for therapeutics applications. The issued patents and pending patentapplications in the United States and in key markets around the world that we own or license claim many different methods, compositions and processesrelating to the discovery, development, manufacture and commercialization of antibody and immunoregulatory therapeutics. Specifically, we own and havelicensed a portfolio of patents, patent applications and other intellectual property covering Probody compositions of matter as well as their methods ofmanufacturing and use.As the field of antibody and immunoregulatory therapeutics matures, patent applications are being processed by national patent offices around the world.There is uncertainty about which patents will issue, and, if they do, as to when, to whom, and with what claims. In addition, third parties may attempt toinvalidate our intellectual property rights. Even if our rights are not directly challenged, disputes could lead to the weakening of our intellectual propertyrights. Our defense against any attempt by third parties to circumvent or invalidate our intellectual property rights could be costly to us, could requiresignificant time and attention of our management and could have a material and adverse effect on our business, financial condition, results of operations andprospects or our ability to successfully compete.There are many issued and pending patents that claim aspects of our product candidates and modifications that we may need to apply to our productcandidates. There are also many issued patents that claim antibodies or portions of antibodies that may be relevant for Probody products we wish to develop.Thus, it is possible that one or more organizations will hold patent rights to which we will need a license. If those organizations refuse to grant us a license tosuch patent rights on reasonable terms, we may not be able to market products or perform research and development or other activities covered by thesepatents.56 We may not be able to protect our intellectual property rights throughout the world.Obtaining a valid and enforceable issued or granted patent covering our technology in the U.S. and worldwide can be extremely costly. In jurisdictions wherewe have not obtained patent protection, competitors may use our technology to develop their own products and further, may export otherwise infringingproducts to territories where we have patent protection, but where it is more difficult to enforce a patent as compared to the U.S. Competitor products maycompete with our future products in jurisdictions where we do not have issued or granted patents or where our issued or granted patent claims or otherintellectual property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certaindeveloping countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual property protection, particularlythat relating to biopharmaceuticals. This could make it difficult for us to prevent the infringement of our patents or marketing of competing products inviolation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result insubstantial cost and divert our efforts and attention from other aspects of our business.We generally file a provisional patent application first (a priority filing) at the USPTO. An international application under the Patent Cooperation Treaty(“PCT”) is usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in theUnited States, Europe, Japan, Australia and Canada and, depending on the individual case, also in any or all of, inter alia, Brazil, China, Hong Kong, India,Indonesia, Israel, Malaysia, Mexico, New Zealand, Russia or Eurasian Patent Organization, Singapore, South Africa, South Korea and other jurisdictions. Wehave so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide toabandon national and regional patent applications before grant. Finally, the grant proceeding of each national or regional patent is an independentproceeding which may lead to situations in which applications might in some jurisdictions be refused by the relevant registration authorities, while grantedby others. It is also quite common that depending on the country, various scopes of patent protection may be granted on the same product candidate ortechnology.The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the U.S., and many companies have encounteredsignificant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwiseprecluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may bediminished and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patentowner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies orgovernment contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we orany of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position in the relevantjurisdiction may be impaired and our business and results of operations may be adversely affected.We or our licensors, or any future strategic partners may become subject to third party claims or litigation alleging infringement of patents or otherproprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents orother proprietary rights, all of which could be costly, time consuming, delay or prevent the development and commercialization of our product candidates,or put our patents and other proprietary rights at risk.We or our licensors, or any future strategic partners may be subject to third-party claims for infringement or misappropriation of patent or other proprietaryrights. We are generally obligated under our license or collaboration agreements to indemnify and hold harmless our licensors or collaborators for damagesarising from intellectual property infringement by us. If we or our licensors, or any future strategic partners are found to infringe a third-party patent or otherintellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. Inaddition, we or our licensors, or any future strategic partners may choose to seek, or be required to seek, a license from a third party, which may not beavailable on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give ourcompetitors access to the same technology or intellectual property rights licensed to us. If we fail to obtain a required license, we or our collaborators may beunable to effectively market product candidates based on our technology, which could limit our ability to generate revenue or achieve profitability andpossibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits toprotect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patentor other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of ourcompetitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources.Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts andlimit our ability to continue our operations.57 If we were to initiate legal proceedings against a third party to enforce a patent covering one of our products or our technology, the defendant couldcounterclaim that our patent is invalid or unenforceable. In patent litigation in the U.S., defendant counterclaims alleging invalidity or unenforceability arecommonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, lack of novelty,obviousness or non-enablement. Grounds for an unenforceability assertion could be an allegation that someone connected with prosecution of the patentwithheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidityand unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain that there is noinvalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidityor unenforceability, we would lose at least part, and perhaps all, of the patent protection on one or more of our products or certain aspects of our platformtechnology. Such a loss of patent protection could have a material and adverse effect on our business, financial condition, results of operations and prospects.Patents and other intellectual property rights also will not protect our technology if competitors design around our protected technology without legallyinfringing our patents or other intellectual property rights.Intellectual property rights of third parties could adversely affect our ability to commercialize our product candidates, and we might be required to litigateor obtain licenses from third parties in order to develop or market our product candidates. Such litigation or licenses could be costly or not available oncommercially reasonable terms.Because the antibody landscape is still evolving, including the masked antibody landscape, it is difficult to conclusively assess our freedom to operatewithout infringing on third-party rights. There are numerous companies that have pending patent applications and issued patents broadly coveringantibodies generally or covering antibodies directed against the same targets as, or targets similar to, those we are pursuing. There are many issued patentsand patent applications covering antibodies targeted against PD-1 and PD-L1, and the intellectual property covering PD-1 and PD-L1 antibodies has been thesubject of litigation and licensing, especially regarding how broadly certain claims should be construed. If the claims were to be construed broadly by thecourts, we may need to obtain a license to some of such intellectual property, covering PD-1 and/or PD-L1 antibodies, which would decrease the profits wewould realize from the sale of such products. An increasing number of third parties are filing masked antibody patent applications, several of which containclaims that are patterned after our own patent claims. Our competitive position may suffer if patents issued to third parties or other third-party intellectualproperty rights cover our products or product candidates or elements thereof, or our manufacture or uses relevant to our development plans. In such cases, wemay not be in a position to develop or commercialize products or product candidates unless we successfully pursue litigation to nullify or invalidate thethird-party intellectual property right concerned, or enter into a license agreement with the intellectual property right holder, if available on commerciallyreasonable terms. There may be issued patents of which we are not aware, held by third parties that, if found to be valid and enforceable, could be alleged tobe infringed by our Probody therapeutic technologies. There also may be pending patent applications of which we are not aware that may result in issuedpatents, which could be alleged to be infringed by our Probody therapeutic technologies. If such an infringement claim should be brought and be successful,we may be required to pay substantial damages, be forced to abandon our product candidates or seek a license from any patent holders. No assurances can begiven that a license will be available on commercially reasonable terms, if at all.It is also possible that we have failed to identify relevant third-party patents or applications. For example, U.S. applications filed before November 29, 2000and certain U.S. applications filed after that date that will not be filed outside the U.S. remain confidential until patents issue. Patent applications in the U.S.and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonlyreferred to as the priority date. Therefore, patent applications covering our products or platform technology could have been filed by others without ourknowledge. Additionally, pending patent applications that have been published can, subject to certain limitations, be later amended in a manner that couldcover our platform technologies, our products or the use of our products. Third-party intellectual property right holders may also actively bring infringementclaims against us. We cannot guarantee that we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable tosuccessfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable and time-consuming litigationand may be prevented from or experience substantial delays in marketing our products. If we fail in any such dispute, in addition to being forced to paydamages, we may be temporarily or permanently prohibited from commercializing any of our product candidates that are held to be infringing. We might, ifpossible, also be forced to redesign product candidates so that we no longer infringe the third-party intellectual property rights. Any of these events, even ifwe were ultimately to prevail, could require us to divert substantial financial and management resources that we would otherwise be able to devote to ourbusiness.58 Intellectual property litigation could cause us to spend substantial resources and distract our personnel from their normal responsibilities.Litigation or other legal proceedings relating to intellectual property claims, with or without merit, is unpredictable and generally expensive and timeconsuming and is likely to divert significant resources from our core business, including distracting our technical and management personnel from theirnormal responsibilities. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is arisk that some of our confidential information could be compromised by disclosure during this type of litigation. In addition, there could be publicannouncements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these resultsto be negative, it could have a substantial adverse effect on the price of our common stock. Such litigation or proceedings could substantially increase ouroperating losses and reduce the resources available for development activities or any future sales, marketing or distribution activities.We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustainthe costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developedintellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or fromsuccessfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedingscould have a material and adverse effect on our ability to compete in the marketplace.If we fail to comply with our obligations under any license, collaboration or other agreements, we may be required to pay damages and could lose ourrights to intellectual property rights that are necessary for developing and protecting our product candidates or we could lose certain rights to grantsublicenses.Our licenses from Amgen, ImmunoGen and UCSB impose, and any future licenses we enter into are likely to impose, various development,commercialization, funding, diligence, sublicensing, insurance, patent prosecution and enforcement and/or other obligations on us, including variouspayment obligations such as milestone and royalty payments and payments based on sublicensing revenues. Our rights under our agreements with ourlicensors or collaborators may be limited or modified according to their terms. Additionally, if we breach any of these obligations, or use the intellectualproperty licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, whichcould result in us being unable to develop, manufacture and sell products that are covered by the licensed technology or enable a competitor to gain accessto the licensed technology. Moreover, our licensors and collaborators may own or control intellectual property that has not been licensed to us and, as aresult, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannotcurrently determine the amount of the royalty or sublicense revenue payment obligations we would be required to pay on development or sales of futureproducts, if any, the amounts may be significant. The amount of our future royalty or sublicense revenue payment obligations will depend on the technologyand intellectual property we use in products that we successfully develop and commercialize, if any. Therefore, even if we successfully develop andcommercialize products, we may be unable to achieve or maintain profitability.Our intellectual property agreements with our licensors, collaborators and third parties may be subject to disagreements over contract interpretation,which could narrow the scope of, or result in termination of, our rights to the relevant intellectual property or technology or increase our financial or otherobligations to such third parties.Certain provisions in our intellectual property agreements may be susceptible to multiple interpretations. For example, we may disagree with our licensors orcollaborators regarding whether, when and to what extent various obligations under these agreements apply to certain of our product candidates andproducts, including various payment, development, commercialization, funding, diligence, sublicensing, insurance, patent prosecution and enforcementand/or other obligations. The resolution of any contract interpretation disagreement that may arise could affect the scope of our rights to the relevantintellectual property or technology, or affect financial or other obligations under the relevant agreement. In either case, such disagreement could have amaterial adverse effect on our business, financial condition, results of operations and prospects.In addition, while it is our policy to require our employees and contractors who may be involved in the conception or development of intellectual property toexecute agreements assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who in fact conceivesor develops intellectual property that we regard as our own. Our assignment agreements may not be self‑executing or may be breached, and we may be forcedto bring claims against third parties, or defend claims they may bring against us, to determine the ownership of what we regard as our intellectual property.59 If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.In addition to seeking patent protection for certain aspects of our product candidates, we also consider trade secrets, including confidential and unpatentedknow-how, important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, byentering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators,outside scientific collaborators, CROs, contract manufacturers, consultants, advisors and other third parties. We also enter into confidentiality and inventionor patent assignment agreements with our employees and consultants that obligate them to maintain confidentiality and assign their inventions to us.Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not beable to obtain adequate remedies for such breaches. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensiveand time-consuming, and the outcome is unpredictable. In addition, some courts in the U.S. and certain foreign jurisdictions are less willing or unwilling toprotect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to preventthem from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by acompetitor, our competitive position would be harmed.We may be subject to claims that we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ orconsultants’ former employers or their clients. These claims may be costly to defend and if we do not successfully do so, we may be required to paymonetary damages and may lose valuable intellectual property rights or personnel.Many of our employees were previously employed at universities or biotechnology or biopharmaceutical companies, including our competitors or potentialcompetitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently or otherwiseused or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. If wefail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. A loss of key researchpersonnel or their work product could hamper our ability to commercialize, or prevent us from commercializing, our product candidates, which couldseverely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction tomanagement.If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and ourbusiness may be adversely affected.Our trademarks or trade names may be challenged, infringed, circumvented or declared generic or determined to be infringing on other marks. We may not beable to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potentialpartners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be ableto compete effectively and our business may be adversely affected.Risks Related to Government RegulationWe may be unable to obtain or be delayed in obtaining U.S. or foreign regulatory approval and, as a result, unable or delayed in being able tocommercialize our product candidates.Our product candidates are subject to extensive governmental regulations relating to, among other things, research, testing, development, manufacturing,safety, efficacy, approval, recordkeeping, reporting, labeling, storage, packaging, advertising and promotion, pricing, marketing and distribution of drugs andtherapeutic biologics. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be successfully completedin the U.S. and in many foreign jurisdictions before a new drug or therapeutic biologic can be marketed. Satisfaction of these and other regulatoryrequirements is costly, time consuming, uncertain and subject to unanticipated delays. It is possible that none of the product candidates we may develop willobtain the regulatory approvals necessary for us or our existing or future collaborators to begin selling them.As a company, we have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval bythe FDA. The time required to obtain FDA and other approvals is unpredictable but typically takes many years following the commencement of clinical trials,depending upon the type, complexity and novelty of the product candidate. The standards that the FDA and its foreign counterparts use when regulating usrequire judgment and can change, which makes it difficult to predict with certainty how they will be applied. Any analysis we perform of data frompreclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, which could delay, limit or prevent regulatoryapproval. We may also encounter unexpected delays or increased costs due to new government regulations, for example, from future legislation oradministrative action, or from changes in FDA policy during the period of product development, clinical trials and FDA regulatory review. Further,government shutdowns, such as the recent U.S. shutdown in late 2018 or the uncertainty of Great Britain’ departure60 from the European Union may impact our ability to access government agencies in a timely manner or otherwise impact our ability to move our productcandidates through the regulatory process. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign regulations,guidance or interpretations will be changed, or what the impact of such changes, if any, may be.Because the product candidates we are developing may represent a new class of therapeutic biologics, the FDA and its foreign counterparts have not yetestablished any definitive policies, practices or guidelines in relation to these product candidates. While we believe the product candidates that we arecurrently developing are regulated as therapeutic biologics that are subject to requirements for review and approval of a BLA by the FDA’s Center for DrugEvaluation and Research (“CDER”), the FDA could decide to regulate them as drugs that are subject to requirements for review and approval of an NDA byCDER or as biological products that are subject to requirements for review and approval of a BLA by the FDA’s Center for Biologics Evaluation andResearch (“CBER”). The lack of policies, practices or guidelines may hinder or slow review by the FDA of any regulatory filings that we may submit.Moreover, the FDA may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delaysin the clinical development of our product candidates. In addition, because there may be approved treatments for some of the diseases for which we may seekapproval, in order to receive regulatory approval, we may need to demonstrate through clinical trials that the product candidates we develop to treat thesediseases, if any, are not only safe and effective, but safer or more effective than existing products. Furthermore, in recent years, there has been increased publicand political pressure on the FDA with respect to the approval process for new drugs and therapeutic biologics, and the FDA’s standards, especially regardingproduct safety, appear to have become more stringent.Any delay or failure in obtaining required approvals could have a material and adverse effect on our ability to generate revenues from the particular productcandidate for which we are seeking approval. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved usesfor which we may market the product or the labeling or other restrictions. In addition, the FDA has the authority to require a risk evaluation and mitigationstrategies (“REMS”) plan as part of an NDA or BLA or after approval, which may impose further requirements or restrictions on the distribution or use of anapproved drug or biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatmentto patients who meet certain safe-use criteria and requiring treated patients to enroll in a registry. These limitations and restrictions may limit the size of themarket for the product and affect reimbursement by third-party payors.We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing and marketingauthorization, pricing and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the risksassociated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the timerequired to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authoritiesoutside the U.S. and vice versa.Even if we receive regulatory approval for any of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatoryreview, which may result in significant additional expense. Additionally, our product candidates, if approved, could be subject to labeling and otherrestrictions and market withdrawal and we may be subject to penalties if we fail to comply with regulatory requirements or experience unanticipatedproblems with our products.Any regulatory approvals that we or our collaborators obtain for our product candidates may also be subject to limitations on the approved indicated uses forwhich a product may be marketed or to the conditions of approval, or contain requirements for potentially costly post-marketing testing, including “Phase 4”clinical trials, and surveillance to monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreign regulatoryauthority approves any of our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, import,export, advertising, promotion and recordkeeping for the product will be subject to extensive and ongoing regulatory requirements. These requirementsinclude submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and good clinicalpractices for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with a product, including adverse events ofunanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, mayresult in, among other things: •restrictions on the marketing or manufacturing of the product, withdrawal of the product from the market or voluntary or mandatory productrecalls; •fines, warning letters or holds on clinical trials; •refusal by the FDA to approve pending applications or supplements to approved applications filed by us or our strategic partners;61 •suspension or revocation of product license approvals; •product seizure or detention or refusal to permit the import or export of products; and •injunctions or the imposition of civil or criminal penalties.The FDA’s policies may change and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our productcandidates. For example, in December 2016, the 21st Century Cures Act, or “Cures Act”, was signed into law. The Cures Act, among other things, is intendedto modernize the regulation of drugs and biologics and to spur innovation, but its ultimate implementation is unclear. If we are slow or unable to adapt tochanges in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose anymarketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business.We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action,either in the United States or abroad. For example, certain policies of the Trump administration may impact our business and industry. Namely, the Trumpadministration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, orotherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking,issuance of guidance, and review and approval of marketing applications. It is difficult to predict how these requirements will be implemented, and theextent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on FDA’s ability toengage in oversight and implementation activities in the normal course, our business may be negatively impacted.Healthcare legislative reform measures may have a material and adverse effect on our business and results of operations.In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March 2010, thePatient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (together, the “ACA”), was passed, whichsubstantially changed the way healthcare is financed by both governmental and private insurers, and significantly impacts the U.S. pharmaceutical industry.The ACA, among other things, subjected therapeutic biologics to potential competition by lower-cost biosimilars, addressed a new methodology by whichrebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs and therapeutic biologics that are inhaled, infused,instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program and extended therebate program to individuals enrolled in Medicaid managed care organizations, established annual fees and taxes on manufacturers of certain brandedprescription drugs and therapeutic biologics, and created a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer50% point-of-sale discounts, which, through subsequent legislative amendments, will be increased to 70% starting in 2019, off negotiated prices ofapplicable brand drugs and therapeutic biologics to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatientdrugs and therapeutic biologics to be covered under Medicare Part D.Since its enactment, there have been judicial and Congressional challenges to certain aspects of the ACA, and we expect there will be additional challengesand amendments to the ACA in the future. The current Presidential Administration and U.S. Congress will likely continue to seek to modify, repeal, orotherwise invalidate all, or certain provisions of, the ACA. Since taking office, President Trump has continued to support the repeal of all or portions of theACA. On October 12, 2017, President Trump issued an executive order that expands the use of association health plans and allows anyone to purchase short-term health plans that provide temporary, limited insurance. This executive order also calls for the halt of federal payments to health insurers for cost-sharingreductions previously available to lower-income Americans to afford coverage. There is still uncertainty with respect to the impact this executive order couldhave on coverage and reimbursement for healthcare items and services covered by plans that were authorized by the ACA. In addition, the Tax Cuts and JobsAct was enacted, which, among other things, removes penalties for not complying with the Affordable Care Act’s individual mandate to carry healthinsurance. On January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation ofcertain mandated fees under the Affordable Care Act, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, theannual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Congressmay consider other legislation to repeal or replace other elements of the Affordable Care Act. It is uncertain the extent to which any such changes may impactour business or financial condition.In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted to reduce healthcare expenditures.The Budget Control Act of 2011, among other things, included aggregate reductions of Medicare payments to providers of 2% per fiscal year. Thesereductions went into effect on April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2027 unlessadditional Congressional action is taken. On January 2, 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things,further reduced Medicare payments to several types of providers, including hospitals, imaging centers and cancer treatment centers, and increased the statuteof limitations period for the62 government to recover overpayments to providers from three to five years. If federal spending is further reduced, anticipated budgetary shortfalls may alsoimpact the ability of relevant agencies, such as the FDA or the National Institutes of Health to continue to function at current levels. Amounts allocated tofederal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approveresearch and development, manufacturing, and marketing activities, which may delay our ability to develop, market and sell any products we may develop.Moreover, payment methodologies, including payment for companion diagnostics, may be subject to changes in healthcare legislation and regulatoryinitiatives. For example, the Centers for Medicare & Medicaid Services (“CMS”) has begun bundling the Medicare payments for certain laboratory testsordered while a patient received services in a hospital outpatient setting and, beginning in 2018, CMS will pay for clinical laboratory services based on aweighted average of reported prices that private payors, Medicare Advantage plans, and Medicaid Managed Care plans pay for laboratory services. Further, inMarch 2018, CMS finalized a national coverage determination extending coverage under the Medicare program for certain diagnostic laboratory tests usingnext generation sequencing (“NGS”) that are approved by the FDA as a companion in vitro diagnostic and used in a cancer with an FDA-approvedcompanion diagnostic indication. Under the national coverage determination, diagnostic tests that meet these criteria are covered only in patients withrecurrent, metastatic, relapsed, refractory or stages III or IV cancer if the test has an FDA-approved or cleared indication for use in that patient’s cancer andresults are provided to the treating physician for management of the patient using a report template to specify treatment options. Although the Medicareprogram increasingly is used as a model for how private payors and other governmental payors develop their coverage and reimbursement policies, it isdifficult to predict at this time what third-party payors will decide with respect to the coverage and reimbursement for any companion diagnostics associatedwith our product candidates.In addition, recently there has been heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products, whichhas resulted in several Congressional inquiries and proposed bills designed to, among other things, bring more transparency to product pricing, review therelationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for drug products. Forexample, the 21st Century Cures Act changed the reimbursement methodology for infusion drugs and biologics furnished through durable medicalequipment in an attempt to remedy over- and underpayment of certain products. Individual states in the United States have also become increasingly activein passing legislation and implementing regulations designed to control pharmaceutical product pricing, including price or patient reimbursementconstraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed toencourage importation from other countries and bulk purchasing. In addition, regional healthcare authorities and individual hospitals are increasingly usingbidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal andstate governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or companion diagnosticsor additional pricing pressures.If we or our collaborators, manufacturers or service providers fail to comply with healthcare laws and regulations, we or they could be subject toenforcement actions, which could affect our ability to develop, market and sell our products and may harm our reputation.Although we do not currently have any products on the market, once we begin commercializing our product candidates, we will be subject to additionalhealthcare statutory and regulatory requirements and enforcement by the federal government and the states and foreign governments in which we conduct ourbusiness. 