Jounce Therapeutics
Annual Report 2018

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549________________________________________________________________________________________________________FORM 10-K________________________________________________________________________________________________________(Mark One)x 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 001-37998________________________________________________________________________________________________________JOUNCE THERAPEUTICS, INC.(Exact name of registrant as specified in its charter)________________________________________________________________________________________________________ Delaware(State or other jurisdiction ofincorporation or organization) 45‑4870634(I.R.S. EmployerIdentification No.) 780 Memorial DriveCambridge, Massachusetts(Address of principal executive offices) 02139(Zip Code)Registrant’s telephone number, including area code: (857) 259‑3840Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of each exchange on which registeredCommon Stock, $0.001 par value 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 xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for suchshorter 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 x No ¨ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S‑T (§ 232.405 of this chapter)during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non‑accelerated filer, a smaller reporting company, or an emerging growth company. See the definitionsof “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b‑2 of the Exchange Act.Large accelerated filer¨Accelerated filer x Non‑accelerated filer¨Smaller reporting company x Emerging growth companyx 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 financial accounting standardsprovided pursuant to Section 13(a) of the Exchange Act. x Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b‑2 of the Act). Yes ¨ No xAs 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 theregistrant was approximately $120,393,951, based upon the closing price of the registrant’s Common Stock on June 29, 2018. As of March 1, 2019, there were 32,972,345 shares of common stock, $0.001 par value per share, outstanding.Documents Incorporated by ReferencePortions of the registrant’s Definitive Proxy Statement on Schedule 14A relating to its 2019 Annual Meeting of Stockholders to be filed within 120 days of the end of the registrant’s fiscal yearended December 31, 2018 are incorporated by reference into Part III of this Annual Report on Form 10-K to the extent stated herein. Table of ContentsTable of Contents PagePART I Item 1.Business3Item 1A.Risk Factors24Item 1B.Unresolved Staff Comments56Item 2.Properties56Item 3.Legal Proceedings57Item 4.Mine Safety Disclosures57 PART II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of EquitySecurities58Item 6.Selected Financial Data58Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations59Item 7A.Quantitative and Qualitative Disclosures above Market Risk69Item 8.Financial Statements and Supplementary Data69Item 9.Change in and Disagreements with Accountants on Accounting and Financial Disclosure69Item 9A.Controls and Procedures69Item 9B.Other Information70 PART III Item 10.Directors, Executive Officers and Corporate Governance71Item 11.Executive Compensation73Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters73Item 13.Certain Relationships and Related Transactions, and Director Independence73Item 14.Principal Accounting Fees and Services73 PART IV Item 15.Exhibits and Financial Statement Schedules74Item 16.Form 10-K Summary74 EXHIBIT INDEX SIGNATURES Table of ContentsReferences to JounceThroughout this Annual Report on Form 10-K, the “Company,” “Jounce,” “Jounce Therapeutics,” “we,” “us,” and “our,” except where the contextrequires otherwise, refers to Jounce Therapeutics, Inc. and its consolidated subsidiary, and “our board of directors” refers to the board of directorsof Jounce Therapeutics, Inc.Cautionary Note Regarding Forward-Looking Statements and Industry DataThis Annual Report on Form 10-K contains forward-looking statements that involve substantial risks and uncertainties. All statements other thanstatements of historical facts contained in this Annual Report on Form 10-K, including statements regarding our strategy, future operations, futurefinancial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-lookingstatements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results,performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “would”, “will,” “target”, “goal”, “could,” “should,“potential,” “continue” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statementscontain these identifying words. These forward-looking statements include, among other things, statements about:•the timing, progress, and results of preclinical studies and clinical trials for vopratelimab (formerly JTX-2011), JTX-4014, JTX-8064 andany other product candidates we may develop, including statements regarding the timing of initiation and completion of studies or trialsand related preparatory work, the period during which the results of the trials will become available, and our research and developmentprograms;•the timing, scope, or likelihood of regulatory filings and approvals, including, as applicable, timing of our investigational new drugapplication for, biologics license application filing for, and final Food and Drug Administration approval of vopratelimab, JTX-4014, JTX-8064 and other future product candidates;•our ability to use our Translational Science Platform to identify targets for future product candidates and to match immunotherapies toselect patient subsets;•our ability to identify, develop and advance future product candidates into, and successfully complete, clinical studies;•our ability to develop combination therapies, whether on our own or in collaboration with Celgene Corporation, or Celgene, and other thirdparties, for vopratelimab, JTX-4014 and JTX-8064;•our expectations regarding the size of the patient populations for vopratelimab, JTX-4014 and JTX-8064, if approved for commercial use,and any product candidates we may develop;•our commercialization and marketing capabilities and strategy;•the pricing and reimbursement of vopratelimab, JTX-4014, JTX-8064 and any product candidates we may develop, if approved;•the implementation of our business model and our strategic plans for our business, vopratelimab, JTX-4014, JTX-8064 and any productcandidates we may develop, and our technology;•our ability to develop and commercialize a companion diagnostic or complementary diagnostic for vopratelimab, JTX-4014, JTX-8064 andany product candidates we may develop;•the rate and degree of market acceptance and clinical utility of vopratelimab, JTX-4014, JTX-8064 and any product candidates we maydevelop;•the potential benefits of and our ability to maintain our collaboration with Celgene, and the impact of the anticipated acquisition of Celgeneby Bristol-Myers Squibb Company on our collaboration;•our ability to establish or maintain future collaborations or strategic relationships or obtain additional funding;•our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;1Table of Contents•our intellectual property position, including the scope of protection we are able to establish and maintain for intellectual property rightscovering vopratelimab, JTX-4014, JTX-8064 and any product candidates we may develop, and our ability not to infringe, misappropriate orotherwise violate any third-party intellectual property rights;•our competitive position, and developments and projections relating to our competitors and our industry;•our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and•the impact of laws and regulations.There are a number of important risks and uncertainties that could cause our actual results to differ materially from those indicated by forward-looking statements. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and youshould not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions andexpectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included inthis Annual Report on Form 10-K, particularly in the section entitled “Risk Factors” in Part I, Item 1A that could cause actual results or events todiffer materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any futureacquisitions, mergers, dispositions, joint ventures or investments that we may make.You should read this Annual Report on Form 10-K and the documents that we have filed as exhibits to this Annual Report on Form 10-Kcompletely and with the understanding that our actual future results may be materially different from what we expect. The forward-lookingstatements contained in this Annual Report on Form 10-K are made as of the date of this Annual Report on Form 10-K, and we do not assume anyobligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required byapplicable law.This Annual Report on Form 10-K may include industry and market data, which we may obtain from our own internal estimates and research, aswell as from industry and general publications and research, surveys, and studies conducted by third parties. Industry publications, studies, andsurveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy orcompleteness of such information. While we believe that such studies and publications are reliable, we have not independently verified market andindustry data from third‑party sources.Website and Social Media DisclosureFrom time to time, we may use our website (www.jouncetx.com), investor and media relations website (http://ir.jouncetx.com), Facebook page(https://www.facebook.com/jouncetx), LinkedIn page (https://www.linkedin.com/company/3494537/) and Twitter feed (https://twitter.com/JounceTx)as channels for the distribution of information. The information we post through these channels may be deemed material. Accordingly, investorsshould monitor these channels, in addition to following our press releases, Securities and Exchange Commission filings and public conferencecalls and webcasts. The contents of our website and social media channels are not, however, a part of this report.2Table of ContentsPART IItem 1. BusinessOverviewWe are a clinical-stage immunotherapy company dedicated to transforming the treatment of cancer by developing therapies that enable theimmune system to attack tumors and provide long-lasting benefits to patients. We have developed a suite of integrated technologies that compriseour Translational Science Platform, enabling us to comprehensively interrogate the cellular and molecular composition of tumors. By focusing onspecific cell types, both immune and non-immune, within tumors, we can prioritize targets and then identify related biomarkers designed to matchthe right therapy to the right patient. Through this scientific understanding of the tumor microenvironment, or TME, our goal is to effectively andefficiently identify and develop new cancer immunotherapies designed to benefit patients with tumors across the spectrum from highly inflamed, or“hot,” to poorly inflamed, or “cold,” and especially those not well served by current therapies.Our most advanced product candidate, vopratelimab (formerly JTX-2011), is a clinical-stage monoclonal antibody that binds to and activates theInducible T cell CO-Stimulator, or ICOS, a protein on the surface of certain T cells commonly found in many solid tumors. Vopratelimab wasassessed in a Phase 1/2 clinical trial that we refer to as ICONIC. In the initial Phase 1/2 portion of ICONIC, vopratelimab was found to be safe andwell-tolerated, both alone and in combination with nivolumab, an anti-PD-1 antibody. At the June 2018 annual meeting of the American Society ofClinical Oncology, or ASCO, we reported Response Evaluation Criteria in Solid Tumors, or RECIST, responses and other tumor reductions asdetermined by investigator assessment that were associated with an ICOS pharmacodynamic biomarker. We subsequently reported that theseresponses were durable, lasting six or more months and that all responders, as determined by investigator assessments, remained on study formore than one year. ICONIC also includes an on-going dose-escalation Phase 1 portion to assess vopratelimab in combination withpembrolizumab, an anti-PD-1 antibody, and in combination with ipilimumab, an antibody that binds to CTLA-4 on certain T cells. This Phase 1portion established the safety of vopratelimab in combination with each of ipilimumab and pembrolizumab. We plan to initiate additional Phase 2clinical studies, including one or more new dosing schedules and combination sequences, in 2019 and expect to report preliminary efficacy datafrom these additional clinical studies in 2020. These anticipated Phase 2 clinical studies will evaluate vopratelimab in combination with ipilimumab,and, separately, using a predictive biomarker approach, will evaluate vopratelimab alone and/or in combination with a PD-1 inhibitor. Theseadditional clinical studies are designed to determine whether vopratelimab can offer a treatment alternative to patients who otherwise do notdisplay an effective response to currently approved therapies, and/or whether it can enhance the therapeutic benefit of currently approvedtherapies.Our second product candidate, JTX-4014, is a clinical-stage anti-PD-1 antibody that we are developing primarily for potential use in combinationwith future product candidates, as we believe that combination therapy has the potential to be a mainstay of cancer immunotherapy. We arecurrently conducting a Phase 1 clinical trial of JTX‑4014 monotherapy and completed enrollment in the first cohort in the fourth quarter of 2018.This Phase 1 clinical trial is designed to assess safety and to determine the recommended Phase 2 dose. We expect to identify the recommendedPhase 2 dose in 2019.JTX-8064, our third product candidate, is an antibody that binds to LILRB2, which is a cell surface receptor expressed on macrophages. JTX-8064is the first tumor-associated macrophage candidate to emerge from our Translational Science Platform. We believe therapies targeting theseinnate immune cells may have the potential to benefit patients with tumors that are less likely to respond to existing T cell-focused approaches.We are currently conducting IND-enabling activities for JTX-8064, with the goal of filing an investigational new drug application, or IND, andinitiating a Phase 1 clinical trial in 2019.Our strategy is to use a biomarker-driven approach from discovery through clinical development. We leverage our Translational Science Platformto interrogate cell types within the human tumor microenvironment and to identify and prioritize targets across a broad spectrum of immune andnon-immune cell types. In addition, early in the development process, we use our Translational Science Platform to identify potential predictivebiomarkers to enable us to enrich our clinical trials for patient populations that may be more likely to respond to a particular immunotherapy. Wecan also use characteristics defined by our biomarker efforts to focus on niche indications and/or niche subsets within indications to inform ourclinical strategy. Once clinical data is available for a product candidate, we then use a reverse translational approach to interrogate tumor andblood samples from patients with known outcomes. By using these reverse translational findings, we believe we are better able to design clinicaltrials and more efficiently develop cancer immunotherapies that potentially provide greater benefit to patients. We believe that the biomarkerresults, coordinated3Table of Contentsto clinical response, will assist with determining the utility of proceeding to the use of a complementary diagnostic and/or companion diagnostic fora given therapy.We have assembled a highly-experienced internal and external team of experts in immunotherapy to help us leverage our Translational SciencePlatform to drive the development of our early discovery programs and our product candidates, including vopratelimab. Two of our founders,Dr. James Allison and Dr. Padmanee Sharma of the University of Texas MD Anderson Cancer Center, were initially responsible for thetranslational science behind ICOS. Dr. Allison played a fundamental role in ushering in the era of immune checkpoint therapy, includingcontributing to the understanding of the basic science of CTLA-4 that supported the development of ipilimumab, marketed as Yervoy. In 2018, Dr.Allison was awarded the Nobel Prize in Physiology or Medicine for his work related to the discovery of cancer therapy by inhibition of negativeimmune regulation.Our ability to prioritize targets and potential predictive biomarkers using our Translational Science Platform helped lead to our strategiccollaboration with Celgene Corporation, or Celgene. This global strategic collaboration, which included a $225.0 million upfront payment and a$36.1 million equity investment, is primarily focused on co-developing and co-commercializing innovative biologic immunotherapy treatments forpatients with cancer. Under the agreement, we granted Celgene exclusive options to develop and commercialize our lead product candidate,vopratelimab, and up to four early-stage programs consisting of targets to be selected from a pool of certain B cell, T regulatory cell and tumor-associated macrophage targets, including JTX-8064. Additionally, Celgene has an exclusive option to develop and commercialize JTX-4014,which, upon exercise of such option, will be a shared program that may be used by both parties within and outside of the collaboration. Under theterms of the agreement, if Celgene exercises all of its options, all programs meet all milestones, including regulatory approvals in the UnitedStates and outside the United States, and Celgene extends the initial four-year research term for three additional years, we are eligible to earn upto approximately $2.6 billion in clinical, regulatory, and/or commercialization milestone payments, option-exercise fees and research termextension fees. In January 2019, Celgene and Bristol-Myers Squibb Company, or BMS, announced that they had entered into an agreement underwhich Celgene will be acquired by BMS, subject to shareholder and regulatory approvals. If the transaction closes, we anticipate that theacquisition of Celgene by BMS may change the dynamics of our collaboration, given the overlap of our product candidates and therapies in BMS’spipeline. We expect that the acquisition may have a positive impact on our business if we successfully develop a relationship with BMS, a leaderin the immuno-oncology field. In the event that BMS or Celgene chooses not to exercise some or all of the rights to the optioned programs, we willretain one hundred percent of the worldwide rights for the non-optioned programs and may advance them on our own or potentially with a newpartner. In addition to progressing collaboration programs, we will continue to use our Translational Science Platform to progress our own programsthat are not part of the collaboration and for which we retain worldwide commercial rights.Our StrategyWe aim to build a multi-product company that discovers, develops and commercializes first-in-class and/or best in class novel therapeutics andcombination approaches for patients who are less likely to respond, or who have experienced limited or no response, to currently-approvedimmunotherapies. Key elements of our strategy include:•Aggressively develop our product candidates, and potential future product candidates, using a biomarker-driven approach and reversetranslational analysis aimed at bringing the right immunotherapy to the right patients;•Continue our investment in our Translational Science Platform to enhance our understanding of the TME, as we look to broaden thebenefit of immunotherapy through targeting additional cell types;•Address the unmet need of cancer patients with tumors unresponsive to T effector cell-directed therapies by focusing our discovery effortson other cell types within the TME; and•Expand our pipeline by leveraging our internal discovery platform and/or in-licensing new technologies, product candidates andmethodologies.Immuno-Oncology OverviewHistorically, cancer treatments have focused on either killing or arresting the proliferation of the tumor cells themselves. However, fundamentalwork pioneered by one of our founders, Dr. Allison, led to the discovery of one of the first immune cell checkpoint therapies. Immune checkpointinhibitors show promise in treating various cancers, including immunotherapies that bind to the PD-1 or PD-L1 receptor on certain T cells, and areapproved in multiple cancer types and across different lines of therapy.4Table of ContentsEven with the success of these antibodies that bind to PD-1 or PD-L1, known as PD-1 checkpoint inhibitors, there is still a significant unmet need.Data emerging from clinical studies with these PD-1 checkpoint inhibitors suggests the importance of a biomarker-driven patient-enrichmentstrategy, like that used for pembrolizumab, in first-line non-small cell lung cancer subjects and in second line microsatellite-instability-high, or MSI-H, cancer patient populations. Additional highlights of the evolving immunotherapy landscape include longer-lasting responses as compared tochemotherapy and that these longer-lasting responses can be improved with combination therapy.The interplay between the immune system and cancer is dynamic and as more patients, in an expanded set of indications, are being exposed tocancer immunotherapies we are learning about the factors that may contribute to a lack of response or a failed response. Reasons for resistanceto immunotherapy may include a lack of appropriate immune cells in the TME, for example, the absence of T effector cells, or the presence ofimmunosuppressive cells, such as tumor associated macrophages or T regulatory cells. In these cases, therapeutic approaches that target othercell types within the TME to convert colder tumors to hot tumors may broaden the applicability of cancer immunotherapies. In addition, a tumormay initially respond to a PD-1 checkpoint inhibitor immunotherapy, but other immune checkpoints may emerge or an acquired resistance to theparticular immunotherapy may occur, for example through genetic alterations in key T cell signaling pathways. In these instances, combinationtherapy approaches that target more than one checkpoint, or more than one mechanism, may be key to maximizing the benefit of cancerimmunotherapies.We believe that our Translational Science Platform, which enables both the identification and prioritization of targets across a broad spectrum ofimmune and non-immune cell types and the identification of potential biomarkers to inform our clinical development strategy, may position us toaddress multiple pathways and indications, including those that may be important in colder tumors, and to identify the most appropriate indicationsand most responsive patient populations for our new immunotherapies. By taking this dual approach, we believe we may be able to address areasof unmet need, particularly in the combination setting.The promise of long-lasting benefit to cancer patients has led to heightened enthusiasm for these types of immunotherapy products and the rapidexpansion of the market opportunity. The overall market for immunotherapy is expected to expand over the next five years, with 2024 market sizeestimates ranging from $41 billion to $58 billion across solid and blood-based tumors according to market reports.Our Product PipelineWe are developing a pipeline of immunotherapies that we believe will provide a meaningful and long-lasting benefit to cancer patients. We plan todevelop each of these as a single agent and/or in combination with other therapies, as applicable. The following table depicts our current pipeline:5Table of ContentsDevelopment ProgramsLead Program Vopratelimab: An Anti-ICOS Monoclonal Antibody ImmunotherapyOur most advanced product candidate, vopratelimab, is a clinical-stage monoclonal antibody that binds to and activates ICOS, a protein on thesurface of certain T cells commonly found in many solid tumors. Vopratelimab was assessed in a Phase 1/2 clinical trial that we refer to asICONIC. In the initial Phase 1/2 portion of ICONIC, vopratelimab was found to be safe and well-tolerated, both alone and in combination withnivolumab. ICONIC also includes an on-going dose-escalation Phase 1 portion to assess the safety of vopratelimab in combination with each ofpembrolizumab and ipilimumab. We plan to initiate additional Phase 2 clinical studies, including one or more new dosing schedules andcombination