Five Prime Therapeutics Inc
Annual Report 2018

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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, DC 20549 FORM 10-K ☒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: 001-36070 Five Prime Therapeutics, Inc.(Exact name of registrant as specified in its charter) Delaware 26-0038620(State or other jurisdiction ofincorporation or organization) (IRS EmployerIdentification No.) 111 Oyster Point BoulevardSouth San Francisco, California 94080(415) 365-5600(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices) Securities registered pursuant to Section 12(b) of the Act: Title of Each Class Name of Each Exchange on Which RegisteredCommon Stock, par value $0.001 per share Nasdaq Global Select MarketSecurities registered pursuant to Section 12(g) of the Act: NoneIndicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐ Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding12 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 and posted pursuant to Rule 405 of Regulation S-Tduring the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files): Yes ☒ No ☐Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’sknowledge, 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, or a smaller reporting company. See the definitions of “largeaccelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one): 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 Act). Yes ☐ No ☒As of June 29, 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 $549 million, based on the closing price of the registrant’s common stock on The Nasdaq Global Select Market on June 29, 2018 of$15.81 per share. Shares of the registrant’s common stock held by each officer and director and stockholders that the registrant has concluded are affiliates of the registrant. Thisdetermination of affiliate status is not a determination for other purposes.As of February 19, 2019, the registrant had 35,487,149 shares of common stock, par value $0.001 per share, outstanding.DOCUMENTS INCORPORATED BY REFERENCEPortions of the definitive proxy statement, or the Proxy Statement, for the 2019 Annual Meeting of Stockholders of the registrant are incorporated by reference into Part III of thisAnnual Report on Form 10-K. The Proxy Statement will be filed with the Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31,2018. TABLE OF CONTENTS Page SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA iiPART I Item 1 Business 1Item1A Risk Factors 30Item1B Unresolved Staff Comments 67Item 2 Properties 67Item 3 Legal Proceedings 67Item 4 Mine Safety Disclosures 67 PART II Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 68Item 6 Selected Financial Data 70Item 7 Management’s Discussion and Analysis of Financial Condition and Results of Operations 71Item 7A Quantitative and Qualitative Disclosures About Market Risk 90Item 8 Financial Statements and Supplementary Data 90Item 9 Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 90Item 9A Controls and Procedures 90Item 9B Other Information 93 PART III Item 10 Directors, Executive Officers and Corporate Governance 94Item 11 Executive Compensation 94Item 12 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 94Item 13 Certain Relationships and Related Transactions, and Director Independence 94Item 14 Principal Accountant Fees and Services 94 PART IV Item 15 Exhibits, Financial Statement Schedules 95 Signatures In this report, unless otherwise stated or the context otherwise indicates, references to “Five Prime,” “the company,” “we,” “us,” “our” and similarreferences refer to Five Prime Therapeutics, Inc. The Five Prime logo and RIPPS® are our registered trademarks. This report also contains registered marks,trademarks and trade names of other companies. All other trademarks, registered marks and trade names appearing in this report are the property of theirrespective holders. i SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTSAND INDUSTRY DATAThis Annual Report on Form 10-K contains forward-looking statements. In some cases you can identify these statements by forward-looking wordssuch as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or thenegative or plural of these words or expressions. These forward-looking statements include statements concerning the following: •our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing; •our receipt of future milestone payments and/or royalties, and the timing of such payments; •our or our partners’ ability to timely advance drug candidates into and through clinical data readouts and successful completion of clinicaltrials; •the timing of the initiation, progress and results of preclinical studies and research and development programs; •our expectations regarding the potential safety, efficacy or clinical utility of our product candidates; •the implementation, timing and likelihood of success of our plans to develop companion diagnostics for our product candidates; •our ability to establish and maintain collaborations and necessary licenses; •the implementation of our business model and strategic plans for our business, product candidates and technology; •the scope of protection we establish and maintain for intellectual property rights covering our product candidates and technology; •the size of patient populations targeted by products we or our partners develop and market adoption of such products by physicians andpatients; •the timing or likelihood of regulatory filings and approvals; •the ability to negotiate pricing, coverage and adequate reimbursement for our drug candidates with third-parties and government authorities; •developments relating to our competitors' and our industry; and •our expectations regarding licensing, acquisitions and strategic operations.These statements are only current predictions and are subject to known and unknown risks, uncertainties and other factors that may cause our or ourindustry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements.We discuss many of these risks in this report in greater detail under the heading “Risk Factors” and elsewhere in this report. You should not rely uponforward-looking statements as predictions of future events.Although we believe that the expectations reflected in these forward-looking statements are reasonable, we cannot guarantee future results, levels ofactivity, performance, or achievements. Except as required by law, we are under no duty to update or revise any of these forward-looking statements, whetheras a result of new information, future events or otherwise, after the date of this report.We obtained the industry, market and competitive position data in this annual report from our own internal estimates and research as well as fromindustry and general publications and research surveys and studies conducted by third-parties. While we believe that each of these studies and publications isreliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliableand the market definitions we use are appropriate, neither such research nor these definitions have been verified by any independent source. ii PART I. Item 1. Business.Our CompanyWe are a clinical-stage biotechnology company focused on discovering and developing innovative protein therapeutics to improve the lives of patients withserious diseases. Each of our product candidates has an innovative mechanism of action and addresses patient populations for which better therapies areneeded. Our primary focus is on researching and developing immuno-oncology and targeted cancer therapies. In addition, we use companion diagnosticswhere appropriate to allow us to select patients most likely to benefit from treatment with our product candidates. The most advanced product candidates thatwe or our partners are developing are identified below. •Bemarituzumab (FPA144) is an antibody that inhibits fibroblast growth factor receptor 2b, or FGFR2b, that we are studying in a clinical trialin combination with 5-fluorouracil (5-FU), leucovorin and oxaliplatin, a standard-of-care chemotherapy regimen known as mFOLFOX6, asfront-line treatment of patients with gastric (stomach) or gastroesophageal junction, or GEJ, cancer that overexpresses FGFR2b. In December2017, we granted Zai Lab (Shanghai) Co., Ltd., or Zai Lab, an exclusive license to develop and commercialize bemarituzumab in China, HongKong, Macau and Taiwan. •FPA150 is a CD8 T cell checkpoint inhibitor antibody that targets B7-H4 that we are studying in a clinical trial in multiple cancers. •FPT155 is a soluble CD80 fusion protein that enhances co-stimulation of T cells through CD28 that we are studying in a clinical trial inmultiple cancers. •Cabiralizumab (FPA008) is an antibody that inhibits colony stimulating factor-1, or CSF1, receptor, or CSF1R, that we and our partnerBristol-Myers Squibb Company, or BMS, are studying in clinical trials in multiple cancers in combination with BMS’s PD-1 immunecheckpoint inhibitor, Opdivo® (nivolumab). In October 2015, we granted BMS an exclusive worldwide license for the development andcommercialization of cabiralizumab. •BMS-986258 is an anti-T cell immunoglobulin and mucin domain-3, or TIM-3, antibody that our partner, BMS, is studying in a clinical trial asa single agent and in combination with Opdivo in patients with advanced malignant tumors.We are focusing our activities on immuno-oncology and targeted cancer therapies, which we believe to have significant therapeutic potential. We leverageour differentiated discovery capabilities and protein therapeutic generation and engineering capabilities to identify and validate targets that we believecould be useful in oncology and generate and preclinically test therapeutic proteins, including antibodies and fusion proteins, directed to or containing thetargets we identify and validate. We plan to continue to advance selected therapeutic candidates into clinical development. Our product candidates aretypically only-in-class, first-in-class or meaningfully differentiated from other in-class therapeutics. We generally look for single-agent activity or clearactivity in, for example, tumor types that are rarely sensitive to checkpoint inhibitors.Clinical StrategyOur goal is to use our differentiated target discovery platform and protein therapeutic generation and engineering capabilities to maintain our leadershipposition in the discovery of innovative protein therapeutic targets and to build a leadership position in the development and commercialization of oncologytherapeutics. The key elements of our strategy to achieve this goal are:1 •Focus on immuno-oncology and targeted protein therapeutics. Cancer therapeutics accounted for $133 billion in global sales in 2017.However, there continues to be significant medical need for innovative and effective cancer therapies. With the productivity of our drugdiscovery capabilities and the significant experience and expertise of our research, preclinical and clinical scientists in the field of oncology,we believe we are well positioned to discover new targets and develop effective, innovative protein therapeutics. •Continue to advance and expand our pipeline. We have a robust pipeline that addresses multiple cell types in the tumor microenvironment.We and our partners are currently advancing five of our product candidates, bemarituzumab, FPA150, FPT155, cabiralizumab and BMS-986258, through clinical development, and we have other products in preclinical or earlier development. We plan to focus our resources on thefurther development of these product candidates, discovering and developing new therapeutic candidates with our platform, and potentially in-licensing additional product rights from third parties to expand our development pipeline. •Establish additional product and clinical collaborations to supplement our development capabilities and generate funding. From time totime, we expect to establish additional product and clinical collaborations. These collaborations will supplement our research, development,manufacturing, regulatory and commercialization capabilities, provide us with significant funding to advance our pipeline and validate ourtechnology. •Build a U.S.-focused commercial enterprise by retaining rights for products in targeted specialty markets. We plan to build sales andmarketing capabilities in selected specialty markets in the United States that we can adequately serve as we work toward becoming a focusedcommercial organization. We currently have global rights to all our product candidates, except that we granted Zai Lab an exclusive license todevelop and commercialize bemarituzumab in China, Hong Kong, Macau and Taiwan, and granted BMS exclusive global rights to developand commercialize cabiralizumab. Our cabiralizumab collaboration agreement with BMS provides us with an option to co-promotecabiralizumab in the United States.2 Our PipelineThe following table shows the stage of development of the most advanced product candidates that we are developing or that have come from our pipelineand are being developed or supported by our collaborators: ______________________________ * Partnered with Zai Lab – see “Part I—Item 1. Collaborations” for a description of our China collaboration agreement with Zai Lab.** Partnered with BMS – see “Part I—Item 1. Collaborations” for a description of our collaboration agreements with BMS.† Clinical development is being conducted exclusively by BMS.†† Clinical development is being conducted by the University of California, San Diego, the sponsor of the trial, in collaboration with Stand Up To Cancer and BMS.‡ Clinical development is being conducted by the Sidney Kimmel Comprehensive Cancer Center at Johns Hopkins, the sponsor of the trial, in collaboration with BMS.§ Clinical development is being conducted by the Yale Cancer Center, the sponsor of the trial, in collaboration with Apexigen, Inc. and BMS. Clinical ProgramsBemarituzumab (FPA144)Bemarituzumab is an antibody that inhibits FGFR2b that we are developing to treat a subset of gastric (stomach) and GEJ cancer patients whose tumorsoverexpress FGFR2b. This subset of patients is associated with lower overall survival. We are working with third parties specializing in companiondiagnostic development to develop immunohistochemistry, or IHC, and blood-based companion diagnostics to identify gastric and GEJ cancer patients whohave FGFR2b overexpressing tumors or FGFR2 gene amplification and who would be most likely to benefit from treatment with bemarituzumab.We believe that bemarituzumab acts on tumor cells in two ways: •bemarituzumab binds to FGFR2b and blocks certain FGFs from binding to FGFR2b, preventing these FGFs from promoting the growth of thetumor cells; and •once bemarituzumab binds to FGFR2b on the surface of the tumor cell, bemarituzumab recruits natural killer immune cells into the tumormicroenvironment to kill the tumor cell in a process called antibody-dependent cell-mediated cytotoxicity, or ADCC.3 Clinical Development of BemarituzumabWe are conducting a Phase 3 registrational trial of bemarituzumab in combination with mFOLFOX6 as front-line treatment of patients with gastric or GEJcancer that overexpresses FGFR2b, which we refer to as our FIGHT trial. In the FIGHT trial, we are evaluating bemarituzumab in combination withmFOLFOX6 against placebo in combination with mFOLFOX6 in approximately 550 patients with advanced gastric or GEJ cancer. We will conduct theFIGHT trial at over 200 clinical trial sites in North America, Europe and Asia. We are conducting the trial in China in collaboration with Zai Lab. Wecontinue to engage with regulatory authorities in several countries to obtain approval to initiate the FIGHT trial in those countries.We are identifying patients for inclusion in the FIGHT trial using both an IHC test and a circulating tumor DNA, or ctDNA, blood-based test, which allows usto detect FGFR2 gene amplification from DNA shed from tumors that circulates in blood plasma outside of cells. FGFR2 gene amplification causes FGFR2boverexpression, and measuring FGFR2 gene amplification in the blood is an indirect way of identifying tumors with FGFR2b overexpression that we mayotherwise not identify using an IHC test. We are developing both companion diagnostics in parallel with our clinical development of bemarituzumab and areusing them concurrently to more effectively identify the estimated 10% of gastric and GEJ cancer patients whose tumors overexpress FGFR2b or amplifythe FGFR2 gene who would be eligible to participate in this trial. We plan to pursue regulatory approval of each companion diagnostic contemporaneouslywith regulatory approval of bemarituzumab.Because the observed incidence of gastric and GEJ cancer is higher in Asian populations than in other populations, in December 2017, we entered into alicense and collaboration agreement, or the China collaboration agreement, with Zai Lab, pursuant to which we granted Zai Lab an exclusive license todevelop and commercialize bemarituzumab in China, Hong Kong, Macau and Taiwan, and pursuant to which Zai Lab is conducting the Phase 3 FIGHT trialin China. We believe that our collaboration with Zai Lab will enhance our ability to enroll patients at clinical sites in China.In June 2017, we presented in a clinical poster at the 2017 American Society of Clinical Oncology, or ASCO, Annual Meeting, or the 2017 ASCOpresentation, safety and efficacy monotherapy data from 64 patients from a Phase 1 clinical trial evaluating bemarituzumab as a potential therapy in patientswith gastric or GEJ cancer whose tumors overexpress FGFR2b. As of the March 20, 2017 data cut-off date for the 2017 ASCO presentation, we had testedbemarituzumab in advanced solid tumors at doses of up to 15 mg/kg given as monotherapy every two weeks, including in patients with gastric or GEJ cancer.We did not observe any dose-limiting toxicities or a maximum-tolerated dose. In addition, unlike small molecule FGF receptor kinase inhibitors, which blocksignaling through a broad number of FGF receptors and can lead to hyperphosphatemia, we did not observe any treatment-related hyperphosphatemia inpatients treated with bemarituzumab. All treatment-related adverse events were Grades 1, 2 or 3. All treatment-related ocular adverse events were Grades 1 or2, and no retinal toxicity was reported.With respect to the patients with gastric or GEJ cancer, we observed preliminary anti-tumor activity with bemarituzumab monotherapy in late-line patientswho had a median of three prior therapies and whose tumors overexpress the FGFR2b protein. Based on radiographic assessments by RECIST 1.1 of anti-tumor activity in the 21 patients who had FGFR2b-overexpressing gastric or GEJ cancer, we observed, as of the March 20, 2017 data cut-off date: •four confirmed partial responses and one unconfirmed partial response; •an objective response rate, or ORR, of 19.0%; •a median duration of response of 15.4 weeks; and •a disease control rate, or DCR, at 6 weeks of 57.1%.4 In January 2019, we presented data from 12 patients in two cohorts from the Phase 1 safety lead-in portion of the FIGHT trial in a clinical poster at the 2019ASCO Gastrointestinal Cancers Symposium, or the 2019 ASCO-GI presentation. As of the September 6, 2018 data cut-off date for the 2019 ASCO-GIpresentation, we had tested bemarituzumab in previously-treated patients with incurable gastrointestinal cancers, including gastric or GEJ cancer, at doses ofup to 15 mg/kg given in combination with mFOLFOX6 every two weeks, with an additional dose of 7.5 mg/kg of bemarituzumab given on day 8 in onecohort of patients, with the goal of achieving the target trough concentration of bemarituzumab more rapidly. We observed that, in patients receiving a doseof 15 mg/kg of bemarituzumab every two weeks with an additional dose of 7.5 mg/kg of bemarituzumab given on day 8, target trough concentration ofbemarituzumab was achieved by day 15. We observed acceptable toxicity levels and did not observe any dose-limiting toxicities with the combination ofbemarituzumab and mFOLFOX6. All treatment-related adverse events were Grades 1, 2 or 3. In addition, based on radiographic assessments by RECIST 1.1,as of the September 6, 2018 data cut-off date, we observed evidence of clinical activity in both of the two known patients with gastric or GEJ cancer, with onepartial response and one stable disease.Based on the data from the Phase 1 safety lead-in, we selected a dose of 15mg/kg of bemarituzumab given in combination with mFOLFOX6 every two weeks,with an additional dose of 7.5mg/kg of bemarituzumab given on day 8, for our Phase 3 FIGHT trial.Market OpportunityGlobally, gastric cancer is the fifth most common malignancy with the third highest mortality. In the United States, Europe, Japan, South Korea and China,approximately 789,800 patients are diagnosed with gastric or GEJ cancer each year. We believe approximately 78,980 of these patients have tumors thatoverexpress FGFR2b or are FGFR2 gene-amplified and are therefore more likely to respond to bemarituzumab. In addition, we believe approximately 56,870of these patients currently receive chemotherapy-based treatment and therefore represent the target population for bemarituzumab of patients with advanced,drug-treatable tumors that overexpress FGFR2b.In June 2016, the U.S. Food and Drug Administration, or the FDA, granted Orphan Drug Designation to bemarituzumab for the treatment of gastric cancer,including GEJ cancer, in patients whose tumors overexpress FGFR2b. We believe that our clinical development organization is well-suited to conduct afocused clinical development plan for FGFR2b-overexpressing or FGFR2 gene-amplified gastric and GEJ cancer.Under our China collaboration agreement, we granted Zai Lab an exclusive license to develop bemarituzumab in China, Hong Kong, Macau and Taiwan. Weplan to continue to seek strategic collaborators to develop and commercialize bemarituzumab in other territories. We plan to retain the right to commercializeor co-commercialize bemarituzumab in the United States.FPA150FPA150 is a CD8 T cell checkpoint inhibitor antibody that targets B7-H4. B7-H4 is a member of the B7 family of checkpoint inhibitors and shares significanthomology with other B7 family members, including PD-L1 and PD-L2. B7-H4 is expressed in several human tumors, including breast, ovarian, endometrial,lung and pancreatic cancers, and its expression correlates with poor prognosis. We designed FPA150 to target tumor cells through two distinct mechanisms ofaction: (i) by blocking B7-H4 from sending an inhibitory signal to CD8 T cells, and (ii) by enhancing ADCC against B7-H4-expressing tumor cells. Clinical Development of FPA150We are conducting a Phase 1a/1b clinical trial to evaluate the safety, tolerability and preliminary efficacy of FPA150 monotherapy as a potential therapy inpatients with a variety of cancers. We completed the Phase 1a monotherapy dose escalation in January 2019 and have begun dosing patients in the Phase 1bexpansion portion of the trial. In the Phase 1b expansion portion of the trial, we are evaluating FPA150 monotherapy in patients with HR+/HER2- and triplenegative breast cancers, ovarian cancer and endometrial cancer whose tumors overexpress B7-H4. 5 In October 2018, we completed a Phase 1a dose escalation cohort testing a dose that has shown efficacy in preclinical models. After completing this Phase 1adose cohort, we initiated patient dosing at this dose in an exploratory cohort to investigate FPA150 monotherapy in patients with tumors that overexpressB7-H4, with the objective of gaining additional data on safety, pharmacokinetics and potential preliminary clinical activity of FPA150 at multiple doselevels while we continued to advance in the monotherapy dose escalation portion of the trial. We expect to enroll 10 patients whose tumors overexpress B7-H4 in this exploratory cohort. All patients in the exploratory cohort will undergo pre- and on-treatment biopsies to assess the pharmacodynamic effects ofFPA150 on the tumor and the tumor microenvironment.We also plan to evaluate FPA150 in combination with Keytruda® (pembrolizumab) in this trial. We expect to begin enrollment in a Phase 1a safety lead-in ofthe combination in patients with advanced ovarian cancer that overexpresses B7-H4 in mid-2019, which we plan to follow with a Phase 1b expansion cohort.We have developed a lab-developed IHC-based assay to identify patients whose tumors overexpress B7-H4 and would be eligible for inclusion in theexploratory cohort and the Phase 1b portion of the trial.FPT155FPT155 is a soluble CD80-Fc fusion protein. CD80 is a member of the B7 family of checkpoint inhibitors that is involved in modulating T cell priming andactivation. This program came from our in vivo screens, which demonstrated that a soluble form of CD80 had potent in vivo anti-tumor activity whencompared with 500 other immune-related proteins. FPT155 uses the binding interactions of soluble CD80 to (i) block CTLA-4 from competing forendogenous CD80, allowing CD28 signaling to prevail in T cell activation in the tumor microenvironment and (ii) directly engage CD28 to enhance its co-stimulatory T cell activation activity without inducing super agonism.Clinical Development of FPT155We are conducting a Phase 1a/1b clinical trial of FPT155 in patients with solid tumors. Because we expect FPT155 to have an immunomodulatory effect andour Phase 1a/1b trial is the first-in-human evaluation of FPT155, the starting dose of the dose escalation portion of the trial was lower than what we wouldhave selected for a development candidate that does not have an immunomodulatory effect. We plan to also open an exploratory cohort during the Phase 1adose escalation portion of the trial after we complete a cohort testing a dose that has shown efficacy in preclinical models. In the exploratory cohort, we willinvestigate FPT155 monotherapy in patients with solid tumors, with the objective of gaining data on safety, pharmacokinetics and potential preliminarysingle-agent clinical activity of FPT155. In the Phase 1b expansion portion of the trial, we plan to evaluate FPT155 in various disease-specific cohorts ofpatients.Cabiralizumab (FPA008)Cabiralizumab is an antibody that inhibits CSF1R. CSF1R is a cell surface protein that controls the survival and function of certain immune response cellscalled monocytes and macrophages. Monocytes and macrophages are elevated or activated in multiple disease settings. In cancer, macrophages suppress theimmune system’s ability to kill cancer cells. Cabiralizumab blocks the activation and survival of these cell types. In many cancers, inhibition of CSF1Rreduces the number of immunosuppressive tumor-associated macrophages, or TAMs, thereby facilitating an immune response against tumors. The stainingimages in Figure 1 below show the inhibitory effect cabiralizumab has on TAMs in a tumor model. We believe the combination of cabiralizumab with T cellcheckpoint inhibitors, such as PD-1 inhibitors, or immune agonists may have synergistic therapeutic effects in treating cancer.6 Figure 1: Inhibition of Tumor-Associated Macrophages by CabiralizumabF4/80 Staining for Macrophages in the MC38 Tumor Model Using our differentiated target discovery platform and libraries, we discovered a protein called interleukin-34, or IL-34, that is a key regulator of monocyteand macrophage numbers and activity. Once we discovered IL-34, we were able to use our protein libraries and ligand-receptor matching technology toidentify its receptor, CSF1R. This receptor is known to be expressed on the surface of monocytes and macrophages. Before our discovery of IL-34, CSF1Rwas thought to have only one ligand called CSF1. Both CSF1 and IL-34 bind to and activate CSF1R and therefore promote the survival and activity ofmonocytes and macrophages. Cabiralizumab blocks the binding of both CSF1 and IL-34 to CSF1R and thereby inhibits the activity and survival of thesecells.We believe that there is a strong rationale for combining cabiralizumab with checkpoint inhibitors to treat cancer, including that: •TAMs are immunosuppressive and act by inhibiting CD8 T cell responses while enhancing recruitment and differentiation of regulatory Tcells, or Tregs; •TAMs often correlate with poor prognosis in cancer patients; •TAMs appear to be sensitive to CSF1R inhibition; and •we believe that CSF1R inhibition in combination with checkpoint inhibitors (e.g., anti-PD1 or anti-CTLA-4 antibodies) or immune agonists(e.g., anti-CD40 antibodies) may synergistically induce tumor regressions.7 These points suggest that combining an anti-CSF1R antibody, such as cabiralizumab, with an anti-PD1 antibody, such as Opdivo, may benefit cancerpatients. In preclinical studies, we observed cabiralizumab to be highly effective in blocking the growth of pancreatic tumors when combined with an anti-PD1 antibody and gemcitabine, as shown in Figure 2 below.Figure 2: Tumor Weight Reduction of Cabiralizumab in Combination with Anti-PD1 Antibody and Gemcitabine Clinical Development of CabiralizumabWe are completing a Phase 1a/1b clinical trial to evaluate the safety, tolerability and preliminary efficacy of combining cabiralizumab with Opdivo as apotential treatment for a variety of cancers. We have completed enrollment in this trial and continue to treat patients still on study.In November 2017, we presented preliminary safety, tolerability and efficacy data from patients from the Phase 1a/1b clinical trial at the Society forImmunotherapy of Cancer 32nd Annual Meeting, or the SITC presentation. As of the August 1, 2017 data cutoff for the SITC presentation, we had testedcabiralizumab as monotherapy in advanced solid tumors at escalating doses in 24 patients, in combination with Opdivo in advanced solid tumors atescalating doses of cabiralizumab in 10 patients, and in combination with Opdivo in advanced solid tumors in disease-specific cohorts at a dose of 4 mg/kgof cabiralizumab every two weeks in 195 patients. We observed a tolerable safety profile of cabiralizumab monotherapy and of cabiralizumab in combinationwith Opdivo. The most common treatment-related laboratory abnormalities were elevations in creatine kinase and serum liver enzymes without an associatedelevation in bilirubin levels or other clinical sequelae. These treatment-related adverse abnormalities are believed to be secondary to cabiralizumab’sdepletion of Kupffer cells and have been observed with other CSF1R-targeting agents. The most common treatment-related adverse events were: periorbitaledema (20.8%), fatigue (29.2%), nausea (12.5%) and pruritus (8.3%). Grade 5 treatment-related adverse events in the trial occurred in three (1.3%) patientstreated with a combination of cabiralizumab and Opdivo. The Grade 5 events were pneumonitis in a patient with thyroid cancer and respiratory distress andacute respiratory distress in two patients with lung cancer.8 Among the other data, we observed preliminary evidence of a durable clinical benefit of the combination therapy in the cohort of patients with advancedpancreatic cancer. Based on radiographic assessments of anti-tumor activity in the 31 second- or later-line patients who had advanced pancreatic cancer, weobserved, as of the August 1, 2017 data cutoff date: •five patients with durable clinical benefit (16%); •four confirmed objective responses (13%); and •disease control for at least five to over nine months.All four confirmed objective responses were in patients with microsatellite stable tumors who had received an average of three prior therapies. In addition, theresponses were accompanied by steep declines in levels of the pancreatic tumor marker CA19-9 over the baseline. The data suggest that a combination therapy of cabiralizumab with Opdivo may benefit patients with pancreatic cancer, including those with microsatellitestable tumors, and support further study of cabiralizumab in combination with Opdivo in pancreatic cancer. BMS is currently enrolling patients in a randomized, controlled multi-arm Phase 2 clinical trial to determine the efficacy of cabiralizumab in combinationwith Opdivo, with and without chemotherapy, as a treatment for patients with second-line pancreatic cancer (NCT03336216). BMS plans to enroll in thestudy approximately 160 patients with pancreatic cancer from the United States, Canada, Europe, Japan, Korea and Taiwan, each of whom will be randomizedto one of four study arms based on the patient’s prior therapy.In June 2018, a poster titled “Pharmacodynamics and Genomic Profiling of Patients Treated with Cabiralizumab + Nivolumab Provide Evidence of On-TargetTumor Immune Modulations and Support Future Clinical Applications” was presented and chosen for oral discussion at the 2018 ASCO Annual Meeting.The data presented suggest that cabiralizumab in combination with nivolumab decreases immunosuppressive macrophages and increases CD8+ effector Tcells in the tumor microenvironment. These data, together with preliminary clinical response data observed in patients with low tumor mutational burden,support further clinical development of cabiralizumab in combination with nivolumab in multiple indications, including pancreatic cancer. Accordingly,BMS has expanded its development of cabiralizumab within pancreatic cancer and in other tumor settings.BMS-986258BMS-986258 is a fully human monoclonal antibody against TIM-3, an immune checkpoint receptor that is known to limit the duration and magnitude of Tcell responses. BMS-986258 binds to TIM-3 that is expressed on certain T cells, including tumor infiltrating lymphocytes. This abrogates T cell inhibition,activates antigen-specific T lymphocytes and enhances cytotoxic T cell-mediated tumor cell lysis, which together result in decreased tumor growth. BMS-986258 is BMS’s first clinical candidate arising from our March 2014 immuno-oncology research collaboration.Clinical Development of BMS-986258BMS is conducting a Phase 1/2 clinical trial of BMS-986258 as a single agent, in combination with Opdivo, and in combination with HalozymeTherapeutics, Inc.’s rHuPH20 in patients with advanced malignant tumors (NCT03446040).9 Target Discovery and Research ProgramsWhen proteins in the body are inappropriately produced or altered, it can result in human diseases. These proteins can serve as targets for proteintherapeutics, which can be designed to reverse these disease-causing mechanisms. There are thousands of proteins in the body that represent potential proteintherapeutic targets or therapeutics themselves, but only a few are targeted by currently marketed protein drugs in oncology, such as PD-1, PD-L1, CTLA-4, IL-2, interferon alpha and CD3. While checkpoint inhibitor therapies have been validated in the clinic with agents targeting the PD-1/PD-L1 and CTLA-4pathways, a significant proportion of patients do not respond to these treatments. New therapies are needed to address those patients who do not respond to orcannot tolerate traditional therapies or agents currently in development.To meet this need, we are focusing our internal discovery and research efforts on targeted cancer therapies, including in immuno-oncology. One of our keypriorities is building a comprehensive portfolio of therapeutic candidates that will impact the tumor microenvironment by directly killing cancer cells, byinhibiting immune checkpoints, macrophages, and regulatory T cells and by activating T cells.We have built what we call our IND engine, consisting of our proprietary libraries of thousands of fully functional human extracellular proteins, differentiatedscreening capabilities, and protein therapeutic generation and engineering capabilities, which we believe provides us a competitive advantage fordiscovering first-in-class oncology biologics.We have tested each of the proteins in our libraries in numerous screens on different cell types, providing us with an extensive database of informationregarding how each protein performs in different screens and whether it is specific to a given disease process or has a broader range of activities. Thecumulative data from all our screens allows us to identify the most appropriate target for our product candidates.In addition, we have used our IND engine to identify dozens of targets validated in rodent models in several different disease areas, including incollaboration with our partners, and to build a growing pipeline of product candidates. We believe we have identified promising new antibody targets andligand traps and are actively researching and validating additional oncology and immuno-regulatory targets.CollaborationsA part of our strategy is to establish collaborations with strategic partners. These collaborations supplement our development, manufacturing, regulatory andcommercialization capabilities, provide us with significant funding to advance our pipeline and validate our technology. A summary of our key product,clinical and discovery collaborations is set forth below. For information regarding the financial terms of the following agreements, including amounts wehave received through December 31, 2018, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations – FinancialOverview – Collaboration and License Revenue.”Zai Lab China License and Collaboration AgreementIn December 2017, we entered into the China collaboration agreement with Zai Lab, pursuant to which we granted Zai Lab an exclusive license to developand commercialize bemarituzumab, and all fragments, conjugates, derivatives and modifications thereof, or the licensed antibody, in China, Hong Kong,Macau, and Taiwan, each a region, and collectively, the territory.Under the terms of the China collaboration agreement, Zai Lab will be responsible, at its expense, for (i) developing and commercializing productscontaining the licensed antibody, each, a licensed product, under a territory development plan, and (ii) performing certain development activities to supportour global development and registration of licensed products, including the Phase 3 FIGHT trial, in the territory, under a global development plan. Inaddition, Zai Lab agreed to reimburse us for certain global development activities, which is limited to a maximum of $10.0 million, and certain costs for thedevelopment of companion diagnostics.In January 2018, pursuant to the terms of the China collaboration agreement, Zai Lab paid us a $5 million non-refundable and non-creditable upfront fee($4.2 million after netting value-added tax withholdings of $0.8 million).10 Additionally, pursuant to the China collaboration agreement, with respect to each licensed product, we will be eligible to receive up to $39.0 million inspecified developmental and regulatory milestone payments.Zai Lab will also be obligated to pay us a royalty, on a licensed product-by-licensed product and region-by-region basis, in the high teens or low twenties,depending on the number of patients Zai Lab enrolls in the FIGHT trial, subject to reduction in certain circumstances, on net sales of each licensed product inthe territory until the latest of (i) 11 years after the first commercial sale of such licensed product in such region, (ii) the expiration of certain patents coveringsuch licensed product in such region, and (iii) the date on which any applicable regulatory, pediatric, orphan drug or data exclusivity with respect to suchlicensed product expires in such region. We cannot determine the date on which Zai Lab’s potential royalty payment obligations to us would expire becauseZai Lab has not yet developed any licensed products under the agreement, and we therefore cannot at this time identify the date of the first commercial sale orany related patents covering or regulatory exclusivity periods with respect to any licensed products.Under the China collaboration agreement, provided that Zai Lab enrolls and treats a specified number of patients in the FIGHT trial in China, Zai Lab iseligible to receive a low single-digit percentage royalty, on a licensed product-by-licensed product basis, on net sales of a licensed product outside theterritory until 10 years after the first commercial sale of each such licensed product outside the territory.Unless earlier terminated by either party, the China collaboration agreement will expire on a licensed product-by-licensed product and region-by-region basisupon the expiration of Zai Lab’s payment obligations with respect to each licensed product under the agreement. Zai Lab may terminate the agreement in itsentirety at any time with advance written notice. Either party may terminate the agreement in its entirety with written notice for the other party’s materialbreach if such party fails to cure the breach. We may terminate the agreement in its entirety with written notice for Zai Lab’s material breach of its diligenceobligations with respect to development and obtaining marketing approval, and may terminate the agreement on a region-by-region basis for Zai Lab’sbreach of its diligence obligations with respect to timely commercialization of a licensed product in a region following marketing approval. We mayterminate the agreement in its entirety if Zai Lab or its affiliates or sublicensees commences a legal action challenging the validity, enforceability or scope ofany of our patents in the territory. Either party also may terminate the agreement in its entirety upon certain insolvency events involving the other party.Cabiralizumab Collaboration Agreement with BMSIn October 2015, we entered into the cabiralizumab collaboration agreement with BMS, pursuant to which we granted to BMS an exclusive, worldwidelicense to develop and commercialize certain CSF1R antibodies, including cabiralizumab, and all modifications, derivatives, fragments or variants of suchantibodies, each of which we refer to as a licensed antibody. The cabiralizumab collaboration agreement superseded the clinical trial collaboration agreementthat we entered into with BMS in November 2014.Under the terms of the cabiralizumab collaboration agreement, BMS is responsible, at its expense, for developing cabiralizumab under a development plan,subject to our option, at our own expense, to conduct certain future studies, including registration-enabling studies to support approval of cabiralizumab.We are completing our Phase 1a/1b clinical trial to evaluate the safety, tolerability and preliminary efficacy of combining Opdivo with cabiralizumab inmultiple tumor types. Under the agreement, BMS bears all costs and expenses relating to this trial, including manufacturing costs for the supply ofcabiralizumab, except that we are responsible for our own internal costs, including internal personnel costs.BMS is responsible for manufacturing and commercialization of cabiralizumab, and we retain rights to a minority co-promotion option in the United States.11 Pursuant to the cabiralizumab collaboration agreement, BMS paid us an upfront fee of $350 million. In January 2018, the dosing of the first patient in BMS’sPhase 2 clinical trial of cabiralizumab in combination with Opdivo, with and without chemotherapy, as a treatment for patients with second-line pancreaticcancer (NCT03336216) triggered a $25 million milestone payment to us. Additionally, we are eligible to receive up to (i) $480.0 million in specifieddevelopmental and regulatory milestone payments for all combination therapies of cabiralizumab with Opdivo; (ii) $542.5 million in specifieddevelopmental and regulatory milestone payments for combination therapies of cabiralizumab with one or more of BMS’s or our proprietary products, at leastone of which is not Opdivo, in the field of oncology; and (iii) $340.0 million in specified developmental and regulatory milestone payments for therapeuticuses of cabiralizumab in non-oncology indications.BMS will also be obligated to pay us, with respect to each licensed product in each country, tiered percentage royalties ranging from the high teens to thelow twenties, subject to reduction in certain circumstances, on worldwide net sales of such licensed product until the latest of (i) the expiration of certainpatents covering such licensed product in such country, (ii) the date on which any applicable regulatory, pediatric, orphan drug or data exclusivity withrespect to such licensed product expires in such country, (iii) the date of the first commercial sale in such country of a biosimilar product with respect to suchlicensed product or (iv) 12 years after the first commercial sale of such licensed product in such country. BMS will be obligated to pay us an additional lowsingle-digit percentage royalty on net sales in the United States in the event we exercise our co-promotion option. We cannot determine the date on whichBMS’s potential royalty payment obligations to us would expire because BMS has not yet developed any licensed products under the agreement andtherefore we cannot identify the date of the first commercial sale or any related patents covering or regulatory exclusivity periods with respect to suchlicensed product.Unless earlier terminated by either party, the cabiralizumab collaboration agreement will expire on a licensed product-by-licensed product and country-by-country basis upon the expiration of BMS’s payment obligations with respect to each licensed product under the agreement. BMS may terminate theagreement in its entirety or on a region-by-region basis at any time with advance written notice. BMS may also terminate the agreement in its entirety (or on alicensed product-by-licensed product basis) upon written notice based on certain safety reasons. Either party may terminate the agreement in its entirety withwritten notice for the other party’s material breach if such party fails to cure the breach. We may terminate the agreement in its entirety with written notice forBMS’s material breach of its diligence obligations with respect to development and obtaining marketing approval, and may terminate the agreement on aregion-by-region basis for BMS’s breach of its diligence obligations with respect to timely commercialization of a licensed product in a region followingmarketing approval. Either party also may terminate the agreement in its entirety upon certain insolvency events involving the other party.BMS Immuno-oncology Research CollaborationIn March 2014, we entered into a research collaboration and license agreement, or the immuno-oncology research collaboration, with BMS pursuant to whichwe and BMS are collaborating to carry out a research program to (i) discover novel interacting proteins in two undisclosed immune checkpoint pathwaysusing our target discovery platform, (ii) further the understanding of target biology with respect to targets in these checkpoint pathways, and (iii) discoverand pre-clinically develop compounds suitable for development for human therapeutic uses against targets in these checkpoint pathways. Based on dataarising from our initial screens, in January 2016, we amended the immuno-oncology research collaboration to add an additional undisclosed checkpointpathway to the research program, for a total of three immune checkpoint pathways.In December 2017, we earned a $5 million milestone payment under the discovery collaboration agreement in connection with BMS’s filing of an IND forBMS-986258, BMS’s anti-TIM-3 antibody. This antibody is BMS’s first clinical candidate arising from the collaboration.The initial three-year research term of the immuno-oncology research collaboration ended in March 2017. BMS exercised its option to extend the researchterm to March 2018 and then again to extend the research term for an additional year to March 2019. BMS agreed to provide us with funding for ouradditional research during the extended term. BMS does not have the right to extend the research term beyond March 2019.12 In connection with entering into the immuno-oncology research collaboration, BMS paid us an upfront payment of $20.0 million. We are eligible to receiveup to $235.0 million per collaboration target in specified developmental-, regulatory- and commercialization-related contingent payments comprisingaggregate developmental-related contingent payments of up to $48.0 million, aggregate regulatory-related contingent payments of up to $74.0 million andaggregate commercialization-related contingent payments of up to $113.0 million. We are also eligible to receive up to $60.0 million in sales-basedcontingent payments per collaboration product.For each commercialized product under the immuno-oncology research collaboration that is directed toward a target in a checkpoint pathway, BMS is alsoobligated to pay us tiered mid-single digit to low double-digit percentage royalties, subject to reduction in certain circumstances, on net sales of suchproduct for the longer of (i) 12 years after the first commercial sale of such product, (ii) the life of certain licensed patents covering such product or (iii) thedate on which any applicable regulatory, pediatric, orphan drug or data exclusivity with respect to such product expires. We cannot determine the date onwhich BMS’s potential royalty payment obligations to us would expire because BMS has not yet commercialized any products under the immuno-oncologyresearch collaboration, and we therefore cannot identify the date of the first commercial sale or any related patents covering such product.Unless earlier terminated by either party, the immuno-oncology research collaboration will expire on a product-by-product and country-by-country basisupon the expiration of all of BMS’s payment obligations under the immuno-oncology research collaboration agreement. BMS may terminate the immuno-oncology research collaboration agreement in its entirety or on a collaboration target-by-collaboration target basis at any time with advance written notice.Either party may terminate the immuno-oncology research collaboration agreement in its entirety or on a collaboration target-by-collaboration target basiswith written notice for the other party’s material breach if such other party fails to timely cure the breach. Either party also may terminate the immuno-oncology research collaboration agreement in its entirety upon certain insolvency events involving the other party.GSK Respiratory Diseases CollaborationIn April 2012, we entered into a research collaboration and license agreement, or the respiratory diseases collaboration, with GSK to identify new therapeuticapproaches to treat refractory asthma and chronic obstructive pulmonary disease, or COPD, function, with a particular focus on identifying novel proteintherapeutics and antibody targets. We conducted six customized cell-based screens of our protein libraries under the collaboration. The research term for thiscollaboration ended in July 2016.GSK has exercised options under the respiratory diseases collaboration to obtain an exclusive, worldwide license to two undisclosed respiratory diseasetargets we identified using our proprietary discovery platform.Through December 31, 2018, we have received $3.6 million in target evaluation and selection fees and contingent payments with respect to each such target.We are also eligible to receive up to $122.5 million and $109 million, respectively, in potential contingent payments with respect to each such target. Withrespect to the first such target, these potential payments are composed of preclinical and development-related contingent payments of up to $28.5 million,regulatory-related contingent payments of up to $40.0 million and commercial-related contingent payments of up to $54.0 million. With respect to thesecond such target, these potential payments are composed of preclinical and development-related contingent payments of up to $15.0 million, regulatory-related contingent payments of up to $40.0 million and commercial-related contingent payments of up to $54.0 million. For each product that incorporates ortargets either such target, GSK is also obligated to pay us tiered low- to mid-single digit royalties on net sales of such product for the longer of the life ofcertain patents licensed to GSK covering such product or 10 years after the first commercial sale of such product. We cannot determine the date on whichGSK’s potential royalty payment obligations to us would expire because GSK has not yet commercialized any products under the respiratory diseasescollaboration, and we therefore cannot identify the date of the first commercial sale or any related patents covering such products.The respiratory diseases collaboration agreement will terminate upon the expiration of the royalty terms of any products that incorporate or target a proteinexclusively licensed under the collaboration. In addition, GSK may terminate the agreement at any time with advance written notice, and either party mayterminate the agreement with written notice for the other party’s material breach if such party fails to cure the breach or immediately in the case of failure tocomply with certain anti-bribery and anti-corruption policies or upon certain insolvency events.13 UCB Fibrosis and CNS CollaborationIn March 2013, we entered into a research collaboration and license agreement with UCB, referred to as the fibrosis and CNS collaboration, to identifyinnovative biologics targets and therapeutics in the areas of fibrosis-related immunologic diseases and central nervous system, or CNS, disorders. Weconducted five customized cell-based and in vivo screens of our protein libraries under the fibrosis and CNS collaboration. We completed our initial researchactivities under the fibrosis and CNS collaboration in March 2016. Following the completion of the research activities, UCB had up to a two-year evaluationperiod during which we may be obligated to perform additional services at UCB’s request.UCB paid us an upfront payment of $6.0 million in March 2013. In addition, UCB agreed to pay us $6.6 million for a technology fee and $2.0 million forresearch funding. As of December 31, 2015, we fully collected the technology access fees and research funding under the fibrosis and CNS collaboration. UCB exercised its option under the fibrosis and CNS collaboration to obtain an exclusive, worldwide license to one undisclosed fibrosis disease target weidentified using our proprietary discovery platform. Through December 31, 2018, we have also received $0.4 million in target evaluation and selection feeswith respect to such licensed protein target. We are eligible to receive up to $91.9 million in additional specified developmental, regulatory and commercialmilestones with respect to such licensed protein target.For each product that incorporates or targets such licensed protein target, UCB is also obligated to pay us tiered low- to mid-single digit royalties on net salesof such product for the longer of the life of certain patents covering such product or 10 years after the first commercial sale of such product. We cannotdetermine the date on which UCB’s potential royalty payment obligations to us would expire because UCB has not yet commercialized any products underthe fibrosis and CNS collaboration, and we therefore cannot identify the date of the first commercial sale or any related patents covering such products.The collaboration agreement will terminate upon the expiration of the royalty terms of any products that incorporate or target the protein UCB exclusivelylicensed under the collaboration. In addition, UCB may terminate the agreement at any time with advance written notice, and either party may terminate theagreement with written notice for the other party’s material breach if such party fails to cure the breach or upon certain insolvency events.License AgreementsLicense Agreement with GalaxyIn December 2011, we entered into a license agreement with Galaxy Biotech LLC, or Galaxy, pursuant to which Galaxy granted us an exclusive worldwidelicense to develop and commercialize FGFR2b antibodies, including bemarituzumab. Under the license agreement, we are obligated to use commerciallyreasonable efforts to develop and commercialize at least one licensed product in at least one tumor indication.In May 2016, we amended the license agreement to revise certain milestone definitions, reduce certain milestone payments and add certain development-related milestone payments that were triggered by dosing of certain patients in the Phase 1 clinical trial of bemarituzumab, which milestones were deemedachieved as of December 31, 2016. In May 2017, we further amended the license agreement to align the net sales definition under the agreement to the netsales definition under any sublicense we may grant under the agreement and to amend the termination provisions to allow for a direct license between Galaxyand any sublicensee upon termination of the agreement.Through December 31, 2018, we made milestone payments to Galaxy totaling $14.6 million. We are obligated to pay Galaxy additional milestone paymentsof up to $77.4 million, comprising aggregate intellectual property-related milestone payments of up to $3.0 million, development-related milestonepayments of up to $17.5 million for development in two indications, aggregate regulatory-related milestone payments of up to $41.5 million for twoindications and aggregate commercial-related milestone payments of up to $30.0 million. We are also obligated to pay tiered royalties on net sales ofbemarituzumab from the high-single digits to the low-double digits.14 Our license agreement with Galaxy will remain in effect until the expiration of our royalty obligations in all countries. For each licensed product, we areobligated to pay Galaxy royalties on net sales of such product on a country-by-country basis for the longer of the life of the licensed patents covering suchlicensed product in such country or 10 years after the first commercial sale of such licensed product in such country. We cannot determine the date on whichour royalty payment obligations to Galaxy would expire because no commercial sales of bemarituzumab have occurred and the last-to-expire relevant patentcovering bemarituzumab in a given country may change in the future. Galaxy currently has issued patents, which we have licensed, covering bemarituzumabin the United States, Europe, China, Japan and other countries that expire in 2029. Further patents may issue from pending patent applications in these andother countries, and these patents would expire in 2029. These patent expiration dates do not reflect any patent term adjustments or extensions that may beavailable.We may terminate the license agreement for convenience in its entirety or on a country-by-country basis upon prior written notice to Galaxy. Either partymay terminate the license agreement in its entirety or with respect to certain countries after the first commercial sale of a licensed product in certaincircumstances in the event of an uncured material breach by the other party. Either party may terminate the license agreement in the event of the other party’sfiling or institution of bankruptcy, reorganization, liquidation or receivership proceedings or upon an assignment of a substantial portion of its assets for thebenefit of creditors. Galaxy may terminate the license agreement if we or any of our affiliates challenge the validity or enforceability of any patent licensed tous by Galaxy under the license agreement or if we aid or assist any affiliate or third-party in such a challenge other than as required by law.Non-Exclusive License with BioWa-LonzaIn February 2012, we entered into a license agreement with BioWa, Inc. and Lonza Sales AG, or BioWa-Lonza, pursuant to which BioWa-Lonza granted us anon-exclusive license to use their Potelligent® CHOK1SV technology, including the CHOK1SV cell line, and a non-exclusive license to related know-howand patents. This license is necessary to produce our bemarituzumab antibody.Under the agreement, we made milestone payments to BioWa-Lonza totaling $1.2 million through December 31, 2018. We are obligated to pay BioWa-Lonza additional milestone payments of up to $24.5 million for regulatory and commercialization milestones achieved in our bemarituzumab antibodyprogram. We are also obligated to pay BioWa-Lonza tiered royalties on net sales of bemarituzumab up to mid-single digit percentages of the proceeds of suchsales.Our license agreement with BioWa-Lonza will remain in effect until the expiration of our royalty obligations. For each licensed product, we are obligated topay BioWa-Lonza royalties on net sales of such licensed product on a country-by-country basis for the longer of the life of the licensed patents covering suchlicensed product in such country or 10 years after the first commercial sale of such licensed product in a major market country, which includes the UnitedStates. However, because we believe the last-to-expire patents currently licensed to us under the license agreement would expire in less than 10 years, webelieve the date on which our royalty payment obligations to BioWa-Lonza would expire in any country would be 10 years after the first commercial sale ofsuch product in a major market country.We may terminate the license agreement for convenience subject to our continuing obligation to pay royalties. BioWa-Lonza may terminate the licenseagreement in the event of our uncured material breach, if we oppose or dispute the validity of patents licensed to us under the license agreement or if we aredeclared insolvent, make an assignment for the benefit of creditors, are the subject of bankruptcy proceedings or have a receiver or trustee appointed forsubstantially all our property.Intellectual PropertyOur intellectual property is critical to our business and we strive to protect it, including by obtaining and maintaining patent protection in the United Statesand internationally for our product candidates and other biological discoveries relating to new targets, pathways and relevant inventions and technologiesthat are important to our business. For our product candidates, we generally initially pursue patent protection covering both compositions of matter andmethods of use.15 Throughout the development of our product candidates, we seek to identify additional means of obtaining patent protection that would potentially enhancecommercial success, including through additional methods of use, combination therapy, biomarker and companion diagnostic related claims. We also rely ontrade secrets relating to our discovery platform and product candidates and seek to protect and maintain the confidentiality of proprietary information toprotect aspects of our business that are not amenable to, or that we do not consider appropriate for, patent protection.Our success will also depend significantly on our ability to obtain rights to intellectual property held by third-parties that may be necessary or useful to ourbusiness, including for the discovery, development and commercialization of our product candidates. We generally obtain rights to third-party intellectualproperty through exclusive or non-exclusive licenses. For example, we entered into a non-exclusive license with BioWa-Lonza to use their proprietaryprotein expression and cell line technology, which is necessary to produce our product candidates. If we are not able to obtain rights to intellectual propertyheld by third-parties that are necessary or useful to our business, our business could be harmed, possibly materially.The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, scientific and factual questions. In addition,the coverage claimed in a patent application can be significantly limited before the patent is issued, and its scope can be reinterpreted after issuance.Consequently, we may not obtain or maintain adequate patent protection for any of our product candidates. We cannot predict whether the patentapplications we are currently pursuing will issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide sufficientproprietary protection from competitors. Any patents that we hold may be challenged, circumvented or invalidated by third-parties. For a morecomprehensive discussion of the risks related to our intellectual property, please see “Risk Factors—Risks Related to Our Intellectual Property.”The patent portfolios for our most advanced programs are summarized below:BemarituzumabOur bemarituzumab patent portfolio includes patents and patent applications we exclusively licensed from Galaxy, as well as U.S. and foreign patents andpatent applications wholly owned by us. The patent portfolio covers compositions of matter, methods of use, companion diagnostics, and combinationtherapies relating to bemarituzumab. The issued U.S. patents and issued foreign patents, covering compositions of matter and methods of use, expire between2029 and 2034. Patents that may issue from the pending U.S. and foreign applications would expire between 2029 and 2039.FPA150Our patent portfolio for FPA150 includes pending U.S. and foreign patent applications wholly owned by us. Those pending applications cover compositionsof matter, methods of use, and combination therapies relating to FPA150. Patents that may issue from the pending U.S. and foreign applications would expirebetween 2038 and 2039.FPT155Our patent portfolio for FPT155 includes pending U.S. and foreign patent applications wholly owned by us. Those pending applications cover compositionsof matter, methods of use, combination therapies and biomarkers relating to FPT155. Patents that may issue from the pending U.S. and foreign applicationswould expire between 2036 and 2039.CabiralizumabOur cabiralizumab patent portfolio includes patents and patent applications wholly owned by us as well as patents jointly owned with BMS. Our patentportfolio includes issued U.S. and foreign patents as well as pending U.S. and foreign patent applications covering compositions of matter, methods of use,biomarkers and combination therapies relating to cabiralizumab. The issued U.S. patents and issued foreign patents covering the composition of matter andmethods of use expire in 2031. Patents that may issue from the pending U.S. and foreign applications would expire between 2031 and 2038.16 ManufacturingWe have process development and small-scale, non-clinical manufacturing capabilities. We generally perform cell line and process development for ourproduct candidates and manufacture quantities of our product candidates necessary to conduct preclinical studies of our investigational product candidates.We do not have and do not currently plan to acquire or develop the facilities or capabilities to manufacture bulk drug substance or filled drug product for usein human clinical trials or commercialization. We rely on third-party manufacturers to produce bulk drug substance required for our clinical trials and expectto continue to rely on third-parties to manufacture clinical trial drug supplies for the foreseeable future. BMS has the exclusive right to manufacturecabiralizumab drug substance and filled drug product. BMS will supply us with cabiralizumab, at its cost and expense, for our use in the conduct of thecurrent trial and will supply us with cabiralizumab for the conduct of our independent cabiralizumab development activities in exchange for a pre-negotiatedservice fee. We also contract with additional third-parties for the filling, labeling, packaging, storage and distribution of investigational drug products. Wehave personnel with significant technical, manufacturing, analytical, quality and project management experience to oversee our third-party manufacturersand to manage manufacturing and quality data and information for regulatory compliance purposes.We must manufacture drug product for clinical trial use in compliance with current Good Manufacturing Practices, or cGMP. The cGMP regulations includerequirements relating to organization of personnel, buildings and facilities, equipment, control of components and drug product containers and closures,production and process controls, packaging and labeling controls, holding and distribution, laboratory controls, records and reports, and returned or salvagedproducts. The manufacturing facilities for our products must meet cGMP requirements and FDA satisfaction before any product is approved. Our third-partymanufacturers are also subject to periodic inspections of facilities by the FDA and other authorities, including procedures and operations used in the testingand manufacture of our products to assess our compliance with applicable regulations. Failure to comply with statutory and regulatory requirements subjectsa manufacturer to possible legal or regulatory action, including warning letters, the seizure or recall of products, injunctions, consent decrees placingsignificant restrictions on or suspending manufacturing operations and civil and criminal penalties. These actions could have a material impact on theavailability of our products. Contract manufacturers often encounter difficulties involving production yields, quality control and quality assurance, as well asshortages of qualified personnel.CommercializationWe have not yet established sales, marketing or product distribution operations. We generally expect to retain some commercial rights in the United Statesfor our product candidates in specialty markets. Pursuant to our cabiralizumab collaboration agreement, we have a co-promotion right in the United Stateswhich, if we exercise, will allow us to field a minority percentage of the total United States sales force promotional effort. If we exercise our option to co-promote cabiralizumab in the United States prior to submission of a biological license application, or BLA, we expect to commence commercializationactivities by building a focused sales and marketing organization in the United States. We believe that such an organization will be able to address thecommunity of oncologists who are the key specialists in treating the patient populations for which cabiralizumab is being developed.17 CompetitionThe biotechnology and pharmaceutical industries are characterized by continuing technological advancement and significant competition. While we believethat our product candidates, technology, knowledge, experience and scientific resources provide us with competitive advantages, we face competition frommajor pharmaceutical and biotechnology companies, academic institutions, governmental agencies and public and private research institutions, amongothers. Any product candidates that we successfully develop and commercialize will compete with existing therapies and new therapies that may becomeavailable in the future. Key product features that would affect our ability to effectively compete with other therapeutics include the efficacy, safety andconvenience of our products and the ease of use and effectiveness of any companion diagnostics. The level of generic competition and the availability ofreimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products. Our competitorsalso may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for ours, which could result in our competitorsestablishing a strong market position before we are able to enter the market.Many of the companies against which we may compete have significantly greater financial resources and expertise in research and development,manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals and marketing approved products than we do. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. Thesecompetitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patientregistration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.Government Regulation and Product ApprovalIn the United States, the FDA regulates protein therapeutics like cabiralizumab, bemarituzumab, FPA150, FPT155 and our other product candidates asbiological drug products, or biologics, under the Federal Food, Drug, and Cosmetic Act, the Public Health Service Act and related regulations. Biologics arealso subject to other federal, state and local statutes and regulations. Failure to comply with the applicable United States regulatory requirements at any timeduring the product development process, approval process or after approval may subject an applicant to administrative or judicial actions. These actionscould include the suspension or termination of clinical trials by the FDA or an Institutional Review Board, or IRB, the FDA’s refusal to approve pendingapplications or supplements, revocation of a biologics license, warning letters, product recalls, product seizures, total or partial suspension of production ordistribution, import detention, injunctions, civil penalties or criminal prosecution. Any administrative or judicial action could have a material adverse effecton us.The FDA and comparable regulatory agencies in state and local jurisdictions and in foreign countries impose substantial requirements upon the clinicaldevelopment, manufacture and marketing of biologics. These agencies and other federal, state and local entities regulate research and development activitiesand the testing, manufacture, quality control, effectiveness, safety, purity, potency, labeling, storage, distribution, record keeping and reporting, approval,import and export, advertising and promotion and post-market surveillance of our products.The FDA’s and comparable regulatory agencies’ policies may change and additional government regulations may be enacted that could prevent or delayregulatory approval of any future product candidates or approval of product or manufacturing changes, new disease indications, or label changes. We cannotpredict the likelihood, nature or extent of adverse governmental regulation that might arise from future legislative or administrative action, either in theUnited States or abroad.18 Biologics Product DevelopmentThe process required by the FDA before biologics may be marketed in the United States generally involves the following: •nonclinical laboratory and animal tests; •submission of an IND application, which must become effective before clinical trials may begin; •adequate and well-controlled human clinical trials to establish the safety, purity and potency of the proposed biologic for its intended use oruses; •pre-approval inspection of manufacturing facilities and clinical trial sites; and •FDA approval of a BLA, which must occur before a biologic can be marketed or sold.The testing and approval process requires substantial time and financial resources, and we cannot be certain that any new approvals for our productcandidates will be granted on a timely basis, if at all.Before testing any compound in human subjects, a company must develop extensive preclinical data. Preclinical testing generally includes laboratoryevaluation of product chemistry and formulation as well as toxicological and pharmacological studies in several animal species to assess the quality andsafety of the product. Animal studies must be performed in compliance with the FDA’s Good Laboratory Practice, or GLP, regulations and the United StatesDepartment of Agriculture’s Animal Welfare Act and related regulations.Prior to commencing the first clinical trial in humans, an IND application must be submitted to the FDA. A company must submit preclinical testing results tothe FDA as part of the IND, and the FDA must evaluate whether there is an adequate basis for testing the drug in humans. The IND application automaticallybecomes effective 30 days after receipt by the FDA unless the FDA within the 30-day time period raises concerns or questions about the conduct of theclinical trial and places the trial on clinical hold. In such case, the IND application sponsor must resolve any outstanding concerns with the FDA before theclinical trial may begin. Further, an independent IRB for each site proposing to conduct the clinical trial must review and approve the plan for any clinicaltrial before it commences at that site. Informed consent must also be obtained from each study subject. Regulatory authorities, an IRB, a data safetymonitoring board or the study sponsor may suspend or terminate a clinical trial at any time on various grounds, including a finding that the participants arebeing exposed to an unacceptable safety risk.A clinical trial sponsor is required to submit to the National Institutes of Health, or NIH, for public posting on NIH’s clinical trial website details about certainactive clinical trials and clinical trial results. For purposes of BLA approval, human clinical trials are typically conducted in the following phases, which mayoverlap: •Phase 1 — the biologic is initially given to healthy human subjects or patients and tested for safety, dosage tolerance, reactivity, absorption,metabolism, distribution and excretion. These trials may also provide early evidence of effectiveness. During Phase 1 clinical trials, sufficientinformation about the investigational product’s effects may be obtained to permit the design of well-controlled and scientifically valid Phase 2clinical trials. •Phase 2 — clinical trials are conducted in a limited number of patients in the target population to identify possible adverse effects and safetyrisks, to determine the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage. MultiplePhase 2 clinical trials may be conducted by the sponsor to obtain information prior to beginning larger and more expensive Phase 3 clinicaltrials.19 •Phase 3 — when Phase 2 evaluations demonstrate that a dosage range of the product appears effective and has an acceptable safety profile andprovide sufficient information for the design of Phase 3 clinical trials, Phase 3 clinical trials are undertaken to provide statistically significantevidence of clinical efficacy and to further test for safety in an expanded patient population at multiple clinical trial sites. Phase 3 clinical trialsare performed after preliminary evidence suggesting effectiveness of the drug has been obtained, and are intended to further evaluate dosage,effectiveness and safety, to establish the overall benefit-risk relationship of the investigational drug, and to provide an adequate basis forproduct approval by the FDA.All of these trials must be conducted in accordance with Good Clinical Practice, or GCP, requirements in order for the data to be considered reliable forregulatory purposes.The Biologic License Application Approval ProcessIn order to obtain approval to market a biologic in the United States, a BLA must be submitted to the FDA that provides data establishing to the FDA’ssatisfaction the safety and effectiveness of the investigational product for the proposed indication. Each BLA submission requires a substantial user feepayment unless a waiver or exemption applies. The application includes all relevant data available from pertinent nonclinical studies and clinical trials,including negative or ambiguous results as well as positive findings, together with detailed information relating to the product’s chemistry, manufacturing,controls and proposed labeling, among other things. Data can come from company-sponsored clinical trials intended to test the safety and effectiveness of ause of a product. In addition, the application may include supplemental data from a number of alternative sources, including studies initiated byinvestigators.The FDA will initially review a BLA for completeness before it accepts it for filing. Under the FDA’s procedures, the agency has 60 days from its receipt of aBLA, or the filing period, to determine whether the application will be accepted for filing based on the agency’s threshold determination that the applicationis sufficiently complete to permit substantive review. After the BLA submission is accepted for filing, the FDA reviews the BLA to determine, among otherthings, whether the proposed product is safe, efficacious, pure and potent, which includes determining whether it is effective for its intended use, and whetherthe product is being manufactured in accordance with cGMP, and to assure and preserve the product’s identity, strength, quality, potency and purity. TheFDA may refer applications for novel products or products that present difficult questions of safety or efficacy to an advisory committee, typically a panelthat includes clinicians and other experts, for review, evaluation and a recommendation as to whether the application should be approved and, if so, underwhat conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when makingdecisions.During the approval process, the FDA also will determine whether a Risk Evaluation and Mitigation Strategy, or REMS, is necessary to assure that thebenefits of the biologic outweigh its risks. A REMS may include various elements depending on what the FDA considers necessary for the safe use of thedrug. These elements range from a medication guide or patient package insert to training and certification requirements for prescribers and/or pharmacies tosafe use conditions that must be in place before the drug is dispensed. If the FDA concludes that a REMS is needed, the BLA sponsor must submit a proposedREMS that the FDA deems satisfactory or the FDA will not approve the BLA.The FDA’s standard review time for a BLA for a new molecular entity is 10 months from the end of the 60-day filing period. Based on pivotal clinical trialresults submitted in a BLA, at the discretion of the FDA or upon the request of an applicant, the FDA may grant a priority review designation to a product,which sets the target date for FDA action on the application at six months from the end of the filing period. Priority review is given for a product that treats aserious condition and, if approved, would provide a significant improvement in safety or effectiveness compared to marketed products or offer a therapywhere no satisfactory alternative therapy exists. Priority review designation does not change the scientific or medical standard for approval or the quality ofevidence necessary to support approval.20 After the FDA completes its review of a BLA, it will either communicate to the sponsor that it will approve the product, or issue a complete response letter tocommunicate that it will not approve the BLA in its current form and to inform the sponsor of changes that the sponsor must make or additional clinical,nonclinical or manufacturing data that must be received before the FDA can approve the application, with no implication regarding the ultimateapprovability of the application. If a complete response letter is issued, the sponsor may either resubmit the BLA, addressing all deficiencies identified in theletter, or withdraw the application. Resubmitting a BLA in response to a complete response letter can add additional time to the approval process for aproduct.Before approving a BLA, the FDA will inspect the facilities at which the product is manufactured. The FDA will not approve the product unless it determinesthat the manufacturing processes and facilities are in compliance with cGMP requirements and are adequate to assure consistent production of the productwithin required specifications. Additionally, before approving a BLA, the FDA may inspect one or more clinical sites to assure compliance with GCP. If theFDA determines the application, manufacturing process or manufacturing facilities are not acceptable, it typically will outline the deficiencies and often willrequest additional testing or information. This may significantly delay further review of the application. If the FDA finds that a clinical site did not conductthe clinical trial in accordance with GCP, the FDA may determine the data generated by the clinical site should be excluded from the primary efficacyanalyses provided in the BLA. Additionally, notwithstanding the submission of any requested additional information, the FDA ultimately may decide thatthe application does not satisfy the regulatory criteria for approval.The testing and approval process for a biologic requires substantial time, effort and financial resources and this process may take several years to complete.Data obtained from clinical activities are not always conclusive and may be susceptible to varying interpretations, which could delay, limit or preventregulatory approval. The FDA may not grant approval on a timely basis or at all. We may encounter difficulties or unanticipated costs in our efforts to securenecessary governmental approvals, which could delay or preclude us from marketing our products.The FDA may require, or companies may pursue, additional clinical trials after a product is approved. These so-called Phase 4 clinical trials may be made acondition to be satisfied for continuing product approval. The results of Phase 4 clinical trials can confirm the effectiveness of a product candidate and canprovide important safety information. Conversely, the results of Phase 4 clinical trials can raise new safety or effectiveness issues that were not apparentduring the original review of the product, which may result in product restrictions or even withdrawal of product approval. The FDA has express statutoryauthority to require sponsors to conduct post marketing studies or clinical trials to specifically address safety issues identified by the agency. If any of ourproducts are subject to post-marketing requirements and commitments, there may be resource and financial implications for our business.Even if a product candidate receives regulatory approval, the approval will be limited to specific disease states, patient populations and/or dosages, or mightcontain significant limitations on use in the form of warnings, precautions or contraindications, or in the form of onerous risk management plans, restrictionson distribution, or post-marketing study or clinical trial requirements. Further, even after regulatory approval is obtained, later discovery of previouslyunknown problems with a product may result in restrictions on the product, requirements to conduct additional studies or trials, or even complete withdrawalof the product from the market. In addition, we cannot predict what adverse governmental regulations may arise from future United States or foreigngovernmental action.21 FDA Post-Approval RequirementsAny products manufactured or distributed by us or on our behalf pursuant to FDA approvals are subject to continuing regulation by the FDA, includingrequirements for record-keeping, reporting of adverse experiences with the biologic, and submitting biological product deviation reports to notify the FDA ofunanticipated changes in distributed products. Manufacturers are required to register their facilities with the FDA and certain state agencies and are subject toperiodic unannounced inspections by the FDA and certain state agencies for compliance with cGMP standards. This requires us and our third-partymanufacturers to implement certain quality processes, manufacturing controls and documentation requirements in order to ensure that the product is safe, hasthe identity and strength, and meets the quality, purity and potency characteristics that it purports to have. Certain states also impose requirements onmanufacturers and distributors to establish the pedigree of product in the chain of distribution, including some states that require manufacturers and others toadopt new technology capable of tracking and tracing product as it moves through the distribution chain. We cannot be certain that we or our present orfuture suppliers will be able to comply with the cGMP and other FDA regulatory requirements. If our present or future suppliers are not able to comply withthese requirements, the FDA may halt our clinical trials, refuse to approve any BLA or other application, force us to recall a drug from distribution, shut downmanufacturing operations or withdraw approval of the BLA for that biologic. Noncompliance with cGMP or other requirements can result in issuance ofwarning letters, civil and criminal penalties, seizures, and injunctive action.The FDA and other federal and state agencies closely regulate the labeling, marketing and promotion of drugs. While doctors may prescribe any productapproved by the FDA for any use as long as consistent with any REMS restrictions, if applicable, a company can only make claims relating to safety andefficacy of a product that are consistent with FDA approval, and the company is allowed to market a drug only for the particular use and treatment approvedby the FDA. In addition, any claims we make relating to our products in advertising or promotion must be appropriately balanced with important safetyinformation and otherwise be adequately substantiated. Failure to comply with these requirements can result in adverse publicity, warning letters, correctiveadvertising, injunctions, potential civil and criminal penalties, criminal prosecution, and agreements with governmental agencies that materially restrict themanner in which we may promote or distribute drug products. Government regulators, including the Department of Justice and the Office of the InspectorGeneral of the Department of Health and Human Services, as well as state authorities, recently have increased their scrutiny of the promotion and marketingof drugs.Orphan Drug and Orphan Medicinal Product Designation and ExclusivityThe Orphan Drug Act provides incentives for the development of products intended to treat rare diseases or conditions, which are generally diseases orconditions that affect fewer than 200,000 individuals in the United States. If a sponsor demonstrates that a biologic is intended to treat rare diseases orconditions, the FDA will grant orphan designation for that product. Orphan designation must be requested before submitting a BLA.Under the Pediatric Research Equity Act, or the PREA, submission of a pediatric assessment is not typically required for pediatric investigation of a productthat has been granted orphan drug designation. However, under the FDA Reauthorization Act of 2017, the scope of the PREA was extended to requirepediatric studies for products intended for the treatment of an adult cancer that are directed at a molecular target that the Secretary of Health and HumanServices determines to be substantially relevant to the growth or progression of a pediatric cancer. In addition, the FDA issued guidance in 2017 that it nolonger intends to grant orphan drug designation to products for pediatric subpopulations of common diseases unless the use of the drug in the pediatricsubpopulation meets the criteria for an orphan disease or unless the disease in the pediatric subpopulation is considered a different disease from the disease inthe adult population.The benefits of orphan drug designation include research and development tax credits and exemption from FDA user fees. Orphan designation, however, doesnot convey any advantage in, or shorten the duration of, the regulatory review and approval process. Generally, if a product that receives orphan designationis approved for the orphan indication, it receives orphan drug exclusivity, which for seven years prohibits the FDA from approving another product with thesame active ingredient for the same use. Additionally, if a biologic designated as an orphan product receives marketing approval for an indication broaderthan what is designated, it may not be entitled to orphan drug exclusivity.22 Orphan exclusivity will not bar approval of another product under certain circumstances, including if a subsequent product with the same active ingredientfor the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or provides a major contribution topatient care, or if the company with orphan drug exclusivity is not able to meet market demand. Further, the FDA may approve more than one product for thesame orphan indication or disease as long as the products contain different active ingredients. As a result, even if one of our product candidates receivesorphan exclusivity, the FDA can still approve other drugs that have a different active ingredient for use in treating the same indication or disease, whichcould create a more competitive market for us.After the FDA grants orphan designation, the identity of the applicant, as well as the name of the therapeutic agent and its designated orphan use, aredisclosed publicly by the FDA.Similarly, the European Commission grants orphan medicinal product designation to products intended for the treatment, prevention or diagnosis of adisease that is life-threatening or chronically debilitating affecting not more than five in 10,000 people. In order to receive orphan designation, there mustalso be no satisfactory method of diagnosis, prevention or treatment of the condition, or if such a method exists, the medicine must be of significant benefit tothose affected by the condition. In addition, sponsors are required to submit to the EMA’s Pediatric Committee, or the PDCO, and comply with a pediatricinvestigation plan, or a PIP, in order to initiate pivotal clinical investigation and seek marketing authorization in the EU.Designated orphan medicinal products are entitled to a range of incentives during the development and regulatory review process, including scientificassistance for study protocols, a partial or total reduction in fees and eligibility for conditional marketing authorization. Once authorized, orphan medicinalproducts are entitled to 10 years of market exclusivity in all EU member states. However, marketing authorization may be granted to a similar medicinalproduct with the same orphan indication during the 10-year period with the consent of the marketing authorization holder for the original orphan medicinalproduct or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities of such product. Marketing authorizationmay also be granted to a similar medicinal product with the same orphan indication if the similar product is established to be safer, more effective orotherwise clinically superior to the original orphan medicinal product. After five years, a member state can request that the period of market exclusivity bereduced to six years if it can be demonstrated the criteria for orphan designation no longer apply and the medicine is sufficiently profitable. The periodof market exclusivity may be extended by two years for medicines that have also complied with an agreed PIP. Biologics Price Competition and Innovation Act of 2009The Biologics Price Competition and Innovation Act of 2009, or BPCIA, created a licensure framework for biosimilars, which could ultimately subject ourbiological product candidates to competition from biosimilars. Under the BPCIA, a manufacturer may submit an abbreviated application for licensure of abiologic that is “biosimilar to” a referenced branded biologic. This abbreviated approval pathway is intended to permit a biosimilar to come to market morequickly and less expensively than if a “full” BLA were submitted, by relying to some extent on the FDA’s previous review and approval of the referencebiologic to which the proposed product is similar.Under the BPCIA, a biosimilar sponsor’s ability to seek or obtain approval through the abbreviated pathway is limited by periods of exclusivity granted tothe sponsor of the reference product. No biosimilar application may be submitted until four years after the date of approval of the reference product, and nosuch application, once submitted, may receive final approval until twelve years after that same date (with a potential six-month extension of exclusivity ifcertain pediatric studies are conducted and the results are reported to the FDA). Once approved, biosimilar products likely would compete with (and in somecircumstances, may be deemed under the law to be “interchangeable with”) the previously approved reference product.23 FDA Regulation of Companion DiagnosticsAs part of our clinical development plans, have engaged third-party collaborators to develop companion diagnostics to identify patients most likely torespond to our product candidates. Companion diagnostics are classified as medical devices under the Federal Food, Drug, and Cosmetic Act in the UnitedStates. The FDA regulates medical device design and development, preclinical and clinical testing, premarket clearance or approval, registration and listing,manufacturing, labeling, storage, reporting, recordkeeping, advertising and promotion, export and import, sales and distribution, and post-marketsurveillance. Unless an exemption applies, companion diagnostics require marketing clearance or approval from the FDA prior to commercial distribution.The two primary types of FDA marketing authorization applicable to a medical device are premarket notification, also called 510(k) clearance, and premarketapproval, or PMA. The use of companion diagnostics with therapeutic products raises important concerns about the safety and effectiveness of both thecompanion diagnostic devices and the corresponding therapeutic products and, therefore, ordinarily will require a PMA before they are marketed. Becausethe diagnostic tests that we plan to develop are essential for the safety and effective use of our therapeutics in selected patients, these diagnostic tests wouldbe subject to the PMA approval process.The PMA process is costly, lengthy and uncertain. PMA applications must be supported by valid scientific evidence, which typically requires extensive data,including technical, preclinical, clinical and manufacturing data, to demonstrate to the FDA’s satisfaction the safety and effectiveness of the device. Forcompanion diagnostic tests, a PMA application typically includes data regarding analytical and clinical validation studies. As part of its review of the PMA,the FDA will conduct a pre-approval inspection of the manufacturing facility or facilities to ensure compliance with the Quality System Regulation, whichrequires manufacturers to follow design, testing, control, documentation and other quality assurance procedures. FDA review of an initial PMA application isrequired by statute to take six months. If the FDA evaluations of both the PMA application and the manufacturing facilities are favorable, the FDA will eitherissue an approval letter or an approvable letter, which usually contains a number of conditions that must be met in order to secure final approval of the PMA.If the FDA’s evaluation of the PMA or manufacturing facilities is not favorable, the FDA will deny approval of the PMA or issue a not approvable letter. A notapprovable letter will outline the deficiencies in the application, and where practical, will identify what is necessary to secure approval of the PMA. The FDAmay also determine that additional clinical trials are necessary, in which case the PMA may be delayed for several months or years while such trials areconducted and the data then submitted in an amendment to the PMA. Once granted, a PMA may be withdrawn by the FDA if compliance with post-approvalrequirements, conditions of approval or other regulatory standards are not maintained or problems are identified following initial marketing.We and any third party collaborator who we engage to develop companion diagnostics will work cooperatively to generate the data required for submissionwith the PMA application, and will remain in contact with the Center for Devices and Radiological Health, or CDRH, at the FDA to ensure that any changesin requirements are incorporated into the development plans. We anticipate that meetings with the FDA with regard to our drug product candidates, as well ascompanion diagnostic product candidates, will include representatives from the Center for Drug Evaluation and Research, or the CDER, and CDRH to ensurethat the BLA and PMA submissions are coordinated to enable the FDA to conduct a parallel review of both submissions. FDA guidance addresses issuescritical to developing companion diagnostics, such as biomarker qualification, establishing clinical validity, the use of retrospective data, the appropriatepatient population and when the FDA will require that the device and the drug be approved simultaneously. According to the guidance, if safe and effectiveuse of a therapeutic product depends on a diagnostic, then the FDA generally will require approval or clearance of the diagnostic contemporaneously withthe FDA’s approval of the therapeutic product. We plan to structure our programs for the development of our companion diagnostics to be consistent withthis guidance.24 In the European Economic Area, or the EEA, in vitro medical devices are required to conform with essential requirements by undergoing a conformityassessment procedure. The conformity assessment varies according to the type of medical device and its classification. For low-risk devices, the conformityassessment can be carried out internally, but for higher risk devices it requires the intervention of an accredited EEA Notified Body. If successful, theconformity assessment concludes with the drawing up by the manufacturer of an EC Declaration of Conformity entitling the manufacturer to affix the CEmark to its products and to sell them throughout the EEA. We expect our companion diagnostic will require a conformity assessment through an accreditedEEA Notified Body, and that the data generated for the U.S. registration will be sufficient to satisfy the regulatory requirements for the European Union andother countries.Coverage and ReimbursementIn both domestic and foreign markets, sales of any products for which we may receive regulatory approval will depend in part upon the availability ofcoverage and reimbursement from third-party payors. Such third-party payors include government health programs, such as Medicare and Medicaid, privatehealth insurers and managed care providers, and other organizations. Coverage decisions may depend upon clinical and economic standards that disfavornew drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming coverageis granted, the reimbursement rates paid for covered products might not be adequate. Even if favorable coverage status and adequate reimbursement rates areattained, less favorable coverage policies and reimbursement rates may be implemented in the future. The marketability of any products for which we mayreceive regulatory approval for commercial sale may suffer if the government and other third-party payors fail to provide coverage and adequatereimbursement to allow us to sell such products on a competitive and profitable basis. For example, under these circumstances, physicians may limit howmuch or under what circumstances they will prescribe or administer our products and patients may decline to purchase such products. This, in turn, couldaffect our ability to successfully commercialize our products and impact our profitability, results of operations, financial condition, and future success.The market for any product candidates for which we may receive regulatory approval will depend significantly on the degree to which these products arelisted on third-party payors’ drug formularies or lists of medications for which third-party payors provide coverage and reimbursement. The industrycompetition to be included on such formularies often leads to downward pricing pressures on pharmaceutical companies. Also, third-party payors may refuseto include a particular branded drug on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or otheralternative is available. In addition, because each third-party payor may individually establish coverage and reimbursement policies, obtaining coverage andadequate reimbursement can be a time-consuming and costly process. We may be required to provide scientific and clinical support for the use of any productto each third-party payor separately with no assurance that approval would be obtained, and we may need to conduct expensive pharmacoeconomic studiesin order to demonstrate the cost-effectiveness of our products. We cannot be certain that our product candidates will be considered cost-effective. Thisprocess could delay the market acceptance of any product candidates for which we may receive approval and could have a negative effect on our futurerevenues and operating results.25 Anti-Kickback, False Claims, Physician Payments Sunshine and Other Healthcare LawsIn addition to FDA restrictions on marketing, several other types of U.S. state and federal laws are relevant to certain marketing practices in thepharmaceutical and medical device industries and their other interactions with healthcare providers. These laws include the Federal Anti-Kickback Statute,false claims statutes, and the Federal Physician Payments Sunshine Act and other healthcare laws. We are subject to these laws and they may affect ourbusiness. The Federal Anti-Kickback Statute prohibits, among other things, any person or entity from knowingly and willfully soliciting, receiving, offeringor paying remuneration, directly or indirectly, in exchange for or to induce either the referral of an individual for, or the purchase, lease, order orrecommendation of, any good or service for which payment may be made under federal healthcare programs such as the Medicare and Medicaid programs.This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers, formularymanagers and other individuals and entities on the other hand. Violations of the Federal Anti-Kickback Statute are punishable by imprisonment, criminalfines, civil monetary penalties and exclusion from participation in federal healthcare programs. The Federal Patient Protection and Affordable Care Act, asamended by the Health Care and Education Reconciliation Act of 2010 and subsequent legislation, or collectively, the Affordable Care Act, among otherthings, amended the intent requirement of the Federal Anti-Kickback Statute. A person or entity no longer needs to have actual knowledge of this statute orspecific intent to violate it in order to have committed a violation. In addition, the Affordable Care Act provides that the government may assert that a claimincluding items or services resulting from a violation of the Federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FederalFalse Claims Act. There are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution or otherregulatory sanctions; however, the exceptions and safe harbors are drawn narrowly, and practices that do not fit squarely within an exception or safe harbormay be subject to scrutiny.The Federal False Claims Act prohibits, among other things, any person from knowingly presenting, or causing to be presented, a false or fraudulent claim forpayment to a government program, or knowingly making, or causing to be made, a false record or statement material to a false or fraudulent claim. Manypharmaceutical and other healthcare companies have faced investigations and private lawsuits and, in many cases, have agreed to significant andburdensome settlements under these laws for a variety of allegedly improper promotional and marketing activities, including inflating drug prices they reportto pricing services, which in turn were used by the government to set Medicare and Medicaid reimbursement rates; providing free product to customers withthe expectation that the customers would bill federal programs for the product; providing consulting fees and other benefits to physicians to induce them toprescribe products; or engaging in promotion for “off-label” uses. Federal False Claims Act violations may result in significant civil monetary penalties,including three times the damages incurred by the government from the violation and exclusion from participation in federal healthcare programs. Themajority of U.S. states also have statutes or regulations similar to the Federal Anti-Kickback Statute and Federal False Claims Act, which apply to items andservices reimbursed under Medicaid and other state programs, and in some states, apply regardless of the payor.The federal Health Insurance Portability and Accountability Act of 1996, as amended by the Health Information Technology for Economic and ClinicalHealth Act of 2009, and its implementing regulations, or HIPAA, imposes criminal liability for knowingly and willfully executing a scheme to defraud anyhealthcare benefit program, knowingly and willfully embezzling or stealing from a healthcare benefit program, willfully obstructing a criminal investigationof a healthcare offense, or knowingly and willfully making false statements relating to healthcare matters. HIPAA also imposes obligations on certain coveredentity healthcare providers, health plans and healthcare clearinghouses as well as their business associates that perform certain services involving the use ordisclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security andtransmission of individually identifiable health information.The federal Physician Payments Sunshine Act, being implemented as the Open Payments Program, requires certain manufacturers of products for whichpayment is available under Medicare, Medicaid, or the Children’s Health Insurance Program to track payments and other transfers of value to physicians andteaching hospitals, as well as physician ownership and investment interests, and to publicly report such data. Manufacturers subject to the Open PaymentsProgram must submit a report on or before the 90th day of each calendar year disclosing reportable payments made in the previous calendar year. Failure tocomply with the reporting obligations may result in civil monetary penalties.26 Several states now require pharmaceutical companies to report expenses relating to the marketing and promotion of pharmaceutical products in those statesand to report gifts and payments to individual healthcare providers in those states. Some of these states also prohibit certain marketing related activitiesincluding the provision of gifts, meals, or other items to certain healthcare providers. Some states also require pharmaceutical companies to implementcompliance programs or marketing codes and report information on the pricing of certain drugs. Certain state and local laws also require the registration ofpharmaceutical sales representatives.Because of the breadth of these laws and the narrowness of available statutory exceptions and regulatory exemptions, it is possible that some of our businessactivities could be subject to challenge under one or more of such laws. If our operations are found to be in violation of any of the federal or state lawsdescribed above or any other governmental regulations that apply to us, we may be subject to penalties, including significant criminal, civil monetarypenalties, damages, fines, imprisonment, exclusion from participation in government programs, injunctions, recall or seizure of products, total or partialsuspension of production, denial or withdrawal of pre-marketing product approvals, private “qui tam” actions brought by individual whistleblowers in thename of the government, additional reporting requirements and oversight if we become subject to a corporate integrity agreement or similar agreement toresolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, any of which could adversely affect our abilityto operate our business and our results of operations.To the extent that any of our products are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, forinstance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate complianceprograms and reporting of payments or transfers of value to healthcare professionals.Healthcare ReformThe United States and some foreign jurisdictions are considering or have enacted a number of legislative and regulatory proposals to change the healthcaresystem in ways that could affect our ability to sell our product candidates profitably, even if they are approved for sale. Among policy makers and payors inthe United States and elsewhere, there is significant interest in promoting changes in healthcare systems with the stated goals of containing healthcare costs,improving quality and/or expanding access. In the United States, the pharmaceutical and medical device industries have been a particular focus of theseefforts and have been significantly affected by major legislative initiatives.In March 2010, the Affordable Care Act was enacted, which includes measures that have or will significantly change the way healthcare is financed by bothgovernmental and private insurers.27 Some of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and Congressional challenges to certain aspectsof the Affordable Care Act, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the Affordable Care Act. Since January2017, President Trump has signed two Executive Orders and other directives designed to delay the implementation of certain provision of the AffordableCare Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. Concurrently, Congress has consideredlegislation that would repeal or repeal and replace all or part of the Affordable Care Act. While Congress has not passed comprehensive repeal legislation,two bills affecting the implementation of certain taxes under the Affordable Care Act have been signed into law. The Tax Cuts and Jobs Act of 2017, or theTax Act, includes a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the Affordable Care Act oncertain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” OnJanuary 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certainAffordable Care Act-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposedon certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. The Bipartisan Budget Act of2018, or the BBA, among other things, amended the Affordable Care Act, effective January 1, 2019, to close the coverage gap in most Medicare drug plans,commonly referred to as the “donut hole.” In July 2018, the Centers for Medicare & Medicaid Services, or CMS, published a final rule permitting furthercollections and payments to and from certain Affordable Care Act qualified health plans and health insurance issuers under the Affordable Care Act riskadjustment program in response to the outcome of federal district court litigation regarding the method CMS uses to determine this risk adjustment. OnDecember 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable Care Act is unconstitutional in its entirety because the “individual mandate”was repealed by Congress as part of the Tax Act. While the Texas U.S. District Court Judge, as well as the Trump administration and CMS, have stated thatthe ruling will have no immediate effect pending appeal of the decision.Other legislative changes have been proposed and adopted since the PPACA was enacted. These changes include aggregate reductions to Medicare paymentsto providers of 2% per fiscal year pursuant to the Budget Control Act of 2011, which began in 2013, and due to subsequent legislative amendments to thestatute, including the BBA, will remain in effect through 2027 unless additional Congressional action is taken. The American Taxpayer Relief Act of 2012,among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute oflimitations period for the government to recover overpayments to providers from three to five years.Further, there has been heightened governmental scrutiny in the United States of pharmaceutical pricing practices in light of the rising cost of prescriptiondrugs and biologics. Such scrutiny has resulted in several recent congressional inquiries and proposed and enacted federal legislation designed to, amongother things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform governmentprogram reimbursement methodologies for products. For example, at the federal level, the Trump administration released a “Blueprint” to lower drug pricesand reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase the negotiating power of certainfederal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out-of-pocket costs of drug products paid byconsumers. On January 31, 2019, the U.S. Department of Health and Human Services Office of Inspector General proposed modifications to Federal Anti-Kickback Statute safe harbors which, among other things, will affect rebates paid by manufacturers to Medicare Part D plans, the purpose of which is tofurther reduce the cost of drug products to consumers. Although a number of these, and other proposed measures may require authorization throughadditional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/oradministrative measures to control drug costs. At the state level, legislatures are also increasingly passing legislation and implementing regulations designedto control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain productaccess and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulkpurchasing.28 Further, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right to Try Act,was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products thathave completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seektreatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for apharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.Foreign RegulationIn addition to regulations in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales anddistribution of our product candidates. Whether or not we obtain FDA approval for a product candidate, we must obtain approval from the comparableregulatory authorities of foreign countries or economic areas, such as the European Union, before we may commence clinical trials or market products inthose countries or areas. The approval process and requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement varygreatly from place to place, and the time may be longer or shorter than that required for FDA approval.Other RegulationsWe are also subject to numerous federal, state and local laws relating to such matters as safe working conditions, manufacturing practices, environmentalprotection, fire hazard control, and disposal of hazardous or potentially hazardous substances. We may incur significant costs to comply with such laws andregulations now or in the future.Corporate Information and EmployeesOur principal corporate offices are located at 111 Oyster Point Boulevard, South San Francisco, California 94080 and our telephone number is (415) 365-5600. We were incorporated in December 2001 in Delaware and completed our initial public offering in September 2013.As of December 31, 2018, we had 209 full-time employees and one part-time employee. Of these employees, 121 were primarily engaged in research anddevelopment activities and 56 have an M.D. or a Ph.D. degree.On January 15, 2019, we implemented a corporate restructuring, or the restructuring, to focus our resources on our clinical development and late-stageresearch programs. Pursuant to the restructuring, we eliminated 41 employee positions, primarily in the areas of research, pathology and manufacturing.Following the restructuring, as of January 23, 2019, we had 168 full-time employees and no part-time employees. Of these employees, 81 were primarilyengaged in research and development activities and 40 have an M.D. or a Ph.D. degree.Available InformationOur website address is www.fiveprime.com. We make available on our website, free of charge, this Annual Report on Form 10-K, our Quarterly Reports onForm 10-Q and our Current Reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the SecuritiesExchange Act of 1934, as amended, or the Exchange Act, as soon as reasonably practicable after we electronically file such material with, or furnish it to, theSecurities and Exchange Commission, or the SEC. The SEC maintains a website that contains reports, proxy and information statements and otherinformation regarding our filings at www.sec.gov. The information found on our website is not incorporated by reference into this Annual Report on Form 10-K or any other report we file with or furnish to the SEC. 29 Item 1A. Risk FactorsThis Annual Report on Form 10-K contains forward-looking information based on our current expectations. Because our business is subject to many risksand our actual results may differ materially from any forward-looking statements made by or on behalf of us, this section includes a discussion of importantfactors that could affect our business, operating results, financial condition and the trading price of our common stock. You should carefully consider theserisk factors, together with all of the other information included in this Annual Report on Form 10-K as well as our other publicly available filings with theSEC.Risks Related to Our Business and IndustryIf we are unable to advance additional product candidates into clinical development or identify or validate additional drug targets, or if we experiencesignificant delays in doing any of the foregoing, our business will be materially harmed.We have invested a significant portion of our efforts and financial resources in the identification and validation of new targets for protein therapeutics andthe identification and preclinical development of product candidates directed to these targets or in these target pathways. We are clinically developing ourbemarituzumab, FPA150, FPT155 and cabiralizumab product candidates. Our ability to generate product revenues, which we do not expect to occur for manyyears, if ever, will depend heavily on our and our partners’ ability to successfully develop these product candidates and our ability to identify and validatenew targets and product candidates and identify and advance preclinical product candidates into and through clinical development. The outcome ofpreclinical studies of our product candidates may not predict the success of such product candidates in clinical trials. Moreover, preclinical results regardinga product candidate are often susceptible to varying interpretations and analyses and may not translate into similar results when the product candidate istested clinically in humans. Many companies have believed their product candidates performed satisfactorily in preclinical and early clinical studies, butsuch product candidates have nonetheless failed during clinical development. Our inability to successfully complete preclinical or clinical development ofour product candidates could cause us to incur additional costs, delay or prevent our ability to advance product candidates into clinical development orcommercialization, or impair our ability to receive development, regulatory, commercialization or sales milestone payments from our current or futurecollaboration partners, or to generate and receive royalties on product sales or product revenues from our current or future collaboration partners.If clinical trials of our product candidates fail to demonstrate safety and efficacy to the satisfaction of regulatory authorities or do not otherwise producemeaningfully positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development andcommercialization of our product candidates.Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we or our partners must conduct extensive clinicaltrials to demonstrate the safety and efficacy of such product candidates in humans. Clinical testing is expensive and difficult to design and implement,generally takes many years to complete and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcomeof preclinical studies and early clinical trials may not predict the success of later clinical trials and interim results of a clinical trial do not necessarily predictfinal results. A number of companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in advanced clinical trials due tolack of efficacy or unacceptable safety profiles of their product candidates, notwithstanding promising results in earlier trials. Even though we have alreadygenerated results from certain preclinical studies and clinical trials of our product candidates, we do not know whether the clinical trials of those of ourproduct candidates that we or our partners may conduct will demonstrate adequate efficacy and safety to result in regulatory approval to market any of theseproduct candidates in any particular jurisdiction or jurisdictions. If later-stage clinical trials for one or more of our product candidates do not producefavorable results, we or our partners may be unable to obtain regulatory approval for such product candidates.30 Delays in clinical testing will delay the commercialization of our product candidates, increase our costs and harm our business.We do not know whether any of our clinical trials will begin as and when planned, will need to be amended or restructured or will be completed on schedule,or at all. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays also could shorten anyperiods during which we may have the exclusive right to commercialize our product candidates or could allow our competitors to bring products to marketbefore we do, which would impair our ability to successfully commercialize our product candidates and may harm our business, results of operations andprospects. Events which may result in a delay in or unsuccessful completion of clinical development include: •delays in reaching an agreement with or failure to obtain authorization from the U.S. Food and Drug Administration, or FDA, or othercomparable regulatory authorities, and institutional review boards, or IRBs; •imposition of a clinical hold following an inspection of our manufacturing or clinical trial operations, including clinical trial sites, by the FDAor other comparable regulatory authorities, or a decision by the FDA, other comparable regulatory authorities, IRBs or us, or a recommendationby a data safety monitoring board, to suspend or terminate a clinical trial at any time for safety or other reasons; •delays in reaching, or the inability to reach, agreement on acceptable terms with prospective clinical research organizations, or CROs, clinicaltrial sites, laboratory service providers, companion diagnostic development partners, CMOs and other service providers we may engage tosupport the conduct of our clinical trials or eventual commercialization of our products; •deviations from the clinical trial protocol by clinical trial sites or investigators or failure to conduct a clinical trial in accordance withregulatory requirements; •failure of third parties, such as CROs, to satisfy their contractual duties or meet expected deadlines; •delays in the testing, validation and manufacturing of product candidates and the delivery of these product candidates to clinical trial sites; •in the case of clinical trials testing combination treatment of our product candidates with third-party drug products, delays in procuring suchthird-party drug products and the delivery of such third-party drug products to clinical trial sites, or the inability to procure such third-partydrug products at all; •for clinical trials in selected patient populations, delays in identifying and auditing central or other laboratories that develop or use assays ortests to identify eligible patients for our clinical trials, or delays in the validation or transfer of such assays or tests to such laboratories; •with respect to patients in any of our clinical trials, delays in completing their participation in any such clinical trial or returning for post-treatment follow-up; •the occurrence of side effects, disease progression or other events requiring patients to drop out of one or more of our clinical trials beforecompletion; •withdrawal of one or more clinical trial sites from our clinical trials, including as a result of any clinical trial site investigator ceasing his or heraffiliation with any such site, changes to any applicable standard of care or the ineligibility of any such site to participate in our clinical trials; •administrative actions or changes in government policies, laws or regulations affecting any aspect of the conduct of our clinical trials; or •lack of adequate funding to continue our clinical trials.31 For example, we are conducting our Phase 3 registrational trial of bemarituzumab in combination with 5-fluorouracil (5-FU), leucovorin, and oxaliplatin, astandard of care chemotherapy regimen known as mFOLFOX6, as front-line treatment for patients with gastric or gastroesophageal junction, or GEJ, cancerwith tumors that overexpress FGFR2b, or our FIGHT trial, at over 200 clinical trial sites in North America, Europe and Asia. Our ability to conduct the FIGHTtrial in accordance with our timelines will depend on our ability to timely contract with, initiate and enroll patients at each of these clinical trial sites. Wehave not undertaken a trial of this scale as an organization. Delays in contracting with or initiating or conducting our FIGHT trial at one or more of theseclinical trial sites may delay our ability to fully enroll the trial in accordance with our projected timelines and may delay any potential approval for orcommercialization of bemarituzumab.Moreover, we are conducting the FIGHT trial in China in collaboration with Zai Lab (Shanghai) Co., Ltd., or Zai Lab. Given the greater potential patientpopulation in China, we believe that our ability to enroll patients at clinical trial sites in China will reduce the overall time to fully enroll the FIGHT trial andwill therefore allow us to advance and complete the FIGHT trial within a shorter time period. However, Zai Lab’s ability to initiate and conduct the FIGHTtrial in China depends on Zai Lab’s and our ability to comply with the government policies, laws and regulations applicable to conducting clinical trials inChina. The government policies, laws and regulations in China are evolving rapidly and changes to these policies, laws and regulations are difficult topredict. If any such government policies, laws or regulations in China evolve in a way that makes it more difficult or inefficient for us or Zai Lab to conductour FIGHT trial in China, we may experience delays in initiating or conducting our FIGHT trial at clinical trial sites in China and in fully enrolling trial,which would delay our ability to obtain approval for and commercialize bemarituzumab.In addition, in order to successfully initiate and conduct the FIGHT trial in each country where the trial is taking place, we must obtain sufficient clinicalsupply of each component of mFOLFOX6 to administer the mFOLFOX6 regimen to patients in each such country. If we have difficulty obtaining or areunable to obtain sufficient supply of any component of the mFOLFOX6 regimen in any country, we may experience delays in initiating or conducting ourFIGHT trial at clinical trial sites in such country and in timely enrolling the trial, which would delay our ability to obtain approval for and commercializebemarituzumab. If we or our partners are unable to timely complete clinical development for any of our product candidates, we may incur additional costs and our ability toachieve development, regulatory, commercialization or sales milestones or to generate and receive royalties on product sales and product revenues for anysuch product candidate may be impaired.If we or our partners are unable to timely enroll patients in our clinical trials, we will be unable to complete these trials on a timely basis.The timely completion of clinical trials largely depends on the rate of patient enrollment. Many factors affect the rate of patient enrollment, including: •the size and nature of the patient population; •the number and location of clinical trial sites; •competition with other companies for clinical trial sites or patients; •the eligibility and exclusion criteria for the clinical trial; •the design of the clinical trial; •the ability to obtain and maintain patient consents; •the risk that enrolled patients will drop out before completion of the trial; and •clinicians’ and patients’ perceptions as to the potential advantages of the product candidate being studied in relation to other availabletherapies, including any new drugs that may be approved for the indications we are investigating.32 We face and will continue to face significant competition in recruiting patients for our and our partners’ current and future clinical trials, and we or ourpartners may be unable to timely enroll the patients necessary to complete clinical trials on a timely basis or at all.For example, we are conducting our FIGHT trial to evaluate bemarituzumab in gastric and GEJ cancer patients whose tumors overexpress FGFR2b or amplifythe FGFR2 gene. We believe using both an immunohistochemistry-, or IHC-, based diagnostic and a circulating tumor DNA, or ctDNA, blood-basedcompanion diagnostic to select patients with gastric and GEJ cancer whose tumors overexpress FGFR2b or amplify the FGFR2 gene should increase thelikelihood of identifying eligible patients and the probability of success in our FIGHT trial. However, our selection criteria limit the overall number ofpatients eligible for enrollment in the trial. Also, if our assumptions regarding the percentage of patients with tumors that overexpress FGFR2b or amplify theFGFR2 gene that we expect to identify for inclusion in the FIGHT trial are higher than we actually observe, the FIGHT trial will take longer to enroll, we willincur higher costs and the commercial potential for bemarituzumab would be adversely affected. Additionally, Astellas Pharma Inc., or Astellas, is conductingtwo Phase 3 clinical trials of its zolbetuximab (IMAB362, claudiximab) anti-Claudin 18.2 antibody in combination with mFOLFOX6 or capecitabine andoxaliplatin, or CAPOX, as front-line treatment in patients with HER2-negative, Claudin 18.2-positive gastric and GEJ cancer. If Astellas continues theclinical development of zolbetuximab in gastric and GEJ cancer, we may compete with Astellas for patient enrollment in this patient population, which mayadversely impact the rate of patient enrollment in and the timely completion of our FIGHT trial.We may not successfully identify, test, develop or commercialize our current or future product candidates, which may force us to terminate ourdevelopment efforts for one or more programs.The success of our business depends primarily upon our ability to discover, develop and commercialize protein therapeutics, which we may developourselves or in-license from third parties, and identify and validate new protein therapeutic targets, including through the use of our discovery platform. Ourefforts to discover and preclinically develop potential new protein therapeutic candidates may initially show promise, yet fail to yield product candidates forclinical development or candidates that we successfully clinically develop and ultimately commercialize for numerous reasons, including the following: •our research methodology, including our screening technology, may not successfully identify medically relevant protein therapeutic targets orpotential product candidates; •our discovery platform often identifies novel, untested targets that may be challenging to validate because of the novelty of the target or thatwe may be unable to validate at all after further research; •product manufacturing difficulties may limit product yield or produce undesirable product characteristics that increase the cost of goods, causedelays or make our product candidates unmarketable; •third parties on whom we may rely to generate antibody or other product candidates may fail to produce candidates that we can successfullyvalidate or that have the characteristics necessary develop into marketable product candidates; •our product candidates may cause adverse effects in patients, even after successful initial toxicology studies or early-stage clinical trials, whichmay make our product candidates unsuitable for approval or otherwise unmarketable; •our product candidates may have an unacceptable safety profile or otherwise fail to provide a meaningful benefit to patients; or •our collaboration partners may change their development profiles or plans for our partnered product candidates or abandon a therapeutic areafor or the development of a partnered product candidate.The occurrence of any of these events may force us to abandon our development efforts for one or more programs, which would have a material adverse effecton our business, operating results and prospects and could potentially cause us to cease operations. Research programs that are designed and conducted toidentify new product targets and candidates require substantial technical, financial and human resources. We may focus these resources and our efforts onpotential discovery efforts, programs or product candidates that ultimately prove to be unsuccessful.33 We and our product candidates are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply ofsuch product candidates.The process of manufacturing our product candidates is complex and subject to a number of risks, including the following: •The biologics manufacturing process is susceptible to product loss due to contamination, equipment failure, improper installation or operationof equipment or vendor or operator error leading to manufacturing process deviations. Even minor deviations from specified manufacturingprocesses could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminationsare discovered in our products or in the manufacturing facilities in which our products are made, such manufacturing facilities may need to beclosed for an extended time to investigate and remediate the contamination. •The manufacturing facilities in which our products are made, and their ability to successfully and timely manufacture our products, could beadversely affected by equipment failures, labor and raw material shortages, natural disasters, power failures and numerous other factors. •Any adverse developments affecting manufacturing operations for our products may result in shipment delays, inventory shortages, lot failures,product withdrawals or recalls, or other interruptions in the supply of our products to clinical trial sites. We may also have to take inventorywrite-offs and incur other charges and expenses for products that fail to meet specifications, or to undertake costly remediation efforts or seekmore expensive manufacturing alternatives.Certain raw materials necessary for the manufacture of our products, such as growth media, resins and filters, are sourced from a single supplier. We do nothave agreements in place that guarantee our supply or the price of these raw materials. Any significant delay in the acquisition or decrease in the availabilityor significant increase in the price of these raw materials could considerably delay the manufacture of our product candidates, which could adversely impactthe timing of any planned clinical trials or the regulatory approval of those product candidates.We have process development and small-scale preclinical manufacturing capabilities. We do not have and we do not have current plans to acquire or developthe facilities or capabilities to manufacture bulk drug substance or filled drug product for use in human clinical trials or commercialization. In the past wehave engaged, and we expect in the future to engage, CMOs for the manufacture of bulk drug substance and drug product for our clinical trials and additionalthird parties for our supply chain. Any problems we experience with any of these third parties could delay the manufacturing of our product candidates or theprogress of our clinical trials, which could harm our results of operations.For example, Bristol-Myers Squibb Company, or BMS, has the exclusive right to manufacture cabiralizumab under our cabiralizumab collaborationagreement with BMS. Under this agreement, BMS will supply us with cabiralizumab, at its cost and expense, for our use in the conduct of our clinical trialevaluating cabiralizumab in combination with Opdivo in multiple tumor types and will supply us with cabiralizumab, in exchange for a service fee, for ourconduct of our independent development activities with respect to cabiralizumab.We have not contracted with alternate suppliers in the event that our current CMOs are unable to scale production or if we otherwise experience any problemswith these CMOs. If we are unable to arrange for alternative third-party manufacturing sources, or are unable to do so on commercially reasonable terms or ina timely manner, we may be delayed in the development of our product candidates.Our reliance on third-party manufacturers subjects us to risks to which we would not be subject if we manufactured product candidates internally, includingpotential failure of any such third party to abide by regulatory and quality assurance requirements, breach of the manufacturing agreement by such third partydue to factors beyond our control (including the third party’s failure to manufacture our product candidates