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 product candidates for which we obtain marketing approval. In addition, we may be subject to patient data privacy and security regulation byboth the U.S. federal government and the states in which we conduct our business. Restrictions under applicable federal and state healthcare laws andregulations, include the following: •the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, offering,receiving or providing remuneration, directly or indirectly, in cash or in kind to induce or reward either the referral of an individual for, or thepurchase, or order or recommendation of, any good or service, for which payment may be made under federal and state healthcare programssuch as Medicare and Medicaid. A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in orderto have committed a violation; •the U.S. federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, againstindividuals or entities for knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false orfraudulent, knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim, or fromknowingly making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government. In addition, thegovernment may assert that a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes afalse or fraudulent claim for purposes of the False Claims Act;63 •the U.S. federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), which imposes criminal and civil liability for, amongother things, knowingly and willfully executing, or attempting to execute a scheme to defraud any healthcare benefit program, or knowinglyand willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery ofor payment for healthcare benefits, items or services; similar to the federal Anti-Kickback Statute, a person or entity does not need to haveactual knowledge of the statute or specific intent to violate it in order to have committed a violation; •HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), which imposes obligations oncertain covered entity healthcare providers, health plans, and healthcare clearinghouse as well as their business associates that perform certainservices involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect tosafeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affectedindividuals and regulatory authorities of certain breaches of security of individually identifiable health information; •The new EU General Data Protection Regulation (“GDPR”) which came into effect on May 25, 2018 and imposes obligations and restrictionson how we collect and use personal data relating to individuals located in the EU (including health data), and introduces fines of up to 4% totalworldwide annual turnover or up to €20 million (whichever is higher) for non-compliance with its requirements. The GDPR also provides thatEU member states may make their own further laws and regulations limiting the processing of special categories of personal data such asgenetic, biometric or health data; •the U.S. federal legislation commonly referred to as Physician Payments Sunshine Act, enacted as part of the ACA, and its implementingregulations, which requires certain manufacturers of drugs, devices, biologics and medical supplies that are reimbursable under Medicare,Medicaid, or the Children’s Health Insurance Program to report annually to the CMS information related to certain payments and other transfersof value to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors) and teaching hospitals, as well asownership and investment interests held by the physicians described above and their immediate family members; and •analogous state laws and regulations, such as state anti-kickback and false claims laws that may apply to sales or marketing arrangements andclaims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state laws thatrequire pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant complianceguidance promulgated by the federal government in addition to requiring drug and therapeutic biologics manufacturers to report informationrelated to payments to physicians and other healthcare providers or marketing expenditures and pricing information; and state laws governingthe privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often arenot preempted by HIPAA, thus complicating compliance efforts.Ensuring that our future business arrangements with third-parties comply with applicable healthcare laws and regulations could involve substantial costs. It ispossible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations, agency guidanceor case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any suchrequirements, we may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, lossof eligibility to obtain approvals from the FDA, or exclusion from participation in government contracting, healthcare reimbursement or other governmentprograms, including Medicare and Medicaid, any of which could adversely our financial results. Although effective compliance programs can mitigate therisk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspectedviolation could cause us to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if ourdefense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time andresources.If we or future collaborators, manufacturers or service providers fail to comply with applicable federal, state or foreign laws or regulations, we could besubject to enforcement actions, which could affect our ability to develop, market and sell our products successfully and could harm our reputation and lead toreduced acceptance of our products by the market. These enforcement actions include, among others: •adverse regulatory inspection findings; •warning letters; •voluntary or mandatory product recalls or public notification or medical product safety alerts to healthcare professionals; •restrictions on, or prohibitions against, marketing our products;64 •restrictions on, or prohibitions against, importation or exportation of our products; •suspension of review or refusal to approve pending applications or supplements to approved applications; •exclusion from participation in government-funded healthcare programs; •exclusion from eligibility for the award of government contracts for our products; •suspension or withdrawal of product approvals; •seizures or administrative detention of products; •injunctions; and •civil and criminal penalties and fines.If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercializationapprovals we may receive and subject us to other penalties that could materially harm our business.Even if we receive marketing and commercialization approval of a product candidate, we will be subject to continuing regulatory requirements, including inrelation to adverse patient experiences with the product and clinical results that are reported after a product is made commercially available, both in the U.S.and any foreign jurisdiction in which we seek regulatory approval. The FDA has significant post-market authority, including the authority to require labelingchanges based on new safety information and to require post-market studies or clinical trials to evaluate safety risks related to the use of a product or torequire withdrawal of the product from the market. The FDA also has the authority to require a REMS plan after approval, which may impose furtherrequirements or restrictions on the distribution or use of an approved drug or therapeutic biologic. The manufacturer and manufacturing facilities we use tomake a future product, if any, will also be subject to periodic review and inspection by the FDA and other regulatory agencies, including for continuedcompliance with cGMP requirements. The discovery of any new or previously unknown problems with our third-party manufacturers, manufacturingprocesses or facilities may result in restrictions on the product, manufacturer or facility, including withdrawal of the product from the market. If we rely onthird-party manufacturers, we will not have control over compliance with applicable rules and regulations by such manufacturers. Any product promotionand advertising will also be subject to regulatory requirements and continuing regulatory review. If we or our collaborators, manufacturers or serviceproviders fail to comply with applicable continuing regulatory requirements in the U.S. or foreign jurisdictions in which we seek to market our products, weor they may be subject to, among other things, fines, warning letters, holds on clinical trials, delay of approval or refusal by the FDA to approve pendingapplications or supplements to approved applications, suspension or withdrawal of regulatory approval, product recalls and seizures, administrativedetention of products, refusal to permit the import or export of products, operating restrictions, injunction, civil penalties and criminal prosecution.We face regulation and potential liability related to the privacy, data protection and information security which may require significant resources andmay adversely affect our business, operations and financial performance.The regulatory environment surrounding information security, data collection and privacy is increasingly demanding. We are subject to numerous U.S.federal and state laws and non-U.S. regulations governing the protection of personal and confidential information of our clinical subjects, clinicalinvestigators, employees and vendors/business contacts, including in relation to medical records, credit card data and financial information. For example, onMay 25, 2018, the European General Data Protection Regulation, or GDPR, became effective, implementing more stringent requirements in relation to ouruse of personal data relating to individuals located in the E.U. (and E.E.A.). The GDPR repeals the Data Protection Directive (95/46/EC) and is directlyapplicable in all E.U. member states. The GDPR significantly increased fining levels to up to 4% total worldwide annual turnover or up to €20 million(whichever is higher) for non-compliance with its requirements. We will be subject to the GDPR where we have an E.U. presence or “establishment” (e.g., E.U.based subsidiary or operations), when conducting clinical trials with E.U. based data subjects (whether the trials are conducted directly by us or through aclinical vendor or collaborator) or offering approved products or services (if relevant) to E.U. based data subjects (regardless of whether involving our E.U.based subsidiary or operations).The GDPR sets out a number of requirements that must be complied with when handling the personal data of such E.U. based data subjects including:providing expanded disclosures about how their personal data will be used; higher standards for organizations to demonstrate that they have obtained validconsent or have another legal basis in place to justify their data processing activities; the obligation to appoint data protection officers in certaincircumstances; new rights for individuals to be “forgotten” and rights to data portability, as well as enhanced current rights (e.g., access requests); theprincipal of accountability and demonstrating compliance through policies, procedures, training and audit; the new mandatory data breach regime. Inparticular, medical or health data, genetic data and biometric data where the latter is used to uniquely identify an individual (even, in certain situations,where such data is key coded) are all classified as “special category” data under GDPR and afford greater protection and require additional complianceobligations. Further, E.U. member states have a broad right to impose additional conditions – including restrictions – on these data65 categories. This is because the GDPR allows E.U. member states to derogate from the requirements of the GDPR mainly in regard to specific processingsituations (including special category data and processing for scientific or statistical purposes). As the E.U. member states reframe their national legislation toharmonize with the GDPR, we will need to monitor compliance with all relevant E.U. member states' laws and regulations, including where permittedderogations from the GDPR are introduced.We will also be subject to evolving E.U. laws on data export, where we transfer data outside the E.U. (or E.E.A.) to group companies or third parties. TheGDPR only permits exports of data outside the E.U. (and E.E.A.) where there is a suitable data transfer solution in place to safeguard personal data (e.g., theEU Commission approved Standard Contractual Clauses). Some of the approved current data transfer mechanisms are under review in the E.U. courts and bythe E.U. Commission and therefore we need to monitor this space for any future changes.Where we rely on third parties to carry out a number of services for us, including processing personal data on our behalf, we are required under GDPR to enterinto contractual arrangements to help ensure that these third parties only process such data according to our instructions and have sufficient securitymeasures in place. Any security breach or non-compliance with our contractual terms or breach of applicable law by such third parties could result inenforcement actions, litigation, fines and penalties or adverse publicity and could cause our customers to lose trust in us, which could have an adverse impacton our reputation and business.In recent years, U.S. and European lawmakers and regulators have expressed concern over electronic marketing and the use of third-party cookies, webbeacons and similar technology for online behavioral advertising. In the E.U., marketing is defined broadly to include any promotional material and the rulesspecifically on e-marketing are currently set out in the ePrivacy Directive which will be replaced by a new ePrivacy Regulation. While the ePrivacyRegulation was originally intended to be adopted on May 25, 2018 (alongside the GDPR), it is still going through the European legislative process andcommentators now expect it to be adopted during the middle or second half of 2019. The current draft of the ePrivacy Regulation imposes strict opt-in e-marketing rules with limited exceptions to business to business communications and significantly increases fining powers to the same levels as GDPR (seeabove). We may find it necessary or desirable to join self-regulatory bodies or other privacy-related organizations, particularly relating to biopharmacy and/orscientific research, that require compliance with their rules pertaining to privacy and data security.The introduction of the GDPR, and any resultant changes in E.U. member states’ national laws and regulations and the ePrivacy Regulation, will increase ourcompliance obligations and will necessitate the review and implementation of policies and processes relating to our collection and use of data. This increasein compliance obligations could also lead to an increase in compliance costs which may have an adverse impact on our business, financial condition orresults of operations.If any person, including any of our employees, clinical vendors or collaborators or those with whom we share such information, negligently disregards orintentionally breaches our established controls with respect to our clinical subject, clinical investigator or employee data, or otherwise mismanages ormisappropriates that data, we could be subject to significant monetary damages, regulatory enforcement actions, fines and/or criminal prosecution in one ormore jurisdictions. As above, under the GDPR there are significant new punishments for non-compliance which could result in a penalty of up to 4% of afirm’s global annual revenue. In addition, a data breach could result in negative publicity which could damage our reputation and have an adverse effect onour business, financial condition or results of operations.We strive to comply with all applicable laws, but they may conflict with each other, and by complying with the laws or regulations of one jurisdiction, wemay find that we are violating the laws or regulations of another jurisdiction. Despite our efforts, we may not have fully complied in the past and may not inthe future. If we become liable under laws or regulations applicable to us, we could be required to pay significant fines and penalties, our reputation may beharmed and we may be forced to change the way we operate. That could require us to incur significant expenses or to discontinue certain services, whichcould negatively affect our business.Even if we are able to commercialize any product candidate, such product candidate may become subject to unfavorable pricing regulations or third-partycoverage and reimbursement policies, which would harm our business.The regulations that govern regulatory approvals, pricing and reimbursement for new drugs and therapeutic biologics vary widely from country to country.Some countries require approval of the sale price of a drug or therapeutic biologic before it can be marketed. In many countries, the pricing review periodbegins after marketing approval is granted. In some foreign markets, prescription biopharmaceutical pricing remains subject to continuing governmentalcontrol even after initial approval is granted. As a result, we might obtain regulatory approval for a product in a particular country, but then be subject toprice regulations that delay our commercial launch of the product, possibly for lengthy time periods and negatively impact the revenues we are able togenerate from the sale of the product in that country. Adverse pricing limitations may hinder our ability to recoup our investment in one or more productcandidates, even if our product candidates obtain regulatory approval.66 Our ability to commercialize any products successfully also will depend in part on the extent to which coverage and reimbursement for these products andrelated treatments will be available from government authorities, private health insurers and other organizations. Even if we succeed in bringing one or moreproducts to the market, these products may not be considered cost-effective, and the amount reimbursed for any products may be insufficient to allow us tosell our products on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their costeffectiveness or the likely level or method of reimbursement. Increasingly, the third-party payors who reimburse patients or healthcare providers, such asgovernment and private insurance plans, are requiring that drug companies provide them with predetermined discounts from list prices, and are seeking toreduce the prices charged or the amounts reimbursed for biopharmaceutical products. If the price we are able to charge for any products we develop, or thereimbursement provided for such products, is inadequate in light of our development and other costs, our return on investment could be adversely affected.There may be significant delays in obtaining reimbursement for newly-approved drugs or therapeutic biologics, and coverage may be more limited than thepurposes for which the drug or therapeutic biologic is approved by the FDA or similar regulatory authorities outside of the United States. Moreover,eligibility for reimbursement does not imply that any drug or therapeutic biologic will be reimbursed in all cases or at a rate that covers our costs, includingresearch, development, manufacture, sale and distribution. Interim reimbursement levels for new drugs or therapeutic biologics, if applicable, may also not besufficient to cover our costs and may not be made permanent. Reimbursement rates may be based on payments allowed for lower-cost drugs or therapeuticbiologics that are already reimbursed, may be incorporated into existing payments for other services and may reflect budgetary constraints or imperfections inMedicare data. Net prices for drugs or therapeutic biologics may be reduced by mandatory discounts or rebates required by government healthcare programsor private payors and by any future relaxation of laws that presently restrict imports of drugs or therapeutic biologics from countries where they may be soldat lower prices than in the U.S. Third-party payors often rely upon Medicare coverage policy and payment limitations in setting their own reimbursementrates. Our inability to promptly obtain coverage and adequate reimbursement rates from both government-funded and private payors for new drugs ortherapeutic biologics that we develop and for which we obtain regulatory approval could have a material and adverse effect on our operating results, ourability to raise capital needed to commercialize products and our financial condition.A Breakthrough Therapy Designation by the FDA for any of our product candidates may not lead to a faster development or regulatory review or approvalprocess, and it does not increase the likelihood that our product candidates will receive marketing approval.We may seek a Breakthrough Therapy Designation for some of our product candidates. A breakthrough therapy is defined as a product that is intended, aloneor in combination with one or more other products, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates thatthe product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatmenteffects observed early in clinical development. For products that have been designated as breakthrough therapies, interaction and communication betweenthe FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed inineffective control regimens. Products designated as breakthrough therapies by the FDA can also be eligible for accelerated approval.Designation as a breakthrough therapy is within the discretion of the FDA. Accordingly, even if we believe one of our product candidates meets the criteriafor designation as a breakthrough therapy, the FDA may disagree and instead determine not to make such designation. In any event, the receipt of aBreakthrough Therapy Designation for a product candidate may not result in a faster development process, review or approval compared to productsconsidered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of ourproduct candidates qualify as breakthrough therapies, the FDA may later decide that the products no longer meet the conditions for qualification and rescindthe breakthrough designation.A Fast Track Designation by the FDA for any of our product candidates may not actually lead to a faster development or regulatory review or approvalprocess.We may seek Fast Track Designation for some of our product candidates. If a product is intended for the treatment of a serious or life-threatening conditionand the product demonstrates the potential to address unmet medical needs for this condition, the product sponsor may apply for Fast Track Designation. TheFDA has broad discretion whether or not to grant this designation, so even if we believe a particular product candidate is eligible for this designation, wecannot assure you that the FDA would decide to grant it. Even if we do receive Fast Track Designation, we may not experience a faster development process,review or approval compared to conventional FDA procedures. The FDA may withdraw Fast Track Designation if it believes that the designation is no longersupported by data from our clinical development program.67 We may seek Orphan Drug Designation for some of our product candidates, and we may be unsuccessful or may be unable to maintain the benefitsassociated with Orphan Drug Designation, including the potential for market exclusivity.As part of our business strategy, we may seek Orphan Drug Designation for our product candidates, and we may be unsuccessful. Regulatory authorities insome jurisdictions, including the United States and Europe, may designate drugs and therapeutic biologics for relatively small patient populations as orphandrugs. Under the Orphan Drug Act, the FDA may designate a drug or therapeutic biologic as an orphan drug if it is a drug or therapeutic biologic intended totreat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States, or apatient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or therapeuticbiologic will be recovered from sales in the United States. In the United States, Orphan Drug Designation entitles a party to financial incentives such asopportunities for grant funding toward clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has Orphan Drug Designationsubsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, whichmeans that the FDA may not approve any other applications, including a full NDA or BLA, to market the same product for the same indication for sevenyears, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer isunable to assure sufficient product quantity.Even if we obtain Orphan Drug Designation for our product candidates in specific indications, we may not be the first to obtain marketing approval of theseproduct candidates for the orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusivemarketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if theFDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product tomeet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may noteffectively protect the product from competition because different drugs or therapeutic biologics with different active moieties can be approved for the samecondition. Even after an orphan product is approved, the FDA can subsequently approve the same drug or therapeutic biologic with the same active moietyfor the same condition if the FDA concludes that the later drug or therapeutic biologic is safer, more effective or makes a major contribution to patient care.Orphan Drug Designation neither shortens the development time or regulatory review time of a drug or therapeutic biologic nor gives the drug or therapeuticbiologic any advantage in the regulatory review or approval process. In addition, while we may seek Orphan Drug Designation for our product candidates, wemay never receive such designations.Tax reform legislation passed in 2017 reduced the amount of the qualified clinical research costs for a designated orphan product that a sponsor may claim asa credit from 50% to 25%. Thus, further limiting the advantage and may impact our future business strategy of seeking the Orphan Drug Designation.Risks Related to Ownership of Our Common StockOur quarterly operating results may fluctuate significantly or may fall below the expectations of investors or securities analysts, each of which may causeour stock price to fluctuate or decline.We expect our operating results to be subject to quarterly fluctuations. Our net loss and other operating results will be affected by numerous factors,including: •variations in the level of expense related to the ongoing development of our Probody platform, our product candidates or future developmentprograms; •results of clinical trials, or the addition or termination of clinical trials or funding support by us, or existing or future collaborators or licensingpartners; •our execution of any additional collaboration, licensing or similar arrangements, and the timing of payments we may make or receive underexisting or future arrangements or the termination or modification of any such existing or future arrangements; •developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patentprotection for our products; •any intellectual property infringement lawsuit or opposition, interference or cancellation proceeding in which we may become involved; •additions and departures of key personnel;68 •strategic decisions by us or our competitors, such as acquisitions, divestitures, spin-offs, joint ventures, strategic investments or changes inbusiness strategy; •if any of our product candidates receives regulatory approval, the terms of such approval and market acceptance and demand for such productcandidates; •regulatory developments affecting our product candidates or those of our competitors; and •changes in general market and economic conditions.If our quarterly operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially.Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially. We believe that quarterlycomparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.Our stock price may be volatile and purchasers of our common stock could incur substantial losses.Our stock price is volatile. Since our initial public offering (“IPO”), our stock had high and low sales prices in the range of $9.01 and $35.00 per share. Themarket price for our common stock may be influenced by many factors, including the other risks described in this section titled “Risk Factors” and thefollowing: •results of clinical trials and preclinical studies of our product candidates, or those of our competitors or our collaborators; •regulatory or legal developments in the U.S. and other countries, especially changes in laws or regulations applicable to our products; •the success of competitive products or technologies; •introductions and announcements of new products by us, our future commercialization partners, or our competitors, and the timing of theseintroductions or announcements; •actions taken by regulatory agencies with respect to our products, clinical studies, manufacturing process or sales and marketing terms; •actual or anticipated variations in our financial results or those of companies that are perceived to be similar to us; •the success of our efforts to acquire or in-license additional technologies, products or product candidates; •developments concerning any future collaborations, including but not limited to those with our sources of manufacturing supply and ourcommercialization partners; •market conditions in the pharmaceutical and biotechnology sectors; •announcements by us or our competitors of significant acquisitions, strategic collaborations, joint ventures or capital commitments; •developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patentprotection for our products; •our ability or inability to raise additional capital and the terms on which we raise it; •the recruitment or departure of key personnel; •changes in the structure of healthcare payment systems; •actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, othercomparable companies or our industry generally; •our failure or the failure of our competitors to meet analysts’ projections or guidance that we or our competitors may give to the market; •fluctuations in the valuation of companies perceived by investors to be comparable to us; •announcement and expectation of additional financing efforts; •speculation in the press or investment community; •trading volume of our common stock;69 •sales of our common stock by us or our stockholders; •the concentrated ownership of our common stock; •changes in accounting principles; •terrorist acts, acts of war or periods of widespread civil unrest; •natural disasters and other calamities; and •general economic, industry and market conditions.In addition, the stock markets in general, and the markets for pharmaceutical, biopharmaceutical and biotechnology stocks in particular, have experiencedextreme volatility that has been often unrelated to the operating performance of the issuer. These broad market and industry factors may seriously harm themarket price of our common stock, regardless of our operating performance.The future issuance of equity or of debt securities that are convertible into equity will dilute our share capital.We may choose to raise additional capital in the future, depending on market conditions, strategic considerations and operational requirements. To the extentthat additional capital is raised through the issuance of shares or other securities convertible into shares, our stockholders will be diluted. Future issuances ofour common stock or other equity securities, or the perception that such sales may occur, could adversely affect the trading price of our common stock andimpair our ability to raise capital through future offerings of shares or equity securities. No prediction can be made as to the effect, if any, that future sales ofcommon stock or the availability of common stock for future sales will have on the trading price of our common stock.The employment agreements with our executive officers may require us to pay severance benefits to officers in connection with termination of employmentor upon a change of control of us, which could harm our financial condition.Each of our executive officers is entitled to receive a lump sum payment equal to nine months or one year of his or her base salary as well as continuedmedical and dental coverage for a period of nine months or one year following his or her termination of employment due to good reason or without cause. Inthe event of a change in control and a termination of employment without cause or due to good reason, each of our executive officers would similarly receivenine months or one year of his or her base salary as well as continued medical and dental coverage for a period of nine months or one year, as well as anadditional lump sum payment equal to three-fourths or 100% of his or her target annual bonus for the calendar year in which his or her employment isterminated and full vesting of his or her outstanding option awards. The accelerated vesting of options could result in dilution to our existing stockholdersand harm the market price of our common stock. Furthermore, the payment of these severance benefits could harm our financial condition. In addition, thesepotential severance payments may discourage or prevent third parties from seeking a business combination with us.An active market for our common stock may not be maintained.Prior to our IPO in October 2015, there had been no public market for shares of our common stock. Our stock began trading on The Nasdaq Global SelectMarket in 2015, and we can provide no assurance that we will be able to maintain an active trading market on The Nasdaq Global Select Market or any otherexchange in the future. If an active market for our common stock is not maintained, it may be difficult for our stockholders to sell shares without depressingthe market price for the shares or at all. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquireother businesses, applications or technologies using our shares as consideration.If securities or industry analysts do not publish research or reports about our business, or if they issue adverse or misleading opinions regarding our stock,our stock price and trading volume could decline.The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. Ifany of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance,or if our target studies and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analystscease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price ortrading volume to decline.70 Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject tostockholder approval.As of December 31, 2018, our executive officers, directors, holders of 5% or more of our capital stock based on publicly available filings made with the SECand their respective affiliates beneficially owned approximately 44.9% of our outstanding common stock. Therefore, these stockholders have the ability toinfluence us through this ownership position. These stockholders may be able to determine all matters requiring stockholder approval. For example, thesestockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or othermajor corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that our stockholders may feelare in their best interest.Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial to our stockholders,more difficult and may prevent attempts by our stockholders to replace or remove our current management.Provisions in our amended and restated certificate of incorporation and our amended and restated bylaws may delay or prevent an acquisition of us or achange in our management. In addition, these provisions may frustrate or prevent any attempts by our stockholders to replace or remove our currentmanagement by making it more difficult for stockholders to replace members of our board of directors. Because our board of directors is responsible forappointing the members of our management team, these provisions could in turn affect any attempt by our stockholders to replace current members of ourmanagement team. These provisions include: •a prohibition on actions by our stockholders by written consent; •a requirement that special meetings of stockholders, which our company is not obligated to call more than once per calendar year, be calledonly by the chairman of our board of directors, our chief executive officer, our board of directors pursuant to a resolution adopted by a majorityof the total number of authorized directors, or, subject to certain conditions, by our secretary at the request of the stockholders holding ofrecord, in the aggregate, shares entitled to cast not less than ten percent of the votes at a meeting of the stockholders (assuming all sharesentitled to vote at such meeting were present and voted); •advance notice requirements for election to our board of directors and for proposing matters that can be acted upon at stockholder meetings; •division of our board of directors into three classes, serving staggered terms of three years each; and •the authority of the board of directors to issue preferred stock with such terms as the board of directors may determine.Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, as amended,which prohibits a person who owns in excess of 15 percent of our outstanding voting stock from merging or combining with us for a period of three yearsafter the date of the transaction in which the person acquired in excess of 15 percent of our outstanding voting stock, unless the merger or combination isapproved in a prescribed manner. These provisions would apply even if the proposed merger or acquisition could be considered beneficial by somestockholders.We incur increased costs as a result of operating as a public company, and our management is required to devote substantial time to new complianceinitiatives and corporate governance practices.As a public company, we incur significant legal, accounting and other expenses. The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and ConsumerProtection Act, the listing requirements of The Nasdaq Global Select Market and other applicable securities rules and regulations impose variousrequirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governancepractices. Our management and other personnel need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules andregulations increase our legal and financial compliance costs and make some activities more time consuming and costly. For example, we expect that theserules and regulations may make it more difficult and more expensive for us to obtain director and officer liability insurance, which in turn could make it moredifficult for us to attract and retain qualified members of our board of directors. However, these rules and regulations are often subject to varyinginterpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is providedby regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoingrevisions to disclosure and governance practices.71 If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 in a timely manner or with adequate compliance, wemay be subject to sanctions by regulatory authorities.Section 404 of the Sarbanes-Oxley Act of 2002 requires that we evaluate and determine the effectiveness of our internal controls over financial reporting andprovide a management report on the internal control over financial reporting. If we have a material weakness in our internal controls over financial reporting,we may not detect errors on a timely basis and our financial statements may be materially misstated. We evaluate our internal controls systems to allowmanagement to report on the effectiveness of the operation of our internal controls. Based on our market capitalization at June 30, 2018, we ceased to be anemerging growth company at December 31, 2018 and, accordingly, are now required to have an opinion from our independent registered public accountingfirm on the effectiveness of our internal controls over financial reporting for our 2018 Annual Report and future annual reports.However, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firmidentify deficiencies in our internal controls that are deemed to be material weaknesses, we could be subject to sanctions or investigations by The NasdaqGlobal Select Market, the SEC or other regulatory authorities, which would entail expenditure of additional financial and management resources and couldmaterially adversely affect our stock price. Deficient internal controls could also cause us to fail to meet our reporting obligations or cause investors to loseconfidence in our reported financial information, which could have a negative effect on our stock price. Because we do not anticipate paying any cash dividends on our capital stock in the foreseeable future, capital appreciation, if any, will be your sole sourceof gain.We have never declared or paid cash dividends on our capital stock. We currently intend to retain all of our future earnings, if any, to finance the growth anddevelopment of our business. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.We may incur significant costs from class action litigation due to our expected stock volatility.Our stock price may fluctuate for many reasons, including as a result of public announcements regarding the progress of our development efforts or thedevelopment efforts of future collaborators or competitors, the addition or departure of our key personnel, variations in our quarterly operating results andchanges in market valuations of biopharmaceutical and biotechnology companies.This risk is especially relevant to us because biopharmaceutical and biotechnology companies have experienced significant stock price volatility in recentyears. When the market price of a stock has been volatile as our stock price may be, holders of that stock have occasionally brought securities class actionlitigation against the company that issued the stock. If any of our stockholders were to bring a lawsuit of this type against us, even if the lawsuit is withoutmerit, we could incur substantial costs defending the lawsuit. The lawsuit could also divert the time and attention of our management.Our amended and restated bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions andproceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with usor our directors, officers or employees.Our amended and restated bylaws provide that, subject to limited exceptions, the Court of Chancery of the State of Delaware will be the sole and exclusiveforum for any derivative action or proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors,officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provision of the Delaware GeneralCorporation Law, as amended, our amended and restated certificate of incorporation or our amended and restated bylaws, any action to interpret, apply,enforce or determine the validity of our amended and restated certificate of incorporation or our amended and restated bylaws or any other action asserting aclaim against us that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of our capitalstock shall be deemed to have notice of and to have consented to the provisions of our amended and restated certificate of incorporation described above.This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or ourdirectors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and employees. Alternatively, if a court wereto find these provisions of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specifiedtypes of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could adversely affect ourbusiness and financial condition.Item 1B.Unresolved Staff CommentsNone72 Item 2.PropertiesOur principal executive office is currently located in South San Francisco, California, and consists of approximately 76,000 square feet of office and researchand development space, all of which is located in a single building, under a lease that expires in October 2026. We believe that our existing facilities aresufficient for our current needs.Item 3.Legal ProceedingsWe are not currently a party to any material litigation or legal proceedings.Item 4.Mine Safety DisclosuresNot applicable. 73 PART IIItem 5.Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity SecuritiesMarket Information for Common StockOur common stock has been listed on the Nasdaq Global Select Market under the symbol “CTMX” since our initial public offering in October 2015. Prior tothat time, there was no public market for our common stock.Holders of RecordAs of January 31, 2019, there were approximately 37 stockholders of record of our common stock. The actual number of stockholders is greater than thisnumber of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees. Thisnumber of holders of record also does not include stockholders whose shares may be held in trust by other entities.Dividend PolicyWe currently intend to retain future earnings, if any, for use in operation of our business and to fund future growth. We have never declared or paid any cashdividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. Payment of cash dividends, if any, in the future willbe at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, operating results, contractualrestrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. Stock Performance GraphThe following graph shows the total stockholder’s return on an investment of $100 in cash at market close on October 8, 2015 (the first day of trading of ourcommon stock), through December 31, 2018 for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index. Pursuantto applicable Securities and Exchange Commission rules, all values assume reinvestment of pre-tax amount of all dividends; however, no dividends havebeen declared on our common stock to date. The stockholder return shown on the graph below is not necessarily indicative of future performance, and we donot make or endorse any predictions as to future stockholder return. This graph shall not be deemed “soliciting material” or be deemed “filed” for purposes ofSection 18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall notbe deemed to be incorporated by reference into any of our filings under the Securities Act of 1933, as amended (the “Securities Act”), whether made before orafter the date hereof and irrespective of any general incorporation language in any such filing. 74 $100 investment in stock or index October 8, 2015 December 31, 2015 December 31, 2016 December 31, 2017 December 31, 2018 CytomX (CTMX) $100.00 $161.78 $85.19 $163.64 $117.05 Nasdaq Composite Index (IXIC) $100.00 $104.09 $111.90 $143.50 $137.92 Nasdaq Biotech Index (^NBI) $100.00 $110.25 $86.34 $104.52 $94.77 Securities Authorized for Issuance Under Equity Compensation PlansThe information required by this Item regarding equity compensation plans is incorporated by reference to the information set forth in PART III. Item 12 ofthis Annual Report on Form 10-K.Use of Proceeds from Registered Securities None.Recent Sales of Unregistered Equity SecuritiesNone.Issuer Purchases of Equity SecuritiesNone.Item 6.Selected Financial DataYou should read the following selected financial data together with the information under “Item 7. Management’s Discussion and Analysis of FinancialCondition and Results of Operations” and our financial statements and related notes included in this Form 10-K. The statement of operations data for each ofthe years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 are derived from our audited financialstatements included elsewhere in this Form 10-K. The statement of operations data for each of the years ended December 31, 2015 and 2014 and the selectedbalance sheet data as of December 31, 2016, 2015 and 2014 are derived from our audited financial statements which are not included in this Annual Reporton Form 10-K. Our historical results of any prior periods are not necessary indicative of results to be expected in any future period.We adopted the Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”), effective January 1, 2018 on a modifiedretrospective basis. As such, the prior period amounts were not restated and continue to be presented in accordance with Accounting Standards Codification605, Revenue Recognition (“ASC 605”).75 Statement of Operations Data: Year Ended December 31, (in thousands, except share and per share data) 2018 2017 2016 2015 2014 Revenues $59,502 $71,623 $12,845 $5,941 $2,751 Revenues from related parties — — 2,198 1,771 2,326 Total revenues 59,502 71,623 15,043 7,712 5,077 Operating expenses: Research and development 103,866 92,277 54,755 28,357 28,302 General and administrative 33,510 25,605 19,874 12,558 6,540 Total operating expenses 137,376 117,882 74,629 40,915 34,842 Loss from operations (77,874) (46,259) (59,586) (33,203) (29,765)Interest income 7,641 2,674 736 1,315 7 Interest expense — — — (1,732) (487)Other income (expense), net (68) (27) (69) (1,744) (55)Loss before income taxes (70,301) (43,612) (58,919) (35,364) (30,300)Provision for (benefit from) income taxes 14,303 (513) (19) 10 10 Net loss (84,604) (43,099) (58,900) (35,374) (30,310)Accretion to redemption value and cumulative dividends on preferred stock — — — (6,705) (4,566)Net loss attributable to common stockholders $(84,604) $(43,099) $(58,900) $(42,079) $(34,876)Net loss per share attributable to common stockholders, basic and diluted $(2.03) $(1.16) $(1.63) $(4.90) $(35.25)Shares used to compute net loss per share attributable to common stockholders, basic and diluted 41,664,382 37,166,830 36,234,732 8,595,247 989,453 Other comprehensive loss: Changes in unrealized gain (losses) on investments 1 (67) 49 (76) — Comprehensive loss $(84,603) $(43,166) $(58,851) $(35,450) $(30,310) Balance Sheet Data: As of December 31, (in thousands) 2018 2017 2016 2015 2014 Balance Sheet Data: Cash, cash equivalents and short term investments $436,127 $374,110 $181,938 $186,711 $64,396 Working capital 347,567 327,454 152,380 174,015 55,690 Total assets 457,108 397,644 199,128 197,215 73,062 Total long-term debt, current and non-current — — — — 2,987 Redeemable convertible preferred stock — — — — 76,236 Convertible preferred stock — — — — 474 Accumulated deficit (314,981) (219,465) (176,366) (117,466) (78,138)Total stockholders' equity (deficit) 130,883 69,896 78,479 126,068 (78,541) 76 Item 7.Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion should be read in conjunction with the attached financial statements and notes thereto. This Annual Report on Form 10-K,including the following sections, contains forward-looking statements within the meaning of the federal securities laws. These statements are subject torisks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements.For a detailed discussion of these risks and uncertainties, see the “Risk Factors” section in Item 1A of this Annual Report on Form 10-K. We caution thereader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Form 10-K. Weundertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Form 10-K.OverviewWe are a clinical-stage, oncology-focused biopharmaceutical company with a vision of transforming lives with safer, more effective therapies. We arepioneering a novel class of investigational antibody therapeutics, based on our Probody™ technology platform, for the treatment of cancer. The Probodytherapeutic approach is designed to more specifically target antibody therapeutics to the tumor microenvironment and minimize drug activity in healthytissue and in circulation. We believe this approach has the potential to make meaningful enhancements to the combined efficacy and safety profile ofantibody therapeutics, known as the “therapeutic window” and also to enable new targeted therapies. We believe that Probody therapeutics have thepotential to create or widen the therapeutic window for certain antibody therapeutics, allowing for the development of new approaches to the treatment ofcancer. We are utilizing our Probody Platform to develop a pipeline of potential best-in-class immunotherapies against clinically-validated targets andpotential first-in-class therapeutics against novel, difficult to drug targets. Furthermore, we believe the Probody therapeutic approach has the potential toenable safer, more effective combination therapy for cancer.Our most advanced product candidate is CX-072, a wholly owned Probody therapeutic targeting programmed cell death ligand 1 (“PD-L1”), a clinically andcommercially validated immuno-oncology target. CX-072 is designed to uncouple the anti-cancer activity of PD-L1 inhibitors from the associatedautoimmune toxicities by inhibiting PD-L1 in the tumor microenvironment with minimal engagement in healthy tissue. We are currently evaluating CX-072in a Phase 1/2 study that we call PROCLAIM-CX-072. This study is designed to assess the safety, activity, and translational biology of CX-072 as a singleagent and in combination with other anticancer therapies. We disclosed initial clinical proof of concept data on CX-072 at various oncology conferences in2018. In February 2019, we disclosed additional clinical safety and efficacy data on CX-072 at a Research and Development Day hosted by CytomXmanagement (“CytomX R&D Day”).Our second most advanced product candidate is CX-2009, a wholly owned Probody Drug Conjugate directed against CD166, a novel drug target. ProbodyDrug Conjugates are unique, CytomX-designed Probody therapeutic versions of a class of drugs called Antibody Drug Conjugates (ADCs), which areantibodies that have been conjugated to a small molecule cytotoxic agent via a labile chemical linker. Because our Probody therapeutics are designed tominimize binding of potent anti-cancer therapy to normal tissues, we believe we can address a new class of targets with attractive molecular features that werepreviously unsuitable because of high expression on normal tissues. CD166 is an example of this kind of target. CD166 is highly and homogenouslyexpressed in multiple different tumors types, which makes it an attractive target for a Probody drug conjugate therapeutic; however, the high expression ofCD166 on normal tissues makes this a difficult target to drug with a traditional ADC. CX-2009 is currently in the dose escalation portion of a Phase 1/2study. In February 2019, we disclosed initial clinical data on CX-2009 at the CytomX R&D Day.In addition to our wholly owned programs, we have entered into several strategic collaborations with leading oncology-focused pharmaceutical companies,such as AbbVie Inc., through its subsidiary AbbVie Ireland Unlimited Company (“AbbVie”), Amgen, Inc. (“Amgen”) and Bristol-Myers Squibb Company(“BMS”). The most advanced program from our partnerships is a BMS-986249, a CTLA-4 Probody therapeutic, which BMS is currently advancing throughthe dose escalation phase of a Phase 1/2 clinical trial. We are also treating patients in a Phase 1/2 clinical study for CX-2029, a PDC targeting the highlyexpressed target, CD71 that we have partnered with AbbVie. We have also extended our Probody platform to the T-cell engaging bispecific modality. Ourmost advanced program in that modality is an Epidermal Growth Factor Receptor-CD3 (“EGFR-CD3”) T-cell bispecific, which is currently in leadoptimization stage, and which we are developing in partnership with Amgen. We currently have three product candidates enrolling patients in clinical trials that we are conducting and one product candidate enrolling patients inclinical trials which our partner, BMS, is conducting, but we do not have any product candidates approved for sale, and we continue to incur significantresearch and development and general administrative expenses related to our operations. We are not profitable and have incurred losses in each year since ourfounding in 2008. Our net loss was $84.6 million, $43.1 million and $58.9 million for 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017we had an accumulated deficit of $315.0 million and $219.5 million, respectively. We expect to continue to incur significant losses for the foreseeable future. 77 Regulatory agencies, including the FDA, regulate many aspects of a product candidate’s life cycle, including research and development and preclinical andclinical testing. We will need to commit significant time, resources, and funding to develop our wholly owned and partnered product candidates in clinicaltrials, including CX-072, CX-2009 and CX-2029 as well as any additional product candidates for which we initiate clinical trials in 2019 and beyond. We areunable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of our product candidates because, amongother reasons, of regulatory uncertainty, manufacturing limitations and the pace of enrollment of our clinical trials, which is a function of many factors,including the availability and proximity of patients with the relevant condition. We currently have no manufacturing capabilities and do not intend to establish any such capabilities in the near term. As such, we are dependent on thirdparties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standardsand at competitive prices.Components of Results of OperationsRevenueOur revenue to date has been primarily derived from non-refundable license payments, milestone payments and reimbursements for research and developmentexpenses under our research, collaboration, and license agreements. We recognize revenue from upfront payments over the term of our estimated period ofperformance under the agreement using a cost-based input method or a common measure of progress for the entire performance obligation. In addition toreceiving upfront payments, we may also be entitled to milestone and other contingent payments upon achieving predefined objectives. Revenue frommilestones and other contingent payments, when it is probable that there will not be a significant revenue reversal, is also recognized over the performanceperiod based on a similar method. Reimbursements from BMS and Pfizer for research and development costs incurred under our research, collaboration andlicense agreements with them are classified as revenue. For the foreseeable future, we do not expect to generate any revenue from the sale of products unless and until such time as our product candidates haveadvanced through clinical development and obtained regulatory approval. We expect that any revenue we generate in the foreseeable future will fluctuatefrom year to year as a result of the timing and amount of milestones and other payments from our collaboration agreements with AbbVie, Amgen, BMS,ImmunoGen and any other collaboration partners, and as a result of the fluctuations in the research and development expenses we incur in the performance ofassigned activities under these agreements. AbbVie Ireland Unlimited Company (“AbbVie”), one of our collaboration partners, entered into a license agreement with Seattle Genetics, Inc. (“SGEN”) tolicense certain intellectual property rights. As part of our collaboration agreement with AbbVie, we pay SGEN sublicense fees. These sublicense fees aretreated as reductions to the transaction price and combined with the performance obligation to which they relate. Milestone payments, when consideredprobable of being reached and when a significant revenue reversal would not be probable of occurring, are also recorded net of the associated sublicense feesand included in the transaction price. On January 1, 2018, we adopted Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606) using themodified retrospective transition method. See further discussion under “ Critical Accounting Policies and Estimates – Revenue Recognition.”Research and Development ExpensesOur research and development expenses consist primarily of costs incurred to conduct research, such as the discovery and development of our productcandidates, clinical development including activities with third parties, such as CROs and CMOs, the manufacture of drug products used in clinical trials, aswell as the development of product candidates pursuant to our research, collaboration and license agreements. Research and development expenses includepersonnel costs, including stock-based compensation expense, contractor services, laboratory materials and supplies, depreciation and maintenance ofresearch equipment, and an allocation of related facilities costs. We expense research and development costs as incurred. We expect our research and development expenses to increase substantially in absolute dollars in the future as we advance our product candidates throughclinical trials, initiate additional clinical trials, and pursue regulatory approval of our product candidates. For example, we commenced enrollment of ourPhase 1/2 clinical trial of CX-072, our candidate directed against PD-L1, for cancer and treated our first patient in January 2017, and our Phase 1/2 clinicaltrial of CX-2009, our PDC candidate directed against CD-166, for cancer and treated our first patient in June 2017. In June 2018, we commenced enrollmentof our Phase 1/2 clinical trial for CX-2029, our CD71 Probody Drug Conjugate being developed in collaboration with AbbVie. The process of conductingthe necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates maybe affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical program, theability of collaborators to successfully develop our licensed product candidates, competition, manufacturing78 capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of theuncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to whatextent we will generate revenue from the commercialization and sale of our product candidates.General and Administrative ExpensesGeneral and administrative expenses include personnel costs, expenses for outside professional services and other allocated expenses. Personnel costs consistof salaries, bonuses, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and otherconsulting fees. Allocated expenses consist of rent expense related to our office and research and development facility. We expect to incur additionalexpenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the SEC and the Sarbanes-Oxley Act of 2002 and those of any national securities exchange on which our securities are traded, additional insurance expenses, investor relationsactivities and other administrative and professional services. We also expect to increase our administrative headcount to operate as a public company and aswe advance our product candidates through clinical development, which will also increase our general and administrative expenses.Interest IncomeInterest income primarily consists of interest income from our cash equivalents and short-term investments, and accretion of discounts or amortization ofpremiums on our short-term investments.Other Income (Expense), NetOther income (expense), net consists primarily of changes to currency exchange rates. Provision for (Benefit from) Income TaxesIncome taxes are recorded in accordance with ASC 740, Accounting for Income Taxes, or ASC 740, which provides for deferred taxes using an asset andliability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financialstatements or tax returns. We determine our deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets andliabilities, which are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Valuation allowancesare provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.We also account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefitof tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than notbe realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”), which includes significant changes to the U.S. corporate tax system.Effective January 1, 2018, the Tax Act reduced the U.S. federal corporate tax rate from 35% to 21%, and transitioned from a worldwide tax system to aterritorial tax system, and eliminated or reduced certain domestic deductions among other changes. The Tax Act introduced new provisions including theGlobal Intangible Low-Taxed Income (“GILTI”), Foreign Derived Intangible Income (“FDII”), Base Erosion Anti-Abuse Tax (“BEAT"), expanded bonusdepreciation and changed deductions for executive compensation and interest expense. See "Part II. Item 8. Financial Statements and Supplementary Data,Note 14. Income Taxes" in the accompanying Notes to the consolidated financial statements for more information regarding the impact of the Tax Act. Comparison of Years Ended December 31, 2018 and 2017 Revenue Year Ended December 31, 2018 2017 Change (in thousands) Revenue $59,502 $71,623 $(12,121) 79 Revenue decreased by $12.1 million during the year ended December 31, 2018 compared to the corresponding period in 2017. The following tablesummarizes our revenue by collaboration partner during the respective periods: Year Ended December 31, 2018 2017 Change (in thousands) AbbVie $18,997 $19,434 $(437)Amgen 4,899 1,311 3,588 BMS 32,780 36,492 (3,712)ImmunoGen 1,471 12,503 (11,032)Pfizer 1,355 1,883 (528)Total Revenue $59,502 $71,623 $(12,121) The variances in revenue for 2018 compared to 2017 were partially due to the adoption of ASC 606. Under ASC 605, total revenue for 2018 would have been $66.0 million, a decrease of $5.6 million from $71.6 million in 2017, primarily due to a $3.0 millionnet decrease in milestone payments, as well as a $2.6 million decrease in the recognition of deferred revenues in 2018. •In 2017, a total of $24.0 million in milestone payments were recognized, including $14.0 million (net of the payment of an associated licensefee of $1.0 million to Seattle Genetics (“SGEN”) under the Seattle Genetics Agreement) received from AbbVie for meeting the criteria to beginthe CD71 GLP toxicology studies under the AbbVie Agreements and $10.0 million received from BMS related to the IND filing for BMS-986249 in 2017. •In 2018, a $21.0 million milestone payment (net of the payment of an associated sublicense fee of $4.0 million to SGEN) was received fromAbbVie for the achievement of the successful IND filing criteria related to CX-2029. •The $2.6 million decrease in recognition of deferred revenue under ASC 605 was attributable to a decrease of $11.8 million related toImmunogen, partially offset by a $6.2 million increase and a $3.1 million increase related to BMS and Amgen, respectively. The difference between the amount of revenue recognized under ASC 606 and the amount that would have been recognized under ASC 605 was primarily aresult of the difference in how revenue is recognized related to the $21.0 million (net of the payment of an associated sublicense fee of $4.0 million to SGEN)CD71 milestone payment. Under ASC 606, the milestone payment is included in the transaction price and recognized over time based on the total estimatedpercentage completed to-date. Under ASC 605, the entire $21.0 million would have been recognized upon satisfaction of the successful IND filing criteria. The decrease in revenue from AbbVie of $0.4 million for 2018 compared to 2017 was primarily due to the recognition of $14.0 million (net of the payment ofan associated license fee of $1.0 million to SGEN) in milestone revenue as a result of completion of certain milestones under the CD71 Agreement during thethird quarter of 2017, which was partially offset by the recognition of $11.7 million of revenue based on the percentage completed to-date on the project ofthe $21.0 million milestone payment received(net of the payment of an associated sublicense fee of $4.0 million to SGEN) and added to the transaction pricein May 2018 for the achievement of the IND filing success criteria under the CD71 Agreement; and an increase of $1.9 million in revenue resulting from thechange in the method of revenue recognition for the CD71 Agreement from straight-line under ASC 605 to percentage-of-completion under ASC 606, whichwe adopted on January 1, 2018. Revenue from Amgen under the Amgen Agreement entered into in September 2017 increased by $3.6 million for 2018 compared to 2017. The increase inrevenue was primarily due to a full year of revenue recognized for 2018 as compared to a partial year’s revenue recognition for this agreement starting inOctober 2017. In the fourth quarter of 2018, the joint steering committee (“JSC”) officially terminated any further work on two molecules in the AmgenEGFR project due to unacceptable test results. The current plan is to evaluate other molecules as part of the candidate identification phase of the project, andas a result, there has been a change in estimate of the projected costs and an extended research service period to seven years. As such, the revenue growth in2018 was not as large as it may have been before this change in estimate in late 2018. The decrease in revenue from BMS of $3.7 million for 2018 compared to 2017 was primarily due to a $10.0 million milestone payment related to the INDfiling for BMS-986249 by BMS in 2017, a decrease of $1.3 million in amortization of certain deferred revenue resulting from an increase in the estimatedlength of the research terms during late April 2017, which caused average monthly amortization in 2018 to be less than that reported in 2017, and a decreasein service revenue of $0.3 million for 2018 compared to that in 2017. These factors that contributed to larger revenue in 2017 were partially offset by anincrease of $7.9 million in amortization of deferred revenue for 2018 related to the $200.0 million upfront payment we received in the second quarter of 2017as a result of Amendment Number 1 to Extend Collaboration and License Agreement (“BMS Amendment) entered into in March 2017.80 The decrease in revenue from ImmunoGen of $11.0 million for 2018 compared to 2017 was the result of the recognition of $6.5 million in revenue in 2017related to the delivery of the ImmunoGen 2017 License to ImmunoGen in connection with the Immunogen Research Agreement, as well as the recognition of$5.9 million of revenue during 2017 resulting from an amendment to the ImmunoGen Research Agreement extending the research term to June 2018, whichwas partially offset by an increase of $1.4 million in revenue in 2018 due to the related extension of the research term to June 2018. The decrease in revenue from Pfizer of $0.5 million for 2018 compared to 2017 was as a result of Pfizer terminating our Research Collaboration, Option andLicense Agreement in March 2018. Research and Development Expenses Year Ended December 31, 2018 2017 Change (in thousands) Research and development $103,866 $92,277 $11,589 Research and development expenses increased by $11.6 million during 2018 compared to 2017. The increase was primarily attributable to the following: •an increase of $10.0 million in lab services and $12.3 million in clinical trial expenses related to CX-072, CX-2009 and CX-2029 Phase 1/2clinical development and the ramp up for IND filing and clinical trial preparation for CX-188, •an increase of $10.5 million in personnel related expenses and a $1.2 million allocation of information technology and facilities-relatedexpenses resulting from an increase in headcount, •an increase of $0.9 million in lab supplies and •an increase of $0.7 million in consulting expenses. These increases were partially offset by: •a $10.7 million of non-cash research and development expense recognized in 2017 related to the estimated fair value of the CytomX Productunder the Amgen Agreement, •a $10.0 million sublicense fee payment made to UCSB in 2017, which was triggered by the $200 million upfront payment made by BMS inconnection with our expanded collaboration, •a $2.1 million sublicense fee payable to UCSB recognized as a result of the Amgen Agreement in 2017 and •a $1.0 million sublicense payment to ImmunoGen upon the commencement of enrollment of Phase 1/2 and first patient dosing in the clinicaltrial for CX-2009 during the second quarter of 2017. The following table summarizes our research and development expenses by program incurred during the respective periods: Year Ended December 31, 2018 2017 Change External costs incurred by product candidate (target): (in thousands) CX-072 (PD-L1) $19,393 $9,290 $10,103 CX-2009 (CD166) 16,615 8,533 8,082 CX-2029 (CD71) 10,798 9,550 1,248 Other wholly owned and partnered programs 10,261 21,099 (10,838)General research and development expenses 10,547 18,976 (8,429) 67,614 67,448 166 Internal Costs 36,252 24,829 11,423 Total research and development expenses $103,866 $92,277 $11,589 81 The decrease in “Other wholly owned and partnered programs” for 2018 compared to 2017 was primarily due to $10.7 million of research and developmentexpense recognized during 2017 related to the estimated fair value of the CytomX Product under the Amgen Agreement. The decrease in general researchand development expenses for 2018 compared to 2017 was primarily a payment of $10.0 million in sublicense fee under the UCSB Agreement in 2017. Theincrease in other categories of external costs for 2018 was due primarily to increases in laboratory contracts and services and clinical trial expenses related toCX-072, CX-2009 and CX-2029 Phase 1/2 clinical development and the ramp up for IND filing and clinical trial preparation for CX-188. The increase ininternal costs for 2018 was primarily due to increase in personnel-related expenses and allocation of information technology and facilities-related expensesresulting from an increase in headcount.General and Administrative Expenses Year Ended December 31, 2018 2017 Change (in thousands) General and administrative $33,510 $25,605 $7,905 General and administrative expenses increased by $7.9 million during 2018 compared to 2017. The increase was attributable to an increase of $5.6 million inpersonnel-related expenses primarily due to an increase in headcount, and an increase of $2.3 million in subscription services and consulting or servicesexpenses related to audit, strategic planning, tax compliance, legal compliance and facilities.Interest Income(Expense) and Other Income (Expense), Net Year Ended December 31, 2018 2017 Change (in thousands) Interest income $7,641 $2,674 $4,967 Other income (expense), net (68) $(27) (41)Total interest and other income (expense) $7,573 $2,647 $4,926Interest Income Interest income increased by $5.0 million for 2018 compared to 2017. The increase was primarily attributable to an increase in interest earned on our short-term investments due to an overall increase in our cash and cash equivalents position resulting from the common stock offering completed in July 2018. Other Income (Expense), Net Other income (expense), net increased by $41,000 in expense was primarily due to increased loss in currency exchange resulting from unfavorablemovements in the US dollar relative to Euros. Provision for (Benefit from) Income Taxes Year Ended December 31, 2018 2017 Change (in thousands) Provision for (benefit from) income taxes $14,303 $(513) $14,816 Provision for income tax expense increased to $14.3 million in 2018 from a tax benefit of $0.5 million in 2017. The income tax expense was generated as aresult of a temporary difference in the recognition of revenue under tax and U.S. GAAP authoritative guidance, primarily due to revenue recognition for taxpurposes in 2018 of the upfront payments received pursuant to the BMS Amendment entered into in March 2017, and the Amgen Agreement entered into inSeptember 2017, prior to revenue recognition for U.S. GAAP purposes. These upfront payments will be recognized over the related research and developmentservice periods under U.S. GAAP for book purposes and the associated deferred tax assets due to the timing differences are subject to a valuationallowance. In addition, the ownership changes under Section 382 of the IRC in 2017 limited the use of available net operating losses and research tax creditsagainst our 2018 taxable income.82 Comparison of Years Ended December 31, 2017 and 2016 Revenue Year Ended December 31, 2017 2016 Change (in thousands) Revenue $71,623 $15,043 $56,580 Revenue increased $56.6 million during the year ended December 31, 2017 compared to the corresponding period in 2016. The following table summarizesour revenue by collaboration partner during the respective periods: Year Ended December 31, 2017 2016 Change (in thousands) AbbVie $19,434 $3,268 $16,166 Amgen 1,311 — 1,311 BMS 36,492 9,577 26,915 ImmunoGen 12,503 — 12,503 Pfizer 1,883 2,198 (315)Total Revenue $71,623 $15,043 $56,580The increase in revenue from AbbVie of $16.2 million for the year ended December 31, 2017 compared to the corresponding period in 2016 was due torecognition of $14.0 million, net of the associated sublicense fee, from the milestone payment we received as a result of our achievement of certainmilestones