sequences, in 2019, and expect to report preliminary efficacy data from these additional clinical studies in 2020. These anticipatedPhase 2 clinical studies are designed to evaluate vopratelimab in combination with ipilimumab in patients who have previously received a PD-1checkpoint inhibitor therapy and who have either non-small cell lung cancer or bladder cancer, and, separately, using a predictive biomarkerapproach, to evaluate vopratelimab alone and/or in combination with a PD-1 inhibitor in patients with multiple tumor types. These trials aim todetermine whether vopratelimab can offer a treatment alternative to patients who otherwise do not display an effective response to currentlyapproved therapies, and/or whether it can enhance the therapeutic benefit of currently approved therapies.At the June 2018 ASCO annual meeting, we presented preliminary efficacy data and safety data from ICONIC, comprised of data across multipletumor types from all evaluable patients as of April 4, 2018. Patients were heavily pre-treated, with approximately 65 percent having received threeor more prior therapies and approximately 65 percent discontinuing during the first three cycles. In gastric cancer, a RECIST partial response withvopratelimab monotherapy was observed in one of eight Phase 2 patients, and two RECIST partial responses with vopratelimab plus nivolumabwere observed in one of four Phase 1 patients and one of 28 Phase 2 patients. In triple negative breast cancer, or TNBC, a RECIST partialresponse with vopratelimab plus nivolumab was observed in one of 17 Phase 2 patients. All RECIST partial responses were based on investigatorassessments and were observed in patients who had not previously received a PD-1 checkpoint inhibitor treatment. Additionally, based oninvestigator assessments, tumor reductions were observed in eight of 28 Phase 2 gastric cancer patients treated with vopratelimab plusnivolumab, in two of 17 Phase 2 TNBC patients treated with vopratelimab plus nivolumab, in one of 16 Phase 2 head and neck squamous cellcancer patients treated with vopratelimab plus nivolumab and in four of 12 Phase 2 non-small cell lung cancer patients treated with vopratelimabplus nivolumab. Preliminary signals of clinical activity with vopratelimab monotherapy and in combination with nivolumab were observed,accompanied by an ICOS pharmacodynamic biomarker, specifically the emergence of CD4 T cells in the peripheral blood with a high expression ofICOS per T cell, which we refer to as ICOS hi CD4 T cells. All responses, as determined by investigator assessments, have been durable lastingsix or more months, and all responders, as determined by investigator assessments, remained on study for more than one year. Additionally,vopratelimab was well tolerated alone and in combination with nivolumab, and the overall safety profile observed was consistent with data fromICONIC previously reported at the 2017 ASCO annual meeting. In the first half of 2019, we expect to provide incremental data from ICONIC, aswell as an update on overall survival data and progression-free survival data, and their relationship to the emergence of ICOS hi CD4 T cells.Consistent with the inducible nature of ICOS, data from Drs. Sharma and Allison and others suggest that ICOS can be upregulated on T cellsfollowing exposure to certain agents, such as ipilimumab, and our ex vivo studies indicate that a high expression of ICOS per T cell is necessaryfor vopratelimab to drive the activation of T effector cells. Through reverse translational analysis, we believe we have identified an associationbetween the emergence of ICOS hi CD4 T cells and clinical response to vopratelimab. We conducted an analysis of the populations of CD4 T cellsin the blood of a subset of ICONIC patients with evaluable samples that demonstrated the emergence of ICOS hi CD4 T cells in all patients whohad a target lesion reduction of 30 percent or greater, and that the emergence of these cells was not detectable in patients with target lesionprogression. This subset of patients included those treated with vopratelimab monotherapy, as well as vopratelimab in combination with nivolumab.In order to examine the possible role of PD-1 checkpoint inhibitors in the emergence of ICOS hi CD4 T cells, we conducted a separate study ofblood samples from responding and non-responding patients who received PD-1 checkpoint inhibitor monotherapy treatment. In this study, noemergence of ICOS hi CD4 T cells was observed, suggesting that the emergence of this cell population is attributable to activity of vopratelimab.Furthermore, in an ex vivo study of peripheral blood mononuclear cells, or PBMCs, PBMCs from healthy donors were stimulated and divided intoICOS hi and ICOS lo CD4 T cell populations and then treated with vopratelimab. This ex vivo data demonstrated that vopratelimab induced apolyfunctional cytokine response only in the ICOS hi CD4 T cells and not in the ICOS lo CD4 T cells, suggesting that combining vopratelimab withagents that induce ICOS hi CD4 T cells, such as ipilimumab, may increase proliferation and activity of these cells, which may lead to clinicalbenefit in a greater number of patients.6Table of ContentsBased on our reverse translation work, clinical studies along two development paths are planned for vopratelimab in 2019. Specifically, we intendto combine ipilimumab, an agent that induces ICOS hi CD4 T cells, with vopratelimab to potentially induce a population of ICOS hi CD4 T cellsthat may be more likely to respond when treated with vopratelimab. In addition, we plan to assess vopratelimab as a monotherapy and/or incombination with a PD-1 checkpoint inhibitor, and we anticipate selecting patients using potential predictive biomarkers that were identified byanalyzing baseline blood and tumor samples from patients treated in ICONIC and comparing baseline samples from patients who had emergenceof ICOS hi CD4 T cells and those who did not.JTX-4014: An Anti-PD-1 Antibody for Combination TherapyCombination therapy aimed at multiple targets has become an important element of immunotherapy development efforts with the goal of creatingeven better, long-lasting responses. PD-1 checkpoint inhibitors are anticipated to play a key role in combination therapies. For this reason, we aredeveloping our own anti-PD-1 antibody, JTX-4014, primarily for use in combinations with potential future product candidates. We believe this willgive us greater flexibility to develop our pipeline of therapies.We are currently conducting a Phase 1 clinical trial of JTX-4014 monotherapy and completed enrollment in the first cohort in the fourth quarter of2018. This Phase 1 clinical trial is designed to assess safety and determine the recommended Phase 2 dose of JTX-4014. We expect to identifythe recommended Phase 2 dose in 2019.JTX-8064: An Anti-LILRB2 Monoclonal Antibody ImmunotherapyIn early 2018, we commenced IND-enabling activities for JTX-8064, a monoclonal antibody binding to LILRB2. JTX-8064 is the first potentialcandidate to emerge from our macrophage-focused efforts, and we have generated encouraging in vitro data and ex vivo data using human tumorhistoculture.Immunosuppressive macrophages are highly prevalent in many solid tumor types and their presence is associated with poorer disease prognosis.Therefore, we prioritized macrophage targets for our initial foray into developing more effective cancer therapies to address the unmet needs ofpatients with tumors that are less likely to respond to existing therapeutic approaches that focus on T effector cells alone. Using our TranslationalScience Platform, we identified LILRB2 as a potential macrophage checkpoint. When LILRB2 binds to its ligands, such as HLA-G, animmunosuppressive state is created. Like other important immune checkpoints, PD-L1 and CTLA-4, HLA-G has been shown to play a key role infetal-maternal tolerance and thus may also represent an important immune evasion strategy employed by tumors. By inhibiting the binding ofLILRB2 to its ligands, we hope to release the brakes on this immunosuppressive interaction, resulting in a reprogramming of the macrophagesfrom an immuno-suppressive, or M2, phenotype to immuno-stimulatory, or M1, phenotype, which is characterized by enhanced microbicidal ortumorcidal capacity and high levels of pro-inflammatory cytokine secretion. Our goal is to convert, but not deplete, immune-suppressing M2macrophages to immune-enhancing M1 macrophages, thus engaging the innate immune system in the response to cancer. We expect to file anIND and initiate a Phase 1 trial for JTX-8064 in 2019.Discovery ProgramsWith our focus on bringing the right immunotherapy to the right patients, we have invested heavily in our Translational Science Platform as webelieve that the systematic interrogation of the immune make-up of human tumors gives us the ability to target different cell types within the TMEbeyond the T effector cells that are the focus of currently approved immunotherapies. This may enable us to fully exploit the promise ofimmunotherapy in cancer by allowing us to pursue tumor types not currently served by therapies that target the T effector arm of the adaptiveimmune system, as well as potentially convert the TME from an immunosuppressive environment to an immune activating environment andthereby convert cold tumors to hot tumors.Analysis of The Cancer Genome Atlas, or TCGA, using our proprietary gene signatures, which represent various immune cells, shows that theimmune cell composition of tumors is diverse, both across and within indications, and suggests that a significant number of tumors, including coldtumors in particular, may not benefit from the current T‑cell focused immunotherapies, such as PD-1 checkpoint inhibitors.We are leveraging our Translational Science Platform to systematically and comprehensively interrogate cell types within the TME, including non-immune cells such as stromal cells, with the goal of enabling us to develop therapies to benefit patients with tumors across the hot to coldspectrum. We believe that some of our discovery approaches, including targeting stromal cells, may identify product candidates with the potentialto address a significant unmet medical need by turning cold tumors hot and making them amenable to PD-1 checkpoint inhibitors, such as JTX-4014, and other immunotherapies.7Table of ContentsStrategic Alliance with CelgeneIn July 2016, we entered into a Master Research and Collaboration Agreement, or the Celgene Collaboration Agreement, with Celgene. The primarygoal of the collaboration is to co-develop and co-commercialize innovative biologic immunotherapies that either activate or suppress the immunesystem by binding to targets identified by leveraging our Translational Science Platform. Under the agreement, we granted Celgene exclusiveoptions to develop and commercialize our lead product candidate, vopratelimab, and up to four early-stage programs consisting of targets to beselected from a pool of certain B cell, T regulatory cell and tumor-associated macrophage targets, including JTX-8064. Additionally, Celgene hasan exclusive option to develop and commercialize our product candidate JTX-4014, which, upon exercise of such option, will be a shared programthat may be used by both parties in and outside of the collaboration. Prior to Celgene exercising an option for a program, we are responsible for allresearch and development activities for that program under the agreement during the collaboration, and subject to all costs and potential liabilities.Advancement of biologics: For programs that have biologics that meet mutually agreed criteria for suitability for further development, Celgene mayelect that program’s target (solely with respect to immune activation or immune suppression, as applicable) to be added to the pool of targets forwhich we may conduct further research subject to the terms of the collaboration. If we continue to conduct research and development for suchprograms, then such activity will be part of the collaboration. If Celgene does not elect a program that achieves such criteria, then we will retain therights to such program’s targets and biologics and Celgene will not have an option to such program.Exercise of options and further development of programs: Celgene may extend the initial four-year research term of the collaboration for up to threeadditional one-year periods upon payment of an extension fee for each additional year. Celgene may exercise its option for a program at any timeuntil the expiration of an option term for that program. For each program, the option term ends 45 to 60 days following Celgene’s receipt of a datapackage that includes certain information relating to the program’s research and development activities. The data package for a program may bedelivered to Celgene after the applicable development milestone for such program has been achieved. Depending on the program, the applicabledevelopment milestone is (i) IND acceptance, (ii) availability of certain Phase 1a data, or (iii) availability of certain Phase 1/2 data. If Celgene failsto exercise its option during the option term for a program, we will retain the rights to such program. If Celgene exercises its option for a programother than JTX-4014, then we will enter into a co-development and co-commercialization agreement with Celgene for such program in substantiallythe form attached to the agreement as an exhibit. Under the co-development and co-commercialization agreement for vopratelimab and oneadditional program for which Celgene opts in that is not JTX-4014, we will be responsible for leading development and commercialization activitiesin the United States and Celgene will be responsible for development and commercialization activities outside the United States. For all otheradditional programs for which Celgene opts in, other than JTX-4014, Celgene will lead development and commercialization activities worldwide. IfCelgene exercises its option for JTX-4014, we will enter into a license agreement, in substantially the form attached to the agreement as anexhibit, pursuant to which we will both be able to equally access JTX-4014 for combinations within our portfolios and with other molecules that aresubject to the agreement, subject to joint governance. Once Celgene opts in with respect to a given program, Celgene and we must each usecommercially reasonable efforts to develop and commercialize the corresponding product in the United States.Governance: The collaboration is governed by a joint steering committee, or JSC, and a joint patent committee. The JSC may establish additionalsubcommittees to oversee particular projects or activities. Subject to limitations specified in the agreement, if the applicable governancecommittee is unable to make a decision by consensus and the parties are unable to resolve the issue through escalation to specified seniorexecutive officers of the parties, then we generally have final decision-making authority over research and development matters for programs priorto Celgene’s exercise of its option to such program. If Celgene exercises its option for a program, final decision-making authority for that programis specified in the applicable co-development and co-commercialization agreement or license agreement.Exclusivity: During the collaboration’s research term (i.e., for four years plus up to three one-year extensions that Celgene may elect), we may notalone, or with a third party, research, develop, manufacture or commercialize a biologic that binds to a defined pool of B cell, T regulatory cell ortumor-associated macrophage targets that meet certain criteria, termed an exclusive target, and inhibit, activate or otherwise modulate the activityof such exclusive target. In addition, if Celgene exercises its option for a program within the collaboration other than JTX-4014, then untiltermination or expiration of the applicable co-development and co-commercialization agreement for such program, we may not directly or indirectlyresearch, develop, manufacture or commercialize, outside of the collaboration, any biologic with specified activity against that program’scollaboration target.Financial terms: Under the terms of the agreements, we received a $225.0 million upfront cash payment and $36.1 million from the sale of10,448,100 shares of our Series B-1 convertible preferred stock to Celgene, which shares8Table of Contentsconverted into 2,831,463 shares of common stock upon the closing of our initial public offering. If Celgene exercises any of its options, thenCelgene will pay us an option-exercise fee, the parties will enter into a co-development and co-commercialization agreement or a licenseagreement that governs the development and commercialization of the applicable program, and we will then split future development andcommercialization costs with Celgene in accordance with such agreement. Additionally, under the terms of the agreement, if Celgene exercises allof its options, all programs meet all milestones, including regulatory approvals in the United States and outside the United States, and Celgeneextends the initial four-year research term for three additional years, we are eligible to earn up to approximately $2.6 billion in clinical, regulatory,and/or commercialization milestone payments, option-exercise fees and research term extension fees.The development milestones are payable on initiation of certain clinical trials and range from $32.5 million to $105.0 million, per program, with anaggregate total of $290.0 million. The regulatory approval milestones are payable upon regulatory approval in the United States and outside theUnited States and range from $7.5 million to $50.0 million per milestone, with an aggregate total of $700.0 million. The commercial milestones arepayable upon achievement of specified aggregate product sales outside the United States for each program and range from $40.0 million to$200.0 million per milestone, with an aggregate total of $1.270 billion. We are also eligible to receive royalties on product sales outside the UnitedStates ranging from high single digit to mid-teen royalties. As of December 31, 2018, we had not received any option exercise, research termextension, milestone or royalty payments under the Celgene Collaboration Agreement.Profit sharing, cost sharing and commercialization rights for products: If Celgene exercises its option for a program, then we will share withCelgene the U.S. profits or losses on such collaboration program as follows:•We will retain 60 percent of the U.S. operating profits or losses arising from commercialization of vopratelimab, with 40 percent allocatedto Celgene.•We will retain 25 percent of the U.S. operating profits or losses arising from commercialization of the first program, other than vopratelimabor JTX-4014, for which an IND application is filed under the collaboration, with 75 percent allocated to Celgene. Celgene has a one-timeright to substitute and swap the economics and governance of this program with that of another program for which it exercises an option(other than vopratelimab and JTX-4014).•We and Celgene will equally share U.S. operating profits or losses arising from commercialization of up to three additional programs (otherthan vopratelimab or JTX-4014).•We and Celgene will share all development costs, other than for JTX-4014, in accordance with the applicable co-development and co-commercialization agreement.If Celgene exercises its option for a program other than JTX-4014, we will enter into a co-development and co-commercialization agreement,pursuant to which Celgene will have the exclusive right to develop and commercialize the products arising out of such collaboration programoutside of the United States, and we will be eligible to receive tiered royalties ranging from a high single digit to mid-teen percentage rate on netproduct sales outside of the United States. Under each co-development and co-commercialization agreement, we will also have the right to opt outof profit sharing in the United States and instead receive milestones and royalties.Furthermore, if Celgene exercises its option for JTX-4014, we will enter into a license agreement, pursuant to which Celgene and we will each haveequal rights to develop and commercialize JTX-4014 in combination with other proprietary molecules in their or our respective pipelines or incombination with products arising out of collaboration programs. Subject to terms specified in the license agreement for JTX-4014, the partyowning the proprietary molecule that is combined with JTX-4014, if such molecule does not arise from a collaboration program with Celgene, will besolely responsible for all development and commercialization costs related to such combination. If JTX-4014 is combined with a product arisingfrom a collaboration program, then the parties will share costs and, if co-packaged or co-formulated, profits or losses in accordance with the co-development and co-commercialization agreement for such other product.Intellectual Property: We and Celgene will jointly own any intellectual property that is generated or invented by both parties pursuant to theactivities conducted under the collaboration agreement. If Celgene exercises its option for a program, each party will also grant the other partyexclusive or co-exclusive licenses, with rights to grant sublicenses, under certain of each party’s intellectual property rights, determined by thenature of the program and the licensed territory.9Table of ContentsTermination: At any point during the collaboration agreement, including during the research, development and clinical trial process, or during theterm of the applicable co-development and co-commercialization or license agreement, respectively, Celgene can terminate the applicableagreement with us in its entirety, or with respect to any program under the collaboration agreement, upon 120 days’ notice and can terminate theentire agreement with us in connection with a material breach of the agreement by us that remains uncured for 90 days.In January 2019, Celgene and BMS announced that they had entered into an agreement under which Celgene will be acquired by BMS, subject toshareholder and regulatory approvals.ManufacturingWe rely on and will continue to rely on our contract manufacturing organizations, or CMOs, for both drug substance and drug product. While we donot plan to develop our own full-scale manufacturing capabilities, we may consider establishing a small, flexible approach for supporting preclinicalIND-enabling studies and early clinical trials. As of now, all of our manufacturing is outsourced to well-established third-party manufacturers. Wehave entered into long-term contracts with CMOs for drug supply to our vopratelimab, JTX-4014 and JTX-8064 preclinical studies and clinicaltrials.CompetitionThe biotechnology and pharmaceutical industries, and the immunotherapy subsector, are characterized by rapid evolution of technologies, fiercecompetition and strong defense of intellectual property. While we believe that our product candidates, discovery programs, technology, knowledge,experience, and scientific resources provide us with competitive advantages, we face competition from major pharmaceutical and biotechnologycompanies, academic institutions, governmental agencies and public and private research institutions, among others.Any product candidates that we successfully develop and commercialize will compete with currently approved therapies and new therapies thatmay become available in the future. Key product features that would affect our ability to effectively compete with other therapeutics include theefficacy, safety and convenience of our products and the ease of use and effectiveness of any complementary diagnostics and/or companiondiagnostics. Potentially competitive therapies fall primarily into the following groups of treatment:•traditional cancer therapies, including chemotherapy;•four clinical-stage anti-ICOS antibody programs in clinical trials, being developed by BMS, GlaxoSmithKline plc and Kymab Group Ltd.;•a bispecific anti-ICOS and anti-PD-1 antibody program in clinical development being developed by Xencor, Inc.;•approved immunotherapy antibodies, including an approved anti-CTLA 4 antibody (Yervoy, marketed by BMS) and approved anti-PD-1/anti-PD-L1 antibodies (Bavencio, Keytruda, Libtayo, Opdivo, Tecentriq, and Imfizi, marketed by Merck KGaA and Pfizer, Inc.,Merck & Co., Regeneron Pharmaceuticals, Inc., BMS, Genentech, Inc. and AstraZeneca PLC, respectively);•an anti-LILRB2 (also known as ILT4) program in clinical development being developed by Merck & Co., Inc.;•anti-PD-1/anti-PD-L1 immunotherapy antibodies in clinical development;•other agonist immunotherapy antibodies in clinical development; and•therapies targeting T regulatory cells and B cells that are in clinical development.The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of ourproducts. In addition, our competitors may obtain Food and Drug Administration, or FDA, or other regulatory approval for their products morerapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position before we are able toenter the market.Many of the companies against which we may compete, either alone or with their strategic partners, have significantly greater financial resourcesand expertise in research and development, manufacturing, preclinical testing, conducting clinical trials, obtaining regulatory approvals andmarketing approved products than we do. These competitors also compete with us in recruiting and retaining qualified scientific and managementpersonnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, ornecessary for, our programs.10Table of ContentsIntellectual PropertyOur intellectual property is critical to our business and we strive to protect it, including by obtaining and maintaining patent protection in the UnitedStates and internationally for our product candidates, novel biological discoveries, including new targets and applications, and other inventions thatare important to our business. For our product candidates, generally we intend to first pursue patent protection covering both compositions ofmatter and methods of use. As we continue the development of our product candidates, we intend to identify additional means of obtaining patentprotection that would potentially enhance commercial success, including through additional methods of use and biomarker and complementarydiagnostic and/or companion diagnostic related claims.The patent positions of biotechnology companies like ours are generally uncertain and involve complex legal, scientific and factual questions. Inaddition, the coverage claimed in a patent application can be significantly reduced before the patent is issued, and its scope can be reinterpretedafter issuance. Consequently, we may not obtain or maintain adequate patent protection for any of our product candidates. As of March 1, 2019,with respect to vopratelimab patent rights, we own six pending U.S. provisional patent applications, two pending U.S. non-provisional application,thirty-six pending foreign patent applications, and one pending Patent Cooperation Treaty, or PCT, patent application within five patent families thatcover compositions of matter and methods of use and ICOS-related biomarkers, and we own one issued U.S. patent that covers compositions ofmatter and methods of use. As of March 1, 2019, with respect to JTX-4014 patent rights, we own one pending U.S. non-provisional application,three pending foreign patent applications, and one pending PCT patent application within one patent family that covers compositions of matter andmethods of use, and we do not own any issued patents. As of March 1, 2019, with respect to JTX-8064 patent rights, we own one pending U.S.non-provisional application, three pending foreign patent applications, and one pending PCT patent application within one patent family that coverscompositions of matter and methods of use, and we do not own any issued patents. We cannot predict whether the patent applications we pursuewill issue as patents in any particular jurisdiction or whether the claims of any issued patents will provide any proprietary protection fromcompetitors. Even if our pending patent applications are granted as issued patents, those patents, as well as any patents we license from thirdparties, may be challenged, circumvented or invalidated by third parties.In addition, we exclusively in-licensed a patent portfolio from Sloan Kettering Institute for Cancer Research, Memorial Sloan Kettering CancerCenter and Memorial Hospital for Cancer, or MSK, and University of Texas MD Anderson Cancer Center, or MD Anderson, consisting of fourissued U.S. patents, one issued Australian patent, one issued Japanese patent, one issued Canadian patent, two issued Chinese patents, oneissued European patent that has been validated in thirteen European jurisdictions, one pending U.S. patent application, and two pending foreignpatent applications. This licensed patent portfolio covers methods related to the use of an ICOS agonist in combination with blocking agents ofcertain T cell inhibitory receptors. The issued patents and the pending patent applications (if issued) licensed from MSK and MD Anderson, if theappropriate maintenance, renewal, annuity or other governmental fees are paid, are expected to expire in 2030, excluding any additional term forpatent term adjustments or patent term extensions.The term of individual patents depends upon the legal term of the patents in the countries in which they are obtained. In most countries in whichwe file, the patent term is 20 years from the earliest date of filing a non-provisional patent application. In the United States, the patent term of apatent that covers an FDA-approved drug may also be eligible for patent term extension, which permits patent term restoration as compensationfor the patent term lost during the FDA regulatory review process. The Hatch-Waxman Act permits a patent term extension of up to five yearsbeyond the expiration of the patent. The length of the patent term extension is related to the length of time the drug is under regulatory review.Patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval and only onepatent applicable to an approved drug may be extended. Similar provisions are available in Europe and other foreign jurisdictions to extend theterm of a patent that covers an approved drug. In the future, if and when our products receive FDA approval, we expect to apply for patent termextensions on patents covering those products. We plan to seek patent term extensions to any of our issued patents in any jurisdiction wherethese are available, however there is no guarantee that the applicable authorities, including the FDA in the United States, will agree with ourassessment of whether such extensions should be granted, and if granted, the length of such extensions.We also rely on unpatented know-how, inventions and other proprietary information relating to vopratelimab, JTX-4014, JTX-8064 and our otherfuture product candidates. We seek to protect and maintain the confidentiality of proprietary information to protect aspects of our business that arenot amenable to, or that we do not consider appropriate for, patent protection. Although we take steps to protect our proprietary information andtrade secrets, including through contractual means with our employees and consultants, third parties may independently develop substantiallyequivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our11Table of Contentstechnology. Thus, we may not be able to meaningfully protect our trade secrets. It is our policy to require our employees, consultants, outsidescientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employmentor consulting relationships with us. These agreements provide that all confidential information concerning our business or financial affairsdeveloped or made known to the individual during the course of the individual’s relationship with us is to be kept confidential and not disclosed tothird parties except in specific circumstances. Our agreements with employees also provide that all inventions conceived by the employee in thecourse of employment with us or from the employee’s use of our confidential information are our exclusive property. However, such confidentialityagreements and invention assignment agreements can be breached, and we may not have adequate remedies for any such breach. For a morecomprehensive discussion of the risks related to our intellectual property, please see “Risk Factors—Risks Related to Intellectual Property.”Exclusive License Agreement with Sloan Kettering Institute for Cancer Research, Memorial Sloan Kettering Cancer Center, and MemorialHospital for Cancer and Allied DiseasesIn September 2015, we amended and restated an exclusive license agreement from December 2013 with Sloan Kettering Institute for CancerResearch, MSK and Memorial Hospital for Cancer and Allied Diseases. Pursuant to this amended and restated license agreement, MSK and MDAnderson granted to us a worldwide exclusive license under certain patents to manufacture, develop and commercialize certain products andservices, including those products for which the use in combination with another product for the treatment of any disease is covered by suchpatents (including, potentially, vopratelimab), and to practice certain methods covered by the patents.Under the license agreement, we are obligated to use commercially reasonable efforts to commercialize at least one licensed product or licensedservice as defined in the license agreement. We also are required to achieve the following developmental milestones by the end of 2019:achievement of initial efficacy of proof of concept, identification of a development candidate, and filing of an IND application with the FDA. As ofSeptember 30, 2016, we have achieved all of these milestones.In connection with the license agreement, we issued to MSK and MD Anderson an aggregate of 60,974 shares of our common stock. We also paidan upfront license fee of $30,000 to MSK and MD Anderson. Commencing on the third anniversary of the effective date of the license agreement,we must pay an annual maintenance fee ranging in the mid-four figures to the mid-five figures. The annual maintenance fee is fully credited againstthe royalty payments for the same year or any subsequent year or any other amount due under the license agreement. We are obligated to payMSK milestone payments of up to $3,475,000 for the first and second licensed products to achieve certain development and marketing approvalmilestones, including up to $2,725,000 for the first licensed product to achieve such developmental and marketing approval milestones. On acountry-by-country basis and licensed product-by-licensed product or licensed service-by-licensed service basis, we are also obligated to payMSK a low single-digit percentage royalty on net sales of licensed products or licensed services, to the extent used in combination with anotherproduct for the treatment of any disease covered by the applicable patents, until the earlier of the expiration of the last valid patent claim coveringsuch licensed product or licensed service in such country or twelve years after the first commercial sale of such licensed product or licensedservice in such country. If we sublicense our rights under our license agreement with MSK, we would be obligated to pay MSK a low double-digitpercentage royalty of the total gross proceeds we receive in consideration of the grant of the sublicense, excluding royalties, research anddevelopment funding, payments for equity or debt securities and certain other expenses we have incurred that are reimbursed by the sublicensee.Unless terminated earlier, the license agreement expires on the date that we no longer have any royalty payment obligations under the licenseagreement. We may terminate the license agreement for convenience in its entirety upon 30 days’ prior written notice to MSK and MD Anderson.Either party may terminate the license agreement in its entirety in the event of an uncured material breach or the bankruptcy, insolvency,dissolution or winding up of the other party which is not dismissed or cured within a set period of time. If we terminate the license agreementbecause of MSK’s and MD Anderson’s uncured breach or insolvency, we will retain a non-exclusive, perpetual, irrevocable, fully paid-up, royalty-free worldwide license to the licensed patents. Upon expiration of our obligation to pay royalties for a licensed product or service in a country, ourlicense to the licensed patents for such licensed product or service will become exclusive, perpetual, irrevocable, fully paid-up and royalty-free insuch country.12Table of ContentsGovernment RegulationGovernment authorities in the United States at the federal, state and local level and in other countries regulate, among other things, the research,development, testing, manufacture, quality control, approval, labeling, packaging, storage, record-keeping, promotion, advertising, sales, pricing,reimbursement, distribution, post-approval monitoring and reporting, marketing and export and import of drug and biological products, such asvopratelimab, JTX-4014, JTX-8064 and other future product candidates. Generally, before a new drug or biologic can be marketed, considerabledata demonstrating its quality, safety and efficacy must be obtained, organized into a format specific for each regulatory authority, submitted forreview and approved by the regulatory authority.U.S. Drug DevelopmentIn the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA, and its implementing regulations andregulates biologics under the FDCA, the Public Health Service Act, or PHSA, and their implementing regulations. Both drugs and biologics also aresubject to other federal, state and local statutes and regulations. The process of obtaining regulatory approvals and the subsequent compliancewith appropriate federal, state, local and foreign statutes and regulations requires the expenditure of substantial time and financial resources. Thefailure to comply with the applicable U.S. requirements at any time during the product development process, approval process or post-market maysubject an applicant to administrative or judicial sanctions. These sanctions could include, among other actions, the FDA’s refusal to approvepending applications, withdrawal of an approval, a clinical hold, untitled or warning letters, product recalls or market withdrawals, product seizures,total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement and civil orcriminal penalties. Any agency or judicial enforcement action could have a material adverse effect on us.Vopratelimab, JTX-4014, JTX-8064 and other future product candidates must be approved by the FDA through either a New Drug Application, orNDA, or Biologics License Application, or BLA, process before they may be legally marketed in the United States. We expect vopratelimab, JTX-4014, JTX-8064 and other future product candidates to be regulated by the FDA as biologics and require the submission of a BLA prior be beingmarketed in the United States. The process generally involves the following:•completion of extensive preclinical studies in accordance with applicable regulations, including studies conducted in accordance with goodlaboratory practice, or GLP, requirements;•submission to the FDA of an IND application, which must become effective before human clinical trials may begin;•approval by an independent institutional review board, or IRB, or ethics committee at each clinical trial site before each trial may beinitiated;•performance of adequate and well-controlled human clinical trials in accordance with applicable IND regulations, good clinical practice, orGCP, requirements and other clinical trial-related regulations to establish the safety and efficacy of the investigational product for eachproposed indication;•submission to the FDA of an NDA or BLA;•determination by the FDA within 60 days of its receipt of an NDA or BLA to accept the filing for review;•satisfactory completion of an FDA pre-approval inspection of the manufacturing facility or facilities where the drug or biologic will beproduced to assess compliance with current good manufacturing practices, or cGMP, requirements to assure that the facilities, methodsand controls are adequate to preserve the drug or biologic’s identity, strength, quality and purity;•potential FDA audit of the preclinical and/or clinical trial sites that generated the data in support of the NDA or BLA;•FDA review and approval of the NDA or BLA, including consideration of the views of any FDA advisory committee, prior to anycommercial marketing or sale of the drug or biologic in the United States; and•compliance with any post-approval requirements, including the potential requirement to implement a Risk Evaluation and MitigationStrategy, or REMS, and the potential requirement to conduct post-approval studies.13Table of ContentsPreclinical Studies and INDThe preclinical developmental stage generally involves laboratory evaluations of product chemistry, formulation and stability, as well as in vitro andanimal studies to evaluate toxicity, assess the potential for adverse events and, in some cases, establish a rationale for therapeutic use. Theconduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations for safety/toxicology studies. An INDsponsor must submit the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data orliterature and plans for clinical trials, among other things, to the FDA as part of an IND. An IND is an exemption from the FDCA that allows anunapproved product candidate to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization toadminister such investigational product to humans. Some long-term preclinical testing, such as animal tests of reproductive adverse events andcarcinogenicity, may continue after the IND is submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless beforethat time, the FDA raises concerns or questions related to one or more proposed clinical trials and places the trial on clinical hold. In such a case,the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission of an IND may notresult in the FDA allowing clinical trials to commence.Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. Clinical holdsare imposed by the FDA whenever there is concern for patient safety and may be a result of new data, findings, or developments in clinical, non-clinical, and/or chemistry, manufacturing, and controls. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinicalinvestigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requestedunder the IND. For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. Following issuanceof a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation mayproceed. The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwisesatisfying the FDA that the investigation can proceed.Clinical TrialsThe clinical stage of development involves the administration of the investigational product to healthy volunteers or patients under the supervisionof qualified investigators in accordance with GCP requirements, including the requirement that all research subjects provide their informed consent.Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, dosing procedures, subject selectionand exclusion criteria and the parameters to be used to monitor subject safety and assess efficacy. Each protocol, and any subsequentamendments to the protocol, must be submitted to the FDA as part of the IND. Furthermore, an IRB for each institution at which the clinical trialwill be conducted must review and approve the protocol before a clinical trial commences at such institution, approve the information regarding thetrial and the consent form that must be provided to each clinical trial subject or his or her legal representative and must monitor the clinical trialuntil completed. Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as adata safety monitoring board or committee, or DSMB. This group provides authorization as to whether or not a trial may move forward atdesignated check points based on available data from the study. There also are requirements governing the reporting of ongoing clinical trials andcompleted clinical trial results to public registries.Clinical trials generally are conducted in three sequential phases, known as Phase 1, Phase 2 and Phase 3, which may overlap.•Phase 1 clinical trials generally involve a small number of healthy volunteers or disease-affected patients who are initially exposed to asingle dose and then multiple doses of the product candidate. The primary purpose of these clinical trials is to assess the metabolism,pharmacologic action, side effect tolerability and safety of the drug.•Phase 2 clinical trials involve studies in disease-affected patients to determine the dose required to produce the desired benefits. At thesame time, safety and further pharmacokinetic and pharmacodynamic information is collected, possible adverse effects and safety risksare identified and a preliminary evaluation of efficacy is conducted.•Phase 3 clinical trials generally involve a large number of patients at multiple sites and are designed to provide the data necessary todemonstrate the effectiveness of the product for its intended use, its safety in use and to establish the overall benefit/risk relationship ofthe product and provide an adequate basis for product approval. These trials may include comparisons with placebo and/or othercomparator treatments. The duration of treatment is often extended to mimic the actual use of a product during marketing.14Table of ContentsPost-approval trials, sometimes referred to as Phase 4 clinical trials, may be conducted after initial marketing approval. These trials are used togain additional experience from the treatment of patients in the intended therapeutic indication.Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and written IND safety reports must besubmitted to the FDA and the investigators for serious and unexpected suspected adverse events, findings from animal or in vitro testing or otherstudies that suggest a significant risk for human subjects and any clinically important increase in the rate of a serious suspected adverse reactionover that listed in the protocol or investigator brochure.Clinical trials may not be completed successfully within any specified period, if at all. The FDA or the sponsor may suspend or terminate a clinicaltrial at any time on various grounds, including a finding that the research subjects or patients are being exposed to an unacceptable health risk.Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution if the clinical trial is not being conducted in accordance withthe IRB’s requirements or if the drug or biologic has been associated with unexpected serious harm to patients. Results from one trial are notnecessarily predictive of results from later trials. Concurrent with clinical trials, companies usually complete additional animal studies and mustdevelop additional information about the chemistry and physical characteristics of the drug or biologic as well as finalize a process formanufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable ofconsistently producing quality batches of the product and, among other things, companies must develop methods for testing the identity, strength,quality and purity of the final product. Additionally, appropriate packaging must be selected and tested, and stability studies must be conducted todemonstrate that vopratelimab, JTX-4014, JTX-8064 and other future product candidates do not undergo unacceptable deterioration over their shelflife.Information about clinical trials must be submitted within specific time frames to the National Institutes of Health, or NIH, for public disseminationon its ClinicalTrials.gov website.Expanded Access to an Investigational Drug for Treatment UseExpanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patientswith serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. Therules and regulations related to expanded access are intended to improve access to investigational drugs for patients who may benefit frominvestigational therapies. FDA regulations allow access to investigational drugs under an IND by the company or the treating physician fortreatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment INDApplication.On December 13, 2016, the 21st Century Cures Act established (and the 2017 Food and Drug Administration Reauthorization Act later amended) arequirement that sponsors of one or more investigational drugs for the treatment of a serious disease(s) or condition(s) make publicly availabletheir policy for evaluating and responding to requests for expanded access for individual patients. Although these requirements were rolled out overtime, they have now come into full effect. This provision requires drug and biologic companies to make publicly available their policies forexpanded access for individual patient access to products intended for serious diseases. Sponsors are required to make such policies publiclyavailable upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days after the drug or biologic receives designation as a breakthroughtherapy, fast track product, or regenerative medicine advanced therapy. In addition, on May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certainpatients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation forFDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDApermission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligiblepatients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to thatpolicy.NDA/BLA and FDA Review ProcessThe results of preclinical studies and clinical trials, together with other detailed information, including proposed labeling, chemistry andmanufacturing information, are submitted to the FDA as part of an NDA or BLA. The NDA or BLA is a request for approval to market the drug orbiologic for one or more specified indications and must contain proof of safety and efficacy for a drug or safety, purity and potency for a biologic.The FDA must approve the NDA or BLA before a drug or biologic may be marketed in the United States.15Table of ContentsUnder the Prescription Drug User Fee Act, or PDUFA, as amended, each NDA or BLA must be accompanied by a user fee. Under federal law, thesubmission of most NDAs and BLAs is subject to a substantial application user fee, currently $2,588,478 for an application requiring clinical datafor fiscal year 2019, and the sponsor of an approved NDA or BLA is also subject to an annual product or program fees, currently $309,915 perprogram. These fees may be increased or decreased annually, and fee waivers, reductions or deferrals are available in certain circumstances.The FDA reviews each NDA and BLA for administrative completeness and reviewability within 60 days following receipt by the FDA of the NDA orBLA. If the submission is found to be complete, the FDA will file the NDA or BLA, triggering a full review. The FDA may refuse to file any NDA orBLA that it deems incomplete or not properly reviewable at the time of submission. The established goal of the FDA is to review applications withinten months of the filing date for a new molecular-entity NDA or original BLA and within six months from the filing date for a new molecular-entityNDA or original BLA designated for priority review. The FDA does not always meet its goal dates for standard and priority NDAs or BLAs, and thereview process is often extended by FDA requests for additional information or clarification.Before approving an NDA or BLA, the FDA may inspect the manufacturing facilities for the new product and will not approve the product unless thefacilities comply with cGMP requirements. The FDA may refer applications for novel drug products or drug products which present difficultquestions of safety or efficacy to an advisory committee, typically a panel that includes clinicians and other experts, for review, evaluation and arecommendation as to whether the application should be approved and under what conditions, if any. The FDA is not bound by recommendationsof an advisory committee, but it considers such recommendations when making decisions on approval. Additionally, the FDA may audit data fromclinical trials to ensure compliance with GCP requirements and likely will reanalyze the clinical trial data, which could result in extensivediscussions between the FDA and the applicant during the review process. After the FDA evaluates an NDA or BLA, it will issue an approval letteror a Complete Response Letter. An approval letter authorizes commercial marketing of the drug with specific prescribing information for specificindications. A Complete Response Letter describes additional work that must be done before the application can be approved, such as requiringadditional clinical data, additional pivotal Phase 3 clinical trial(s) and/or other significant and time-consuming requirements related to clinical trials,preclinical studies or manufacturing. Even if such data and information are submitted, the FDA may decide that the NDA or BLA does not satisfythe criteria for approval. Data obtained from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret thesame data.Orphan Drug DesignationUnder the Orphan Drug Act, the FDA may grant orphan designation to a drug or biological product intended to treat a rare disease or condition,which is generally a disease or condition that affects fewer than 200,000 individuals in the United States, or more than 200,000 individuals in theUnited States and for which there is no reasonable expectation that the cost of developing and making the product available in the United Statesfor this type of disease or condition will be recovered from sales of the product.Orphan drug designation must be requested before submitting an NDA or BLA. After the FDA grants orphan drug designation, the identity of thetherapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in orshorten the duration of the regulatory review and approval process. These circumstances are where another product shows clinical superiority tothe product with orphan drug exclusivity because it is shown to be safer, more effective or makes a major contribution to patient care. This is thecase despite an earlier court opinion holding that the Orphan Drug Act unambiguously required the FDA to recognize orphan exclusivity regardlessof a showing of clinical superiority.If a product that has orphan designation subsequently receives the first FDA approval for the disease or condition for which it has suchdesignation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications to market thesame drug for the same indication for seven years from the date of such approval, except in limited circumstances.Competitors may also receive approval of either a different product for the same indication or the same product for a different indication but thatcould be used off-label in the orphan indication. Orphan drug exclusivity also could block the approval of one of our products if a competitorobtains approval before we do for the same product, as defined by the FDA, for the same indication we are seeking approval, or if one of ourproducts is determined to be contained within the scope of the competitor’s product for the same indication or disease. If one of our productsdesignated as an orphan drug receives marketing approval for an indication broader than that which is designated, it may not be entitled to orphandrug exclusivity. Orphan drug status in the European Union has similar, but not identical, requirements and benefits.16Table of ContentsExpedited Development and Review ProgramsThe FDA has various programs, including a fast track program, priority review and accelerated approval, that are intended to expedite or facilitatethe process for reviewing new drugs and biologics that, generally, are intended to treat a serious or life-threatening condition, demonstrate thepotential to address unmet medical needs and that offer meaningful benefits over existing treatments. The fast track program is designed tofacilitate the development and review of drugs to treat serious or life-threatening diseases or conditions and fulfill unmet needs. Priority review isdesigned to give drugs that offer major advances in treatment or provide treatment where no adequate therapy exists. The FDA will attempt todirect additional resources to the evaluation of an application for a new drug or biologic designated for priority review in an effort to facilitate thereview.A candidate product may also be eligible for accelerated approval if it treats a serious or life-threatening condition and generally provides ameaningful advantage over available therapies. In addition, the investigational product must demonstrate an effect on a surrogate endpoint that isreasonably likely to predict clinical benefit or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, or IMM,which is reasonably likely to predict an effect on IMM or other clinical benefit. As a condition of approval, the FDA may require that a sponsor of adrug or biologic receiving accelerated approval perform adequate and well-controlled post-marketing clinical trials.Additionally, a drug or biologic may be eligible for designation as a breakthrough therapy if the product is intended, alone or in combination with oneor more other drugs or biologics, to treat a serious or life-threatening condition and preliminary clinical evidence indicates that the product maydemonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints. The benefits ofbreakthrough therapy designation include the same benefits as fast track designation, plus intensive guidance from the FDA to ensure an efficientdrug development program. Fast track designation, priority review, accelerated approval and breakthrough therapy designation do not change thestandards for approval, but may expedite the development or approval process.Pediatric InformationUnder the Pediatric Research Equity Act, an NDA or BLA or supplement to an NDA or BLA must contain data to assess the safety and efficacy ofthe drug for the claimed indications in all relevant pediatric subpopulations and to support dosing and administration for each pediatricsubpopulation for which the product is safe and effective. The assessment must also support dosing and administration for each pediatricsubpopulation for which the product is safe and effective. The Food and Drug Administration Safety and Innovation Act, or FDASIA, requires thesubmission of a pediatric study plan prior to the assessment of data, which must contain proposed pediatric study, including study design andobjectives, any deferral or waiver requests, and any other information required by regulation. The FDA may grant deferrals for submission ofpediatric data until after the approval of the drug for use in adults or full or partial waivers from the pediatric data requirements. Additionalrequirements and procedures relating to deferral requests and requests for extensions of deferrals are contained in FDASIA.Post-marketing RequirementsFollowing approval of a new product, the manufacturer and the approved product are subject to continuing regulation by the FDA, including, amongother things, monitoring and record-keeping activities, reporting of adverse experiences, complying with promotion and advertising requirements,which include restrictions on promoting drugs for unapproved uses or patient populations (known as “off-label use”) and limitations on industry-sponsored scientific and educational activities.The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market. The FDA and other agenciesactively enforce the laws and regulations prohibiting the promotion of off label uses, and a company that is found to have improperly promoted offlabel uses may be subject to significant liability. If a company is found to have promoted off-label uses, it may become subject to adverse publicrelations and administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of theDepartment of Health and Human Services, as well as state authorities.The FDA may also place other conditions on approvals, including imposing limitations on the uses for which the product may be marketed,requiring that warning statements be included in the product labeling, requiring that additional studies be conducted following approval as acondition of the approval, imposing restrictions and conditions on product distribution, prescribing or dispensing in the form of a Risk Evaluationand Mitigation Strategy, or REMS, or otherwise limiting the scope of any approval. Product approvals may be withdrawn for non-compliance withregulatory requirements or if problems occur following initial marketing.17Table of ContentsFDA regulations require that products be manufactured in specific approved facilities and in accordance with cGMP regulations. We rely, andexpect to continue to rely, on third parties for the production of clinical and commercial quantities of our products in accordance with cGMPregulations. These manufacturers must comply with cGMP regulations that require, among other things, quality control and quality assurance, themaintenance of records and documentation and the obligation to investigate and correct any deviations from cGMP. Manufacturers and otherentities involved in the manufacture and distribution of approved drugs or biologics are required to register their establishments with the FDA andcertain state agencies. The discovery of violative conditions, including failure to conform to cGMP regulations, could result in enforcement actions,and the discovery of problems with a product after approval may result in restrictions on a product, manufacturer or holder of an approved NDA orBLA, including recall.Companion Diagnostics and Complementary DiagnosticsWe believe that the success of our product candidates may depend, in part, on the development and commercialization of either a companiondiagnostic or complementary diagnostic. Companion diagnostics and complementary diagnostics can identify patients who are most likely tobenefit from a particular therapeutic product, identify patients likely to be at increased risk for serious side effects as a result of treatment with aparticular therapeutic product, or monitor response to treatment with a particular therapeutic product for the purpose of adjusting treatment toachieve improved safety or effectiveness. Companion diagnostics and complementary diagnostics are regulated as medical devices by the FDAand, as such, require either clearance or approval prior to commercialization. The level of risk combined with available controls to mitigate riskdetermines whether a companion diagnostic device requires Premarket Approval Application approval or is cleared through the 510(k) premarketnotification process. Under FDA guidance, for a novel therapeutic product for which a companion diagnostic device is essential for the safe andeffective use of the product, the companion diagnostic device should be developed and approved or 510(k)-cleared contemporaneously with thetherapeutic. The use of the companion diagnostic device will be stipulated in the labeling of the therapeutic product. This is also true for acomplementary diagnostic, although it is not a prerequisite for receiving the therapeutic.If safe and effective use of a therapeutic depends on an in vitro diagnostic, then the FDA generally will require approval or clearance of thatdiagnostic, known as a companion diagnostic, at the same time that the FDA approves the therapeutic product. In August 2014, the FDA issuedfinal guidance clarifying the requirements that will apply to approval of therapeutic products and in vitro companion diagnostics. According to theguidance, if FDA determines that a companion diagnostic device is essential to the safe and effective use of a novel therapeutic product orindication, FDA generally will not approve the therapeutic product or new therapeutic product indication if the companion diagnostic device is notapproved or cleared for that indication. Approval or clearance of the companion diagnostic device will ensure that the device has been adequatelyevaluated and has adequate performance characteristics in the intended population. The review of in vitro companion diagnostics in conjunctionwith the review of our therapeutic treatments for cancer will, therefore, likely involve coordination of review by the FDA’s Center for Drug Evaluationand Research and the FDA’s Center for Devices and Radiological Health Office of In Vitro Diagnostics Device Evaluation and Safety.Other Regulatory MattersManufacturing, sales, promotion and other activities following product approval are also subject to regulation by numerous regulatory authorities inthe United States in addition to the FDA, including the Centers for Medicare & Medicaid Services, other divisions of the Department of Health andHuman Services, the Department of Justice, the Drug Enforcement Administration, the Consumer Product Safety Commission, the Federal TradeCommission, the Occupational Safety & Health Administration, the Environmental Protection Agency and state and local governments.For example, in the United States, sales, marketing and scientific and educational programs also must comply with state and federal fraud andabuse laws. These laws include the federal Anti-Kickback Statute, which makes it illegal for any person, including a prescription drug manufacturer(or a party acting on its behalf), to knowingly and willfully solicit, receive, offer or pay any remuneration that is intended to induce or rewardreferrals, including the purchase, recommendation, order or prescription of a particular drug, for which payment may be made under a federalhealthcare program, such as Medicare or Medicaid.Although we would not submit claims directly to payors, manufacturers also can be held liable under the federal False Claims Act, which prohibitsanyone from knowingly presenting, or causing to be presented, for payment to federal programs (including Medicare and Medicaid) claims for itemsor services, including drugs or biologics, that are false or fraudulent, claims for items or services not provided as claimed or claims for medicallyunnecessary items or services. In addition, our future activities relating to the reporting of wholesaler or estimated retail prices for our products, thereporting of prices used to calculate Medicaid rebate information and other information affecting federal, state and third-party reimbursement for ourproducts, and the sale and marketing of our products, are subject to scrutiny under this law.18Table of ContentsPricing and rebate programs must comply with the Medicaid rebate requirements of the U.S. Omnibus Budget Reconciliation Act of 1990 and morerecent requirements in the Affordable Care Act. The distribution of pharmaceutical products is subject to additional requirements and regulations,including extensive record-keeping, licensing, storage and security requirements intended to prevent the unauthorized sale of pharmaceuticalproducts.The failure to comply with any of these laws or regulatory requirements subjects us to possible legal or regulatory action. Depending on thecircumstances, failure to meet applicable regulatory requirements can result in criminal prosecution, fines or other penalties, injunctions, requestsfor recall, seizure of products, total or partial suspension of production, denial or withdrawal of product approvals or refusal to allow a firm to enterinto supply contracts, including government contracts. Any action against us for violation of these laws, even if we successfully defend against it,could cause us to incur significant legal expenses and divert our management’s attention from the operation of our business. Prohibitions orrestrictions on sales or withdrawal of future products marketed by us could materially affect our business in an adverse way.Changes in regulations, statutes or the interpretation of existing regulations could impact our business in the future by requiring, for example:(i) changes to our manufacturing arrangements; (ii) additions or modifications to product labeling; (iii) the recall or discontinuation of our products;or (iv) additional record-keeping requirements. If any such changes were to be imposed, they could adversely affect the operation of our business.U.S. Patent Term Restoration and Non-Patent ExclusivityDepending upon the timing, duration and specifics of FDA approval of vopratelimab, JTX-4014, JTX-8064 and other future product candidates,some of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of1984, commonly referred to as the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit restoration of the patent term of up tofive years as compensation for patent term lost during product development and FDA regulatory review process. Patent term restoration, however,cannot extend the remaining term of a patent beyond a total of 14 years from the product’s approval date. The United States Patent andTrademark Office, or USPTO, in consultation with the FDA, reviews and approves the application for any patent term extension or restoration. Inthe future, we may apply for restoration of patent term for our currently owned or licensed patents to add patent life beyond its current expirationdate, depending on the expected length of the clinical trials and other factors involved in the filing of the relevant NDA or BLA.Market exclusivity provisions under the FDCA also can delay the submission or the approval of certain applications. The FDCA provides a five-year period of non-patent marketing exclusivity within the United States to the first applicant to gain approval of an NDA for a new chemical entity;a drug is a new chemical entity if the FDA has not previously approved any other new drug containing the same active moiety, which is themolecule or ion responsible for the action of the drug substance.An abbreviated approval pathway for biological products shown to be biosimilar to, or interchangeable with, an FDA-licensed reference biologicalproduct was created by the Biologics Price Competition and Innovation Act of 2009, or BPCI Act, as part of the Affordable Care Act. Biosimilarity,which requires that the biological product be highly similar to the reference product notwithstanding minor differences in clinically inactivecomponents and that there be no clinically meaningful differences between the product and the reference product in terms of safety, purity andpotency, can be shown through analytical studies, animal studies and a clinical trial or trials. Complexities associated with the larger, and oftenmore complex, structure of biological products as compared to small molecule drugs, as well as the processes by which such products aremanufactured, pose significant hurdles to implementation that are still being worked out by the FDA.A reference biological product is granted twelve years of data exclusivity from the time of first licensure of the product, and the FDA will not acceptan application for a biosimilar or interchangeable product based on the reference biological product until four years after the date of first licensureof the reference product. “First licensure” typically means the initial date the particular product at issue was licensed in the United States. It isnecessary to determine whether a new product includes a modification to the structure of a previously licensed product that results in a change insafety, purity, or potency to assess whether the licensure of the new product is a first licensure that triggers its own period of exclusivity and, forsubsequent applications, such determinations are made a case-by-case basis with data submitted by the sponsor. As of January 31, 2019, theFDA has approved 17 biosimilar products for use in the United States. No interchangeable biosimilars have been approved.Pediatric ExclusivityPediatric exclusivity is another type of regulatory exclusivity in the United States. Pediatric exclusivity, if granted, adds six months to existingregulatory exclusivity periods or patent protection. This six-month exclusivity may be granted19Table of Contentsbased on the voluntary completion of a pediatric trial in accordance with an FDA-issued “Written Request” for such a trial. Furthermore, a biologicalproduct seeking licensure as biosimilar to or interchangeable with a reference product indicated for a rare disease or condition and granted sevenyears of orphan drug exclusivity may not be licensed by the FDA for the protected orphan indication until after the expiration of the seven-yearorphan drug exclusivity period or the 12-year reference product exclusivity, whichever is later.Foreign RegulationAs in the United States, we will be subject to a variety of foreign regulations governing clinical trials and commercial sales and distribution of ourfuture products and medicinal products can be marketed only if a marketing authorization from the competent regulatory agencies has beenobtained.Certain countries outside of the United States have a process that requires the submission of a clinical trial application, or CTA, much like the INDprior to the commencement of human clinical studies. In the European Union, for example, a CTA must be submitted for each clinical trial to thenational health authority and an independent ethics committee in each country in which the company intends to conduct clinical trials. Once theCTA is approved in accordance with a country’s requirements, the clinical trial may proceed. In all cases, the clinical trials must be conducted inaccordance with GCPs and other applicable regulatory requirements and ethical principles.To obtain regulatory approval of an investigational product under European Union regulatory systems, we must submit a marketing authorizationapplication