or any products we may eventuallycommercialize in accordance with our specifications) and termination of or a decision not to renew such agreement by such third party, based on its ownbusiness priorities, at a time when our finding and retaining a replacement manufacturer may be costly or damaging to our business.34 The regulatory approval processes of the FDA and comparable foreign regulatory authorities are lengthy, time-consuming and inherently unpredictable.Our inability to obtain regulatory approval for our product candidates would substantially harm our business.The FDA and comparable foreign regulatory authorities extensively and rigorously regulate and evaluate the testing, manufacture, distribution, advertisingand marketing of drug products prior to granting marketing approvals with respect to such products. This approval process generally requires, at minimum,testing of any product candidate in preclinical studies and clinical trials to establish its safety and effectiveness, and confirmation by the FDA andcomparable foreign regulatory authorities that any such product candidate, and any parties involved in its testing, development and manufacturing, compliedwith current Good Manufacturing Practices, or GMP, current Good Laboratory Practices, or GLP, and current Good Clinical Practices, or GCP, regulations,standards and guidelines during such testing and manufacturing. The time required to obtain approval to market a product candidate from the FDA or anycomparable foreign regulatory authority is unpredictable but typically takes many years following the commencement of clinical trials and depends onnumerous factors, including the conduct of testing, development and manufacturing activities with respect to such product candidate and the substantialdiscretion of the applicable regulatory authorities. In addition, approval policies, regulations, or the type and amount of clinical data necessary to obtainapproval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not obtained regulatoryapproval for any of our product candidates and it is possible that none of our existing product candidates or potential future product candidates will everobtain regulatory approval.35 Any of our product candidates could fail to receive regulatory approval from the FDA or a comparable foreign regulatory authority for many reasons,including: •the FDA’s or such comparable foreign regulatory authority’s disagreement with the design or implementation of our clinical trials testing anysuch product candidate; •our failure to demonstrate that a product candidate is effective for its proposed indication and has an acceptable safety profile; •our failure to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks; •the failure of our clinical trial data for a product candidate to meet the level of statistical significance required for regulatory approval; •the FDA’s or such comparable foreign regulatory authority’s disagreement with our interpretation of data from preclinical studies or clinicaltrials testing a product candidate; •the insufficiency of our clinical trial data for a product candidate to support the submission and filing of a Biologic License Application orother regulatory submission or to obtain regulatory approval for such product candidate; •our failure to obtain approval from the FDA or such comparable foreign regulatory authority for the manufacturing or testing processes orfacilities of CMOs or CROs with whom we contract for clinical and commercial product supply or preclinical or clinical testing; or •changes in the applicable standard of care or the FDA’s or such comparable foreign regulatory authority’s approval policies or regulations thatrender our preclinical and clinical data for a product candidate insufficient for regulatory approval.The FDA or a comparable foreign regulatory authority may require more information to support approval of a product candidate, including additionalpreclinical or clinical data, which may delay or prevent approval and our commercialization plans, or result in our decision to abandon the developmentprogram with respect to such product candidate. For example, given the greater potential patient population in China, we plan to enroll a substantial numberof the patients in our Phase 3 FIGHT trial at clinical trial sites in China in order to reduce the overall time to fully enroll the FIGHT trial and potentiallyadvance and complete the FIGHT trial within a shorter time period. However, we are currently unable to provide regulatory authorities with data thatdemonstrate that patients participating in the FIGHT trial at clinical trial sites in China are representative of the general patient population and will respondto bemarituzumab the same way as other patient populations. If we obtain a significant portion of our positive clinical data from clinical trial sites in China ascompared to data from clinical trial sites located elsewhere, and an analysis of the data from Chinese patients suggest that other patient populations may nothave similar outcomes, the FDA and comparable foreign regulatory authorities may determine that the data we observe in Chinese patients are not sufficientto support regulatory approval for bemarituzumab for the general patient population and may require more clinical data from other patient populations tosupport regulatory approval for bemarituzumab. This could significantly delay or prevent our ability to timely obtain approval for and to commercializebemarituzumab.In addition, if we were to obtain approval for any of our product candidates, regulatory authorities may approve any such product candidate for fewer or morelimited indications than we request, may grant approval contingent on the performance of costly post-marketing clinical trials or risk evaluation andmitigation strategy, or REMS, drug safety programs, or may approve a product candidate with a label that does not include the labeling claims necessary ordesirable for the successful commercialization of that product candidate.36 Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit thecommercial profile of an approved product, or result in significant negative consequences following any marketing approval.Our product candidates may cause undesirable side effects in patients, which could cause us 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 comparable foreign regulatory authority orotherwise limit the commercial potential of any such product candidate. Our clinical trial results could reveal an unacceptable severity or prevalence of sideeffects or unexpected characteristics. In such an event, we may elect to suspend or terminate our clinical trials or the FDA or comparable foreign regulatoryauthorities could order us to cease our clinical trials or deny approval of our product candidates for any or all targeted indications. Drug-related side effectscould affect patient recruitment, cause enrolled patients to drop out of a clinical trial and result in product liability claims. Any of these occurrences maysignificantly harm our business, financial condition and prospects.37 Additionally, if one or more of our product candidates receives marketing approval, and we or others later identify undesirable side effects caused by anysuch product, numerous potentially significant negative consequences could result, including: •we may suspend marketing of, or withdraw or recall, such product; •regulatory authorities may withdraw approvals of such product; •regulatory authorities may require additional warnings on the label for such product; •regulatory authorities may issue safety alerts, Dear Healthcare Provider letters, press releases or other communications containing warningsabout such product; •regulatory authorities may require the establishment or modification of REMS or a similar strategy that may, for instance, restrict distribution ofsuch product and impose burdensome implementation requirements on us; •regulatory authorities may require that we conduct post-marketing studies; •we could be sued and held liable for harm caused to patients; and •our reputation may suffer.Any of these events could prevent us from achieving or maintaining marketing approval for or acceptance for a product candidate or otherwise materiallyharm the commercial prospects for such product, if approved, and could significantly harm our business, results of operations and prospects.Certain of our product candidates, including bemarituzumab and FPA150, are expected to be effective only in certain selected patient populations. If weare unable to successfully develop and obtain FDA approval for companion diagnostics for these product candidates, or experience significant delays indoing so, we may not obtain marketing approval for such product candidates or realize their full commercial potential.Certain of our current product candidates, including bemarituzumab and FPA150, may be effective only in selected patient populations. For any suchproduct candidate, we expect that the FDA and comparable foreign regulatory authorities may require the development and regulatory approval of at leastone companion diagnostic as a condition to approving such product candidate for use in patients within the selected patient population. We do not haveexperience in or capabilities for developing or commercializing companion diagnostics and have depended and will continue to depend on the sustainedcooperation and effort of our third-party diagnostic development collaborators to perform these functions.For example, we are developing bemarituzumab to treat a subset of patients with gastric or GEJ cancer whose tumors overexpress FGFR2b. We havedeveloped, in collaboration with third-party diagnostic development partners, both an IHC-based assay and a ctDNA blood-based assay to identify gastricand GEJ cancer patients with FGFR2 overexpression or FGFR2 gene amplification who may benefit from treatment with bemarituzumab. We are using bothcompanion diagnostics concurrently to more effectively screen patients for participation in the FIGHT trial. In addition, we are developing FPA150 to treatpatients with a variety of cancers whose tumors overexpress the B7-H4 protein. We have developed, in collaboration with a third-party diagnosticdevelopment partner, an IHC-based assay for use in clinical trials to identify patients whose tumors overexpress B7-H4. We plan to use this IHC-based assayin the Phase 1b portion of our Phase 1a/1b clinical trial of FPA150.Companion diagnostics are subject to regulation by the FDA and comparable foreign regulatory authorities as medical devices and may require separateregulatory approval prior to commercialization, which could delay their development and harm our business. For example, if we or our collaboration partnersare unable to obtain any necessary regulatory approvals for our companion diagnostics for bemarituzumab or FPA150, or experience delays in doing so, wemay suffer significant negative consequences, including: •bemarituzumab or FPA150, as applicable, may not receive marketing approval if its safe and effective use depends on use of a companiondiagnostic; or38 •we may not realize the full commercial potential of bemarituzumab or FPA150 if, among other reasons, we are unable to appropriately identifypatients with overexpression of FGFR2b or B7-H4, as applicable.The occurrence of any of these events would harm our business, possibly materially.Even if our product candidates receive regulatory approval, they may face future development and regulatory difficulties, which may inhibit our ability tocommercialize our products and generate revenue.Even if we obtain regulatory approval for a product candidate in a particular jurisdiction, the product would be subject to ongoing requirements by the FDAor applicable comparable foreign regulatory authorities governing such product’s manufacture, quality control, further development, labeling, packaging,storage, distribution, safety surveillance, import, export, advertising, promotion, recordkeeping and reporting of safety and other post-market information.The FDA and comparable foreign regulatory authorities will continue to closely monitor the safety profile of any product even after approval. If the FDA orany comparable foreign regulatory authority becomes aware of new safety information after approval of any of our product candidates, it may require labelingchanges or establishment of a REMS or similar strategy, impose significant restrictions on the product’s indicated uses or marketing, or impose ongoingrequirements for post-approval studies or post-market surveillance, which may be costly.In addition, drug product manufacturers and their facilities are subject to continual review and periodic inspections by the FDA and other regulatoryauthorities to evaluate compliance with GMP and GLP regulations and standards. If we or a regulatory authority discover previously unknown problems withone of our product candidates, such as side effects or adverse events of unanticipated severity or frequency, or problems with the facility where such productcandidate is manufactured, a regulatory authority may impose restrictions on that product, the manufacturing facility or us, including requiring recall orwithdrawal of such product from the market or suspension of manufacturing. If we, our product candidates or the manufacturing facilities for our productcandidates fail to comply with applicable regulatory requirements, a regulatory authority may: •issue warning letters or untitled letters; •mandate modifications to promotional materials or require us to provide corrective information to healthcare practitioners; •require us to enter into a consent decree, which may require payment of various monetary fines and reimbursement for inspection costs, imposedue dates for specific actions by us, and impose penalties for non-compliance; •seek an injunction or bring other court action to impose civil or criminal penalties or monetary fines; •suspend or withdraw regulatory approval for our product candidates; •suspend any ongoing clinical trials of our product candidates; •refuse to approve pending applications or supplements to applications that we have filed with respect to our product candidates; •suspend or impose restrictions on our or our manufacturing facilities’ operations, including costly new manufacturing requirements; or •seize or detain products, refuse to permit the import or export of products, or require us to initiate a product recall.The occurrence of any event or penalty described above may limit or prevent our ability to commercialize our products and generate revenue.39 Advertising and promotion of any product candidate that obtains approval in the United States will be heavily scrutinized by the FDA, the Department ofJustice, the Department of Health and Human Services’ Office of Inspector General, state attorneys general, members of Congress and the public. Violations ofapplicable laws and regulations, including promotion of our products for unapproved or off-label uses, may subject us to enforcement letters, inquiries,investigations and civil and criminal sanctions by the government. Similarly, comparable foreign regulatory authorities will heavily scrutinize advertisingand promotion of any product candidate that obtains approval outside of the United States.In the United States, engaging in the impermissible promotion of products for off-label uses can also subject a company to false claims litigation underfederal and state statutes, which can lead to civil and criminal penalties and fines and agreements that materially restrict the manner in which such companypromotes or distributes drug products. These false claims statutes include the Federal False Claims Act, which allows any individual to bring a lawsuit againsta pharmaceutical company on behalf of the federal government alleging submission of false or fraudulent claims or that such company caused another entityor individual to present such false or fraudulent claims for payment by a federal program such as Medicare or Medicaid. If the government prevails in thelawsuit, the individual will receive a portion of any fines or settlement funds. Since 2004, Federal False Claims Act lawsuits against pharmaceuticalcompanies have increased significantly in volume and breadth, leading to several substantial civil and criminal settlements involving fines exceeding $1.0billion based on certain sales practices promoting off-label drug uses. This growth in litigation has increased the risk that a pharmaceutical company willhave to defend against false claims actions, pay settlement fines or restitution, agree to comply with burdensome reporting and compliance obligations andbe excluded from Medicare, Medicaid and other federal and state healthcare programs. If we do not lawfully promote any of our products that may receivemarketing approval, we may become subject to such litigation and our inability to successfully defend the company in such litigation may material adverselyaffect our business, financial condition and results of operations.The policies of the FDA or any comparable foreign regulatory authority may change, and additional government regulations may be enacted that couldprevent, limit or delay regulatory approval of our product candidates. If we are slow or unable to adapt to changes in existing requirements or policies or newrequirements or policies that may be adopted, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may haveobtained, which would adversely affect our business, prospects and ability to achieve or sustain profitability.Our failure to obtain regulatory approval in international jurisdictions would prevent us from marketing our product candidates outside the United States.In order to market and sell our products in other jurisdictions, we or our collaboration partners must obtain separate marketing approvals and comply withnumerous and varying regulatory requirements in those jurisdictions. The approval procedures vary among countries and can involve additional testing. Thetime required to obtain approval outside of the United States may differ substantially from that required to obtain FDA approval. The regulatory approvalprocesses outside the United States generally include all the risks associated with obtaining FDA approval and may include additional risks that we cannotpredict. In addition, in many countries outside the United States, we or our collaboration partners must secure product reimbursement approvals beforeregulatory authorities will approve a product for sale in that country. Obtaining foreign regulatory approvals and compliance with foreign regulatoryrequirements could result in significant difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. We maynot obtain foreign regulatory approvals for our product candidates on a timely basis, if at all.40 For example, we are conducting our FIGHT trial for bemarituzumab in China in collaboration with Zai Lab and are relying on Zai Lab’s ability to obtainapproval for bemarituzumab in China, Taiwan, Hong Kong and Macau, or collectively, Greater China, from the China Food and Drug Administration.However, Zai Lab’s ability to obtain approval in Greater China depends on Zai Lab’s and our ability to comply with the government policies, laws andregulations applicable to conducting clinical trials and obtaining approval for and commercializing drug products in Greater China. The governmentpolicies, laws and regulations in China are evolving rapidly and future changes are difficult to predict. If any such government policies, laws or regulationsevolve in a way that make it more difficult or inefficient for Zai Lab or us to clinically develop, obtain approval for or commercialize bemarituzumab inChina, we may experience delays in initiating, conducting or completing the FIGHT trial at our clinical trial sites in China and in fully enrolling the FIGHTtrial, which will delay our ability to obtain approval for and commercialize bemarituzumab.Further, data and results from clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatoryapproval in one country or by one regulatory authority outside the United States does not ensure approval by regulatory authorities in any other country orjurisdiction or by the FDA, while a failure or delay in obtaining regulatory approval for any of our product candidates in one country or by one regulatoryauthority may have a negative effect on the regulatory approval process in other countries or jurisdictions and may significantly diminish the commercialprospects of that product candidate, which may cause our business prospects to decline. Also, regulatory approval for any of our product candidates may bewithdrawn in any country or jurisdiction. If we fail to comply with the regulatory requirements in international jurisdictions, we may not receive thenecessary marketing approvals for our product candidates in these jurisdictions, our target market for these product candidates will be reduced, we may beunable to realize the full market potential of these product candidates and our business will be adversely affected.We face substantial competition from third parties that may discover, develop or commercialize products before or more successfully than we do.The biotechnology industry is intensely competitive and subject to rapid and significant technological change. We face worldwide competition from majorpharmaceutical companies, specialty pharmaceutical companies and biotechnology companies with respect to our current product candidates and will facesuch competition with respect to our future product candidates. Many of our competitors have significantly greater financial, technical and human resourcesthan we do. Smaller and early-stage companies may also prove to be significant competitors, particularly through their collaborative arrangements with largeand established companies.Our competitors may obtain regulatory approval for their products more rapidly than we do or may obtain patent protection or other intellectual propertyrights that limit our ability to develop or commercialize our product candidates. Our competitors may also develop drugs that are more effective, moreconvenient, more widely accepted or less costly or have better safety profiles than our product candidates and may also be more successful in manufacturingand marketing their products than we are with respect to our product candidates.We also currently and will in the future compete with other companies in recruiting and retaining qualified personnel, establishing clinical trial sites andenrolling patients in clinical trials, as well as in acquiring technologies complementary to, or necessary for, our research and development programs.Although there are no approved therapies that specifically target the signaling pathways that our product candidates are designed to modulate or inhibit,there are numerous drugs that are currently approved to treat the same diseases or indications for which our product candidates may be useful and many ofthese currently-approved therapies act through mechanisms similar to those of our product candidates. Many of these approved drugs are well-establishedtherapies or products and are widely accepted by physicians, patients and third-party payors. Some of these drugs are branded and subject to patentprotection and others are available on a generic basis. Insurers and other third-party payors may also encourage the use of generic products or specificbranded products. We expect that if our product candidates are approved, they will be priced at a significant premium over competitive generic, includingbranded generic, products. This may make it difficult for us to differentiate our products from currently-approved therapies, which may adversely impact ourbusiness strategy. In addition, many companies are developing new therapeutics and we cannot predict if and how the applicable standards of care willchange as our product candidates progress through clinical development.41 If cabiralizumab were approved for the treatment of cancer, it could face competition from products currently in development as single agents or incombination with anti-PD-1/PD-L1 agents or other immuno-oncology agents, including Amgen Inc.’s AMG 820 anti-CSF1R antibody, SyndaxPharmaceuticals Inc.’s SNDX-6352 anti-CSF1R monoclonal antibody, Pfizer Inc.’s, or Pfizer’s, PD-0360324 CSF1 monoclonal antibody, Novartis’ BLZ945CSF1R-directed small molecule and lacnotuzumab (MCS110) CSF1 monoclonal antibody, Daiichi Sankyo’s pexidartinib (PLX3397), PLX73086 andPLX7486 small molecule tyrosine kinase inhibitors, or TKIs, Array Biopharma Inc.’s ARRY-382 CSF1R small molecule TKI or Deciphera PharmaceuticalsLLC’s DCC-3014 CSF1R small molecule TKI, each of which acts in the same pathway as cabiralizumab.If bemarituzumab were approved for the treatment of front-line gastric or GEJ cancer, it could face competition from currently-approved and marketedproducts, including 5-fluorouracil, S-1, capecitabine, doxorubicin, cisplatin, oxaliplatin, carboplatin, paclitaxel, irinotecan, and docetaxel, as well asantibodies that bind to PD-1/PD-L1, including BMS’s Opdivo monotherapy and Opdivo in combination with BMS’s Yervoy® (ipilimumab) anti-CTLA-4antibody, Merck & Co., Inc.’s Keytruda® (pembrolizumab), Merck KGaA/Pfizer’s Bavencio® (avelumab), AstraZeneca UK Limited/MedImmune, LLC’sImfinzi® (durvalumab) anti-PD-L1 antibody, BeiGene Ltd.’s tislelizumab, Astellas’s zolbetuximab and AstraZeneca UK Limited/MedImmune, LLC’stremelimumab anti-CTLA4 antibody. If FPA150 were approved for the treatment of various cancers, it could face competition from currently-approved and marketed products, including cisplatin,carboplatin, gemcitabine, doxorubicin, paclitaxel, topotecan, Avastin® (bevacizumab), Abraxane® (paclitaxel protein-bound), Xeloda® (capecitabine),Navelbine® (vinorelbine), and Halaven® (eribulin mesylate); antibodies that bind to PD-1/PD-L1, including BMS’s Opdivo monotherapy and Opdivo incombination with BMS’s Yervoy (ipilimumab) anti-CTLA-4 antibody, Merck & Co., Inc.’s Keytruda (pembrolizumab), Merck KGaA/Pfizer’s Bavencio(avelumab), Roche’s Tecentriq (atezolizumab), AstraZeneca UK Limited/MedImmune, LLC’s Imfinzi (durvalumab), and AstraZeneca UKLimited/MedImmune, LLC’s tremelimumab anti-CTLA4 antibody; Immunomedics, Inc.’s sacituzumab govitecan (IMMU-132) anti-Trop-2-SN-38 ADC;small molecule poly ADP-ribose polymerase inhibitors, including AstraZeneca UK Limited’s Lynparza® (olaparib), GlaxoSmithKline plc/Tesaro, Inc.’sZejula® (niraparib), Clovis Oncology, Inc.’s Rubraca® (rucaparib), Pfizer’s talazoparib and AbbVie Inc.’s veliparib; and other product candidates that are inor may enter clinical development, such as ImmunoGen, Inc.’s mirvetuximab soravtansine (IMGN853) ADC that targets folate receptor alpha.42 We believe that our ability to successfully compete will depend on, among other things: •the efficacy and safety profile of our product candidates, including relative to marketed products and product candidates undergoingdevelopment by third parties; •the time it takes for our product candidates to complete clinical development and receive marketing approval; •our and our partners’ ability to commercialize any of our product candidates that receive regulatory approval; •the price of our products, including in comparison to branded or generic competitors; •whether coverage and adequate levels of reimbursement are available under private and governmental health insurance plans, includingMedicare; •our ability to establish, maintain and protect intellectual property rights related to our product candidates; •our and our partners’ ability to manufacture commercial quantities of any of our product candidates that receive regulatory approval; and •acceptance of any of our product candidates that receive regulatory approval by physicians and other healthcare providers.Our product candidates may not achieve the level of market acceptance among physicians, patients, healthcare payors and others in the medicalcommunity necessary for commercial success.Even if our product candidates receive regulatory approval, they may not gain the level of market acceptance among physicians, patients, healthcare payorsand others in the medical community necessary for commercial success. Commercial success of our product candidates also depends on coverage of andadequate reimbursement for these product candidates by third-party payors, including government payors, which may be difficult or time-consuming toobtain, may be limited in scope and may not be available or otherwise obtained in all jurisdictions in which we may seek to market our approved productcandidates. The degree of market acceptance of any of our approved product candidates will depend on numerous factors, including: •the efficacy and safety profile of the product candidate, as demonstrated in clinical trials; •the acceptance of the product candidate as a safe and effective treatment by physicians, clinics and patients; •the timing of market introduction of both the product candidate and products competitive to such product candidate; •the clinical indications for which the product candidate is approved; •the potential and perceived advantages of the product candidate over alternative treatments, including any similar generic treatments; •the cost of treatment with the product candidate in relation to alternative treatments; •the availability of coverage and adequate reimbursement and pricing by third parties and government authorities; •the relative convenience and ease of administration of the product candidate; •the frequency and severity of adverse events caused by the product candidate; •the effectiveness of sales and marketing efforts with respect to the product candidate; and •any unfavorable publicity relating to the product candidate.If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payors and patients, we maynot generate or derive sufficient revenue from that product candidate, which could prevent us from becoming or remaining profitable.43 Even if we commercialize one or more of our product candidates, these product candidates may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices or healthcare reform initiatives, which could harm our business.The regulations that govern marketing approvals, pricing, coverage and reimbursement for new drug products vary widely from country to country. Currentand future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtainingapprovals. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins aftermarketing or product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmentalcontrol even after initial approval is granted. As a result, even if we obtain marketing approval for a product in a particular country, we may be subject toprice regulations that delay the commercial launch of such product, possibly for lengthy time periods, which could negatively impact the revenues wegenerate from the sale of such product in that particular country. Adverse pricing limitations may hinder our ability to recoup our investment in one or moreproduct candidates, even if such product candidates obtain marketing approval.Our ability to successfully commercialize any products will also depend in part on the extent to which coverage and adequate reimbursement for theseproducts and related treatments will be available from government health administration authorities, private health insurers and other organizations.Government authorities and other third-party payors, such as private health insurers and health maintenance organizations, determine which medicationsthey will cover, establish reimbursement levels for medications and attempt to control costs by limiting such coverage and reimbursement levels.Increasingly, third-party payors are requiring that pharmaceutical companies provide such third-party payors with predetermined discounts from list pricesand are challenging the prices charged for medications. We cannot be sure that coverage and reimbursement will be available for any product that wecommercialize and, if reimbursement is available, what the level of reimbursement will be. Coverage and reimbursement may impact the demand for, or theprice of, any product candidate for which we obtain marketing approval. If coverage and reimbursement for any product candidate for which we obtainmarketing approval are not available or reimbursement is available only at limited levels, we may be unable to successfully commercialize any such productcandidate.There may be significant delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the purposes forwhich the drug is approved by the FDA or any comparable foreign regulatory authority. Moreover, eligibility for coverage and reimbursement does notguarantee that a drug will be paid for in all cases or at a rate that covers our costs, including with respect to research, development, manufacture, sale anddistribution. Interim reimbursement levels for new drugs, if applicable, may also not be sufficient to cover our costs and may only be provided on a temporarybasis. Reimbursement rates may vary depending on the approved uses for the drug and the clinical setting in which it is used, may be based on reimbursementlevels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatorydiscounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presently restrict imports ofdrugs from countries where they may be sold at lower prices than in the United States. Our inability to promptly obtain coverage and profitablereimbursement rates from both government-funded and private payors for any of our approved products could have a material adverse effect on our operatingresults, our ability to raise capital needed to commercialize products and our overall financial condition.44 Enacted and future legislation may increase the difficulty and cost of commercialization of our product candidates and affect the prices we may charge forsuch product candidates.The United States and many foreign jurisdictions have enacted or proposed legislative and regulatory changes affecting the healthcare system that couldprevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any productcandidate for which we obtain marketing approval.In March 2010, Congress enacted the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010,or collectively, the Affordable Care Act, which includes measures that have significantly changed the way healthcare is financed by both governmental andprivate insurers. Some of the provisions of the Affordable Care Act have yet to be implemented, and there have been judicial and congressional challenges tocertain aspects of the Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders and other directives designed to delay theimplementation of certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by theAffordable Care Act. Concurrently, Congress has considered legislation that would repeal or repeal and replace all or part of the Affordable Care Act. WhileCongress has not passed comprehensive repeal legislation, two bills affecting the implementation of certain taxes under the Affordable Care Act have beensigned into law. The federal Tax Cuts and Jobs Act of 2017, or the Tax Act, includes a provision that became effective on January 1, 2019 and repealed thetax-based shared responsibility payment imposed by the Affordable Care Act on certain individuals who fail to maintain qualifying health coverage for all orpart of a year, which payment is commonly referred to as the “individual mandate.” On January 22, 2018, President Trump signed a continuing resolution onappropriations for fiscal year 2018 that delayed the implementation of certain Affordable Care Act-mandated fees, including the so-called “Cadillac” tax oncertain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medicaldevice excise tax on non-exempt medical devices. The Bipartisan Budget Act of 2018, or the BBA, among other things, amended the Affordable Care Act,effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” In July 2018, the Centers forMedicare & Medicaid Services, or CMS, published a final rule permitting further collections and payments to and from certain Affordable Care Act qualifiedhealth plans and health insurance issuers under the Affordable Care Act risk adjustment program in response to the outcome of federal district court litigationregarding the method CMS uses to determine this risk adjustment. On December 14, 2018, a Texas U.S. District Court Judge ruled that the Affordable CareAct is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act. While the Texas U.S. District CourtJudge, as well as the Trump administration and CMS, have stated that the ruling will have no immediate effect pending appeal of the decision, it is unclearhow this decision, subsequent appeals, and other efforts to repeal and replace the Affordable Care Act will impact our business.In addition, since the Affordable Care Act was enacted, other legislative changes have been proposed and adopted that may impact the extent to which we areable to successfully commercialize any of our product candidates that receive regulatory approval. For example, in August 2011, then-President Obamasigned into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend toCongress proposals in spending reductions. The Joint Select Committee on Deficit Reduction did not achieve a targeted deficit reduction, which triggeredthe legislation’s automatic reduction to several government programs. This includes aggregate reductions to Medicare payments to providers of, on average,two percent per fiscal year through 2027 unless Congress takes additional action. The American Taxpayer Relief Act of 2012, among other things, furtherreduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for thegovernment to recover overpayments to providers from three to five years.45 Recently, there has been increasing legislative and enforcement interest in the United States with respect to specialty drug pricing practices. Specifically,there have been several recent U.S. congressional inquiries and proposed and enacted federal legislation designed to, among other things, increasetransparency in drug pricing, reduce the cost of prescription drugs under Medicare, review the relationship between pricing and manufacturer patientprograms and reform government program reimbursement methodologies for drugs. For example, at the federal level, the Trump administration released a“Blueprint” to lower drug prices and reduce out of pocket costs of drugs that contains additional proposals to increase manufacturer competition, increase thenegotiating power of certain federal healthcare programs, incentivize manufacturers to lower the list price of their products and reduce the out of pocket costsof drug products paid by consumers. On January 31, 2019, the U.S. Department of Health and Human Services Office of Inspector General proposedmodifications to Federal Anti-Kickback Statute safe harbors which, among other things, will affect rebates paid by manufacturers to Medicare Part D plans,the purpose of which is to further reduce the cost of drug products to consumers. Although a number of these, and other proposed measures may requireauthorization through additional legislation to become effective, Congress and the Trump administration have each indicated that it will continue to seeknew legislative and/or administrative measures to control drug costs. At the state level, legislatures are increasingly passing legislation and implementingregulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictionson certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage product importation fromother countries and bulk purchasing.We expect that the healthcare reform measures that have been adopted and may be adopted in the future may result in more rigorous coverage criteria and inadditional downward pressure on the price that we receive for any approved product, which could seriously harm our future revenues. Any reduction inreimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of costcontainment measures or other healthcare reforms may prevent us from being able to generate revenue, attain or maintain profitability or commercialize ourproducts.Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn, and Matthew Bellina Right to Try Act of 2017, or the Right to TryAct, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug productsthat have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seektreatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for apharmaceutical manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act.We may become subject to product liability lawsuits, which could cause us to incur substantial liabilities and limit commercialization of any products wemay develop.We face an inherent risk of product liability exposure related to the testing of our product candidates in human clinical trials and will face an even greaterrisk if we commercially sell any products that we may develop. Product liability claims may be brought against us by patients, including those enrolled inour clinical trials, healthcare providers or others that use, administer or sell our products. If we cannot successfully defend ourselves against claims that ourproduct candidates or products that we may develop caused injuries, we could incur substantial liabilities. Regardless of merit or eventual outcome, productliability claims may result in: •decreased demand for our product candidates or any products that we may develop; •termination of clinical trials at particular sites or entire clinical trial programs; •injury to our reputation and significant negative media attention; •withdrawal of clinical trial participants from our clinical trials; •significant costs to defend the related litigation; •substantial monetary awards payable to patients, including those enrolled in our clinical trials; •loss of revenue;46 •diversion of management and scientific resources from our business operations; and •inability to commercialize any products that we may develop.We currently hold $10.0 million in clinical trial liability insurance coverage, which may not adequately cover all liabilities that we may incur. We may notbe able to maintain insurance coverage at a reasonable cost or in an amount adequate to satisfy any liability that may arise. We intend to expand our productliability insurance coverage to include the sale of commercial products if we obtain marketing approval for one or more of our product candidates, but wemay be unable to obtain product liability insurance on commercially reasonable terms for any of our products that have been approved for marketing. Largejudgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series ofclaims brought against us, particularly if judgments exceed our insurance coverage, could decrease our cash and adversely affect our business.Our relationships with healthcare providers, customers and third-party payors will be subject to applicable anti-kickback, fraud and abuse, transparency,privacy and other healthcare laws and regulations, violation of which could expose us to criminal sanctions, civil penalties, contractual damages,reputational harm, administrative burdens and diminished profits and future earnings.Healthcare providers, physicians and third-party payors will play a primary role in the recommendation and prescription of any product candidates for whichwe obtain marketing approval. Our current and future arrangements with healthcare providers, third-party payors and customers may expose us to broadlyapplicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships throughwhich we market, sell and distribute any of our products that have received marketing approval. Restrictions under applicable federal and state healthcarelaws and regulations include the following: •The federal Anti-Kickback Statute prohibits any person or entity from, among other things, knowingly and willfully soliciting, offering,receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward, or in return for, the referral of an individualfor the furnishing or arranging for the furnishing, or the purchase, lease or order, or arranging for or recommending purchase, lease or order, ofany good or service for which payment may be made under a federal healthcare program such as Medicare or Medicaid; •The federal false claims laws, including the civil Federal False Claims Act (which can be enforced by private citizens through whistleblower orqui tam actions), impose civil and criminal penalties against individuals or entities for knowingly presenting, or causing to be presented, to thefederal government claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation topay money to the federal government; •The federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, imposes criminal liability for knowingly and willfullyexecuting a scheme to defraud any healthcare benefit program, knowingly and willfully embezzling or stealing any money or other assets of ahealthcare benefit program, willfully obstructing a criminal investigation of a healthcare fraud offense or knowingly and willfully making falsestatements relating to healthcare matters; •HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, and their implementing regulations,also imposes obligations on certain healthcare providers, health plans and healthcare clearinghouses, known as covered entities, as well as theirbusiness associates that perform certain services involving the use or disclosure of individually identifiable health information, includingmandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable healthinformation; •The federal Open Payments program requires manufacturers of drugs, devices, biologics or medical supplies for which payment is availableunder Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually to CMS information relatedto “payments or other transfers of value” made to physicians (defined to include doctors, dentists, optometrists, podiatrists and chiropractors)and teaching hospitals, as well as ownership and investment interests held by such physicians and their immediate family members; and47 •Analogous state and foreign laws and regulations impose similar restrictions to those described above, such as state anti-kickback and falseclaims laws, which may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; state and foreign laws that require pharmaceutical companies to comply with thepharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government orotherwise restrict payments that may be made to healthcare providers; state and foreign laws that require drug manufacturers to reportinformation related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; state lawsthat require pharmaceutical companies to report information on the pricing of certain drugs, state and local laws that require the registration ofpharmaceutical sales representatives, and state and foreign laws that govern the privacy and security of health information in certaincircumstances, many of which differ from each other in significant ways and often are not preempted by or are in conflict with HIPAA,including the European Union, or EU, General Data Protection Regulation, or GDPR, which imposes privacy and security obligations on anyentity that collects or processes health data from individuals located in the EU and became enforceable on May 25, 2018. As well ascomplicating our compliance efforts, these laws could subject us to penalties or significant legal liability in the event that we fail to or areunable to comply. For example, significant non-compliance with the GDPR may result in the imposition of fines of up to 20 million euros or upto four percent of the annual global turnover of the responsible entity, whichever is greater.Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and regulations will involve substantial costs.It is possible that governmental authorities will conclude that our business practices do not comply with current or future statutes, regulations or case lawinterpreting applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or anyother governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines,imprisonment, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, additional reporting requirements and oversight ifwe become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, reputational harm andthe curtailment or restructuring of our operations. If any physician or other healthcare provider or entity with whom we expect to do business is found to haveviolated applicable laws, that person or entity may be subject to criminal, civil or administrative sanctions, including exclusions from government-fundedhealthcare programs.We must attract and retain highly skilled employees to succeed.We continue to grow our operations and capabilities as we advance our research and clinical activities, including the initiation of our Phase 1a/1b clinicaltrials of each of FPA150 and FPT155 in multiple cancers, the initiation of our Phase 3 FIGHT trial of bemarituzumab in gastric and GEJ cancer andadvancement of our research and preclinical programs. Our success will depend in part on our ability to manage our growth, including increases to ourheadcount, effectively. To succeed, we must continue to recruit, develop, retain, manage and motivate qualified clinical, scientific, technical, general andadministrative and management personnel while facing significant competition for experienced personnel. In January 2019, we announced that we wereimplementing a corporate restructuring, or the restructuring, to focus our resources on our clinical development and late-stage research programs. Pursuant tothe restructuring, we eliminated 41 employee positions, representing approximately 20% of our then-current headcount. The restructuring could harm ourability to attract and retain qualified personnel. The restructuring could also result in reduced morale and productivity among our remaining personnel. Ourinability or failure to successfully attract and retain qualified personnel, particularly at the management level, could adversely affect our ability to executeour business plan and harm our operating results. In particular, the loss of one or more of our executive officers could be detrimental if we cannot recruitsuitable replacements in a timely manner. The competition for qualified personnel in the pharmaceutical field is intense and we may be unable to continue toattract and retain qualified personnel necessary for the development of our business or to recruit suitable replacement personnel.48 Many of the other pharmaceutical companies with which we compete for qualified personnel have greater financial and other resources, different risk profilesand a longer history in the industry than we have. These companies may also provide more diverse opportunities and better or more chances for developmentor career advancement. Some of these characteristics may appeal more to high-quality candidates than what we offer. If we are unable to continue to attractand retain personnel, the rate at which we can discover, develop and advance current and future product candidates, and our success in doing so, will belimited and our business may be harmed.Our operations are vulnerable to interruption by fire, earthquake, power loss, telecommunications failure, terrorist activity, political and economicinstability in the countries in which we operate and other events beyond our control, which could harm our business.Our computer and other systems, or those of our partners, CROs or other service providers, may fail or be interrupted, including due to fire, earthquake orother natural disasters, hardware, software, telecommunication or electrical failures or terrorism, which could significantly disrupt or harm our business oroperations. For example, a computing system failure could result in the loss of research or preclinical or clinical data important to our discovery, research ordevelopment programs, interrupt the conduct of ongoing research or otherwise impair our ability to operate, which could result in delays in the advancementof our programs or cause us to incur costs to recover or reproduce lost data. Our facility is in a seismically-active region. We have not undertaken a systematicanalysis of the potential consequences to our business and financial results from a major earthquake, fire, power loss, terrorist activity or other disaster and donot have a recovery plan for such disasters. In addition, we do not carry sufficient insurance to compensate us for actual losses that may occur frominterruption of our business and any losses or damages incurred by us could harm our business. We maintain multiple copies of each of our protein libraries,most of which we maintain at our headquarters in South San Francisco, California. We maintain one copy of each of our protein libraries offsite in CentralCalifornia. If both facilities were impacted by the same event, we could lose all our protein libraries, which would have a material adverse effect on our abilityto discover new targets and develop any resulting product candidates.49 We significantly depend on information technology systems to operate our business, and a cyber-attack or other significant disruption or breach of ourinformation technology systems, or those of third parties on whom we may rely or with whom we share confidential information, could cause us significantfinancial, legal, regulatory, business and reputational harm.We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business. In the ordinarycourse of our business, we collect, store, process and transmit large amounts of sensitive information, including intellectual property, proprietary businessinformation, personal information and other confidential information belonging to us and to third parties. It is critical that we do so in a secure manner tomaintain the confidentiality, integrity and availability of such sensitive information. We also outsource elements of our operations, including elements of ourinformation technology infrastructure, to third-party vendors, and as a result, these vendors may or could have access to our computer networks or ourconfidential information. In addition, many of those vendors subcontract or outsource to other third parties some of their responsibilities under ouragreements with such vendors. While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches,incidents, attacks and exposures, the accessibility and distributed nature of our information technology systems, and the nature of the sensitive informationstored on these systems, make such systems particularly vulnerable to internal and external attacks, both unintentional and malicious. Potentialvulnerabilities can be exploited through inadvertent or intentional actions of our employees, third-party vendors, and business partners, or by malicious thirdparties. Attacks of this nature are increasing in their frequency, levels of persistence, sophistication and intensity and are being conducted by sophisticatedand organized groups and individuals, including organized criminal groups, “hacktivists,” nation-states and others, with a wide range of motives, includingindustrial espionage, and expertise. In addition to the extraction of sensitive information, such attacks could involve the deployment of harmful malware,ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity andavailability of such information. In addition, the prevalent use of mobile devices increases the risk of the occurrence of data security incidents.Data security incidents or other significant disruptions affecting our, our vendors’ or our business partners’ information technology systems could adverselyaffect our business operations and result in loss or misappropriation of, or unauthorized access to, use or disclosure of, or the prevention of access to, sensitiveinformation, which could cause us financial, legal, regulatory, business and reputational harm. In addition, disruptions to our information technology systemscould result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed,current or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce such data.50 There is no way of knowing with certainty whether we have experienced any data security incidents that we have not yet discovered. While we have noreason to believe this to be the case, attackers have become sophisticated with respect to concealing their access to systems, and many companies whoseinformation security systems have been attacked are not aware that they have been attacked. Any event that leads to unauthorized access, use or disclosure ofpersonal information, including personal information of our employees or patients or investigators in our clinical trials, could disrupt our business, harm ourreputation, compel us to comply with applicable federal, state or foreign breach notification laws, subject us to time-consuming, distracting and expensivelitigation, regulatory investigations and oversight or mandatory corrective action, require us to verify the correctness of certain stored information, orotherwise subject us to liability under applicable laws, regulations and our contracts with third parties, including those that require us to protect the privacyand security of personal information. This could cause us to incur significant costs and expose us to significant legal and financial liability and reputationalharm. In addition, if there is any failure or perceived failure by us or our vendors or business partners to comply with our or their privacy, confidentiality ordata security-related legal or other obligations to third parties, or if there are any security incidents or other inappropriate access events that result in theunauthorized access, release or transfer of sensitive information, including personally identifiable information, we may be the subject of governmentalinvestigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others, third parties, including clinicaltrial sites, regulators or current and potential business partners, may lose trust in us, and we could be subject to claims by third parties that we have breachedour privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects. Moreover, data security incidentsand other unauthorized access can be difficult to detect, and any delay in identifying such incidents or unauthorized access may lead to increased harm of thetypes described above. While we have implemented security measures intended to protect our information technology systems and infrastructure, there canbe no assurance that such measures have prevented or will prevent service interruptions or security incidents.Our employees, consultants, collaborators and other third parties may engage in misconduct or other improper activities, including insider trading andnon-compliance with regulatory standards and requirements.We are exposed to the risk that our employees, consultants, collaborators and other third parties with whom we interact may engage in fraudulent or illegalactivity. Misconduct by these parties could include intentional, reckless or negligent conduct that violates United States and international laws andregulations, including laws requiring the true, complete and accurate reporting of financial and other information or data, drug manufacturing standards andhealthcare fraud and abuse laws and regulations. In particular, sales, marketing and business arrangements in the healthcare industry, including the sale ofpharmaceutical products, are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusivepractices. Such laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customerincentive programs and other business arrangements. It is not always possible to detect, identify and deter misconduct by our employees or third parties, andthe precautions we take to detect and prevent this activity may not be effective to control risks or losses or protect us from governmental investigations orother actions or lawsuits stemming from a failure to comply with such laws or regulations. If any such actions are instituted against us and we are notsuccessful in defending ourselves or asserting our rights, such actions could result in the imposition of significant monetary fines or other sanctions,including the imposition of civil, criminal and administrative penalties, damages, imprisonment, possible exclusion from participation in Medicare,Medicaid and other federal healthcare programs, additional reporting obligations and oversight if we become subject to a corporate integrity agreement orother agreement to resolve allegations of non-compliance with these laws, contractual damages, reputational harm, diminished profits and future earnings andcurtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations. Whether or not we aresuccessful in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of managementin defending ourselves against any such actions or investigations.51 Risks Related to Our Dependence on Third PartiesBMS has exclusive global rights to develop and commercialize cabiralizumab, and Zai Lab has exclusive rights to develop and commercializebemarituzumab in Greater China. BMS or Zai Lab’s failure to timely develop or commercialize cabiralizumab or bemarituzumab, respectively, would havea material adverse effect on our business and operating results.We granted BMS an exclusive global license to develop and commercialize cabiralizumab, subject to certain rights that we retained. Additionally, wegranted Zai Lab an exclusive license to develop and commercialize bemarituzumab in Greater China, subject to certain rights that we retained in thatterritory. Either or both of our cabiralizumab collaboration with BMS and our bemarituzumab collaboration with Zai Lab may not be successful for variousreasons, including the following: •cabiralizumab or bemarituzumab may fail to demonstrate in clinical trials sufficient efficacy with an acceptable safety profile to supportregulatory approval; •BMS may be unable to manufacture sufficient quantities of cabiralizumab or Zai Lab may not be able to obtain from us or manufacture, asapplicable, bemarituzumab, in a timely or cost-effective manner to support clinical development and potential commercialization; •BMS or Zai Lab may be unable to obtain regulatory approval to commercialize cabiralizumab or bemarituzumab, respectively, even ifpreclinical and clinical testing is successful; •BMS or Zai Lab may not succeed in obtaining sufficient reimbursement for cabiralizumab or bemarituzumab, respectively, if approved; and •existing or future products or technologies developed by competitors may be safer, more effective, more conveniently delivered to patients orotherwise better accepted than cabiralizumab or bemarituzumab.In addition, we could be adversely affected by: •BMS’s or Zai Lab’s failure to timely perform their respective obligations under our collaboration agreements; •BMS’s or Zai Lab’s failure to timely or fully develop or effectively commercialize cabiralizumab or bemarituzumab, respectively; or •a material contractual dispute with BMS or Zai Lab.The occurrence of any of the foregoing could adversely impact the likelihood and timing of any milestone payments we are eligible to receive under ourcollaboration agreements with BMS and Zai Lab and could have a material adverse effect on our business, results of operations and prospects and wouldlikely cause our stock price to decline. In addition, reimbursement for our research and development expenses and other payments we may receive from BMSor Zai Lab may fluctuate from period to period, which may adversely affect our stock price.Each of BMS and Zai Lab has the right to terminate its collaboration agreement with us without cause as well as upon the existence of certain conditions and,in some cases, BMS or Zai Lab may terminate on short notice. BMS or Zai Lab could each also pursue alternative potentially competitive products,therapeutic approaches or technologies as a means of developing treatments for the diseases targeted by cabiralizumab or bemarituzumab, respectively,during the course of our collaborations.52 We may not succeed in establishing and maintaining additional development collaborations, which could adversely affect our ability to develop andcommercialize product candidates.A part of our strategy is to enter into product development collaborations, including collaborations with major biotechnology or pharmaceutical companies.We face significant competition in seeking appropriate development partners for additional product development collaborations and the negotiation processis time-consuming and complex. Moreover, we may not succeed in our efforts to establish a development collaboration or other alternative arrangement forany of our other existing or future product candidates and programs because our research and development pipeline may be insufficient, development of ourproduct candidates and programs may be deemed to be too early in development for collaborative efforts or third parties may not view our product candidatesas having the requisite potential to demonstrate safety and efficacy or otherwise become a marketable product if approved. Even if we are successful in ourefforts to establish new development collaborations, the terms that we agree upon may not be favorable to us and we may not be able to maintain suchdevelopment collaborations if, for example, development or approval of the applicable product candidate is delayed or sales of such product candidate, onceapproved, are disappointing. Any delay in entering into new development collaboration agreements related to our product candidates could delay thedevelopment and commercialization of such product candidates and reduce their competitiveness if they reach the market.Moreover, if we fail to establish and maintain additional development collaborations related to our product candidates: •the development of certain of our current or future product candidates may be delayed or terminated; •our cash expenditures related to development of certain of our current or future product candidates would increase significantly and we mayneed to seek additional financing; •we may be required to hire additional employees for which we have not budgeted, or otherwise develop expertise in areas in which we mayhave limited experience, such as sales and marketing; and •we will bear all the risk related to the development of any such product candidates.We rely on third-party CROs to conduct our clinical trials, and the unsatisfactory performance by such CROs may harm our business.We rely on CROs to perform most of the activities related to the conduct of our clinical trials, including site identification, screening, preparation, training,initiation and monitoring, document preparation and coordination, program management and data management. However, we do not directly control theconduct, timing, expense or quality of the performance of these activities. The performance of our CROs will impact the quality and validity of our clinicaltrial results, which we rely on for business planning purposes and include in submissions to regulatory authorities. Although we contract with CROs toconduct most clinical trial-related activities, we remain responsible for ensuring that each of our clinical trials is conducted in accordance with the applicableprotocol and legal and regulatory requirements. Our reliance on CROs does not relieve us of our legal and regulatory responsibilities with respect to ourclinical trials.We and our CROs are required to comply with current GCP, which are regulations, standards and guidelines enforced by the FDA, the Competent Authoritiesof the Member States of the European Economic Area and comparable foreign regulatory authorities, for all of our product candidates in clinicaldevelopment. Regulatory authorities enforce GCP requirements through periodic inspections of clinical trial sponsors, principal investigators and clinicaltrial sites. If we or any of our CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and theFDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannotensure that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials are being conducted inaccordance with GCP requirements. In addition, we must conduct our clinical trials using drug product produced and developed in accordance with GMP andGLP requirements. Our failure, or the failure of our clinical trial sites or CROs or CMOs, to comply with applicable GCP, GMP and GLP may require us torepeat preclinical studies and clinical trials, which would delay the regulatory approval process.53 Our CROs are not our employees. Except for remedies available to us in connection with our agreements with such CROs, we cannot control whether theydevote sufficient time and resources to our ongoing clinical, nonclinical and preclinical programs. If our CROs do not successfully carry out their contractualduties or obligations or meet expected deadlines or if the quality or accuracy of the clinical data they obtain is compromised due to their failure to adhere toour clinical protocols or regulatory requirements, or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able toobtain regulatory approval for or successfully commercialize our product candidates. In such a case, our results of operations and the commercial prospectsfor our product candidates would be harmed, our costs could increase and our ability to generate revenues could be delayed or significantly limited.Risks Related to Intellectual PropertyIf we are unable to obtain, maintain or protect intellectual property rights, we may not be able to compete effectively in our market.Our success depends in significant part on our ability and the ability of our licensors and collaborators to obtain, maintain and defend patents and otherintellectual property rights and to operate without infringing the intellectual property rights of others. We have filed numerous patent applications both inthe United States and in foreign jurisdictions to obtain patent rights to inventions we have discovered. We have also licensed patent and other intellectualproperty rights to and from our partners and other third parties. Pursuant to some of these licenses, we have the right to prepare, file and prosecute patentapplications and maintain and enforce the patents that are the subject of these licenses, whereas our partners or other third parties have such rights under otherlicenses.In some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications or to maintain the patents coveringtechnology that we license to or from third parties, including our collaborators, and we may have to rely on such third parties to fulfill these responsibilities.Consequently, these patents and applications may not be prosecuted and enforced in a manner consistent with the best interests of our business. If our currentor future licensors, licensees or collaborators fail to establish, maintain or protect such patents and other intellectual property rights, such rights may bereduced or eliminated. If our licensors, licensees or collaborators are not fully cooperative or disagree with us as to the strategy for prosecution, maintenanceor enforcement of any patent rights, such patent rights could be compromised.The patent prosecution process is expensive and time-consuming. We and our current or future licensors, licensees or collaborators may not be able toprepare, file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. It is also possible that we or our licensors,licensees or collaborators will fail to file patent applications covering inventions made in the course of development and commercialization activities beforea competitor or other third party files a patent application covering or publishes information disclosing a similar, independently-developed invention. Suchcompetitor’s or third party’s patent application may hinder our or our licensors’, licensees’ or collaborators’ ability to obtain patent protection for theseinventions or may limit the scope of patent protection we or our licensors, licensees or collaborators may obtain.The patent position of biotechnology and pharmaceutical companies generally is uncertain, involves complex legal and factual questions and is the subjectof much litigation. As a result, the scope, validity, enforceability and commercial value of our and our current or future licensors’, licensees’ or collaborators’patent rights, as well as whether any patents will ever be issued based on applications claiming such patent rights, are uncertain. Our and our current or futurelicensors’, licensees’ or collaborators’ pending and future patent applications may not result in issued patents that protect our technology or products, inwhole or in part, or that effectively exclude others from commercializing similar or otherwise competitive technologies and products. The patent prosecutionprocess may require us or our licensors, licensees or collaborators to narrow the scope of the claims of our pending and future patent applications, which maylimit the scope of protection if patents issue from such applications. Our and our licensors’, licensees’ or collaborators’ rights in the technology claimed inpatent applications cannot be enforced against third parties using such technology unless and until a patent issues from such applications, and then only tothe extent the issued claims effectively cover such technology.54 Furthermore, because the amount of time required for the development, testing and regulatory review of new product candidates is lengthy, patents protectingsuch candidates might expire before or shortly after such candidates are approved for commercialization. As a result, our owned and licensed patent portfoliosmay not provide us with adequate protection against third parties seeking to commercialize products similar or identical to ours. We expect to requestextensions of patent terms to the extent available in countries where we obtain issued patents. In the United States, the Drug Price Competition and PatentTerm Restoration Act of 1984 permits, in certain cases, a patent term extension of up to five years beyond the expiration of the patent. However, there are noassurances that the FDA or any comparable foreign regulatory authority will grant such extensions, in whole or in part. If we fail to obtain patent termextensions for any reason, our competitors may launch their products earlier than might otherwise be anticipated.We may not be able to protect our intellectual property rights throughout the world.Filing, prosecuting, enforcing and defending patents covering our product candidates in all countries throughout the world would be prohibitivelyexpensive, and our or our licensors’ or collaborators’ intellectual property rights in some countries outside the United States may be less extensive than thosein the United States. Moreover, the requirements for patentability in certain foreign countries, particularly developing countries, differ materially from thoseof the United States and such requirements also vary among foreign countries. For example, compared to the United States, China’s patentabilityrequirements are more stringent and may limit the scope of a patent’s claims solely to the specific examples described in the patent. Therefore, it may be moredifficult to obtain patent protection in certain countries relative to others.The laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently,we and our licensors or collaborators may not be able to prevent third parties from using our and our licensors’ or collaborators’ inventions in certaincountries outside the United States. In jurisdictions where we have not obtained patent protection, competitors may use our and our licensors’ orcollaborators’ technologies to develop their own products. Competitors may also export infringing products to territories where we and our licensors orcollaborators have patent protection but enforcement is not as strong or effective as in the United States. These products may compete with our productcandidates and our and our licensors’ or collaborators’ patents or other intellectual property rights may not be sufficient to prevent them from competing.Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systemsin certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property rights, particularlythose relating to biopharmaceuticals, which could make it difficult for us and our licensors or collaborators to stop the infringement of our and our licensors’or collaborators’ patents or marketing of competing products in violation of our and our licensors’ or collaborators’ proprietary rights generally. Proceedingsto enforce our and our licensors’ or collaborators’ patent rights in foreign jurisdictions could result in substantial costs and divert our and our licensors’ orcollaborators’ efforts and attention from other aspects of our business and could provoke third parties to assert counterclaims against us or our licensors orcollaborators, which could put our and our licensors’ or collaborators’ patents at risk of being invalidated or interpreted narrowly. We or our licensors orcollaborators may not prevail in any lawsuits that we or our licensors or collaborators initiate and, even if we or our licensors or collaborators prevail, thedamages or other remedies awarded, if any, may not be commercially meaningful, particularly in light of any expenses incurred in connection with theinitiation and conduct of such lawsuits.Biosimilar drug manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors’ or collaborators’ foreignpatents, requiring us or our licensors or collaborators to engage in complex, lengthy and costly litigation or other proceedings outside of the United States.Biosimilar drug manufacturers may develop, seek approval for and launch biosimilar versions of our products. India, certain countries in Europe and certaindeveloping countries, including China, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. Inthose countries, we and our licensors or collaborators may have limited remedies if compelled to grant a license to a third party, which could materiallydiminish the value of the applicable patents and limit our potential revenue opportunities. Accordingly, we may be unable to derive a significant commercialadvantage from our and our licensors’ or collaborators’ intellectual property rights or our enforcement of those rights.55 Changes to patent laws could diminish the value of patents in general, thereby impairing our ability to protect our rights in our product candidates.The ability of a party to obtain and enforce patents in the biopharmaceutical industry is inherently uncertain, due in part to ongoing changes to applicablepatent laws. Depending on decisions by Congress, the federal courts, and the U.S. Patent and Trademark Office, or USPTO, the laws and regulationsgoverning patents could change in unpredictable ways and could weaken our and our licensors’ or collaborators’ ability to obtain new patents or to enforceexisting or future patents.For example, several of the Supreme Court’s rulings in patent cases in recent years have either narrowed the scope of patent protection available under certaincircumstances or weakened the rights of patent owners in certain situations. Therefore, there is increased uncertainty with regard to our and our licensors’ orcollaborators’ ability to obtain patents in the future, as well as uncertainty with respect to the value that any of our patents may have once they have issued.Additionally, significant changes to the patent laws under the Leahy-Smith America Invents Act of 2011, or the Leahy-Smith Act, have affected how patentapplications are prosecuted and challenged in the U.S. Those changes include implementation of a “first-to-file” system, effective in 2013, for determiningentitlement to inventions claimed by more than one party, as well as creation of new administrative proceedings for challenging issued patents. As such, thereis increased uncertainty with respect to both outcome and costs associated with the prosecution of patent applications and the enforcement or defense ofissued patents controlled by us or our licensors or collaborators, which could have a material adverse effect on our business and financial condition.Obtaining and maintaining patent protection requires compliance with various procedural, document submission, fee payment and other requirementsimposed by governmental patent agencies, and our patent protection could be reduced or eliminated if we fail to comply with these requirements.Patent holders are required to pay periodic maintenance and annuity fees to the USPTO and foreign patent agencies over the lifetime of any issued patent.The USPTO and various foreign patent agencies also require compliance with a number of procedural, documentary, fee payment and other similarrequirements during the patent application and prosecution process. Non-compliance events that could result in abandonment or lapse of a patent or patentapplication include failure to respond to official communications within prescribed time limits, non-payment of fees and failure to properly legalize andsubmit formal documents. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with theapplicable rules, there are situations in which non-compliance can result in irrevocable abandonment or lapse of the patent or patent application, resulting inpartial or complete loss of patent rights in the relevant jurisdiction. If we or our licensors or collaborators fail to maintain the patents and patent applicationscovering our product candidates, our competitors might be able to enter the market and compete with such product candidates, which would have a materialadverse effect on our business.56 We may need to protect or enforce our intellectual property through litigation or other proceedings, which could be expensive, time-consuming andunsuccessful and have a material adverse effect on the success of our business.Third parties may infringe our or our licensors’ or collaborators’ patents or misappropriate or otherwise violate our or our licensors’ or collaborators’intellectual property rights. In the future, we or our licensors or collaborators may initiate legal proceedings to enforce or defend our or our licensors’ orcollaborators’ intellectual property rights or to protect our or our licensors’ or collaborators’ trade secrets. The outcome of such proceedings may determine oralter the validity or scope of intellectual property rights we own or control. Also, third parties may initiate legal proceedings, including litigation oradministrative proceedings, against us or our licensors or collaborators to challenge the validity or scope of intellectual property rights we own or control.These proceedings can be expensive and time-consuming and many of our or our licensors’ or collaborators’ adversaries in these proceedings may have theability to dedicate substantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can. Accordingly, despite our orour licensors’ or collaborators’ efforts and the legitimacy of our or our licensors’ or collaborators’ arguments and positions in these proceedings, we or ourlicensors or collaborators may not be able to prevent third parties from infringing or misappropriating intellectual property rights we or our licensors orcollaborators own or control, particularly in countries where the laws may not protect those rights as fully as in the United States. Litigation or administrativeproceedings could result in substantial costs and diversion of management resources, which could harm our business and financial results. In addition, in apatent infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to impose monetarydamages or enjoin the infringing party from using the technology at issue on the grounds that our or our licensors’ or collaborators’ patents do not cover thetechnology in question. Any legal proceeding involving one or more of our or our licensors’ or collaborators’ patents could put such patents at risk of beinginvalidated, held unenforceable or interpreted narrowly.Derivation or interference proceedings in the United States or similar proceedings in other jurisdictions may be necessary to determine the priority ofinventions with respect to our or our licensors’ or collaborators’ patents or patent applications. An unfavorable outcome in these proceedings could require usor our licensors or collaborators to cease using the technology covered by the applicable patents or patent applications and commercializing our productcandidates or to attempt to license rights to such technology from the prevailing party. Our business could be harmed if the prevailing party does not offer usor our licensors or collaborators a license or offers a license on terms that are not commercially reasonable or are otherwise unfavorable to us. Even if we orour licensors or collaborators obtain a license, it may be non-exclusive, allowing our competitors to gain access to the same technologies licensed to us or ourlicensors or collaborators. In addition, if the breadth or strength of protection provided by our or our licensors’ or collaborators’ patents and patentapplications is threatened, potential collaborators may be dissuaded from partnering with us with respect to the development or commercialization of ouraffected current or future product candidates. Even if we prevail in such a proceeding, such a proceeding may cause us to incur substantial costs and distractour management and other employees from our business and operations.Furthermore, because intellectual property litigation and certain other legal proceedings require discovery, which may in some cases be substantial, there is arisk that our confidential information could be compromised by disclosure during the course of such proceedings. There could also be public announcementsof the results of hearings, motions or other interim rulings or developments in the proceedings, and if securities analysts or investors perceive these results tobe negative, the price of shares of our common stock may be materially adversely affected.57 If we breach the agreements under which third parties have licensed intellectual property rights to us, we could lose the ability to use certain of ourtechnologies or continue the development and commercialization of our product candidates.Our commercial success depends upon our ability, and the ability of our licensors and collaborators, to discover and validate protein therapeutic targets andto identify, test, develop, manufacture, market and sell product candidates without infringing the proprietary rights of third parties. Third parties currently,and may in the future, hold intellectual property rights, including patent rights, that are important or necessary for the development or commercialization ofour product candidates. As a result, we are a party to a number of licenses that are important to our business and expect to enter into additional licenses in thefuture. For example, we have entered into non-exclusive licenses with third parties, including BioWa, Inc. and Lonza Sales AG, to use their proprietaryprotein expression and cell line technologies, which are necessary to produce our product candidates, and non-exclusive licenses with each of the NationalResearch Council of Canada and the Board of Trustees of the Leland Stanford Junior University to use materials and technologies that we use in theproduction of our protein library. If we fail to comply with the obligations under these license agreements, including payment and diligence terms, ourlicensors may have the right to terminate these agreements, in which event we may not be able to develop, manufacture, market or sell any product candidatethat, or the development or manufacturing of which, is covered by these agreements and may face other contractual penalties. Such an occurrence couldmaterially adversely affect the value of any product candidate being developed using technology licensed under any such agreement. Termination of, orreduction or elimination of our rights under, these agreements may require us to negotiate new or reinstated agreements, which may not be available to us onequally favorable or otherwise commercially reasonable terms, or at all, or cause us to lose our rights we had under the original agreements, including ourrights to intellectual property or technology important to our development programs.Third parties may initiate legal proceedings against us alleging that we infringe their intellectual property rights or we may initiate legal proceedingsagainst third parties to challenge the validity or scope of intellectual property rights controlled by such third parties. The outcome of any of theseproceedings would be uncertain and could have a material adverse effect on the success of our business.Third parties may initiate legal proceedings against us or our licensors or collaborators alleging that we or our licensors or collaborators infringe theintellectual property rights controlled by these third parties, or we or our licensors or collaborators may initiate legal proceedings against third parties tochallenge the validity or scope of intellectual property rights controlled by these third parties, including in oppositions, interferences, reexaminations, interpartes reviews, post-grant reviews or derivation proceedings in the United States or comparable proceedings in other jurisdictions. These proceedings can beexpensive and time-consuming and many of our or our licensors’ or collaborators’ adversaries in these proceedings may have the ability to dedicatesubstantially greater resources to prosecuting these legal actions than we or our licensors or collaborators can.An unfavorable outcome in any of these proceedings could require us or our licensors or collaborators to cease using the relevant technology or developingor commercializing our product candidates, or to attempt to license any necessary rights to such technology from the prevailing party. Our business could beharmed if the prevailing party does not offer us or our licensors or collaborators a license, or otherwise offers a license on terms that are not commerciallyreasonable or are otherwise unfavorable to us. Even if we or our licensors or collaborators obtain a license, it may be non-exclusive, thereby giving ourcompetitors access to the same technologies licensed to us or our licensors or collaborators. In addition, we could be found liable for monetary damages if weare found to have infringed a patent, including treble damages and attorneys’ fees if such infringement was willful. A finding of infringement could preventus from commercializing our product candidates or force us to cease some of our business operations, which could materially harm our business.Furthermore, because of intellectual property litigation and certain other legal proceedings require discovery, which may in some cases be substantial, thereis a risk that our confidential information could be compromised by disclosure during the course of such proceedings involving third party intellectualproperty rights. There could also be public announcements of the results of hearings, motions or other interim rulings or developments in the proceedings,and if securities analysts or investors perceive these results to be negative, the price of shares of our common stock may be materially adversely affected.58 We may be subject to claims by third parties asserting that we or our employees have misappropriated their intellectual property or claiming ownership ofwhat we regard as our own intellectual property.Many of our employees, including members of our senior management, were previously employed at universities or at other biotechnology or pharmaceuticalcompanies, including our competitors or potential competitors, and executed proprietary rights, non-disclosure and non-competition agreements inconnection with such previous employment. Although we work to ensure that our employees do not use the proprietary information or know-how of others intheir work for us, including through written contractual obligations, we may be subject to claims that we or our employees have used or disclosedconfidential information or intellectual property, including trade secrets or other proprietary information, of a former employer of any such employee.Litigation may be necessary to defend against these claims.If we are unable to successfully defend against any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights orpersonnel. Such intellectual property rights could be determined to be owned by a third party, and we could be required to obtain a license from such thirdparty to commercialize our technology or products. Such a license may not be available to us at all, may not be available to us on commercially reasonableterms or may include obligations that are otherwise unfavorable for us. Even if we successfully defend against such claims, litigation could result insubstantial costs and distract management from our day-to-day operations.Our inability to protect our confidential information and trade secrets would harm our business and competitive position.In addition to seeking patents covering our technology and products, we also rely on trade secrets, including unpatented know-how, technology and otherproprietary information, to maintain our competitive position. We seek to protect these trade secrets, in part, by entering into confidentiality agreements withparties who have access to them, including our employees, corporate collaborators, scientific collaborators, contract manufacturers, advisors and other thirdparties. We also enter into confidentiality and intellectual property, including patent, assignment agreements with our employees and consultants. Despitethese efforts, any of these parties, including our current or former employees or consultants and those of our service providers or collaborators, may breach theapplicable agreements and disclose our confidential information, including our trade secrets, and we may not be able to obtain adequate remedies for anysuch breach. Additionally, bringing a claim against a party for illegally disclosing or misappropriating a trade secret is difficult, expensive and time-consuming, the outcome of such a claim is unpredictable and any such litigation involving our trade secrets puts us at significant risk that such trade secretswill be publicly disclosed, thereby significantly reducing or eliminating their value and potentially increasing competition and otherwise harming ourbusiness. Further, some courts both within and outside the United States may be less willing or unwilling to protect trade secrets. If a competitor lawfullyobtained or independently developed any of our trade secrets, we would have no right to prevent such competitor from using any such trade secret tocompete with us, which could harm our competitive position.Risks Related to Our Financial Position and Capital NeedsWe expect to incur net losses for the foreseeable future.We are a clinical-stage biotechnology company with a limited operating history. Investment in biopharmaceutical product development is highlyspeculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrateadequate effect with an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercialsale, have not generated any revenue from product sales to date and continue to incur significant research and development and other expenses related to ourongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception in 2001, with the exception of the fiscalyear ended December 31, 2015, due primarily to the $350.0 million up-front payment we received from BMS under our license and collaboration agreementfor cabiralizumab, and the fiscal year ended December 31, 2011, due primarily to an upfront payment we received from a collaboration partner. For the yearended December 31, 2018, we reported a net loss of $140.4 million.59 Although we may from time to time report profitable results, we expect to continue to incur significant expenses and increasing operating losses for theforeseeable future. The net losses we incur may fluctuate significantly from quarter to quarter. We expect our operating expenses to increase as we advanceour research and development of, and seek regulatory approvals for, our product candidates. We may encounter unforeseen expenses, difficulties,complications, delays and other unknown circumstances that may adversely affect our business. The size of our future net losses will depend, in part, on therate of future growth of our expenses and our ability to generate revenues. Our prior losses and expected future losses have had and will continue to have anadverse effect on our stockholders’ equity and working capital.60 We currently have no source of product revenue and may never become consistently profitable.To date, we have not generated any revenue from commercialization of our product candidates. Our ability to generate product revenue and ultimatelybecome profitable depends upon our ability, alone or with our partners, to successfully commercialize products, including our current product candidates andother product candidates that we may develop, in-license or acquire in the future. We do not anticipate that we will generate revenue from the sale of productsfor the foreseeable future. Our ability to generate future product revenue from our current or future product candidates also depends on additional factors,including our or our partners’ ability to: •successfully complete research and clinical development of current and future product candidates; •establish and maintain supply and manufacturing relationships with third parties to ensure adequate, timely and compliant manufacturing ofbulk drug substances and drug products to maintain our or our partners’ supply of such bulk drug substances and drug products; •launch and commercialize any product candidates for which we obtain marketing approval, and if we launch independently or with certainpartners, successfully establish a sales force and marketing and distribution infrastructure; •obtain coverage and adequate product reimbursement from third-party payors, including government payors; •successfully and timely develop, validate and obtain any necessary regulatory approvals for companion diagnostics to any of our approvedproduct candidates; •achieve market acceptance for any of our or our partners’ approved products; •acquire rights to and otherwise establish, maintain and protect intellectual property rights necessary to develop and commercialize our productcandidates; and •attract, hire and retain qualified personnel.In addition, because of the numerous risks and uncertainties generally associated with development of pharmaceutical products, including that they may notadvance through clinical development or achieve the endpoints of applicable clinical trials, we are unable to predict the timing or amount of expensesassociated with development of our product candidates, or if or when we will achieve or maintain profitability. In addition, our expenses could increasebeyond our current expectations if we decide to or are required by the FDA or any comparable foreign regulatory authority to perform studies or trials inaddition to those that we currently anticipate. Even if we successfully complete the development and regulatory processes described above, we expect thatwe will incur significant costs in connection with launching and commercializing our products.Even if we generate revenue from the sale of any of our products that may be approved, we may not become profitable and may need to obtain additionalfunding to continue operations. If we fail to become profitable or do not sustain profitability on a continuing basis, then we may be unable to continue ouroperations at planned levels and be forced to reduce our operations.61 We will require additional capital to finance our operations, which may not be available to us on acceptable terms or at all. As a result, we may notcomplete the development and commercialization of our current product candidates or develop new product candidates.As a research and development company, our operations have consumed substantial amounts of cash since inception. We have sufficient cash and cashequivalents to fund our projected operating expenses and capital expenditure requirements for at least the next 12 months and, as a result of our restructuringand other cost control measures, we expect our expenses to decrease in the short term. However, we expect our research and development expenses willincrease substantially in connection with our ongoing activities, particularly as we advance our product candidates further into clinical development,advance additional product candidates into clinical trials and increase the number and size of our clinical trials. In addition, circumstances may cause us toconsume capital more rapidly than we currently anticipate. For example, as we move our product candidates through preclinical studies and into clinicaldevelopment, we may observe adverse results that require us or one of our collaboration partners to terminate the program for a product candidate.Alternatively, we may be required to conduct additional research or development activities or studies for a product candidate or substantially redesign aproduct candidate, each of which could lengthen the development process and increase our development costs for such product candidate. If we choose toinitiate additional clinical trials for certain product candidates, we may need to raise additional funds or otherwise obtain funding through productcollaborations beyond the collaborations we currently have in place. In any event, we will require additional capital to obtain regulatory approval for, and tocommercialize, our current and future product candidates.If we need to secure additional financing, fundraising efforts may divert our management from our day-to-day activities, which may adversely affect ourability to develop and commercialize current and future product candidates. In addition, we cannot guarantee that future financing will be available insufficient amounts or on terms acceptable to us, if at all. If we do not raise additional capital when required or on acceptable terms, we may need to: •significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates or ceaseoperations altogether; •seek collaborations for research and development programs at an earlier stage than we would otherwise desire or on terms less favorable thanmight otherwise be available; or •relinquish or license to third parties on unfavorable terms our rights to technologies or product candidates that we otherwise would seek todevelop or commercialize ourselves.If we need to conduct additional fundraising activities and we do not raise additional capital in sufficient amounts or on terms acceptable to us, we may berequired to halt or delay our ongoing development efforts and may be prevented from pursuing further development and commercialization efforts, whichcould have a material adverse effect on our business, operating results and prospects.The time through which our financial resources will adequately support our operations could vary as a result of numerous factors, including factors discussedelsewhere in this “Risk Factors” section. Our future funding requirements, both short- and long-term, will depend on many factors, including: •the initiation, progress, timing, costs and results of preclinical and clinical studies for our current product candidates and any future productcandidates; •the outcome, timing and cost of seeking and obtaining regulatory approvals from the FDA and comparable foreign regulatory authorities,including the potential that such authorities may require us to perform more studies than those that we currently expect; •the cost to establish, maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of anypayments we may be required to make, or that we may receive, in connection with licensing, preparing, filing, prosecuting, maintaining,defending and enforcing any of our patents or other intellectual property rights; •the effect of competing technological and market developments; •market acceptance of any of our product candidates that may receive regulatory approval;62 •the costs of acquiring, licensing or investing in additional businesses, products, product candidates and technologies; •the cost and timing of selecting, auditing and validating a manufacturing site for commercial-scale manufacturing; and •the cost of establishing sales, marketing and distribution capabilities for any product candidates for which we may receive regulatory approvaland that we choose to commercialize ourselves or with our collaboration partners.If a lack of available capital means that we cannot expand our operations or otherwise capitalize on our business opportunities, our business, financialcondition and results of operations could be materially adversely affected.Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our technologies.Until we generate sufficient product revenue, if ever, we expect to finance our future cash needs through public or private equity or debt offerings. Additionalcapital may not be available on reasonable terms, if at all. Raising additional funds through the issuance of additional debt or equity securities could diluteour existing stockholders or increase fixed payment obligations. Furthermore, these securities may have rights senior to those of our common stock and couldcontain covenants that restrict our operations and potentially impair our competitiveness, including limitations on our ability to incur additional debt,limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability toconduct our business. Any of these events could significantly harm our business, financial condition and prospects.Comprehensive tax reform legislation could adversely affect our business and financial condition.On December 22, 2017, the Tax Act was signed into law. The Tax Act, among other things, contains significant changes to corporate taxation, including (i)reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, (ii) limitation of the tax deduction for interest expense to 30% ofadjusted earnings (except for certain small businesses), (iii) limitation of the deduction for net operating losses to 80% of current year taxable income inrespect of net operating losses generated during or after 2018 and elimination of net operating loss carrybacks, (iv) one-time taxation of offshore earnings atreduced rates regardless of whether they are repatriated, (v) immediate deductions for certain new investments instead of deductions for depreciation expenseover time, and (vi) modifying or repealing many business deductions and credits, including reducing the Orphan Drug Credit from 50% to 25% of clinicalcosts incurred in the United States. Any federal net operating loss incurred in 2018 and in future years may now be carried forward indefinitely pursuant tothe Tax Act. It is uncertain if and to what extent various states will enact legislation to conform to the Tax Act. We continue to examine the impact the TaxAct may have on our business. 63 Risks Related to the Ownership of Our Common StockThe market price of our stock is volatile.The trading price of our common stock has been and is likely to continue to be volatile. Since shares of our common stock were sold in our initial publicoffering in September 2013, our closing stock price as reported on The Nasdaq Global Market and The Nasdaq Global Select Market has ranged from $8.12 to$60.89 through February 25, 2019. The following factors, in addition to other risk factors described in this “Risk Factors” section and elsewhere in thisAnnual Report on Form 10-K, may have a significant impact on the market price of our common stock: •results or status of or plans for clinical trials of our product candidates or those of our competitors, as well as interpretation and perception ofsuch results, status or plans by third parties; •announcements by us, our partners or our competitors of significant acquisitions, strategic collaborations, joint ventures, collaborations orcapital commitments; •success or failure of products or technologies that compete or may compete with our product candidates and technologies; •regulatory actions with respect to our product candidates or our competitors’ products; •actual or anticipated changes in our or our partners’ growth rates relative to our competitors; •failure of our partners to effectively execute or changes in our partners’ strategies with respect to our product candidates or collaborations; •regulatory or legal developments in the United States and other countries; •developments or disputes concerning our patent applications, issued patents or other proprietary rights; •our dependence on third parties, including CMOs, CROs and collaboration partners, including those we may engage to develop and provide uswith companion diagnostic products; •recruitment or departure of key personnel; •level of expenses related to any of our product candidates or clinical development programs; •results of our efforts to in-license or acquire additional product candidates or products; •actual or anticipated changes in estimates as to our financial results, development timelines or recommendations by securities analysts; •variations in our financial results or those of companies that are perceived to be comparable to us; •fluctuations in the valuation of companies perceived by investors to be comparable to us; •share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; •announcements or expectations of additional financing efforts; •sales of our common stock by us, our insiders or our other stockholders; •changes in the structure of healthcare payment systems; •market conditions in the pharmaceutical and biotechnology sectors; and •general economic, industry, political and market conditions.In addition, the stock market in general, and The Nasdaq Global Select Market and biotechnology companies, in particular, have experienced extreme priceand volume fluctuations that have often been unrelated or disproportionate to the operating performance of these companies. Broad market and industryfactors may negatively affect the market price of our common stock, regardless of our actual operating performance. The realization of any of the above risksor any of a broad range of other risks, including those described in this “Risk Factors” section, could have a dramatic and material adverse impact on themarket price of our common stock.64 We may be subject to securities litigation, which is expensive and could divert management attention.The market price of our common stock may be volatile, and in the past, companies that have experienced volatility in the market price of their stock havebeen subject to securities class action litigation. We may become a target of this type of litigation in the future. Securities litigation against us could result insubstantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.Our principal stockholders and management own a significant percentage of our stock and may 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 and their respective affiliates beneficially ownedapproximately 49% of our common stock. This concentration of share ownership may adversely affect the trading price of our common stock becauseinvestors often perceive disadvantages in owning stock in companies with controlling stockholders. As a result, these stockholders, acting together, couldsignificantly influence all matters requiring approval by our stockholders, including the election of directors and the approval of mergers or other businesscombination transactions. The interests of these stockholders may not always coincide with our interests or the interests of other stockholders.Sales of a substantial number of shares of our common stock in the public market by our existing stockholders could cause our stock price to fall.Sales of a substantial number of shares of our common stock in the public market or the perception that these sales might occur could depress the market priceof our common stock and could impair our ability to raise capital through the sale of additional equity securities. We are unable to predict the effect that salesmay have on the prevailing market price of our common stock.Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.We are subject to the periodic reporting requirements of the Securities and Exchange Act of 1934, as amended, or the Exchange Act. We designed ourdisclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulatedand communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. Webelieve that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide onlyreasonable, not absolute, assurance that the objectives of the control system are met.These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error ormistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorizedoverride of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not bedetected.Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if anacquisition would benefit our stockholders, and may prevent attempts by our stockholders to replace or remove our current management.Provisions in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could make itmore difficult or costly for a third party to acquire us, even if doing so would benefit our stockholders, and could make it more difficult to remove our currentmanagement. These provisions include: •authorizing the issuance of “blank check” preferred stock, the terms of which we may establish and shares of which we may issue withoutstockholder approval; •prohibiting cumulative voting in the election of directors, which would otherwise allow for less than a majority of stockholders to elect directorcandidates; •prohibiting stockholder action by written consent, thereby requiring all stockholder actions to be taken at a meeting of our stockholders;65 •eliminating the ability of stockholders to call a special meeting of stockholders; and •establishing advance notice requirements for nominations for election to the board of directors or for proposing matters that can be acted uponat stockholder meetings.These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult forstockholders to replace members of our board of directors, who are responsible for appointing the members of our management. Because we are incorporatedin Delaware, we are governed by the provisions of Section 203 of the General Corporation Law of the State of Delaware, or the DGCL, which may discourage,delay or prevent someone from acquiring us or merging with us whether or not it is desired by or beneficial to our stockholders. Under the DGCL, acorporation may not, in general, engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock forthree years or, among other things, the board of directors has approved the transaction. Any provision of our amended and restated certificate of incorporationor amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change of control could limit the opportunity for ourstockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our commonstock. 66 Item 1B. Unresolved Staff Comments.None.Item 2. Properties.Our principal executive office is currently located in South San Francisco, California, and consists of 115,466 square feet of office and laboratory space, all ofwhich is located in a single building, under a lease that expires on December 31, 2027. We believe that our existing facility is sufficient for our current needs.Item 3. Legal Proceedings.We are not currently subject to any material legal proceedings.Item 4. Mine Safety Disclosures.None. 67 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.Market InformationOur common stock is traded on The Nasdaq Global Select Market under the symbol “FPRX.”Holders of RecordAs of February 19, 2019, we had 35,487,149 shares of common stock outstanding held by approximately 29 stockholders of record. The actual number ofstockholders is greater than this number of record holders, and includes stockholders who are beneficial owners, but whose shares are held in street name bybrokers and other nominees. This number of holders of record also does not include stockholders whose shares may be held in trust by other entities.Dividend PolicyWe have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable future. Paymentof cash dividends, if any, in the future will be at the discretion of our board of directors and will depend on then-existing conditions, including our financialcondition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant.68 Stock Performance GraphThe following graph illustrates a comparison of the total cumulative stockholder return on our common stock since our initial public offering onSeptember 18, 2013 with the Nasdaq Composite Index and the Nasdaq Biotechnology Index. The stockholder return shown in the graph below is notnecessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder returns. This graph shall not be deemed“soliciting material” or be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shallnot be deemed to be incorporated by reference into any of our filings under the Securities Act, whether made before or after the date hereof and irrespective ofany general incorporation language in any such filing. $100 investment in stock or index Sep 18,2013 Dec 31, 2013 Dec 31, 2014 Dec 31, 2015 Dec 31, 2016 Dec 31, 2017 Dec 31, 2018 Five Prime (FPRX) $100.00 $128.36 $206.42 $317.28 $383.10 $167.58 $71.10 Nasdaq Composite Index (IXIC) $100.00 $110.39 $125.17 $132.34 $142.27 $182.45 $175.37 Nasdaq Biotechnology (NBI) $100.00 $107.41 $144.04 $160.49 $125.69 $152.16 $137.97Purchases of Equity Securities by the Issuer and Affiliated PurchasersNone. 69 Item 6. Selected Financial Data.You should read the following selected financial data together with the “Management’s Discussion and Analysis of Financial Condition and Results ofOperations” section of this report and our financial statements and the accompanying notes included elsewhere in this report. We have derived the statementsof operations data for the years ended December 31, 2018, 2017 and 2016 and the balance sheet data as of December 31, 2018 and 2017 from our auditedfinancial statements appearing in this report. We have derived the statements of operations data for the years ended December 31, 2015 and 2014 and thebalance sheet data as of December 31, 2016, 2015, and 2014 from our audited financial statements not included in this report. Our historical results for anyprior period are not necessarily indicative of results to be expected in any future period. Year Ended December 31, (in thousands, except per share amounts) 2018 2017 2016 2015 2014 Statement of Operations Data: Collaboration and license revenue (1) $49,868 $39,508 $30,691 $379,801 $19,231 Operating expenses: Research and development 156,352 150,908 94,072 70,197 43,173 General and administrative 39,671 40,002 35,831 22,631 13,632 Total operating expenses 196,023 190,910 129,903 92,828 56,805 (Loss) income from operations (146,155) (151,402) (99,212) 286,973 (37,574)Interest income 5,792 2,978 2,467 487 210 Other loss, net (84) (94) — (3) (60)(Loss) income before income tax (140,447) (148,518) (96,745) 287,457 (37,424)Income tax (provision) benefit — (1,704) 31,048 (37,810) — Net (loss) income $(140,447) $(150,222) $(65,697) $249,647 $(37,424)Basic net (loss) income per share attributable to common stockholders (2) $(4.13) $(5.38) $(2.44) $9.73 $(1.79)Diluted net (loss) income per share attributable to common stockholders (2) $(4.13) $(5.38) $(2.44) $9.23 $(1.79)Weighted average shares of common stock outstanding used in computing basic net (loss) income per share (2) 33,976 27,945 26,955 25,661 20,865 Weighted average shares of common stock outstanding used in computing diluted net (loss) income per share (2) 33,976 27,945 26,955 27,035 20,865 (1)Effective January 1, 2018, we adopted Financial Accounting Standards Board, or FASB, Accounting Standard Update, or ASU 2014-09, Revenuefrom Contracts with Customers (Topic 606), or Topic 606, using the modified retrospective transition method. We applied the standard to contractsthat were not completed at the date of initial application. See Note 2 to our financial statements for impact of our adoption of Topic 606 on thefinancial statement line items.(2)See Note 7 to our financial statements for an explanation of the method used to calculate basic and diluted net income (loss) per share of commonstock and the weighted average number of shares used in computation of the per share amounts. As of December 31, (in thousands) 2018 2017 2016 2015 2014 Balance Sheet Data: Cash, cash equivalents and marketable securities $270,138 $292,690 $421,748 $517,466 $149,054 Working capital 261,081 260,209 401,384 448,913 131,443 Total assets 321,534 344,047 448,281 548,285 155,631 Total stockholders’ equity 265,139 265,202 391,575 433,206 85,205 70 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the relatednotes included elsewhere in this Annual Report on Form 10-K. The following discussion contains forward-looking statements that reflect our plans,estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause orcontribute to these differences include those discussed below and elsewhere in this Annual Report on Form 10-K, particularly in “Special Note RegardingForward-Looking Statements and Industry Data” and “Risk Factors.”OverviewWe are a clinical-stage biotechnology company focused on discovering and developing innovative protein therapeutics to improve the lives of patients withserious diseases. Each of our product candidates has an innovative mechanism of action and addresses patient populations for which better therapies areneeded. Our primary focus is on researching and developing immuno-oncology and targeted cancer therapies. In addition, we use companion diagnosticswhere appropriate to allow us to select patients most likely to benefit from treatment with our product candidates. The most advanced product candidates weor our partners are developing are identified below. •Bemarituzumab (FPA144) is an antibody that inhibits fibroblast growth factor receptor 2b, or FGFR2b, that we are studying in a clinical trialin combination with 5-fluorouracil (5-FU), leucovorin and oxaliplatin, a standard-of-care chemotherapy regimen known as mFOLFOX6, asfront-line treatment of patients with gastric (stomach) or gastroesophageal junction, or GEJ, cancer that overexpresses FGFR2b. In December2017, we granted Zai Lab (Shanghai) Co., Ltd., or Zai Lab, an exclusive license to develop and commercialize bemarituzumab in China, HongKong, Macau and Taiwan. •FPA150 is a CD8 T-cell checkpoint inhibitor antibody that targets B7-H4 that we are studying in a clinical trial in multiple cancers. •FPT155 is a soluble CD80 fusion protein that enhances co-stimulation of T-cells through CD28 that we are studying in a clinical trial inmultiple cancers. •Cabiralizumab (FPA008) is an antibody that inhibits colony stimulating factor-1, or CSF1, receptor, or CSF1R, that we and our partnerBristol-Myers Squibb Company, or BMS, are studying in clinical trials in multiple cancers in combination with BMS’s PD-1 immunecheckpoint inhibitor, Opdivo® (nivolumab). In October 2015, we granted BMS an exclusive worldwide license for the development andcommercialization of cabiralizumab. •BMS-986258 is an anti-T-cell immunoglobulin and mucin domain-3, or TIM-3, antibody that our partner, BMS, is studying in a clinical trial asa single agent and in combination with Opdivo in patients with advanced malignant tumors.We are focusing our activities on immuno-oncology and targeted cancer therapies, which we believe to have significant therapeutic potential. We leverageour differentiated discovery capabilities and protein therapeutic generation and engineering capabilities to identify and validate targets that we believecould be useful in oncology and generate and preclinically test therapeutic proteins, including antibodies and fusion proteins, directed to or containing thetargets we identify and validate. We plan to continue to advance selected therapeutic candidates into clinical development. Our product candidates aretypically only-in-class, first-in-class or meaningfully differentiated from other in-class therapeutics. We generally look for single-agent activity or clearactivity in, for example, tumor types that are rarely sensitive to checkpoint inhibitors.71 We have no products approved for commercial sale and have not generated any revenue from product sales to date. We continue to incur significant researchand development and other expenses related to our ongoing operations and we expect that our expenses will increase as we advance our product candidatesinto later stages of clinical development and increase the number of product candidates in clinical development. We have incurred losses in each period sinceour inception in 2002, with the exception of the fiscal year ended December 31, 2015, due primarily to the $350.0 million upfront payment we received fromBMS from our license and collaboration agreement for cabiralizumab, and the fiscal year ended December 31, 2011, due primarily to the $50.0 millionupfront payment we received from GSK from our license and collaboration agreement for FP-1039. For the years ended December 31, 2018 and 2017, wereported net loss of $140.4 million and net loss of $150.2 million, respectively.Critical Accounting Policies and EstimatesWe based our management’s discussion and analysis of financial condition and results of operations upon our condensed financial statements, which weprepared in accordance with U.S. generally accepted accounting principles, or GAAP. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We evaluate our critical accounting policies andestimates on an ongoing basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under thecircumstances, and these estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent fromother sources. Actual results under different assumptions and conditions may differ from these estimates. Our significant accounting policies are more fullydescribed in Note 2 to our financial statements.We define our critical accounting policies as those accounting principles generally accepted in the United States of America that require us to makesubjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results ofoperations as well as the specific manner in which we apply those principles. We believe the critical accounting policies used in the preparation of ourfinancial statements that require significant estimates and judgments are as follows:Revenue RecognitionThe terms of our collaborative research and development agreements include upfront and license fees, research, development and other funding orreimbursements, milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical, clinical,regulatory and sales-based events, as well as royalties on sales of commercialized products. Arrangements that include upfront payments may require deferralof revenue recognition to a future period until we perform obligations under these arrangements. We record research and development funding payable to usas accounts receivable when our right to consideration is unconditional. The event-based milestone and other contingent payments represent variableconsideration, and we use the most likely amount method to estimate this variable consideration. Given the high degree of uncertainty around occurrence ofthese events, we determine the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments isresolved. We will recognize revenue from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reportingperiod as uncertain events are resolved and other changes in circumstances occur.A performance obligation is a promise in a contract to transfer a distinct good or service and is the unit of accounting in Topic 606. A contract’s transactionprice is allocated among each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, theapplicable performance obligation is satisfied. Under Topic 606, we elected to use the practical expedient permitted related to adoption, which does notrequire us to disclose certain information regarding our remaining performance obligations as of the end of the reporting period prior to the initial date ofadoption. Additionally, we elected the practical expedient for certain research and development funding which allows us to recognize revenue in the amountfor which we have a right to invoice if our right to consideration is an amount that corresponds directly to the value of our performance completed to date. Asa result, we effectively bypass the steps of determining the transaction price and allocating that transaction price to the performance obligation.See Note 2 to our financial statements for information regarding our adoption of Topic 606.72 Research and Development ExpensesResearch and development expenses consist of costs we incur for our own and for sponsored and collaborative research and development activities. Researchand development costs are expensed as incurred. Research and development costs consist of salaries and benefits, including associated stock-basedcompensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on ourbehalf. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contractresearch organizations, or CROs, and clinical manufacturing organizations, or CMOs, that conduct and manage preclinical studies and clinical trials on ourbehalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient enrollment andactivity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimatesaccordingly. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of theseservices, our actual expenses could differ from our estimates.We expense payments for the acquisition and development of technology as research and development costs if, at the time of payment, the technology isunder development, is not approved by the U.S. Food and Drug Administration or other regulatory agencies for marketing, has not reached technicalfeasibility, or otherwise has no foreseeable alternative future use.Stock-Based CompensationWe issue stock-based compensation awards in the form of restricted stock awards and stock options. We measure stock-based compensation expense relatedto these awards based on the fair value of the award on the date of grant and recognize stock-based compensation expense on a straight-line basis over therequisite service period of the awards, which generally equals the vesting period.Restricted stock awards we grant generally vest over three years, though we have granted awards with shorter vesting schedules from time to time. We basestock-based compensation expense related to restricted stock awards on the closing market value of our common stock at the date of grant and recognizeexpense ratably over the requisite service period.Stock options we grant generally vest over four years. We have selected the Black-Scholes option pricing model to determine the fair value of stock optionawards, which requires the input of various assumptions that require management to apply judgment and make assumptions and estimates, including: •The expected term of the stock option award, which we calculate using the simplified method, due to limited history, in accordance with theSecurities and Exchange Commission Staff Accounting Bulletin Nos. 107 and 110, which calculates the expected term as the midpoint of thecontractual term of the options and the ordinary vesting period; •The expected volatility of the underlying common stock, which we estimate for options based on the historical volatility of our common stockprice since we became publicly traded; •The assumed dividend yield, which is based on our expectation of not paying dividends for the foreseeable future; and •The fair value of our common stock is determined on the date of grant, as described below.73 We estimated the fair value of each stock option using the Black-Scholes option-pricing model based on the date of grant of such stock option with thefollowing assumptions: Year Ended December 31, 2018 2017 2016 Expected term (years) 5.5-6.3 5.5-6.3 5.5-6.3 Expected volatility 68-70% 66-70% 69-74% Risk-free interest rate 2.6-2.9% 1.9-2.2% 1.3%-1.8% Expected dividend yield 0.0% 0.0% 0.0%Income TaxesWe account for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on differences between financialreporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expectedto reverse. On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Tax Act, was signed into law. The Tax Act reduces the corporate tax rate from atop marginal rate of 35% to a flat rate of 21%. Although the Tax Act is generally effective on January 1, 2018, GAAP requires recognition of the tax effects ofnew legislation during the reporting period that includes the enactment date, which was December 22, 2017. Because of the impacts of the Tax Act, the SECissued Staff Accounting Bulletin No. 118 Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) that allows us to record provisionalamounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment. As a result,as of December 31, 2017, we performed a provisional estimate of the effect of the Tax Act in the financial statements. In the fourth quarter of 2018, wecompleted our analysis to determine the effect of the Tax Act. No material adjustments were noted from the completion of the analysis as of December 31,2018. The primary impact of the Tax Act resulted from the re-measurement of deferred tax assets and liabilities due to the change in the corporate tax rate,reducing our deferred tax assets by $27.1 million with a corresponding reduction in our valuation allowance, which had no effect on our effective tax rate.Our income tax provision for 2017 is based on the Internal Revenue Service reducing our tentative net operating loss carryback refund claim filed in March2017. Our income tax benefit for 2016 relates to our ability to carry back 2016 losses to the 2015 tax year and to obtain a refund of taxes paid related to aprior period. Valuation allowances are provided when the expected realization of the deferred tax assets does not meet the more-likely-than-not criteria. As aresult, deferred tax assets at the end of 2018 are subject to a full valuation allowance. We are required to determine whether it is more likely than not that atax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financialstatements. It is our practice to recognize interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.New Accounting StandardsFor a discussion of new accounting standards, please read Note 2 to our financial statements.74 Financial OverviewCollaboration and License RevenueWe have not generated any revenue from product sales. We have derived our revenue to date from upfront payments, research and development funding andmilestone payments under collaboration and license agreements with our collaboration partners and licensees. We currently have an active cabiralizumablicense and collaboration agreement with BMS and an active collaboration and license agreement with Zai Lab for bemarituzumab. We are winding down theresearch activities in our immuno-oncology research collaboration with BMS as the research term ends in March 2019 and we completed the research terms ofour research collaboration in respiratory diseases with GSK and of our fibrosis and CNS research collaboration with UCB Pharma S.A., or UCB, in July 2016and March 2016, respectively. For additional information on these collaborations, please see the section titled “Business – Collaborations” located elsewherein this report.Summary Revenue by Collaboration and License AgreementsThe following is a comparison of collaboration and license revenue for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, (in millions) 2018 2017 2016 Milestone Payments Cabiralizumab Collaboration - BMS 25.0 — — Immuno-oncology Research Collaboration - BMS — 5.0 — Fibrosis and CNS Collaboration - UCB 0.3 0.3 0.4 Respiratory Diseases Collaboration - GSK — 0.5 1.8 Other Payments China Collaboration - Zai Lab 5.1 — — Cabiralizumab Collaboration - BMS 13.4 23.7 14.4 Immuno-oncology Research Collaboration - BMS 6.1 7.0 7.7 Fibrosis and CNS Collaboration - UCB — 3.0 3.1 Respiratory Diseases Collaboration - GSK — — 3.2 Other License Revenue — — 0.1 Total $49.9 $39.5 $30.7We expect that the level of revenue we generate will fluctuate from period to period as a result of the timing and amount of milestone, reimbursable expenseand other payments we receive in the course of our existing collaborations and licenses and as a result of the deferred revenue that we recognize, includingdue to revisions to estimates related to reimbursable activities or to estimates of actual or estimated costs as a percentage of total budgeted costs, or as a resultof entry into any new collaborations and license agreements.BMS Immuno-Oncology Research CollaborationIn March 2014, we entered into a research collaboration and license agreement, or the Immuno-Oncology Research Collaboration, with BMS, to carry out aresearch program to (i) discover novel interacting proteins in two undisclosed immune checkpoint pathways, which we refer to as the checkpoint pathways,using our target discovery platform; (ii) further the understanding of target biology with respect to targets in these checkpoint pathways; and (iii) discoverand pre-clinically develop compounds suitable for development for human therapeutic uses against targets in these checkpoint pathways. Under the Immuno-Oncology Research Collaboration, we granted BMS an exclusive, worldwide license to research, develop and commercialize products directed towardscertain targets in the checkpoint pathways. BMS has an option to take exclusive licenses to additional targets we may identify in these checkpoint pathwayspursuant to the research plan under the immuno-oncology research collaboration. Based on data arising from our activities under the research plan, in January2016, we amended the Immuno-Oncology Research Collaboration to add an additional checkpoint pathway to the research program, for a total of threeimmune checkpoint pathways.75 We received an upfront payment of $20.0 million from BMS in April 2014 in connection with our entry into the Immuno-Oncology Research Collaboration.BMS was obligated to pay us $9.5 million in research funding over the course of the three-year research term based on the research activities currentlyplanned under the research plan. BMS had the option to extend the research term for two additional one-year periods on a year-by-year basis for an additional$2.1 million for each extension, during which extensions we would be obligated to perform additional services as agreed to with BMS and BMS would beobligated to pay us research funding with respect to such services. The initial research term under the Immuno-Oncology Research Collaboration expired inMarch 2017. In each of December 2016 and December 2017, BMS exercised its option to extend the research term for an additional year to March 2018 andMarch 2019, respectively. In connection with the Immuno-Oncology Research Collaboration, BMS purchased 994,352 shares of our common stock at a priceper share of $21.16, for an aggregate purchase price of $21.0 million. We determined that the purchase price of $21.16 per share exceeded the fair value of ourcommon stock by $2.4 million and, therefore, recorded the $2.4 million as deferred revenue that we are recognizing in the same manner as the $20.0 millionupfront payment and research funding. We are eligible to receive certain contingent payments with respect to each target subject to the Immuno-OncologyResearch Collaboration and royalties on sales of products related to such targets, if any. In December 2017, we recognized $5.0 million related to adevelopmental contingent payment.The Immuno-Oncology Research Collaboration will terminate upon the expiration of all payment obligations under the collaboration. In addition, BMS mayterminate the Immuno-Oncology Research Collaboration in its entirety or on a collaboration target-by-collaboration target basis at any time with advancewritten notice and either party may terminate the collaboration in its entirety or on a collaboration target-by-collaboration target basis with written notice forthe other party’s material breach if such other party fails to timely cure the breach or immediately upon certain insolvency events.We identified one performance obligation under the Immuno-Oncology Research Collaboration for the research license to access our technology, theexclusive commercial license and research activities. BMS’s options to select additional collaboration targets are not priced at a discount and therefore donot represent performance obligations for which the transaction price would be allocated. The transaction price of $36.1 million includes the $20.0 millionnon-refundable upfront fee, $13.7 million of research funding and $2.4 million of equity premium. We concluded that the transaction price should notinclude the variable consideration related to maintenance fees and unachieved clinical and regulatory development milestones as this consideration wasconsidered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal in revenue in the future.We will recognize any consideration related to sales-based payments (including milestones and royalties) when the related sales occur, as we havedetermined that these amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of theperformance obligation, or the occurrence of the related sales. We will re-evaluate the transaction price at each reporting period. For year ended December 31,2018, no adjustments were made to the transaction price.76 Upon adoption of Topic 606, we recognized an additional $0.7 million of revenue, through a decrease to deferred revenue and an increase to beginningretained earnings, based on the difference between the input method currently used under Topic 606 and the ratable recognition method previously usedunder Topic 605. Under the input method, we recognize revenue on the basis of our efforts or inputs applicable to the satisfaction of a performance obligation(e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs applicable to the satisfaction of thatperformance obligation. We concluded that we will recognize revenue based on actual costs incurred as a percentage of total budgeted costs as we completeour performance obligation. Revenue recognized from the performance obligation was $6.1 million for the year ended December 31, 2018. ThroughDecember 31, 2018, we have recognized $34.6 million of the transaction price as collaboration revenue under the agreement. We will recognize theremaining transaction price of $1.5 million as revenue under the input method over the estimated performance period. For the years ended December 31, 2018, 2017, and 2016, we recognized $6.1 million, $12.0 million and $7.7 million, respectively, of revenue under theImmuno-Oncology Research Collaboration. As of December 31, 2018 and 2017, we had deferred revenue relating to the immuno-oncology researchcollaboration of $1.5 million and $6.3 million, respectively.BMS License and Collaboration AgreementOn October 14, 2015, we entered into a license and collaboration agreement, or the Cabiralizumab Collaboration Agreement, pursuant to which we grantedBMS exclusive global rights to develop and commercialize certain colony stimulating factor-1 receptor, or CSF1R, antibodies, including our monoclonalCSF1R inhibiting antibody that we refer to as cabiralizumab, and all modifications, derivatives, fragments, or variants of such antibodies, each of which werefer to as a licensed antibody. Under the terms of the Cabiralizumab Collaboration Agreement, BMS is responsible, at its expense, for developing productscontaining licensed antibodies, each of which we refer to as a licensed product, under a development plan, subject to our option, at our own expense, toconduct certain studies, including registration-enabling studies to support approval of cabiralizumab. BMS is responsible for manufacturing andcommercializing each licensed product and we will retain rights to a U.S. co-promotion option. The Cabiralizumab Collaboration Agreement supersedes theclinical trial collaboration agreement we entered into with BMS in November 2014, or the Original Collaboration Agreement. We assessed the twoagreements separately as standalone agreements under Topic 606.We received an upfront payment of $30.0 million from BMS in December 2014 in connection with our entry into the Original Collaboration Agreement. Weare completing our Phase 1a/1b clinical trial to evaluate the safety, tolerability and preliminary efficacy of combining Opdivo, BMS’s programmed-death 1(PD-1) immune checkpoint inhibitor, with cabiralizumab in multiple tumor types, which we commenced under the Original Collaboration Agreement. BMSbears all costs and expenses relating to this trial, including manufacturing costs for the supply of cabiralizumab, except that we are responsible for our owninternal costs, including internal personnel costs.Under the Original Collaboration Agreement, we identified one performance obligation for the execution of a Phase 1a/1b clinical trial of cabiralizumab incombination with Opdivo. The transaction price consists of the $30.0 million non-refundable upfront fee under the Original Collaboration Agreement. We used the input method to measure progress toward completion of the performance obligation and concluded that we will recognize revenue based onactual costs incurred by our CRO, as a percentage of total budgeted costs as we complete our performance obligation. We will recognize revenue fromreimbursements when we have the right to invoice BMS. No adjustment was necessary upon adoption of Topic 606. We recognized $6.6 million of thetransaction price as revenue for the year ended December 31, 2018. Total revenue recognized for reimbursements for the year ended December 31, 2018, was$6.9 million. Through December 31, 2018, we recognized $24.8 million of the transaction price as collaboration revenue under the Original CollaborationAgreement. The remaining transaction price of $5.2 million is recorded in deferred revenue as of December 31, 2018 and will be recognized as revenue underthe input method over the estimated performance period. 