required to be met to begin GLP toxicology studies under the AbbVie Agreements, and an increase of $2.2 million, net of the related deferredcosts, related to the recognition of the upfront payment we received in April 2016.We entered into the Amgen Agreement in September 2017 and we recognized $1.3 million of upfront payments in 2017. The increase in revenue from BMS of $26.9 million for the year ended December 31, 2017 compared to the corresponding period in 2016 was due to anincrease of $17.1 million related to the recognition of an upfront payment we received in connection with the expansion of our collaboration, an increase of$2.1 million related to the recognition of payments made in connection with the selection of its fourth target under our collaboration and license agreementwith BMS and the acceleration of the research timeline triggered by BMS’s selection of a fourth target under the BMS Agreement, and a milestone paymentof $10.0 million related to the IND filing for BMS-986249 by BMS in 2017. These increases were partially offset by a milestone payment of $2.0 millionpayment received in 2016 for the selection of BMS-986249 clinical candidate, and a decrease of $0.3 million related to research and development servicesprovided to BMS. The increase in revenue from ImmunoGen of $12.5 million for the year ended December 31, 2017 compared to the corresponding period in 2016 was a resultof the recognition of $6.6 million for the delivery of the ImmunoGen 2017 License to ImmunoGen in connection with the ImmunoGen Research Agreementand the recognition of $5.9 million resulting from an amendment to the ImmunoGen Research Amendment. See Note 9 - Research and CollaborationAgreements under Item 8 of this Annual Report on Form 10-K for more details. The decrease in revenue from Pfizer of $0.3 million for the year ended December 31, 2017 compared to the corresponding period in 2016 was due to areduction in the research and development services we provided to Pfizer. In March 2018, Pfizer gave notice terminating our collaboration in its entirety. As aresult of such termination, we are no longer eligible to receive any future payments from our collaboration with Pfizer. Research and Development Expenses Year Ended December 31, 2017 2016 Change (in thousands) Research and development $92,277 $54,755 $37,522 83 Research and development expenses increased $37.5 million during the year ended December 31, 2017 compared to the corresponding period in 2016. Theincrease was primarily attributable to the following: •a non-cash charge of $10.7 million of in-process research and development expense recognized related to the Amgen Agreement; •$10.0 million sublicense payment made to UCSB triggered by the $200.0 million upfront payment made by BMS in connection with ourexpanded collaboration; •$2.1 million of UCSB sublicense fees accrued as a result of the Amgen agreement; •$1.0 million of UCSB sublicense fees recognized for our achievement of certain milestones required to be met to begin GLP toxicology studiesunder the AbbVie Agreement and the IND filing for BMS-986249 by BMS; •an increase of $8.5 million in pharmacology studies and clinical trial expenses resulting from the advancement of CX-072, CX-2009 and CX-2029 in 2017; •an increase of $5.3 million in personnel-related expenses and allocation of IT and facilities-related expenses due to an increase in headcount; •an increase of $1.7 million in consulting expenses due to the commencement of clinical trials in 2017; •an increase of $0.6 million related to expenses incurred in acquiring a patent; and •an increase of $0.5 million in stock-based compensation resulting from increased headcount and an increase in the value of our stock.These increases were partially offset by: •a decrease of $2.1 million in manufacturing expenses for our CX-072 and CX-2009 programs due to manufacturing activities occurring in 2016in preparation for clinical trials in 2017; •a decrease in laboratory supply expenses of $0.4 million; and •a decrease in program management expenses of $0.4 million. The following table summarizes our research and development expenses by program incurred during the respective periods: Year Ended December 31, 2017 2016 Change External costs incurred by product candidate (target): (in thousands) CX-072 (PD-L1) $9,290 $8,917 $373 CX-2009 (CD166) 8,533 10,695 (2,162)CX-2029 (CD71) 9,550 3,220 6,330 Other wholly owned and partnered programs 21,099 3,840 17,259 General research and development expenses 18,976 9,382 9,594 67,448 36,054 31,394 Internal Costs 24,829 18,701 6,128 Total research and development expenses $92,277 $54,755 $37,522General and Administrative Expenses Year Ended December 31, 2017 2016 Change (in thousands) General and administrative $25,605 $19,874 $5,731 84 General and administrative expense increased $5.7 million during the year ended December 31, 2017 compared to the corresponding period in 2016. Theincrease was attributable to an increase of $1.4 million in personnel-related expenses and an increase of $1.0 million in recruitment fees due to an increase inheadcount and temporary labor; an increase in stock-based compensation of $1.0 million due to an increase in headcount and an increase in the value of ourstock; an increase of $1.2 million in consulting services expenses primarily due to an increase in tax and accounting compliance activities and investorrelations expenses; an increase in legal expenses of $0.8 million resulting from patent filings; and an increase of $0.2 million in dues and subscriptionsrelated to computer software.Interest Income and Other Income (Expense), Net Year Ended December 31, 2017 2016 Change (in thousands) Interest income $2,674 $736 $1,938 Other income (expense), net (27) (69) 42 Total interest and other income (expense) $2,647 $667 $1,980 Interest IncomeInterest income increased $1.9 million during the year ended December 31, 2017 compared to the corresponding period in 2016. The increase wasattributable to an increase in cash and cash equivalents and a decrease in the amortization of premiums on short-term investments resulting from a decrease inaverage investments in treasury bills.Other Income (Expense), NetOther income (expense), net decreased in loss of $42,000 during the year ended December 31, 2017 compared to the corresponding period in 2016. Thedecrease was primarily attributable to a decrease in foreign currency losses resulting from the strengthening of the U.S. dollar against Euros and British PoundSterling. Provision for (Benefit from) Income Taxes The benefit for income taxes during the year ended December 31, 2017, of $0.5 million was due to a reduction in our valuation allowance and related taxbenefit when we began amortizing certain indefinite-lived intangible assets. An income tax benefit of $19,000 was recorded for 2016. Liquidity and Capital ResourcesSources of Liquidity As of December 31, 2018, we had cash, cash equivalents and short-term investments of $436.1 million and an accumulated deficit of $315.0 million,compared to cash and cash equivalents of $374.1 million and an accumulated deficit of $219.5 million as of December 31, 2017. To date, we have financedour operations primarily through sales of our common stock in conjunction with the IPO and a subsequent stock offering, sales of our convertible preferredsecurities prior to our IPO and payments received under our collaboration agreements. In July 2018, we issued 5,867,347 shares of our common stock at aprice of $24.50 per share, which included 765,306 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares ofcommon stock, for net proceeds of $134.6 million. Based upon our current operating plan, we expect our existing capital resources will be sufficient to fund operations into 2021. However, if the anticipatedoperating results and future financing are not achieved in future periods, our planned expenditures may need to be reduced in order to extend the time periodover which the then-available resources would be able to fund the operations. The amounts and timing of our actual expenditures depend on numerousfactors, including the progress of our preclinical and clinical development efforts, the results of any clinical trials and other studies, our operating costs andexpenditures and other factors described under the caption “Risk Factors” in this Annual Report on Form 10-K. The cost and timing of developing ourproducts, including CX-072, CX-2009 and CX-2029 are highly uncertain, are subject to substantial risks and many changes. As such, we may alter ourexpenditures as a result of contingencies such as the failure of one or all of our product candidates currently in clinical development, the acceleration of oneor all of our product candidates in clinical development, the initiating of clinical trials for additional product candidates, the identification of a morepromising product candidate in our research efforts or unexpected operating costs and expenditures. We will need to raise additional funds in thefuture. There can be no assurance, however, that such efforts will be successful or that, in the event that they are successful, the terms and conditions of suchfinancing will be favorable to us. 85 Summary Statement of Cash FlowsThe following table summarizes our cash flows for the periods presented: Year Ended December 31, 2018 2017 2016 (in thousands) Net cash (used in) provided by operating activities $(75,521) $170,373 $(2,032)Net cash provided by (used in) by investing activities 5,926 (121,266) 45,859 Net cash provided by financing activities 139,624 23,796 996 Net increase in cash, cash equivalents and restricted cash $70,029 $72,903 $44,823Cash Flows from Operating Activities During the year ended December 31, 2018, cash used in operating activities was $75.5 million, which consisted of a net loss of $84.6 million, adjusted bynon-cash charges of $17.1 million and a net decrease of $8.0 million in our operating assets and liabilities. The non-cash charges primarily consisted of $16.9million in stock-based compensation and $1.9 million in depreciation and amortization, partially offset by $1.7 million in accretion of discounts on ourshort-term investments. The net decrease in our operating assets and liabilities of $8.0 million was primarily attributable to: •a net decrease in deferred revenue of $38.2 million resulting from the recognition of $59.2 million in upfront fees and milestone paymentsunder ASC 606 pursuant to our collaboration agreements, offset by the $21.0 million (net of the payment of an associated sublicense fee of$4.0 million to SGEN) new milestone addition to deferred revenue in 2018 resulting from the AbbVie CX-2029 milestone payment received; •a decrease of $4.9 million resulting from the increase in prepaid expenses and other current assets; partially offset by •an increase in cash flows from accounts receivable primarily from the $10.0 million we received from BMS for achieving the milestone of INDfiling of BMS-986249 in 2018; •an increase of $24.8 million in accrued liabilities, income tax payable and other long-term liabilities resulting primarily from a $13.3 millionincrease in income tax payable, a $10.3 million in accrued liabilities driven by increases in laboratory services, UCSB sublicense fee accrualand CRO expenses accrual relating to clinical trial activities; and •an increase in accounts payable of $0.3 million.During the year ended December 31, 2017, cash provided by operating activities was $170.4 million, which consisted of a net loss of $43.1 million, non-cashcharges of $23.5 million, and an increase of $190.0 million in our net operating assets and liabilities. The non-cash charges primarily consisted of $1.6million in depreciation and amortization, $11.3 million in stock-based compensation and a $10.7 million non-cash acquisition of in-process research anddevelopment asset charged to expense. The change in our net operating assets and liabilities of $190.0 million was primarily attributable to: •an increase of $189.9 million in deferred revenue resulting from BMS upfront payment of $200.0 million and $40.0 million received inconnection with the collaboration we entered into with Amgen in September 2017. These increases were partially offset by an increase in therecognition of revenue associated with upfront fees of $34.4 million under our various collaboration agreements, $6.6 million in recognizedrevenue from our delivery of a Development and Commercialization License to ImmunoGen in connection with the ImmunoGen ResearchAgreement, and $5.9 million in recognized revenue from ImmunoGen as a result of the amendment to the ImmunoGen Research Amendment; •an increase in accrued and long-term liabilities of $9.2 million; and •an increase in other assets of $1.6 million; partially offset by •a decrease in accounts receivable of $8.0 million resulting primarily from the $10.0 million of milestone billing to BMS for the IND filing ofBMS-986249, offset by $2.0 payment received from BMS relating to the 2016 milestone for the selection of BMS-986249; and •a decrease of $2.4 million in accounts payable.86 During the year ended December 31, 2016, cash used in operating activities was $2.0 million, which consisted of a net loss of $58.9 million, adjusted by non-cash charges of $13.6 million and an increase of $43.3 million in our net operating assets and liabilities. The non-cash charges primarily consisted of $10.3million in stock-based compensation, $1.7 million in depreciation and amortization and $1.6 million in amortization of premiums on our investments.The change in our net operating assets and liabilities was primarily attributable to: •an increase of $43.3 million in deferred revenue, which was primarily due to a $30.0 million upfront payment from AbbVie in connection withthe AbbVie Agreements and $25.0 million in payments from BMS in connection with the selection of its third and fourth targets under ourcollaboration, partially offset by the recognition of upfront fees under certain of our collaboration agreements of $11.7 million; •an increase of $4.0 million in accrued liabilities and other liabilities; and •an increase of $1.8 million in accounts payable; partially offset by •a decrease of $2.6 million in other assets; •a decrease of $1.8 million in accounts receivable; and •a decrease of $1.6 million in prepaid expenses and other current assets.Cash Flows from Investing Activities During the year ended December 31, 2018, cash provided by investing activities was $5.9 million, which consisted of $204.6 million used in purchases ofshort-term investments and $3.8 million of capital expenditures used to purchase property and equipment. This was offset by $214.3 million in proceedsreceived upon the maturity of short-term investments.During the year ended December 31, 2017, cash used in investing activities was $121.3 million, which consisted of $218.7 million used in the purchase ofshort-term investments and $1.6 million of capital expenditures used to purchase property and equipment. This amount was partially offset by $99.0 millionin proceeds received upon the maturity of short term investments.During the year ended December 31, 2016, cash provided by investing activities was $45.9 million, which consisted of $169.5 million in proceeds receivedupon the maturity of short term investments. This was offset by $121.5 million used in the purchase of short-term investments and $2.2 million of capitalexpenditures used to purchase property and equipment.Cash Flows from Financing Activities During the year ended December 31, 2018, cash provided by financing activities was $139.6 million, primarily consisted of proceeds from our common stockpublic offering of $134.6 million (net of underwriting discounts and stock issuance costs of $9.2 million) and proceeds from the exercise of stock options andemployee stock purchases under the employee stock purchase plan (“ESPP”) of $5.0 million.During the year ended December 31, 2017, cash provided by financing activities was $23.8 million, which primarily consisted of proceeds received from theissuance of common stock to Amgen pursuant to a stock purchase of $20.0 million and proceeds from the exercise of stock options and ESPP of $3.8 million.During the year ended December 31, 2016, cash provided by financing activities was $1.0 million, which primarily consisted of proceeds from the exercise ofstock options and ESPP as well as repayment of stockholder notes.87 Contractual ObligationsThe following table summarizes our contractual obligations as of December 31, 2018 (in thousands): Payments Due by Period(3) 2019 2020 2021 2022 2023+ Total Operating leases(1) $4,854 $4,990 $5,129 $5,273 $21,109 $41,355 Royalty obligations(2) 150 — — — — 150 Total contractual obligations $5,004 $4,990 $5,129 $5,273 $21,109 $41,505 (1)We lease our current facility under a long-term operating lease, which expires in 2026. The lease provides us with one option to extend the lease termfor a period of five years at the then fair market rental value.(2)We have royalty obligations under the terms of certain exclusive licensed patent rights. The royalty obligations are cancellable any time by givingnotice to the licensor, with the termination being effective 60 days after giving notice. See Part II. Item 8. Financial Statements and SupplementaryData, Note 11. Commitments and Contingencies" in the accompanying Notes to the consolidated financial statements for more information.(3)This table does not include any milestone payments or royalty payments to third parties as the amounts, timing and likelihood of such payments arenot known. We enter into agreements in the normal course of business with CROs for clinical trials and with vendors for pre-clinical studies and other services andproducts for operating purposes, which are cancelable at any time by us, generally upon 30 to 60 days prior written notice. These payments are not includedin the above table of contractual obligations. The above table also excludes unrecognized tax benefits of $3.8 million as of December 31, 2018 because theseuncertain tax positions, if recognized, would be an adjustment to our deferred tax assets. Segment Information We have one primary business activity and operate as one reportable segment. Critical Accounting Policies and Estimates Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been preparedin accordance with United States generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires ourmanagement to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilitiesat the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are basedon our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis formaking judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from thesejudgments and estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policiesdiscussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involvingmanagement’s judgments and estimates. Revenue Recognition On January 1, 2018, we adopted Accounting Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606) using themodified retrospective transition method. We recognize revenue when our customer obtains control of the promised goods or services, in an amount that reflects the consideration which we havereceived or expect to receive in exchange for those goods or services. Our revenues are primarily derived through our license, research, development and commercialization agreements. The terms of these types of agreementsmay include (i) licenses for our technology or programs, (ii) research and development services, and (iii) services or obligations in connection withparticipation in research or steering committees. Payments to us under these arrangements typically include one or more of the following: nonrefundableupfront and license fees, research funding, milestone and other contingent payments to us for the achievement of defined collaboration objectives and certainpreclinical, clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products. In certain agreements, the collaborationpartner is solely responsible for meeting the defined collaboration objectives that trigger the contingent payment. 88 We assess whether the promises in these arrangements are considered distinct performance obligations that should be accounted for separately. Judgment isrequired to determine whether the license to our Probody therapeutic technology platform is distinct from the research and development services orparticipation on development committees. The transaction price in each arrangement is allocated to the identified performance obligations based on the standalone selling price (“SSP”) of each distinctperformance obligation. Judgment is required to determine SSP. In instances where SSP is not directly observable, such as when a license or service is notsold separately, SSP is determined using information that may include market conditions and other observable inputs. Due to the early stage of our licensedtechnology, the license of such technology is typically combined with the research and development services and committee participation as oneperformance obligation. In these cases, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combinedperformance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizingrevenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performanceand related revenue recognition. Our collaboration and license agreements may include contingent payments related to specified research, development and regulatory milestones and sales-based milestones. Such payments are typically payable under the collaborations when the collaboration partner claims or selects a target, or initiates oradvances a covered product candidate in preclinical or clinical development, upon submission for marketing approval of a covered product with regulatoryauthorities, upon receipt of actual marketing approvals of a covered product or for additional indications, or upon the first commercial sale of a coveredproduct. Sales-based milestones are typically payable when annual sales of a covered product reach specified levels. At the inception of each agreement thatincludes such milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included inthe transaction price by using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestonevalue is included in the transaction price. Milestone payments that are not within our control or the licensee, such as regulatory approvals, are not consideredprobable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation based on a relative SSPbasis. At the end of each subsequent reporting period, we re-evaluate the probability or achievement of each such milestone and any related constraint, and ifnecessary, adjusts its estimate of the overall transaction price.Accrued Research and Development Expenses We record accruals for estimated costs of research, preclinical and clinical studies and contract manufacturing activities, which are a significant component ofresearch and development expenses. A substantial portion of our ongoing research and development activities is conducted by third-party service providers,including CROs. Our contracts with CROs generally include pass-through costs, such as regulatory expenses, investigator fees, travel costs and othermiscellaneous costs. The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payments thatdo not match the periods over which materials or services are provided to us under such contracts. We accrue the costs incurred under agreements with thesethird parties based on actual work completed in accordance with the respective agreements. In the event we make advance payments, they are recorded asprepaid expenses and recognized as the services are performed. We determine the estimated costs through discussions with internal personnel and externalservice providers as to the progress of stage of completion of the services and the agreed-upon fees to be paid for such services. We make significant judgments and estimates in determining the accrual balance in each reporting period. As actual costs become known, we adjust ouraccruals. Although we do not expect our estimates to be materially different than the actual amounts incurred, such estimates for the status and timing ofservices performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or toolow in any one period. Our accrual is dependent, in part, upon the receipt of timely and accurate reporting from CROs and other third-party vendors.Variations in the assumptions used to estimate accruals including, but not limited to, the number of patients enrolled, the rate of patient enrollment and theactual services performed, may vary from our estimates, resulting in adjustments to clinical trial expenses in future periods. Changes in these estimates thatresult in material changes to our accruals could materially affect our financial condition and results of operations.Stock-based Compensation We recognize compensation costs related to stock options granted to employees based on the estimated fair value of the awards on the date of grant. Beforethe adoption of ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU2016-09”), we estimated the fair value of the awards net of estimated forfeitures. Beginning in 2017, we record forfeitures as they are incurred. We estimatethe grant date fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model. The grant date fair value ofstock-based awards is expensed on a straight-line basis over the period during which the employee is required to provide service in exchange for the award(generally the vesting period).89 We estimate the fair value of our stock-based awards using the Black-Scholes option-pricing model, which requires the input of assumptions. Ourassumptions are as follows: •Expected term. The expected term represents the period that the stock-based awards are expected to be outstanding. We use the simplifiedmethod to determine the expected term, which is calculated as the average of the time to vesting and the contractual life of the options. •Expected volatility. The expected volatility was derived from the average historical volatilities of our stock price and of the stock price ofseveral comparable publicly traded companies within the biotechnology and pharmaceutical industry using an average of historical volatilitiesof Company’s industry peers. •Risk-free interest rate. The risk-free interest rate is based on the U.S. Treasury yield with a maturity equal to the expected term of the option ineffect at the time of grant. •Dividend yield. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividendson our common stock.In addition to the assumptions used in the Black-Scholes option-pricing model, prior to 2017, we also estimate a forfeiture rate to calculate the stock-basedcompensation for our equity awards. Beginning in 2017, we adjust our stock-based compensation expense for forfeitures as they are incurred. We willcontinue to use judgment in evaluating the expected volatility and expected terms utilized for our stock-based compensation calculations on a prospectivebasis. Stock-based compensation expense for options granted to non-employees as consideration for services received is measured on the date of performance at thefair value of the consideration received or the fair value of the equity instruments issued, using the Black-Scholes option-pricing model, whichever can bemore reliably measured. Stock-based compensation expense for options granted to non-employees is periodically remeasured as the underlying options vest.Income Taxes We account for income taxes using an asset and liability approach. Deferred tax assets and liabilities reflect the net tax effects of temporary differencesbetween the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities aremeasured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered orsettled. We record a valuation allowance to reduce our deferred tax assets to reflect the net amount that we believe is more likely than not to be realized.Realization of our deferred tax assets is dependent on the generation of future taxable income, the amount and timing of which are uncertain. The valuationallowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets arerecoverable. Based upon the weight of available evidence at December 31, 2018, we continue to maintain a full valuation allowance against all of ourdeferred tax assets after management considered all available evidence, both positive and negative, including but not limited to our historical operatingresults, income or loss in recent periods, cumulative income in recent years, forecasted earnings, future taxable income, and significant risk and uncertaintyrelated to forecasts. We recognize the tax effects of an uncertain tax position only if it is more likely than not that it will be sustained based solely on its technical merits as of thereporting date and only in an amount more likely than not that it will be sustained upon review by the tax authorities. We evaluate uncertain tax positions ona quarterly basis and adjust the liability for changes in facts and circumstances, such as new regulations or interpretations by the taxing authorities, newinformation obtained during a tax examination, significant amendment to an existing tax law, or resolution of an examination. To the extent that the final taxoutcome of these matters is different than the amounts recorded, such differences will impact the income tax provision in the period in which suchdetermination is made. The resolution of our uncertain income tax positions is dependent on uncontrollable factors such as law changes, new case law, andthe willingness of the income tax authorities to settle, including the timing thereof and other factors. Although we do not anticipate significant changes toour uncertain income tax positions in the next twelve months, items outside of our control could cause our uncertain income tax positions to change in thefuture, which would be recorded in our statements of operations. Interest and/or penalties related to income tax matters are recognized as a component ofincome tax expense.90 On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (“Tax Act”) that instituted fundamental changes to the taxation of multinationalcorporations. The Tax Act includes changes to the taxation of foreign earnings by implementing a dividend exemption system, expansion of the current anti-deferral rules, a minimum tax on low-taxed foreign earnings and new measures to deter base erosion. The Tax Act also includes a permanent reduction in thecorporate tax rate to 21%, repeal of the corporate alternative minimum tax, expensing of capital investment, and limitation of the deduction for interestexpense. Although the Tax Act is generally effective on January 1, 2018, GAAP requires recognition of the tax effects of new legislation during the reportingperiod that includes the enactment date, which was December 22, 2017. As a result of the impacts of the Tax Act, the SEC provided guidance that allows the Company to record provisional amounts for those impacts, with therequirement that the accounting be completed in a period not to exceed one year from the date of enactment. As a result, we previously provided aprovisional estimate of the effect of the Tax Act in our financial statements. In the fourth quarter of 2018, we completed our analysis to determine the effect ofthe Tax Act and no material adjustments were recognized as of December 31, 2018. See "Part II. Item 8. Financial Statements and Supplementary Data,Note 14. Income Taxes" in the accompanying Notes to the consolidated financial statements for more information regarding the impact of the Tax Act.Off-Balance Sheet ArrangementsWe have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.JOBS Act Accounting Election We were an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerginggrowth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as thosestandards apply to private companies. We irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and,therefore, were subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We also relied onother exemptions provided by the JOBS Act, including without limitation, providing an auditor’s attestation report on our system of internal controls overfinancial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act. Based on our public float at June 30, 2018, we ceased to be an emerging growth company at December 31, 2018 and, accordingly, we are required to complywith the auditor attestation requirements of Section 404 to include an opinion from our independent registered public accounting firm on the effectiveness ofour internal controls over financial reporting for this 2018 Annual Report on Form 10-K. 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 relate to interest rate risks. We had cash, cash equivalents andshort-term investments of $436.1 million as of December 31, 2018 and cash, cash equivalents and short-term investments of $374.1 million as of December31, 2017, which consists of bank deposits, money market funds and U.S. government bonds. Such interest-bearing instruments carry a degree of interest raterisk; however, historical fluctuations of interest income have not been significant.We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rateexposure. We have not historically been exposed to material risks due to changes in interest rates. Based on our investment positions as of December 31,2018, a hypothetical 100 basis point change in interest rates would not have material effect in the fair value of the portfolio. Any changes would only berealized if we sold the investments prior to maturity. 91 Item 8.Financial Statements and Supplementary DataCYTOMX THERAPEUTICS, INC.ANNUAL REPORT ON FORM 10-KINDEX TO AUDITED FINANCIAL STATEMENTS PageReports of Ernst & Young - Independent Registered Public Accounting Firm 93Report of PricewaterhouseCoopers - Independent Registered Public Accounting Firm 95Financial Statements Balance Sheets 96Statements of Operations and Comprehensive Loss 97Statements of Stockholders’ Equity 98Statements of Cash Flows 99Notes to Financial Statements 100 92 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of CytomX Therapeutics, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of CytomX Therapeutics, Inc. (the Company) as of December 31, 2018 and 2017, the related statements ofoperations and comprehensive loss, stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2018, and the relatednotes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financialposition of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the two years in the period endedDecember 31, 2018, in conformity with U.S. generally accepted accounting principles We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company'sinternal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 27, 2019 expressed an unqualifiedopinion thereon. Adoption of ASU No. 2014-09As discussed in Note 2 to the financial statements, the Company changed its method for recognizing revenue as a result of the adoption of AccountingStandards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), using the modified retrospective transition method effectiveJanuary 1, 2018. Basis for OpinionThese financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financialstatements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Companyin accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing proceduresto assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also includedevaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financialstatements. We believe that our audits provide a reasonable basis for our opinion. /s/ Ernst & Young LLPWe have served as the Company’s auditor since 2017.Redwood City, CaliforniaFebruary 27, 2019 93 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of CytomX Therapeutics, Inc. Opinion on Internal Control over Financial Reporting We have audited CytomX Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2018, based on criteria established in InternalControl—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria).In our opinion, CytomX Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as ofDecember 31, 2018, based on the COSO criteria.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets ofthe Company as of December 31, 2018 and 2017, the related statements of operations and comprehensive loss, stockholders' equity, and cash flows for eachof the two years in the period ended December 31, 2018, and the related notes and our report dated February 27, 2019 expressed an unqualified opinionthereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firmregistered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and theapplicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonableassurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining anunderstanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operatingeffectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. Webelieve that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reportingand the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal controlover financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permitpreparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are beingmade only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention ortimely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation ofeffectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliancewith the policies or procedures may deteriorate. /s/ Ernst & Young LLPRedwood City, CaliforniaFebruary 27, 201994 Report of Independent Registered Public Accounting Firm To the Board of Directors and Stockholders of CytomX Therapeutics, Inc. In our opinion, the statements of operations and comprehensive loss, of stockholders’ equity and of cash flows for the year ended December 31, 2016 present fairly, in all materialrespects, the results of operations and cash flows of CytomX Therapeutics, Inc. for the year ended December 31, 2016, in conformity with accounting principles generally acceptedin the United States of America. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financialstatements based on our audit. We conducted our audit of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significantestimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaMarch 2, 2017 95 CYTOMX THERAPEUTICS, INC.BALANCE SHEETS(in thousands, except share and per share data) December 31, December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $247,577 $177,548 Short-term investments 188,550 196,562 Accounts receivable 97 10,139 Prepaid expenses and other current assets 9,251 4,352 Total current assets 445,475 388,601 Property and equipment, net 6,934 4,218 Intangible assets, net 1,458 1,604 Goodwill 949 949 Restricted cash 917 917 Other assets 1,375 1,355 Total assets $457,108 $397,644 Liabilities, Convertible Preferred Stock and Stockholders' Equity Current liabilities: Accounts payable $5,132 $4,205 Accrued liabilities 26,724 16,382 Income tax payable 13,339 1 Deferred revenues, current portion 52,713 40,559 Total current liabilities 97,908 61,147 Deferred revenue, net of current portion 225,267 264,704 Other long-term liabilities 3,050 1,897 Total liabilities 326,225 327,748 Commitments and contingencies (Note 11) Stockholders' equity Convertible preferred stock, $0.00001 par value; 10,000,000 shares authorized at December 31, 2018 and 2017; no shares issued and outstanding at December 31, 2018 and 2017, respectively — — Common stock, $0.00001 par value; 75,000,000 shares authorized at December 31, 2018 and 2017; 45,083,209 and 38,478,560 shares issued and outstanding at December 31, 2018 and 2017, respectively 1 1 Additional paid-in capital 445,956 289,454 Accumulated other comprehensive loss (93) (94)Accumulated deficit (314,981) (219,465)Total stockholders' equity 130,883 69,896 Total liabilities, convertible preferred stock and stockholders' equity $457,108 $397,644 See accompanying notes to financial statements 96 CYTOMX THERAPEUTICS, INC.STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS(in thousands, except share and per share data) Year Ended December 31, 2018 2017 2016 Revenues $59,502 $71,623 $12,845 Revenues from related parties — — 2,198 Total revenues 59,502 71,623 15,043 Operating expenses: Research and development 103,866 92,277 54,755 General and administrative 33,510 25,605 19,874 Total operating expenses 137,376 117,882 74,629 Loss from operations (77,874) (46,259) (59,586)Interest income 7,641 2,674 736 Other income (expense), net (68) (27) (69)Loss before income taxes (70,301) (43,612) (58,919)Provision for (benefit from) income taxes 14,303 (513) (19)Net loss $(84,604) $(43,099) $(58,900)Net loss per share, basic and diluted $(2.03) $(1.16) $(1.63)Shares used to compute net loss per share, basic and diluted 41,664,382 37,166,830 36,234,732 Other comprehensive loss: Changes in unrealized gain (losses) on investments 1 (67) 49 Total comprehensive loss $(84,603) $(43,166) $(58,851) See accompanying notes to financial statements 97 CYTOMX THERAPEUTIC, INC.Statements of Stockholders’ Equity(in thousands, except share and per share data) Accumulated Additional Other Total Common Stock Stockholder Paid-in Comprehensive Accumulated Stockholders' Shares Amount Notes Capital Income/(Loss) Deficit Equity Balance at December 31, 2015 36,033,209 $1 $(78) $243,687 $(76) $(117,466) $126,068 Exercise of stock options 414,396 — — 643 — — 643 Issuance of common stock under the Employee StockPurchase Plan 31,564 — — 287 — — 287 Issuance of common stock in connection with services 11,000 — — 159 — — 159 Repayment on stockholder note — — 78 — — — 78 Stock-based compensation — — — 10,095 — — 10,095 Other comprehensive income — — — — 49 — 49 Net loss — — — — — (58,900) (58,900)Balance at December 31, 2016 36,490,169 1 — 254,871 (27) (176,366) 78,479 Exercise of stock options 764,576 — — 3,165 — — 3,165 Issuance of common stock under the Employee StockPurchase Plan 67,746 — — 674 — — 674 Issuance of common stock pursuant to the Amgen StockPurchase Agreement 1,156,069 — — 19,457 — — 19,457 Stock-based compensation — — — 11,287 — — 11,287 Other comprehensive loss — — — — (67) — (67)Net loss — — — — — (43,099) (43,099)Balance at December 31, 2017 38,478,560 1 — 289,454 (94) (219,465) 69,896 Impact of adoption of new accounting pronouncements — — — — — (10,912) (10,912)Issuance of common stock in follow-on offering, net ofissuance costs 5,867,347 — — 134,596 — — 134,596 Exercise of stock options 673,382 — — 4,156 — — 4,156 Issuance of common stock under the Employee StockPurchase Plan 63,920 — — 872 — — 872 Stock-based compensation — — — 16,878 — — 16,878 Other comprehensive income — — — — 1 — 1 Net loss — — — — — (84,604) (84,604)Balance at December 31, 2018 45,083,209 $1 $— $445,956 $(93) $(314,981) $130,883 See accompanying notes to financial statements 98 CYTOMX THERAPEUTICS, INC.STATEMENTS OF CASH FLOWS(in thousands) Year Ended December 31, 2018 2017 2016 Cash flows from operating activities: Net loss $(84,604) $(43,099) $(58,900)Adjustments to reconcile net loss to net cash (used) provided by operating activities: Loss/(gain) on disposal of property and equipment — 17 (47)Depreciation and amortization 1,884 1,645 1,733 Amortization of premium (accretion of discount) on investments (1,701) 371 1,662 Stock-based compensation expense 16,878 11,287 10,095 Issuance of common stock in connection with services — — 159 Non-cash acquisition of in process research and development asset charged to expense — 10,700 — Deferred income taxes — (513) 6 Changes in operating assets and liabilities Accounts receivable 10,042 (7,980) (1,787)Related party accounts receivable — 154 218 Prepaid expenses and other current assets (4,899) (456) (1,597)Other assets (20) 1,618 (2,609)Accounts payable 261 (2,441) 1,765 Accrued liabilities and other liabilities 24,833 9,157 3,953 Deferred revenue (38,195) 189,913 43,317 Net cash (used in) provided by operating activities (75,521) 170,373 (2,032)Cash flows from investing activities: Purchases of property and equipment (3,788) (1,559) (2,176)Proceeds from sales of assets — — 52 Purchases of short term investments (204,601) (218,707) (121,517)Maturities of short term investments 214,315 99,000 169,500 Net cash provided by (used in) investing activities 5,926 (121,266) 45,859 Cash flows from financing activities: Proceeds from issuance of common stock, net of issuance costs 134,596 19,957 — Proceeds from employee stock purchases and exercise of stock options 5,028 3,839 930 Proceeds from stockholder notes — — 78 Payment of deferred offering costs — — (12)Net cash provided by financing activities 139,624 23,796 996 Net increase in cash and cash equivalents 70,029 72,903 44,823 Cash, cash equivalents and restricted cash, beginning of year 178,465 105,562 60,739 Cash, cash equivalents and restricted cash, end of year $248,494 $178,465 $105,562 Supplemental disclosures of noncash investing and financing items: Purchases of property and equipment in accounts payable and accrued liabilities $1,027 $361 $473 See accompanying notes to financial statements 99CytomX Therapeutics, Inc.Notes to Financial Statements 1. Description of the BusinessCytomX Therapeutics, Inc. (the “Company”) is a clinical-stage, oncology-focused biopharmaceutical company with a vision of transforming lives with safer,more effective therapeutics. The Company is pioneering a novel class of investigational antibody therapeutics, based on its Probody™ therapeutictechnology platform, for the treatment of cancer. The Probody therapeutic approach is designed to more specifically target antibody therapeutics to the tumormicroenvironment and minimize drug activity in healthy tissue and in circulation. The Company is located in South San Francisco, California and wasincorporated in the state of Delaware in September 2010.Stock OfferingIn July 2018, the Company completed an underwritten public offering of 5,867,347 shares of common stock at a price of $24.50 per share, which included765,306 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The aggregate net proceedsreceived by the Company from the offering were approximately $134.6 million after deducting underwriting discounts and commissions and offeringexpenses of $9.2 million.Private PlacementOn September 29, 2017, the Company and Amgen entered into the Purchase Agreement, pursuant to which the Company agreed to issue and sell to Amgen1,156,069 shares (the “Shares”) of its common stock, for an aggregate cash purchase price of $20 million. The Shares were issued and sold to Amgen at a priceper share of $17.30, using a calculation method of 20-day Volume Weighted Average Price (VWAP). The Closing of the sale and issuance of the Shares,including the delivery of the aggregate purchase price, occurred on October 4, 2017.2. Basis of Presentation and Summary of Significant Accounting PoliciesBasis of PresentationThe accompanying financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America(“U.S. GAAP”).Use of EstimatesThe preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues andexpenses during the reporting periods. Actual results could differ from those estimates.Concentration of Credit Risk and Other Risks and UncertaintiesThe Company is subject to a number of risks similar to other biopharmaceutical companies in the early stage, including, but not limited to, the need to obtainadequate additional funding, possible failure of preclinical testing or clinical trials, the need to obtain marketing approval for its product candidates,competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s products, andprotection of proprietary technology. If the Company does not successfully obtain regulatory approval, commercialize or partner any of its productcandidates, it will be unable to generate revenue from product sales or achieve profitability.Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents, short-term investments andaccounts receivable. Substantially all the Company’s cash is held by one financial institution. Such deposits may, at times, exceed federally insured limits.The Company invests its cash equivalents and short-term investments in highly rated money market funds and its short-term investments in U.S. GovernmentBonds.100CytomX Therapeutics, Inc.Notes to Financial Statements Customers and collaboration partners who represent 10% or more of the Company’s total revenue during each period presented or accounts receivablebalance at each respective balance sheet date are as follows (in thousands): Revenue Accounts Receivable, net Year Ended December 31, December 31, 2018 2017 2016 2018 2017 AbbVie Ireland Unlimited Company $18,997 $19,434 $3,268 — ** Bristol-Myers Squibb Company 32,780 36,492 9,577 97 10,126 ImmunoGen, Inc. * 12,503 — — — Pfizer Inc. * * 2,198 — ** Total revenue from customers who represent 10% or more of the Company's total revenue $51,777 $68,429 $15,043 $97 $10,126 *Revenue from the customer was less than 10% of the Company’s total revenue for the respective periods presented.**Accounts receivable balance from the customer was less than 10% of the Company’s total accounts receivable as of the respective periods presented. All of the Company’s customers are located in the United States of America. SegmentsManagement has determined that it has one business activity and operates as one operating segment as it only reports financial information on an aggregatebasis to its chief executive officer and chief financial officer, who are the Company’s chief operating decision makers. All long-lived assets are maintained inthe United States of America.Cash and Cash EquivalentsThe Company considers all highly liquid investments purchased with original maturities of three months or less at the date of purchase to be cashequivalents. Restricted CashRestricted cash represents a standby letter of credit issued pursuant to an office lease entered in December 2015.The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the balance sheets that sum to the total of theamounts shown in the statement of cash flows (in thousands): December 31 2018 2017 Cash and cash equivalents $247,577 $177,548 Restricted cash 917 917 $248,494 $178,465 Short-term InvestmentsAll investments have been classified as “available-for-sale” and are carried at fair value as determined based upon quoted market prices or pricing models forsimilar securities at period end. Generally, those investments with contractual maturities greater than 12 months are considered long-terminvestments. Unrealized gains and losses, deemed temporary in nature, are reported as a component of accumulated other comprehensive income (loss), netof tax.A decline in the fair value of any security below cost that is deemed other than temporary results in a charge to earnings and the corresponding establishmentof a new cost basis for the security. The amortized cost of securities is adjusted for amortization of premiums and accretion of discounts to maturity. Dividendand interest income are recognized when earned. Realized gains and losses are included in earnings and are derived using the specific identification methodfor determining the cost of securities sold. 101CytomX Therapeutics, Inc.Notes to Financial Statements Property and Equipment, netProperty and equipment are recorded at cost net of accumulated depreciation and amortization. Depreciation is provided using the straight-line method overthe estimated useful lives of the respective assets. The useful lives of property and equipment are as follows: Machinery and equipment 5 yearsComputer equipment and software 3 yearsFurniture and fixtures 3 yearsLeasehold improvements Shorter of remaining lease term orestimated life of the assets Maintenance and repairs that do not extend the life or improve the asset are expensed when incurred.Goodwill and Intangible AssetsGoodwill represents the excess of the purchase price paid over the fair value of tangible and identifiable intangible assets acquired in business combinations.Goodwill and other intangible assets with indefinite lives are not amortized, but are assigned to reporting units and tested for impairment annually, orwhenever there is an impairment indicator. Intangible assets are comprised of in-process research and development. The Company assesses impairmentindicators annually as of December 31 or more frequently, if a change in circumstances or the occurrence of events suggests the remaining value may not berecoverable. Intangible assets that are not deemed to have an indefinite life are amortized over their estimated useful lives. There was no impairment ofgoodwill or intangible assets identified during the years ended December 31, 2018, 2017 and 2016.Impairment of Long-Lived AssetsLong-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) maynot be recoverable and prior to any goodwill impairment test. An impairment loss is recognized when the total of estimated undiscounted future cash flowsexpected to result from the use of the asset (or asset group) and its eventual disposition is less than its carrying amount. Impairment, if any, would be assessedusing discounted cash flows or other appropriate measures of fair value. There was no impairment of long-lived assets during the years ended December 31,2018, 2017 and 2016. Revenue RecognitionOn January 1, 2018, the Company adopted Accounting Standards Update No. 2014-09, Revenue from Contracts with Customers (Topic 606), whichsupersedes the revenue recognition requirements in Accounting Standards Codification (ASC) Topic 605, Revenue Recognition (ASC 605), using themodified retrospective transition method applied to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginningafter January 1, 2018 are presented under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with ourhistoric accounting under ASC 605. The Company’s revenues are primarily derived through its license, research, development and commercialization agreements. The terms of these types ofagreements may include (i) licenses for the Company’s technology or programs, (ii) research and development services, and (iii) services or obligations inconnection with participation in research or steering committees. Payments to the Company under these arrangements typically include one or more of thefollowing: nonrefundable upfront and license fees, research funding, milestone and other contingent payments to the Company for the achievement ofdefined collaboration objectives and certain preclinical, clinical, regulatory and sales-based events, as well as royalties on sales of any commercializedproducts. In the event that the Company receives non-cash consideration such as in the form of a research license and research support services from thecounterparty, under ASC 606, the transaction price of a non-monetary exchange that has commercial substance is estimated based on the fair value of thenon-cash consideration received, which may be determined through a valuation analysis. The Company assesses whether the promises in its arrangements with customers are considered distinct performance obligations that should be accounted forseparately. Judgment is required to determine whether the license to the Company’s intellectual property is distinct from the research and developmentservices or participation on steering committees. 102CytomX Therapeutics, Inc.Notes to Financial Statements The transaction price in each arrangement is allocated to the identified performance obligations based on the standalone selling price (“SSP”) of each distinctperformance obligation, which requires judgment. In instances where SSP is not directly observable, such as when a license or service is not sold separately,SSP is determined using information that may include market conditions and other observable inputs. Due to the early stage of the Company’s licensedtechnology, the license of such technology is typically combined with research and development services and steering committee participation as oneperformance obligation. The Company’s performance creates an asset that does not have an alternative use to the customer and the Company has anenforceable right to payment at all times for performance completed to date. In these cases, the Company utilizes judgment to assess the nature of thecombined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, theappropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, ifnecessary, adjusts the measure of performance and related revenue recognition. The Company’s collaboration and license agreements may include contingent payments related to specified research, development and regulatorymilestones. Such payments are typically payable under the collaborations when the collaboration partner claims or selects a target, or initiates or advances acovered product candidate in preclinical or clinical development, upon submission for marketing approval of a covered product with regulatory authorities,or upon receipt of actual marketing approvals of a covered product or for additional indications. At each reporting date, the Company evaluates whether themilestones are considered probable of being reached and estimates the amount to be included in the transaction price by using the most likely amountmethod. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestonepayments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved untilthose approvals are received. Once determined, the transaction price is allocated to each performance obligation on a relative SSP basis. At the end of eachsubsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary,adjusts its estimate of the overall transaction price. The Company’s collaboration and license agreements may also include contingent payments related to sales-based milestones. Sales-based milestones aretypically payable when annual sales of a covered product reach specified levels. Sales-based milestones are recognized at the later of when the associatedperformance obligation has been satisfied or when the sales occur. Unlike other contingency payments, such as regulatory milestones, sales-based milestonesare not included in the transaction price based on estimates at the inception of the contract, but rather, are included when the sales or usage occur.AbbVie Ireland Unlimited Company (“AbbVie”), one of the Company’s collaboration partners, entered into a license agreement with Seattle Genetics, Inc.(“SGEN”) to license certain intellectual property rights. As part of the Company’s collaboration agreement with AbbVie, the Company pays SGEN sublicensefees. These sublicense fees are treated as reductions to the transaction price and combined with the performance obligation to which they relate. Milestonepayments, when considered probable of being reached and when a significant revenue reversal would not be probable of occurring, are also recorded net ofthe associated sublicense fees and included in the transaction price.Comprehensive LossComprehensive loss represents all changes in stockholders’ equity except those resulting from distributions to stockholders. The Company’s unrealized gainsand losses on short-term investments represent the only component of other comprehensive income (loss) that is excluded from the reported net loss.Contract BalancesCustomer payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until theCompany performs its obligations under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’sright to consideration is unconditional.103CytomX Therapeutics, Inc.Notes to Financial Statements Stock-Based CompensationThe Company measures its stock-based awards made to employees based on the fair values of the awards as of the grant date using the Black-Scholes option-pricing model. Stock-based compensation expense is recognized over the requisite service period using the ratable method and is based on the value of theportion of stock-based payment awards that is ultimately expected to vest. Prior to 2017, the Company’s stock-based compensation is reduced for theestimated forfeitures at the date of grant and revised in subsequent periods if actual forfeitures differ from those estimates. After the adoption of ASU No.2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting (“ASU 2016-09”) in 2017,forfeitures are recognized as they occur.Stock-based compensation expense for options granted to non-employees as consideration for services received is measured on the date of performance at thefair value of the consideration received or the fair value of the equity instruments issued, using the Black-Scholes option-pricing model, whichever can bemore reliably measured. Compensation expense for options granted to non- employees is periodically remeasured as the underlying options vest.Income TaxesThe Company accounts for income taxes using an asset and liability approach. Deferred tax assets and liabilities reflect the net tax effects of temporarydifferences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilitiesare measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered orsettled. The Company records a valuation allowance to reduce its deferred tax assets to reflect the net amount that it believes as more likely than not to berealized. Realization of the deferred tax assets is dependent on the generation of future taxable income, the amount and timing of which are uncertain. Thevaluation allowance requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred taxassets are recoverable. Based upon the weight of available evidence at December 31, 2018, the Company continues to maintain a full valuation allowanceagainst all of its deferred tax assets after management considered all available evidence, both positive and negative, including but not limited to itshistorical operating results, income or loss in recent periods, cumulative income in recent years, forecasted earnings, future taxable income, and significantrisk and uncertainty related to forecasts.The Company recognizes the tax effects of an uncertain tax position only if it is more likely than not that it will be sustained based solely on its technicalmerits as of the reporting date and only in an amount more likely than not that it will be sustained upon review by the tax authorities. The Companyevaluates uncertain tax positions on a quarterly basis and adjust the liability for changes in facts and circumstances, such as new regulations orinterpretations by the taxing authorities, new information obtained during a tax examination, significant amendment to an existing tax law, or resolution ofan examination. To the extent that the final tax outcome of these matters is different than the amounts recorded, such differences will impact the income taxprovision in the period in which such determination is made. The resolution of its uncertain income tax positions is dependent on uncontrollable factors suchas law changes, new case law, and the willingness of the income tax authorities to settle, including the timing thereof and other factors. Although theCompany does not anticipate significant changes to its uncertain income tax positions in the next twelve months, items outside of its control could cause itsuncertain income tax positions to change in the future, which would be recorded in its statements of operations. Interest and/or penalties related to incometax matters are recognized as a component of income tax expense.Accrued Research and Development CostsThe Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which includethe conduct of preclinical and clinical studies, and contract manufacturing activities. The Company records the estimated costs of research and developmentactivities based upon the estimated amount of services provided but not yet invoiced, and includes these costs in accrued liabilities in the balance sheets andwithin research and development expense in the statements of operations. These costs are a significant component of the Company’s research anddevelopment expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreementsestablished with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining theaccrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has notexperienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed may varyfrom the Company’s estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in material changes to theCompany’s accruals could materially affect the Company’s results of operations.104CytomX Therapeutics, Inc.Notes to Financial Statements Research and development expenses include costs directly attributable to the conduct of research and development programs, including the cost of salaries,payroll taxes, employee benefits, materials, supplies, depreciation on and maintenance of research equipment, the cost of services provided by outsidecontractors, and the allocated portions of facility costs, such as rent, utilities, insurance, repairs and maintenance, depreciation, and general support services.All costs associated with research and development are expensed as incurred.Reclassifications Certain reclassifications have been made to prior period amounts to conform to current period presentation. Such reclassifications have no effect on revenues,loss from operations or net loss as previously reported. 3. Adopted and Recent Accounting PronouncementsAdopted Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts withCustomers (Topic 606), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods orservices to customers. ASU 2014-09 replaced most existing revenue recognition guidance in U.S. GAAP. The standard permits the use of either theretrospective or cumulative effect transition method. Additionally, in March 2016, the FASB issued ASU No. 2016-08, Revenue from Contracts withCustomers (Topic 606): Principal versus Agent Considerations (Reporting Revenue Gross versus Net), which clarifies the implementation guidance onprincipal versus agent considerations in ASU No. 2014-09. In April 2016, the FASB issued ASU No. 2016-10, Revenue from Contracts with Customers (Topic606): Identifying Performance Obligations and Licensing, which clarifies certain aspects of identifying performance obligations and licensingimplementation guidance. In May 2016, the FASB issued ASU No. 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-ScopeImprovements and Practical Expedients, which relates to disclosures of remaining performance obligations, as well as other amendments to guidance oncollectability, non-cash consideration and the presentation of sales and other similar taxes collected from customers. These standards (collectivelyAccounting Standard Codification Topic 606 (“ASC 606”) have the same effective date and transition date of January 1, 2018. The Company adopted ASC606 on January 1, 2018, using the modified retrospective transition method. The Company elected to use the practical expedient for contract modificationswhereby the aggregate effect of all modifications that occurred prior to the transition date can be reflected when identifying performance obligations anddetermining and allocating the transaction price.The Company evaluated its contracts with customers under ASC 606. The impact of adopting ASC 606 on the Company’s results of operations, financialcondition, and cash flows varies depending on the contract. The Company recorded adjustments upon the adoption of ASC 606 as a result of the differentaccounting treatment of its revenue agreements with respect to the inclusion of milestone payments in the initial transaction price and the method to be usedto recognize upfront fees. Under the prior revenue recognition standard, milestone payments were recognized when earned and upfront fees were generallyrecognized as revenue over the research term on a straight-line basis if another method of revenue recognition did not more clearly match the pattern ofdelivery of goods or services to the customer. Under ASC 606, milestone payments are included in the initial transaction price when it is probable that asignificant reversal of the milestone payment will not occur. In addition, the Company can no longer default to the straight-line method as the default methodin recognizing revenue for goods or services delivered over time. As such, the amount and timing of revenue recognition for its collaboration agreementschanged under ASC 606. The impact of the adoption of ASC 606 was an increase in the balance of deferred revenue and an increase in the accumulateddeficit balance of $10.9 million on January 1, 2018 in the Company’s Balance Sheet. 105CytomX Therapeutics, Inc.Notes to Financial Statements The following table summarizes the impact of adopting ASC 606 on select balance sheet line items (in thousands): As of December 31, 2018 BalancesUnder ASC605 Adjustments As ReportedUnder ASC606 Liabilities Income tax payable $14,886 $(1,547) $13,339 Other long-term liabilities 3,249 (199) 3,050 Deferred revenue - current 45,288 7,425 52,713 Deferred revenue - long-term 214,790 10,477 225,267 Stockholders' Equity Accumulated deficit (298,825) (16,156) (314,981) Three Months Ended December 31, 2018 BalancesUnder ASC605 Adjustments As ReportedUnder ASC606 Revenue $10,022 $1,449 $11,471 Loss from Operations (27,260) 1,449 (25,811)Loss before income taxes (24,770) 1,449 (23,321)Provision for income taxes 11,566 (2,654) 8,912 Net loss (36,336) 4,103 (32,233)Net loss per share, basic and diluted (0.81) 0.09 (0.72) Year Ended December 31, 2018 BalancesUnder ASC605 Adjustments As ReportedUnder ASC606 Revenue $65,966 $(6,464) $59,502 Loss from Operations (71,410) (6,464) (77,874)Loss before income taxes (63,837) (6,464) (70,301)Provision for income taxes 16,049 (1,746) 14,303 Net loss (79,886) (4,718) (84,604)Net loss per share, basic and diluted (1.92) (0.11) (2.03) Year Ended December 31, 2018 BalancesUnder ASC605 Adjustments As ReportedUnder ASC606 Cash flows from operating activities: Net loss $(79,886) $(4,718) $(84,604)Changes in operating assets and liabilities: Accrued liabilities, income tax payable and other long-term liabilities 26,579 (1,746) 24,833 Deferred revenue (44,659) 6,464 (38,195) 106CytomX Therapeutics, Inc.Notes to Financial Statements In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. Thenew standard provides clarification on the cash flow presentation and classification of certain transactions, including debt prepayment or extinguishment,settlement of certain debt instruments, contingent consideration payments made after a business combination, proceeds from the settlement of certaininsurance claims and distributions received from equity method investees. The Company adopted this standard in its first quarter ended March 31, 2018. Theadoption of this standard had no significant impact on the Company’s financial statements.In November 2016, the FASB issued ASU No. 2016-18, Restricted Cash, Statement of Cash Flows (Topic 230). ASU 2016-18 requires that a statement of cashflows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cashequivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalentswhen reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. The Company adopted this standard in itsfirst quarter ended March 31, 2018. The Company has revised the presentation of restricted cash in its Statements of Cash Flows and provided the additionaldisclosures required under this standard.In May 2017, the FASB issued ASU No. 2017-09, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. This accountingstandard update provides clarity when a change to terms or conditions of a share-based payment award must be accounted for as a modification. The newguidance requires modification accounting if the vesting condition, fair value or the award classification is not the same both before and after a change to theterms and conditions of the award. The Company adopted this standard on January 1, 2018. The adoption of this standard did not impact on the Company’sfinancial position or results of operations for the year ended December 31, 2018.In March 2018, the FASB issued ASU No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting BulletinNo. 118 (SEC Update). This standard adds various SEC paragraphs pursuant to the issuance of SEC Staff Accounting Bulletin No. 118, which clarifies theSEC Staff’s views on income tax accounting implications of the Tax Cuts and Jobs Act (the “Tax Act”). It requires reporting of provisional amounts forspecific income tax effects of the Tax Act for which the accounting under ASC Topic 740 will be incomplete, but a reasonable estimate can be determined.For provisional amounts for income tax effects of the Tax Act for which a reasonable estimate cannot be determined, ASC Topic 740 should be applied basedon provisions of the tax laws that were in effect immediately prior to the Tax Act being enacted. Provisional amounts for income tax effects for which areasonable estimate cannot be determined would be reported in the first reporting period in which a reasonable estimate can be determined. The provisionalamounts during a measurement period do not extent beyond one year of the enactment date. As a result, the Company previously provided a provisionalestimate of the effect of the Tax Act. In the fourth quarter of 2018, the Company completed the analysis to determine the effect of the Tax Act. No materialadjustments were recorded as of December 31, 2018.Recent Accounting Pronouncements In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), that amends the guidance for the accounting and disclosure of leases. This newstandard requires that lessees recognize on the balance sheet the assets and liabilities that arise from leases, including leases classified as operating leasesunder current GAAP, and disclose qualitative and quantitative information about leasing arrangements. The new standard requires a modified retrospectiveapproach to adoption and is effective for interim and annual periods beginning after December 15, 2018 but may be adopted earlier. In July 2018, the FASBfurther amended this standard to allow for a new transition method that provides the option to use the effective date as the date of initial application. TheCompany will adopt this standard using the modified retrospective approach on the effective date of January 1, 2019.The Company has elected the package of practical expedients permitted under ASC 842. Accordingly, the Company continues to account for its existingoperating leases as operating leases under the new guidance, without reassessing (a) whether the contracts contain a lease under ASC 842, (b) whetherclassification of the operating leases would be different in accordance with ASC 842, or (c) whether the unamortized initial direct costs before transitionadjustments would have met the definition of initial direct costs in ASC 842 at lease commencement. In addition, the Company also elected the short-termlease practical expedients allowed under the standard. As a result of the adoption of ASC 842, the Company expects to recognize on January 1, 2019 on itsbalance sheet a right-of-use asset and a lease liability of approximately $27 million to $32 million. This standard will not have material impact on theCompany’s results of operations or cash flows. 