under either a centralized or decentralized procedure. The centralized procedure is compulsory for medicinal products produced bybiotechnology. The application used to file the BLA in the United States is similar to that required in the European Union, with the exception of,among other things, region-specific document requirements.The European Union also provides opportunities for market exclusivity. For example, upon receiving marketing authorization, innovative medicinalproducts generally receive eight years of data exclusivity and an additional two years of market exclusivity. If grated, data exclusivity preventsregulatory authorities in the European Union from referencing the innovator’s data to assess a generic or biosimilar application. There is noguarantee that a product will be considered by the European Union’s regulatory authorities to be an innovative medicinal product, and productsmay not qualify for data exclusivity. Products receiving orphan designation in the European Union can receive ten years of market exclusivity,during which time no similar medicinal product for the same indication may be placed on the market. An orphan product can also obtain anadditional two years of market exclusivity in the European Union for pediatric studies. No extension to any supplementary protection certificate canbe granted on the basis of pediatric studies for orphan indications.If we fail to comply with applicable foreign regulatory requirements, we may be subject to, among other things, fines, suspension or withdrawal ofregulatory approvals, product recalls, seizure of products, operating restrictions and criminal prosecution.Brexit and the Regulatory Framework in the United KingdomOn June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as “Brexit”. Thereafter,on March 29, 2017, the country formally notified the European Union of its intention to withdraw pursuant to Article 50 of the Lisbon Treaty. Thewithdrawal of the United Kingdom from the European Union will take effect either on the effective date of the withdrawal agreement or, in theabsence of agreement, two years after the United Kingdom provides a notice of withdrawal pursuant to the EU Treaty. Since the regulatoryframework for pharmaceutical products in the United Kingdom. covering quality, safety and efficacy of pharmaceutical products, clinical trials,marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations,Brexit could materially impact the future regulatory regime which applies to products and the approval of product candidates in the UnitedKingdom. It remains to be seen how, if at all, Brexit will impact regulatory requirements for product candidates and products in the UnitedKingdom.The United Kingdom has a period of a maximum of two years from the date of its formal notification to negotiate the terms of its withdrawal from,and future relationship with, the European Union. If no formal withdrawal agreement is reached between the United Kingdom and the EuropeanUnion, then it is expected the United Kingdom's membership of the European Union will automatically terminate two years after the submission ofthe notification of the United Kingdom's intention to withdraw from the European Union. Discussions between the United Kingdom and theEuropean Union focused on finalizing withdrawal issues and transition agreements are ongoing. However, limited progress to date in thesenegotiations and ongoing uncertainty within the UK Government and Parliament sustains the possibility of the United Kingdom leaving theEuropean Union on March 29, 2019 without a withdrawal agreement and associated transition period in place, which is likely to cause significantmarket and economic disruption.20Table of ContentsGeneral Data Protection RegulationThe collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, issubject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scopeand imposes numerous requirements on companies that process personal data, including requirements relating to processing health and othersensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding dataprocessing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches,and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data tocountries outside the EU, including the U.S., and permits data protection authorities to impose large penalties for violations of the GDPR, includingpotential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on datasubjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation fordamages resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may increase thecost of doing business or require companies to change their business practices to ensure full compliance.ReimbursementSales of our products will depend, in part, on the extent to which our products will be covered by third-party payors, such as government healthprograms, commercial insurance and managed healthcare organizations. In the United States, no uniform policy of coverage and reimbursementfor drug or biological products exists. Accordingly, decisions regarding the extent of coverage and amount of reimbursement to be provided for anyof our products will be made on a payor-by-payor basis. As a result, the coverage determination process is often a time-consuming and costlyprocess that will require us to provide scientific and clinical support for the use of our products to each payor separately, with no assurance thatcoverage and adequate reimbursement will be obtained.The United States government, state legislatures and foreign governments have shown significant interest in implementing cost containmentprograms to limit the growth of government-paid health care costs, including price-controls, restrictions on reimbursement and requirements forsubstitution of generic products for branded prescription drugs. If we obtain approval in the future to market any our product candidates, we mayseek approval and coverage for those products under Medicaid, Medicare and the Public Health Service pharmaceutical pricing program and mayseek approval to sell the products to federal agencies. Adoption of general controls and measures, coupled with the tightening of restrictivepolicies in jurisdictions with existing controls and measures, could limit payments for pharmaceutical drugs.Medicaid is a joint federal and state program that is administered by the states for low income and disabled beneficiaries. The Medicaid DrugRebate Program requires pharmaceutical manufacturers to pay a rebate for each product reimbursed by the state Medicaid programs. The amountof the rebate for each product is set by law and may be subject to an additional discount if certain pricing increases more than inflation.Medicare is a federal program that is administered by the federal government. The program covers individuals age 65 and over as well as thosewith certain disabilities. Medicare Part D provides coverage to enrolled Medicare patients for self-administered drugs (i.e., drugs that are notadministered by a physician). Medicare Part D is administered by private prescription drug plans approved by the U.S. government and each drugplan establishes its own Medicare Part D formulary for prescription drug coverage and pricing, which the drug plan may modify from time to time.Medicare Part B covers most injectable drugs given in an in-patient setting, and some drugs administered by a licensed medical provider inhospital outpatient departments and doctors’ offices. Medicare Part B is administered by Medicare Administrative Contractors, which generallyhave the responsibility of making coverage decision. Subject to certain payment adjustments and limits, Medicare generally pays for Part Bcovered drugs based on a percentage of a manufacturer-reported average sales price.As noted above, the marketability of any products for which we receive regulatory approval for commercial sale may suffer if the government andthird-party payors fail to provide adequate coverage and reimbursement. An increasing emphasis on cost containment measures in the UnitedStates has increased and we expect will continue to increase the pressure on pharmaceutical pricing. Coverage policies and third-partyreimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for whichwe receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.In addition, in most foreign countries, the proposed pricing for a drug must be approved before it may be lawfully marketed. The requirementsgoverning drug pricing and reimbursement vary widely from country to country. There21Table of Contentscan be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorablereimbursement and pricing arrangements for any of our products. Historically, products launched in the European Union do not follow pricestructures of the United States and generally prices tend to be significantly lower.Healthcare ReformA primary trend in the U.S. healthcare industry and elsewhere is cost containment. There have been a number of federal and state proposalsduring the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugsand other medical products, government control and other changes to the healthcare system in the United States. By way of example, the UnitedStates and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In March 2010, the UnitedStates Congress enacted the Affordable Care Act, or ACA, which, among other things, includes changes to the coverage and payment forproducts under government health care programs.Since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the law.For example, with enactment of the Tax Cuts and Jobs Act of 2017, Congress repealed the “individual mandate.” The repeal of this provision,which requires most Americans to carry a minimal level of health insurance, becomes effective in 2019. According to the Congressional BudgetOffice, the repeal of the individual mandate will cause 8.67 million fewer Americans to be insured in 2027 and premiums in insurance markets mayrise.Further, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to,among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reducethe costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congressand the current administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drugcosts. At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to controlpharmaceutical 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 countriesand bulk purchasing.EmployeesAs of December 31, 2018, we had 115 full-time employees. Of these full-time employees, 37 have Ph.D. or M.D. degrees and 86 are engaged inresearch and development activities. None of our employees are represented by labor unions or covered by collective bargaining agreements. Weconsider our relationship with our employees to be good.Corporate InformationWe were incorporated under the laws of the State of Delaware in March 2012. Our principal offices are located at 780 Memorial Drive, Cambridge,MA 02139, and our telephone number is (857) 259-3840.We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012. We will remain an emerging growthcompany until the earlier of: (i) the last day of the fiscal year (a) following the fifth anniversary of the completion of the our initial public offering inFebruary 2017, (b) in which we have total annual gross revenue of at least $1.07 billion, or (c) in which we are deemed to be a large acceleratedfiler, which means the market value of our common stock that is held by non-affiliates exceeds $700.0 million as of the prior June 30th, and (ii) thedate on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.Our website address is www.jouncetx.com. Our website and the information contained on, or that can be accessed through, the website will not bedeemed to be incorporated by reference in, and are not considered part of, this Annual Report on Form 10-K. Through our website, we makeavailable, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, any amendments to thosereports, proxy and registration statements, and all of our insider Section 16 reports, as soon as reasonably practicable after such material iselectronically filed with, or furnished to, the Securities and Exchange Commission, or the SEC. These SEC reports can be accessed through the“Investors & Media” section of our website. The information found on our website (or that may be accessed through links on our website) is notpart of this or any other report we file with, or furnish to, the SEC. You should not rely on any such information in making your decision whether topurchase our common stock.In addition, the SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuersthat file electronically with the SEC, including us, and any document we file may be22Table of Contentsviewed at the SEC’s internet address at http://www.sec.gov (this website address is not intended to function as a hyperlink, and the informationcontained in the SEC’s website is not intended to be a part of this filing).Our code of conduct, corporate governance guidelines and the charters of our Audit Committee, Compensation Committee, Nominating andCorporate Governance Committee and Science and Technology Committee are available through our website at www.jouncetx.com.23Table of ContentsItem 1A. Risk FactorsOur business is subject to numerous risks. The following important factors, among others, could cause our actual results to differ materially fromthose expressed in forward-looking statements made by us or on our behalf in this Annual Report on Form 10-K and other filings with theSecurities and Exchange Commission, or the SEC, press releases, communications with investors, and oral statements. Actual future results maydiffer materially from those anticipated in our forward-looking statements. We undertake no obligation to update any forward-looking statements,whether as a result of new information, future events, or otherwise.Risks Related to Product Development and Regulatory ProcessWe are early in our development efforts. Our product candidates vopratelimab (formerly JTX-2011) and JTX-4014 are clinical-stageprograms and JTX-8064 and other future product candidates are in preclinical or earlier stages of development. If we are unable toadvance vopratelimab, JTX-4014 or JTX-8064 through clinical development, advance other future product candidates to clinicaldevelopment or obtain marketing approval and ultimately commercialize any product candidates or experience significant delays indoing so, our business will be materially harmed.We are early in our development efforts: vopratelimab and JTX-4014 are our only clinical-stage product candidates, and JTX-8064 and other futureproduct candidates are in preclinical or earlier stages of development. We have invested substantially all of our efforts and financial resources inthe identification of targets and early stage, preclinical and clinical development of monoclonal antibodies, including the development ofvopratelimab, JTX-4014 and JTX-8064.Our other efforts have been invested in early stage, preclinical and earlier development programs. Our ability to generate product revenues, whichwe do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization ofvopratelimab, JTX-4014, JTX-8064 or other future product candidates, which may never occur. We currently generate no revenues from sales ofany products, and we may never be able to develop or commercialize a marketable product. Vopratelimab, JTX-4014, JTX-8064 and other futureproduct candidates will require additional preclinical and clinical development, management of clinical, preclinical and manufacturing activities,marketing approval in the United States and other markets, demonstrating effectiveness to pricing and reimbursement authorities, obtainingsufficient manufacturing supply for both clinical development and commercial production, building of a commercial organization, and substantialinvestment and significant marketing efforts before we generate any revenues from product sales. In addition, our product development programscontemplate the development of complementary diagnostics and/or companion diagnostics, which are assays or tests to identify an appropriatepatient population. Complementary diagnostics and companion diagnostics are subject to regulation as medical devices and, if there are noadequate complementary diagnostics and/or companion diagnostics currently on the market for our product candidates, we may elect to advance adiagnostic and that diagnostic would have to be approved or cleared for marketing by the Food and Drug Administration, or FDA, or comparableforeign regulatory agencies before we could commercialize it. The success of vopratelimab, JTX-4014, JTX-8064 and other future productcandidates will depend on several factors, including the following:•successful completion of preclinical studies and advancement to clinical development of JTX-8064 and other future product candidates;•successful completion of non-clinical toxicology studies that may be required for regulatory approval of JTX-8064;•acceptance of investigational new drug applications, or INDs, for our planned clinical trials or future clinical trials;•successful enrollment and completion of clinical trials;•demonstration of a benefit/risk profile for vopratelimab, JTX-4014, JTX-8064 and other future product candidates that is sufficient tosupport a successful biologics license application, or BLA;•successful development and marketing approval and clearance of complementary diagnostics and/or companion diagnostics for use withvopratelimab, JTX-4014, JTX-8064 or other future product candidates, if applicable;•receipt and maintenance of marketing approvals from applicable regulatory authorities;•approval by national pricing and reimbursement agencies (such as NICE, National Institute for Health Care and Excellence in the UnitedKingdom);24Table of Contents•establishing agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if ourproduct candidate is approved;•obtaining and maintaining patent and trade secret protection or regulatory exclusivity for our product candidates;•launching commercial sales of vopratelimab, JTX-4014, JTX-8064 or other future product candidates, if and when approved;•acceptance of our product candidates, if and when approved, by patients, the medical community and third-party payors;•effectively competing with other therapies;•obtaining and maintaining healthcare coverage and adequate reimbursement;•enforcing and defending intellectual property rights and claims;•successful completion of clinical confirmatory trials to verify clinical benefit, if applicable; and•maintaining a continued acceptable safety profile of the product candidates following approval.If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfullycommercialize vopratelimab, JTX-4014, JTX-8064 or other future product candidates, which would materially harm our business. If we do notreceive marketing approvals for vopratelimab, JTX-4014, JTX-8064 or other future product candidates, we may not be able to continue ouroperations.We rely on our Translational Science Platform to identify and develop product candidates. Our competitive position could be materiallyharmed if our competitors develop a platform similar to our Translational Science Platform and develop rival product candidates.We rely on unpatented know-how, inventions and other proprietary information, to maintain our competitive position. We consider know-how to beour primary intellectual property with respect to our Translational Science Platform. Know-how can be difficult to protect. In particular, we anticipatethat with respect to this platform, this know-how may over time be disseminated within the industry through independent development, thepublication of journal articles describing the methodology, and the movement of skilled personnel.We cannot rule out that our competitors may have or obtain the knowledge necessary to analyze and characterize tumors for the purpose ofidentifying and developing products that could compete with the product candidates we develop. Our competitors may also have significantlygreater financial, product development, technical, and human resources and access to other human tumors than we do and may have significantlygreater experience in using translational science methodology to identify and develop product candidates.We may not be able to prohibit our competitors from using translational science methods to develop product candidates, including such methodsthat are the same as or similar to our own. If our competitors use translational science methods to identify and develop products that compete withvopratelimab, JTX-4014, JTX-8064 or other future product candidates we develop, our ability to develop and market a promising product or productcandidate may diminish substantially, which could have a material adverse effect on our business prospects, financial condition, and results ofoperations.Clinical product development involves a lengthy and expensive process, with an uncertain outcome. We will incur additional costs inconnection with, and may experience delays, in completing, or ultimately be unable to complete, the development andcommercialization of vopratelimab, JTX-4014, JTX-8064 and other future product candidates, and any complementary diagnostics and/orcompanion diagnostics.Our product candidates vopratelimab and JTX-4014 are clinical-stage programs and JTX-8064 and other future product candidates are in preclinicalor earlier stages of development. The risk of failure at any stage of clinical or preclinical development is high. It is impossible to predict when or ifvopratelimab, JTX-4014, JTX-8064 and other future product candidates will prove effective and safe in humans and will receive marketingapproval. Before obtaining marketing approval from regulatory authorities for the sale of our product candidates, we must complete preclinicalstudies and then conduct extensive clinical trials to demonstrate the safety and efficacy of vopratelimab, JTX-4014, JTX-8064 and other futureproduct candidates in humans. Clinical testing is expensive, difficult to design and implement, can take many years to complete or may bedelayed and is uncertain as to outcome. A failure of one or more clinical trials can occur at any stage of testing. The outcome of preclinicaldevelopment testing and early clinical trials may not be predictive of the success of later clinical trials, and interim results of a clinical trial do notnecessarily predict final results. Moreover, preclinical and clinical data are often susceptible to varying interpretations and analyses, and many25Table of Contentscompanies that have believed their product candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed toobtain marketing approval of their product candidates. Our preclinical studies and clinical trials may not be successful.The FDA or comparable foreign regulatory authorities could change their position on the acceptability of our trial designs or the clinical endpointsselected, which may require us to complete more preclinical studies or provide additional data before continuing clinical trials. In the event we arerequired to satisfy additional FDA requests, the completion of our clinical trials for vopratelimab and JTX-4014 may be delayed. Successfulcompletion of our clinical trials is a prerequisite to submitting a BLA to the FDA and a Marketing Authorization Application, or MAA, in Europe forvopratelimab, JTX-4014, JTX-8064 and other future product candidates and, consequently, the ultimate approval and commercial marketing ofvopratelimab, JTX-4014, JTX-8064 and other future product candidates. We do not know whether any of our clinical trials will be completed onschedule, if at all.We may experience delays in completing our preclinical studies and initiating or completing clinical trials, and we may experience numerousunforeseen events during, or as a result of, any potential future clinical trials that could delay or prevent our ability to receive marketing approval ofvopratelimab, JTX-4014, JTX-8064 and other future product candidates, including:•regulators, institutional review boards, or IRBs, or ethics committees may not authorize us or our investigators to commence a clinical trialor conduct a clinical trial at a prospective trial site;•we may experience delays in reaching, or fail to reach, agreement on acceptable terms with prospective trial sites and prospectivecontract research organizations, or CROs;•clinical trials may produce negative or inconclusive results, and we may decide, or regulators may require us, to conduct additionalpreclinical studies or clinical trials or abandon product development programs;•the number of patients required for