77 Under the Cabiralizumab Collaboration Agreement, we identified the following performance obligations: (1) license grant to BMS and (2) transfer of licensedknow-how to BMS. The transaction price consists of the $350.0 million non-refundable up-front fee. We concluded that the transaction price should not yetinclude milestone payments that may become due as they are fully constrained. We will recognize any consideration related to royalties when the relatedsales occur, as we have determined that these amounts relate predominantly to the license granted and therefore will be recognized upon the occurrence of therelated sales. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur. Forthe year ended December 31, 2018, no adjustments were made to the transaction price.The $350.0 million non-refundable upfront fee was fully recognized concurrent with the transfer of the license and know-how in 2015. As such, noadjustment to revenue was necessary under Topic 606. In January 2018, we recognized $25.0 million related to a milestone achieved for the dosing of thefirst patient in BMS’s randomized Phase 2 clinical trial of cabiralizumab in combination with Opdivo, with and without chemotherapy, as a treatment forpatients with second-line pancreatic cancer.For the years ended December 31, 2018, 2017, and 2016, we recognized $38.4 million, $23.7 million and $14.4 million, respectively, of revenue under thelicense and collaboration agreements. As of December 31, 2018 and 2017, we had deferred revenue relating to the license and collaboration agreements of$5.2 million and $11.8 million, respectively.Zai Lab China License and Collaboration AgreementIn December 2017, we entered into a license and collaboration agreement, or the China Collaboration Agreement, with Zai Lab, pursuant to which we grantedZai Lab an exclusive license to develop and commercialize bemarituzumab in China, Hong Kong, Macau and Taiwan.Under the terms of the China Collaboration Agreement, Zai Lab will be responsible, at its expense, for (i) developing and commercializing productscontaining the licensed antibody, each, a licensed product, under a territory development plan and (ii) performing certain development activities to supportour global development and registration of licensed products, including our Phase FIGHT trial, in the territory, under a global development plan. Under theterms of the China Collaboration Agreement, Zai Lab paid us a $5.0 million non-refundable and non-creditable upfront fee ($4.2 million after netting ofvalue-added tax withholdings of $0.8 million) in January 2018. Pursuant to the China Collaboration Agreement, with respect to each licensed product, we areeligible to receive up to $39.0 million of specified developmental and regulatory milestone payments. Zai Lab will also be obligated to pay us a royalty, on alicensed product-by-licensed product and region-by-region basis. In addition, Zai Lab agreed to reimburse us for certain global development activities, whichis limited to a maximum of $10.0 million, and certain costs for the development of companion diagnostics. 78 We identified the following performance obligations: (1) license grant to Zai Lab together with the transfer of licensed know-how, development drug supplyand global development activities, or the License Grant and (2) development of companion diagnostics. Zai Lab has the option to purchase commercial drugsupply from us pursuant to a separate commercial supply agreement to be negotiated in the future. The commercial drug supply will be accounted for as aseparate contract when Zai Lab exercises this option. In our evaluation of the transaction price upon the adoption of Topic 606, the $4.2 million non-refundable upfront fee and $8.3 million of expected reimbursement from Zai Lab for global development activities were included as part of the transactionprice of $12.5 million. We estimated the $8.3 million of expected reimbursements from Zai Lab based on the probability-weighted amounts of a range ofpossible consideration amounts. In September 2018, we recorded a $1.7 million receivable related to Zai Lab’s $2.0 million clinical development milestonepayment, net of value-added tax and other withholdings of $0.3 million, which became due upon dosing of the first patient in the Phase 3 FIGHT trial. Wehave since re-evaluated the transaction price and increased the transaction price by $2.2 million to $14.7 million which includes the $4.2 million non-refundable upfront fee, $8.8 million of expected reimbursement from Zai Lab for global development activities and the $1.7 million clinical developmentmilestone payment. We have not included the remaining regulatory milestone payments in the transaction price as all such milestone amounts are fullyconstrained. We will recognize any consideration related to royalties when the related sales occur, as we determined that these amounts relate predominantlyto the license granted and therefore will be recognized upon the occurrence of the related sales. We concluded that the reimbursement of costs incurred for thedevelopment of companion diagnostics qualifies for the practical expedient under Topic 606, which allows us to recognize revenue in the amount for whichwe have a right to invoice if our right to consideration is an amount that corresponds directly to the value to Zai Lab of our performance completed to date.We therefore effectively bypass the steps of determining the transaction price and allocating that transaction price to the performance obligation. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.We use the input method to measure progress toward completion of the performance obligation for the License Grant. We concluded that revenue will berecognized based on actual costs incurred by our CRO as a percentage of total budgeted costs as we complete our performance obligation. We will recognizerevenue from reimbursements for the development of companion diagnostics when we have the right to invoice Zai Lab.No adjustment was necessary upon adoption of Topic 606. For the year ended December 31, 2018, revenue recognized for the License Grant was $1.7million. Total revenue recognized for the companion diagnostics development performance obligation was $3.3 million. Of the remaining transaction priceof $12.9 million, we recorded $5.2 million in deferred revenue, which we will recognize over the estimated performance period for satisfaction of theperformance obligations. The remaining $8.7 million of the transaction price will be recorded in deferred revenue when invoiced as we complete globaldevelopment activities.GSK Respiratory Diseases and Muscle Diseases CollaborationsIn April 2012, we entered into a research collaboration and license agreement, or the Respiratory Diseases Collaboration, with Glaxo Group Limited, or GSK,to identify new therapeutic approaches to treat refractory asthma and chronic obstructive pulmonary disease, or COPD, with a particular focus on identifyingnovel protein therapeutics and antibody targets. In January 2016, we amended our Respiratory Diseases Collaboration to extend the research term by threemonths to July 2016 to allow additional validation of the protein targets we discovered and to increase the research funding. In July 2010, we entered into aresearch collaboration and license agreement, or the Muscle Diseases Collaboration, with GlaxoSmithKline LLC, to identify potential drug targets and drugcandidates to treat skeletal muscle diseases. We conducted three customized cell-based screens and one in vivo screen of our protein libraries under themuscle diseases collaboration. The research term under the Muscle Diseases Collaboration ended in May 2014 and the agreement terminated in April 2018.79 Based on our assessment of the Respiratory Diseases Collaboration and the Muscle Disease Collaboration under Topic 606, we identified one performanceobligation under each collaboration for the research license and research activities. The non-refundable upfront fees, the equity premiums and the variableconsideration for research activities are included as part of the transaction prices for each collaboration. The clinical and regulatory development milestonepayments have not been included in the transaction prices, as all such milestone amounts are fully constrained. We will recognize any consideration relatedto sales-based payments (including milestones and royalties) when the related sales occur, as we have determined that these amounts relate predominantly tothe license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation, or the occurrence of the related sales.Under the Respiratory Diseases Collaboration, additional research funding that GSK had the option to add was also not included in the transaction price. Asthe Muscle Diseases Collaboration with GlaxoSmithKline LLC terminated in April 2018, we are no longer eligible to receive milestone payments orroyalties under that collaboration. We will re-evaluate the transaction price for the Respiratory Diseases Collaboration in each reporting period as uncertainevents are resolved and other changes in circumstances occur. For year ended December 31, 2018, no adjustments were made to the transaction prices of thecollaborations with GSK or GlaxoSmithKline LLC.Under the Respiratory Diseases Collaboration and the Muscle Diseases Collaboration, the non-refundable upfront fees, the equity premiums and the paymentfor research activities were fully recognized in 2016 and 2014, respectively. As the performance obligations were fully satisfied in prior years, no adjustmentto revenue was necessary under Topic 606. For the years ended December 31, 2018, 2017 and 2016, we recognized $0, $0.5 million and $1.8 million of milestone revenue, respectively, and $0, $0 and$3.2 million of revenue for progress made toward the performance obligation, respectively, under the Respiratory Diseases Collaboration.UCB Fibrosis and CNS CollaborationIn March 2013, we entered into a research collaboration and license agreement, or the Fibrosis and CNS Collaboration, with UCB Pharma, S.A., or UCB, toidentify potential biologics targets and therapeutics in the areas of fibrosis-related immunologic diseases and central nervous system, or CNS, disorders.Under the terms of the Fibrosis and CNS Collaboration, UCB paid us an upfront payment of $6.0 million in March 2013. In addition, UCB agreed to pay us$6.6 million for a technology fee and $2.0 million for research funding. As of December 31, 2015, we fully collected the technology fees and researchfunding under the Fibrosis and CNS Collaboration. We are eligible to receive certain evaluation and selection fees and contingent payments with respect toeach protein target that UCB elects to obtain an exclusive license, and royalties on the sales of products related to such targets, if any. Our initial researchactivities under this agreement were completed in March 2016. Upon the completion of those research activities, UCB had up to a two-year evaluationperiod, which ended in March 2018, during which we were obligated to perform additional services at the request of UCB.The agreement will terminate upon the expiration of the royalty terms of any products that incorporate or target a protein exclusively licensed under thecollaboration. In addition, UCB may terminate this agreement at any time with advance written notice, and either party may terminate the agreement withwritten notice for the other party’s material breach if such other party fails to timely cure the breach or upon certain insolvency events.80 Based on our assessment of the Fibrosis and CNS Collaboration under Topic 606, we identified research activities as our only performance obligation. UCB’soptions to select additional collaboration targets and to license exclusive rights to selected targets are not priced at a discount and therefore do not representperformance obligations for which the transaction price would be allocated. The transaction price of $15.6 million includes the $6.0 million non-refundableupfront fee, the $6.6 million technology access fee, the $1.0 million reimbursement for reagent costs and the $2.0 million of research funding. We have notincluded the clinical and regulatory development milestone payments in the transaction price as all such milestone amounts are fully constrained. We willrecognize any consideration related to sales-based payments (including milestones and royalties) when the related sales occur, as we have determined thatthese amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation,or the occurrence of the related sales. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes incircumstances occur. For the year ended December 31, 2018, there was no change in the transaction price.Upon adoption of Topic 606, we recognized an additional $0.6 million of revenue through a decrease to deferred revenue and an increase to beginningretained earnings, based on the difference between the input method currently used under Topic 606 and the ratable recognition method previously usedunder Topic 605. We use the input method to measure progress toward completion of the performance obligation and concluded that revenue will berecognized based on actual full-time equivalent labor hours expended as a percentage of total budgeted costs. The $0.6 million adjustment recorded upon theadoption of Topic 606 recognized the remainder of the transaction price.During 2018, 2017 and 2016, we recognized $0.3 million, $0.3 million and $0.4 million in target evaluation and selection fees, respectively. For the yearsended December 31, 2018, 2017 and 2016, revenue recognized for the performance obligation was $0, $3.0 million and $3.1 million, respectively. As ofDecember 31, 2017, we had deferred revenue of $0.6 million which was fully recognized upon adoption of Topic 606.Research and DevelopmentResearch and development expenses consist of costs we incur in performing internal and collaborative research and development activities. Expensesincurred related to collaborative research and development agreements generally approximate the revenue recognized under these agreements. Research anddevelopment costs consist of salaries and benefits, including associated stock-based compensation, lab supplies and facility costs, as well as fees paid toother entities that conduct certain research and development activities, including manufacturing, on our behalf.We are conducting research and development activities on several disease targets and product candidates.We have a research and development team that designs, manages and evaluates the results of all our research and development activities. We conduct most ofour core target discovery and early research and preclinical activities internally and rely more heavily on third parties, such as CROs and CMOs, for theexecution of our IND-enabling and development activities, such as GLP toxicology studies, drug substance and drug product manufacturing, lab-developedtest and companion diagnostic development, and the conduct of our clinical trials. We account for research and development costs on a program-by-programbasis. In the early phases of research and discovery, our costs are often related to conducting target screening, evaluation and validation activities andconducting research activities with respect to selected targets and target pathways and are not necessarily allocable to a specific program. We assign costs forsuch activities to a distinct non-program related project code. We allocate research and development management, overhead, common usage laboratorysupplies and facility costs on a full-time equivalent basis.81 The following is a comparison of research and development expenses for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, (in millions) 2018 2017 2016 Development programs: Cabiralizumab $15.8 $29.5 $19.9 Bemarituzumab 63.1 34.8 21.9 FPA150 18.8 19.0 — FP-1039 0.1 1.6 0.3 Subtotal development programs 97.8 84.9 42.1 Preclinical programs 19.1 32.5 18.3 Discovery collaborations 3.3 4.0 8.1 Early research and discovery 36.2 29.5 25.6 Total research and development expenses $156.4 $150.9 $94.1We expect that most of the research and development expenses we incur will continue to relate to activities to support our clinical development programs,preclinical programs and other research efforts. Our research and development expenses may increase as we advance our current product candidates throughclinical development and additional product candidates into preclinical and clinical development, in particular, as we increase the number and size of ourclinical trials, including by advancing into registrational trials, and as we expand our internal immuno-oncology preclinical, research and discovery efforts.In January 2019, we implemented a corporate restructuring to focus our resources on our clinical development and late-stage research programs. Pursuant tothe restructuring, we eliminated 41 employee positions, representing approximately 20% of our then-current headcount, primarily in areas relating toresearch, pathology and manufacturing. We estimate approximately $2 million of pre-tax charges for severance and other costs related to the restructuring, primarily during the first quarter of 2019.The process to obtain marketing approval of a drug candidate, including preclinical and clinical development and the development of manufacturingprocesses, is costly and time-consuming. We or our partners may never succeed in achieving marketing approval for any of our drug candidates. Numerousfactors may affect the probability of success for each drug candidate, including preclinical and clinical results, competition, manufacturing capability andcommercial viability.The successful development of our drug candidates is highly uncertain and may not result in products that are approved for marketing by the FDA or anycomparable foreign regulatory authority. The costs and duration of the processes necessary to achieve marketing approval for each drug candidate can varysignificantly and are difficult to predict. Given the uncertainty associated with clinical trial patient enrollment and the risks inherent in the developmentprocess, estimating the duration and completion costs of current or future clinical trials of our drug candidates or if, or to what extent, we will generaterevenues from the commercialization and sale of any of our approved drug candidates is difficult and uncertain. We anticipate we will make determinationsas to which programs to pursue and how much funding to direct to each program on an ongoing basis in response to the outcome of research, preclinical andclinical activities with respect to each drug candidate, as well as ongoing assessments as to each drug candidate’s commercial potential. We will need to raiseadditional capital and may seek to enter into additional collaborations in the future to advance and complete the development and commercialization of ourcurrent and future drug candidates.82 General and AdministrativeGeneral and administrative expenses consist primarily of salaries and related benefits, including associated stock-based compensation, related to ourexecutive, finance, legal, business development, human resource and support functions. Other general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses, travel expenses and professional fees for auditing and tax and legal services,including intellectual property-related legal services.Our general and administrative expenses may increase due to expanded operations to support our increased research and development activities. Also, weexpect our intellectual property-related legal expenses, including those related to preparing, filing and prosecuting patent applications and maintainingpatents, to increase as our intellectual property portfolio expands.Interest IncomeInterest income consists of interest income earned on our cash and cash equivalents and marketable securities.Other (Expense) Income, NetOther (expense) income, net consists primarily of the gain or loss on the disposal of property and equipment, if any.Results of OperationsComparison for the Years Ended December 31, 2018 and 2017 Year Ended December 31, (in millions) 2018 2017 Collaboration and license revenue $49.9 $39.5 Operating expenses: Research and development 156.3 150.9 General and administrative 39.7 40.0 Total operating expenses 196.0 190.9 Interest income 5.8 3.0 Other expense, net (0.1) (0.1)Loss before income tax (140.4) (148.5)Income tax benefit (provision) — (1.7)Net loss $(140.4) $(150.2)Collaboration and License RevenueCollaboration and license revenue increased by $10.4 million, or 26%, to $49.9 million for the year ended December 31, 2018 from $39.5 million for the yearended December 31, 2017. This increase was primarily due to $25.0 million of revenue recognized under our Cabiralizumab Collaboration Agreement withBMS for the achievement of the developmental milestone for the dosing of the first patient in BMS’s Phase 2 clinical trial of cabiralizumab in combinationwith Opdivo, with and without chemotherapy, as a treatment for patients with second-line pancreatic cancer as well as an increase of $5.1 million ofcollaboration and license revenue from our collaboration with Zai Lab. This increase was offset by a $10.3 million decrease in research and developmentfunding from our Original Collaboration Agreement with BMS as our Phase 1a/1b combination trial completed enrollment, a $5.0 million decrease related toa 2017 developmental contingent payment from our Immuno-Oncology Research Collaboration with BMS, a $3.0 million decrease from the Fibrosis andCNS collaboration with UCB due to the completion of the performance obligation under this agreement, a $0.9 million decrease from our Immuno-OncologyResearch Collaboration with BMS and a $0.5 million decrease in revenue from the Respiratory Diseases Collaboration with GSK.83 Research and DevelopmentOur research and development expenses increased by $5.4 million, or 3.6%, to $156.3 million for the year ended December 31, 2018 from $150.9 million forthe year ended December 31, 2017. This increase was due to $10.4 million in milestone payments associated with the first patient dosed in our Phase 3FIGHT trial, a $4.4 million increase in the cost to develop companion diagnostics for use in our bemarituzumab development program, a $3.0 millionincrease in facility and depreciation costs, a $2.6 million increase in clinical trial expenses, a $1.9 million increase in expense related to temporary resourcesand a $1.5 million increase in lab supplies and other lab costs. These increases were offset by a $10.6 million decrease in manufacturing costs to advance ourFPA150 and FPT155 programs and the FPA154 program, which we terminated in 2017, a $7.4 million decrease in preclinical expense to advance FPA150towards clinical development and for preclinical expense, including licensing fees associated with FPA154 and a $0.3 million decrease in employeecompensation.General and AdministrativeOur general and administrative expenses decreased by $0.3 million, or 0.7%, to $39.7 million in 2018 from $40.0 million in 2017. This decrease wasprimarily due to a $2.7 million decrease in compensation costs and a $0.5 million decrease in facilities expense related to our corporate office and laboratoryfacility offset by increases of $2.4 million in expense related to temporary resources and $0.6 million in other miscellaneous costs.Income Tax Benefit (Provision)We recognized a tax expense of $1.7 million in 2017 related to deficiency interest based on the Internal Revenue Service reducing our tentative netoperating loss carryback refund claim filed in March 2017.Comparison of the Years Ended December 31, 2017 and 2016 Year Ended December 31, (in millions) 2017 2016 Collaboration and license revenue $39.5 $30.7 Operating expenses: Research and development 150.9 94.1 General and administrative 40.0 35.8 Total operating expenses 190.9 129.9 Interest income 3.0 2.5 Other expense, net (0.1) - Loss before income tax (148.5) (96.7)Income tax (provision) benefit (1.7) 31.0 Net loss $(150.2) $(65.7)Collaboration and License RevenueCollaboration and license revenue increased by $8.8 million, or 28.7%, to $39.5 million in 2017 from $30.7 million in 2016. This increase was primarily dueto the $9.3 million increase in revenue from our Original Collaboration Agreement with BMS and a $4.3 million increase in revenue, primarily from a $5.0million developmental contingent payment from our Immuno-Oncology Research Collaboration with BMS, offset by a $4.5 million decrease in revenuerecognized under our Respiratory Diseases Collaboration with GSK as the research term ended in July 2016.84 Research and DevelopmentOur research and development expenses increased by $56.8 million, or 60.4%, to $150.9 million in 2017 from $94.1 million in 2016. This increase wasprimarily due to an increase of $19.0 million to advance our FPA150 development program, which was included in preclinical programs before 2017. Therewas also an increase of $14.2 million to further advance our preclinical programs toward filing INDs, a $9.6 million to advance cabiralizumab in our Phase 2clinical trial in diffuse pigmented villonodular synovitis, or PVNS, and our Phase 1a/1b clinical trial in immuno-oncology, a $12.9 million increase toadvance our bemarituzumab development program and a $1.3 million increase for our FP-1039 program.General and AdministrativeOur general and administrative expenses increased by $4.2 million, or 11.7%, to $40.0 million in 2017 from $35.8 million in 2016, primarily due to a $1.6million increase in overhead and facilities expense related to our corporate office and laboratory facility, a $1.0 million increase in stock-based compensationcosts, a $0.7 million increase in spending associated with the development of our commercialization strategy and a $0.6 million increase in compensationcosts.Income Tax Benefit (Provision)We recognized a tax expense of $1.7 million in 2017 related to deficiency interest based on the Internal Revenue Service reducing our tentative netoperating loss carryback refund claim filed in March 2017. Our income tax benefit for 2016 relates to our ability to carry back 2016 losses to the 2015 taxyear and to obtain a refund of taxes paid related to a prior period.Liquidity and Capital ResourcesAs of December 31, 2018, we had $270.1 million in cash, cash equivalents and marketable securities invested in a money market fund, U.S. Treasurysecurities and commercial paper with maturities of 10 months or less.In January 2018, we closed on a public offering of 5,897,435 shares of our common stock, which included 769,230 shares sold upon the underwriters' fullexercise of their option to purchase additional shares, resulting in aggregate gross proceeds of $115.0 million, before deducting underwriting discounts andcommissions and estimated offering expenses payable by us, and net proceeds of approximately $107.6 million after deducting these amounts.On November 6, 2018, we filed a shelf registration on Form S-3 with the SEC for the issuance and sale of up to an aggregate of $250.0 million in shares of ourcommon stock.In addition to our existing cash and cash equivalents, we are eligible to receive research and development funding and to earn milestone and othercontingent payments for the achievement of defined collaboration objectives and certain nonclinical, clinical, regulatory and sales-based events and royaltypayments under our collaboration agreements. Our ability to earn these milestone and contingent payments and the timing of these milestones is primarilydependent upon the outcome of our collaborators’ and licensees’ research and development activities and is uncertain at this time. Our rights to paymentunder our collaboration and license agreements are our only committed external sources of funds.85 Funding RequirementsOur primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical and preclinical research anddevelopment services, including clinical trial, manufacturing, laboratory and related supplies, legal, patent and other regulatory expenses and generaloverhead costs. We believe our use of CROs and CMOs provides us with flexibility in managing our spending and limits our cost commitments at any pointin time.Because our product candidates are in various stages of clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimatethe actual amounts necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we mayachieve profitability. Until such time, if ever, that we can generate substantial product revenues, we expect to finance our cash needs primarily through equityfinancings and collaboration and licensing arrangements. Except for any obligations of our collaborators to reimburse us for research and developmentexpenses or to make milestone or royalty payments under our agreements with them, we will not have any committed external sources of liquidity. To theextent that we raise additional capital through the future sale of equity or debt, the ownership interests of our stockholders will be diluted, and the terms ofthese securities may include liquidation or other preferences that adversely affect the rights of our existing stockholders. If we raise additional funds throughcollaboration or licensing arrangements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or productcandidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings whenneeded, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop andmarket product candidates that we would otherwise prefer to develop and market ourselves.Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash and cashequivalents and marketable securities as of December 31, 2018 will enable us to fund our operating expenses and capital expenditure requirements for at leastthe next twelve months.86 Cash FlowsThe following is a summary of cash flows for the years ended December 31, 2018, 2017 and 2016: Year Ended December 31, (in millions) 2018 2017 2016 Net cash used in operating activities $(122.5) $(112.2) $(79.8)Net cash (used in) provided by investing activities (2.5) 174.2 (53.7)Net cash provided by (used in) financing activities 109.2 (9.9) (8.9)Net Cash Used in Operating ActivitiesNet cash used in operating activities was $122.5 million during the year ended December 31, 2018. The net loss of $140.4 million was offset by non-cashcharges of $29.5 million for stock-based compensation expense and $3.3 million for amortization of property and equipment and of premium on marketablesecurities. The net change in operating assets and liabilities was $14.8 million.Net cash used in operating activities was $112.2 million during the year ended December 31, 2017. The net loss of $150.2 million was offset by non-cashcharges of $34.2 million for stock-based compensation expense, $1.6 million for amortization of premium on marketable securities and $2.5 million fordepreciation and amortization. The net change in operating assets and liabilities was $0.4 million.Net cash used in operating activities was $79.8 million during the year ended December 31, 2016. The net loss of $65.7 million was offset by non-cashcharges of $32.9 million for stock-based compensation expense, $15.1 million for deferred income taxes, $4.2 million for amortization of premium onmarketable securities and $1.7 million for depreciation and amortization. The net change in operating assets and liabilities was $71.1 million, which isprimarily due to a $52.8 million decrease in income tax payable and a $16.8 million decrease in deferred revenue from the recognition of revenue in thecurrent period for cash received from collaboration partners in prior periodsNet Cash Provided by (Used in) Investing ActivitiesNet cash used in investing activities was $2.5 million for the year ended December 31, 2018. Net cash used in investing activities primarily relates topayments for the purchases of property and equipment of $11.3 million during the year ended December 31, 2018. The property and equipment purchasesconsisted primarily of charges related to tenant improvement to our corporate office and laboratory facility and purchases of laboratory equipment to supportour research and development activities. This was offset by the maturities of marketable securities exceeding the purchase of such marketable securities by$8.8 million.Net cash provided by investing activities was $174.2 million for the year ended December 31, 2017. Net cash provided by investing activities for the periodpresented primarily relates to maturities of marketable securities exceeding purchase of such marketable securities by $179.1 million. Payments for thepurchases of property and equipment was $4.9 million during the year ended December 31, 2017. The property and equipment purchases consisted primarilyof purchases of laboratory equipment to support our research and development activities.Net cash used in investing activities was $53.7 million for the year ended December 31, 2016. Net cash provided by investing activities for the periodpresented primarily relates to the purchase of marketable securities exceeding the maturities of such marketable securities by $50.8 million. Payments for thepurchases of property and equipment was $3.0 million during the year ended December 31, 2016. The property and equipment purchases consisted primarilyof purchases of laboratory equipment to support our research and development activities.87 Net Cash Provided by (Used in) Financing ActivitiesNet cash provided by financing activities was $109.2 million during the year ended December 31, 2018, which consisted primarily of $107.6 million in netproceeds from the public offering of our common stock in January 2018 and $4.0 million received from employee stock option exercises. This was offset by$2.4 million paid to satisfy tax withholding obligations from the net share issuance of restricted stock awards.Net cash used in financing activities was $9.9 million during the year ended December 31, 2017, primarily related to $13.9 million paid to satisfy taxwithholding obligations from the net share issuance of restricted stock awards offset by $4.0 million received from employee stock option exercises andemployee stock purchases in 2017.Net cash used in financing activities was $8.9 million during the year ended December 31, 2016, primarily related to $14.1 million paid to satisfy taxwithholding obligations from the net share issuance of restricted stock awards and $3.1 million from excess tax benefits from employee equity incentiveplans, offset by $8.3 million received from employee stock option exercises and employee stock purchases in 2016.88 Contractual Obligations and Contingent LiabilitiesThe following table summarizes our significant contractual obligations as of December 31, 2018: (in millions) Less Than More Than Contractual Obligations Total 1 Year 1 to 3 Years 3 to 5 Years 5 Years Operating leases (1) $73,601 $7,315 $15,269 $15,851 $35,166 Total obligations $73,601 $7,315 $15,269 $15,851 $35,166 (1) Represents future minimum lease payments under non-cancelable operating leases in effect as of December 31, 2018 for our corporate office andlaboratory facility in South San Francisco, California and sequencing instruments to support our FPA144 program. The minimum lease payments forour corporate office and laboratory facility above do not include common area maintenance charges or real estate taxes. The minimum leasepayments for the sequencing instruments do not include installation and initiation.The contractual obligations table above does not include any potential future milestone payments to third-parties as part of certain collaboration and in-licensing agreements, which could total up to $145.5 million, or any potential future royalty payments we may be required to make under our licenseagreements, including with: •Galaxy, under which we were granted an exclusive worldwide license for the development, manufacturing and commercialization of anti-FGFR2b antibodies; •BioWa-Lonza, under which we were granted a non-exclusive license to use their Potelligent® CHOK1SV technology, including the CHOK1SVcell line, and a non-exclusive license to related know-how and patents; and •Adimab, under which Adimab conducted programs to discover and evaluate antibodies directed against targets of interest to us and underwhich we licensed certain of these antibodiesPayments under these agreements are not included in the above contractual obligations table due to the uncertainty of the occurrence of the events requiringpayment under these agreements, including our share of potential future milestone and royalty payments. These payments generally become due and payableonly upon achievement of certain clinical development, regulatory or commercial milestones.Off-Balance Sheet ArrangementsWe did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.89 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.The market risk inherent in our financial instruments and in our financial position reflects the potential losses arising from adverse changes in interest ratesand concentration of credit risk. As of December 31, 2018, we had cash and cash equivalents and marketable securities of $270.1 million, consisting of bankdeposits, interest-bearing money market accounts, a U.S. Treasury money market fund, U.S. Treasury securities, agency bonds, corporate bonds andcommercial paper. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Ourcash equivalents and marketable securities have an average maturity of approximately four months and the longest maturity is ten months. Due to the short-term maturities of our cash equivalents and marketable securities and the low risk profile of our marketable securities, an immediate 100 basis point change ininterest rates would not have a material effect on the fair market value of our cash equivalents and marketable securities. We can hold our marketablesecurities until maturity, and we therefore do not expect a change in market interest rates to affect our operating results or cash flows to any significantdegree.Item 8. Financial Statements and Supplementary Data.The financial statements required by this item are set forth beginning on page F-1 of this Annual Report on Form 10-K.Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.None.Item 9A. Controls and Procedures.Evaluation of Disclosure Controls and ProceduresAs of December 31, 2018, management, with the participation of our disclosure committee, performed an evaluation of the effectiveness of the design andoperation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Our disclosure controls and proceduresare designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management,including the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures.Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objective.Based on this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of December 31, 2018, the design and operation of ourdisclosure controls and procedures were effective.Management’s Annual Report on Internal Control over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f)and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accountingprinciples, or GAAP. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that inreasonable detail accurately and fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with GAAP, and that our receipts and expenditures are being made only in accordancewith authorizations of our management and directors, and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorizedacquisition, use or disposition of our assets that could have a material effect on our financial statements.90 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.Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted anevaluation of the effectiveness of our internal control over financial reporting as of December 31, 2018 based on the criteria established in Internal Control -Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework), or COSO. Based on ourevaluation under the criteria set forth in Internal Control - Integrated Framework issued by COSO, our management concluded our internal control overfinancial reporting was effective as of December 31, 2018.Our independent registered public accounting firm, Ernst & Young LLP, audited the effectiveness of our internal control over financialreporting. Ernst & Young LLP has issued their attestation report which is included herein.Changes in Internal Control over Financial Reporting.There have been no significant changes in our internal control over financial reporting during our most recent fiscal quarter that materially affected, or isreasonably likely to materially affect, our internal control over financial reporting.91 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Five Prime Therapeutics, Inc. Opinion on Internal Control over Financial ReportingWe have audited Five Prime Therapeutics, Inc.’s (the “Company”) internal control over financial reporting as of December 31, 2018, based on criteriaestablished in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013framework) (the COSO criteria). In our opinion, Five Prime Therapeutics, Inc. maintained, in all material respects, effective internal control over financialreporting as of December 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, and the related statements of operations, comprehensive income (loss), stockholders’ equity and cash flowsfor each of the three years in the period ended December 31, 2018 and the related notes, and our report dated February 26, 2019 expressed an unqualifiedopinion thereon.Basis for OpinionThe 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 Annual 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 ReportingA 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 arebeing made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding preventionor timely 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 LLPSan Francisco, CaliforniaFebruary 26, 201992 Item 9B. Other Information.None. 93 PART IIIItem 10. Directors, Executive Officers and Corporate Governance.The information required by this item is incorporated by reference to the information set forth in the sections titled “Information About Our Board ofDirectors” and “Information About Our Executive Officers Who Are Not Directors,” “Corporate Governance,” “Corporate Governance – Code of BusinessConduct and Ethics,” “Section 16(a) Beneficial Ownership Reporting Compliance,” “Corporate Governance – Committees of the Board of Directors –Nominating and Corporate Governance Committee,” “Corporate Governance – Committees of the Board of Directors – Audit Committee” and “CorporateGovernance – Committees of the Board of Directors – Compensation Committee” in our Proxy Statement.Item 11. Executive Compensation.The information required by this item is incorporated by reference to the information set forth in the sections titled “Executive Compensation,” “DirectorCompensation” and “Committees of the Board of Directors — Compensation Committee Interlocks and Insider Participation” in our Proxy Statement.Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.The information required by this item is incorporated by reference to the information set forth in the sections titled “Securities Authorized For Issuance UnderEquity Compensation Plans” and “Security Ownership of Certain Beneficial Owners and Management” in our Proxy Statement.Item 13. Certain Relationships and Related Transactions, and Director Independence.The information required by this item is incorporated by reference to the information set forth in the sections titled “Corporate Governance – Board ofDirectors Independence” and “Transactions With Related Persons” in our Proxy Statement.Item 14. Principal Accountant Fees and Services.The information required by this item is incorporated by reference to the information set forth in the sections titled “Independent Registered PublicAccounting Firm Fees and Services” in our Proxy Statement. 94 PART IVItem 15. Exhibits and Financial Statement Schedules.The financial statements schedules and exhibits filed as part of this Annual Report on Form 10-K are as follows:(a)(1) Financial StatementsReference is made to the financial statements included in Item 8 of Part II hereof.(a)(2) Financial Statement SchedulesAll other schedules are omitted because they are not required or the required information is included in the financial statements or notes thereto.(a)(3) ExhibitsThe exhibits required to be filed as part of this report are listed in the Exhibit List attached hereto and are incorporated herein by reference. ExhibitNo. Description 3.1 Amended and Restated Certificate of Incorporation (incorporated herein by reference to Exhibit 3.1 to the company’s Current Report onForm 8-K (File No. 001-36070), filed with the SEC on September 23, 2013). 3.2 Amended and Restated Bylaws (incorporated herein by reference to Exhibit 3.4 to the company’s Registration Statement on Form S-1(File No. 333-190194), filed with the SEC on July 26, 2013). 4.1 Specimen common stock certificate (incorporated herein by reference to Exhibit 4.1 to the company’s Amendment No. 3 to theRegistration Statement on Form S-1 (File No. 333-190194), filed with the SEC on September 4, 2013).10.1+ 2002 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.2 to the company’s Registration Statement on Form S-1 (FileNo. 333-190194), filed with the SEC on July 26, 2013).10.2+ Form of Option Agreement under 2002 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.3 to the company’sRegistration Statement on Form S-1 (File No. 333-190194), filed with the SEC on July 26, 2013).10.3+ 2010 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the company’s Registration Statement on Form S-1 (FileNo. 333-190194), filed with the SEC on July 26, 2013).10.4+ Form of Option Agreement under 2010 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.5 to the company’sRegistration Statement on Form S-1 (File No. 333-190194), filed with the SEC on July 26, 2013).10.5+ 2013 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 4.8 to the company’s Registration Statement on Form S-8(File No. 333-191700), filed with the SEC on October 11, 2013).10.6+ Amendment No. 1 to Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.4 to the company’s Quarterly Report onForm 10-Q (File No. 001-36070), filed with the SEC on November 6, 2017).95 ExhibitNo. Description10.7+ Form of Incentive Stock Option Agreement under 2013 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.7 to thecompany’s Registration Statement on Form S-1 (File No. 333-190194), filed with the SEC on July 26, 2013).10.8+ Form of Non-Qualified Option Agreement under 2013 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.8 to thecompany’s Registration Statement on Form S-1 (File No. 333-190194), filed with the SEC on July 26, 2013).10.9+ Form of Restricted Stock Agreement under 2013 Omnibus Incentive Plan (incorporated herein by reference to Exhibit 10.9 to thecompany’s Registration Statement on Form S-1 (File No. 333-193491), filed with the SEC on January 22, 2014).10.10+ 2013 Employee Stock Purchase Plan (incorporated herein by reference to Exhibit 4.11 to the company’s Registration Statement on FormS-8 (File No. 333-191700), filed with the SEC on October 11, 2013).10.11+ Offer Letter Agreement by and between the company and Aron M. Knickerbocker, dated as of October 18, 2017 (incorporated herein byreference to Exhibit 10.2 to the company’s Quarterly Report on Form 10-Q (File No. 001-36070), filed with the SEC on November 6,2017).10.12+ Offer Letter Agreement by and between the company and Marc L. Belsky, dated as of September 3, 2009 (incorporated herein byreference to Exhibit 10.12 to the company’s Registration Statement on Form S-1 (File No. 333-193491), filed with the SEC on January22, 2014).10.13+ Offer Letter Agreement by and between the company and Francis Sarena, dated as of December 2, 2010 (incorporated herein by referenceto Exhibit 10.10 to the company’s Registration Statement on Form S-1 (File No. 333-190194), filed with the SEC on July 26, 2013).10.14+ Offer Letter Agreement by and between the company and Bryan Irving, dated as of July 27, 2017.10.15+ Offer Letter Agreement by and between the company and David V. Smith, dated as of October 24, 2018.10.16+ Offer Letter Agreement by and between the company and Lewis T. Williams, dated as of November 17, 2017 (incorporated herein byreference to Exhibit 10.17 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with the SEC on February 27,2018).10.17+ Offer Letter by and between the company and Helen Collins, dated as of May 12, 2016 (incorporated herein by reference to Exhibit10.18 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with the SEC on February 27, 2018).10.18+ Executive Severance Benefits Agreement by and between the company and Lewis T. Williams, dated as of April 19, 2007 (incorporatedherein by reference to Exhibit 10.11 to the company’s Registration Statement on Form S-1 (File No. 333-190194), filed with the SEC onJuly 26, 2013).10.19+ Executive Severance Benefits Agreement by and between the company and Aron M. Knickerbocker, dated as of December 30, 2009(incorporated herein by reference to Exhibit 10.12 to the company’s Registration Statement on Form S-1 (File No. 333-190194), filedwith the SEC on July 26, 2013).10.20+ Amendment No. 1 to the Executive Severance Benefits Agreement by and between the company and Aron M. Knickerbocker, effectiveDecember 5, 2012 (incorporated herein by reference to Exhibit 10.13 to the company’s Registration Statement on Form S-1 (File No.333-190194), filed with the SEC on July 26, 2013).10.21+ Amendment No. 2 to the Executive Severance Benefits Agreement by and between the company and Aron M. Knickerbocker, effectiveOctober 18, 2017 (incorporated herein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q (File No. 001-36070), filed with the SEC on November 6, 2017).96 ExhibitNo. Description10.22+ Executive Severance Benefits Agreement by and between the company and Marc L. Belsky, dated as of December 30, 2009(incorporated herein by reference to Exhibit 10.17 to the company’s Registration Statement on Form S-1 (File No. 333-193491), filedwith the SEC on January 22, 2014).10.23+ Executive Severance Benefits Agreement by and between the company and Francis Sarena, dated as of February 18, 2011 (incorporatedherein by reference to Exhibit 10.14 to the company’s Registration Statement on Form S-1 (File No. 333-190194), filed with the SEC onJuly 26, 2013).10.24+ Amendment No. 1 to the Executive Severance Benefits Agreement by and between the company and Francis Sarena, effective May 8,2013 (incorporated herein by reference to Exhibit 10.15 to the company’s Registration Statement on Form S-1 (File No. 333-190194),filed with the SEC on July 26, 2013).10.25+ Amendment No. 1 to the Executive Severance Benefits Agreement by and between the company and Marc Belsky, effective January 16,2014 (incorporated herein by reference to Exhibit 10.18 to the company’s Registration Statement on Form S-1 (File No. 333-193491),filed with the SEC on January 22, 2014).10.26+ Executive Severance Benefits Agreement by and between the company and Bryan Irving, dated as of September 5, 2017.10.27+ Executive Severance Benefits Agreement by and between the company and David V. Smith, dated as of November 26, 2018.10.28+ Executive Severance Benefits Agreement by and between the company and Helen Collins, dated as of March 20, 2017 (incorporatedherein by reference to Exhibit 10.30 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with the SEC onFebruary 27, 2018).10.29+ Consulting Agreement by and between the company and Marc Belsky, effective as of April 7, 2018 (incorporated herein by reference toExhibit 10.1 to the company’s Quarterly Report on Form 10-Q (File No. 001-36070), filed with the SEC on May 8, 2018).10.30+ Amendment to Stock Option Agreements by and between the company and Marc Belsky, effective as of April 6, 2018 (incorporatedherein by reference to Exhibit 10.2 to the company’s Quarterly Report on Form 10-Q (File No. 001-36070), filed with the SEC on May 8,2018).10.31+ Form of Retention Award Agreement (incorporated herein by reference to Exhibit 10.1 to the company’s Current Report on Form 8-K(File No. 001-36070), filed with the SEC on May 4, 2015).10.32+ Form of Restricted Stock Agreement (incorporated herein by reference to Exhibit 10.27 to the company’s Annual Report on Form 10-K(File No. 001-36070), filed with the SEC on February 24, 2017).10.33+ Annual Bonus Plan, effective January 1, 2018 (incorporated herein by reference to Exhibit 10.34 to the company’s Annual Report onForm 10-K (File No. 001-36070), filed with the SEC on February 27, 2018).10.34+ Form of Indemnification Agreement by and between the company and each of its directors and officers (incorporated herein by referenceto Exhibit 10.16 to the company’s Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-190194), filed with theSEC on August 16, 2013).10.35 Lease by and between the company and HCP Oyster Point III LLC, dated as of December 12, 2016 (incorporated herein by reference toExhibit 10.34 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with the SEC on February 24, 2017).10.36+ Confidential Consulting Agreement by and between the company and FLG Partners, LLC, dated as of April 13, 2018 (incorporatedherein by reference to Exhibit 10.3 to the company’s Quarterly Report on Form 10-Q (File No. 001-36070), filed with the SEC on May 8,2018).97 ExhibitNo. Description10.37+ Amendment No. 1 to the Confidential Consulting Agreement by and between the company and FLG Partners, LLC, dated as of October13, 2018.v10.38† Exclusive License Agreement by and between the company and Galaxy Biotech, LLC, dated as of December 22, 2011 (incorporatedherein by reference to Exhibit 10.23 to the company’s Amendment No. 1 to the Registration Statement on Form S-1 (File No. 333-190194), filed with the SEC on August 16, 2013).10.39† Amendment to the Exclusive License Agreement by and between the company and Galaxy Biotech, LLC, dated as of May 16, 2016(incorporated herein by reference to Exhibit 10.1 to the company’s quarterly report on Form 10-Q (File No. 001-36070), filed with theSEC on August 5, 2016).10.40† Amendment No. 2 to the Exclusive License Agreement by and between the company and Galaxy Biotech, LLC, dated as of May 30,2017 (incorporated herein by reference to Exhibit 10.39 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed withthe SEC on February 27, 2018).10.41† Non-Exclusive License Agreement by and among the company, BioWa, Inc. and Lonza Sales AG, dated as of February 6, 2012(incorporated herein by reference to Exhibit 10.30 to the company’s Amendment No. 1 to the Registration Statement on Form S-1 (FileNo. 333-190194), filed with the SEC on August 16, 2013).10.42†† Amendment No. 1 to the Non-Exclusive License Agreement by and among the company, BioWa, Inc. and Lonza Sales AG, dated as ofJune 6, 2013.10.43†† Amendment No. 2 to the Non-Exclusive License Agreement by and among the company, BioWa, Inc. and Lonza Sales AG, dated as ofApril 27, 2018.10.44† Research Collaboration and License Agreement by and between the company and Bristol-Myers Squibb Company, dated as of March14, 2014 (incorporated herein by reference to Exhibit 10.1 to Amendment No. 1 the company’s Quarterly Report on Form 10-Q (File No.001-36070), filed with the SEC on August 26, 2014).10.45† Amendment No. 1 to the Research Collaboration and License Agreement by and between the company and Bristol-Myers SquibbCompany, dated as of January 21, 2016 (incorporated herein by reference to Exhibit 10.47 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with the SEC on March 11, 2016).10.46† License and Collaboration Agreement by and between the company and Bristol-Myers Squibb Company, dated as of October 14, 2015(incorporated herein by reference to Exhibit 10.49 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with theSEC on March 11, 2016).10.47† License and Collaboration Agreement by and between the company and Zai Lab (Shanghai) Co., Ltd., dated as of December 19, 2017(incorporated herein by reference to Exhibit 10.44 to the company’s Annual Report on Form 10-K (File No. 001-36070), filed with theSEC on February 27, 2018).10.48†† Amendment No. 1 to the License and Collaboration Agreement by and between the company and Zai Lab (Shanghai) Co., Ltd., dated asof December 21, 2018.21.1 Subsidiaries of the company (incorporated herein by reference to Exhibit 21.1 to the company’s Registration Statement on Form S-1(File No. 333-190194), filed with the SEC on July 26, 2013).23.1* Consent of Independent Registered Public Accounting Firm.24.1 Power of Attorney (included on the signature page to this Annual Report on Form 10-K).31.1* Certification of Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Actof 1934, as amended.98 ExhibitNo. Description31.2* Certification of Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) promulgated under the Securities Exchange Act of1934, as amended.32.1* Certifications of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.32.2* Certifications of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-OxleyAct of 2002.101.INS XBRL Instance Document.101.SCH XBRL Taxonomy Extension Schema Document.101.CAL XBRL Taxonomy Extension Calculation Linkbase Document.101.DEF XBRL Taxonomy Extension Definition Linkbase Document.101.LAB XBRL Taxonomy Extension Labels Linkbase Document.101.PRE XBRL Taxonomy Extension Presentation Linkbase Document. *Furnished herewith and not deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or the ExchangeAct, and shall not be deemed to be incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.+Indicates a management contract or compensatory plan.†Confidential treatment has been granted for certain portions of this exhibit. These portions have been omitted and filed separately with the SEC.††Confidential treatment has been requested for certain portions of this exhibit. These portions have been omitted and filed separately with the SEC. 99 SIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report tobe signed on its behalf by the undersigned thereunto duly authorized. Five Prime Therapeutics, Inc. (Registrant) Date: February 26, 2019 /s/ Aron Knickerbocker Aron KnickerbockerPresident and Chief Executive Officer(Principal Executive Officer) Date: February 26, 2019 /s/ David V. Smith David V. SmithExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) POWER OF ATTORNEYEach person whose individual signature appears below hereby authorizes and appoints Aron Knickerbocker and Francis W. Sarena, and each of them,with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in hisor her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file any and allamendments to this report on Form 10-K, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities andExchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act andthing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to bedone by virtue thereof.Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report on Form 10-K has been signed below by the followingpersons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Aron Knickerbocker Chief Executive Officer,President and Director(Principal Executive Officer) February 26, 2019Aron Knickerbocker /s/ David V. Smith Executive Vice President andChief Financial Officer(Principal Financial and Accounting Officer) February 26, 2019David V. Smith /s/ Franklin M. Berger Director February 26, 2019Franklin M. Berger /s/ Kapil Dhingra, M.B.B.S. Director February 26, 2019Kapil Dhingra, M.B.B.S. /s/ Sheila Gujrathi, M.D. Director February 26, 2019Sheila Gujrathi, M.D. /s/ Peder Jensen, M.D. Director February 26, 2019Peder Jensen, M.D. /s/ Garry Nicholson Director February 26, 2019Garry Nicholson /s/ William Ringo Chairman of the Board February 26, 2019William Ringo /s/ Lewis T. Williams, M.D., Ph.D. Director February 26, 2019Lewis T. Williams, M.D., Ph.D. FIVE PRIME THERAPEUTICS, INC.FINANCIAL STATEMENTSYEARS ENDED DECEMBER 31, 2018, 2017 AND 2016Index PAGEReport of Independent Registered Public Accounting Firm F-2Audited Financial Statements: Balance Sheets F-3Statements of Operations F-4Statements of Comprehensive Loss F-5Statements of Stockholders’ Equity F-6Statements of Cash Flows F-7Notes to Financial Statements F-8 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Five Prime Therapeutics, Inc.Opinion on the Financial StatementsWe have audited the accompanying balance sheets of Five Prime Therapeutics, Inc. (the “Company”) as of December 31, 2018 and 2017, and the relatedstatements of operations, comprehensive loss, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and therelated notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, thefinancial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the periodended December 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 26, 2019 expressed an unqualifiedopinion thereon.Adoption of ASU No. 2014-09As discussed in Note 2 to the financial statements, the Company changed its method of recognizing revenue as a result of the adoption of AccountingStandards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the amendments in ASUs 2015-14, 2016-10 and 2016-12effective January 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 LLP We have served as the Company’s auditor since 2003.San Francisco, CaliforniaFebruary 26, 2019 F-2 FIVE PRIME THERAPEUTICS, INC.Balance Sheets(In thousands, except share and per share amounts) December 31, 2018 2017 Assets Current assets: Cash and cash equivalents $43,953 $59,790 Marketable securities 226,185 232,900 Receivables from collaborative partners 5,096 13,133 Prepaid and other current assets 13,334 5,367 Total current assets 288,568 311,190 Restricted cash 1,543 1,543 Property and equipment, net 28,718 30,762 Other long-term assets 2,705 552 Total assets $321,534 $344,047 Liabilities and stockholders’ equity Current liabilities: Accounts payable $1,972 $2,237 Accrued personnel-related expenses 7,383 7,156 Other accrued liabilities 15,348 27,519 Deferred revenue, current portion 1,428 12,713 Deferred rent, current portion 1,356 1,356 Total current liabilities 27,487 50,981 Deferred revenue, long-term portion 10,465 10,223 Deferred rent, long-term portion 18,443 17,641 Commitments and contingencies (Note 11) Stockholders’ equity: Common stock, $0.001 par value; 100,000,000 shares authorized, 35,625,751 issued and 34,745,721 outstanding atDecember 31, 2018. 28,982,056 issued and 28,178,639 outstanding at December 31, 2017. 