107CytomX Therapeutics, Inc.Notes to Financial Statements In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.The new standard changes the impairment model for most financial assets and certain other instruments. Under the new standard, entities holding financialassets and net investment in leases that are not accounted for at fair value through net income are to be presented at the net amount expected to be collected.An allowance for credit losses will be a valuation account that will be deducted from the amortized cost basis of the financial asset to present the net carryingvalue at the amount expected to be collected on the financial asset. The new standard will be effective for the Company on January 1, 2020. The Company iscurrently evaluating the impact of this new guidance. In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment. The newstandard simplifies the measurement of goodwill by eliminating the Step 2 impairment test. Step 2 measures a goodwill impairment loss by comparing theimplied fair value of a reporting unit's goodwill with the carrying amount of that goodwill. The new guidance requires an entity to compare the fair value of areporting unit with its carrying amount and recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fairvalue. Additionally, an entity should consider income tax effects from any tax-deductible goodwill on the carrying amount of the reporting unit whenmeasuring the goodwill impairment loss, if applicable. The new guidance becomes effective for goodwill impairment tests in fiscal years beginning afterDecember 15, 2019, though early adoption is permitted. The Company is currently evaluating the impact of this new guidance. In February 2018, the FASB issued ASU No. 2018-02, Income Statement - Reporting Comprehensive Income (Topic 220): Reclassification of Certain TaxEffects from Accumulated Other Comprehensive Income. The amendments in this standard allows a reclassification from accumulated other comprehensiveincome to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. The new standard will be effective for the Company on January1, 2019. The Company does not expect the adoption of this ASU will have a material impact on its financial statements. In June 2018, the FASB issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based PaymentAccounting. The amendments in this ASU expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services fromnonemployees. This new guidance is effective for the Company on January 1, 2019 with early adoption permitted. The Company does not expect theadoption of this ASU will have a material impact on its financial statements. In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820). The amendments in this ASU modify the disclosure requirementson fair value measurements in Topic 820, Fair Value Measurement. Various disclosure requirements have been removed, including the amount of and reasonsfor transfers between Level 1 and Level 2 of the fair value hierarchy, the policy for timing of transfers between levels, the valuation processes for Level 3 fairvalue measurements held at the end of the reporting period. The ASU also modified various disclosure requirements and added some disclosure requirementsfor Level 3 fair value measurements. The amendments in this ASU are effective for the Company on January 1, 2020. The additional disclosures on changesin unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and thenarrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initialfiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. An entity is permitted toearly adopt any removed or modified disclosures upon issuance of this ASU and delay adoption of the additional disclosures until their effective date. TheCompany does not expect the adoption of this ASU will have a material impact on its financial statements. In August 2018, the FASB issued ASU No. 2018-15, Intangibles-Goodwill and Other- Internal-Use Software (Subtopic 350-40). The amendments in thisASU on the accounting for implementation, setup and other upfront costs (collectively “implementation costs”) apply to entities that are a customer in ahosting arrangement. The amendments under this ASU align the requirements for capitalizing implementation costs incurred in a hosting arrangement that isa service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. Accordingly, theamendments in this ASU require an entity in a hosting arrangement that is a service contract to follow the guidance in Subtopic 350-40 to determine whichimplementation costs to expense. They also require an entity to expense the capitalized implementation costs of a hosting arrangement that is a servicecontract over the term of the hosting arrangement. This ASU is effective for the Company on January 1, 2020. The Company is currently evaluating theimpact of this new guidance. 108CytomX Therapeutics, Inc.Notes to Financial Statements In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808): Clarifying the interaction between Topic 808 and Topic606. The amendments in this ASU targeted improvements to generally accepted accounting principles for collaborative arrangements by clarifying thatcertain transactions between collaborative arrangement participants should be accounted for as revenue under Topic 606 when the collaborative arrangementparticipant is a customer in the context of a unit of account. In those situations, all the guidance in Topic 606 should be applied, including recognition,measurement, presentation, and disclosure requirements. In addition, unit-of-account guidance in Topic 808 was aligned with the guidance in Topic 606(that is, a distinct good or service) when an entity is assessing whether the collaborative arrangement or a part of the arrangement is within the scope of Topic606. The ASU is effective for the Company on January 1, 2020, and interim periods within those fiscal years. Early adoption is permitted. The Company iscurrently evaluating the impact of this new guidance. 4. Net Loss Per Share Attributable to Common Stockholders Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Diluted net loss per share attributable to common stockholders is calculated using theweighted-average number of common shares outstanding, plus potential dilutive common stock during the period. Diluted net loss per share attributable tocommon stockholders is the same as basic net loss per share attributable to common stockholders since the effect of the potentially dilutive securities is anti-dilutive. The following weighted-average outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share astheir effect would have been anti-dilutive: Year Ended December 31, 2018 2017 2016 Options to purchase common stock 7,478,755 6,891,123 6,086,939 5. Fair Value Measurements and Short-Term InvestmentsIn accordance with Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures, the Company determines the fair value offinancial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value,as follows: •Level I: Inputs which include quoted prices in active markets for identical assets and liabilities. •Level II: Inputs other than Level I that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quotedprices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially thefull term of the assets or liabilities. •Level III: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets orliabilities.The carrying amounts of the Company’s financial instruments, including restricted cash, accounts receivable, accounts payable and accrued liabilitiesapproximate fair value due to their relatively short maturities. The Company’s financial instruments consist of Level I and II assets. Level I assets consistprimarily of highly liquid money market funds, some of which is included in restricted cash and U.S. government bonds that are included in short-terminvestments.109CytomX Therapeutics, Inc.Notes to Financial Statements The following tables set forth the fair value of the Company’s financial instruments subject to fair value measurements on a recurring basis and the level ofinputs used in such measurements (in thousands): December 31, 2018 ValuationHierarchy AmortizedCost GrossUnrealizedHoldingGains GrossUnrealizedHoldingLosses AggregateFair Value Assets Money market funds Level I $226,979 $— $— $226,979 Restricted cash (money market funds) Level I 917 — — 917 U.S. Government bonds Level I 188,616 — (66) 188,550 Total Securities $416,512 $— $(66) $416,446 December 31, 2017 ValuationHierarchy AmortizedCost GrossUnrealizedHoldingGains GrossUnrealizedHoldingLosses AggregateFairValue Assets Money market funds Level I $164,440 $— $— $164,440 Restricted cash (money market funds) Level I 917 — — 917 U.S. Government bonds Level I 196,629 — (67) 196,562 Total Securities $361,986 $— $(67) $361,919 No securities have contractual maturities of longer than one year. 6. Property and EquipmentProperty and equipment, net consisted of the following (in thousands): December 31 2018 2017 Machinery and equipment $10,498 $7,162 Computer equipment and software 955 897 Furniture and fixtures 749 643 Leasehold improvements 893 701 Construction in progress 785 23 13,880 9,426 Less: accumulated depreciation and amortization (6,946) (5,208) $6,934 $4,218 Depreciation and amortization expense was $1.7 million, $1.5 million and $1.7 million for the years ended December 31, 2018, 2017 and 2016, respectively. 7. Goodwill and Intangible AssetsGoodwill and in-process research and development assets resulted from a series of integrated financing transactions in 2010 that was accounted for as abusiness combination. The in-process research and development relates to the Company’s proprietary Probody Platform and was accounted for as anindefinite-lived intangible asset until the underlying project was completed or abandoned. In connection with the collaboration agreements, the Companybegan amortizing the intangible asset in 2017. The intangible asset is being amortized over the estimated lives of the patents which average 12 years. Theamortization for the year ended December 31, 2018 and 2017 was $0.1 million and $0.1 million, respectively.110CytomX Therapeutics, Inc.Notes to Financial Statements Goodwill and intangible assets consisted of the following (in thousands): Goodwill December 31, 2018 2017 Goodwill $949 $949 Intangible assets December 31, 2018 2017 In-process research and development $1,750 $1,750 Less accumulated amortization (292) (146) $1,458 $1,604 8. Accrued LiabilitiesAccrued liabilities consisted of the following (in thousands): December 31, 2018 2017 Research and clinical expenses $18,520 $10,068 Payroll and related expenses 6,585 4,526 Legal and professional expenses 830 1,523 Other accrued expenses 789 265 Total $26,724 $16,382 9. Research and Collaboration Agreements The following table summarizes the revenue by collaboration partner (in thousands): Year Ended December 31, 2018 2017 2016 AbbVie $18,997 $19,434 $3,268 Amgen 4,899 1,311 — BMS 32,780 36,492 9,577 ImmunoGen 1,471 12,503 — Pfizer 1,355 1,883 2,198 Total Revenue $59,502 $71,623 $15,043 AbbVie Ireland Unlimited CompanyIn April 2016, the Company and AbbVie entered into two agreements, a CD71 Co-Development and Licensing Agreement (the “CD71 Agreement”) and aDiscovery Collaboration and Licensing Agreement (the “Discovery Agreement” and together with the CD71 Agreement the “AbbVie Agreements”). Underthe terms of the CD71 Agreement, the Company and AbbVie will co-develop a Probody Drug Conjugates (“PDC”) against CD71, with the Companyresponsible for pre-clinical and early clinical development. AbbVie will be responsible for later development and commercialization, with global late-stagedevelopment costs shared between the two companies. The Company will assume 35% of the net profits or net losses related to later development unless itopts-out. If the Company opts-out from participation of co-development of the CD71 PDC, AbbVie will have sole right and responsibility for the furtherdevelopment, manufacturing and commercialization of such CD71 PDC. 111CytomX Therapeutics, Inc.Notes to Financial Statements Under the CD71 Agreement, the Company received an upfront payment of $20.0 million in April 2016, and is eligible to receive up to $470.0 million indevelopment, regulatory and commercial milestone payments, a 35% profit split on U.S. sales, and royalties on ex-U.S. sales in the high teens to low twentiesif the Company participates in the co-development of the CD71 Licensed Product subject to a reversion to a royalty on U.S. sales, and reduction in royaltieson ex-U.S. sales, if the Company opts-out from the co-development of the CD71 PDC. The Company’s share of later stage co-development costs for eachCD71 PDC are capped, provided that AbbVie may offset the Company’s co-development cost above the capped amounts from future payments such asmilestone payments and royalties. In July 2017, the Company received a milestone payment of $14.0 million (net of payment of an associated sublicense feeof $1.0 million to SGEN under the Seattle Genetics Agreement) from AbbVie for achieving certain milestones required to be met to begin GLP toxicologystudies under the CD71 Agreement. In May 2018, the United States Food and Drug Administration (“FDA”) cleared the IND application for CX-2029, thePDC targeting CD71. As a result, the Company achieved the IND success criteria under the CD71 Agreement and received a $21.0 million milestone payment(net of the payment of an associated sublicense fee of $4.0 million to SGEN). The Company commenced enrollment of our Phase 1/2 clinical trial and dosedthe first patient in a clinical trial at the end of the second quarter of 2018. Under the terms of the Discovery Agreement, AbbVie receives exclusive worldwide rights to develop and commercialize PDCs against up to two targets, oneof which was selected in March 2017. The Company shall perform research services to discover the Probody therapeutics and create PDCs for the nominatedcollaboration targets. From that point, AbbVie shall have sole right and responsibility for development and commercialization of products comprising orcontaining such PDCs (“Discovery Licensed Products”). Under the Discovery Agreement, the Company received an upfront payment of $10.0 million in April 2016 and may receive an additional payment upon theselection by AbbVie of the second target and the satisfaction of certain success criteria under the CD71 Agreement. AbbVie has not selected the secondtarget, but the success criteria under the CD71 Agreement were met in September 2016. The Company is also eligible to receive up to $275.0 million in targetnomination, development, regulatory and commercial milestone payments and royalties in the high single to low teens from commercial sales of anyresulting PDCs. The Company has determined that the CD71 and Discovery Agreements with AbbVie should be combined and evaluated as a single arrangement indetermining revenue recognition, because both agreements were concurrently negotiated and executed. The Company identified the following performance obligations at the inception of the AbbVie Agreements: (1) the research, development and commercialization license for CD71 Probody therapeutic,(2) the research services related to CD71 Probody therapeutic,(3) the obligation to participate in the CD71 Agreement joint research committee,(4) the research services related to the first discovery target(5) the research, development and commercialization license for the first discovery target, and(6) the obligation to participate in the Discovery Agreement joint research committee. The Company concluded that, at the inception of the agreement, AbbVie’s option for the second discovery target is not a material right and is therefore not aperformance obligation. The Company determined that the research, development and commercialization licenses for CD71 and discovery targets are not distinct from the Company’srespective research services and expertise. The Company considered factors such as novelty of the Probody therapeutic and PDC technology and lack ofother parties’ expertise in this space, the Company’s rights to technology relating to a proprietary platform to enable the Probody therapeutic developmentand AbbVie’s contractual obligation to use the Company’s research services. The Company determined that the CD71 Agreement research, development andcommercialization license, related research service and participation in the joint research committee were a combined performance obligation and weredistinct from the Discovery Agreement research, development and commercialization license, related research service and participation in the joint researchcommittee. Therefore, the Company concluded that there are two distinct performance obligations: (1)the CD71 Agreement performance obligation consisting of the CD71 Agreement research, development and commercialization license, relatedresearch service and participation in the joint research committee, and (2)the Discovery Agreement performance obligation consisting of the Discovery Agreement research, development and commercializationlicense, related research service and participation in the joint research committee.112CytomX Therapeutics, Inc.Notes to Financial Statements The total transaction price upon adoption of ASC 606 on January 1, 2018 of $39.8 million consists of $30.0 million in upfront payments, $14.0 millionmilestone payment received (net of the payment of an associated sublicense fee of $1.0 million to SGEN) less $4.2 million of estimated sublicense fees. Theupfront payments under the AbbVie Agreements are allocated between the two performance obligations based on the estimated relative standalone sellingprices. The $30.0 million of upfront payments is allocated $20.0 million to the CD71 Agreement, with the remaining $10.0 million allocated to theDiscovery Agreement. The $14.0 million milestone payment received (net of the payment of an associated sublicense fee of $1.0 million to SGEN) andestimated sublicense fees are allocated to the CD71 Agreement performance obligation as they are directly related to the development of the CD71 Probodytherapeutic.In May 2018, the Company earned a $21.0 million milestone payment (net of the payment of an associated sublicense fee of $4.0 million to SGEN). The$21.0 million milestone payment was included as part of the transaction price in May 2018 and a revenue adjustment of $9.9 million was recognized in thesecond quarter of 2018 reflecting the percentage completed to-date on the project related to this milestone. The Company determined that the remainingpotential milestone payments are probable of significant revenue reversal as their achievement is highly dependent on factors outside the Company’s control.Therefore, these payments have been fully constrained and were not included in the transaction price as of December 31, 2018.Under the UCSB Agreement, the Company is obligated to make royalty payments to UCSB equal to 5% of certain sublicense revenue payments owed to orreceived by the Company. As of December 31, 2018 and December 31, 2017, the Company accrued sublicense fees of $1.1 million and $0.5 million,respectively, under the CD71 Agreement.The Company recognized the initial transaction price upon adoption of ASC 606 on January 1, 2018 of $29.8 million allocated to the CD71 Agreementperformance obligation using a cost-based input measure. In applying the cost-based input method, revenue is recognized based on actual full time employee(“FTE”) hours incurred as a percentage of total estimated FTE hours as the Company completes its combined performance obligation over the five-yearservice period.As the Discovery Agreement performance obligation represents an obligation to continuously make the Company’s Probody therapeutic technology platformavailable to AbbVie, the initial transaction price of $10.0 million allocated to this performance obligation is recognized over the common measure ofprogress for the entire performance obligation over the estimated research service period of five years.The Company recognized revenue of $19.0 million, $19.4 million and $3.3 million for 2018, 2017 and 2016, respectively, related to the AbbVieAgreements. As of December 31, 2018 and 2017, deferred revenue related to the CD71 Agreement performance obligation was $23.2 million and $11.2million, respectively, and deferred revenue related to the Discovery Agreement performance obligation was $4.7 million and $6.8 million, respectively. As ofboth December 31, 2018 and 2017, no amount was due from AbbVie under the CD71 and Discovery Agreements.Amgen, Inc. On September 29, 2017, the Company and Amgen, Inc. (“Amgen”) entered into a Collaboration and License Agreement (the “Amgen Agreement”). Pursuantto the Amgen Agreement, the Company received an upfront payment of $40.0 million in October 2017. Concurrent with the entry into the AmgenAgreement, the Company and Amgen entered into a Share Purchase Agreement (the “Purchase Agreement”) pursuant to which Amgen purchased 1,156,069shares of the Company’s common stock at a price of $17.30 per share (calculated based on a 20-day volume-weighted average price), for total proceeds of$20.0 million, which the Company received on October 6, 2017, the closing date of the transaction. The Company estimated a premium on the stock sold toAmgen of $0.5 million, which takes into account a discount due to the lack of marketability resulting from the six-month lockup period. Under the terms of the Amgen Agreement, the Company and Amgen will co-develop a Probody T-cell engaging bi-specific therapeutic targeting EGFR(“EGFR Products”). The Company is responsible for early-stage development of EGFR Products and all related costs up to certain pre-set costs and certainlimits based on clinical study size. Amgen will be responsible for late-stage development, commercialization, and all related costs of EGFR Products.Following early-stage development, the Company will have the right to elect to participate financially in the global co-development of EGFR Products withAmgen, during which the Company would bear certain of the worldwide development costs for EGFR Products and Amgen would bear the rest of such costs(the “EGFR Co-Development Option”). If the Company exercises its EGFR Co-Development Option, the Company will share in somewhat less than 50% ofthe profit and losses from sales of such EGFR Products in the U.S., subject to certain caps, offsets, and deferrals. If the Company chooses not to exercise itsEGFR Co-Development Option, the Company will not bear any costs of later stage development. The Company is eligible to receive up to $455.0 million indevelopment, regulatory, and commercial milestone payments for EGFR Products, and royalties in the low-double-digit to mid-teen percentage of worldwidecommercial sales, provided that if the Company exercises its EGFR Co-Development option, it shall receive a profit and loss split of sales in the U.S. androyalties in the low-double-digit to mid-teen percentage of commercial sales outside of the U.S.113CytomX Therapeutics, Inc.Notes to Financial Statements Amgen also has the right to select a total of up to three targets, including the two additional targets discussed below. The Company and Amgen collaborate inthe research and development of Probody T-cell engaging bi-specifics products directed against such targets. Amgen has selected one such target (the“Amgen Other Product”). If Amgen exercises its option within a specified period of time, it can select two such additional targets (the “Amgen OptionProducts” and, together with the Amgen Other Product, the “Amgen Products”). Except with respect to preclinical activities to be conducted by CytomX,Amgen will be responsible, at its expense, for the development, manufacture, and commercialization of all Amgen Products. If Amgen exercises all of itsoptions and advances all three of the Amgen Products, CytomX is eligible to receive up to $950.0 million in upfront, development, regulatory, andcommercial milestones and tiered high single-digit to low-teen percentage royalties. The Company concluded that, at the inception of the agreement,Amgen’s option to select the two additional targets is not a material right and does not represent a performance obligation of the agreement. At the initiation of the collaboration, CytomX had the option to select, from programs specified in the Amgen Agreement, an existing pre-clinical stage T-cellengaging bispecific product from the Amgen pre-clinical pipeline. In March 2018, CytomX selected the program. CytomX is responsible, at its expense, forconverting this program to a Probody T-cell engaging bispecific product, and thereafter, will be responsible for development, manufacturing, andcommercialization of the product (“CytomX Product”). Amgen is eligible to receive up to $203.0 million in development, regulatory, and commercialmilestone payments for the CytomX Product, and tiered mid-single digit to low double-digit percentage royalties. The Company considered the criteria for combining contracts in ASC 606 and determined that the Amgen Agreement and the Purchase Agreement should becombined into one contract. The Company accounted for the Amgen Agreement based on the fair values of the assets and services exchanged. The Companyidentified the following performance obligations at the inception of the Amgen Agreement: (1) the research, development and commercialization license,(2) the research and development services for the EGFR Products and the Amgen Other Product, and(3) the obligation to participate in the joint steering committee (“JSC”) and the joint research committee (“JRC”). The Company determined that research, development and commercialization license and the participation in the JSC and JRC are not distinct from theresearch and development services and therefore those performance obligations were combined into one combined performance obligation. The Amgen OtherProducts are accounted for as a separate performance obligation from the EGFR Products as the nature of the services being performed is not the same and thevalue that Amgen can derive from one program is not dependent on the success of the other. Concurrent with the execution of the Amgen Agreement, the Company entered into a sublicense agreement whereby the Company granted Amgen asublicense of its rights to one patent family that it co-owns with the Regents of the University of California, acting through its Santa Barbara campus(“UCSB”), that is exclusively licensed to the Company under the UCSB Agreement covering Probody antibodies and other pro-proteins in the fields oftherapeutics, in vivo diagnostics and prophylactics. This sublicense was incremental to the patents, patent applications and know-how covering T-cellengaging bispecific Probody molecules that were developed and owned by the Company and licensed to Amgen. Under the UCSB Agreement, the Companyis obligated to make a royalty payment to UCSB equal to 15% of certain sublicense revenue payments owed to or received by the Company. The Companydetermined that the calculation of the sublicense fee is not specifically addressed in the sublicense agreement when the Company simultaneously licenses theUCSB technology along with the technology the Company has developed internally. As of December 31, 2017, the Company recorded a liability of $2.1million, which represents the Company’s best estimate of the amount to be remitted to UCSB. As of December 31, 2018, the Company determined that theestimated liability of $2.1 million was still appropriate. The total transaction price of $51.2 million, consisting of the $40.0 million upfront payment, an estimated fair value of $10.7 million for the CytomX Productand $0.5 million of premium on the sale of the Company’s common stock, was allocated between the two performance obligations based on the relativestandalone selling price of each performance obligation. To determine the standalone selling price, the Company used the discounted cash flow method bycalculating risk-adjusted net present values of estimated cash flows. The Company determined that the remaining potential milestone payments wereprobable of significant revenue reversal as their achievement was highly dependent on factors outside the Company’s control. As a result, these paymentswere fully constrained and were not included in the transaction price as of December 31, 2018. The Company recognizes the transaction price of $46.4million allocated to the EGFR Products performance obligation using a cost-based input measure. In applying the cost-based input method of revenuerecognition, the Company uses actual FTE hours incurred relative to estimated FTE hours expected to be incurred for the combined performance obligation.Revenue is recognized based on actual FTE hours incurred as a percentage of total114CytomX Therapeutics, Inc.Notes to Financial Statements estimated FTE hours as the Company completes its performance obligation over the research service period. In the fourth quarter of 2018, the JSC officiallyterminated any further work on two molecules due to unacceptable test results. The current plan is to evaluate other molecules as part of the candidateidentification phase of the EGFR project, and as a result, there has been a change in estimate of the projected costs and research service period to seven years. As the Amgen Other Product performance obligation represents an obligation to continuously make the Probody therapeutic technology platform availableto Amgen, the initial transaction price of $4.8 million allocated to this performance obligation is recognized over the common measure of progress for theentire performance obligation over the estimated research service period of six years. The Company recognized revenue of $4.9 million and $1.3 million for the years ended December 31, 2018 and 2017, respectively, related to the AmgenAgreement. There was no revenue recognized for the year ended December 31, 2016 because the Company entered into the agreement in 2017. As ofDecember 31, 2018 and December 31, 2017, deferred revenue related to the EGFR Products performance obligation was $40.7 million and $45.3 million,respectively. As of December 31, 2018 and 2017, deferred revenue related to the Amgen Other Products performance obligation was $3.8 million and $4.6million, respectively. As of December 31, 2018 and 2017, no amount was due from Amgen under the Amgen Agreement.Bristol-Myers Squibb CompanyOn May 23, 2014, the Company and Bristol-Myers Squibb Company (“BMS”) entered into a Collaboration and License Agreement (the “BMS Agreement”)to discover and develop compounds for use in human therapeutics aimed at multiple immuno-oncology targets using the Company’s Probody therapeutictechnology. The effective date of the BMS Agreement was July 7, 2014. Under the terms of the BMS Agreement, the Company granted BMS exclusive worldwide rights to develop and commercialize Probody therapeutics for up tofour oncology targets. BMS had additional rights to substitute up to two collaboration targets within three years of the effective date of the BMS Agreement.These rights expired in May 2017. Each collaboration target has a two-year research term and the two additional targets must be nominated by BMS withinfive years of the effective date of the BMS Agreement. The research term for each collaboration target can be extended in one year increments up to threetimes. Pursuant to the BMS Agreement, the financial consideration from BMS was comprised of an upfront payment of $50.0 million and the Company was initiallyentitled to receive contingent payments of up to an aggregate of $1,217.0 million as follows: (i) up to $25.0 million for additional targets; (ii) up to $114.0million in development milestone payments per research target program or up to $456.0 million if the maximum of four research targets are selected; (iii) upto $124.0 million in milestone payments for the first commercial sale in various territories for up to three indications per research target program or up to$496.0 million if the maximum of four research targets are selected, and (iv) up to $60.0 million in sales milestones payments per research target program orup to $240.0 million if maximum of four research targets are selected. The Company is entitled to royalty payments in the mid-single digits to low double-digit percentages from potential future sales. The Company also receives research and development service fees based on a prescribed FTE rate that is capped. The Company identified the following performance obligations at the inception of the BMS Agreement: (1) the exclusive research, development and commercialization license,(2) the research and development services and(3) the obligation to participate in the joint research committee. The Company determined that the license, the Company’s research services and expertise related to the development of the product candidates should becombined with the research services and participation in the joint research committee as one combined performance obligation. The Company concludedthat, at the inception of the agreement, BMS’ options for the third and fourth targets were not material rights and not performance obligations. As such, eachoption was accounted for as a separate arrangement upon exercise. Additionally, the Company considered whether the services performed for each targetshould be considered separate performance obligations and concluded that all targets should be accounted for as one combined performance obligation. The Company received an upfront payment of $50.0 million from BMS in July 2014. In January and December 2016, BMS selected the third and fourthtargets, respectively, and paid the Company $10.0 million and $15.0 million, respectively, pursuant to the terms of the BMS Agreement. In December 2016,BMS selected a clinical candidate pursuant to the BMS Agreement, which triggered a $2.0 million pre-clinical milestone payment to the Company. InNovember 2017, the Company recognized a $10.0 million milestone payment from BMS upon approval of the investigational new drug application for theCTLA-4-directed Probody therapeutic. 