clinical trials may be larger than we anticipate;•it may be difficult to enroll a sufficient number of patients with a predictive biomarker or enrollment in these clinical trials may be slowerthan we anticipate or participants may drop out of these clinical trials or fail to return for post-treatment follow-up at a higher rate than weanticipate;•our third-party contractors may fail to comply with regulatory requirements or meet their contractual obligations to us in a timely manner, orat all, or may deviate from the clinical trial protocol or drop out of the trial, which may require that we add new clinical trial sites orinvestigators;•we may elect to, or regulators or IRBs or ethics committees may require that we or our investigators, suspend or terminate clinicalresearch for various reasons, including noncompliance with regulatory requirements or a finding that the participants are being exposed tounreasonable and significant health risks;•the cost of clinical trials may be greater than we anticipate;•the supply or quality of materials or other materials necessary to conduct clinical trials may be insufficient or inadequate;•the size of the patient population required to validate our biomarker-driven strategy may be larger than we anticipate;•competitors may obtain regulatory approval ahead of us for compounds similar to ours, preventing us from obtaining regulatory approvaldespite positive clinical data;•our product candidates may have undesirable side effects or other unexpected characteristics, causing us to suspend or terminate thetrials, or reports may arise from preclinical or clinical testing of other similar cancer therapies that raise safety or efficacy concerns aboutour product candidates; and•the FDA or other regulatory authorities may require us to submit additional data or impose other requirements before permitting us toinitiate or continue a clinical trial.We could encounter delays if a clinical trial is suspended or terminated by us, by the IRBs of the institutions in which such trials are beingconducted or ethics committees, or by the FDA or other regulatory authorities, or recommended for suspension or termination by the Data SafetyMonitoring Board, or DSMB, for such trial. Such authorities or we may impose such a suspension or termination due to a number of factors,including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, inspection of the clinical trialoperations or trial site by the FDA or other regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverseside effects, including those issues or effects seen in other drugs or drug candidates in the class to which26Table of Contentsour drug candidates belong, failure to demonstrate a benefit from using a product, changes in governmental regulations or lack of adequate fundingto continue the clinical trial. Many of the factors that result in a delay in the commencement or completion of clinical trials may also ultimately leadto the denial of marketing approval of our product candidates. Further, regulatory authorities may disagree with our clinical trial design and ourinterpretation of data from clinical trials or may change the requirements for approval even after such authorities have reviewed and commented onthe design for our clinical trials.If we are required to conduct additional clinical trials or other testing, if the results of these trials or tests are not positive or are only modestlypositive or if there are safety concerns, or if we are unable to successfully complete clinical trials or other testing of vopratelimab, JTX-4014, JTX-8064 and other future product candidates, we may:•be delayed in obtaining marketing approval for our product candidates;•not obtain marketing approval at all;•obtain approval for indications or patient populations that are not as broad as intended or desired;•be subject to post-marketing testing requirements; or•have the product removed from the market after obtaining marketing approval.Our product development costs will also increase if we experience delays in testing or marketing approvals. We do not know whether any of ourclinical trials will need to be restructured, will be completed on schedule, or will begin as planned, if at all. Any delays in our preclinical or futureclinical development programs may harm our business, financial condition and prospects significantly.If we encounter difficulties enrolling patients in our clinical trials, our clinical development activities could be delayed or otherwise beadversely affected.The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient numberof patients who remain in the study until its conclusion. We may experience difficulties in patient enrollment in our clinical trials for a variety ofreasons. The enrollment of patients depends on many factors, including:•the patient eligibility criteria defined in the protocol;•our ability to identify and enroll sufficient number of patients with a predictive biomarker;•the size of the patient population required for analysis of the trial’s primary endpoints;•the proximity of patients to study sites;•the design of the trial;•our ability to recruit clinical trial investigators with the appropriate competencies and experience;•clinicians’ and patients’ perceptions of the potential advantages of the product candidate being studied in relation to other availabletherapies;•our ability to obtain and maintain patient consents for participation in our clinical trials and, where appropriate, biopsies for future patientenrichment efforts; and•the risk that patients enrolled in clinical trials will drop out of the trials before completion or, because they are late-stage cancer patients,will not survive the full terms of the clinical trials.In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as vopratelimab,JTX-4014, JTX-8064 and other future product candidates. This competition will reduce the number and types of patients available to us, becausesome patients who might have opted to enroll in our trials may instead opt to enroll in a trial conducted by one of our competitors. Since thenumber of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of ourcompetitors use, which will reduce the number of patients who are available for our clinical trials at such sites. Moreover, because vopratelimab,JTX-4014, JTX-8064 and other future product candidates represent a departure from more commonly used methods for cancer treatment, potentialpatients and their doctors may be inclined to use conventional therapies, such as chemotherapy, rather than enroll patients in our ongoing or anyfuture clinical trial.27Table of ContentsDelays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could preventcompletion of these trials and adversely affect our ability to advance the development of vopratelimab, JTX-4014, JTX-8064 and other futureproduct candidates.Vopratelimab, JTX-4014, JTX-8064 and other future product candidates we develop may cause undesirable side effects or have otherproperties when used alone or in combination with other approved pharmaceutical products or investigational new drugs that could halttheir clinical development, prevent their marketing approval, limit their commercial potential or result in significant negativeconsequences.Although vopratelimab, JTX-4014, JTX-8064 and other future product candidates will undergo safety testing to the extent possible and, whereapplicable, under such conditions discussed with regulatory authorities, not all adverse effects of drugs can be predicted or anticipated. In order toobtain marketing approval of a product candidate, we must demonstrate safety in various non-clinical and clinical tests. At the time of initiatinghuman clinical trials, we may not have conducted or may not conduct the types of non-clinical testing ultimately required by regulatory authorities,or future non-clinical tests may indicate that our product candidates are not safe for use. Non-clinical testing and clinical testing are bothexpensive and time-consuming and have uncertain outcomes.Immunotherapy, and its method of action of harnessing the body’s immune system, is powerful and could lead to serious side effects that we onlydiscover in clinical trials. Undesirable or clinically unmanageable side effects could occur and cause us or regulatory authorities to interrupt, delayor halt clinical trials and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreignregulatory authorities. Results of our trials could reveal a high and unacceptable severity and prevalence of side effects or unexpectedcharacteristics. Unforeseen side effects from vopratelimab, JTX-4014, JTX-8064 and other future product candidates could arise either duringclinical development or, if such side effects are more rare, after vopratelimab, JTX-4014, JTX-8064 and other future product candidates have beenapproved by regulatory authorities and the approved product has been marketed, resulting in the exposure of additional patients. Although we haveestablished that vopratelimab is safe in humans, we cannot predict if future clinical trials of our product candidates, either alone or in combinationwith other therapies, will demonstrate safety in humans. If vopratelimab, JTX-4014, JTX-8064 or other future product candidates we develop fail todemonstrate safety and efficacy in clinical trials or do not gain marketing approval, we will not be able to generate revenue and our business will beharmed.We cannot predict whether future safety and toxicology studies may cause undesirable effects. In addition, success in initial tests does not ensurethat later testing will be successful. Our product candidates could cause undesirable side effects similar to those toxicities observed in otherimmunotherapies. It remains possible that new or more severe toxicities could be seen if vopratelimab, JTX-4014 or JTX-8064 is used incombination with other agents. Such toxicities, if observed, could result in development delays, a determination by the FDA or other regulatoryauthorities that additional safety testing is required, delay or denial of approval, or limit the labeling and thus overall market scope for vopratelimab,JTX-4014 or JTX-8064.If unacceptable toxicities arise in the development of vopratelimab, JTX-4014, JTX-8064 and other future product candidates, we or a futurecollaborator could suspend or terminate our trials, or the FDA or comparable foreign regulatory authorities could order us to cease clinical trials ordeny approval of vopratelimab, JTX-4014, JTX-8064 and other future product candidates for any or all targeted indications. Treatment-related sideeffects could also affect patient recruitment or the ability of enrolled subjects to complete the trial or result in potential product liability claims. Inaddition, these side effects may not be appropriately recognized or managed by the treating medical staff, particularly outside of our existing orfuture collaborators as toxicities resulting from cancer immunotherapies are not normally encountered in the general patient population and bymedical personnel. We expect to have to train medical personnel using vopratelimab, JTX-4014 or JTX-8064 to understand the side effect profileof vopratelimab, JTX-4014 or JTX-8064, as applicable, for both our ongoing and planned clinical trials and upon commercialization of vopratelimab,JTX-4014 or JTX-8064. The inability to recognize and manage the potential side effects of vopratelimab, JTX-4014 or JTX-8064 could result inpatient deaths. Any of these occurrences may prevent us from achieving or maintaining market acceptance of the affected product candidate andmay harm our business, financial condition and prospects significantly.We may seek a Breakthrough Therapy Designation or Fast Track Designation by the FDA for vopratelimab, JTX-4014, JTX-8064 and otherfuture product candidates, and we may be unsuccessful. If we are successful, the designation may not actually lead to a fasterdevelopment or regulatory review or approval process, and it does not increase the likelihood that vopratelimab, JTX-4014, JTX-8064 andother future product candidates will receive marketing approval.We may seek a Breakthrough Therapy Designation or Fast Track Designation for vopratelimab, JTX-4014, JTX-8064 and other future productcandidates. A breakthrough therapy is defined as a drug that is intended, alone or in combination28Table of Contentswith one or more other drugs, to treat a serious or life-threatening disease or condition, and preliminary clinical evidence indicates that the drugmay demonstrate substantial improvement over currently approved therapies on one or more clinically significant endpoints, such as substantialtreatment effects observed early in clinical development. Fast Track Designation may be available if a product is intended for the treatment of aserious or life-threatening condition and preclinical or clinical data demonstrate the potential to address an unmet medical need for this condition.Drugs that receive Breakthrough Therapy Designation or Fast Track Designation by the FDA are eligible for accelerated approval and priorityreview.The FDA has broad discretion whether or not to grant Breakthrough Therapy Designation or Fast Track Designation. Even if we receiveBreakthrough Therapy Designation or Fast Track Designation for a product candidate, such designation may not result in a faster developmentprocess, review or approval compared to conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even ifvopratelimab, JTX-4014, JTX-8064 or other future product candidates receive Breakthrough Therapy Designation or Fast Track Designation, theFDA may later decide that the drugs no longer meet the conditions for qualification and rescind the designation.We may seek Orphan Drug Designation for vopratelimab, JTX-4014, JTX-8064 and other future product candidates, and we may beunsuccessful or may be unable to maintain the benefits associated with Orphan Drug Designation, including the potential for marketexclusivity.As part of our business strategy, we may seek Orphan Drug Designation for vopratelimab, JTX-4014, JTX-8064 and other future productcandidates, and we may be unsuccessful. In the United States, Orphan Drug Designation entitles a party to financial incentives such asopportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers.In Europe, Orphan Drug Designation entitles a party to a number of incentives, such as protocol assistance and scientific advice specifically fordesignated orphan medicines, and potential fee reductions depending on the status of the sponsor.Generally, if a drug with an Orphan Drug Designation subsequently receives the first marketing approval for the indication for which it has suchdesignation, the drug is entitled to a period of marketing exclusivity, which precludes the European Medicines Agency or the FDA from approvinganother marketing application for the same drug and indication for a set time period, except in limited circumstances.Even if we obtain orphan drug exclusivity for a drug, that exclusivity may not effectively protect the drug from competition because different drugscan be approved for the same condition, or the drug may be used off-label. Even after an orphan drug is approved, the FDA can subsequentlyapprove another drug for the same condition if the FDA concludes that the other drug is clinically superior. In addition, a designated orphan drugmay not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation.Moreover, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation wasmaterially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease orcondition. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage inthe regulatory review or approval process. While we may seek Orphan Drug Designation for applicable indications for vopratelimab, JTX-4014,JTX-8064 and other future product candidates, we may never receive such designations. Even if we do receive such designations, there is noguarantee that we will enjoy the benefits of those designations.The marketing approval process is expensive, time consuming and uncertain and may prevent us or any of our existing or futurecollaboration partners from obtaining approvals for the commercialization of vopratelimab, JTX-4014, JTX-8064 and other future productcandidates.Among other things, the research, testing, manufacturing, labeling, approval and license maintenance, selling, import and export, marketing anddistribution of biologic products are subject to extensive regulation by the FDA and comparable foreign regulatory authorities. Neither we nor anyexisting or future collaboration partner is permitted to market vopratelimab, JTX-4014, JTX-8064 and any other future products in the United Statesuntil we receive approval of a BLA from the FDA. We have never submitted an application for, or received, marketing approval. Obtaining approvalof a BLA can be a lengthy, expensive and uncertain process. In addition, failure to comply with FDA and other applicable domestic and foreignregulatory requirements may subject us to administrative or judicially imposed sanctions, including the following:•untitled and warning letters;•civil or criminal penalties and fines;29Table of Contents•injunctions;•suspension or withdrawal of marketing approval;•suspension of any ongoing clinical trials;•product recalls;•refusal to accept or approve BLAs or supplements thereto filed by us;•restrictions on operations, including costly new manufacturing requirements; or•seizure or detention of our products or import bans.Prior to receiving approval to commercialize our product candidates in the United States or abroad, we and any of our existing or futurecollaboration partners must demonstrate with substantial evidence from well-controlled clinical trials, and to the satisfaction of the FDA andcomparable foreign regulatory authorities, that such product candidates are safe and effective for their intended uses. Even if we and any of ourexisting or future collaboration partners believe the preclinical or clinical data for vopratelimab, JTX-4014, JTX-8064 and other future productcandidates are promising, such data may not be sufficient to support approval by the FDA and comparable foreign regulatory authorities.Administering our product candidates to humans may produce undesirable side effects, which could interrupt, delay or cause suspension of clinicaltrials of our product candidates and result in the FDA or other regulatory authorities denying approval of vopratelimab, JTX-4014, JTX-8064 andother future product candidates for any or all targeted indications.Marketing approval of a BLA is not guaranteed, and the approval process is expensive and may take several years. The FDA also has substantialdiscretion in the approval process. Despite the time and expense exerted, failure can occur at any stage, and we could encounter problems thatcause us to abandon or repeat clinical trials or perform additional preclinical studies and clinical trials. The number of preclinical studies andclinical trials that will be required for FDA approval varies depending on the product candidate, the disease or condition that the product candidateis designed to address and the regulations applicable to any particular product candidate. The FDA can delay, limit or deny approval of a productcandidate for many reasons, including, but not limited to, the following:•a product candidate may not be deemed safe or effective;•FDA officials may not find the data from preclinical studies and clinical trials sufficient;•the FDA might not deem our or our third-party manufacturers’ processes or facilities adequate for approval of our marketing applications;or•the FDA may change its approval policies or adopt new regulations.If vopratelimab, JTX-4014, JTX-8064 and other future product candidates fail to demonstrate safety and efficacy in clinical trials or do not gainmarketing approval, our business will be harmed.We may choose not to develop a potential product candidate, or we may suspend or terminate one or more discovery or preclinicalprograms related to our product candidates.At any time and for any reason, we may determine that one or more of our discovery programs, preclinical programs or product candidates doesnot have sufficient potential to warrant the allocation of resources toward such program or product candidate. Furthermore, because we havelimited financial and personnel resources, we are placing significant focus on the development of our product candidates vopratelimab, JTX-4014and JTX-8064. Accordingly, we may choose not to develop a product candidate or elect to suspend or terminate one or more of our discovery orpreclinical programs. If we suspend or terminate a program or product candidate in which we have invested significant resources, we will haveexpended resources on a program or product candidate that will not provide a full return on our investment and we may have missed an opportunityto have allocated those resources to potentially more productive uses, including existing or future programs or product candidates. If we do notaccurately evaluate the commercial potential or target market for a particular future product candidate, we may relinquish valuable rights to futureproduct candidates through collaboration, licensing or other royalty arrangements.Even if we complete the necessary clinical trials, we cannot predict when or if we will obtain marketing approval to commercialize aproduct or the approval may be for a narrower indication than we expect.We cannot commercialize a product candidate until the appropriate regulatory authorities have reviewed and approved the product candidate. Evenif our product candidates demonstrate safety and efficacy in clinical trials, the regulatory agencies may not complete their review processes in atimely manner, or we may not be able to obtain marketing30Table of Contentsapproval. In addition, we may experience delays or rejections based upon government regulation or changes in regulatory agency policy during theperiod of product development. Regulatory agencies also may impose significant limitations in the form of narrow indications, warnings,precautions or contraindications with respect to conditions of use or may grant approval subject to the performance of costly post-marketingclinical trials or may not approve the price we intend to charge for our product candidates. Any of the foregoing scenarios could materially harm thecommercial prospects for vopratelimab, JTX-4014, JTX-8064 and other future product candidates.Obtaining and maintaining marketing approval of vopratelimab, JTX-4014, JTX-8064 or other future product candidates in onejurisdiction does not mean that we will be successful in obtaining marketing approval of that product candidate in other jurisdictions.Obtaining and maintaining marketing approval of vopratelimab, JTX-4014, JTX-8064 and other future product candidates in one jurisdiction doesnot guarantee that we will be able to obtain or maintain marketing approval in any other jurisdiction. For example, even if the FDA grants marketingapproval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing andpromotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements andadministrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials.Obtaining foreign marketing approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costsfor us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements ininternational markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full marketpotential of vopratelimab, JTX-4014, JTX-8064 and other future product candidates will be harmed. Even if we obtain approval for our productcandidates and ultimately commercialize them in foreign markets, we would be subject to separate risks and uncertainties, including the burden ofcomplying with complex and changing foreign regulatory, tax, accounting and legal requirements and the reduced protection of intellectual propertyrights in some foreign countries.Our failure to successfully identify, discover, acquire, develop or commercialize additional products or product candidates could impairour ability to grow.Although a substantial amount of our efforts will focus on the clinical testing and potential approval of our most advanced product candidate,vopratelimab, and our other product candidates, JTX-4014 and JTX-8064, an element of our long-term growth strategy is to in-license products orproduct candidates for development and commercialization. We may never be able to identify, discover, acquire, develop or commercialize anyproducts or product candidates, which would have a material adverse effect on our business.Because our internal research capabilities are limited, we may be dependent upon pharmaceutical and biotechnology companies, academicscientists, and other researchers to sell or license products or technology to us. The success of this strategy depends partly upon our ability toidentify, select, and acquire promising pharmaceutical product candidates and products. The process of proposing, negotiating and implementing alicense or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantiallygreater financial, marketing and sales resources, may compete with us for the license or acquisition of product candidates and approved products.Acquisitions and in-licenses include numerous risks, including potential failure to achieve the expected benefits of the acquisition or license andpotential unknown liabilities associated with the product or technology. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses, and technologies, integrate them into our current infrastructure and manage our development efforts.31Table of ContentsEven if we receive marketing approval of vopratelimab, JTX-4014, JTX-8064 or other future product candidates, we will be subject toongoing regulatory obligations and continued regulatory review.Any marketing approvals that we receive for vopratelimab, JTX-4014, JTX-8064 and other future product candidates may be subject to limitationson the approved indicated uses for which the product may be marketed or the conditions of approval or contain requirements for potentially costlypost-market testing and surveillance to monitor the safety and efficacy of the product candidate. In addition, if the FDA or a comparable foreignregulatory authority approves vopratelimab, JTX-4014, JTX-8064 and other future product candidates, the manufacturing processes, labeling,packaging, distribution, adverse event reporting, storage, advertising, promotion, import and export and record keeping for vopratelimab, JTX-4014,JTX-8064 and other future product candidates will be subject to extensive and ongoing regulatory requirements. These requirements includesubmissions of safety and other post-marketing information and reports, registration, as well as continued compliance with current goodmanufacturing practice, or cGMP, and good clinical practice, or GCP, for any clinical trials that we conduct post-approval. Failure to comply withregulatory requirements, may result in, among other things:•restrictions on the marketing or manufacturing of our product candidates, withdrawal of the product from the market, or product recalls;•fines, untitled and warning letters, or holds on clinical trials;•refusal by the FDA to approve pending applications or supplements to approved applications we filed or suspension or revocation oflicense approvals;•product seizure or detention, or refusal to permit the import or export of our product candidates; and•injunctions or the imposition of civil or criminal penalties.We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either inthe United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies,or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieveor sustain profitability.Even if vopratelimab, JTX-4014, JTX-8064 and other future product candidates receive marketing approval, they may fail to achieve thedegree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercialsuccess.If vopratelimab, JTX-4014, JTX-8064 and other future product candidates receive marketing approval, whether as a single agent or in combinationwith other therapies, they may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors, and others in themedical community. If vopratelimab, JTX-4014, JTX-8064 and other future product candidates do not achieve an adequate level of acceptance, wemay not generate significant product revenues and we may not become profitable.32Table of ContentsRisks Related to Manufacturing, Commercialization and Reliance on Third PartiesWe depend on our collaboration with Celgene and may depend on collaborations with additional third parties for the development andcommercialization of our product candidates. If our collaborations are not successful, we may not be able to capitalize on the marketpotential of these product candidates.In July 2016, we entered into a Master Research and Collaboration Agreement, or the Celgene Collaboration Agreement, with Celgene Corporation,or Celgene, focused on developing and commercializing biologic immunotherapies. Under our Celgene Collaboration Agreement with Celgene,Celgene may exercise options granting it certain commercialization or licensing rights for vopratelimab, JTX-4014, JTX-8064 and other productcandidate programs from a pool of certain molecular targets. The collaboration involves a complex allocation of rights, provides for milestonepayments to us based on the achievement of specified clinical development, regulatory and commercial milestones, provides for additionalpayments upon Celgene’s election to exercise rights to commercialize additional product candidates or extend the research term, and provides uswith profit-sharing and royalty-based revenue if certain product candidates are successfully commercialized. We cannot provide any assurancewith respect to, or otherwise, the success of the collaboration. In January 2019, Celgene and Bristol-Myers Squibb Company, or BMS, announcedthat they entered into an agreement under which Celgene will be acquired by BMS, subject to shareholder and regulatory approvals. Thetransaction is currently expected to close in the third quarter of 2019. The acquisition of Celgene by BMS may result in a change in Celgene’sbusiness priorities, and as such, may lead to changes in its future operations, contracts and strategic plans, including those involving itscollaboration with us, and may have a material adverse effect on our collaboration with Celgene. Any such change could affect Celgene’swillingness to perform its obligations or exercise its options under the Celgene Collaboration Agreement, have an impact on Celgene’s ability toretain and motivate key personnel who are important to our collaboration, reduce or terminate its efforts on the development of our productcandidates, and/or cause the Celgene Collaboration Agreement to terminate. If the transaction is completed as planned, there is no guarantee thatBMS will place the same emphasis on the collaboration, and our business may be harmed. In addition, BMS is a leader in the immuno-oncologyfield and has several programs that may be competitive with our product candidates. For example, BMS currently markets nivolumab, an anti-PD-1antibody, and may not seek to acquire an additional anti-PD-1 antibody, which could cause BMS to decline to exercise the option for JTX-4014. Asa result, if the acquisition in consummated, BMS may elect to terminate the Celgene Collaboration Agreement or may choose to advance its ownprograms rather than ours even if it does not terminate the Celgene Collaboration Agreement. Although we would retain worldwide rights to ourprograms in the event of any termination, any such termination may adversely affect our business and our stock price, and make it more difficultfor us to enter into a collaboration agreement with another party.We may form or seek other strategic alliances, joint ventures, or collaborations, or enter into additional licensing arrangements with third partiesthat we believe will complement or augment our development and commercialization efforts with respect to vopratelimab, JTX-4014, JTX-8064 andother future product candidates that we may develop.Collaborations involving our product candidates, including our collaboration with Celgene, pose the following risks to us:•Collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations. For example,under our collaboration agreement with Celgene, development and commercialization plans and strategies for licensed programs will beconducted in accordance with a plan approved by the appropriate committee comprised of representatives from both us and Celgene.•Collaborators, including Celgene, may not pursue development and commercialization of vopratelimab, JTX-4014, JTX-8064 or other futureproduct candidates or may elect not to continue or renew development or commercialization programs based on clinical trial results,changes in their strategic focus due to the acquisition of competitive products, availability of funding or other external factors such as abusiness combination that diverts resources or creates competing priorities. For example, Celgene may decline to exercise any of itsoptions under the Celgene Collaboration Agreement and, although we would retain worldwide rights to our programs, a decision not toexercise any such option may adversely affect our business and our stock price.•Collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial, abandon a productcandidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing. For example, underour collaboration agreement with Celgene, at any point in the research, development and clinical trial process, or during the term of anyapplicable co-development and co-commercialization or license agreement, respectively, Celgene may terminate the applicable agreementupon 120 days’ prior written notice with respect to any product candidate that is subject33Table of Contentsto the collaboration agreement without triggering a termination of the remainder of the collaboration and, under a co-development and co-commercialization agreement or a license agreement, it is possible for Celgene to terminate that agreement upon 120 days prior writtennotice at any point during the development or commercialization activities. If Celgene exercises any such termination right, we may nothave sufficient resources to continue the research, development or commercialization of such product candidate.•Collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our products orproduct candidates.•A collaborator with marketing and distribution rights to one or more products may not commit sufficient resources to their marketing anddistribution.•Collaborators may own or co-own intellectual property covering our products that results from our collaborating with them, and in suchcases, we would not have the exclusive right to develop, commercialize, enforce, maintain or defend such intellectual property.•Collaborators may not properly enforce, maintain or defend our intellectual property rights or may use our proprietary information in a waythat gives rise to actual or threatened litigation that could jeopardize or invalidate our intellectual property or proprietary information orexpose us to potential litigation, or other intellectual property proceedings. For example, under certain limited circumstances, Celgene hasthe first right to enforce, maintain or defend our intellectual property rights under our collaboration arrangement with respect to certainlicensed programs and, although we may have the right to assume the enforcement, maintenance and defense of our intellectual propertyrights if Celgene does not, our ability to do so may be compromised by Celgene’s actions.•Disputes may arise between a collaborator and us that cause the delay or termination of the research, development or commercializationof vopratelimab, JTX-4014, JTX-8064 and other future product candidates, or that result in costly litigation or arbitration that divertsmanagement attention and resources. For example, although we and Celgene have agreed to the form of co-development and co-commercialization agreement and license agreement to be entered into should Celgene exercise its option for a program under theCelgene Collaboration Agreement, we may never come to agreement with Celgene on a final definitive agreement. Further, even if we doreach a definitive agreement, it may not be on terms that are as favorable to us as expected.•Collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development orcommercialization of the applicable product candidates. For example, Celgene can terminate its agreement with us, in its entirety or withrespect to any program, upon 120 days’ notice and can terminate the entire agreement with us in connection with a material breach of theagreement by us that remains uncured for 90 days. If Celgene exercises such termination right, we may not have sufficient resources tocontinue the development of such product candidate.•Collaboration agreements may not lead to development or commercialization of product candidates in the most efficient manner or at all.•Collaboration agreements may restrict our right to independently pursue new product candidates. For example, if Celgene exercises itsoption for a program within the collaboration other than JTX-4014, then until termination or expiration of the applicable co-development andco-commercialization agreement for such program, we may not directly or indirectly research, develop, manufacture or commercialize,outside of the collaboration, any biologic medicine or product candidate with specified activity against that program’s collaboration target.As a result, if we enter into additional collaboration agreements and strategic partnerships or license our intellectual property, products orbusinesses, we may not be able to realize the benefit of, or generate revenues from, such arrangements.We may seek to establish additional collaborations, and, if we are not able to establish them on commercially reasonable terms, we mayhave to alter our development and commercialization plans.Our drug development programs and the potential commercialization of our product candidates will require substantial additional resources. Forsome of our product candidates, we may decide to collaborate with additional pharmaceutical and biotechnology companies for the developmentand potential commercialization of those product candidates. Any of these relationships may require us to incur non-recurring and other charges,increase our near and long-term expenditures, issue securities that dilute our existing stockholders, or disrupt our management and business.34Table of ContentsWe face significant competition in seeking appropriate strategic partners and the negotiation process is time consuming and complex. Whether wereach a definitive agreement for other collaborations will depend, among other things, upon our assessment of the collaborator’s resources andexpertise, the terms and conditions of the proposed collaboration and the proposed collaborator’s evaluation of our business. We may not besuccessful in our efforts to establish a strategic partnership or other alternative arrangements for future product candidates because they may bedeemed to be at too early of a stage of development for collaborative effort and third parties may not view them as having the requisite potential todemonstrate safety and efficacy. In addition, there have been a significant number of recent business combinations among large pharmaceuticalcompanies that have resulted in a reduced number of potential future collaborators.We may also be restricted under existing collaboration agreements from entering into future agreements on certain terms with potentialcollaborators. For example, during the research term of our collaboration with Celgene, we may not directly or indirectly research, develop,manufacture or commercialize, except pursuant to the agreement, certain product candidates. In addition, if Celgene exercises its option for aprogram within the collaboration other than JTX-4014, then until termination or expiration of the applicable co-development and co-commercialization agreement for such program, we may not directly or indirectly develop, manufacture or commercialize, outside of thecollaboration, any biologic medicine or product candidate with specified activity against that program’s collaboration target.We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtailthe development of the product candidate for which we are seeking to collaborate, reduce or delay its development program, delay or reduce thescope of potential commercialization activities, or increase our expenditures and undertake development or commercialization activities at our ownexpense. If we elect to increase our expenditures to fund development or commercialization activities on our own, we may need to obtainadditional capital, which may not be available to us on acceptable terms or at all.The market opportunities for vopratelimab, JTX-4014, JTX-8064 and any other future products, if and when approved, may be limited tothose patients who are ineligible for established therapies or for whom prior therapies have failed, and may be small.Cancer therapies are sometimes characterized as first-line, second-line, or third-line, and the FDA often approves new therapies initially only forthird-line use. When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiation therapy, and,increasingly, immunotherapies or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure. Second andthird-line therapies are administered to patients when prior therapy is not effective. We expect to initially seek approval of vopratelimab, JTX-4014,JTX-8064 and other future product candidates as a therapy for patients who have received one or more prior treatments. Subsequently, for thoseproducts that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is noguarantee that vopratelimab, JTX-4014, JTX-8064 or other future product candidates, even if approved, would be approved for first-line therapy,and, prior to any such approvals, we may have to conduct additional clinical trials.Our projections of both the number of people who have the cancers we are targeting, as well as the subset of people with these cancers who havereceived one or more prior treatments, and who have the potential to benefit from treatment with vopratelimab, JTX-4014, JTX-8064 and otherfuture product candidates, are based on our beliefs and estimates. These estimates have been derived from a variety of sources, includingscientific literature, surveys of clinics, patient foundations, and market research, and may prove to be incorrect. Further, new studies may changethe estimated incidence or prevalence of these cancers. The number of patients may turn out to be lower than expected. Additionally, thepotentially addressable patient population for vopratelimab, JTX-4014, JTX-8064 and other future product candidates may be limited or may not beamenable to treatment with vopratelimab, JTX-4014, JTX-8064 and any other products, if and when approved. Even if we obtain significant marketshare for vopratelimab, JTX-4014, JTX-8064 and any other products, if and when approved, because the potential target populations may be small,we may never achieve profitability without obtaining marketing approval for additional indications, including to be used as first- or second-linetherapy.35Table of ContentsExclusivity and other governance provisions within our collaboration agreement with Celgene may prevent us from pursuing alternativeproduct candidates and exercising complete control over our product candidates’ development.During the research term in our collaboration agreement with Celgene, we may not alone, or with a third party, research, develop, manufacture orcommercialize a biologic that binds to ICOS or a pool of certain B cell, T regulatory cell or tumor-associated macrophage targets, other than PD-1,that meet certain criteria, termed an exclusive target, and inhibit, activate or otherwise modulate the activity of such exclusive target. In addition, ifCelgene exercises its option for a program within the collaboration other than JTX-4014, then until termination or expiration of the applicable co-development and co-commercialization agreement for such program, we may not directly or indirectly research, develop, manufacture orcommercialize, outside of the collaboration, any biologic with specified activity against that program’s collaboration target. Further, ourcollaboration with Celgene is governed by the joint steering committee, or JSC, and a joint patent committee. The JSC may establish additionalsubcommittees, to oversee particular projects or activities. Subject to limitations specified in the agreement, if the applicable governancecommittee is unable to make a decision by consensus and the parties are unable to resolve the issue through escalation to specified seniorexecutive officers of the parties, then we generally have final decision-making authority over research and development matters for programs priorto Celgene’s exercise of its option to such program. If Celgene exercises its option for a program, final decision-making authority for that programis specified in the applicable co-development and co-commercialization agreement or license agreement. These exclusivity and governanceprovisions may inhibit our development efforts and may materially harm our business, financial condition, results of operations and prospects.We rely and expect to continue to rely on third parties to conduct our clinical trials. If these third parties do not successfully carry outtheir contractual duties, comply with regulatory requirements or meet expected deadlines, we may not be able to obtain marketingapproval for or commercialize our product candidates and our business could be substantially harmed.We do not have the ability to independently conduct clinical trials. We rely and will rely on medical institutions, clinical investigators, contractlaboratories, and other third parties, such as CROs, to conduct or otherwise support our ongoing clinical trials, including processing of human bloodand tumor samples and analysis of biomarkers from the clinical trials. We rely and will rely heavily on these parties for execution of clinical trialsfor vopratelimab, JTX-4014, JTX-8064 and other future product candidates and we control only certain aspects of their activities. Nevertheless, weare responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal and regulatoryrequirements and scientific standards, and our reliance on these third parties including CROs will not relieve us of our regulatory responsibilities.For any violations of laws and regulations during the conduct of our clinical trials, we could be subject to untitled and warning letters orenforcement action that may include civil penalties up to and including criminal prosecution.We and our clinical investigators and CROs are required to comply with regulations and requirements, including GCP, for conducting, monitoring,recording and reporting the results of clinical trials to ensure that the data and results are scientifically credible and accurate, and that the trialpatients are adequately informed of the potential risks of participating in clinical trials and their rights are protected. If we or our clinicalinvestigators or CROs fail to comply with applicable GCP, the clinical data generated in our clinical trials may be deemed unreliable and the FDAor comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. Wecannot assure stockholders that, upon inspection, the FDA will determine that any of our future clinical trials will comply with GCP. In addition, ourclinical trials must be conducted with product candidates produced under cGMP regulations. Our failure or the failure of our clinical investigators orCROs to comply with these regulations may require us to repeat clinical trials, which would delay the marketing approval process and could alsosubject us to enforcement action. We also are required to register certain ongoing clinical trials and provide certain information, includinginformation relating to the trial’s protocol, on a government-sponsored database, ClinicalTrials.gov, within specific time frames. Failure to do socan result in fines, adverse publicity and civil and criminal sanctions.Although we designed the clinical trials for vopratelimab and JTX-4014 and intend to design the clinical trials for JTX-8064 and other future productcandidates, clinical investigators or CROs will conduct all of the clinical trials. As a result, many important aspects of our development programs,including their conduct and timing, will be outside of our direct control. Our reliance on third parties to conduct future clinical trials will also result inless direct control over the management of data developed through clinical trials than would be the case if we were relying entirely upon our ownstaff. Communicating with outside parties can be challenging, potentially leading to mistakes as well as difficulties in coordinating activities.Outside parties may also face internal challenges that may materially adversely affect the willingness or ability of such parties to conduct ourclinical trials and may subject us to unexpected cost increases that are