34 28 Preferred stock, $0.001 par value, 10,000,000 shares authorized; no shares issued and outstanding — — Additional paid-in capital 559,892 421,257 Accumulated other comprehensive loss (106) (476)Accumulated deficit (294,681) (155,607)Total stockholders’ equity 265,139 265,202 Total liabilities and stockholders’ equity $321,534 $344,047 The accompanying notes are an integral part of these financial statements.F-3 FIVE PRIME THERAPEUTICS, INC.Statements of Operations(In thousands, except per share amounts) Year Ended December 31, 2018 2017 2016 Collaboration and license revenue $49,868 $39,508 $30,691 Operating expenses: Research and development 156,352 150,908 94,072 General and administrative 39,671 40,002 35,831 Total operating expenses 196,023 190,910 129,903 Loss from operations (146,155) (151,402) (99,212)Interest income 5,792 2,978 2,467 Other loss, net (84) (94) - Loss before income tax (140,447) (148,518) (96,745)Income tax (provision) benefit — (1,704) 31,048 Net loss $(140,447) $(150,222) $(65,697)Basic and diluted net loss per common share $(4.13) $(5.38) $(2.44)Weighted-average shares used to compute basic and diluted net loss per common share 33,976 27,945 26,955 The accompanying notes are an integral part of these financial statements.F-4 FIVE PRIME THERAPEUTICS, INC.Statements of Comprehensive Loss(In thousands) Year Ended December 31, 2018 2017 2016 Net loss $(140,447) $(150,222) $(65,697)Other comprehensive gain (loss): Unrealized gain (loss) on marketable securities, net of tax 370 (437) 35 Comprehensive loss $(140,077) $(150,659) $(65,662) The accompanying notes are an integral part of these financial statements. F-5 FIVE PRIME THERAPEUTICS, INC.Statements of Stockholders’ Equity(In thousands, except share data) Accumulated Retained Additional Other Earnings Total Common Stock Paid-In Comprehensive (Accumulated Stockholders' Shares Amount Capital Loss Deficit) Equity Balances at December 31, 2015 26,116,886 $26 $372,605 $(74) $60,649 $433,206 Issuance of common stock under equity incentive plans and related excess tax benefits 1,730,340 1 5,199 — — 5,200 Repurchase of shares to satisfy tax withholding obligations (338,149) — (14,054) — — (14,054)Stock-based compensation expense — — 32,885 — — 32,885 Other comprehensive gain — — — 35 — 35 Net loss — — — — (65,697) (65,697)Balances at December 31, 2016 27,509,077 27 396,635 (39) (5,048) 391,575 Issuance of common stock under equity incentive plans 992,556 1 4,021 — — 4,022 Repurchase of shares to satisfy tax withholding obligations (322,994) — (13,909) — — (13,909)Cumulative effect of adoption of ASU 2016-09 — — 337 — (337) — Stock-based compensation expense — — 34,173 — — 34,173 Other comprehensive loss — — — (437) — (437)Net loss — — — — (150,222) (150,222)Balances at December 31, 2017 28,178,639 28 421,257 (476) (155,607) 265,202 Issuance of common stock upon follow-on public offering, net of issuance costs 5,897,435 6 114,994 — — 115,000 Issuance costs related to the follow-on public offering — — (7,388) — — (7,388)Issuance of common stock under equity incentive plans 821,456 — 3,963 — — 3,963 Repurchase of shares to satisfy tax withholding obligations (151,809) — (2,402) — — (2,402)Effect of adoption of ASU 2014-09 — — — — 1,373 1,373 Stock-based compensation expense — — 29,468 — — 29,468 Other comprehensive gain — — — 370 — 370 Net loss — — — — (140,447) (140,447)Balances at December 31, 2018 34,745,721 34 559,892 (106) (294,681) 265,139 The accompanying notes are an integral part of these financial statements. F-6 FIVE PRIME THERAPEUTICS, INC.Statements of Cash Flows(In thousands) Year Ended December 31, 2018 2017 2016 Operating activities Net income loss $(140,447) $(150,222) $(65,697)Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,020 2,513 1,742 Loss on disposal of property and equipment 38 95 9 Stock-based compensation expense 29,468 34,173 32,885 Amortization of discounts and premiums on marketable securities (1,750) 1,621 4,187 Excess tax benefits from employee equity incentive plans — — 3,123 Deferred income taxes — — 15,071 Changes in operating assets and liabilities: Receivables from collaborative partners 8,037 (9,174) 95 Income tax receivable — 4,670 (4,670)Prepaid, other current assets, and other long-term assets (10,120) 4,235 (2,999)Restricted cash — — (1,543)Accounts payable (265) 1,903 (1,560)Accrued personnel-related expenses 227 (801) 1,079 Deferred revenue (9,670) (9,070) (16,771)Deferred rent 802 3,699 (768)Income tax payable — — (52,843)Other accrued liabilities, and other long-term liabilities (3,854) 4,174 8,909 Net cash used in operating activities (122,514) (112,184) (79,751)Investing activities Purchases of marketable securities (377,365) (330,363) (516,752)Maturities of marketable securities 386,200 509,500 466,000 Proceeds from disposal of property and equipment — 12 — Purchases of property and equipment (11,331) (4,941) (2,961)Net cash (used in) provided by investing activities (2,496) 174,208 (53,713)Financing activities Proceeds from public offering of common stock, net of issuance costs 107,612 — — Proceeds from issuance of common stock under equity incentive plans 3,963 4,022 8,323 Repurchase of shares to satisfy tax withholding obligations (2,402) (13,909) (14,054)Excess tax benefits from employee equity incentive plans — — (3,123)Net cash provided by (used in) financing activities 109,173 (9,887) (8,854)Net (decrease) increase in cash and cash equivalents and restricted cash (15,837) 52,137 (142,318)Cash, cash equivalents and restricted cash at beginning of period 61,333 9,196 149,971 Cash, cash equivalents and restricted cash at end of period $45,496 $61,333 $9,196 Supplemental disclosure Income taxes paid $— $1,704 $11,433 Property and equipment purchases included in accrued liabilities $716 $9,033 $1,232 Tenant improvement by the landlord $— $14,324 $— Supplemental cash flow information Cash and cash equivalents at beginning of period $59,790 $7,653 $149,971 Restricted cash at beginning of period 1,543 1,543 - Cash, cash equivalents and restricted cash at beginning of period 61,333 9,196 149,971 Cash and cash equivalents at end of period $43,953 $59,790 $7,653 Restricted cash at end of period 1,543 1,543 1,543 Cash, cash equivalents and restricted cash at end of period 45,496 61,333 9,196 The accompanying notes are an integral part of these financial statements. F-7 FIVE PRIME THERAPEUTICS, INC.Notes to Financial StatementsDecember 31, 2018 1. BusinessFive Prime Therapeutics, Inc. (we, us, our, or the Company) is a clinical-stage biotechnology company focused on discovering and developing innovativeprotein therapeutics. We were incorporated in December 2001 in Delaware. Our operations are based in South San Francisco, California and we operate in onesegment.We have reclassified certain prior period amounts within our footnotes to conform to our current period presentation.2. Summary of Significant Accounting PoliciesUse of EstimatesThe preparation of financial statements in conformity GAAP requires management to make estimates and assumptions that affect the amounts reported in thefinancial statements and accompanying notes as of the date of the financial statements. The most significant estimates in the Company’s financial statementsinclude the recognition of revenue, stock-based compensation, completeness of clinical trial accruals and income taxes. Management bases its estimates onhistorical experience and on various other market-specific and relevant assumptions that management believes to be reasonable. Actual results could differmaterially from those estimates.Cash and Cash EquivalentsWe consider all highly liquid investments purchased with original maturities of three months or less at the date of purchase to be cash equivalents. Cashequivalents are recorded at face value, or cost, which approximates fair value.Restricted CashRestricted cash consists of a certificate of deposit held by our bank as collateral for a standby letter of credit in the same notional amount by our landlord tosecure our obligations under our corporate office and laboratory facility lease entered in December 2016. We are required to maintain this restricted cashbalance, the amount of which is subject to reduction starting on January 1, 2023, if certain conditions are met, for the duration of this lease. See Note 11 forfurther discussion on our lease.Marketable SecuritiesAll marketable securities have been classified as “available-for-sale” and are carried at fair value, based upon quoted market prices. We consider ouravailable-for-sale portfolio as available for use in current operations. Accordingly, we classify certain investments as short-term marketable securities, eventhough the stated maturity date may be one year or more beyond the current balance sheet date. Unrealized gains and losses, net of any related tax effects, areexcluded from earnings and are included in other comprehensive income or loss and reported as a separate component of stockholders’ equity or deficit untilrealized. Realized gains and losses and declines in value judged to be other than temporary, if any, on available-for-sale securities are included in otherincome (expense), net. The cost of securities sold is based on the specific identification method. We adjust the amortized cost of securities for amortization ofpremiums and accretion of discounts to maturity. We include interest on short-term investments in interest income. In accordance with our investment policy,management invests to diversify credit risk and only invests in debt securities with high credit quality, including U.S. government securities.F-8 We periodically evaluate whether declines in the fair value of our investments below their cost are other than temporary. The evaluation includesconsideration of the cause of the impairment, including the creditworthiness of the security issuers, the number of securities in an unrealized loss position, theseverity and duration of the unrealized losses, whether we have the intent to sell the securities, and whether it is more likely than not that we will be requiredto sell the securities before the recovery of their amortized cost basis. If we determine that the decline in fair value of an investment is below its accountingbasis and this decline is other than temporary, we would reduce the carrying value of the security we hold and record a loss for the amount of such decline.We have not recorded any realized losses or declines in value judged to be other than temporary on our investments in debt securities.Concentrations of Credit RiskFinancial instruments that potentially subject us to significant concentrations of credit risk consist primarily of cash and cash equivalents and marketablesecurities. Cash and cash equivalents and marketable securities are invested through banks and other financial institutions in the United States. Such depositsin the United States may be in excess of insured limits.Fair Value of Financial InstrumentsWe determine the fair value of financial and nonfinancial assets and liabilities using the fair value hierarchy, which describes three levels of inputs that maybe used to measure fair value, as follows:Level 1—Quoted prices in active markets for identical assets or liabilities;Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices for identical or similar assetsor liabilities 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. For our marketable securities, we review trading activity and pricing as of the measurement date. When sufficientquoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained fromvarious third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived fromobservable market data; andLevel 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.We determine the fair value of Level 1 assets using quoted prices in active markets for identical assets. We review trading activity and pricing for Level 2investments as of each measurement date. Level 2 inputs, obtained from various third-party data providers, represent quoted prices for similar assets in activemarkets and were derived from observable market data, or, if not directly observable, were derived from or corroborated by other observable market data.There were no transfers between Level 1 and Level 2 securities in the periods presented.In certain cases where there is limited activity or less transparency around inputs to valuation, securities are classified as Level 3 within the valuationhierarchy. We do not have any assets or liabilities measured using Level 3 inputs as of December 31, 2018.F-9 The following table summarizes our financial instruments that were measured at fair value on a recurring basis by level of input within the fair valuehierarchy defined above (in thousands): December 31, 2018 Basis of Fair Value Measurements Total Level 1 Level 2 Level 3 Assets Money market funds $40,849 $40,849 $— $— U.S. Treasury securities 104,140 104,140 — — Agency bonds 53,999 53,999 — — Corporate bonds 11,893 — 11,893 — Commercial paper 56,152 — 56,152 — Certificate of deposit 1,543 — 1,543 — Total $268,576 $198,988 $69,588 $— December 31, 2017 Basis of Fair Value Measurements Total Level 1 Level 2 Level 3 Assets Money market funds $31,802 $31,802 $— $— U.S. Treasury securities 232,900 232,900 — — Certificate of deposit 1,543 — 1,543 — Total $266,245 $264,702 $1,543 $— Property and EquipmentProperty and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, ranging from three tofive years. Leasehold improvements are amortized over the shorter of their estimated useful lives or the related lease term.Impairment of Long-Lived AssetsLong-lived assets include property and equipment. We review the carrying value of long-lived assets for impairment whenever events or changes incircumstances indicate that the assets may not be recoverable. We recognize an impairment loss when the total estimated future cash flows expected to resultfrom the use of the asset and its eventual disposition are less than the carrying amount. Through December 31, 2018, there have been no such impairmentlosses.Revenue RecognitionEffective January 1, 2018, we adopted Financial Accounting Standards Board, or FASB, Accounting Standard Update, or ASU 2014-09, Revenue fromContracts with Customers (Topic 606), or Topic 606, using the modified retrospective transition method. We applied the standard to contracts that were notcompleted at the date of initial application. Topic 606 provides a unified model to determine how revenue is recognized. We determine revenue recognitionfor arrangements within the scope of Topic 606 by performing the following five steps: (i) identify the contract; (ii) identify the performance obligations inthe contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenuewhen, or as, the company satisfies a performance obligation. F-10 The terms of our collaborative research and development agreements include upfront and license fees, research, development and other funding orreimbursements, milestone and other contingent payments for the achievement of defined collaboration objectives and certain preclinical, clinical,regulatory and sales-based events, as well as royalties on sales of commercialized products. Arrangements that include upfront payments may require deferralof revenue recognition to a future period until we perform obligations under these arrangements. We record research and development funding payable to usas accounts receivable when our right to consideration is unconditional. The event-based milestone and other contingent payments represent variableconsideration, and we use the most likely amount method to estimate this variable consideration. Given the high degree of uncertainty around occurrence ofthese events, we determine the milestone and other contingent amounts to be fully constrained until the uncertainty associated with these payments isresolved. We will recognize revenue from sales-based royalty payments when or as the sales occur. We will re-evaluate the transaction price in each reportingperiod as uncertain events are resolved and other changes in circumstances occur.A performance obligation is a promise in a contract to transfer a distinct good or service and is the unit of accounting in Topic 606. A contract’s transactionprice is allocated among each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, theapplicable performance obligation is satisfied. Under Topic 606, we elected to use the practical expedient permitted related to adoption, which does notrequire us to disclose certain information regarding our remaining performance obligations as of the end of the reporting period prior to the initial date ofadoption. Additionally, we elected the practical expedient for certain research and development funding which allows us to recognize revenue in the amountfor which we have a right to invoice if our right to consideration is an amount that corresponds directly to the value of our performance completed to date. Asa result, we effectively bypass the steps of determining the transaction price and allocating that transaction price to the performance obligation.Research and Development ExpensesResearch and development expenses consist of costs we incur for our own and for sponsored and collaborative research and development activities. Researchand development costs are expensed as incurred. Research and development costs consist of salaries and benefits, including associated stock-basedcompensation, laboratory supplies and facility costs, as well as fees paid to other entities that conduct certain research and development activities on ourbehalf. We estimate preclinical study and clinical trial expenses based on the services performed pursuant to contracts with research institutions and contractresearch organizations, or CROs, and clinical manufacturing organizations, or CMOs, that conduct and manage preclinical studies and clinical trials on ourbehalf based on actual time and expenses incurred by them. Further, we accrue expenses related to clinical trials based on the level of patient activityaccording to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimatesaccordingly. If we do not identify costs that we have begun to incur or if we underestimate or overestimate the level of services performed or the costs of theseservices, our actual expenses could differ from our estimates.We expense payments for the acquisition and development of technology as research and development costs if, at the time of payment, the technology: isunder development; is not approved by the U.S. Food and Drug Administration or other regulatory agencies for marketing; has not reached technicalfeasibility; or otherwise has no foreseeable alternative future use.Stock-Based CompensationWe recognize compensation expense using a fair-value-based method for costs related to all share-based payments, including restricted stock awards, orRSAs, and stock option awards. For RSAs, stock-based compensation cost is based on the closing market value of our common stock at the date of grant andis recognized as expense ratably over the requisite service period. For stock option awards, stock-based compensation cost is measured at the grant date,based on the fair-value-based measurement of the award estimated using the Black-Scholes option-pricing model, and is recognized as expense over therequisite service period on a straight-line basis. We account for forfeitures as they occur by reversing any expense recognized for unvested awards.F-11 Income TaxesWe account for income taxes using the liability method, under which deferred tax assets and liabilities are determined based on differences between financialreporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expectedto reverse. Valuation allowances are provided when the expected realization of the deferred tax assets does not meet the more-likely-than-not criteria. As aresult, deferred tax assets at the end of 2018 and 2017 are subject to a full valuation allowance. We are required to determine whether it is more likely thannot that a tax position will be sustained upon examination by the appropriate taxing authorities before any part of the benefit can be recorded in the financialstatements. It is our practice to recognize interest and penalties related to unrecognized tax benefits, if any, as a component of income tax expense.Accounting Pronouncements Adopted in 2018In May 2014, FASB issued Topic 606, which supersedes nearly all existing revenue recognition guidance under U.S. generally accepted accountingprinciples, or GAAP. FASB subsequently issued amendments to Topic 606 that have the same effective date and transition date. The core principle of Topic606 is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to bereceived for those goods or services. Topic 606 defines a five-step process to achieve this core principle and, in as a result, more judgment and estimates maybe required in the course of the revenue recognition process, including with respect to identifying performance obligations in a contract, estimating theamount of variable consideration to include in the transaction price and allocating the transaction price to each separate performance obligation.We adopted Topic 606, effective January 1, 2018, using the modified retrospective transition method, in which the new standard is applied as of the date ofinitial adoption. We applied the standard to contracts that were not completed at the date of initial application. We recorded the cumulative effect of initiallyapplying the standard as an adjustment to the opening balance of retained earnings. The adoption of the new revenue recognition guidance resulted in adecrease of $1.4 million to deferred revenue and an increase of $1.4 million to retained earnings as of January 1, 2018. Additionally, we determined that theclassification between deferred revenue, current portion, and deferred revenue, long-term portion, changed as a result of adoption of Topic 606. Weconcluded that we will classify deferred revenue for all licensing and collaboration arrangements as deferred revenue, long-term portion, and will reclassify todeferred revenue, current portion, when the remaining term of the estimated performance period is one year or less.Our adoption of Topic 606 effective January 1, 2018 affected the following financial statement line items:Condensed Statements of Operations Year Ended December 31, 2018 (in thousands, except per share data)Under Topic 606 Under Topic 605 Effect of change Collaboration and license revenue$49,868 $52,329 $(2,461)Operating expenses 196,023 196,023 — Operating loss$(146,155)$(143,694)$(2,461)Net loss$(140,447)$(137,986)$(2,461)Net loss per share applicable to common stockholders - basic and diluted$(4.13)$(4.06)$(0.07) Condensed Balance Sheets December 31, 2018 (in thousands)Under Topic 606 Under Topic 605 Effect of change Receivables from collaborative partner$5,096 $5,096 $— Deferred revenue, current portion 1,428 8,187 (6,759)Deferred revenue, long-term portion 10,465 2,618 7,847 Accumulated deficit (294,681) (293,593) (1,088)F-12 Condensed Statement of Cash Flows Year Ended December 31, 2018 (in thousands)Under Topic 606 Under Topic 605 Effect of change Net loss$(140,447)$(137,986)$(2,461)Decrease in deferred revenue in connection with Topic 606 adoption 1,373 — 1,373 Changes in operating assets and liabilities Receivables from collaborative partner 8,037 8,037 — Deferred revenue (11,043) (12,131) 1,088 Cash, cash equivalents and restricted cash at beginning of period 61,333 61,333 — Cash, cash equivalents and restricted cash at end of period 45,496 45,496 — In May 2017, FASB issued ASU 2017-09, Compensation-Stock Compensation (Topic 718) – Scope of Modification Accounting, or ASU 2017-09, whichamends the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting toan equity award if the fair value, vesting conditions, and classification of such award are the same immediately before and after the modification. Weadopted the standard, effective January 1, 2018, to be applied prospectively to awards modified on or after the effective date. We did not have anyarrangements within the scope of ASU 2017-09 as of the adoption date, and therefore the adoption of ASU 2017-09 had no effect on our financialposition, results of operations or liquidity.In November 2016, FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230) – Restricted Cash, or ASU 2016-18. ASU 2016-18 requires that astatement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash orrestricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cashequivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. We adopted ASU 2016-18,effective January 1, 2018, to be applied retrospectively and revised the beginning and ending balance of our statement of cash flows to include restrictedcash. Other than the change in presentation in the accompanying consolidated statement of cash flows, the adoption of ASU 2016-18 had no effect on ourfinancial position, results of operations or liquidity.In June 2018, FASB issued ASU 2018-07, Compensation-Stock Compensation (Topic 718) – Improvements to Nonemployee Share-Based PaymentAccounting, or ASU 2018-07. ASU 2018-07 expanded the scope of Topic 718, which previously included only share-based payments to employees, toinclude share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees andemployees will be substantially aligned. ASU 2018-07 supersedes Subtopic 505-50, Equity–Equity-Based Payments to Non-Employees. ASU 2018-07 iseffective for public companies for fiscal years, and interim fiscal periods within those fiscal years, beginning after December 15, 2018. Early adoption ispermitted, but no earlier than a company’s adoption date of Topic 606. We early adopted ASU 2018-07 in the second quarter of 2018. No adjustment wasrequired as a result of this adoption.Accounting Pronouncements Not Yet AdoptedIn November 2018, FASB issued ASU No. 2018-18, Collaborative Arrangements (Topic 808), or ASU 2018-18, which clarifies when certain transactionsbetween collaborative arrangement participants should be accounted for under Topic 606 and incorporates unit-of-account guidance consistent with Topic606 to aid in this determination. ASU 2018-18 will become effective January 1, 2020 and will apply to all annual and interim reporting periods thereafter.Early adoption is permitted. ASU 2018-18 should generally be applied retrospectively to the date of initial application of Topic 606. We do not anticipatethat the adoption of this standard will have a material effect on our financial statementsF-13 In August 2018, the SEC adopted amendments to certain disclosure requirements in Securities Act Release No. 33-10532, Disclosure Update andSimplification. These amendments eliminate, modify, or integrate into other SEC requirements certain disclosure rules. Among the amendments is therequirement to present an analysis of changes in stockholders’ equity in the interim financial statements included in quarterly reports on Form 10-Q. Theanalysis, which can be presented as a footnote or separate statement, is required for the current and comparative quarter and year-to-date interim periods. Theamendments are effective for all filings made on or after November 5, 2018. In light of the anticipated timing of effectiveness of the amendments andexpected proximity of effectiveness to the filing date for most filers’ quarterly reports, the SEC’s Division of Corporate Finance issued a Compliance andDisclosure Interpretation related to Exchange Act Forms, or CDI – Question 105.09, that provides transition guidance related to this disclosure requirement.CDI – Question 105.09 states that the SEC would not object if the filer’s first presentation of the changes in shareholders’ equity is included in its quarterlyreport on Form 10-Q for the quarter that begins after the effective date of the amendments. As such, we adopted these SEC amendments on November 5, 2018and will present the analysis of changes in stockholders’ equity beginning the first quarter of 2019. We do not anticipate that the adoption of these SECamendments will have a material effect on our financial position, results of operations, cash flows or shareholders’ equity.In August 2018, FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820), or ASU 2018-13. The updated guidance improvesthe disclosure requirements on fair value measurements. The update will become effective for us beginning in the first quarter of 2020. Early adoption ispermitted for any removed or modified disclosures. We are currently assessing the timing and impact of adopting the updated provisions.In June 2016, FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), or ASU 2016-13. ASU 2016-13 requires measurement andrecognition of expected credit losses for financial assets. This guidance will become effective for us beginning in the first quarter of 2020 and must beadopted using a modified retrospective approach, with certain exceptions. We do not anticipate that the adoption of this standard will have a material effecton our financial statements.In February 2016, FASB issued ASU 2016-02, Leases (Topic 842), or ASU 2016-02, which amends existing guidance to require substantially all leases to berecognized by lessees on their balance sheet as a right-of-use asset and corresponding lease liability, including leases currently accounted for as operatingleases. ASU 2016-02 will become effective January 1, 2019 and will apply to all annual and interim reporting periods thereafter. Early adoption is permitted.Under ASU 2016-02, agreements executed prior to January 1, 2019 that are currently considered leases are expected to be recognized on the consolidatedbalance sheet as right-to-use lease assets and lease liabilities. We plan to elect the practical expedients upon transition that will retain the lease classificationand initial direct costs for any leases that exist prior to adoption of the standard. We will not reassess whether any contracts entered into prior to adoption areleases. We expect to recognize approximately $50.4 million to $54.8 million in lease liabilities and $31.2 million to $35.6 million in right-of use assets onour balance sheet and derecognize existing deferred tax assets of approximately $4.2 million. Further, we anticipate adoption of the standard will not have amaterial impact on our statement of operation. We are in the process of updating our controls and procedures for maintaining and accounting for our leaseportfolio under the new guidance.F-14 3. Cash Equivalents and Marketable SecuritiesThe following is a summary of our cash equivalents and marketable securities at December 31, 2018 and 2017 (in thousands): December 31, 2018 Amortized Unrealized Unrealized Estimated Cost Basis Gains Losses Fair Value Money market funds $40,849 $— $— $40,849 U.S. Treasury securities 104,218 — (78) 104,140 Agency bonds 54,005 9 (15) 53,999 Corporate bonds 11,897 — (4) 11,893 Commercial paper 56,171 0 (19) 56,152 Total cash equivalents and marketable securities 267,140 9 (115) 267,034 Less: cash equivalents (40,849) — — (40,849)Total marketable securities $226,291 $9 $(115) $226,185 December 31, 2017 Amortized Unrealized Unrealized Estimated Cost Basis Gains Losses Fair Value Money market funds $31,802 $— $— $31,802 U.S. Treasury securities 233,376 — (476) 232,900 Total cash equivalents and marketable securities 265,178 — (476) 264,702 Less: cash equivalents (31,802) — — (31,802)Total marketable securities $233,376 $— $(476) $232,900 As of December 31, 2018, the amortized cost and estimated fair value of our available-for-sale securities by contractual maturity are shown below (inthousands): Estimated Amortized Fair Cost Value Debt securities maturing: In one year or less $226,291 $226,185 Total marketable securities $226,291 $226,185 Our cash equivalents and marketable securities have an average maturity of approximately four months and the longest maturity is ten months. There havebeen no significant realized gains or losses on our available-for-sale securities for the periods presented. We determined that the gross unrealized losses of$0.1 million on our marketable securities as of December 31, 2018 were temporary in nature and related primarily to interest rate shifts rather than significantchanges in the underlying credit quality of the securities that we hold. We currently do not intend to sell these securities prior to maturity and do not considerthese investments to be other-than-temporarily impaired at December 31, 2018. There were no sales of available-for-sale securities in any of the periodspresented.F-15 4. Property and EquipmentProperty and equipment consist of the following (in thousands): December 31, 2018 2017 Computer equipment and software $2,403 $1,892 Furniture and fixtures 968 947 Laboratory equipment 19,579 17,429 Leasehold improvements 22,175 22,175 $45,125 $42,443 Less: accumulated depreciation and amortization (16,407) (11,681)Property and equipment, net $28,718 $30,762 We entered into a lease agreement with respect to our new corporate office and laboratory facility in December 2016. During fiscal 2017, we acquired $22.2million of leasehold improvements in connection with our move to the new office. We received lease incentives totaling $14.4 million from our landlord fora portion of the costs of these leasehold improvements.5. Other Accrued LiabilitiesOther accrued liabilities consist of the following (in thousands): December 31, 2018 2017 Clinical development $10,513 $12,580 Manufacturing 1,104 2,835 Trade payable 3,381 3,995 Unpaid leasehold improvements — 7,742 Other 350 367 Total accrued liabilities $15,348 $27,519 6. Stockholders’ EquityWe have 110,000,000 shares of authorized capital stock issuable in series, all with a par value of $0.001 per share, of which 100,000,000 shares aredesignated as common stock and 10,000,000 shares are designated as preferred stock. Our Board is authorized to determine the designation, powers,preferences and rights of any such series. As of December 31, 2018 and 2017, we had 34,745,721 and 28,178,639 shares of common stock outstanding,respectively. There were no shares of preferred stock outstanding as of December 31, 2018 and 2017. In January 2018, we closed on a public offering of 5,897,435 shares of our common stock, which included 769,230 shares sold upon the underwriters' fullexercise of their option to purchase additional shares, resulting in aggregate gross proceeds of $115.0 million, before deducting underwriting discounts andcommissions and estimated offering expenses payable by us, and net proceeds of approximately $107.6 million after deducting these amountsEquity Incentive PlansOur Board of Directors, or Board, and stockholders previously approved the 2002 Equity Incentive Plan, or the 2002 Plan, and the 2010 Equity IncentivePlan, or the 2010 Plan, and collectively with the 2002 Plan, the Prior Plans. The 2002 Plan terminated in March 2012. In September 2013, our stockholdersapproved the 2013 Omnibus Incentive Plan, or the 2013 Plan. As of September 23, 2013, the effective date of the 2013 Plan, we suspended the 2010 Plan andno additional awards may be granted under the 2010 Plan. Any shares of common stock covered by awards granted under the Prior Plans that terminate afterSeptember 23, 2013 by expiration, forfeiture, cancellation or other means without the issuance of such shares were added to the 2013 Plan reserve.F-16 The initial number of shares of common stock available for issuance under the 2013 Plan was 3,500,000, which includes the 1,069,985 shares of commonstock that were available for issuance under the Prior Plans as of the effective date of the 2013 Plan. Unless our Board provides otherwise, beginning onJanuary 1, 2014 and continuing until the expiration of the 2013 Plan, the total number of shares of common stock available for issuance under the 2013 Planwill automatically increase annually on January 1 by 4% of the total number of issued and outstanding shares of common stock as of December 31 of theimmediately preceding year. Under the plan, any shares that are forfeited or expired are added back to the shares available for issuance. As of December 31,2018, 1,884,387 shares of common stock were available for future issuance of options, restricted stock and other stock-based awards under the 2013 Plan.Incentive stock options may be granted with an exercise price of not less than estimated fair value. Stock options granted to a stockholder owning more than10% of our voting stock must have an exercise price of not less than 110% of the estimated fair value of the common stock on the date of grant. For all stockoptions granted prior to our initial public offering, our Board determined the estimated fair value of our common stock. For all stock options granted after thecompletion of our initial public offering in September 2013, the fair value for our underlying common stock is determined using the closing market price onthe date of grant. Stock options are granted with terms of up to ten years and generally vest over a period of four years.The following table summarizes option activity under our stock plans and related information: Options Outstanding Weighted- Weighted- Average Average Exercise Remaining Aggregate Number Price Contractual Intrinsic of Shares Per Share Terms Value (in years) (in thousands) Balance at January 1, 2018 3,867,645 $30.35 Options granted 858,100 17.05 Options exercised (328,585) 8.18 Options forfeited (303,640) 34.20 Options expired (383,339) 35.69 Balance at December 31, 2018 3,710,181 28.37 7.05 $740,587 Options exercisable at December 31, 2018 2,195,470 26.95 6.03 740,587 The weighted-average grant-date fair value per share of stock options granted during the years ended December 31, 2018, 2017 and 2016 was $10.85, $25.78and $27.95 per share, respectively. The total intrinsic value of options exercised during the years ended December 31, 2018, 2017 and 2016 was $2.4 million,$5.4 million and $30.8 million, respectively.We recorded stock-based compensation expense related to options of approximately $17.3 million, $19.7 million and $11.4 million for the years endedDecember 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, there was $27.9 million of total unrecognized compensation expense that weexpect to recognize over a weighted-average period of 2.5 years.RSAs are share awards that entitle the holder to receive freely tradable shares of our common stock upon vesting and are unforfeitable once fully vested. Thefair value of RSAs was based upon the closing sales price of our common stock on the grant date.F-17 The following table summarizes the RSA activity under our stock plans and related information: RSAs Outstanding Weighted-Average Number Grant-Date of Shares Fair Value Unvested balance at January 1, 2018 803,417 $40.24 RSAs granted 715,775 17.62 RSAs vested (392,136) 34.89 RSAs forfeited (247,026) 32.66 Unvested balance at December 31, 2018 880,030 26.36 The total fair value on the date of vesting of RSAs that vested in 2018, 2017 and 2016 was $6.2 million, $30.8 million, and $33.2 million, respectively.We recorded stock-based compensation expense related to RSAs of approximately $11.6 million, $14.0 million and $20.9 million for the years endedDecember 31, 2018, 2017 and 2016, respectively. As of December 31, 2018, there was $16.6 million of unrecognized compensation cost related to unvestedemployee and director RSAs that we expect to recognize over a weighted-average period of 1.8 years.Employee Stock Purchase PlanIn September 2013, our stockholders approved the 2013 Employee Stock Purchase Plan, or the ESPP, which became effective as of September 23, 2013. Weinitially reserved a total of 250,000 shares of common stock for issuance under the ESPP. Unless our Board provides otherwise, continuing until theexpiration of the ESPP, the total number of shares of common stock available for issuance under the ESPP will automatically increase annually on January 1by the lesser of (i) 1% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or(ii) 300,000 shares of common stock. As of December 31, 2018, 1,138,877 shares of common stock were available for issuance under the ESPP.Under our ESPP, employees can purchase shares of our common stock based on a percentage of their compensation subject to certain limits. The purchaseprice per share is equal to the lower of 85% of the fair market value of our common stock on the offering date or the purchase date with a six-month look-backfeature. ESPP purchases are settled with common stock from the ESPP’s previously authorized and available pool of shares. We issued a total of 100,735shares under the ESPP in 2018.The compensation expense related to the ESPP was $0.5 million, $0.5 million and $0.6 million for the years ended December 31, 2018, 2017 and 2016,respectively. As of December 31, 2018, there was $0.2 million of unrecognized compensation cost related to the ESPP, which we expect to recognize over 4.4months.Stock-Based CompensationTotal stock-based compensation expense recognized was as follows: Year Ended December 31, (in thousands) 2018 2017 2016 Research and development $15,426 $18,285 $17,960 General and administrative 14,042 15,888 14,925 Total $29,468 $34,173 $32,885F-18 We estimated the fair value of each award using the Black-Scholes option-pricing model based on the date of grant of such award with the followingassumptions: Options ESPP Year Ended December 31, Year Ended December 31, 2018 2017 2016 2018 2017 2016 Expected term (years) 5.5-6.3 5.5-6.3 5.5-6.3 0.5 0.5 0.5 Expected volatility 68-70% 66-70% 69-74% 47-94% 42-94% 47-57% Risk-free interest rate 2.6-2.9% 1.9-2.2% 1.3-1.8% 1.4-2.5% 1.0-1.4% 0.4-0.6% Expected dividend yield 0.0% 0.0% 0.0% 0.0% 0.0% 0.0% The expected term of options granted represents the period of time that we expect options granted to remain outstanding, which we determined using thesimplified method as we have insufficient historical information to provide a basis for estimate. The expected term of the ESPP rights is equal to the six-month look-back period. Volatility for options granted is based on the historical volatility of our stock price since we became publicly traded. Volatility forESPP rights is equal to our historical volatility over the six-month look-back period. The risk-free interest rate for the expected term of the options is based onthe U.S. Treasury yield curve with a maturity equal to the expected term in effect at the time of grant. We have not paid, and do not anticipate paying, cashdividends on our shares of common stock; therefore, the expected dividend yield is zero.7. Earnings per ShareThe computation of basic loss per share is based on the weighted-average number of our common shares outstanding. The computation of diluted loss pershare is based on the weighted-average number of our common shares outstanding and dilutive potential common shares, which include shares that may beissued under our equity incentive plans, determined using the treasury stock method.The following table sets forth the computation of basic and diluted net loss (in thousands, except per share data): Year Ended December 31, 2018 2017 2016 Numerator: Net loss $(140,447) $(150,222) $(65,697) Denominator: Denominator for basic loss per share - weighted-average shares 33,976 27,945 26,955 Denominator for diluted loss per share 33,976 27,945 26,955 Basic and diluted net loss per share $(4.13) $(5.38) $(2.44) We excluded the following securities from the calculation of diluted net loss per share as the effect would have been antidilutive (in thousands): Year Ended December 31, 2018 2017 2016 Options to purchase common stock 3,710 3,843 2,981 RSAs 880 886 1,278 Total 4,590 4,729 4,259 F-19 8. License and Collaboration AgreementsThe following table presents changes during the year ended December 31, 2018 in the balances of our contract assets, including receivables fromcollaboration partners, and contract liabilities, including deferred revenue. (in thousands)Contract Assets Balance at January 1, 2018$13,133 Additions 39,262 Deductions (47,299)Balance at December 31, 2018$5,096 (in thousands)Contract Liabilities Balance at January 1, 2018$21,563 Additions for advance billings 4,727 Deductions for performance obligations satisfied in current period (12,218) Deductions for performance obligations satisfied in the prior periods in connection with updates to the measure of progress (2,179)Balance at December 31, 2018$11,893Bristol-Myers Squibb CompanyImmuno-Oncology Research CollaborationIn March 2014, we entered into a research collaboration and license agreement, or the Immuno-Oncology Research Collaboration, with Bristol-Myers SquibbCompany, or BMS, to carry out a research program to (i) discover novel interacting proteins in two undisclosed immune checkpoint pathways, which we referto as the checkpoint pathways, using our target discovery platform; (ii) further the understanding of target biology with respect to targets in these checkpointpathways; and (iii) discover and pre-clinically develop compounds suitable for development for human therapeutic uses against targets in these checkpointpathways. Under the Immuno-Oncology Research Collaboration, we granted BMS an exclusive, worldwide license to research, develop and commercializeproducts directed towards certain targets in the checkpoint pathways. BMS has an option to take exclusive licenses to additional targets we may identify inthese checkpoint pathways pursuant to the research plan under the immuno-oncology research collaboration. Based on data arising from our activities underthe research plan, in January 2016, we amended the Immuno-Oncology Research Collaboration to add an additional checkpoint pathway to the researchprogram, for a total of three immune checkpoint pathways.We received an upfront payment of $20.0 million from BMS in April 2014 in connection with our entry into the Immuno-Oncology Research Collaboration.BMS was obligated to pay us $9.5 million in research funding over the course of the three-year research term based on the research activities currentlyplanned under the research plan. BMS had the option to extend the research term for two additional one-year periods on a year-by-year basis for an additional$2.1 million for each extension, during which extensions we would be obligated to perform additional services as agreed to with BMS and BMS would beobligated to pay us research funding with respect to such services. The initial research term under the Immuno-Oncology Research Collaboration expired inMarch 2017. In each of December 2016 and December 2017, BMS exercised its option to extend the research term for an additional year to March 2018 andMarch 2019, respectively. In connection with entering into the Immuno-Oncology Research Collaboration, BMS purchased 994,352 shares of our commonstock at a price per share of $21.16, for an aggregate purchase price of $21.0 million. We determined that the purchase price of $21.16 per share exceeded thefair value of our common stock by $2.4 million and, therefore, recorded the $2.4 million as deferred revenue that we are recognizing in the same manner asthe $20.0 million upfront payment and research funding. We are eligible to receive certain contingent payments with respect to each target subject to theImmuno-Oncology Research Collaboration and royalties on sales of products related to such targets, if any. In December 2017, we recognized $5.0 millionrelated to a developmental contingent payment.F-20 The Immuno-Oncology Research Collaboration will terminate upon the expiration of all payment obligations under the collaboration. In addition, BMS mayterminate the Immuno-Oncology Research Collaboration in its entirety or on a collaboration target-by-collaboration target basis at any time with advancewritten notice, and either party may terminate the collaboration in its entirety or on a collaboration target-by-collaboration target basis with written notice forthe other party’s material breach if such other party fails to timely cure the breach or immediately upon certain insolvency events.We identified one performance obligation under the Immuno-Oncology Research Collaboration for the research license to access our technology, theexclusive commercial license and research activities. BMS’s options to select additional collaboration targets are not priced at a discount and therefore donot represent performance obligations for which the transaction price would be allocated. The transaction price of $36.1 million includes the $20.0 millionnon-refundable upfront fee, $13.7 million of research funding and $2.4 million of equity premium. We concluded that the transaction price should notinclude the variable consideration related to maintenance fees and unachieved clinical and regulatory development milestones as this consideration wasconsidered to be constrained as it is probable that the inclusion of such variable consideration could result in a significant reversal in revenue in the future.We will recognize any consideration related to sales-based payments (including milestones and royalties) when the related sales occur, as we havedetermined that these amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of theperformance obligation, or the occurrence of the related sales. We will re-evaluate the transaction price at each reporting period. For year ended December 31,2018, no adjustments were made to the transaction price.Upon adoption of Topic 606, we recognized an additional $0.7 million of revenue, through a decrease to deferred revenue and an increase to beginningretained earnings, based on the difference between the input method currently used under Topic 606 and the ratable recognition method previously usedunder Topic 605. Under the input method, we recognize revenue on the basis of our efforts or inputs applicable to the satisfaction of a performance obligation(e.g., resources consumed, labor hours expended, costs incurred, or time elapsed) relative to the total expected inputs applicable to the satisfaction of thatperformance obligation. We concluded that we will recognize revenue based on actual costs incurred as a percentage of total budgeted costs as we completeour performance obligation. Revenue recognized from the performance obligation was $6.1 million for the year ended December 31, 2018. ThroughDecember 31, 2018, we have recognized $34.6 million of the transaction price as collaboration revenue under the agreement. We will recognize theremaining transaction price of $1.5 million as revenue under the input method over the estimated performance period. For the years ended December 31, 2018, 2017, and 2016, we recognized $6.1 million, $12.0 million and $7.7 million, respectively, of revenue under theImmuno-Oncology Research Collaboration. As of December 31, 2018 and 2017, we had deferred revenue relating to the immuno-oncology researchcollaboration of $1.5 million and $6.3 million, respectively.License and Collaboration AgreementOn October 14, 2015, we entered into a license and collaboration agreement, or the Cabiralizumab Collaboration Agreement, pursuant to which we grantedBMS exclusive global rights to develop and commercialize certain colony stimulating factor-1 receptor, or CSF1R, antibodies, including our monoclonalCSF1R inhibiting antibody that we refer to as cabiralizumab, and all modifications, derivatives, fragments, or variants of such antibodies, each of which werefer to as a licensed antibody. Under the terms of the Cabiralizumab Collaboration Agreement, BMS is responsible, at its expense, for developing productscontaining licensed antibodies, each of which we refer to as a licensed product, under a development plan, subject to our option, at our own expense, toconduct certain studies, including registration-enabling studies to support approval of cabiralizumab. BMS is responsible for manufacturing andcommercializing each licensed product and we will retain rights to a U.S. co-promotion option. The Cabiralizumab Collaboration Agreement supersedes theclinical trial collaboration agreement we entered into with BMS in November 2014, or the Original Collaboration Agreement. We assessed the twoagreements separately as standalone agreements under Topic 606.F-21 We received an upfront payment of $30.0 million from BMS in December 2014 in connection with our entry into the Original Collaboration Agreement. Weare completing our Phase 1a/1b clinical trial to evaluate the safety, tolerability and preliminary efficacy of combining Opdivo, BMS’s programmed-death 1(PD-1) immune checkpoint inhibitor, with cabiralizumab in multiple tumor types, which we commenced under the Original Collaboration Agreement. BMSbears all costs and expenses relating to this trial, including manufacturing costs for the supply of cabiralizumab, except that we are responsible for our owninternal costs, including internal personnel costs.Under the Original Collaboration Agreement, we identified one performance obligation for the execution of a Phase 1a/1b clinical trial of cabiralizumab incombination with Opdivo. The transaction price consists of the $30.0 million non-refundable upfront fee under the Original Collaboration Agreement.We used the input method to measure progress toward completion of the performance obligation and concluded that we will recognize revenue based onactual costs incurred by our CRO, as a percentage of total budgeted costs as we complete our performance obligation. We will recognize revenue fromreimbursements when we have the right to invoice BMS. No adjustment was necessary upon adoption of Topic 606. We recognized $6.6 million of thetransaction price as revenue for the year ended December 31, 2018. Total revenue recognized for reimbursements for the year ended December 31, 2018, was$6.9 million. Through December 31, 2018, we recognized $24.8 million of the transaction price as collaboration revenue under the Original CollaborationAgreement. The remaining transaction price of $5.2 million is recorded in deferred revenue as of December 31, 2018 and will be recognized as revenue underthe input method over the estimated performance period. Under the Cabiralizumab Collaboration Agreement, we identified the following performance obligations: (1) license grant to BMS and (2) transfer of licensedknow-how to BMS. The transaction price consists of the $350.0 million non-refundable up-front fee. We concluded that the transaction price should not yetinclude milestone payments that may become due as they are fully constrained. We will recognize any consideration related to royalties when the relatedsales occur, as we have determined that these amounts relate predominantly to the license granted and therefore will be recognized upon the occurrence of therelated sales. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur. Forthe year ended December 31, 2018, no adjustments were made to the transaction price.The $350.0 million non-refundable upfront fee was fully recognized concurrent with the transfer of the license and know-how in 2015. As such, noadjustment to revenue was necessary under Topic 606. In January 2018, we recognized $25.0 million related to a milestone achieved for the dosing of thefirst patient in BMS’s randomized Phase 2 clinical trial of cabiralizumab in combination with Opdivo, with and without chemotherapy, as a treatment forpatients with second-line pancreatic cancer.For the years ended December 31, 2018, 2017, and 2016, we recognized $38.4 million, $23.7 million and $14.4 million, respectively, of revenue under thelicense and collaboration agreements. As of December 31, 2018 and 2017, we had deferred revenue relating to the license and collaboration agreements of$5.2 million and $11.8 million, respectively. F-22 Zai Lab China License and Collaboration AgreementIn December 2017, we entered into a license and collaboration agreement, or the China Collaboration Agreement, with Zai Lab, pursuant to which we grantedZai Lab an exclusive license to develop and commercialize bemarituzumab in China, Hong Kong, Macau and Taiwan.Under the terms of the China Collaboration Agreement, Zai Lab will be responsible, at its expense, for (i) developing and commercializing productscontaining the licensed antibody, each, a licensed product, under a territory development plan and (ii) performing certain development activities to supportour global development and registration of licensed products, including our Phase 3 FIGHT trial, in the territory, under a global development plan. Under theterms of the China Collaboration Agreement, Zai Lab paid us a $5.0 million non-refundable and non-creditable upfront fee ($4.2 million after netting ofvalue-added tax withholdings of $0.8 million) in January 2018. Pursuant to the China collaboration agreement, with respect to each licensed product, we areeligible to receive up to $39.0 million of specified developmental and regulatory milestone payments. Zai Lab will also be obligated to pay us a royalty, on alicensed product-by-licensed product and region-by-region basis. In addition, Zai Lab agreed to reimburse us for certain global development activities, whichis limited to a maximum of $10.0 million, and certain costs for the development of companion diagnostics.We identified the following performance obligations: (1) license grant to Zai Lab together with the transfer of licensed know-how, development drug supplyand global development activities, or the License Grant and (2) development of companion diagnostics. Zai Lab has the option to purchase commercial drugsupply from us pursuant to a separate commercial supply agreement to be negotiated in the future. The commercial drug supply will be accounted for as aseparate contract when Zai Lab exercises this option. In our evaluation of the transaction price upon the adoption of Topic 606, the $4.2 million non-refundable upfront fee and $8.3 million of expected reimbursement from Zai Lab for global development activities were included as part of the transactionprice of $12.5 million. We estimated the $8.3 million of expected reimbursements from Zai Lab based on the probability-weighted amounts of a range ofpossible consideration amounts. In September 2018, we recorded a $1.7 million receivable related to Zai Lab’s $2.0 million clinical development milestonepayment, net of value-added tax and other withholdings of $0.3 million, which became due upon dosing of the first patient in the Phase 3 FIGHT trial. Wehave since re-evaluated the transaction price and increased the transaction price by $2.2 million to $14.7 million which includes the $4.2 million non-refundable upfront fee, $8.8 million of expected reimbursement from Zai Lab for global development activities and the $1.7 million clinical developmentmilestone payment. We have not included the remaining regulatory milestone payments in the transaction price as all such milestone amounts are fullyconstrained. We will recognize any consideration related to royalties when the related sales occur, as we determined that these amounts relate predominantlyto the license granted and therefore will be recognized upon the occurrence of the related sales. We concluded that the reimbursement of costs incurred for thedevelopment of companion diagnostics qualifies for the practical expedient under Topic 606, which allows us to recognize revenue in the amount for whichwe have a right to invoice if our right to consideration is an amount that corresponds directly to the value to Zai Lab of our performance completed to date.We therefore effectively bypass the steps of determining the transaction price and allocating that transaction price to the performance obligation. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur. We use the input method to measure progress toward completion of the performance obligation for the License Grant. We concluded that revenue will berecognized based on actual costs incurred by our CRO as a percentage of total budgeted costs as we complete our performance obligation. We will recognizerevenue from reimbursements for the development of companion diagnostics when we have the right to invoice Zai Lab.No adjustment was necessary upon adoption of Topic 606. For the year ended December 31, 2018, revenue recognized for the License Grant was $1.7million. Total revenue recognized for the companion diagnostics development performance obligation was $3.3 million. Of the remaining transaction priceof $12.9 million, we recorded $5.2 million in deferred revenue, which we will recognize over the estimated performance period for satisfaction of theperformance obligations. The remaining $8.7 million of the transaction price will be recorded in deferred revenue when invoiced as we complete globaldevelopment activities.F-23 GlaxoSmithKline LLCRespiratory Diseases and Muscle Diseases CollaborationsIn April 2012, we entered into a research collaboration and license agreement, or the Respiratory Diseases Collaboration, with Glaxo Group Limited, or GSK,to identify new therapeutic approaches to treat refractory asthma and chronic obstructive pulmonary disease, or COPD, with a particular focus on identifyingnovel protein therapeutics and antibody targets. In January 2016, we amended our Respiratory Diseases Collaboration to extend the research term by threemonths to July 2016 to allow additional validation of the protein targets we discovered and to increase the research funding. In July 2010, we entered into aresearch collaboration and license agreement, or the Muscle Diseases Collaboration, with GlaxoSmithKline LLC, to identify potential drug targets and drugcandidates to treat skeletal muscle diseases. We conducted three customized cell-based screens and one in vivo screen of our protein libraries under themuscle diseases collaboration. The research term under the Muscle Diseases Collaboration ended in May 2014 and the agreement terminated in April 2018. Based on our assessment of the Respiratory Diseases Collaboration and the Muscle Disease Collaboration under Topic 606, we identified one performanceobligation under each collaboration for the research license and research activities. The non-refundable upfront fees, the equity premiums and the variableconsideration for research activities are included as part of the transaction prices for each collaboration. The clinical and regulatory development milestonepayments have not been included in the transaction prices, as all such milestone amounts are fully constrained. We will recognize any consideration relatedto sales-based payments (including milestones and royalties) when the related sales occur, as we have determined that these amounts relate predominantly tothe license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation, or the occurrence of the related sales.Under the Respiratory Diseases Collaboration, additional research funding that GSK had the option to add was also not included in the transaction price. Asthe Muscle Diseases Collaboration with GlaxoSmithKline LLC terminated in April 2018, we are no longer eligible to receive milestone payments orroyalties under that collaboration. We will re-evaluate the transaction price for the Respiratory Diseases Collaboration in each reporting period as uncertainevents are resolved and other changes in circumstances occur. For year ended December 31, 2018, no adjustments were made to the transaction prices of thecollaborations with GSK or GlaxoSmithKline LLC.Under the Respiratory Diseases Collaboration and the Muscle Diseases Collaboration, the non-refundable upfront fees, the equity premiums and the paymentfor research activities were fully recognized in 2016 and 2014, respectively. As the performance obligations were fully satisfied in prior years, no adjustmentto revenue was necessary under Topic 606. For the years ended December 31, 2018, 2017 and 2016, we recognized $0, $0.5 million and $1.8 million of milestone revenue, respectively, and $0, $0 and$3.2 million of revenue for progress made toward the performance obligation, respectively, under the Respiratory Diseases Collaboration. UCB Fibrosis and CNS CollaborationIn March 2013, we entered into a research collaboration and license agreement, or the Fibrosis and CNS Collaboration, with UCB Pharma, S.A., or UCB, toidentify potential biologics targets and therapeutics in the areas of fibrosis-related immunologic diseases and central nervous system, or CNS, disorders.Under the terms of the Fibrosis and CNS Collaboration, UCB paid us an upfront payment of $6.0 million in March 2013. In addition, UCB agreed to pay us$6.6 million for a technology fee and $2.0 million for research funding. As of December 31, 2015, we fully collected the technology fees and researchfunding under the Fibrosis and CNS Collaboration. We are eligible to receive certain evaluation and selection fees and contingent payments with respect toeach protein target that UCB elects to obtain an exclusive license, and royalties on the sales of products related to such targets, if any. Our initial researchactivities under this agreement were completed in March 2016. Upon the completion of those research activities, UCB had up to a two-year evaluationperiod, which ended in March 2018, during which we were obligated to perform additional services at the request of UCB.F-24 The agreement will terminate upon the expiration of the royalty terms of any products that incorporate or target a protein exclusively licensed under thecollaboration. In addition, UCB may terminate this agreement at any time with advance written notice, and either party may terminate the agreement withwritten notice for the other party’s material breach if such other party fails to timely cure the breach or upon certain insolvency events.Based on our assessment of the Fibrosis and CNS Collaboration under Topic 606, we identified research activities as our only performance obligation. UCB’soptions to select additional collaboration targets and to license exclusive rights to selected targets are not priced at a discount and therefore do not representperformance obligations for which the transaction price would be allocated. The transaction price of $15.6 million includes the $6.0 million non-refundableupfront fee, the $6.6 million technology access fee, the $1.0 million reimbursement for reagent costs and the $2.0 million of research funding. We have notincluded the clinical and regulatory development milestone payments in the transaction price as all such milestone amounts are fully constrained. We willrecognize any consideration related to sales-based payments (including milestones and royalties) when the related sales occur, as we have determined thatthese amounts relate predominantly to the license granted and therefore will be recognized on the later to occur of satisfaction of the performance obligation,or the occurrence of the related sales. We will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes incircumstances occur. For the year ended December 31, 2018, there was no change in the transaction price.Upon adoption of Topic 606, we recognized an additional $0.6 million of revenue through a decrease to deferred revenue and an increase to beginningretained earnings, based on the difference between the input method currently used under Topic 606 and the ratable recognition method previously usedunder Topic 605. We use the input method to measure progress toward completion of the performance obligation and concluded that revenue will berecognized based on actual full time equivalent labor hours expended as a percentage of total budgeted costs. The $0.6 million adjustment recorded upon theadoption of Topic 606 recognized the remainder of the transaction price.During 2018, 2017 and 2016, we recognized $0.3 million, $0.3 million and $0.4 million in target evaluation and selection fees, respectively. For the yearsended December 31, 2018, 2017 and 2016, revenue recognized for the performance obligation was $0, $3.0 million and $3.1 million, respectively. As ofDecember 31, 2017, we had deferred revenue of $0.6 million which was fully recognized upon adoption of Topic 606.9. Acquired TechnologiesGalaxy Biotech, LLCIn December 2011, we entered into an exclusive license agreement with Galaxy Biotech, LLC, or Galaxy, for the development, manufacturing, andcommercialization of certain anti-FGFR2b monoclonal antibodies. Under the terms of the agreement, we agreed to pay Galaxy an upfront license payment of$3.0 million. We paid the upfront payment in two equal installments in January 2012 and July 2012. As we had full access to the technology and materialsupon execution of the agreement, the lead compound was in an early stage of development, and the underlying technology has no alternative future uses, werecorded the entire upfront payment to research and development expenses in our statement of operations for the year ended December 31, 2011. We are alsorequired to make additional payments based upon the achievement of certain intellectual property, development, regulatory, and commercial milestones, aswell as royalties on future net sales of products resulting from development of this purchased technology, if any. In May 2016, we amended the licenseagreement to revise certain milestone definitions, reduce certain milestone payments and add certain development-related milestone payments that weretriggered by dosing of certain patients in the Phase 1 clinical trial of bemarituzumab. We made milestone payments to Galaxy totaling $9.5 million, $0 and$2.5 million in 2018, 2017 and 2016, respectively. In May 2017, we further amended the license agreement to align the net sales definition under theagreement to the net sales definition under any sublicense we may grant under the agreement and to amend the termination provisions to allow for a directlicense between Galaxy and any sublicensee upon termination of the agreement.F-25 BioWa, Inc. and Lonza Sales AGIn February 2012, we entered into a license agreement with BioWa, Inc. and Lonza Sales AG, or BioWa-Lonza, pursuant to which BioWa-Lonza granted us anon-exclusive license to use their Potelligent® CHOK1SV technology, including the CHOK1SV cell line, and a non-exclusive license to related know-howand patents. This license is necessary for our bemarituzumab antibody.In November 2015, we entered into a separate license agreement for the same technology with BioWa-Lonza for our FPA150 antibody program.We are obligated to pay BioWa-Lonza aggregate milestone payments of up to $24.5 million and $25.4 million, respectively, for development, regulatory andcommercialization milestones achieved in our bemarituzumab and FPA150 antibody programs. We are also obligated to pay BioWa-Lonza tiered royaltieson net sales up to mid-single digit percentages of the proceeds of such sales. We made milestone payments to BioWa-Lonza under both agreements totaling$1.2 million, $0 and $0, respectively, in 2018, 2017 and 2016.Our license agreements with BioWa-Lonza will remain in effect until the expiration of our royalty obligations under each agreement, unless earlierterminated. For each licensed product under each agreement, we are obligated to pay BioWa-Lonza royalties on net sales of such licensed product on acountry-by-country basis for the longer of the life of the licensed patents covering such licensed product in