115CytomX Therapeutics, Inc.Notes to Financial Statements On March 17, 2017, the Company and BMS entered into Amendment Number 1 to Extend Collaboration and License Agreement (the “Amendment”). TheAmendment grants BMS exclusive worldwide rights to develop and commercialize Probody therapeutics for up to six additional oncology targets and twonon-oncology targets. The effective date of the Amendment was April 25, 2017 (“Amendment Effective Date”). Under the terms of the Amendment, theCompany continues to collaborate with BMS to discover and conduct preclinical development of Probody therapeutics against targets selected by BMSunder the terms of the Amendment. Pursuant to the Amendment, the financial consideration from BMS is comprised of an upfront payment of $200.0 million and the Company is eligible toreceive up to an aggregate of $3,586.0 million as follows: (i)up to $116.0 million in development milestone payments per target or up to $928.0 million if the maximum of eight targets are selected for thefirst product modality; (ii)up to $124.0 million in milestone payments for the first commercial sale in various territories for up to three indications per target program orup to $992.0 million if the maximum of eight targets are selected for the first product modality; (iii)up to $60.0 million in sales milestone payments per target or up to $480.0 million if maximum of eight targets are selected for the first productmodality; and (iv)up to $56.3 million in development milestone payments or up to $450.0 million if the maximum of eight targets are selected for the secondproduct modality; (v)up to $62.0 million in milestone payments for the first commercial sale in various territories for up to three indications per target program or upto $496.0 million if the maximum of eight targets are selected for the second product modality; (vi)up to $30.0 million in sales milestone payments per target or up to $240.0 million if maximum of eight targets are selected for the secondproduct modality. The Company is also entitled to tiered mid-single to low double-digit percentage royalties from potential future sales. The Amendment does not changethe term of the BMS’s royalty obligation under the BMS Agreement. BMS’s royalty obligation continues on a licensed-product by licensed-productbasis until the later of (i) the expiration of the last claim of the licensed patents covering the licensed products in the country, (ii) the twelfth anniversaryof the first commercial sale of a licensed product in a country, or (iii) the expiration of any applicable regulatory, pediatric, orphan drug or dataexclusivity with respect to such product. The initial transaction price is $272.8 million consisting of the upfront fees of $250.0 million, research and development service fees of $10.8 million andmilestone payments received to date of $12.0 million. The Company determined that the remaining potential milestone payments were probable ofsignificant revenue reversal as their achievement was highly dependent on factors outside the Company’s control. Therefore, these payments were fullyconstrained and were not included in the transaction price as of December 31, 2018. The BMS Agreement represents an obligation to continuously make theProbody therapeutic technology platform available to BMS. Therefore, the initial transaction price is recognized over the estimated research service period,which ends on April 25, 2023. The Company recognized revenue of $32.8 million, $36.5 million and $9.6 million for the years ended December 31, 2018, 2017 and 2016, respectively. Asof December 31, 2018 and 2017, deferred revenue related to the BMS Agreement was $205.6 million and $235.0 million, respectively. The amount due fromBMS under the BMS Agreement was $0.1 million and $10.1 million as of December 31, 2018 and 2017, respectively.ImmunoGen, Inc.In January 2014, the Company and ImmunoGen, Inc. (“ImmunoGen”) entered into the Research Collaboration Agreement (the “ImmunoGen ResearchAgreement”). The ImmunoGen Research Agreement provided the Company with the right to use ImmunoGen’s Antibody Drug Conjugate (“ADC”)technology in combination with the Company’s Probody therapeutic technology to create a PDC directed at one specified target under a research license, andto subsequently obtain an exclusive, worldwide development and commercialization license to use ImmunoGen’s ADC technology to develop andcommercialize such PDCs. The Company made no upfront cash payment in connection with the execution of the agreement. Instead, the Company providedImmunoGen with the rights to CytomX’s Probody therapeutic technology to create PDCs directed at two targets under the ImmunoGen Research Agreementand to subsequently obtain exclusive, worldwide development and commercialization licenses to develop and commercialize such PDCs. In February 2016,the Company exercised its option to obtain a development and commercialization license for CX-2009 pursuant to the terms of the ImmunoGen ResearchAgreement (the “CX-2009 License”). In116CytomX Therapeutics, Inc.Notes to Financial Statements February 2017, ImmunoGen exercised its first option to obtain a development and commercialization license for one of the two targets. Substitution rights forthis first target selection program terminated in February 2017 and ImmunoGen discontinued the program in July 2017. The Company recognized theremaining deferred revenue related to the discontinued program upon the termination of the program. ImmunoGen exercised its second option to obtain adevelopment and commercialization license pursuant to the ImmunoGen Research Agreement (the “ImmunoGen 2017 License”) for a target in December2017 and continues research work on this program.Under the terms of the ImmunoGen Research Agreement, both the Company and ImmunoGen performed research activities on behalf of the other party for nomonetary consideration through January 2018 and the arrangement was extended to June 2018, as discussed below. Each party is solely responsible for thedevelopment, manufacturing and commercialization of any products resulting from the exclusive development and commercialization license obtained bysuch party under the agreement. In consideration for the ImmunoGen 2017 License, the Company is entitled to receive up to $30.0 million in development and regulatory milestonepayments, up to $50.0 million in sales milestone payments and royalties in the mid-single digits percentage on the commercial sales of any resulting product.For the CX-2009 License, the Company is obligated to pay ImmunoGen up to $60.0 million in development and regulatory milestone payments and up to$100.0 million in sales milestone payments and royalties in the mid to high single digits percentage on the commercial sales of any resulting product. InAugust 2017, the Company made a milestone payment of $1.0 million to ImmunoGen for the first patient dosing with CX-2009. No milestone payments havebeen accrued to the Company under the ImmunoGen 2017 License.The Company accounted for the ImmunoGen Research Agreement based on the fair value of the assets and services exchanged. The Company identified thefollowing performance obligations at the inception of the ImmunoGen Research Agreement: (1) the research license,(2) the research services,(3) the obligation to participate in the joint research committee,(4) the exclusive research, development and commercialization license and(5) the obligation to provide future technology improvements, when available. The Company determined that the research license, the research services, the participation in the joint steering committee, and the technology improvementsare not distinct from the development and commercialization license and therefore those performance obligations were combined into one combinedperformance obligation. The Company considered factors such as the limited economic benefits to ImmunoGen if the development and commercializationlicense was not obtained and the lack of sublicensing rights in the research license. The estimated total fair value of the consideration of $13.2 million was recorded as deferred revenue at the inception of the ImmunoGen Research Agreement.In December 2017, the Company entered into the ImmunoGen 2017 License arrangement and extended the Company’s obligation to provide researchservices under the ImmunoGen Research Agreement to June 30, 2018. The fair value of the consideration for the combined performance obligation wasrecognized as revenue over the research period that ended on June 30, 2018. As of December 31, 2018, neither company has further research obligationsunder the ImmunoGen Research Agreement. The estimated total fair value of assets and services received was also $13.2 million, of which $12.7 million was allocated to the licenses received and wascharged to research and development expense, with the remaining amount of $0.5 million allocated to the research services, joint research committeeparticipation and technology improvements, which was expensed over the period of services provided.The Company recognized revenue of $1.5 million and $12.5 million for the year ended December 31, 2018 and 2017, respectively. There was no revenuerecognized for the year ended December 31, 2016. As of December 31, 2018 and 2017, deferred revenue relating to the ImmunoGen Research Agreement was$0 and $0.7 million, respectively. As of both December 31, 2018 and 2017, no amount was due from ImmunoGen under the ImmunoGen ResearchAgreement.117CytomX Therapeutics, Inc.Notes to Financial Statements MD AndersonIn November 2015, the Company entered into a research collaboration agreement with MD Anderson to research Probody-enabled chimeric antigen receptorkiller (CAR-NK) cell therapies, known as ProCAR-NK cell therapies. Under this collaboration, MD Anderson will use the Company’s Probody technology toconduct research of ProCAR-NK cell therapies against certain targets selected by the Company in cancer immunotherapy. Under the research collaborationagreement, the Company had the right to exercise an option, during the option period expiring on November 2, 2019 and upon payment of an optionexercise fee, to negotiate and acquire a worldwide, exclusive, sublicensable license from MD Anderson for development and commercialization of productsdirected against any of the selected targets. The research collaboration agreement continued in effect until the earlier of (i) the date that the Companyexercises the option to acquire the license from MD Anderson and (ii) the expiration of the option period. The expenses related to this agreement were notmaterial to the financial statements for the years ended December 31, 2018 and 2017. The Company decided not to exercise the option to extend theagreement and allowed it to expire on November 1, 2018.Pfizer Inc.In May 2013, the Company and Pfizer Inc. (“Pfizer”) entered into a Research Collaboration, Option and License Agreement (the “Pfizer Agreement”) tocollaborate on the discovery and preclinical research activities related to Probody therapeutics, and PDCs for research project targets nominated by Pfizer.Pfizer nominated two research targets in 2013 and, pursuant to the Pfizer Agreement, had the option of nominating two additional research targets. InDecember 2014, Pfizer selected an additional research target and paid the Company $1.5 million. The option to select a fourth target lapsed in May 2016.Pfizer discontinued the epidermal growth factor receptor (“EGFR”) program and decided to terminate the remaining two targets in February and March 2018.In March 2018, Pfizer terminated the Pfizer Agreement. As such, the Company had no further performance obligations under this agreement following thetermination of the Pfizer Agreement and recognized the remaining deferred revenue of $1.1 million during the first quarter of 2018.Pursuant to the Pfizer Agreement, the Company received an upfront payment of $6.0 million and research and development service fees based on a prescribedFTE rate per year that is capped. The Company identified the following performance obligations at the inception of the Pfizer Agreement: (1) the researchlicense, (2) the research services and (3) the obligation to participate in the joint research committee. The Company determined that the research license wasnot distinct from the research services and participation in the joint research committee due to the specialized nature of the research services to be providedby the Company, and accordingly, this deliverable was combined with the research services and participation in the joint research committee as a combinedperformance obligation. The Company concluded that, at the inception of the agreement, Pfizer’s options to obtain an exclusive development andcommercialization license for each research project target did not represent a material right and were not performance obligations.As the combined performance obligation represented an obligation to continuously make the Probody therapeutic technology platform available to Pfizer,the initial transaction price was recognized over the common measure of progress for the entire performance obligation over the estimated research serviceperiod of five and a half years.The Company recognized revenue of $1.4 million, $1.9 million and $2.2 million for the years ended December 31, 2018, 2017 and 2016, respectively. As ofDecember 31, 2018 and 2017, deferred revenue relating to the Pfizer Agreement was $0 and $1.6 million, respectively. The amount due from Pfizer under thePfizer Agreement was $0 and $13,000 as of December 31, 2018 and 2017, respectively.Contract LiabilitiesThe following table presents changes in the Company’s total contract liabilities for the year ended December 31, 2018 (in thousands): Additions Deductions Balance at12/31/2017 ASC 606AdoptionAdjustment Adjustment toTransactionPrice fromPerformanceObligationSatisfied RevenueRecognizedfrom anAdjustment toTransactionPrice Duringthe Period RevenueRecognizedfrom AmountsIncluded inContractLiability at theBeginning ofthe Period Balance at12/31/2018 Contract liabilities: Deferred revenue $305,263 $10,912 $21,000 $(11,718) $(47,477) $277,980 118CytomX Therapeutics, Inc.Notes to Financial Statements Additions of $31.9 million consists of the ASC 606 adoption adjustment of $10.9 million and $21.0 million earned (net of the payment of an associatedsublicense fee of $4.0 million to SGEN) resulting from the achievement of the IND milestone under the CD71 Agreement. The $21.0 million milestonepayment is included in the transaction price in May 2018 and is being recognized over the research period of the CD71 Agreement. Of the $21.0 million,$11.7 million was recognized as revenue during the year ended December 2018 based on the estimated percentage completed to-date of the CD71 project.Deductions also includes $47.5 million of revenue recognized during the year ended December 31, 2018 that was included in the contract liability balance atthe beginning of the period. The Company estimates that the $278.0 million of deferred revenue related to the following contracts as of December 31, 2018 will be recognized as revenueas set forth below. However, the timing of revenue recognition could differ from the estimates depending on facts and circumstances impacting the variouscontracts, including progress of research and development, resources assigned to the contracts by the Company or its collaboration partners or other factorsoutside of the Company’s control. •The $23.2 million of deferred revenue related to the CD71 Agreement as of December 31, 2018 is expected to be recognized based on actualFTE effort and program progress until approximately April 2021. •The $4.7 million of deferred revenue related to the Discovery Agreement as of December 31, 2018 is expected to be recognized ratably untilapproximately April 2021. •The $40.7 million of deferred revenue related to the Amgen EGFR Products as of December 31, 2018 is expected to be recognized based onactual FTE effort and program progress until approximately September 2024. •The $3.8 million of deferred revenue related to the Amgen Other Products as of December 31, 2018 is expected to be recognized ratably untilapproximately September 2023. •The $205.6 million of deferred revenue related to the BMS Agreement as of December 31, 2018 is expected to be recognized ratably untilapproximately April 2025. 10. License AgreementThe Company has an exclusive, worldwide license agreement (the “UCSB Agreement”) with UCSB, relating to the use of certain patents and technologyrelating to its core technology, including its therapeutic antibodies, and to certain patent rights the Company co-owns with UCSB covering Probodyantibodies and other pro-proteins. Pursuant to the UCSB Agreement, the Company is obligated to (i) make royalty payments to UCSB on net sales of its products covered under the agreement,subject to annual minimum amounts, (ii) make milestone payments to UCSB upon the occurrence of certain events, (iii) make a milestone payment to UCSBupon occurrence of an IPO or change of control, and (iv) reimburse UCSB for prosecution and maintenance of the licensed patents. If the Companysublicenses its rights under the UCSB Agreement, it is obligated to pay UCSB a percentage of the total sublicense revenue received, which total amountwould be first reduced by the aggregate amount of certain research and development related expenses incurred by the Company and other permitteddeductions.In 2013, the Company amended the UCSB Agreement to reduce certain amounts due to UCSB upon receipt by the Company of upfront payments, milestonepayments and royalties from sublicensees. In exchange for this amendment, the Company issued to UCSB 157,332 shares of common stock. The UCSBAgreement, as amended, will remain in effect until the expiration or abandonment of the last to expire of the licensed patents.In the years ended December 31, 2018, 2017 and 2016, the Company incurred expenses of $0.6 million, $13.5 million and $2.1 million respectively, toUCSB under the provisions of the UCSB Agreement. As of December 31, 2018 and 2017, the related accrued amounts included in the current liabilities were$3.2 million and $2.6 million, respectively. These balances are estimates based on the latest discussion with UCSB on proposed revision to the terms of thesublicense fee calculation.Royalty obligationsThe Company has annual minimum royalty obligations of $150,000 under the terms of certain exclusive licensed patent rights. The royalty obligations arecancellable any time by giving notice to the licensor, with the termination being effective 60 days after giving notice. 119CytomX Therapeutics, Inc.Notes to Financial Statements 11. Commitments and ContingenciesOperating LeaseOn December 10, 2015, the Company entered into a lease (the “Lease”) with HCP Oyster Point III LLC (the “Landlord”) to lease approximately 76,000rentable square feet of office and laboratory space located in South San Francisco, California for the Company’s new corporate headquarters.The term of the Lease commenced on October 1, 2016. The 2016 Lease has an initial term of ten years from the commencement date, and the Company has anoption to extend the initial term for an additional five years at the then fair rental value as determined pursuant to the 2016 Lease.The Lease provides for annual base rent of approximately $3.1 million in the first year of the lease term. The annual base rent for the second twelve monthswill be approximately $4.3 million, which will increase on an annual basis beginning from the 25th month to approximately $5.5 million for the tenth year ofthe lease. The Company utilized the full amount of the one-time improvement allowance of $12.6 million, of which $2.3 million is recoverable by thelandlord through an increase rent which continues through the expiration of the initial lease term.In addition, the Company obtained a standby letter of credit (the “Letter of Credit”) in an amount of approximately $0.9 million, which may be drawn by theLandlord to be applied for certain purposes upon the Company’s breach of any provisions under the 2016 Lease. The Company has recorded the $0.9 millionLetter of Credit in restricted cash as non-current on its balance sheet at December 31, 2018 and 2017.Rent expense is recognized on a straight-line basis over the term of the lease and accordingly the Company records the difference between cash rentpayments and the recognition of rent expense as a deferred rent liability.The future minimum lease payments for all of the Company’s facility leases are as follows (in thousands): Year Ending December 31: 2019 $4,854 2020 4,990 2021 5,129 2022 5,273 2023 and beyond 21,109 Total $41,355 Rent expense during the years ended December 31, 2018, 2017 and 2016 was $4.2 million, $4.2 million and $1.8 million, respectively.Legal ProceedingsThe Company is subject to claims and assessments from time to time in the ordinary course of business but is not aware of any such matters, individually or inthe aggregate, that will have a material adverse effect on the Company’s financial position, results of operations or cash flows.IndemnificationsIn the ordinary course of business, the Company enters into agreements that may include indemnification provisions.Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnifiedparty. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the terminationof the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable.The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also enteredinto indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities thatmay arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. The Company currently hasdirectors’ and officers’ insurance. 120CytomX Therapeutics, Inc.Notes to Financial Statements 12. Common StockIn October 2015, the Company’s board of directors and stockholders approved the amended and restatement of the Company’s certificate of incorporation.The Amended and Restated Certificate of Incorporation was effective as of October 14, 2015, which provides for 75,000,000 authorized shares of commonstock with par value of $0.00001 per share and 10,000,000 shares of preferred stock with a par value of $0.00001 per share.Common stockholders are entitled to dividends if and when declared by the Board of Directors subject to the prior rights of the preferred stockholders. As ofDecember 31, 2018 and 2017, no dividends on common stock had been declared by the Board of Directors.The Company had reserved shares of common stock for issuance, as follows: December 31, 2018 2017 Options issued and outstanding 7,803,773 6,503,458 Shares available for future stock option grants 1,884,494 2,324,793 Shares available for future employee stock purchase plan 1,301,254 980,389 Total 10,989,521 9,808,640 13. Stock-based Compensation Equity Incentive PlanIn 2010, the Company adopted its 2010 Stock Incentive Plan (the “2010 Plan”) which provided for the granting of stock options to employees, directors andconsultants of the Company. Options granted under the 2010 Plan were either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”).In February 2012, the Company adopted its 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan is divided into two separate equity programs, anoption and stock appreciation rights grant program and a stock award program. In conjunction with adopting the 2011 Plan, the Company discontinued the2010 Plan and released the shares reserved and still available under that plan.In connection with the consummation of the IPO in October 2015, the board of directors adopted the Company’s 2015 Equity Incentive Plan (the “2015Plan” and collectively with the 2010 Plan and 2011 Plan, the “Plans”). In conjunction with adopting the 2015 Plan, the Company discontinued the 2011Plan with respect to new equity awards.The initial number of shares of common stock available for future issuance under the 2015 Plan was 2,444,735. Beginning on January 1, 2016 andcontinuing until the expiration of the 2015 Plan, the total number of shares of common stock available for issuance under the 2015 Plan will automaticallyincrease annually on January 1 by 4% of the total number of issued and outstanding shares of common stock as of January 1 of the same year. As of December31, 2018, 1,884,494 shares of common stock were available for future issuance under the 2015 Plan.Stock OptionsOptions under the 2015 Plan may be granted for periods of up to ten years. All options issued to date have had a 10-year life.Under the terms of the 2015 Plan, options may be granted at an exercise price not less than the estimated fair value of the shares on the date of grant, asdetermined by the Company’s board of directors. For employees holding more than 10% of the voting rights of all classes of stock, the exercise price of ISOsand NSOs may not be less than 110% of the estimated fair value of the shares on the date of grant, as determined by the board of directors. To date, optionsgranted generally vest over four years and vest at a rate of 25% upon the first anniversary of the issuance date and 1/48th per month thereafter.121CytomX Therapeutics, Inc.Notes to Financial Statements Activity under the Company’s stock option plans is set forth below: Options Outstanding OptionsAvailablefor Grant Number ofOptions Weighted-AverageExercisePrice PerShare Weighted-AverageRemainingContractualLife (years) AggregateIntrinsicValue (in thousands) Balances at December 31, 2015 2,401,406 5,270,751 1.197 Options authorized 1,441,328 — — Options granted (1,367,546) 1,356,546 13.234 Options exercised — (414,396) 1.549 Options forfeited 18,000 (54,155) 4.578 Balances at December 31, 2016 2,493,188 6,158,746 3.694 Options authorized 1,459,606 — — Options granted (2,138,620) 2,138,620 13.566 Options exercised — (764,576) 4.140 Options forfeited 510,619 (1,029,332) 9.118 Balances at December 31, 2017 2,324,793 6,503,458 8.157 Options authorized 1,539,142 — Options granted (2,127,400) 2,127,400 24.654 Options exercised — (673,382) 6.172 Options forfeited 147,959 (153,703) 14.293 Balances at December 31, 2018 1,884,494 7,803,773 12.622 7.3 $40,901 Options Exercisable—December 31, 2018 4,520,806 7.853 6.3 $36,017 Options vested and expected to vest—December 31, 2018 7,803,773 12.622 7.3 $40,901 Information with respect to stock options outstanding and exercisable as of December 31, 2018 is as follows: Options Outstanding OptionsExercisable Range of Exercise Price NumberOutstanding Weighted-AverageRemainingContractual Life (Years) NumberExercisable Weighted- AverageExercise Price $0.945 - $1.386 820,235 3.4 820,235 $1.174 $1.449 - $1.575 920,347 5.9 915,120 $1.545 $4.473 - $4.473 119,531 6.4 119,531 $4.473 $6.615 - $6.615 1,171,404 6.6 910,002 $6.615 $10.170 - $11.640 497,541 7.7 298,494 $10.715 $11.940 - $11.940 842,500 8.1 403,695 $11.940 $12.000 - $14.460 1,073,581 7.5 648,933 $14.172 $14.620 - $25.670 846,434 9.1 157,099 $18.574 $25.820 - $25.820 885,000 9.1 202,809 $25.820 $26.300 - $29.710 627,200 9.0 44,888 $26.740 7,803,773 7.3 4,520,806 $7.853 The aggregate intrinsic values of options outstanding, exercisable, vested and expected to vest were calculated as the difference between the exercise price ofthe options and the estimated fair value of the underlying common stock as of December 31, 2018, 2017 and 2016, respectively.The aggregate intrinsic value of stock options exercised in the years ended December 31, 2018, 2017 and 2016 was $14.6 million, $10.5 million and $4.6million, respectively. 122CytomX Therapeutics, Inc.Notes to Financial Statements The options granted in the years ended December 31, 2018, 2017 and 2016 had a weighted-average per share grant-date fair value of $14.205, $8.207, and$8.936, respectively. At December 31, 2018, the unrecognized compensation expense with respect to options granted to employees was $34.6 million, and isexpected to be recognized over 2.4 years.Early Exercise of Employee OptionsCertain stock options granted under the Plans provide option holders the right to elect to exercise unvested options in exchange for restricted common stock.Such unvested restricted shares are subject to a repurchase right held by the Company at the original issuance price in the event the optionee’s service to theCompany is terminated either voluntarily or involuntarily. The right usually lapses 25% on the first anniversary of the vesting start date and in 36 equalmonthly amounts thereafter. These repurchase terms are considered to be a forfeiture provision. The cash or full recourse notes received from employees forexercise of unvested options is treated as a refundable deposit and is classified as a liability on the balance sheets. Employee Stock Purchase PlanConcurrent with the completion of the IPO in October 2015, the Company’s Employee Stock Purchase Plan (“ESPP”) became effective. The ESPP allowseligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15% of their eligible compensation,subject to any plan limitations. The ESPP generally provides for six-month offering periods, and at the end of each offering period, employees are able topurchase shares at 85% of the lower of the fair market value of the Company’s common stock on the first trading day of the offering period or on the lasttrading day of the offering period. The Company issued 63,920 shares and 67,746 shares of common stock under the ESPP in 2018 and 2017, respectively.Shares available for future purchase under the ESPP were 1,301,254 at December 31, 2018. The compensation expense related to the ESPP was $0.5 million,$0.2 million and $0.1 million for the years ended December 31, 2018, 2017 and 2016, respectively. As of December 31, 2018 and 2017, there was $0.3million and $0.1 million, respectively, of unrecognized compensation cost related to the ESPP, which the Company expects to recognize over 5 months. Stock Based CompensationTotal stock-based compensation recorded related to options granted to employees and non-employees and employee stock purchase plan was as follows (inthousands): Year Ended December 31, 2018 2017 2016 Research and development $8,313 $5,161 $4,925 General and administrative 8,565 6,126 5,170 Total stock-based compensation expense $16,878 $11,287 $10,095 Stock-based compensation expense for employees was $16.7 million, $11.0 million and $9.4 million for the years ended December 31, 2018, 2017 and 2016,respectively.Stock-based compensation expense related to stock options granted to non-employees is recognized as the stock options are earned. The Companydetermined that the estimated fair value of the stock options is more readily measurable than the fair value of the services received. The fair value of stockoptions granted to non-employees is calculated at each grant date and re-measured at each reporting date using the Black-Scholes option pricing model. Thestock-based compensation expense related to a grant will fluctuate as the estimated fair value of the common stock fluctuates over the period from the grantdate to the vesting date.Stock-based compensation expense for non-employees was $0.2 million, $0.3 million and $0.9 million for the years ended December 31, 2018, 2017 and2016, respectively.123CytomX Therapeutics, Inc.Notes to Financial Statements The Company estimated the fair value of employee stock options and ESPP using the Black-Scholes valuation model based on the date of grant with thefollowing assumptions: Options ESPP Year Ended December 31, Year Ended December 31, 2018 2017 2016 2018 2017 2016Expected volatility 65.6%-69.3% 69.1%-72.4% 76.4% – 83.5% 46.4%-70.5% 52.3%-63.8% 50.4% – 75.6%Risk-free interest rate 2.5%-3.0% 1.7%-2.2% 1.2% – 2.1% 2.1%-2.6% 1.1%-1.5% 0.5% – 0.6%Dividend yield — % — % — % — % — % — %Expected term (in years) 4.7-4.9 4.9-5.3 5.3 – 5.9 0.5 0.5 0.5 Expected Term. The expected term of stock options represents the period that the stock options are expected to remain outstanding and is based on vestingterms, exercise term and contractual lives of the options. The expected term of the ESPP shares is equal to the six-month look-back period.Expected Volatility. The expected stock price volatility for the Company’s stock options was derived from the average historical volatilities of theCompany’s stock price and the stock price of several comparable publicly traded companies within the biotechnology and pharmaceutical industry. TheCompany will continue to apply this process until a sufficient amount of historical information on the Company’s own stock price becomes available.Volatility for ESPP shares is equal to our historical volatility over the six-month look-back period.Risk-Free Interest Rate. The risk-free interest rate is based on the U.S. Treasury whose term was consistent with expected term of the Company’s stockoptions.Dividend Rate. The expected dividend was assumed to be zero as the Company has never paid dividends and has no current plans to do so. 14. Income TaxesThe Company derives its income only from the United States. The components of the provision for (benefit from) income taxes are as follows (in thousands): Years Ended December 31, 2018 2017 2016 Current: Federal $14,302 $— $— State 1 1 1 Total current 14,303 1 1 Deferred: Federal — (514) (20)State — — — Total deferred — (514) (20)Provision for (benefit from) income taxes $14,303 $(513) $(19) 124CytomX Therapeutics, Inc.Notes to Financial Statements A reconciliation of the Company’s effective tax rate to the statutory U.S. federal rate is as follows: Years Ended December 31, 2018 2017 2016 U.S. federal taxes at statutory rate 21.0% 34.0% 34.0%State tax, net of federal benefit 0.7% 7.6% 0.8%Stock compensation 1.7% 2.3% (0.6)%Tax attributes subject to 382 limitation 0.0% 27.5% 0.0%Tax credits 6.2% 2.7% 2.2%Change in valuation allowance (49.5)% (9.3)% (35.6)%Change in deferreds due to rate change 0.0% (58.6)% 0.0%Other (0.5)% (5.0)% (0.8)%Total (20.4)% 1.2% 0.0% The types of temporary differences that give rise to significant portions of the Company’s deferred income tax liabilities are set out below (in thousands): Year Ended December 31, 2018 2017 2016 Net operating loss carryforwards $15,468 $24,682 $24,528 Research and development credits 7,514 5,757 2,683 Intangible—in-process R&D — — 81 Deferred revenue 56,881 15,631 13,857 Accruals and deferred rent 1,955 1,256 1,335 Stock-based compensation 5,746 3,831 3,963 Other 39 32 1 Total gross deferred income tax assets 87,603 51,189 46,448 Less: valuation allowance (86,466) (50,791) (46,137)Deferred tax assets, net of valuation allowance 1,137 398 311 Fixed assets (854) (282) (229)In-process R&D — — (595)Intangible assets (108) (116) — Prepaid Expenses (175) — — Deferred tax liabilities (1,137) (398) (824)Net deferred income tax liabilities $— $— $(513) The Company has established a valuation allowance against all of its net deferred tax assets. Management considered all available evidence, both positiveand negative, including but not limited to our historical operating results, income or loss in recent periods, cumulative losses in recent years, forecastedearnings, future taxable income, and significant risk and uncertainty related to forecasts, and concluded the deferred tax assets are not more likely than not tobe realized. The net change in the total valuation allowance for the years ended December 31, 2018, 2017 and 2016 was an increase of $35.7 million, $4.7million and $21.1 million, respectively.The Company had net operating loss carryforwards for federal and state income tax purposes of approximately $65.6 million and $24.2 million, respectively,as of December 31, 2018, available to reduce future taxable income. The federal and state net operating loss carryforwards will begin to expire in 2034 and2033, respectively, if not utilized.The Company also has federal and state research and development tax credits carryforwards of $5.7 million and $5.5 million, respectively, as of December 31,2018 available to reduce future income taxes. The federal research and development tax credits will begin to expire in 2031 if not utilized. The state researchand development tax credits have no expiration date.125CytomX Therapeutics, Inc.Notes to Financial Statements In December 2017, the Tax Cuts and Jobs Act (“Tax Act”) was signed into law making significant changes to the Internal Revenue Code. Changes include,but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017 the transition of U.Sinternational taxation from a worldwide tax system to a territorial system, and a one-time transition tax on the mandatory deemed repatriation of cumulativeforeign earnings. Under the Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”) issued by theSEC staff in December 2017, it allowed the Company to record provisional amounts during a measurement period not to extend beyond one year of theenactment date. The Company had calculated its best estimate of the impact of the Tax Act in accordance with its understanding of the Tax Act and guidanceavailable at the time. The tax rate decrease resulted in a reduction of $25.7 million in its deferred tax assets, and a corresponding decrease of the same amountin the valuation allowance against these deferred tax assets as at December 31, 2017, as substantially all of its U.S. deferred tax assets, net of deferred taxliabilities, are subject to a full valuation allowance. The deferred tax asset remeasurement as at December 31, 2017 was provisional because the Companycontinued to evaluate the impact of various domestic provisions of the Act as well as the impact of additional guidance that may be provided. In the fourthquarter of 2018, the Company completed its related analysis to determine the effect of the Tax Act. No material adjustments were recorded based oncompletion of the related analysis as of December 31, 2018In 2018, the Company adopted ASC 606 under the modified retrospective transition method and recorded a net transition adjustment of $10.9 million toaccumulated deficit associated with the change in timing of income recognition for the Company’s collaboration agreements. The transition adjustment alsoresulted in a change to the deferred revenue related deferred tax balance, offset by an adjustment to the valuation allowance.Internal Revenue Code section 382 (“IRC Section 382”) places a limitation (the “Section 382 Limitation”) on the amount of taxable income that can beoffset by net operating loss (“NOL”) carryforwards after a change in control (generally greater than 50% change in ownership) of a loss corporation.California has similar rules. The Company has performed an IRC Section 382 analysis and determined there was an ownership change in 2017 that resulted in382 limitations. When an ownership change occurs, IRC Section 382 limits the use of NOLs and credits in subsequent periods based on the annual 382limitations. The annual 382 limitations may limit the full use of available tax attributes in one year but the identified ownership changes may not result inexpiration of tax attributes for use prior to expiration of their respective carryforward periods. Accordingly, none of the tax attributes have been reduced butlimited the full use in 2018. There may be further ownership changes after December 31, 2017. The Company has determined that, while an ownershipchange has occurred, the applicable limits would not impair the value or anticipated use of the Company’s federal and state net operating losses. Althoughrealization is not assured, management believes it is more likely than not that any limitation under IRC Section 382 will not impair the realizability of thedeferred income tax assets related to federal and state net operating loss carryforwards.The Company had approximately $3.8 million and $4.3 million of unrecognized tax benefits as of December 31, 2018 and 2017, respectively, andapproximately $1.0 million and $0, respectively, would affect the Company’s effective tax rate if recognized.A reconciliation of the beginning and ending unrecognized tax benefit amount is as follows (in thousands): Year Ended December 31, 2018 2017 2016 Balance at the beginning of the year $4,320 $1,182 $666 Additions based on tax positions related to current year 1,166 521 23 Adjustment based on tax positions related to prior years (1,730) 2,617 493 Balance at end of the year $3,756 $4,320 $1,182 The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. To the extent accrued interest and penalties do notultimately become payable, amounts accrued will be reduced and reflected as a reduction of the provision for income taxes in the period that suchdetermination is made. Interest and penalties have not been accrued for 2018, 2017 and 2016.The Company files income tax returns in the United States, including California state jurisdiction. The tax years 2010 to 2018 remains open to U.S. federaland state examination to the extent of the utilization of net operating loss and credit carryovers. As of December 31, 2018, the Company is not underexamination by the Internal Revenue Service or any state or foreign tax jurisdiction. 126CytomX Therapeutics, Inc.Notes to Financial Statements 15. Related Party Transactions One of the Company’s board members was affiliated with Third Rock Ventures, a greater than 10% stockholder of the Company in 2017. General andadministrative expenses for board service fees incurred were $35,000 and $48,000 for the years ended December 31, 2017 and 2016, respectively. Theamounts outstanding and included in accounts payable were $0 and $12,000 as of December 31, 2017 and December 31, 2016, respectively. This boardmember resigned in December 2017. Revenues from related parties refer to the collaboration agreement with Pfizer, one of the Company’s stockholders. The Company recognized revenue of $2.2million for the year ended December 31, 2016. As of December 31, 2016, deferred revenue relating to the Pfizer Agreement was $3.4 million. The amount duefrom Pfizer under the agreement was $0.1 million as of December 31, 2016. As of and during the year ended December 31, 2017, Pfizer owned less than 10%of the Company’s outstanding common stock and was no longer a related party for purposes of disclosure. 16. Defined Contribution PlanThe Company sponsors a defined contribution plan under Section 401(k) of the Internal Revenue Code covering substantially all full-time U.S. employees.Employee contributions are voluntary and are determined on an individual basis subject to the maximum allowable under federal tax regulations. During theyears ended December 31, 2018, 2017 and 2016, the Company made contributions to the plan of $590,000, $255,000 and $201,000, respectively. 17. Supplementary Data – Quarterly Financial Data (Unaudited) The following table represents certain unaudited financial information for each of the quarters ended December 31, 2018 and 2017: Three Months Ended (in thousands, except per share data) December 31,2018 September 30,2018 June 30,2018 March 31,2018 Revenue $11,471 $12,509 $21,338 $14,184 Net income (loss) $(32,233) $(23,431) $(13,447) $(15,493)Net loss per share attributable to common stockholders, basic and diluted $(0.72) $(0.53) $(0.35) $(0.40) Three Months Ended (in thousands, except per share data) December 31,2017 September 30,2017 June 30,2017 March 31,2017 Revenue $27,074 $24,144 $8,752 $11,653 Net income (loss) $621 $(10,247) $(25,216) $(8,257)Net loss per share attributable to common stockholders, basic and diluted $0.02 $(0.28) $(0.69) $(0.23) 18. Subsequent Event On January 31, 2019, BMS notified the Company that it was terminating certain targets in the BMS Agreement. Such termination will become effective 60days after the notification. As a result of such termination, the Company is no longer eligible to receive any further proceeds from milestones, royalties orresearch and development fees for these targets, and will accelerate revenue recognition for these targets. The termination of these targets does not affect theBMS-986249 or the Amendment, which remains in full force and effect. The Company is still in the process of evaluating the financial impact of theseterminated targets. 127 Item 9.Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNot Applicable.Item 9A.Controls and ProceduresEvaluation of Disclosure Controls and Procedures.The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “ExchangeAct”) refers to controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports thatit files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by anissuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principalexecutive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Indesigning and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designedand operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating thecost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance ofachieving their control objectives.Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controlsand procedures as of December 31, 2018, the end of the period covered by this Annual Report on Form 10-K. Management’s assessment of internal controlover financial reporting was conducted using the criteria defined in the Internal Control—Integrated Framework (2013) issued by the Committee ofSponsoring Organizations of the Treadway Commission (“COSO”). Based upon such evaluation, our Chief Executive Officer and Chief Financial Officerhave concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.Management’s Annual Report on Internal Control over Financial ReportingManagement is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange ActRules 13a-15(f) and 15(d)-15(f). Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance ofrecords that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance thattransactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and thatreceipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of our assets that could have a material effect on the financialstatements.Internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation offinancial statements prepared for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internalcontrol over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject tothe risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures maydeteriorate.Our management, with the participation of our principal executive officer and principal financial officer, conducted an evaluation of the effectiveness of ourinternal control over financial reporting based on the framework in Internal Control – Integrated Framework (2013) issued by the Committee of SponsoringOrganizations of the Treadway Commission. Based on our evaluation under the framework in Internal Control – Integrated Framework, managementconcluded that our internal control over financial reporting was effective as of December 31, 2018.The effectiveness of our internal control over financial reporting as of December 31, 2018 has also been audited by Ernst & Young LLP, an independentregistered public accounting firm, as stated in its report included in this Annual Report on Form 10-K.Changes in Internal Control Over Financial ReportingThere was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurredduring our fiscal quarter ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, our internal control over financialreporting.128 Item 9B.Other InformationWe entered into a consulting agreement (“the “Consulting Agreement”) with Dr. Hoyoung Huh effective December 30, 2018, pursuant to which Dr. Huh willserve as an advisor to the chief executive officer, providing consulting services on corporate governance, strategy and development and on scientific mattersof the Company from time to time as requested but not to exceed 15 hours in any given month. As compensation for his service, we agreed to pay Dr. Huh arate of $500 per hour. In addition, we agreed to reimburse Dr. Huh for reasonable expenses incurred for the performance of his services. The ConsultingAgreement will expire on December 30, 2020 unless extended by mutual agreement between the parties.129 PART IIIItem 10.Directors, Executive Officers and Corporate GovernanceThe information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within120 days after the Company’s fiscal year end and is incorporated herein by reference.We have adopted a code of business conduct and ethics that applies to all employees, including our principal executive officer, principal financial officer,principal accounting officer or controller, or persons performing similar functions. The code of business conduct and ethics is available on our website atwww.cytomx.com. Amendments to, and waivers from, the code of business conduct and ethics that apply to any director, executive officer or personsperforming similar functions will be disclosed at the website address provided above and, to the extent required by applicable regulations, on a CurrentReport on Form 8-K filed with the SEC.Item 11.Executive CompensationThe information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within120 days after the Company’s fiscal year end and is incorporated herein by reference.Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within120 days after the Company’s fiscal year end and is incorporated herein by reference.Item 13.Certain Relationships and Related Transactions and Director IndependenceThe information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within120 days after the Company’s fiscal year end and is incorporated herein by reference.Item 14.Principal Accountant Fees and ServicesThe information required by this Item will be set forth in the Company’s proxy statement to be filed with the Securities and Exchange Commission within120 days after the Company’s fiscal year end and is incorporated herein by reference.130 PART IVItem 15.Exhibits and Financial Statement Schedules (1)Financial Statements:The financial statements required by Item 15(a) are filed as part of this Annual Report on Form 10-K under Item 8 “Financial Statements and SupplementaryData.” (2)Financial Statement SchedulesThe financial statement schedules required by Item 15(a) are omitted because they are not applicable, not required or the required information is included inthe financial statements or notes thereto as filed in Item 8 of this Annual Report on Form 10-K. (3)Exhibits. Incorporated by ReferenceExhibitNumber Exhibit Description Form Date Number FiledHerewith 3.1 Amended and Restated Certificate of Incorporation. 8-K 10/19/2015 3.1 3.2 Amended and Restated Bylaws. 8-K 10/19/2015 3.2 4.1 Reference is made to exhibits 3.1 through 3.2. 4.2 Specimen Common Stock Certificate. S-1/A 9/28/2015 4.1 4.3 Amended and Restated Investors’ Rights Agreement dated as ofJune 12, 2015, by and among CytomX Therapeutics, Inc. andthe investors named therein. S-1 8/28/2015 4.2 4.4 Registration Rights Agreement dated as of September 29, 2017by and between CytomX Therapeutics, Inc. and Amgen, Inc. 10-Q 11/7/2017 4.4 10.1(a)# 2010 Stock Incentive Plan adopted on September 21, 2010(“2010 Plan”). S-1 8/28/2015 10.3 10.1(b)# Form of Stock Option Agreement under the 2010 Plan. S-1 8/28/2015 10.4 10.2(a)# 2011 Stock Incentive Plan, adopted on February 7, 2012, asamended (“2011 Plan”). S-1 8/28/2015 10.1 10.2(b)# Form of Restricted Stock Award Agreement and Option ExerciseAgreement under the 2011 Plan. S-1 8/28/2015 10.2 10.3(a)# 2015 Equity Incentive Plan (“2015 Plan”). S-1/A 10/6/2015 10.5 10.3(b)# Form of 2015 Plan Option Agreement under the 2015 Plan. 10-Q 11/23/2015 10.4 10.3(c)# Form of 2015 Plan Early Exercise Option Agreement 10-Q 11/23/2015 10.5 10.4# 2015 CytomX Therapeutics, Inc. Employee Stock PurchasePlan. S-1/A 9/28/2015 10.6 10.5(a)# Employment Offer Letter Agreement between CytomXTherapeutics, Inc. and Sean A. McCarthy, D. Phil, dated as ofDecember 15, 2010. S-1 8/28/2015 10.7 131 Incorporated by ReferenceExhibitNumber Exhibit Description Form Date Number FiledHerewith 10.5(b)# Amended and Restated Severance and Change of ControlAgreement effective as of October 3, 2016, by and betweenCytomX Therapeutics, Inc. and Sean McCarthy, D. Phil. 10-K 3/2/2017 10.5(c) 10.6# Separation Agreement, by and between CytomX Therapeutics,Inc. and Robert C. Goeltz, dated as May 15, 2017. 10-Q 8/7/2017 10.1 10.7# Severance and Change of Control Agreement and FirstAmendment to Severance and Change of Control Agreementeffective as of March 23, 2016, by and between CytomXTherapeutics, Inc. and Michael Kavanaugh, M.D. 10-K 3/2/2017 10.7(c) 10.8# Severance and Change of Control Agreement and FirstAmendment to Severance and Change of Control Agreementeffective as of March 23, 2016, by and between CytomXTherapeutics, Inc. and Rachel W. Humphrey, M.D. 10-Q 5/6/2016 10.2 10.9# Severance and Change of Control Agreement and FirstAmendment to Severance and Change of Control Agreementeffective as of May 15, 2017, by and between CytomXTherapeutics, Inc. and Debanjan Ray. 10-Q 8/7/2017 10.2 10.10# Form of First Amendment to Severance and Change of ControlAgreement by and between CytomX Therapeutics, Inc. andcertain of its officers. 8-K 3/7/2016 10.1 10.11# Form of Indemnification Agreement by and between CytomXTherapeutics, Inc. and each of its directors and each of itsexecutive officers. S-1 8/28/2015 10.16 10.12† Research Collaboration Agreement dated as of January 8, 2014,by and between ImmunoGen, Inc. and CytomX Therapeutics,Inc., as amended by the First Amendment to ResearchCollaboration Agreement effective as of April 3, 2015. S-1/A 10/2/2015 10.17 10.13† Collaboration and License Agreement dated as of May 23,2014, by and between CytomX Therapeutics, Inc. and Bristol-Myers Squibb Company. S-1/A 10/2/2015 10.18 10.14† Amendment to Extend Collaboration and License Agreement,dated March 17, 2017, by and between the Company andBristol-Myers Squibb. 10-Q 5/5/2017 10.1 10.15† Co-Development and License Agreement, dated April 21, 2016,by and between CytomX Therapeutics, Inc. and AbbVie IrelandUnlimited Company. 10-Q 8/3/2016 10.1 10.16† Discovery Collaboration and License Agreement, dated April21, 2016, by and between CytomX Therapeutics, Inc. andAbbVie Ireland Unlimited Company. 10-Q 8/3/2016 10.2 132 Incorporated by ReferenceExhibitNumber Exhibit Description Form Date Number FiledHerewith 10.17 Exclusive License Agreement dated as of August 19, 2010, byand between The Regents of the University of California andCytomX Therapeutics, Inc., as amended by Amendment No. 1 toExclusive Agreement effective as of May 30, 2013 andAmendment No. 2 to Exclusive Agreement effective as ofNovember 8, 2013. S-1/A 9/18/2015 10.21 10.18† Collaboration and License Agreement by and between CytomXTherapeutics, Inc. and Amgen, Inc. dated as of September 29,2017. 10-Q 11/7/2017 10.1 10.19 Lease dated as of December 10, 2015, by and between CytomXTherapeutics, Inc. and HCP Oyster Point III LLC. 8-K 12/16/2015 10.1 10.20† First Amendment to the CD71 Co-Development and LicenseAgreement by and between CytomX Therapeutics, Inc. andAbbVie Ireland Unlimited Company, dated as of October 5,2016. 10-Q 11/6/2018 10.1 10.21† Second Amendment to the CD71 Co-Development and LicenseAgreement by and between CytomX Therapeutics, Inc. andAbbVie Ireland Unlimited Company, dated as of March 31,2017. 10-Q 11/6/2018 10.2 10.22† Third Amendment to the CD71 Co-Development and LicenseAgreement by and between CytomX Therapeutics, Inc. andAbbVie Ireland Unlimited Company, dated as of January 3,2018. 10-Q 11/6/2018 10.3 10.23† License Agreement by and between CytomX Therapeutics, Inc.and ImmunoGen Inc., dated as of February 12, 2016. 10-Q 11/6/2018 10.4 10.24† Second Amendment to the Research Collaboration Agreementby and between CytomX Therapeutics, Inc. and ImmunoGenInc., dated as of February 12, 2016. 10-Q 11/6/2018 10.5 10.25† Third Amendment to the Research Collaboration Agreement byand between CytomX Therapeutics, Inc. and ImmunoGen Inc.,dated as of March 3, 2017. 10-Q 11/6/2018 10.6 10.26# Severance and Change of Control Agreement and FirstAmendment to Severance and Change of Control Agreementeffective as of May 16, 2018, by and between CytomXTherapeutics, Inc. and Lloyd Rowland. 10-Q 8/8/2018 10.1 10.27# Consulting Agreement between CytomX Therapeutics, Inc andDr. Hoyoung Huh, effective as of December 30, 2018. X 23.1 Consent of Ernst & Young LLP, Independent Registered PublicAccounting Firm. X 133 Incorporated by ReferenceExhibitNumber Exhibit Description Form Date Number FiledHerewith 23.2 Consent of PricewaterhouseCoopers LLP, IndependentRegistered Public Accounting Firm. X 24.1 Power of Attorney (included on signature page) X 31.1 Certification of Principal Executive Officer Pursuant to Rules13a-14(a) and 15d-14(a) under the Securities Exchange Act of1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 31.2 Certification of Principal Financial Officer Pursuant to Rules13a-14(a) and 15d-14(a) under the Securities Exchange Act of1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. X 32.1** Certification of Principal Executive Officer and PrincipalFinancial Officer Pursuant to 18 U.S.C. Section 1350, asAdopted Pursuant to Section 906 of the Sarbanes-Oxley Act of2002. X 101.INS XBRL Instance Document X 101.SCH XBRL Taxonomy Extension Schema Document X 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF XBRL Taxonomy Extension Definition Linkbase Document X 101.LAB XBRL Taxonomy Extension Label Linkbase Document X 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document X †Confidential treatment has been granted for certain information contained in this exhibit. Such information has been omitted and filed separately with the Securities andExchange Commission.#Indicates management contract or compensatory plan.**The certifications attached as Exhibit 32.1 that accompany this Annual Report on Form 10-K are not deemed filed with the Securities and Exchange Commission and are notto be incorporated by reference into any filing of CytomX Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, asamended, whether made before or after the date of this Annual Report on Form 10-K, irrespective of any general incorporation language contained in such filing. Item 16. Form 10-K Summary Registrants may voluntarily include a summary of information required by Form 10-K under Item 16. We have elected not to include such summary. 134 SIGNATURESPursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalfby the undersigned, thereunto duly authorized. CYTOMX THERAPEUTICS, INC. Date: February 27, 2019 By:/s/ Sean A. McCarthy Name:Sean A. McCarthy, D.Phil. Title:President and Chief Executive Officer By:/s/ Debanjan Ray Name:Debanjan Ray Title:Chief Financial Officer135 POWER OF ATTORNEYEach person whose individual signature appears below hereby authorizes and appoints Sean A. McCarthy, D. Phil. and Debanjan Ray and each of them, withfull power of substitution and resubstitution, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to executein the name and on behalf of each person, individually and in each capacity stated below, and to file any and all amendments to this Annual Report on Form10-K and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, grantingunto said attorney-in-fact and agents full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorney-in-fact and agents or his substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the SecuritiesExchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. /s/ Sean A. McCarthy President, Chief Executive Officer and Director February 27, 2019Sean A. McCarthy, D.Phil. (Principal Executive Officer) /s/ Debanjan Ray Chief Financial Officer February 27, 2019Debanjan Ray (Principal Financial and Accounting Officer) /s/ Matthew P. Young Director February 27, 2019Matthew P. Young /s/ Charles S. Fuchs, M.D., M.P.H. Director February 27, 2019Charles S. Fuchs /s/ Frederick W. Gluck Director February 27, 2019Frederick W. Gluck /s/ John A. Scarlett, M.D. Director February 27, 2019John A. Scarlett, M.D. /s/ James R. Meyers Director February 27, 2019James Meyers 136 Exhibit 10.27 CONSULTING AGREEMENT This Consulting Agreement (the “Agreement”) is made and entered into by and between CytomX Therapeutics, Inc., a Delawarecorporation, with an address at 151 Oyster Point Blvd, Suite 400, South San Francisco, CA 94080, (“Company”) and, Dr. HoyoungHuh, M.D., Ph.D, an individual residing at * (“Consultant”), effective as of December 31, 2018 (“Effective Date”). Recitals Whereas, Consultant has skills and knowledge in the Company’s field of endeavor and thus is well suited to advise theCompany; and Whereas, the Company desires that Consultant advise and consult with the Company in Consultant’s area of expertise andon the terms and conditions set forth herein; Now Therefore, in consideration of the mutual obligations specified in this Agreement, the parties agree to the following: 1.Consulting Services. Consultant shall serve as an advisor to the chief executive officer, providing consulting services tothe Company on corporate governance, strategy and development and on scientific matters of the Company from time to time asrequested (and such services the “Services”). Consultant will perform the Services using Consultant’s highest degree of professionalskill and expertise. Consultant shall render the Services at such times and in such quantities as are requested, provided that such Services shallnot exceed fifteen (15) hours in any given month, unless otherwise specifically agreed to in writing by Consultant and Company. 2.Compensation. Company shall pay Consultant $500.00 per hour, payable in arrears pursuant to monthly invoices(provided by Consultant) for the Services, such invoices payable within thirty (30) days from date of receipt by the Company. TheCompany shall also reimburse Consultant for reasonable expenses. 3.Independent Contractor Status. It is understood and agreed that Consultant is an independent contractor, is notan agent or employee of the Company, and is not authorized to act on behalf of the Company. Consultant agrees not to hold himself orherself out as, or give any person any reason to believe that he or she is an employee, agent, joint venturer or partner of theCompany. Consultant will not be eligible for any employee benefits, nor will the Company make deductions from any amountspayable to Consultant for taxes or insurance (except to the extent the Company is required by law to do so). All payroll and employment taxes, insurance, and benefits shall be the soleresponsibility of Consultant. 4.No Solicitation. During the term of this Agreement and for one (1) years after its termination, Consultant (and itspersonnel performing hereunder) will not personally or through others recruit, solicit or induce any employee of the Company toterminate his or her employment with the Company. 5.Maintaining Confidential Information. 5.1Company Information. During the term of this Agreement, Consultant may receive or otherwise be exposed toconfidential and proprietary information relating to the Company’s technology, know-how, data, inventions, developments, plans,business practices, and strategies, and those of the Company’s collaborators and business associates. Such confidential and proprietaryinformation of the Company (collectively referred to as “Information”) may include but not be limited to: (i) information supplied toConsultant with the legend “Confidential” or equivalent; (ii) the Company’s marketing and customer support strategies, financialinformation (including sales, costs, profits and pricing methods), internal organization, employee information, customer lists andbusiness plans; (iii) the Company’s technology, including, but not limited to, discoveries, inventions, research and development efforts,manufacturing processes, assays, data (including without limitation preclinical, clinical and manufacturing data), software, trade secrets,processes, compounds, product, candidates, products, samples, media and/or cell lines (and procedures and formulations for producingany such samples, media and/or cell lines), vectors, viruses, assays, plasmids, formulas, methods, protocols, clinical trial designs andproduct know‑how and show‑how; (iv) all derivatives, improvements, additions, modifications, and enhancements to any of the above,including any such information or material created or developed by Consultant under this Agreement; (v) information of third parties asto which the Company has an obligation of confidentiality; and (vi) information regarding the Consulting Inventions (defined inSection 6.1). Consultant acknowledges the confidential and secret character of the Information and agrees that the Information (with theexception of information in category (v)) is the sole, exclusive and extremely valuable property of the Company. Accordingly,Consultant shall not reproduce any of the Information without the applicable prior written consent of the Company, use the Informationexcept in the performance of this Agreement, nor disclose all or any part of the Information in any form to any third party, either duringor after the term of this Agreement. Upon termination of this Agreement for any reason, including expiration of term, Consultantagrees to cease using and to return to the Company all whole and partial copies of the Information. Consultant shall not remove from the premises of Company or otherwise transfer to any third party any materials to whichCompany provides Consultant access, unless Consultant has express advance written consent from Company.  5.2Employer Information. Consultant agrees that she, he or it will not, during her or his engagement with theCompany, improperly use or disclose any proprietary information or trade secrets of her or his former or current employers orcompanies with which she or he has or has had a consulting or other relationship, if any. 5.3Third Party Information. Consultant recognizes that the Company has received and in the future will receivefrom third parties their confidential or proprietary information subject to a duty on the Company’s part to maintain the confidentiality ofsuch information and, in some cases, to use it only for certain limited purposes. Consultant agrees that he, she or it owes the Companyand such third parties, both during the term of her or his engagement and thereafter, a duty to hold all such confidential or proprietaryinformation in the strictest confidence and not to disclose it to any person, firm or corporation (except in a manner that is consistentwith the Company’s agreement with the third party) or use it for the benefit of anyone other than the Company or such third party(consistent with the Company’s agreement with the third party). 5.4Statutory Immunity from Prosecution. Consultant shall not be held criminally or civilly liable under anyFederal or State trade secret law for the disclosure of a trade secret that: (i) is done solely for the purpose of reporting or investigating asuspected violation of law and is made in confidence to a Federal, State, or local government official, either directly or indirectly, or toan attorney; or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. 6.Inventions. 6.1Disclosure of Inventions. Consultant shall promptly and fully disclose to the Company any and all ideas,improvements, inventions, know-how, techniques and works of authorship learned, conceived or developed by Consultant pursuant toher, his or its performance of the Services for the Company and/or using the Information (whether such use of Information occursduring or after the term of this Agreement (and without implying any right to use the Information outside of performing the Services))(all of the foregoing, together with all intellectual property rights therein (including without limitation patent applications and patents),the “Consulting Inventions”). All inventions by Consultant during the term of the Services or within one (1) year thereafterand having utility in the field of protease-activated biologics shall be presumed to have been made using the Informationunless Consultant is able to show conclusively that they were not. 6.2Inventions Assigned to the Company. Consultant agrees that any and all Consulting Inventions shall be thesole and exclusive property of the Company. Accordingly, Consultant hereby assigns to the Company all her, his or its right, title andinterest in and to the Consulting Inventions, and agrees to execute and deliver (during and after the term of this Agreement and for noadditional consideration) all documents and take all reasonable, lawful actions to assist the Company to evidence or record suchassignment or perfect, defend or enforce the Consulting Inventions. Consultant shall do so both during and after the term of thisAgreement, for no additional consideration beyond the payments from Company to Consultant for the Services during the term of thisAgreement. Further, if Company is unable, after making reasonable inquiry, to obtain Consultant’s signature on any such documents,Consultant hereby appoints Company as Consultant’s attorney-in-fact to execute and deliver such documents. Consultant explicitly acknowledges and agrees that all works of authorship contained in the Consulting Inventions are“works for hire” under the copyright laws of the United States, and that the Company shall own the copyright in all such works ofauthorship. 6.3Obligation to Keep the Company Informed. During the term of this Agreement, and for one (1) year after itstermination for any reason, Consultant will promptly disclose to the Company fully and in writing all patent applications filed by her,him or it, or on her, his or its behalf. 7.Term and Termination. This Agreement shall expire two years after the Effective Date. Notwithstanding theforegoing, either the Company or Consultant may terminate this Agreement at any time with or without cause by giving thirty (30)days written notice. If this Agreement terminates, Consultant shall cease work immediately after giving or receiving such notice ortermination, unless otherwise advised by the Company, shall return to the Company all Information, Consulting Inventions, and othermaterials belonging to the Company, and shall notify the Company of costs incurred up to the termination date. Sections 4-6 of thisAgreement shall survive any termination of this Agreement. 8.Compliance with Applicable Laws. Consultant warrants that all work performed under this Agreement complieswith or will comply with all applicable United States and foreign laws and regulations. 9.Assignment; Benefit. This Agreement is for the personal services of Consultant and may not be assigned by her,him or it. Consultant may not delegate any of his, her or its duties under this Agreement nor shall it be assignable by Consultant byoperation of law, without the prior written consent of the Company. The parties’ rights and obligations under this Agreement will bindand inure to the benefit of their respective successors, heirs, executors, and administrators and permitted assigns. 10.Legal and Equitable Remedies. Consultant hereby acknowledges and agrees that if Consultant breaches thisAgreement, including, without limitation, by the actual or threatened disclosure of Information or Consulting Inventions without theprior express written consent of the Company, the Company will suffer an irreparable injury, such that no remedy at law will afford itadequate protection against, or appropriate compensation for, such injury. Accordingly, Consultant hereby agrees that the Companyshall be entitled to specific performance of Consultant’s obligations under this Agreement, as well as such further relief as may begranted by a court of competent jurisdiction.  11.Notices. Any notices required or permitted hereunder shall be given to the appropriate party at the addressspecified below or at such other address as the party shall specify in writing. Such notice shall be deemed given upon personaldelivery to the appropriate address or sent by certified or registered mail, three days after the date of mailing. Either party may updateits notice address by written notice to the other party. If to the Company:If to the Consultant:CytomX Therapeutics, Inc.151 Oyster Point Blvd, Suite 400South San Francisco, CA 94080ATTN: General CounselDr. Hoyoung Huh M.D., Ph.D** 13.Governing Law; Severability. This Agreement shall be governed by and construed according to the laws of theState of California, without giving effect to its conflict of laws rules. If any provision of this Agreement is found by a court ofcompetent jurisdiction to be unenforceable, that provision shall be severed and the remainder of this Agreement shall continue in fullforce and effect. Any disputes arising under this Agreement shall be resolved by trial to a judge as the finder of fact seated in a court ofcompetent subject matter jurisdiction in California. Each party hereby consents to, and waives any defenses that party may have to orconflicting with, the personal jurisdiction and venue of all such courts or relating to trial to a judge (including without limitation thedefense of forum non conveniens). 14.Complete Understanding; Modification. This Agreement constitutes the final, exclusive and completeunderstanding and agreement of the Company and Consultant with respect to the subject matter hereof. There are no otherunderstandings, agreements, representations or warranties between the parties with respect to that subject matter other than those setforth in this Agreement. Any waiver, modification or amendment of any provision of this Agreement shall be effective only if inwriting and signed by a Company officer. In Witness Whereof, the parties hereto have executed this Agreement as of the Effective Date. CytomX Therapeutics, Inc. By: /s/ Sean McCarthy Name: Dr. Sean McCarthy Title: President and CEO Date: 12/20/2018 Consultant By: /s/ Hoyoung Huh Name: Dr. Hoyoung Huh Date: 1/4/2019  Exhibit 23.1CONSENT OF ERNST & YOUNG LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-214418, 333-216567 and 333-228203) and Form S-8(Nos. 333-207694, 333-209992, 333-215795 and 333-223491) of CytomX Therapeutics, Inc. of our reports dated February 27, 2019, with respect to thefinancial statements of CytomX Therapeutics, Inc. and the effectiveness of internal control over financial reporting of CytomX Therapeutics, Inc., included inthis Annual Report (Form 10-K) for the year ended December 31, 2018. /s/ Ernst & Young LLP Redwood City, CaliforniaFebruary 27, 2019  Exhibit 23.2CONSENT OF PRICEWATERHOUSECOOPERS LLP, INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-214418, 333-216567, 333-228203) and Form S-8(Nos. 333-207694, 333-209992, 333-215795, 333-223491) of CytomX Therapeutics, Inc. of our report dated March 2, 2017 relating to the financialstatements, which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPSan Jose, CaliforniaFebruary 27, 2019 Exhibit 31.1CERTIFICATIONSI, Sean A. McCarthy, D.Phil., certify that:1. I have reviewed this Annual Report on Form 10-K of CytomX Therapeutics, Inc. for the year ended December 31, 2018;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 this report;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)) for theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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 under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin 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 the effectivenessof 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’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’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, tothe registrant’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 are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: February 27, 2019 /s/ Sean A. McCarthySean A. McCarthy, D.Phil.President and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2CERTIFICATIONSI, Debanjan Ray, certify that:1. I have reviewed this Annual Report on Form 10-K of CytomX Therapeutics, Inc. for the year ended December 31, 2018;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 this report;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)) for theregistrant and have:a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under my supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularlyduring 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 under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposesin 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 the effectivenessof 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’s most recent fiscalquarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant’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, tothe registrant’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 are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control overfinancial reporting.Date: February 27, 2019 /s/ Debanjan RayDebanjan RayChief Financial Officer(Principal Financial and Accounting Officer) Exhibit 32.1SECTION 1350 CERTIFICATIONS*Pursuant to the requirement set forth in Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Section 1350 ofChapter 63 of Title 18 of the United States Code (18 U.S.C. § 1350), Sean A. McCarthy, D.Phil., President and Chief Executive Officer (Principal ExecutiveOfficer) of CytomX Therapeutics, Inc. (the “Company”), and Debanjan Ray, Chief Financial Officer (Principal Financial and Accounting Officer) of theCompany, each hereby certifies that, to the best of his knowledge:1. The Company’s Annual Report on Form 10-K for the year ended December 31, 2018 to which this Certification is attached as Exhibit 32.1 (the“Annual Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Exchange Act; and2. The information contained in the Annual Report fairly presents, in all material respects, the financial condition and results of operations of theCompany for the period covered by the Annual Report.Dated: February 27, 2019 /s/ Sean A. McCarthy /s/ Debanjan RaySean A. McCarthy, D.Phil. Debanjan RayPresident and Chief Executive Officer(Principal Executive Officer) Chief Financial Officer(Principal Financial and Accounting Officer) *This certification accompanies the Annual Report on Form 10-K, to which it relates, is not deemed filed with the Securities and Exchange Commissionand is not to be incorporated by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Actof 1934, as amended (whether made before or after the date of the Form 10-K), irrespective of any general incorporation language contained in suchfiling. 

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