such country or 10 years after the first commercialsale of such licensed product in a major market country, which includes the United States .INBRX 110 LPIn July 2015, we entered into a research collaboration and license agreement with INBRX 110 LP, or Inhibrx, to obtain (a) an exclusive, worldwide license toantibodies to GITR for therapeutic and diagnostic uses, and (b) an exclusive option to obtain exclusive, worldwide licenses to multi-specific antibodiesdeveloped by Inhibrx that bind to both GITR and other targets.Pursuant to the agreement, we paid Inhibrx an upfront fee of $10.0 million for the license and for services provided by Inhibrx related to a research cell bankin July 2015. We recorded an expense of $5.0 million for a milestone payment to Inhibrx when the milestone was achieved in May 2017.We expense payments for the acquisition and development of technology as research and development cost if, at the time of payment, the technology isunder development, is not approved by the FDA or other regulatory agencies for marketing, has not reached technical feasibility, or otherwise has noforeseeable alternative future use. In accordance with this policy, we expensed the $8.0 million that we determined to be related to the license upon our entryinto the agreement in July 2015 as research and development expense.In accordance with the ASC 730, Research and Development Costs, we concluded that we should defer and capitalize the $2.0 million that we determined tobe related to the prepayment for the research cell bank services over the performance period. During both 2016 and 2015, we recognized $1.0 million ofexpense related to the research cell bank services. As of December 31, 2016, we fully recognized the deferred expense related to this agreement.On August 28, 2017, we delivered to Inhibrx written notice of termination of the agreement for convenience. Pursuant to the terms of the agreement, thetermination became effective on December 27, 2017.10. Income TaxesFor the year ended December 31, 2018, we did not record any income tax expense as compared to an income tax expense of $1.7 million for the year endedDecember 31, 2017 and an income tax benefit of $31.0 million for the year ended December 31, 2016.F-26 For the year ended December 31, 2017, the income tax expense related to deficiency interest was based on the Internal Revenue Service reducing ourtentative net operating loss carryback refund claim filed in March 2017. For the year ended December 31, 2016, the federal tax benefit represents the reversalof the federal tax provided in 2015 due to our ability to carryback federal tax attributes generated in 2016, but not in an amount that was lower than anyminimum taxes as provided under federal law.The components of our income tax expense (benefit) were as follows: Year Ended December 31, 2018 2017 2016 Current tax expense (benefit) Federal $— $1,703 $(40,740)State — 1 (5,340)Total current expense (benefit) — 1,704 (46,080) Deferred tax expense Federal — — 15,032 State — — — Total deferred tax expense — — 15,032 Total tax expense (benefit) $— $1,704 $(31,048) The income tax expense (benefit) differs from the amount computed by applying the statutory federal income tax rate as follows (in thousands): Year Ended December 31, 2018 2017 2016 Federal statutory income tax $(29,495) $(51,981) $(33,862)State statutory income tax 1 1 (3,471)Stock compensation 3,698 (4,847) 715 Nontaxable equity premiums (85) (168) (248)Change in valuation allowance 38,953 41,633 12,152 Remeasurement of deferred taxes — 27,122 — Research and orphan drug credits (13,192) (11,029) (8,029)Interest charge, net of federal benefit — 1,107 — Other permanent items 120 (134) 1,695 Income tax expense (benefit) $— $1,704 $(31,048) F-27 On December 22, 2017, the Tax Cuts and Jobs Act of 2017, or the Tax Act, was signed into law. The Tax Act reduces the corporate tax rate from a topmarginal rate of 35% to a flat rate of 21%. Although the Tax Act is generally effective on January 1, 2018, GAAP requires recognition of the tax effects ofnew legislation during the reporting period that includes the enactment date, which was December 22, 2017. Because of the impacts of the Tax Act, the SECissued Staff Accounting Bulletin No. 118 Income Tax Accounting Implications of the Tax Cuts and Jobs Act (SAB 118) that allows us to record provisionalamounts for those impacts, with the requirement that the accounting be completed in a period not to exceed one year from the date of enactment. As a result,as of December 31, 2017, we performed a provisional estimate of the effect of the Tax Act in the financial statements. In the fourth quarter of 2018, wecompleted our analysis to determine the effect of the Tax Act. No material adjustments were noted from the completion of the analysis as of December 31,2018. The primary impact of the Tax Act resulted from the re-measurement of deferred tax assets and liabilities due to the change in the corporate tax rate,reducing our deferred tax assets by $27.1 million with a corresponding reduction in our valuation allowance, which had no effect on our effective tax rate. The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets consist of the following (inthousands): As of December 31, 2018 2017 Net operating loss carryforwards $60,566 $39,405 Research and orphan drug credits 58,614 42,070 Deferred revenue 2,410 3,701 Stock-based compensation 7,698 7,017 Capitalized license and depreciation basis differences 3,412 892 Reserves, accruals and tenant improvement allowances 5,639 5,738 Total deferred tax assets 138,339 98,823 Less: valuation allowance (134,492) (94,315)Net deferred tax assets $3,847 $4,508 Capitalized license and depreciation basis differences (3,396) (4,069)Prepaid expenses (451) (439)Total deferred tax liabilities $(3,847) $(4,508)Total net deferred tax assets$— $— Based on all available objective evidence, we determined it is more likely than not that we will not fully realize all our net deferred tax assets. The availableobjective evidence considered was our inability to further recover any taxes previously paid and expectation of future taxable income. Accordingly, werecorded a valuation allowance against all our net deferred tax assets for the years ended December 31, 2018 and 2017. We will continue to maintain a fullvaluation allowance on our net deferred tax assets until there is sufficient positive evidence to support the reversal of all or some portion of this allowance.Our valuation allowance increased by $40.2 million and $47.4 million, respectively, during 2018 and 2017. At December 31, 2018, we had approximately $257.0 million of federal net operating losses available for future use that expire beginning in 2024 and federalresearch and Orphan Drug credits of approximately $52.2 million available for future use that expire beginning in 2026.At December 31, 2018, we also had approximately $155.1 million of state net operating losses available for future use that expire beginning in 2028 andstate research credits of approximately $21.4 million that have no expiration date.F-28 Utilization of net operating loss and tax credit carryforwards may be subject to an annual limitation due to ownership change limitations provided by theInternal Revenue Code and similar state provisions. Annual limitations may result in expiration of net operating loss and tax credit carryforwards before someor all of such amounts have been utilized.We had $16.7 million, $13.6 million and $9.4 million of unrecognized tax benefits as of December 31, 2018, 2017 and 2016, respectively. The unrecognizedtax benefits are primarily tax credits for all years and state net operating loss carryover related for certain prior years. As of December 31, 2018, we recordedno interest or penalties related to income taxes. Comparatively, we recorded $1.7 million of interest as of December 31, 2017. A reconciliation of ourunrecognized tax benefits for the years ended December 31, 2018, 2017 and 2016 is as follows (in thousands): Unrecognized Income Tax Benefits Balance as of December 31, 2015 $3,432 Additions for prior year tax positions 4,394 Additions for current year tax positions 1,577 Balance as of December 31, 2016 9,403 Additions for prior year tax positions 691 Additions for current year tax positions 3,490 Balance as of December 31, 2017 13,584 Additions for prior year tax positions 622 Additions for current year tax positions 2,454 Balance as of December 31, 2018 $16,660In the event we are able to recognize these uncertain positions, most of the $16.7 million of the unrecognized tax benefits would reduce our effective tax rate.We currently have a full valuation allowance against our deferred tax assets, which would impact the timing of the effective tax rate benefit, should any ofthese uncertain positions be favorably settled in the future. We do not believe it is reasonably possible that our unrecognized tax benefits will significantlychange within the next twelve months.We file U.S. and state income tax returns with varying statutes of limitations. The tax years from 2003 forward remain open to examination due to thecarryover of unused net operating losses and tax credits. We have no ongoing tax examinations by tax authorities at this time. F-29 11. Commitments and ContingenciesOperating LeasesWe entered into a lease agreement for our new corporate office and laboratory facility in December 2016, which we refer to as the lease. We moved into ournew corporate office and laboratory facility in December 2017. The lease has an initial term of 10 years, beginning on the rent commencement date, with anoption to extend the lease for an additional period of five years. We did not have to pay rent until the rent commencement date of January 1, 2018 and rentwas reduced by 50% for the first six months. The lease contains scheduled rent increases over the lease term. We recognize the related rent expense for thelease on a straight-line basis over the term of the lease with the difference between the rent paid and the straight-line rent expense recorded as deferred rent.As of December 31, 2018 and 2017, deferred rent totaled $7.6 million and $5.4 million, respectively.We received lease incentives totaling $14.4 million recorded as deferred rent from our landlord for a portion of the costs of leasehold improvements we madeto the premises. We amortize the incentives on a straight-line basis over the term of the lease as a reduction of rent expense. As of December 31, 2018 and2017, the unamortized leasehold improvement incentive totaled $12.2 million and $13.6 million, respectively. In addition, the lease required us to deliver anirrevocable standby letter of credit in an amount of $1.5 million to the landlord for the period commencing on the effective date of the agreement until atleast 60 days after the expiration of the lease, subject to 50% reduction on January 1, 2023 if certain conditions are met.In July 2018, we entered into a lease agreement for the installation, operational qualifications and performance qualifications of four sequencing instrumentsto support our bemarituzumab program. The agreement has two 3-year terms based on delivery dates for the first three instruments in July 2018 and the fourthinstrument in January 2019. The lease contains consistent rent payments over the terms of the lease. We recognize the related rent expense for the deliveredinstruments on a straight-line basis over the term of the lease.Rent expense for the years ended December 31, 2018, 2017 and 2016 was $5.9 million, $6.9 million, and $2.3million, respectively. The estimated futureminimum commitments under our non-cancelable operating leases are as follows (in thousands): Year ending December 31: 2019 7,315 2020 7,564 2021 7,705 2022 7,787 2023 8,064 2024 and on 35,166 Total estimated minimum payments $73,601IndemnificationsAs permitted under Delaware law and in accordance with our bylaws, we have agreed to indemnify our officers and directors for certain events or occurrences,subject to certain limits, while the officer or director is or was serving at our request in such capacity. The term of the indemnification period is equal to theofficer’s or director’s lifetime.The maximum amount of potential future indemnification is unlimited; however, we currently hold director and officer liability insurance. This insurancelimits our exposure and may enable us to recover a portion of any future amounts paid. We believe that the fair value of these indemnification obligations isminimal. Accordingly, we have not recognized any liabilities relating to these obligations for any period presented.F-30 We have certain agreements with service providers and other parties with which we do business that contain indemnification provisions pursuant to which wehave agreed to indemnify the party against certain types of third-party claims. We accrue for known indemnification issues when a loss is probable and can bereasonably estimated. We would also accrue for estimated incurred but unidentified indemnification issues based on historical activity. As we have notincurred any indemnification losses to date, there were no accruals for or expenses related to indemnification issues for any period presented.12. Subsequent EventsIn January 2019, we implemented a corporate restructuring, or the restructuring, to focus our resources on our clinical development and late-stage researchprograms. Pursuant to the restructuring, we eliminated 41 employee positions, representing approximately 20% of our then-current headcount, primarily inareas relating to research, pathology and manufacturing.We estimate approximately $2.0 million of pre-tax charges for severance and other costs related to the restructuring, primarily during the first quarter of 2019.13. Selected Quarterly Financial Information (Unaudited)The following amounts are in thousands, except per share amounts: Quarter Ended March 31, June 30, September 30, December 31, Quarterly Results of Operations 2018 2018 2018 2018 (Unaudited) Revenue $32,486 $7,580 $5,771 $4,031 Net loss (20,390) (34,060) (47,244) (38,753) Basic and diluted net loss per share (0.63) (0.99) (1.37) (1.12) Quarter Ended March 31, June 30, September 30, December 31, Quarterly Results of Operations 2017 2017 2017 2017 (Unaudited) Revenue $10,135 $7,822 $8,333 $13,218 Net loss (33,443) (44,286) (43,282) (29,211) Basic and diluted net loss per share (1.21) (1.58) (1.54) (1.04) Basic and diluted net loss per share is computed independently for each of the quarters presented. Therefore, the sum of quarterly basic and diluted per shareamounts may not equal annual basic and diluted net loss per share amounts.F-31 Exhibit 10.14 July 24, 2017 Bryan Irving, Ph.D.108 Ware RoadWoodside, CA 94062 Dear Bryan, We are pleased to extend to you an offer of employment with Five Prime Therapeutics, Inc. as Senior Vice President, Research, reportingdirectly to me. We would like for your full-time employment with FivePrime to begin at your earliest convenience, but no later than Tuesday, September5, 2017. We would pay you a base salary of $345,000, paid semi-monthly less applicable taxes and withholding. Once you begin full-timeemployment, you would be eligible to participate in FivePrime's benefit plans and programs available to all regular, full-time employees.These benefits currently include medical, vision, dental, disability, 401(k) investment plan, Employee Stock Purchase Plan, Section 125(flex spending), Section 132 (mass transit) and paid time-off programs. You would be eligible to participate in FivePrime's annual cash bonus program and your annual target bonus amount would be 35% of yourannual base salary. Your bonus for 2017 will be pro-rated based on your start date. We would determine your actual annual performancebonus based on an assessment of your meeting individual goals (40% weighting) as well as FivePrime's attainment of corporate goals(60% weighting). Corporate achievement is determined by FivePrime's Board of Directors. As an officer of FivePrime, we would enter into our Executive Severance Benefits Agreement with you, which would provide certainseverance and change in control benefits to you. Subject to approval by FivePrime's Board of Directors, we would grant you a stock option to purchase 80,000 shares of common stock ofFivePrime. The exercise price per share would be the fair market value of common stock at the closing price on the date of grant. Wewould issue your stock option award under our 2013 Omnibus Incentive Plan. Your stock option award would be subject to a Stock OptionAgreement, and the Executive Severance and Benefits Agreement. Subject to your continued employment with FivePrime and the otherterms and conditions of your stock option grant, your stock option award would vest over four years, with 25% of the shares vesting onthe first anniversary of your start date and the balance vesting in equal monthly installments over the subsequent 36 months. In addition, subject to approval by FivePrime 's Board of Directors, we would grant you 15,000 shares of restricted common stock after yourstart date under our 2013 Omnibus Incentive Plan. Your restricted stock award would be subject to a Restricted Stock Agreement. Subject toyour continued employment with FivePrime and the other terms and conditions of your restricted stock award, your restricted stock awardwould vest over a three-year period after the grant date in equal annual installments. As a condition of our offer of employment, we require you to sign and comply with our Confidential Information and Innovation AssignmentAgreement, which among other things prohibits unauthorized use or disclosure of FivePrime's confidential information. During your tenurewith FivePrime, we would expect you to also abide by FivePrime's policies and procedures. Federal law requires us to verify your identityand eligibility for employment in the United States. Accordingly, our offer of employment is also conditioned upon this verification. Sincerely,B.lrving, 7-24-2017page 2 of 2 Our offer to you is subject to an acceptable background check. We use a third party resource (AccurateNow) for this background check andthey will contact you by email to initiate this process. Your employment with FivePrime would not be for a set term and you would be an at-will employee. You would be free to terminate youremployment with FivePrime at any time and for any reason whatsoever simply by notifying us. Likewise, we would be free to terminateyour employment at any time for any reason whatsoever, with or without cause or advance notice. This at-will employment relationshipcannot be changed except in writing and signed by FivePrime's Chief Executive Officer. This letter, along with the Confidential Information and Innovation Assignment Agreement, supersedes any prior representations oragreements, whether written or oral, with respect to our offer of employment to you. This letter may not be modified or amended except bya written agreement, signed by FivePrime and you. To accept this offer of employment, please sign, date and return this letter and the Confidential Information and Innovation AssignmentAgreement by the end of the business day on Friday, July 28, 2017. Please either fax the document to (415) 520-9842, attention JeffCoon, or email a scanned copy to eFax-HR@ fiveprime.com.Again, Bryan, I am very pleased to make this offer to you. We all believe you bring a great deal to FivePrime at this stage of our developmentand that your contributions would be important in continuing our progress. We all look forward to having you join our team as we continue tobuild a vibrant and successful company. _/s/ Lewis T. “Rusty” Williams, M.D., Ph.D.______Lewis T. “Rusty” Williams, M.D., Ph.D.Founder, President and Chief Executive Officer Accepted: /s/ Bryan Irving, Ph.D. 7/27/17Bryan Irving, Ph.D.Date September 5, 2017Anticipated Start Date Five Prime Therapeutics, Inc. • Two Corporate Drive • South San Francisco, CA 94080 • Phone (415) 365-5600 • Fax (415) 365-5601 www.fiveprime.com Exhibit 10.15 October 24, 2018 David V. Smith534 Justin Morgan DriveAlamo, California 94507 Dear David, We are pleased to extend to you an offer of employment with Five Prime Therapeutics, Inc. (“FivePrime”) as Executive Vice President and ChiefFinancial Officer, reporting directly to me. We would like for your full-time employment with FivePrime to begin at your earliest convenience, but no later than Monday, November 26, 2018. Once you begin full-time employment, we will pay you an annual base salary of $430,000, paid semi-monthly less applicable taxes andwithholding. You will be eligible to participate in FivePrime’s benefit plans and programs available to all regular, full-time employees. Thesebenefits currently include medical, vision, dental, disability, 401(k) investment plan, Employee Stock Purchase Plan, Section 125 (flex spending),Section 132 (mass transit) and paid time-off programs. We currently have a process to evaluate performance and employee compensation on an annual basis and administer an annual bonus and equityincentive program in connection with this evaluation. This evaluation usually concludes in February or March of each year. Based on youranticipated start date, you will be eligible to participate in the annual discretionary compensation program beginning January 1, 2019. Your initialannual target bonus under our Annual Bonus Plan, which governs our annual cash bonus program, will be 40% of your annual base salary. Subject to approval by the Compensation and Management Development Committee of the Board of Directors of FivePrime (the “CompensationCommittee”), we will grant you a stock option to purchase 185,000 shares of common stock of FivePrime on or promptly after your start date. Theexercise price per share will be the fair market value of common stock on the date of grant. We will issue your stock option award under our 2013Omnibus Incentive Plan (the “2013 Plan”). Your stock option award will be subject to a Stock Option Agreement, and our Executive SeveranceBenefits Agreement (the “ESBA”). Subject to your continued employment with FivePrime and the other terms and conditions of your stock optiongrant, your stock option award will vest over four years, with 25% of the shares vesting on the first anniversary of your start date and the balancevesting in equal monthly installments over the subsequent 36 months. In addition, subject to approval by the Compensation Committee, we will grant you 40,000 shares of restricted common stock under the 2013 Planon or promptly after your start date. Your restricted stock award will be subject to a Restricted Stock Agreement and the ESBA. Subject to yourcontinued employment with FivePrime and the other terms and conditions of your restricted stock award, your restricted stock award will vest overa three-year period after the grant date in equal annual installments. We will enter into the ESBA and our Indemnity Agreement with you on the same terms as offered to other executive officers of FivePrime at theExecutive Vice President level. As a condition of our offer of employment, we require you to sign and comply with our Confidential Information and Innovation AssignmentAgreement, which among other things prohibits unauthorized use or disclosure of FivePrime’s confidential information. During your tenure withFivePrime, we will expect you to also abide by FivePrime’s policies and procedures. Federal law requires us to verify your identity and eligibilityfor employment in the United States. Accordingly, our offer of employment is also conditioned upon this verification.Five Prime Therapeutics, Inc. • 111 Oyster Point Boulevard • South San Francisco, CA 94080www.fiveprime.com David V. SmithOctober 24, 2018Page 2 Our offer to you is conditioned on a check of your background and credit that we find acceptable. We use a third-party resource (AccurateNow) forthis background and credit check and they will contact you by email after you execute and deliver this offer letter to us to initiate this process. Your employment with FivePrime will not be for a set term and you will be an at-will employee. You will be free to terminate your employment with FivePrime at any time and for any reason whatsoever simply by notifying us. Likewise, we willbe free to terminate your employment at any time for any reason whatsoever, with or without cause or advance notice. This at-will employmentrelationship cannot be changed except in writing and signed by FivePrime’s Chief Executive Officer. This letter, along with the Confidential Information and Innovation Assignment Agreement, supersedes any prior representations or agreements,whether written or oral, with respect to our offer of employment to you. This letter may not be modified or amended except by a written agreement,signed by FivePrime and you. To accept this offer of employment, please sign, date and send a scanned copy of this letter and the Confidential Information and InnovationAssignment Agreement by the end of the business day on Friday, October 26, 2018 to eFax-HR@fiveprime.com. Again, David, I am very pleased to make this offer to you. We all believe you bring a great deal to FivePrime at this stage of our development andthat your contributions will be important in continuing our progress. We all look forward to having you join our team as we continue to build avibrant and successful company. Sincerely, Five Prime Therapeutics, Inc. /s/ Aron Knickerbocker Aron KnickerbockerPresident and Chief Executive Officer Accepted: /s/ David V. SmithDavid V. Smith Date: October 24, 2018 Exhibit 10.26 Executive Severance Benefits Agreement This Executive Severance Benefits Agreement (this “Agreement”), effective as of September 5, 2017 (the“Effective Date”), is between Bryan Irving, Ph.D. (“Executive”) and Five Prime Therapeutics, Inc. (“FivePrime”). ThisAgreement is intended to provide Executive with certain compensation and benefits in the event that Executive issubject to certain qualifying terminations of employment. Certain capitalized terms used in this Agreement are definedin Article 6. FivePrime and Executive hereby agree as follows: ARTICLE 1 Scope of and Consideration for this Agreement 1.1FivePrime desires to employ Executive in the position of Senior Vice President,Research, and Executive wishes to be employed by FivePrime in such position. 1.2FivePrime and Executive wish to set forth the compensation and benefits that Executive shall beentitled to receive upon a Change in Control Termination or a Covered Termination. 1.3The duties and obligations of FivePrime to Executive under this Agreement shall be inconsideration for Executive’s employment with FivePrime (and if Executive is a continuing employee, hisor her past services to FivePrime), and, with respect to the benefits described in Article 2 and Article 3,Executive’s compliance with the limitations and conditions on benefits as described in Article 4, includingthe execution of an effective Release, return of Company property and continued compliance with thisAgreement. 1.4This Agreement shall supersede any other policy, plan, program or arrangement, including anycontract between Executive and any entity, relating to severance benefits payable by FivePrime toExecutive in connection with a Change in Control Termination or Covered Termination. ARTICLE 2 Change in Control Severance Benefits 2.1Severance Benefits. Upon a Change in Control Termination, and subject to the limitations andconditions set forth in this Agreement, Executive shall be eligible to receive the benefits set forth in thisArticle 2. 1 2.2Salary Continuance. Executive shall receive, as severance, an amount equal to Executive’s BaseSalary and Pro-Rata Bonus for that number of months in the Change in Control Severance Period, payableover such number of months immediately following the Termination Date in accordance with FivePrime’spayroll schedule then in effect. Except as set forth in Article 4, the payments provided for in this Section 2.2shall commence with the first regularly scheduled payroll pay date following the Termination Date. 2.3Health Continuation Coverage. (a)Provided that Executive is eligible and has made the necessary elections forcontinuation coverage pursuant to COBRA under a health, dental, or vision plan sponsored by FivePrime, FivePrimeshall pay the applicable premiums (inclusive of premiums for Executive’s dependents for such health, dental, or visionplan coverage as in effect immediately prior to the date of the Change in Control Termination) for such continued health,dental, or vision plan coverage following the date of the Change in Control Termination for up to the number of monthsequal to the Change in Control Severance Period (but in no event after such time as Executive is eligible for coverageunder a health, dental or vision insurance plan of a subsequent employer or asExecutive and Executive’s dependents are no longer eligible for COBRA coverage). Such coverage shall be countedas coverage pursuant to COBRA. FivePrime shall have no obligation in respect of any premium payments (or any otherpayments in respect of health, dental, or vision coverage from FivePrime) following the effective date of the Executive’scoverage by a health, dental, or vision insurance plan of a subsequent employer. Executive shall be required to notifyFivePrime immediately if Executive becomes covered by a health, dental, or vision insurance plan of a subsequentemployer. If Executive and Executive’s dependents continue coverage pursuant to COBRA following the conclusion ofthe Change in Control Severance Period, Executive will be responsible for the entire payment of such premiumsrequired under COBRA for the duration of the COBRA period. (b)For purposes of this Section 2.3, (i) references to COBRA shall bedeemed to refer also to analogous provisions of state law, and (ii) any applicable insurance premiums that are paid byFivePrime shall not include any amounts payable by Executive under a Code Section 125 health care reimbursementplan, which amounts, if any, are the sole responsibility of Executive. 2 2.4Stock Awards. Upon a Change in Control Termination, (i) the vesting and exercisability of alloutstanding options to purchase common stock of FivePrime (or stock appreciation rights or other rights withrespect to stock of FivePrime issued pursuant to any equity incentive plan of FivePrime) issued by FivePrimeand held by Executive on the Termination Date shall accelerate in full, and (ii) any reacquisition orrepurchase rights held by FivePrime with respect to common stock issued or issuable (or with respect to otherrights with respect to common stock of FivePrime issued or issuable) pursuant to any other stock award grantedto Executive pursuant to any equity incentive plan of FivePrime shall lapse. 3 ARTICLE 3 Covered Termination Severance Benefits 3.1Severance Benefits. Upon a Covered Termination, and subject to the limitations andconditions set forth in this Agreement, Executive shall be eligible to receive the benefits set forth inthis Article 3. 3.2Salary Continuance. Executive shall receive, as severance, an amount equal to Executive’sBase Salary and Pro-Rata Bonus for that number of months in the Covered Termination SeverancePeriod, payable over such number of months immediately following the Termination Date in accordancewith FivePrime’s payroll schedule then in effect. Except as set forth in Article 4, the payments provided forin this Section 3.2 shall commence with the first regularly scheduled payroll pay date following theTermination Date. 3.3Health Continuation Coverage. (a)Provided that Executive is eligible and has made the necessary electionsfor continuation coverage pursuant to COBRA under a health, dental, or vision plan sponsored by FivePrime,FivePrime shall pay for the applicable premiums (inclusive of premiums for Executive’s dependents for such health,dental, or vision plan coverage as in effect immediately prior to the date of the Covered Termination) for such continuedhealth, dental, or vision plan coverage following the date of the Covered Termination for up to the number of monthsequal to the Covered Termination Severance Period (but in no event after such time as Executive is eligible forcoverage under a health, dental or vision insurance plan of a subsequent employer or asExecutive and Executive’s dependents are no longer eligible for COBRA coverage). Such coverage shall be countedas coverage pursuant to COBRA. FivePrime shall have no obligation in respect of any premium payments (or any otherpayments in respect of health, dental, or vision coverage from FivePrime) following the effective date of the Executive’scoverage by a health, dental, or vision insurance plan of a subsequent employer. Executive shall be required to notifyFivePrime immediately if Executive becomes covered by a health, dental, or vision insurance plan of a subsequentemployer. If Executive and Executive’s dependents continue coverage pursuant to COBRA following the conclusion ofthe Covered Termination Severance Period, Executive will be responsible for the entire payment of such premiumsrequired under COBRA for the duration of the COBRA period. 4 (b)For purposes of this Section 3.3, (i) references to COBRA shall bedeemed to refer also to analogous provisions of state law, and (ii) any applicable insurance premiums that are paid byFivePrime shall not include any amounts payable by Executive under a Code Section 125 health care reimbursement plan,which amounts, if any, are the sole responsibility of Executive. 3.4Stock Awards. Upon a Covered Termination, (i) the vesting and exercisability of fifty percent (50%)of all unvested shares subject to outstanding options to purchase common stock of FivePrime (or stockappreciation rights or other rights with respect to stock of FivePrime issued pursuant to any equity incentiveplan of FivePrime) issued by FivePrime and held by Executive on the Termination Date shall accelerate, and(ii) any reacquisition or repurchase rights held by FivePrime with respect to common stock of FivePrimeissued or issuable (or with respect to other rights with respect to stock of FivePrime issued or issuable)pursuant to any other stock award granted to Executive pursuant to any equity incentive plan of FivePrimeshall lapse with respect to fifty percent (50%) of those shares then unvested as of the Termination Date. 5 ARTICLE 4 Limitations and Conditions on Benefits 4.1Rights Conditioned on Compliance. Executive’s rights to receive all severance benefitsdescribed in Article 2 and Article 3 shall be conditioned upon and subject to Executive’s compliancewith the limitations and conditions on benefits as described in this Article 4. 4.2Continuation of Service Until Date of Termination. Executive shall continue to provide service toFivePrime in good faith until the Termination Date, unless such performance is otherwise excused in writingby FivePrime. 4.3Release Prior to Payment of Benefits. Upon the occurrence of a Change in Control Termination ora Covered Termination, as applicable, and prior to the provision or payment of any benefits under thisAgreement on account of such Change in Control Termination or Covered Termination, as applicable,Executive must execute a general waiver and release in substantially the form attached hereto andincorporated herein as Exhibit A, or Exhibit B, as appropriate (each a “Release”), and such release mustbecome effective in accordance with its terms, but in no event later than 60 days following the TerminationDate. No amount shall be paid prior to such date. Instead, on the 60th day following the Termination Date,FivePrime will pay Executive the severance amount that Executive would otherwise have received on or priorto such date but for the delay in payment related to the effectiveness of the Release, with the balance of theseverance amount being paid as originally scheduled. FivePrime may modify the Release in its discretion tocomply with changes in applicable law at any time prior to Executive’s execution of such Release. SuchRelease shall specifically relate to all of Executive’s rights and claims in existence at the time of suchexecution and shall confirm Executive’s obligations under Executive’s Proprietary Information and 6 Inventions Agreement (or any successor agreement thereto) and any similar obligations under applicable law. It isunderstood that, as specified in the applicable Release, Executive has a certain number of calendar days to considerwhether to execute such Release. If Executive does not execute such Release within the applicable period, no benefitsshall be provided or payable under, and Executive shall have no further rights, title or interests in or to any severancebenefits or payments pursuant to, this Agreement. It is further understood that in connection with a Change in ControlTermination or a Covered Termination, as applicable, Executive may revoke the applicable Release within sevencalendar days after its execution by Executive. If Executive revokes such Release within such subsequent seven-dayperiod, no benefits shall be provided or payable under this Agreement pursuant to such Change in Control Terminationor Covered Termination, as applicable. 4.4Return of Company Property. Not later than the Termination Date, Executive shall return toFivePrime all documents (and all copies thereof) and other property belonging to FivePrime that Executivehas in his or her possession or control. The documents and property to be returned include, but are not limitedto, all files, correspondence, email, memoranda, notes, notebooks, records, plans, forecasts, reports, studies,analyses, compilations of data, proposals, agreements, financial information, research and developmentinformation, marketing information, operational and personnel information, databases, computer-recordedinformation, tangible property and equipment (including computers, facsimile machines, mobile telephones,and servers), credit cards, entry cards, identification badges and keys; and any materials of any kind thatcontain or embody any proprietary or confidential information of FivePrime (and all reproductions thereof inwhole or in part). Executive agrees to make a diligent search to locate any such documents, property andinformation. If Executive has used any personally owned computer, server, or e-mail system to receive, store,review, prepare or transmit any Company confidential or proprietary data, materials or information, then within10 business days after the Termination Date, Executive shall provide FivePrime with a computer-useablecopy of all such information and then permanently delete and expunge such confidential or proprietaryinformation from those systems. Executive agrees to provide FivePrime access to Executive’s system asrequested to verify that the necessary copying or deletion is done. 7 4.5Cooperation and Continued Compliance. (a)From and after the Termination Date, Executive shall cooperate fully withFivePrime in connection with its actual or contemplated defense, prosecution, or investigation of any existing or futurelitigation, arbitrations, mediations, claims, demands, audits, government or regulatory inquiries, or other matters arisingfrom events, acts, or failures to act that occurred during the time period in which Executive was employed by FivePrime(including any period of employment with an entity acquired by FivePrime). Such cooperation includes being availableupon reasonable notice, without subpoena, to provide accurate and complete advice, assistance and information toFivePrime, including offering and explaining evidence, providing truthful and accurate sworn statements, and participating indiscovery and trial preparation and testimony. Executive also agrees to promptly send FivePrime copies of all correspondence(for example subpoenas) received by Executive in connection with any such legal proceedings, unless Executive is expresslyprohibited by law from so doing. FivePrime will reimburse Executive for reasonable out-of-pocket expenses incurred inconnection with any such cooperation (excluding foregone wages, salary, or other compensation) within 30 days of Executive’stimely presentation of appropriate documentation thereof, in accordance with FivePrime’s standard reimbursement policies andprocedures, and will make reasonable efforts to accommodate Executive’s scheduling needs. To the extent that any taxablereimbursements of expenses are provided hereunder, they shall be made or provided in accordance with Section 409A of theCode, including the following provisions: (i) the amount of any such expense reimbursement provided during Executive’s taxableyear shall not affect any expenses eligible for reimbursement in any other taxable year; (ii) the reimbursement of the eligibleexpense shall be made no later than the last day of Executive’s taxable year that immediately follows the taxable year in whichthe expense was incurred; and (iii) the right to any reimbursement shall not be subject to liquidation or exchange for anotherbenefit or payment. (b)From and after the Termination Date, Executive shall continue to abide byall of the terms and provisions of the Confidential Information and Innovation Assignment Agreement betweenFivePrime and Executive (and any other comparable agreement signed by Executive), in accordance with its terms. (c)Executive acknowledges and agrees that Executive’s obligations underthis Section 4.5 are an essential part of the consideration Executive is providing hereunder in exchange for whichand in reliance upon which FivePrime has agreed to provide the payments and benefits under this Agreement.Executive further acknowledges and agrees that Executive’s violation of Section 4.5 inevitably would involve use ordisclosure of FivePrime’s proprietary and confidential information. Accordingly, Executive agrees that Executive willforfeit, effective as of the date of any breach, any right, entitlement, claim or interest in or to any unpaid portion of theseverance payments or benefits provided in Article 2 or Article 3. 8 4.6Parachute Payments. (a)Parachute Payment Limitation. If any payment or benefit (includingpayments and benefits pursuant to this Agreement) Executive would receive in connection with a Change in Controlfrom FivePrime or otherwise (“Payment”) would(i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence,be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then FivePrime shall cause tobe determined, before any amounts of the Payment are paid to Executive, which of the following two alternativeforms of payment shall be paid to Executive: (i) payment in full of the entire amount of the Payment (a “FullPayment”), or (ii) payment of only a part of the Payment so that Executive receives the largest payment possiblewithout the imposition of the Excise Tax (a “Reduced Payment”). A Full Payment shall be made in the event that thequotient obtained by dividing (i) the excess of (a) the Full Payment, over (b) the Reduced Payment, by (ii) theReduced Payment, is greater than ten percent (10%). A Reduced Payment shall be made in the event that thequotient obtained by dividing (i) the excess of (a) the Full Payment, over (b) the Reduced Payment, by (ii) theReduced Payment, is less than or equal to ten percent (10%). If a Reduced Payment is made, (i) the Payment shallbe paid only to the extent permitted under the Reduced Payment alternative, and Executive shall have no rights toany additional payments or benefits constituting the Payment, and (ii) reduction in payments or benefits shall occurin the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards otherthan stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits paid toExecutive. In the event that acceleration of compensation from Executive’s equity awards is to be reduced, suchacceleration of vesting shall be canceled in the reverse order of the date of grant. (b)The independent registered public accounting firm engaged by FivePrimefor general audit purposes as of the day prior to the effective date of the Change in Control shall make alldeterminations required to be made under this Section4.6. If the independent registered public accounting firm so engaged by FivePrime is serving as accountant or auditorfor the individual, entity or group effecting the Change in Control, FivePrime shall appoint a nationally recognizedindependent registered public accounting firm to make the determinations required hereunder. FivePrime shall bear allexpenses with respect to the determinations by such independent registered public accounting firm required to bemade hereunder. (c)The independent registered public accounting firm engaged to make thedeterminations hereunder shall provide its calculations, together with detailed supporting documentation, to FivePrimeand Executive within 15 calendar days after the date on which Executive’s right to a Payment is triggered (if requestedat that time by FivePrime or Executive) or such other time as requested by FivePrime or Executive. If the independentregistered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before orafter the application of the Reduced Amount, it shall furnish FivePrime and Executive with an opinion reasonablyacceptable to Executive9 that no Excise Tax will be imposed with respect to such Payment. Any good faith determinations of the accounting firmmade hereunder shall be final, binding and conclusive upon FivePrime and Executive. 4.7Certain Reductions and Offsets. To the extent that any federal, state or local laws, including theWorker Adjustment and Retraining Notification Act (the “WARN Act”) or any other so-called “plant closing”laws, require FivePrime to give advance notice or make a payment of any kind to Executive because of Executive’s involuntary 10 termination due to a layoff, reduction in force, plant or facility closing, sale of business, change in control, or any othersimilar event or reason, the benefits payable under this Agreement shall be correspondingly reduced. The benefitsprovided under this Agreement are intended to satisfy any and all statutory obligations that may arise out of Executive’sinvoluntary termination of employment for the foregoing reasons, and the parties shall construe and enforce the terms ofthis Agreement accordingly. 4.8Mitigation. Except as otherwise specifically provided herein, Executive shall not be required tomitigate damages or the amount of any payment provided under this Agreement by seeking otheremployment or otherwise, nor shall the amount of any payment provided for under this Agreement be reducedby any compensation earned by Executive as a result of employment by another employer or by anyretirement benefits received by Executive after the date of a Change in Control Termination or CoveredTermination (except as expressly provided in Sections 2.3 and 3.3 above). 4.9Indebtedness of Executive. If Executive is indebted to FivePrime on the effective date of aChange in Control Termination or Covered Termination, FivePrime reserves the right to offset anyseverance payments and benefits under this Agreement by the amount of such indebtedness. 4.10Application of Section 409A. It is intended that each installment of the payments provided for inthis Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). Forthe avoidance of doubt, it is intended that the payments under this Agreement satisfy, to the greatest extentpossible, the exemptions from the application of Code Section 409A provided under Treasury RegulationSections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9). However, if FivePrime (or, if applicable, thesuccessor entity thereto) determines that the severance payments provided under this agreement (the“Agreement Payments”) constitute “deferred compensation” under Section 409A and Executive is, on thetermination of service, a “specified employee” of FivePrime or any successor entity thereto, as such term isdefined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrenceof the adverse personal tax consequences under Code Section 409A, the timing of the AgreementPayments shall be delayed as follows: on the earlier to occur of (i) the date that is six months and one dayafter Executive’s separation from service or (ii) the date of Executive’s death (such earlier date, the “DelayedInitial Payment Date”), FivePrime (or the successor entity thereto, as applicable) shall (A) pay Executive alump sum amount equal to the sum of the Agreement Payments that she would otherwise have receivedthrough the Delayed Initial Payment Date if the commencement of the payment of the Agreement Paymentshad not been so delayed pursuant to this paragraph and (B) commence paying the balance of theAgreement Payments in accordance with the applicable payment schedules set forth in this agreement. 11 4.11Tax Withholding. All payments under this Agreement shall be subject to applicable withholdingfor federal, state and local income and employment taxes. ARTICLE 5 Other Rights and Benefits Nothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any benefit,bonus, incentive or other plans, programs, policies or practices provided by FivePrime and for which Executive mayotherwise qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under otheragreements with FivePrime except as provided in Section 1.4 above. Except as otherwise expressly provided herein,amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice orprogram of FivePrime at or subsequent to the date of a Change in Control shall be payable in accordance with suchplan, policy, practice or program.ARTICLE 6 Definitions Unless otherwise provided, for purposes of this Agreement, the following definitions shall apply: 6.1“Base Salary” means 1/12th of the greater of (i) Executive’s annual base salary (excludingincentive pay, premium pay, commissions, overtime, bonuses, and other forms of variablecompensation) as in effect immediately prior to a Change in Control Termination or a CoveredTermination, as applicable, or (ii) in the case of a Change in Control Termination, Executive’s annualbase salary (excluding incentive pay, premium pay, commissions, overtime, bonuses, and other formsof variable compensation) as in effect immediately prior to a Change in Control. 6.2“Board” means the Board of Directors of FivePrime. 6.3“Cause” means Executive’s: (i) dishonest statements or acts with respect to FivePrime, anysubsidiary or any affiliate of FivePrime or any subsidiary; (ii) commission by or indictment for (A) a felony or(B) any misdemeanor (excluding minor traffic violations) involving moral turpitude, deceit, dishonesty or fraud(“indictment,” for these purposes, meaning an indictment, probable cause hearing or any other procedurepursuant to which an initial determination of probable or reasonable cause with respect to such offense ismade); (iii) gross negligence, willful misconduct or insubordination with respect to FivePrime, any subsidiaryor any affiliate of FivePrime or any subsidiary; (iv) material breach of any of Executive’s obligations under any agreement to which Executive and FivePrime or anysubsidiary are a party; or (v) death or disability. With respect to item (iv), Executive will be given notice and a 30-dayperiod in which to cure 12 such breach, only to the extent such breach can be reasonably expected to be able to be cured within such period.Executive agrees that the breach of any non-solicitation or confidentiality obligation to FivePrime or any subsidiaryshall not be curable to any extent. 6.4“Change in Control” means the occurrence, in a single transaction or in a series of relatedtransactions, of any one or more of the following events: (a)Any natural person, entity or group within the meaning of Section 13(d) or14(d) of the Securities Exchange Act of 1934 (“Exchange Act Person”) becomes the owner, directly or indirectly, ofsecurities of FivePrime representing more than fifty percent (50%) of the combined voting power of FivePrime’s thenoutstanding securities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding theforegoing, a Change in Control shall not be deemed to occur (i) on account of the acquisition of securities of FivePrimeby any institutional investor, any affiliate thereof or any other Exchange Act Person that acquires FivePrime’s securitiesin a transaction or series of related transactions that are primarily a private financing transaction for FivePrime or (ii)solely because the level of ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designatedpercentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of votingsecurities by FivePrime reducing the number of shares outstanding, provided that if a Change in Control would occur(but for the operation of this sentence) as a result of the acquisition of voting securities by FivePrime, and after suchshare acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming therepurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securitiesowned by the Subject Person over the designated percentage threshold, then a Change in Control shall be deemed tooccur; (b)There is consummated a merger, consolidation or similar transactioninvolving (directly or indirectly) FivePrime if, immediately after the consummation of such merger, consolidation orsimilar transaction, the stockholders of FivePrime immediately prior thereto do not own, directly or indirectly, either (i)outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power ofthe surviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of thecombined outstanding voting power of the parent of the surviving entity in such merger, consolidation or similartransaction; (c)The stockholders of FivePrime approve or the Board approves a plan ofcomplete dissolution or liquidation of FivePrime, or a complete dissolution or liquidation of FivePrime shallotherwise occur; or 13 (d)There is consummated a sale, lease, license or other disposition of all orsubstantially all of the consolidated assets of FivePrime and its subsidiaries, other than a sale, lease, license or otherdisposition of all or substantially all of the consolidated assets of FivePrime and its subsidiaries to an entity, more thanfifty percent (50%) of the combined voting power of the voting securities of which are owned by stockholders ofFivePrime in substantially the same proportion as their ownership of FivePrime immediately prior to such sale, lease,license or other disposition. The term Change in Control shall not include a sale of assets, merger or other transaction effectedexclusively for the purpose of changing the domicile of FivePrime. Notwithstanding the foregoing or any other provisionof this Agreement, the definition of Change in Control (or any analogous term) in an individual written agreementbetween FivePrime or any affiliate and the participant shall supersede the foregoing definition with respect to stockawards subject to such agreement (it being understood, however, that if no definition of Change in Control or anyanalogous term is set forth in such an individual written agreement, the foregoing definition shall apply). 6.5“Change in Control Severance Period” means the period of 18 months commencing on theTermination Date. 6.6“Change in Control Termination” means an “Involuntary Termination Without Cause” or“Resignation for Good Reason,” either of which occurs on, or within three months prior to, or within 12months following, the effective date of a Change in Control, provided that any such termination is a“separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h). Death anddisability shall not be deemed Change in Control Terminations. 6.7“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. 6.8“Code” means the Internal Revenue Code of 1986, as amended. 6.9“Company” means Five Prime Therapeutics, Inc. or, following a Change in Control, the survivingentity resulting from such transaction, or any subsequent surviving entity resulting from any subsequentChange in Control. 6.10“Covered Termination” means an “Involuntary Termination Without Cause”, provided that any suchtermination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h).Death, disability, and termination of employment by Executive, shall not be deemed Covered Terminations. 6.11“Covered Termination Severance Period” means the period of nine monthscommencing on the Termination Date. 14 6.12“Involuntary Termination Without Cause” means Executive’s dismissal or discharge byFivePrime for reasons other than Cause and other than as a result of death or disability. 6.13“Pro-Rata Bonus” means 1/12th of the greater of (i) the average annual bonus paid to Executivefor the three years preceding the date of a Change in Control Termination or Covered Termination, asapplicable, (or such lesser number of years during which Executive has been employed by FivePrime),or (ii) annual target cash bonus, as in effect immediately prior to a Change in Control Termination orCovered Termination, as applicable. 6.14“Resignation for Good Reason” means Executive’s resignation from all employee positionsExecutive then-holds with FivePrime within 60 days following any of the following events taken withoutExecutive’s consent, provided Executive has given FivePrime written notice of such event within 30 daysafter the first occurrence of such event and FivePrime has not cured such event within 30 days thereafter: (a)A decrease in Executive’s total target cash compensation (base andbonus) of more than 10% (i.e., a material reduction in Executive’s base compensation and a material breach byFivePrime of Executive’s employment terms with FivePrime), other than in connection with a comparable decrease incompensation for all comparable executives of FivePrime; (b)Executive’s duties or responsibilities are materially diminished (not simplya change in title or reporting relationships); Executive shall not be deemed to have a “Resignation for Good Reason” ifFivePrime survives as a separate legal entity or business unit following the Change in Control and Executive holdsmaterially the same position in such legal entity or business unit as Executive held before the Change in Control; (c)An increase in Executive’s round-trip driving distance of more than 50 milesfrom Executive’s principal personal residence to the principal office or business location at which Executive is requiredto perform services (except for required business travel to the extent consistent with Executive’s prior business travelobligations); or (d)The failure of FivePrime to obtain a satisfactory agreement from anysuccessor to materially assume and materially agree to perform under the terms of this Agreement. 6.15“Termination Date” means the effective date of the Change in Control Termination orCovered Termination, as applicable. 15 ARTICLE 7 General Provisions 7.1Employment Status. This Agreement does not constitute a contract of employment or imposeupon Executive any obligation to remain as an employee, or impose on FivePrime any obligation (i) toretain Executive as an employee, (ii) to change the status of Executive as an at-will employee or (iii) tochange FivePrime’s policies regarding termination of employment. 7.2Notices. Any notices provided hereunder must be in writing, and such notices or any other writtencommunication shall be deemed effective upon the earlier of personal delivery (including personal deliveryby facsimile) or the third day after mailing by first class mail, to FivePrime at its primary office location and toExecutive at Executive’s address as listed in FivePrime’s payroll records. Any payments made by FivePrime to Executive under theterms of this Agreement shall be delivered to Executive either in person or at the address as listed in FivePrime’spayroll records. 7.3Severability. Whenever possible, each provision of this Agreement will be interpreted in suchmanner as to be effective and valid under applicable law, but if any provision of this Agreement is heldto be invalid, illegal or unenforceable in any respect under any applicable law or rule in anyjurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any otherjurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if suchinvalid, illegal or unenforceable provisions had never been contained herein. 7.4Waiver. If either party should waive any breach of any provisions of this Agreement, he, she or itshall not thereby be deemed to have waived any preceding or succeeding breach of the same or anyother provision of this Agreement. 7.5Arbitration. Unless otherwise prohibited by law or specified below, all disputes, claims andcauses of action, in law or equity, arising from or relating to this Agreement or its enforcement,performance, breach, or interpretation shall be resolved solely and exclusively by final and bindingarbitration held in the San Francisco Bay Area through Judicial Arbitration & MediationServices/Endispute (“JAMS”) under the then existing JAMS employment law arbitration rules. However,nothing in this Section 7.5is intended to prevent either party from obtaining injunctive relief in court to prevent irreparable harm pendingthe conclusion of any such arbitration. Each party in any such arbitration shall be responsible for its own attorneys’fees, costs and necessary disbursement; provided, however, that in the event one party refuses to arbitrate and theother party seeks to compel arbitration by court order, if such other party prevails, it shall be entitled to recoverreasonable attorneys’ fees, costs and necessary disbursements. Pursuant to California Civil Code Section 1717, eachparty warrants 16 that it was represented by counsel in the negotiation and execution of this Agreement, including the attorneys’ feesprovision herein. 7.6Complete Agreement. This Agreement, including Exhibit A and Exhibit B, constitutes the entireagreement between Executive and FivePrime and is the complete, final, and exclusive embodiment of theiragreement with regard to this subject matter, wholly superseding all written and oral agreements with respectto payments and benefits to Executive in the event of employment termination. It is entered into withoutreliance on any promise or representation other than those expressly contained herein. 7.7Amendment or Termination of Agreement; Continuation of Agreement. This Agreement may bechanged or terminated only upon the mutual written consent of FivePrime and Executive. The writtenconsent of FivePrime to a change or termination of this Agreement must be signed by an executive officer ofFivePrime (other than Executive) after such change or termination has been approved by the Board. Unlessso terminated, this Agreement shall continue in effect for as long as Executive continues to be employed byFivePrime or by any surviving entity following any Change in Control. In other words, if, following a Changein Control, Executive continues to be employed by the surviving entity without a Change in ControlTermination and the surviving entity then undergoes a Change in Control, following which Executive isterminated by the subsequent surviving entity in a Change in Control Termination, then Executive shallreceive the benefits described in Article 2 hereof. 7.8Counterparts. This Agreement may be executed in separate counterparts, any one of which neednot contain signatures of more than one party, but all of which taken together will constitute one and thesame Agreement. 7.9Headings. The headings of the Articles and Sections hereof are inserted for convenience only andshall not be deemed to constitute a part hereof nor to affect the meaning thereof. 7.10Successors and Assigns. This Agreement is intended to bind and inure to the benefit of and beenforceable by Executive, and FivePrime, and any surviving entity resulting from a Change in Control andupon any other person who is a successor by merger, acquisition, consolidation or otherwise to the businessformerly carried on by FivePrime, and their respective successors, assigns, heirs, executors andadministrators, without regard to whether or not such person actively assumes any rights or duties hereunder;provided, however, that Executive may not assign any duties hereunder and may not assign any rightshereunder without the written consent of FivePrime, which consent shall not be withheld unreasonably. 17 7.11ERISA. This Agreement is intended to constitute a severance agreement subject to the EmployeeRetirement Income Security Act of 1974, as amended (“ERISA”). 7.12Choice of Law. To the extent not preempted by ERISA, all questions concerning theconstruction, validity and interpretation of this Agreement will be governed by the law of the State ofCalifornia, without regard to such state’s conflict of laws rules. 7.13Construction of Agreement. In the event of a conflict between the text of this Agreement andany summary, description or other information regarding this Agreement, the text of this Agreement shallcontrol. 7.14Circular 230 Disclaimer. The following disclaimer is provided in accordance withthe Internal Revenue Service’s Circular 230 (21 C.F.R. Part 10). Any tax advice contained in this Agreement isintended to be preliminary, for discussion purposes only, and not final.Any such advice is notintended to be used for marketing, promoting or recommending any transaction or for the use of any personin connection with the preparation of any tax return. Accordingly, this advice is not intended or written to beused, and it cannot be used, by any person for the purpose of avoiding tax penalties that may be imposed onsuch person. IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date. Five Prime Therapeutics, Inc. By: /s/ Lewis T. WilliamsLewis T. WilliamsPresident and Chief Executive Officer /s/ Bryan Irving, Ph.D.Bryan Irving, Ph.D. 18 Exhibit ARELEASE(Individual Termination – Age 40 or Older) Certain capitalized terms used in this Release are defined in the Executive Change in ControlSeverance Benefits Agreement (the “Agreement”) which I have executed and of which this Release is a part. I hereby confirm my obligations under FivePrime’s Employee Confidentiality and Inventions AssignmentAgreement (or other comparable agreement that I have signed, if any). I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads asfollows: “A general release does not extend to claims which the creditor does not know or suspect to exist inhis or her favor at the time of executing the release, which if known by him or her must have materiallyaffected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefitsunder that section and any law of any jurisdiction of similar effect with respect to my release of any claims providedherein. Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge FivePrime, itsparents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assignsand affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees,damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown,suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a resultof any third party action against me based on my employment with FivePrime), arising out of or in any way related toagreements, events, acts or conduct at any time prior to the date I execute this Release, including all such claims anddemands directly or indirectly arising out of or in any way connected with my employment with FivePrime or thetermination of that employment, including claims of intentional and negligent infliction of emotional distress, any and alltort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or anyother ownership interests in FivePrime, vacation pay, fringe benefits, expense reimbursements, severance pay, or anyother form of compensation; claims pursuant to any federal, state or local law or cause of action including the federalCivil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended(“ADEA”); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans withDisabilities Act of 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; wrongfuldischarge; discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith andfair dealing; provided, however, that nothing in this paragraph shall be construed in any way to A-1 release FivePrime from its obligation to indemnify me pursuant to FivePrime’s indemnification obligationpursuant to written agreement or applicable law. I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. Ialso acknowledge that the consideration given under this Agreement for the waiver and release in the precedingparagraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I havebeen advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights orclaims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior toexecuting this Release; (C) I have 21 days to consider this Release (although I may choose to voluntarily execute thisRelease earlier); (D) I have seven days following my execution of this Release to revoke the Release by providing awritten notice of revocation to FivePrime’s Chief Executive Officer; and (E) this Release shall not be effective until thedate upon which the revocation period has expired, which shall be the eighth day after I execute this Release (providedthat I do not revoke it). I hereby represent that I have been paid all compensation owed and for all hours worked, I have received allthe leave and leave benefits and protections for which I am eligible, pursuant to the federal Family and Medical LeaveAct, the California Family Rights Act, any Company policy or applicable law, and I have not suffered any on-the- jobinjury or illness for which I have not already filed a workers’ compensation claim. Bryan Irving, Ph.D. Date: A-2 Exhibit B RELEASE(Group Termination – Age 40 or Older) Certain capitalized terms used in this Release are defined in the Executive Change in ControlSeverance Benefits Agreement (the “Agreement”) which I have executed and of which this Release is a part. I hereby confirm my obligations under FivePrime’s Employee Confidentiality and Inventions AssignmentAgreement (or other comparable agreement that I have signed, if any). I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads asfollows: “A general release does not extend to claims which the creditor does not know or suspect to exist inhis or her favor at the time of executing the release, which if known by him or her must have materiallyaffected his or her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefitsunder that section and any law of any jurisdiction of similar effect with respect to my release of any claims providedherein. Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge FivePrime, itsparents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assignsand affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees,damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown,suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a resultof any third party action against me based on my employment with FivePrime), arising out of or in any way related toagreements, events, acts or conduct at any time prior to the date I execute this Release, including all such claims anddemands directly or indirectly arising out of or in any way connected with my employment with FivePrime or thetermination of that employment, including claims of intentional and negligent infliction of emotional distress, any and alltort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or anyother ownership interests in FivePrime, vacation pay, fringe benefits, expense reimbursements, severance pay, or anyother form of compensation; claims pursuant to any federal, state or local law or cause of action including the federalCivil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended(“ADEA”); the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans withDisabilities Act of 1990; the California Fair Employment and Housing Act, as B-1 amended; tort law; contract law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breachof the implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall beconstrued in any way to release FivePrime from its obligation to indemnify me pursuant to FivePrime’s indemnificationobligation pursuant to written agreement or applicable law. I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under theADEA. I also acknowledge that the consideration given under this Agreement for the waiver and release in thepreceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge thatI have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rightsor claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney priorto executing this Release; (C) I have 45 days to consider this Release (although I may choose to voluntarily executethis Release earlier); (D) I have seven days following my execution of this Release to revoke the Release by providinga written notice of revocation to FivePrime’s Chief Executive Officer; (E) this Release shall not be effective until the dateupon which the revocation period has expired, which shall be the eighth day after I execute this Release; and (F) I havereceived with this Release the required written disclosure for a “group termination” under the ADEA, including adetailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of allemployees of FivePrime in the same job classification or organizational unit who were not terminated. I hereby represent that I have been paid all compensation owed and for all hours worked, I have received allthe leave and leave benefits and protections for which I am eligible, pursuant to the federal Family and Medical LeaveAct, the California Family Rights Act, any Company policy or applicable law, and I have not suffered any on-the- jobinjury or illness for which I have not already filed a workers’ compensation claim. Bryan Irving, Ph.D. Date: B-2 Exhibit 10.27Executive Severance Benefits Agreement This Executive Severance Benefits Agreement (this “Agreement”), effective as of November 26, 2018 (the“Effective Date”), is between David Smith (“Executive”) and Five Prime Therapeutics, Inc. (“FivePrime”). This Agreementis intended to provide Executive with certain compensation and benefits in the event that Executive is subject to certainqualifying terminations of employment. Certain capitalized terms used in this Agreement are defined in Article 6.BackgroundA.FivePrime and Executive entered into an offer letter effective October 24, 2018 (the “Offer Letter”)pursuant to which FivePrime offered to employ Executive in the position of Executive Vice President and Chief FinancialOfficer of FivePrime and Executive accepted such offer of employment.B.Pursuant to the Offer Letter, FivePrime and Executive agreed to enter into this Agreement.FivePrime and Executive hereby agree as follows:ARTICLE 1Scope of and Consideration for this Agreement1.1FivePrime and Executive wish to set forth the compensation and benefits that Executive shallbe entitled to receive upon a Change in Control Termination or a Covered Termination.1.2The duties and obligations of FivePrime to Executive under this Agreement shall be inconsideration for Executive’s employment with FivePrime and, with respect to the benefits described in Article 2 andArticle 3, Executive’s compliance with the limitations and conditions on benefits as described in Article 4, including theexecution of an effective Release, return of Company property and continued compliance with this Agreement.1.3This Agreement shall supersede any other policy, plan, program or arrangement, including anycontract between Executive and any entity, relating to severance benefits payable by FivePrime to Executive inconnection with a Change in Control Termination or Covered Termination.1 ARTICLE 2Change in Control Severance Benefits2.1Severance Benefits. Upon a Change in Control Termination, and subject to the limitationsand conditions set forth in this Agreement, Executive shall be eligible to receive the benefits set forth in this Article 2.2.2Salary Continuance. Executive shall receive, as severance, an amount equal to Executive’sBase Salary and Pro-Rata Bonus for that number of months in the Change in Control Severance Period, payable oversuch number of months immediately following the Termination Date in accordance with FivePrime’s payroll schedulethen in effect. Except as set forth in Article 4, the payments provided for in this Section 2.2 shall commence with the firstregularly scheduled payroll pay date following the Termination Date.2.3Health Continuation Coverage.(a)Provided that Executive is eligible and has made the necessary elections forcontinuation coverage pursuant to COBRA under a health, dental, or vision plan sponsored by FivePrime, FivePrimeshall pay the applicable premiums (inclusive of premiums for Executive’s dependents for such health, dental, or visionplan coverage as in effect immediately prior to the date of the Change in Control Termination) for such continued health,dental, or vision plan coverage following the date of the Change in Control Termination for up to the number of monthsequal to the Change in Control Severance Period (but in no event after such time as Executive is eligible for coverageunder a health, dental or vision insurance plan of a subsequent employer or as Executive and Executive’s dependentsare no longer eligible for COBRA coverage). Such coverage shall be counted as coverage pursuant toCOBRA. FivePrime shall have no obligation in respect of any premium payments (or any other payments in respect ofhealth, dental, or vision coverage from FivePrime) following the effective date of the Executive’s coverage by a health,dental, or vision insurance plan of a subsequent employer. Executive shall be required to notify FivePrime immediatelyif Executive becomes covered by a health, dental, or vision insurance plan of a subsequent employer. If Executive andExecutive’s dependents continue coverage pursuant to COBRA following the conclusion of the Change in ControlSeverance Period, Executive will be responsible for the entire payment of such premiums required under COBRA for theduration of the COBRA period.(b)For purposes of this Section 2.3, (i) references to COBRA shall be deemed torefer also to analogous provisions of state law, and (ii) any applicable insurance premiums that are paid by FivePrimeshall not include any amounts payable by Executive under a Code Section 125 health care reimbursement plan, whichamounts, if any, are the sole responsibility of Executive.2 2.4Stock Awards. Upon a Change in Control Termination, (i) the vesting and exercisability of alloutstanding options to purchase common stock of FivePrime (or stock appreciation rights or other rights with respect tostock of FivePrime issued pursuant to any equity incentive plan of FivePrime) issued by FivePrime and held byExecutive on the Termination Date shall accelerate in full, and (ii) any reacquisition or repurchase rights held byFivePrime with respect to common stock issued or issuable (or with respect to other rights with respect to common stockof FivePrime issued or issuable) pursuant to any other stock award granted to Executive pursuant to any equity incentiveplan of FivePrime shall lapse.ARTICLE 3Covered Termination Severance Benefits3.1Severance Benefits. Upon a Covered Termination, and subject to the limitations andconditions set forth in this Agreement, Executive shall be eligible to receive the benefits set forth in this Article 3.3.2Salary Continuance. Executive shall receive, as severance, an amount equal to Executive’sBase Salary and Pro-Rata Bonus for that number of months in the Covered Termination Severance Period, payable oversuch number of months immediately following the Termination Date in accordance with FivePrime’s payroll schedulethen in effect. Except as set forth in Article 4, the payments provided for in this Section 3.2 shall commence with the firstregularly scheduled payroll pay date following the Termination Date.3.3Health Continuation Coverage.(a)Provided that Executive is eligible and has made the necessary elections forcontinuation coverage pursuant to COBRA under a health, dental, or vision plan sponsored by FivePrime, FivePrimeshall pay for the applicable premiums (inclusive of premiums for Executive’s dependents for such health, dental, orvision plan coverage as in effect immediately prior to the date of the Covered Termination) for such continued health,dental, or vision plan coverage following the date of the Covered Termination for up to the number of months equal to theCovered Termination Severance Period (but in no event after such time as Executive is eligible for coverage under ahealth, dental or vision insurance plan of a subsequent employer or as Executive and Executive’s dependents are nolonger eligible for COBRA coverage). Such coverage shall be counted as coverage pursuant to COBRA. FivePrimeshall have no obligation in respect of any premium payments (or any other payments in respect of health, dental, orvision coverage from FivePrime) following the effective date of the Executive’s coverage by a health, dental, or visioninsurance plan of a subsequent employer. Executive shall be required to notify FivePrime immediately if Executivebecomes covered by a health, dental, or vision insurance plan of a subsequent employer. If Executive and Executive’sdependents continue coverage3 pursuant to COBRA following the conclusion of the Covered Termination Severance Period, Executive will beresponsible for the entire payment of such premiums required under COBRA for the duration of the COBRA period.(b)For purposes of this Section 3.3, (i) references to COBRA shall be deemed torefer also to analogous provisions of state law, and (ii) any applicable insurance premiums that are paid by FivePrimeshall not include any amounts payable by Executive under a Code Section 125 health care reimbursement plan, whichamounts, if any, are the sole responsibility of Executive.3.4Stock Awards. Upon a Covered Termination, (i) the vesting and exercisability of fifty percent(50%) of all unvested shares subject to outstanding options to purchase common stock of FivePrime (or stockappreciation rights or other rights with respect to stock of FivePrime issued pursuant to any equity incentive plan ofFivePrime) issued by FivePrime and held by Executive on the Termination Date shall accelerate, and (ii) anyreacquisition or repurchase rights held by FivePrime with respect to common stock of FivePrime issued or issuable (orwith respect to other rights with respect to stock of FivePrime issued or issuable) pursuant to any other stock awardgranted to Executive pursuant to any equity incentive plan of FivePrime shall lapse with respect to fifty percent (50%) ofthose shares then unvested as of the Termination Date.ARTICLE 4Limitations and Conditions on Benefits4.1Rights Conditioned on Compliance. Executive’s rights to receive all severance benefitsdescribed in Article 2 and Article 3 shall be conditioned upon and subject to Executive’s compliance with the limitationsand conditions on benefits as described in this Article 4.4.2Continuation of Service Until Date of Termination. Executive shall continue to provideservice to FivePrime in good faith until the Termination Date, unless such performance is otherwise excused in writingby FivePrime.4.3Release Prior to Payment of Benefits. Upon the occurrence of a Change in ControlTermination or a Covered Termination, as applicable, and prior to the provision or payment of any benefits under thisAgreement on account of such Change in Control Termination or Covered Termination, as applicable, Executive mustexecute a general waiver and release in substantially the form attached hereto and incorporated herein as Exhibit A, orExhibit B, as appropriate (each a “Release”), and such release must become effective in accordance with its terms, butin no event later than 60 days following the Termination Date. No amount shall be paid prior to such date. Instead, onthe 60th day following the Termination Date, FivePrime will pay Executive the severance amount that Executive wouldotherwise have received on or prior to such date but for the delay in payment related to the effectiveness of the Release,with the balance of the4 severance amount being paid as originally scheduled. FivePrime may modify the Release in its discretion to complywith changes in applicable law at any time prior to Executive’s execution of such Release. Such Release shallspecifically relate to all of Executive’s rights and claims in existence at the time of such execution and shall confirmExecutive’s obligations under Executive’s Proprietary Information and Inventions Agreement (or any successoragreement thereto) and any similar obligations under applicable law. It is understood that, as specified in the applicableRelease, Executive has a certain number of calendar days to consider whether to execute such Release. If Executivedoes not execute such Release within the applicable period, no benefits shall be provided or payable under, andExecutive shall have no further rights, title or interests in or to any severance benefits or payments pursuant to, thisAgreement. It is further understood that in connection with a Change in Control Termination or a Covered Termination,as applicable, Executive may revoke the applicable Release within seven calendar days after its execution byExecutive. If Executive revokes such Release within such subsequent seven-day period, no benefits shall be providedor payable under this Agreement pursuant to such Change in Control Termination or Covered Termination, asapplicable.4.4Return of Company Property. Not later than the Termination Date, Executive shall return toFivePrime all documents (and all copies thereof) and other property belonging to FivePrime that Executive has in hispossession or control. The documents and property to be returned include, but are not limited to, all files,correspondence, email, memoranda, notes, notebooks, records, plans, forecasts, reports, studies, analyses, compilationsof data, proposals, agreements, financial information, research and development information, marketing information,operational and personnel information, databases, computer-recorded information, tangible property and equipment(including computers, facsimile machines, mobile telephones, and servers), credit cards, entry cards, identificationbadges and keys; and any materials of any kind that contain or embody any proprietary or confidential information ofFivePrime (and all reproductions thereof in whole or in part). Executive agrees to make a diligent search to locate anysuch documents, property and information. If Executive has used any personally owned computer, server, or e-mailsystem to receive, store, review, prepare or transmit any Company confidential or proprietary data, materials orinformation, then within 10 business days after the Termination Date, Executive shall provide FivePrime with acomputer-useable copy of all such information and then permanently delete and expunge such confidential or proprietaryinformation from those systems. Executive agrees to provide FivePrime access to Executive’s system as requested toverify that the necessary copying or deletion is done.4.5Cooperation and Continued Compliance.(a)From and after the Termination Date, Executive shall cooperate fully withFivePrime in connection with its actual or contemplated defense, prosecution, or investigation of any existing or futurelitigation, arbitrations, mediations, claims, demands, audits, government or regulatory inquiries, or other matters arisingfrom5 events, acts, or failures to act that occurred during the time period in which Executive was employed by FivePrime(including any period of employment with an entity acquired by FivePrime). Such cooperation includes being availableupon reasonable notice, without subpoena, to provide accurate and complete advice, assistance and information toFivePrime, including offering and explaining evidence, providing truthful and accurate sworn statements, andparticipating in discovery and trial preparation and testimony. Executive also agrees to promptly send FivePrime copiesof all correspondence (for example subpoenas) received by Executive in connection with any such legal proceedings,unless Executive is expressly prohibited by law from so doing. FivePrime will reimburse Executive for reasonable out-of-pocket expenses incurred in connection with any such cooperation (excluding foregone wages, salary, or othercompensation) within 30 days of Executive’s timely presentation of appropriate documentation thereof, in accordancewith FivePrime’s standard reimbursement policies and procedures, and will make reasonable efforts to accommodateExecutive’s scheduling needs. To the extent that any taxable reimbursements of expenses are provided hereunder, theyshall be made or provided in accordance with Section 409A of the Code, including the following provisions: (i) theamount of any such expense reimbursement provided during Executive’s taxable year shall not affect any expenseseligible for reimbursement in any other taxable year; (ii) the reimbursement of the eligible expense shall be made no laterthan the last day of Executive’s taxable year that immediately follows the taxable year in which the expense wasincurred; and (iii) the right to any reimbursement shall not be subject to liquidation or exchange for another benefit orpayment.(b)From and after the Termination Date, Executive shall continue to abide by allof the terms and provisions of the Confidential Information and Innovation Assignment Agreement between FivePrimeand Executive (and any other comparable agreement signed by Executive), in accordance with its terms.(c)Executive acknowledges and agrees that Executive’s obligations under thisSection 4.5 are an essential part of the consideration Executive is providing hereunder in exchange for which and inreliance upon which FivePrime has agreed to provide the payments and benefits under this Agreement. Executivefurther acknowledges and agrees that Executive’s violation of Section 4.5 inevitably would involve use or disclosure ofFivePrime’s proprietary and confidential information. Accordingly, Executive agrees that Executive will forfeit, effectiveas of the date of any breach, any right, entitlement, claim or interest in or to any unpaid portion of the severancepayments or benefits provided in Article 2 or Article 3.4.6Parachute Payments.(a)Parachute Payment Limitation. If any payment or benefit (includingpayments and benefits pursuant to this Agreement) Executive would receive in connection with a Change in Control fromFivePrime or otherwise (“Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of theCode,6 and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), thenFivePrime shall cause to be determined, before any amounts of the Payment are paid to Executive, which of thefollowing two alternative forms of payment shall be paid to Executive: (i) payment in full of the entire amount of thePayment (a “Full Payment”), or (ii) payment of only a part of the Payment so that Executive receives the largest paymentpossible without the imposition of the Excise Tax (a “Reduced Payment”). A Full Payment shall be made in the eventthat the quotient obtained by dividing (i) the excess of (a) the Full Payment, over (b) the Reduced Payment, by (ii) theReduced Payment, is greater than ten percent (10%). A Reduced Payment shall be made in the event that the quotientobtained by dividing (i) the excess of (a) the Full Payment, over (b) the Reduced Payment, by (ii) the Reduced Payment,is less than or equal to ten percent (10%). If a Reduced Payment is made, (i) the Payment shall be paid only to theextent permitted under the Reduced Payment alternative, and Executive shall have no rights to any additional paymentsor benefits constituting the Payment, and (ii) reduction in payments or benefits shall occur in the following order: (1)reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3)cancellation of accelerated vesting of stock options; and (4) reduction of other benefits paid to Executive. In the eventthat acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of vesting shall becanceled in the reverse order of the date of grant.(b)The independent registered public accounting firm engaged by FivePrime forgeneral audit purposes as of the day prior to the effective date of the Change in Control shall make all determinationsrequired to be made under this Section 4.6. If the independent registered public accounting firm so engaged byFivePrime is serving as accountant or auditor for the individual, entity or group effecting the Change in Control,FivePrime shall appoint a nationally recognized independent registered public accounting firm to make thedeterminations required hereunder. FivePrime shall bear all expenses with respect to the determinations by suchindependent registered public accounting firm required to be made hereunder.(c)The independent registered public accounting firm engaged to make thedeterminations hereunder shall provide its calculations, together with detailed supporting documentation, to FivePrimeand Executive within 15 calendar days after the date on which Executive’s right to a Payment is triggered (if requested atthat time by FivePrime or Executive) or such other time as requested by FivePrime or Executive. If the independentregistered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before orafter the application of the Reduced Amount, it shall furnish FivePrime and Executive with an opinion reasonablyacceptable to Executive that no Excise Tax will be imposed with respect to such Payment. Any good faithdeterminations of the accounting firm made hereunder shall be final, binding and conclusive upon FivePrime andExecutive.4.7Certain Reductions and Offsets. To the extent that any federal, state or local laws, includingthe Worker Adjustment and Retraining Notification Act (the “WARN7 Act”) or any other so-called “plant closing” laws, require FivePrime to give advance notice or make a payment of any kindto Executive because of Executive’s involuntary termination due to a layoff, reduction in force, plant or facility closing,sale of business, change in control, or any other similar event or reason, the benefits payable under this Agreement shallbe correspondingly reduced. The benefits provided under this Agreement are intended to satisfy any and all statutoryobligations that may arise out of Executive’s involuntary termination of employment for the foregoing reasons, and theparties shall construe and enforce the terms of this Agreement accordingly.4.8Mitigation. Except as otherwise specifically provided herein, Executive shall not be requiredto mitigate damages or the amount of any payment provided under this Agreement by seeking other employment orotherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensationearned by Executive as a result of employment by another employer or by any retirement benefits received by Executiveafter the date of a Change in Control Termination or Covered Termination (except as expressly provided in Sections 2.3and 3.3 above).4.9Indebtedness of Executive. If Executive is indebted to FivePrime on the effective date of aChange in Control Termination or Covered Termination, FivePrime reserves the right to offset any severance paymentsand benefits under this Agreement by the amount of such indebtedness.4.10Application of Section 409A. It is intended that each installment of the payments providedfor in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). For theavoidance of doubt, it is intended that the payments under this Agreement satisfy, to the greatest extent possible, theexemptions from the application of Code Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4),1.409A-1(b)(5) and 1.409A-1(b)(9). However, if FivePrime (or, if applicable, the successor entity thereto) determines thatthe severance payments provided under this agreement (the “Agreement Payments”) constitute “deferred compensation”under Section 409A and Executive is, on the termination of service, a “specified employee” of FivePrime or anysuccessor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extentnecessary to avoid the incurrence of the adverse personal tax consequences under Code Section 409A, the timing of theAgreement Payments shall be delayed as follows: on the earlier to occur of (i) the date that is six months and one dayafter Executive’s separation from service or (ii) the date of Executive’s death (such earlier date, the “Delayed InitialPayment Date”), FivePrime (or the successor entity thereto, as applicable) shall (A) pay Executive a lump sum amountequal to the sum of the Agreement Payments that he would otherwise have received through the Delayed Initial PaymentDate if the commencement of the payment of the Agreement Payments had not been so delayed pursuant to thisparagraph and (B) commence paying the balance of the Agreement Payments in accordance with the applicablepayment schedules set forth in this agreement.8 4.11Tax Withholding. All payments under this Agreement shall be subject to applicablewithholding for federal, state and local income and employment taxes.ARTICLE 5Other Rights and BenefitsNothing in this Agreement shall prevent or limit Executive’s continuing or future participation in any benefit,bonus, incentive or other plans, programs, policies or practices provided by FivePrime and for which Executive mayotherwise qualify, nor shall anything herein limit or otherwise affect such rights as Executive may have under otheragreements with FivePrime except as provided in Section 1.4 above. Except as otherwise expressly provided herein,amounts that are vested benefits or that Executive is otherwise entitled to receive under any plan, policy, practice orprogram of FivePrime at or subsequent to the date of a Change in Control shall be payable in accordance with suchplan, policy, practice or program.ARTICLE 6DefinitionsUnless otherwise provided, for purposes of this Agreement, the following definitions shall apply:6.1“Base Salary” means 1/12th of the greater of (i) Executive’s annual base salary (excludingincentive pay, premium pay, commissions, overtime, bonuses, and other forms of variable compensation) as in effectimmediately prior to a Change in Control Termination or a Covered Termination, as applicable, or (ii) in the case of aChange in Control Termination, Executive’s annual base salary (excluding incentive pay, premium pay, commissions,overtime, bonuses, and other forms of variable compensation) as in effect immediately prior to a Change in Control.6.2“Board” means the Board of Directors of FivePrime.6.3“Cause” means Executive’s: (i) dishonest statements or acts with respect to FivePrime, anysubsidiary or any affiliate of FivePrime or any subsidiary; (ii) commission by or indictment for (A) a felony or (B) anymisdemeanor (excluding minor traffic violations) involving moral turpitude, deceit, dishonesty or fraud (“indictment,” forthese purposes, meaning an indictment, probable cause hearing or any other procedure pursuant to which an initialdetermination of probable or reasonable cause with respect to such offense is made); (iii) gross negligence, willfulmisconduct or insubordination with respect to FivePrime, any subsidiary or any affiliate of FivePrime or any subsidiary;(iv) material breach of any of Executive’s obligations under any agreement to which Executive and FivePrime or anysubsidiary are a party; or (v) death or disability. With respect to item (iv), Executive will be given notice and a 30-dayperiod in which to cure such breach, only to the extent such breach can be reasonably expected to be able to9 be cured within such period. Executive agrees that the breach of any non-solicitation or confidentiality obligation toFivePrime or any subsidiary shall not be curable to any extent.6.4“Change in Control” means the occurrence, in a single transaction or in a series of relatedtransactions, of any one or more of the following events:(a)Any natural person, entity or group within the meaning of Section 13(d) or 14(d)of the Securities Exchange Act of 1934 (“Exchange Act Person”) becomes the owner, directly or indirectly, of securities ofFivePrime representing more than fifty percent (50%) of the combined voting power of FivePrime’s then outstandingsecurities other than by virtue of a merger, consolidation or similar transaction. Notwithstanding the foregoing, a Changein Control shall not be deemed to occur (i) on account of the acquisition of securities of FivePrime by any institutionalinvestor, any affiliate thereof or any other Exchange Act Person that acquires FivePrime’s securities in a transaction orseries of related transactions that are primarily a private financing transaction for FivePrime or (ii) solely because thelevel of ownership held by any Exchange Act Person (the “Subject Person”) exceeds the designated percentagethreshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities byFivePrime reducing the number of shares outstanding, provided that if a Change in Control would occur (but for theoperation of this sentence) as a result of the acquisition of voting securities by FivePrime, and after such shareacquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase orother acquisition had not occurred, increases the percentage of the then outstanding voting securities owned by theSubject Person over the designated percentage threshold, then a Change in Control shall be deemed to occur;(b)There is consummated a merger, consolidation or similar transaction involving(directly or indirectly) FivePrime if, immediately after the consummation of such merger, consolidation or similartransaction, the stockholders of FivePrime immediately prior thereto do not own, directly or indirectly, either (i)outstanding voting securities representing more than fifty percent (50%) of the combined outstanding voting power of thesurviving entity in such merger, consolidation or similar transaction or (ii) more than fifty percent (50%) of the combinedoutstanding voting power of the parent of the surviving entity in such merger, consolidation or similar transaction;(c)The stockholders of FivePrime approve or the Board approves a plan ofcomplete dissolution or liquidation of FivePrime, or a complete dissolution or liquidation of FivePrime shall otherwiseoccur; or(d)There is consummated a sale, lease, license or other disposition of all orsubstantially all of the consolidated assets of FivePrime and its subsidiaries, other than a sale, lease, license or otherdisposition of all or substantially all of the10 consolidated assets of FivePrime and its subsidiaries to an entity, more than fifty percent (50%) of the combined votingpower of the voting securities of which are owned by stockholders of FivePrime in substantially the same proportion astheir ownership of FivePrime immediately prior to such sale, lease, license or other disposition.The term Change in Control shall not include a sale of assets, merger or other transaction effectedexclusively for the purpose of changing the domicile of FivePrime. Notwithstanding the foregoing or any other provisionof this Agreement, the definition of Change in Control (or any analogous term) in an individual written agreementbetween FivePrime or any affiliate and the participant shall supersede the foregoing definition with respect to stockawards subject to such agreement (it being understood, however, that if no definition of Change in Control or anyanalogous term is set forth in such an individual written agreement, the foregoing definition shall apply).6.5“Change in Control Severance Period” means the period of 18 months commencing on theTermination Date.6.6“Change in Control Termination” means an “Involuntary Termination Without Cause” or“Resignation for Good Reason,” either of which occurs on, or within three months prior to, or within 12 months following,the effective date of a Change in Control, provided that any such termination is a “separation from service” within themeaning of Treasury Regulation Section 1.409A-1(h). Death and disability shall not be deemed Change in ControlTerminations.6.7“COBRA” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended.6.8“Code” means the Internal Revenue Code of 1986, as amended.6.9“Company” means Five Prime Therapeutics, Inc. or, following a Change in Control, thesurviving entity resulting from such transaction, or any subsequent surviving entity resulting from any subsequentChange in Control.6.10“Covered Termination” means an “Involuntary Termination Without Cause”, provided that anysuch termination is a “separation from service” within the meaning of Treasury Regulation Section 1.409A-1(h). Death,disability, and termination of employment by Executive, shall not be deemed Covered Terminations.6.11“Covered Termination Severance Period” means the period of nine months commencing onthe Termination Date.6.12“Involuntary Termination Without Cause” means Executive’s dismissal or discharge byFivePrime for reasons other than Cause and other than as a result of death or disability.11 6.13“Pro-Rata Bonus” means 1/12th of the greater of (i) the average annual bonus paid toExecutive for the three years preceding the date of a Change in Control Termination or Covered Termination, asapplicable, (or such lesser number of years during which Executive has been employed by FivePrime), or (ii) annualtarget cash bonus, as in effect immediately prior to a Change in Control Termination or Covered Termination, asapplicable.6.14“Resignation for Good Reason” means Executive’s resignation from all employee positionsExecutive then-holds with FivePrime within 60 days following any of the following events taken without Executive’sconsent, provided Executive has given FivePrime written notice of such event within 30 days after the first occurrence ofsuch event and FivePrime has not cured such event within 30 days thereafter:(a)A decrease in Executive’s total target cash compensation (base and bonus) ofmore than 10% (i.e., a material reduction in Executive’s base compensation and a material breach by FivePrime ofExecutive’s employment terms with FivePrime), other than in connection with a comparable decrease in compensationfor all comparable executives of FivePrime;(b)Executive’s duties or responsibilities are materially diminished (not simply achange in title or reporting relationships); Executive shall not be deemed to have a “Resignation for Good Reason” ifFivePrime survives as a separate legal entity or business unit following the Change in Control and Executive holdsmaterially the same position in such legal entity or business unit as Executive held before the Change in Control;(c)An increase in Executive’s round-trip driving distance of more than 50 milesfrom Executive’s principal personal residence to the principal office or business location at which Executive is requiredto perform services (except for required business travel to the extent consistent with Executive’s prior business travelobligations); or(d)The failure of FivePrime to obtain a satisfactory agreement from any successorto materially assume and materially agree to perform under the terms of this Agreement.6.15“Termination Date” means the effective date of the Change in Control Termination or CoveredTermination, as applicable.ARTICLE 7General Provisions7.1Employment Status. This Agreement does not constitute a contract of employment or imposeupon Executive any obligation to remain as an employee, or impose on FivePrime any obligation (i) to retain Executiveas an employee, (ii) to12 change the status of Executive as an at-will employee or (iii) to change FivePrime’s policies regarding termination ofemployment.7.2Notices. Any notices provided hereunder must be in writing, and such notices or any otherwritten communication shall be deemed effective upon the earlier of personal delivery (including personal delivery byfacsimile) or the third day after mailing by first class mail, to FivePrime at its primary office location and to Executive atExecutive’s address as listed in FivePrime’s payroll records. Any payments made by FivePrime to Executive under theterms of this Agreement shall be delivered to Executive either in person or at the address as listed in FivePrime’s payrollrecords.7.3Severability. Whenever possible, each provision of this Agreement will be interpreted in suchmanner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid,illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality orunenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed,construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provisions had never beencontained herein.7.4Waiver. If either party should waive any breach of any provisions of this Agreement, he, she orit shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision ofthis Agreement.7.5Arbitration. Unless otherwise prohibited by law or specified below, all disputes, claims andcauses of action, in law or equity, arising from or relating to this Agreement or its enforcement, performance, breach, orinterpretation shall be resolved solely and exclusively by final and binding arbitration held in the San Francisco BayArea through Judicial Arbitration & Mediation Services/Endispute (“JAMS”) under the then existing JAMS employmentlaw arbitration rules. However, nothing in this Section 7.5 is intended to prevent either party from obtaining injunctiverelief in court to prevent irreparable harm pending the conclusion of any such arbitration. Each party in any sucharbitration shall be responsible for its own attorneys’ fees, costs and necessary disbursement; provided, however, that inthe event one party refuses to arbitrate and the other party seeks to compel arbitration by court order, if such other partyprevails, it shall be entitled to recover reasonable attorneys’ fees, costs and necessary disbursements. Pursuant toCalifornia Civil Code Section 1717, each party warrants that it was represented by counsel in the negotiation andexecution of this Agreement, including the attorneys’ fees provision herein.7.6Complete Agreement. This Agreement, including Exhibit A and Exhibit B, constitutes theentire agreement between Executive and FivePrime and is the complete, final, and exclusive embodiment of theiragreement with regard to this subject matter, wholly superseding all written and oral agreements with respect topayments and benefits to Executive in the event of employment termination. It is entered into13 without reliance on any promise or representation other than those expressly contained herein.7.7Amendment or Termination of Agreement; Continuation of Agreement. This Agreementmay be changed or terminated only upon the mutual written consent of FivePrime and Executive. The written consent ofFivePrime to a change or termination of this Agreement must be signed by an executive officer of FivePrime (other thanExecutive) after such change or termination has been approved by the Board. Unless so terminated, this Agreementshall continue in effect for as long as Executive continues to be employed by FivePrime or by any surviving entityfollowing any Change in Control. In other words, if, following a Change in Control, Executive continues to be employedby the surviving entity without a Change in Control Termination and the surviving entity then undergoes a Change inControl, following which Executive is terminated by the subsequent surviving entity in a Change in Control Termination,then Executive shall receive the benefits described in Article 2 hereof.7.8Counterparts. This Agreement may be executed in separate counterparts, any one of whichneed not contain signatures of more than one party, but all of which taken together will constitute one and the sameAgreement.7.9Headings. The headings of the Articles and Sections hereof are inserted for convenienceonly and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.7.10Successors and Assigns. This Agreement is intended to bind and inure to the benefit ofand be enforceable by Executive, and FivePrime, and any surviving entity resulting from a Change in Control and uponany other person who is a successor by merger, acquisition, consolidation or otherwise to the business formerly carriedon by FivePrime, and their respective successors, assigns, heirs, executors and administrators, without regard towhether or not such person actively assumes any rights or duties hereunder; provided, however, that Executive may notassign any duties hereunder and may not assign any rights hereunder without the written consent of FivePrime, whichconsent shall not be withheld unreasonably.7.11ERISA. This Agreement is intended to constitute a severance agreement subject to theEmployee Retirement Income Security Act of 1974, as amended (“ERISA”).7.12Choice of Law. To the extent not preempted by ERISA, all questions concerning theconstruction, validity and interpretation of this Agreement will be governed by the law of the State of California, withoutregard to such state’s conflict of laws rules.14 7.13Construction of Agreement. In the event of a conflict between the text of this Agreementand any summary, description or other information regarding this Agreement, the text of this Agreement shall control.7.14Circular 230 Disclaimer. The following disclaimer is provided in accordance with theInternal Revenue Service’s Circular 230 (21 C.F.R. Part 10). Any tax advice contained in this Agreement isintended to be preliminary, for discussion purposes only, and not final. Any such advice is not intended to beused for marketing, promoting or recommending any transaction or for the use of any person in connection withthe preparation of any tax return. Accordingly, this advice is not intended or written to be used, and it cannot beused, by any person for the purpose of avoiding tax penalties that may be imposed on such person.IN WITNESS WHEREOF, the parties have executed this Agreement on the Effective Date. Five Prime Therapeutics, Inc. By: /s/ Aron KnickerbockerAron KnickerbockerPresident and Chief Executive Officer /s/ David V. SmithDavid V. Smith 15 Exhibit ARELEASE(Individual Termination – Age 40 or Older)Certain capitalized terms used in this Release are defined in the Executive Change in Control SeveranceBenefits Agreement (the “Agreement”) which I have executed and of which this Release is a part.I hereby confirm my obligations under FivePrime’s Employee Confidentiality and Inventions AssignmentAgreement (or other comparable agreement that I have signed, if any).I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads asfollows: “A general release does not extend to claims which the creditor does not know or suspect to exist in hisor her favor at the time of executing the release, which if known by him or her must have materially affected hisor her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that sectionand any law of any jurisdiction of similar effect with respect to my release of any claims provided herein.Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge FivePrime, itsparents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assignsand affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees,damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown,suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a resultof any third party action against me based on my employment with FivePrime), arising out of or in any way related toagreements, events, acts or conduct at any time prior to the date I execute this Release, including all such claims anddemands directly or indirectly arising out of or in any way connected with my employment with FivePrime or thetermination of that employment, including claims of intentional and negligent infliction of emotional distress, any and alltort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or anyother ownership interests in FivePrime, vacation pay, fringe benefits, expense reimbursements, severance pay, or anyother form of compensation; claims pursuant to any federal, state or local law or cause of action including the federalCivil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”);the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Actof 1990; the California Fair Employment and Housing Act, as amended; tort law; contract law; wrongful discharge;discrimination; fraud; defamation; emotional distress; and breach of the implied covenant of good faith and fair dealing;provided, however, that nothing in this paragraph shall be construed in any way toA-1 release FivePrime from its obligation to indemnify me pursuant to FivePrime’s indemnification obligation pursuant towritten agreement or applicable law.I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under ADEA. Ialso acknowledge that the consideration given under this Agreement for the waiver and release in the precedingparagraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge that I havebeen advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rights orclaims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior toexecuting this Release; (C) I have 21 days to consider this Release (although I may choose to voluntarily execute thisRelease earlier); (D) I have seven days following my execution of this Release to revoke the Release by providing awritten notice of revocation to FivePrime’s Chief Executive Officer; and (E) this Release shall not be effective until thedate upon which the revocation period has expired, which shall be the eighth day after I execute this Release (providedthat I do not revoke it).I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all theleave and leave benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act,the California Family Rights Act, any Company policy or applicable law, and I have not suffered any on-the-job injury orillness for which I have not already filed a workers’ compensation claim. David V. Smith Date: A-2 Exhibit B RELEASE(Group Termination – Age 40 or Older)Certain capitalized terms used in this Release are defined in the Executive Change in Control SeveranceBenefits Agreement (the “Agreement”) which I have executed and of which this Release is a part.I hereby confirm my obligations under FivePrime’s Employee Confidentiality and Inventions AssignmentAgreement (or other comparable agreement that I have signed, if any).I acknowledge that I have read and understand Section 1542 of the California Civil Code which reads asfollows: “A general release does not extend to claims which the creditor does not know or suspect to exist in hisor her favor at the time of executing the release, which if known by him or her must have materially affected hisor her settlement with the debtor.” I hereby expressly waive and relinquish all rights and benefits under that sectionand any law of any jurisdiction of similar effect with respect to my release of any claims provided herein.Except as otherwise set forth in this Release, I hereby release, acquit and forever discharge FivePrime, itsparents and subsidiaries, and their officers, directors, agents, servants, employees, shareholders, successors, assignsand affiliates, of and from any and all claims, liabilities, demands, causes of action, costs, expenses, attorneys fees,damages, indemnities and obligations of every kind and nature, in law, equity, or otherwise, known and unknown,suspected and unsuspected, disclosed and undisclosed (other than any claim for indemnification I may have as a resultof any third party action against me based on my employment with FivePrime), arising out of or in any way related toagreements, events, acts or conduct at any time prior to the date I execute this Release, including all such claims anddemands directly or indirectly arising out of or in any way connected with my employment with FivePrime or thetermination of that employment, including claims of intentional and negligent infliction of emotional distress, any and alltort claims for personal injury, claims or demands related to salary, bonuses, commissions, stock, stock options, or anyother ownership interests in FivePrime, vacation pay, fringe benefits, expense reimbursements, severance pay, or anyother form of compensation; claims pursuant to any federal, state or local law or cause of action including the federalCivil Rights Act of 1964, as amended; the federal Age Discrimination in Employment Act of 1967, as amended (“ADEA”);the federal Employee Retirement Income Security Act of 1974, as amended; the federal Americans with Disabilities Actof 1990; the California Fair Employment and Housing Act, asB-1 amended; tort law; contract law; wrongful discharge; discrimination; fraud; defamation; emotional distress; and breach ofthe implied covenant of good faith and fair dealing; provided, however, that nothing in this paragraph shall be construedin any way to release FivePrime from its obligation to indemnify me pursuant to FivePrime’s indemnification obligationpursuant to written agreement or applicable law.I acknowledge that I am knowingly and voluntarily waiving and releasing any rights I may have under theADEA. I also acknowledge that the consideration given under this Agreement for the waiver and release in thepreceding paragraph hereof is in addition to anything of value to which I was already entitled. I further acknowledge thatI have been advised by this writing, as required by the ADEA, that: (A) my waiver and release do not apply to any rightsor claims that may arise on or after the date I execute this Release; (B) I have the right to consult with an attorney prior toexecuting this Release; (C) I have 45 days to consider this Release (although I may choose to voluntarily execute thisRelease earlier); (D) I have seven days following my execution of this Release to revoke the Release by providing awritten notice of revocation to FivePrime’s Chief Executive Officer; (E) this Release shall not be effective until the dateupon which the revocation period has expired, which shall be the eighth day after I execute this Release; and (F) Ihave received with this Release the required written disclosure for a “group termination” under the ADEA, including adetailed list of the job titles and ages of all employees who were terminated in this group termination and the ages of allemployees of FivePrime in the same job classification or organizational unit who were not terminated.I hereby represent that I have been paid all compensation owed and for all hours worked, I have received all theleave and leave benefits and protections for which I am eligible, pursuant to the federal Family and Medical Leave Act,the California Family Rights Act, any Company policy or applicable law, and I have not suffered any on-the-job injury orillness for which I have not already filed a workers’ compensation claim. David V. Smith Date: B-2 CONFIDENTIALExhibit 10.37 Amendment No. 1 to the Confidential Consulting AgreementThis Amendment No. 1 to the Consulting Agreement (this “Amendment”), effective October 13, 2018 (the “AmendmentEffective Date”), is made and entered into by and between Five Prime Therapeutics, Inc., a Delaware corporation (“Client”), andFLG Partners, LLC, a California limited liability company (“FLG”). BackgroundA.Client and FLG are parties to the Confidential Consulting Agreement, dated April 13, 2018 (the “Agreement”). B.Pursuant to Section 11(G) of the Agreement, any term or provision of the Agreement may be amended only bya writing signed by the parties.C.Client and FLG desire to amend certain provisions of the Agreement as set forth in this Amendment.NOW, THEREFORE, Client and FLG agree as follows:1.Amendment of the Agreement. Client and FLG agree to amend the terms of the Agreement as provided below, effectiveas of the Amendment Effective Date. Capitalized terms used in this Amendment that are not otherwise defined herein shall havethe same meanings as such terms are given in the Agreement. 2.Term. Section 6 of Exhibit A to the Agreement is hereby amended and restated in its entirety as set forth below:“Term. The later of twelve months from the Effective Date or upon the completion of Services, unless earlier terminatedpursuant to Paragraph 4 of the Agreement.”3.Miscellaneous.3.1Full Force and Effect. All terms and conditions set forth in the Agreement that are not amended hereby shallremain in full force and effect.3.2Entire Agreement. The Agreement, as amended by this Amendment, sets forth the entireunderstanding of Client and FLG relating to the subject matter thereof and supersedes all prior agreements and understandingsbetween Client and FLG relating to the subject matter thereof.3.3Modification. This Amendment may not be modified or amended in any way unless done so inaccordance with Section 11(G) of the Agreement.3.4Counterparts. This Amendment may be executed in counterparts, each of which shall constitute anoriginal and both of which, when taken together, shall constitute one agreement. The exchange of a fully executed Amendment (incounterparts or otherwise) by electronic transmission, including by email, or facsimile shall be sufficient to bind Client and FLG tothe terms and conditions of this Amendment.1LGL-7045 CONFIDENTIALIN WITNESS WHEREOF, Client and FLG have executed this Amendment with effect as of the Amendment EffectiveDate. Five Prime Therapeutics, Inc. By: /s/ Jeff Coon Name: Jeff Coon Title: SVP, Human ResourcesFLG Partners, LLC By: /s/ Jeffrey Kuhn Name: Jeffrey Kuhn Title: Administrative Partner 2LGL-7045 Exhibit 10.42AMENDMENT No. 1to theNON-EXCLUSIVE LICENSE AGREEMENTDated 6 February 2012BetweenLONZA SALES AGandFIVE PRIME THERAPEUTICS, INC.andBIOWA, INC. LGL-2015B15265/IS/KJ/31May13[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THIS AMENDMENT is made the 6th day of June, 2013BETWEENBIOWA, INC., a Delaware corporation, with a principal place of business at 9420 Athena Circle, La Jolla, California 92037, USA("BioWa")ANDLONZA SALES AG incorporated and registered in Switzerland whose registered office is at Muenchensteinerstrasse 38, CH-4002,Basel, Switzerland, ("Lonza")(together the "Licensor")ANDFIVE PRIME THERAPEUTICS, INC. of Two Corporate Drive, South San Francisco,California 94080, USA ("Licensee").WHEREASA.Licensor and Licensee entered into a Non-Exclusive License Agreement dated 6 February 2012 (hereinafter referred toas the "Agreement") under which Licensor released materials to Licensee for the purposes of the Commercial License(all as therein defined); andB.Licensee now wishes to provide certain materials to third parties in connection with Licensee's further use of theLicensed Technology; andC.Licensor and Licensee now wish to amend the terms of the Agreement.NOW THEREFORE in consideration of the mutual promises and covenants contained herein and other good and valuableconsideration the sufficiency of which is acknowledged it is hereby agreed by and between the parties to amend the Agreement asfollows:B15265/IS/KJ/31May13[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 1.The words and phrases defined in the Agreement shall have the same meanings in this Amendment. In addition, thefollowing term shall have the meaning shown:"[***]" means [***] of [***].2.Subject to clause 3 below, following signature of this Amendment No. 1 to the Agreement by the parties, Licensee shallbe permitted to supply to [***] the following materials: 1.The Vector [***] identified in clause 3.1 (a) of the Agreement and related Licensor Know-How; and 2.[***] of Potelligent® CHOK1SV from which [***] to be used as a [***].(together, "the Characterisation Materials")3.Licensor hereby consents to Licensee supplying the Characterisation Materials to [***] for the sole purpose of [***] usingthe Characterisation Materials for [***]; provided that [***] shall not use the Characterisation Materials or cause or permitthe Characterisation Materials to be used in any way for human in vivo studies or for commercial purposes including butwithout limitation the manufacture, use, marketing and sale of any Product or any product containing or derived from aProduct.4.Licensee shall ensure that [***] use the Characterisation Materials solely as expressly permitted in clause 3 above andfor no other purpose whatsoever. Licensee is responsible for the strict adherence to the relevant terms of theAgreement, including this Amendment No. 1 to the Agreement, by [***].5.On termination or expiry, whichever occurs earlier, of the Agreement or Licensee's arrangements with [***], Licenseeshall ensure that [***] destroys or returns to Licensee the Characterisation Materials supplied by Licensee to [***] underclause 3 above, as well as any materials resulting or derived therefrom.6.For the avoidance of doubt, Licensee hereby confirms that neither Licensee nor [***] shall perform any analysis, test,experiment, modification or reverse-engineering on any part of the Licensed Technology.B15265/IS/KJ/31May13[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 7.Save as herein provided all other terms and conditions of the Agreement shall remain in full force and effect.IN WITNESS WHEREOF the parties have caused this Amendment No. 1 to be executed by their respective representativesthereunto duly authorised as of the day and year first above written.Signed for and on behalf ofLONZA SALES AG/s/ Nadia Zleger /s/ Jaret White Nadia ZlegerLegal Counsel TITLESigned for and on behalf ofLONZA SALES AGJaret WhiteHead Development TITLEPresident and CEO /s/ TITLESigned for and on behalf ofBIOWA, INC. /s/ Aron Knickerbocker Signed for and on behalf ofFIVE PRIME THERAPEUTICS, INC.Aron Knickerbocker Senior VP-Business Development TITLE B15265/IS/KJ/31May13[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Execution CopyExhibit 10.43 AMENDMENT No. 2 to the NON-EXCLUSIVE LICENSE AGREEMENT Dated 6 February 2012 Between BIOWA, INC. and LONZA SALES AG and FIVE PRIME THERAPEUTICS, INC. LGL-4454CONFIDENTIAL [***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Execution CopyTHIS AMENDMENT No. 2 (this “Amendment”) is made the 17th day of April, 2018 (the “Effective Date”) BETWEEN BIOWA, INC., a Delaware corporation, with a principal place of business at 212 Carnegie Center, Suite 400, Princeton,NJ 08540, USA (“BioWa”) AND LONZA SALES AG incorporated and registered in Switzerland whose registered office is at Muenchensteinerstrasse 38,CH-4002, Basel, Switzerland, (“Lonza") (together the “Licensor”) AND FIVE PRIME THERAPEUTICS, INC., a Delaware corporation with a principal place of business at 111 Oyster PointBoulevard, South San Francisco, California 94080, USA (“Licensee”). WHEREAS A.Licensor and Licensee entered into a Non-Exclusive License Agreement dated 6 February 2012, as amendedon 6 June 2013 (hereinafter referred to as the “Agreement”) under which (inter alia) Licensor released materialsto Licensee for the purposes of the Commercial License (all as therein defined); and. B.Licensor and Licensee now wish to amend the terms of the Agreement. NOW THEREFORE in consideration of the mutual promises and covenants contained herein and other good andvaluable consideration the sufficiency of which is acknowledged, and intending to be legally bound, it is hereby agreedby and between the Parties to amend the Agreement as follows: LGL-4454CONFIDENTIAL [***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Execution Copy1.Capitalized terms used in this Amendment No. 2 and not otherwise defined herein shall have the samemeanings ascribed to such terms in the Agreement. 2.In accordance with Section 2.2.2 of the Agreement, Licensor hereby consents to Licensee’s written requestdated December 9, 2016 that Licensor consent to: (i) the transfer of Transfected Cells by the Licensee to [***], a[***] (hereafter “[***]”) at its [***] facility only, notwithstanding the fact that the Parties understand that [***] is, as ofthe date of this Amendment No. 2, a Competing Contract Manufacturer; and (ii) the sublicense to [***] at its [***]facility only of the rights to make the Product only for the benefit of Licensee as granted to Licensee underSection 2.1 of the Agreement. Such sub-licensing referred to in this Amendment No. 2 shall be subject to theterms of the Agreement, including, without limitation, Sections 2.2.3 and 2.3. Licensee shall at all times remainresponsible for the acts and omissions of [***] in connection with such sub-licensing as set forth in Section 2.3of the Agreement. 3.Licensee shall pay to Lonza the initial payment of the Lonza Annual License Fee when and as applicable, inaccordance with terms set out under Section 6.3 of the Agreement. 4.Save as herein provided all other terms and conditions of the Agreement shall remain in full force and effect. [Remainder of page intentionally blank; signature page follows]LGL-4454CONFIDENTIAL [***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Execution CopyIN WITNESS WHEREOF the Parties have caused this Amendment No. 2 to be executed by their respectiverepresentatives thereunto duly authorised effective as of the day and year first above written. Signed for and on behalf ofBIOWA, INC.../s/ Takeshi Masuda.................... Takeshi MasudaTITLE: President and CEO Signed for and on behalf of.../s/ Albert Pereda.......................LONZA SALES AG...Senior Legal Counsel............... TITLE Signed for and on behalf of.../s/ Cordula Altekrüger...............LONZA SALES AG...Senior Legal Counsel............... TITLE Signed for and on behalf of.../s/ Kevin Baker........................FIVE PRIME THERAPEUTICS, INC...SVP, Development Sciences.... TITLELGL-4454CONFIDENTIAL [***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. CONFIDENTIALExhibit 10.48Amendment No. 1 to the License and Collaboration AgreementThis Amendment No. 1 to the License and Collaboration Agreement (this “Amendment”), effective December 21, 2018(the “Amendment Effective Date”), is made and entered into by and between Five Prime Therapeutics, Inc., a Delaware corporation(“FivePrime”), and Zai Lab (Shanghai) Co., Ltd., a limited company organized under the laws of the People’s Republic of China(“Zai”).BackgroundA.WHEREAS, FivePrime and Zai are parties to that certain License and Collaboration Agreement, dated December 19,2017 (the “Agreement”), pursuant to which FivePrime granted to Zai an exclusive license to develop and commercialize FPA144 inthe Territory (as defined in the Agreement);B.WHEREAS, pursuant to Section 16.6 of the Agreement, the Agreement may be amended, or any term thereofmodified, only by a written instrument duly executed by authorized representatives of both Parties; andC.WHEREAS, FivePrime and Zai desire to amend certain provisions of the Agreement as set forth in thisAmendment.NOW, THEREFORE, FivePrime and Zai agree as follows:1.Amendment of the Agreement. FivePrime and Zai agree to amend the terms of the Agreement as provided below,effective as of the Amendment Effective Date. Capitalized terms used in this Amendment that are not otherwise defined hereinshall have the same meanings as such terms are given in the Agreement.2.Commercial Supply Agreement. The first sentence of Section 7.1(b) of the Agreement is hereby amended and restatedin its entirety as set forth below.“The Parties shall use Commercially Reasonable Efforts to agree on or prior to [***] on the principalterms of a commercial supply agreement (the “Commercial Supply Agreement”) pursuant to which Zai maypurchase commercial supply of a Licensed Product (vialed drug product, labeled or unlabeled) from Five Primeat Five Prime’s Fully Burdened Manufacturing Cost in order to fulfill Zai’s obligations under this Agreement,which terms shall be consistent with the terms and conditions of this Agreement and the terms and conditionsof any agreement between Five Prime and its Third Party manufacturing partner(s), to the extent applicable tocommercial supply of Licensed Product in the Field in the Territory.” 3.Miscellaneous.3.1Full Force and Effect. All terms and conditions set forth in the Agreement, and the rights and obligations ofthe Parties thereunder, that are not amended hereby shall remain in full force and effect.1[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. CONFIDENTIAL3.2Entire Agreement. The Agreement, as amended by this Amendment, sets forth the entireunderstanding of FivePrime and Zai relating to the subject matter thereof and supersedes all prior agreements and understandingsbetween FivePrime and Zai relating to the subject matter thereof.3.3Counterparts. This Amendment may be executed in one (1) or more counterparts, each of which shallconstitute an original and all of which, when taken together, shall constitute one agreement. The exchange of a fully executedAmendment (in counterparts or otherwise) by electronic transmission, including by email, or facsimile shall be sufficient to bindFivePrime and Zai to the terms and conditions of this Amendment.3.4Conflicts. Where there is any conflict between the terms of this Amendment and the terms of the Agreement orany other agreement between the Parties (or their Affiliates), the terms and conditions of this Amendment shall prevail.IN WITNESS WHEREOF, FivePrime and Zai have executed this Amendment with effect as of the Amendment EffectiveDate. Five Prime Therapeutics, Inc. By: /s/ Tarak D. Mody Name: Tarak D. Mody, Ph.D. Title: VP, Bus Dev & AlliancesZai Lab (Shanghai) Co., Ltd. By: /s/ Samantha Du Name: Samantha Du Title: Chief Executive Officer 2[***] = CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY BRACKETS, HAS BEEN OMITTED AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGECOMMISSION PURSUANT TO RULE 24B-2 OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. Exhibit 23.1Consent of Independent Registered Public Accounting Firm We consent to the incorporation by reference in the following Registration Statements: (1)Registration Statement on Form S-3 (File No. 333-228206) of Five Prime Therapeutics, Inc.;(2) Registration Statements on Form S-8 (File Nos. 333-191700, 333-194820, 333-202854, 333-211216, 333-217737 and 333-224748) pertaining tothe 2002 Equity Incentive Plan, 2010 Equity Incentive Plan, 2013 Omnibus Incentive Plan and the 2013 Employee Stock Purchase Plan of FivePrime Therapeutics, Inc.; of our reports dated February 26, 2019, with respect to the financial statements of Five Prime Therapeutics, Inc. and the effectiveness of internal control overfinancial reporting of Five Prime Therapeutics, Inc. included in this Annual Report on Form 10-K of Five Prime Therapeutics, Inc. for the year endedDecember 31, 2018. /s/ Ernst & Young LLP San Francisco, CaliforniaFebruary 26, 2019 Exhibit 31.1CERTIFICATION OF THE CHIEF EXECUTIVE OFFICERPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Aron Knickerbocker, certify that:1. I have reviewed this annual report on Form 10-K of Five Prime Therapeutics, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Dated: February 26, 2019 /s/ Aron KnickerbockerAron KnickerbockerPresident and Chief Executive Officer(Principal Executive Officer) Exhibit 31.2CERTIFICATION OF THE CHIEF FINANCIAL OFFICERPursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, David V. Smith, certify that:1. I have reviewed this annual report on Form 10-K of Five Prime Therapeutics, Inc.;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, 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, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Dated: February 26, 2019 /s/ David V. SmithDavid V. SmithExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer) Exhibit 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Five Prime Therapeutics, Inc. (“Five Prime”) for the year ended December 31, 2018, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, Aron Knickerbocker, President and Chief Executive Officer of Five Prime,certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Five Prime.Dated: February 26, 2019 /s/ Aron Knickerbocker Aron KnickerbockerPresident and Chief Executive Officer(Principal Executive Officer) Exhibit 32.2CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with the Annual Report on Form 10-K of Five Prime Therapeutics, Inc. (“Five Prime”) for the year ended December 31, 2018, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), I, David V. Smith, Executive Vice President and Chief Financial Officer ofFive Prime, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of myknowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Five Prime.Dated: February 26, 2019 /s/ David V. Smith David V. SmithExecutive Vice President and Chief Financial Officer(Principal Financial and Accounting Officer)

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