beyond our control. If the clinical investigators or CROs do not performclinical trials in a satisfactory manner,36Table of Contentsbreach their obligations to us or fail to comply with regulatory requirements, the development, marketing approval and commercialization ofvopratelimab, JTX-4014, JTX-8064 and other future product candidates may be delayed, or our development program may be materially andirreversibly harmed. If we are unable to rely on clinical data collected by our clinical investigators and CROs, we could be required to repeat,extend the duration of, or increase the size of any clinical trials we conduct, and this could significantly delay commercialization and requiresignificantly greater expenditures.If clinical investigators or CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to bereplaced or if the quality or accuracy of the clinical data they obtain are compromised due to the failure to adhere to our clinical protocols,regulatory requirements or for other reasons, any clinical trials such clinical investigators or CROs are associated with may be extended, delayedor terminated. As a result, we believe that our financial results and the commercial prospects for vopratelimab, JTX-4014, JTX-8064 and otherfuture product candidates in the subject indication would be harmed, our costs could increase and our ability to generate revenue could be delayed.We face significant competition and if our competitors develop and market products that are more effective, safer or less expensive thanvopratelimab, JTX-4014, JTX-8064 or other future product candidates, our commercial opportunities will be negatively impacted.The life sciences industry is highly competitive and subject to rapid and significant technological change. We are currently developing therapeuticsthat will compete with other products and therapies that currently exist or are being developed, such as approved immunotherapy antibodies, theanti-ICOS antibodies of BMS, GlaxoSmithKline plc, or Kymab Group Ltd., Xenor, Inc.’s anti-PD-1 and anti-ICOS bispecific antibody or Merck &Co., Inc.’s anti-LILRB2 antibody. Products we may develop in the future are also likely to face competition from other products and therapies,some of which we may not currently be aware. Technological advances or products developed by our competitors may render our technologies orproduct candidates obsolete, less competitive or not economical.We have both domestic and international competitors, including major multinational pharmaceutical companies, established biotechnologycompanies, specialty pharmaceutical companies, universities and other research institutions and small and other early-stage companies. Many ofour competitors have significantly greater financial, manufacturing, marketing, product development, technical and human resources than we do.Large pharmaceutical companies, in particular, have extensive experience in clinical testing, obtaining marketing approvals, establishing clinicaltrial sites, recruiting patients and in manufacturing pharmaceutical products and may succeed in discovering, developing and commercializingproducts in our field before we do. We also face competition in recruiting and retaining qualified scientific and management personnel, as well as inacquiring technologies complementary to, or necessary for, our programs.There are a large number of companies developing or marketing treatments for cancer, including many major pharmaceutical and biotechnologycompanies. These treatments consist both of small molecule drug products, as well as biologics approaches to address cancer. These treatmentsare often combined with one another in an attempt to maximize the response rate.Our commercial opportunity could be reduced or eliminated if our competitors develop and commercialize products that are safer, more effective,have fewer or less severe side effects, are more convenient, have a broader label, are marketed more effectively, are reimbursed or are lessexpensive than any products that we may develop. Our competitors also may obtain FDA, European Commission or other marketing approval fortheir products more rapidly than we may obtain approval for ours, which could result in our competitors establishing a strong market position beforewe are able to enter the market. Even if vopratelimab, JTX-4014, JTX-8064 and other future product candidates achieve marketing approval, theymay be priced at a significant premium over competitive products, resulting in reduced competitiveness. In addition, if vopratelimab, JTX-4014,JTX-8064 and other future product candidates are approved by the FDA, the approval of a biosimilar product to one of our products could have amaterial impact on our business.Because we rely on third-party manufacturing and supply partners, including a single supplier for some of our materials, our supply ofresearch and development, preclinical and clinical development materials may become limited or interrupted or may not be ofsatisfactory quantity or quality.We rely on third-party contract manufacturers to manufacture our preclinical and clinical trial product supplies. We do not own manufacturingfacilities for producing such supplies. There can be no assurance that our preclinical and clinical development product supplies will not be limited,interrupted, or of satisfactory quality or continue to be available at acceptable prices. Our or a third party’s failure to execute on our manufacturingrequirements, or to do so on37Table of Contentscommercially reasonable terms and comply with cGMP could adversely affect our business in a number of ways, including:•an inability to initiate or continue clinical trials of vopratelimab, JTX-4014, JTX-8064 or other future product candidates under development;•delay in submitting regulatory applications, or receiving marketing approvals, for vopratelimab, JTX-4014, JTX-8064 or other future productcandidates;•loss of cooperation of an existing or future collaborator;•subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities; and•requirements to cease distribution or to recall batches of vopratelimab, JTX-4014, JTX-8064 and other future product candidates.In the event that any of our manufacturers fails to comply with applicable regulatory requirements and facility and process validation tests or toperform its obligations to us in relation to quality, timing or otherwise, or if our supply of components or other materials becomes limited orinterrupted for other reasons, we may be forced to manufacture the materials ourselves, for which we currently do not have the capabilities orresources, or enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, thetechnical skills or technology required to manufacture our future product candidates may be unique or proprietary to the original manufacturer,which would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another thirdparty manufacture such future product candidates. In particular, any replacement of our manufacturer could require significant effort and expertisebecause there may be a limited number of qualified replacements. If we are required to change manufacturers for any reason, we will be required toverify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations andguidelines, which could negatively affect our ability to develop product candidates in a timely manner or within budget.Certain raw materials necessary for the manufacture of our product candidates under our current manufacturing process, such as growth media,resins and filters, are available from a single supplier. We do not have agreements in place that guarantee our supply or the price of these rawmaterials. Any significant delay in the acquisition or decrease in the availability of these raw materials could considerably delay the manufacture ofvopratelimab, JTX-4014, JTX-8064 and other future product candidates, which could adversely impact the timing of any planned trials or themarketing approval of that product candidate.We expect to continue to rely on third-party manufacturers if we receive marketing approval for any product candidate. If we are unable to maintainthird-party manufacturing for vopratelimab, JTX-4014, JTX-8064 or obtain or maintain third-party manufacturing for other future product candidates,or to do so on commercially reasonable terms, we may not be able to develop and commercialize vopratelimab, JTX-4014, JTX-8064 or otherfuture product candidates successfully. We do not yet have sufficient information to reliably estimate the cost of the commercial manufacture ofJTX-8064 or other future product candidates.In addition, in order to conduct clinical trials of vopratelimab, JTX-4014, JTX-8064 and other future product candidates, we will need to work withthird-party manufacturers to manufacture them in large quantities. Our manufacturing partners or our third-party collaborators may be unable tosuccessfully increase the manufacturing capacity of vopratelimab, JTX-4014, JTX-8064 and other future product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If our manufacturing partners or collaborators are unableto successfully scale up the manufacture of vopratelimab, JTX-4014, JTX-8064 or other future product candidates in sufficient quality andquantity, the development, testing, and clinical trials of that product candidate may be delayed or infeasible, and marketing approval or commerciallaunch of any resulting product may be delayed or not obtained, which could significantly harm our business.We are subject to manufacturing risks that could substantially increase our costs and limit the supply of our products.The process of manufacturing vopratelimab, JTX-4014, JTX-8064 or other future product candidates is complex, highly regulated and subject toseveral risks, including:•We do not have the capability internally to manufacture drug products or drug substances for clinical use. We use third-partymanufacturers for manufacturing vopratelimab, JTX-4014 and JTX-8064 for our on-going and38Table of Contentsanticipated clinical trials. Any changes in our manufacturing processes as a result of scaling-up may require additional approvals or maydelay the development and marketing approval of vopratelimab, JTX-4014, JTX-8064 and other future product candidates and ultimatelyaffect our success.•The manufacturing facilities in which vopratelimab, JTX-4014, JTX-8064 or other future product candidates are made could be adverselyaffected by equipment failures, contamination, vendor error, labor shortages, natural disasters, power failures and numerous other factors.•Any adverse developments affecting manufacturing operations for vopratelimab, JTX-4014, JTX-8064 or other future product candidates, ifany are approved, may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions inthe supply of our products. We may also have to take inventory write-offs and incur other charges and expenses for products that fail tomeet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.•Biologics, such as vopratelimab, JTX-4014 and JTX-8064, that have been produced and are stored for later use may degrade, becomecontaminated, suffer other quality defects or may not be used within their shelf life, which may cause the affected product candidates tono longer be suitable for their intended use in clinical trials or other development activities. If the defective product candidates cannot bereplaced in a timely fashion, we may incur significant delays in our development programs that could adversely affect the value of suchproduct candidates.We expect to develop vopratelimab, JTX-4014, JTX-8064 and future product candidates in combination with other drugs. If we are unableto enter into a strategic collaboration for, or if we are unable to purchase on commercially reasonable terms, an approved cancer drug touse in combination with our product candidates, we may be unable to develop or obtain approval for, vopratelimab, JTX-4014, JTX-8064and future product candidates in combination with other drugs.We intend to develop vopratelimab, JTX-4014, JTX-8064 and future product candidates in combination with one or more other cancer drugs. If theFDA or similar regulatory authorities outside of the United States revoke or do not grant approval of any drugs we use in combination withvopratelimab, JTX-4014, JTX-8064 or other future product candidates, we will not be able to market any products in combination with such drugs.If safety or efficacy issues arise with any of these drugs, we could experience significant regulatory delays, and the FDA or similar regulatoryauthorities outside of the United States may require us to redesign or terminate the applicable clinical trials. If the drugs we use are replaced asthe standard of care for the indications we choose for vopratelimab, JTX-4014, JTX-8064 or other future product candidates, the FDA or similarregulatory authorities outside of the United States may require us to conduct additional clinical trials. In addition, if manufacturing or other issuesresult in a shortage of supply of the drugs with which we determine to combine with vopratelimab, JTX-4014, JTX-8064 or other future productcandidates, we may not be able to complete clinical development of vopratelimab, JTX-4014, JTX-8064 or other future product candidates on ourcurrent timeline or at all.Even if vopratelimab, JTX-4014, JTX-8064 or other future product candidates were to receive marketing approval or be commercialized for use incombination with other existing drugs, we would continue to be subject to the risks that the FDA or similar regulatory authorities outside of theUnited States could revoke approval of such existing drugs or that safety, efficacy, manufacturing or supply issues could arise with such drugs.We may form or seek strategic collaborations to evaluate and, if approved, market vopratelimab, JTX-4014 and JTX-8064 in combination withanother approved cancer drug. If we are unable to enter into a strategic collaboration on commercially reasonable terms or fail to realize thebenefits of any such collaboration, we may be required to purchase an approved cancer drug to use in combination with vopratelimab, JTX-4014and JTX-8064. The failure to enter into a successful collaboration or the expense of purchasing an approved cancer drug may delay ourdevelopment timelines, increase our costs and jeopardize our ability to develop vopratelimab, JTX-4014 and JTX-8064.We may develop complementary diagnostics and/or companion diagnostics for vopratelimab, JTX-4014, JTX-8064 and other futureproduct candidates. If we are unable to successfully develop such companion diagnostics or complementary diagnostics, or experiencesignificant delays in doing so, we may not realize the full commercial potential of vopratelimab, JTX-4014, JTX-8064 or other futureproduct candidates.Because we are focused on patient enrichment strategies, in which predictive biomarkers may be used to identify the right patients for our productcandidates, we believe that our success may depend, in part, on our ability to develop complementary diagnostics and/or companion diagnostics,which are assays or tests to identify an appropriate patient population for our product candidates. There has been limited success to date industry-wide in developing these types39Table of Contentsof complementary diagnostics and/or companion diagnostics. To be successful, we need to address a number of scientific, technical and logisticalchallenges. We have not yet initiated development of complementary diagnostics and/or companion diagnostics, and the process of obtaining orcreating such a diagnostic is time consuming and costly. We have little experience in the development of diagnostics and may not be successfulin developing appropriate diagnostics to pair with any of our product candidates that receive marketing approval. Complementary diagnosticsand/or companion diagnostics are subject to regulation by the FDA and similar regulatory authorities outside the United States as medical devicesand require separate regulatory approval or clearance prior to commercialization. Given our limited experience in developing diagnostics, we expectto rely in part or in whole on third parties for their design and manufacture. If we are unable to engage a third party to assist us, or if we, or anythird parties that we engage, are unable to successfully develop complementary diagnostics and/or companion diagnostics for vopratelimab, JTX-4014, JTX-8064 and other future product candidates, or experience delays in doing so:•the development of vopratelimab, JTX-4014, JTX-8064 and other future product candidates may be adversely affected if we are unable toappropriately select patients for enrollment in our clinical trials;•vopratelimab, JTX-4014, JTX-8064 and other future product candidates may not receive marketing approval if safe and effective use of aproduct candidate depends on complementary diagnostics and/or companion diagnostics and such a diagnostic is not commerciallyavailable or otherwise approved or cleared by the appropriate regulatory authority; and•we may not realize the full commercial potential of vopratelimab, JTX-4014, JTX-8064 and other future product candidates that receivemarketing approval if, among other reasons, we are unable to appropriately identify, or it takes us longer to identify, patients who are likelyto benefit from therapy with our products, if approved.If any of these events were to occur, our business would be harmed, possibly materially.If product liability lawsuits are brought against us, we may incur substantial liabilities.We face an inherent risk of product liability as a result of the clinical testing of vopratelimab, JTX-4014, JTX-8064 and other future productcandidates. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitableduring clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing,defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also beasserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incursubstantial liabilities. Even successful defense would require significant financial and management resources. Regardless of the merits or eventualoutcome, liability claims may result in:•decreased demand for our product candidates;•injury to our reputation;•withdrawal of clinical trial participants;•initiation of investigations by regulators;•costs to defend the related litigation;•a diversion of management’s time and our resources;•substantial monetary awards to trial participants or patients;•product recalls, withdrawals or labeling, marketing or promotional restrictions;•loss of revenue;•exhaustion of any available insurance and our capital resources;•the inability to commercialize any product candidate; and•a decline in our share price.Insurance coverage is increasingly expensive. We may not be able to maintain insurance at a reasonable cost or in an amount adequate to satisfyany liability that may arise, if at all. Our insurance policy contains various exclusions, and we may be subject to a product liability claim for whichwe have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations orthat are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements40Table of Contentswith any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate shouldany claim arise.Adverse events in the field of immuno-oncology could damage public perception of our product candidates and negatively affect ourbusiness.The commercial success of our products will depend in part on public acceptance of the use of cancer immunotherapies. Adverse events inclinical trials of vopratelimab, JTX-4014, JTX-8064, any of our other future product candidates or other similar products and the resulting publicity,as well as any other adverse events in the field of immuno-oncology that may occur, including in connection with competitor therapies such asapproved immunotherapy antibodies, the anti-ICOS antibodies of BMS, GlaxoSmithKline plc or Kymab Group Ltd., Xenor, Inc.’s anti-PD-1 andanti-ICOS bispecific antibody or Merck & Co., Inc.’s anti-LILRB2 antibody, could result in a decrease in demand for vopratelimab, JTX-4014, JTX-8064 or other products that we may develop. If public perception is influenced by claims that the use of cancer immunotherapies is unsafe,whether related to our or our competitors’ therapies, our products may not be accepted by the general public or the medical community.Future adverse events in immuno-oncology or the biopharmaceutical industry could also result in greater governmental regulation, stricter labelingrequirements and potential regulatory delays in the testing or approvals of our products. Any increased scrutiny could delay or increase the costsof obtaining marketing approval for vopratelimab, JTX-4014, JTX-8064 and other future product candidates.Healthcare legislative reform measures may have a material adverse effect on our business and results of operations.In the United States, there have been and continue to be a number of legislative initiatives to contain healthcare costs. For example, in March2010, the Affordable Care Act was passed, which substantially changes the way health care is financed by both governmental and privateinsurers, and significantly impacts the U.S. pharmaceutical industry.We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts thatfederal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates orcomplementary diagnostics or companion diagnostics or additional pricing pressures.For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealedthe “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will becomeeffective in 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 8.67 million fewer Americans to beinsured in 2027 and premiums in insurance markets may rise. Further, each chamber of the Congress has put forth multiple bills designed torepeal or repeal and replace portions of the Affordable Care Act, or ACA. Although none of these measures has been enacted by Congress to date,Congress may consider other legislation to repeal and replace elements of the ACA.The current administration has also taken executive actions to undermine or delay implementation of the ACA. In January 2017, the Presidentsigned an Executive Order directing federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, ordelay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers,health insurers, or manufacturers of pharmaceuticals or medical devices. In October 2017, the President signed a second Executive Orderallowing for the use of association health plans and short-term health insurance, which may provide fewer health benefits than the plans soldthrough the ACA exchanges. At the same time, the Administration announced that it will discontinue the payment of cost-sharing reduction, orCSR, payments to insurance companies until Congress approves the appropriation of funds for such CSR payments. The loss of the CSRpayments is expected to increase premiums on certain policies issued by qualified health plans under the ACA.41Table of ContentsOur future relationships with customers and third-party payors in the United States and elsewhere may be subject, directly or indirectly,to applicable anti-kickback, fraud and abuse, false claims, transparency, health information privacy and security and other healthcarelaws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm,administrative burdens and diminished profits and future earnings.Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare lawsand regulations. In addition, we may be subject to transparency laws and patient privacy regulation by the U.S. federal and state governments andby governments in foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws and regulationsthat may affect our ability to operate include the federal Anti-Kickback Statute, the federal Health Insurance Portability and Accountability Act of1996, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, the federallegislation commonly referred to as the Physician Payments Sunshine Act, and analogous state and foreign laws and regulations, any of whichmay constrain the business or financial arrangements and relationships through which we sell, market and distribute any products for which weobtain marketing approval.Because of the breadth of these laws and the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it ispossible that some of our business activities could be subject to challenge under one or more of such laws. The scope and enforcement of each ofthese laws is also uncertain and any investigation or settlement could be time- and resource-consuming, divert management’s attention, increaseour costs or otherwise have an adverse effect on our business.If our operations are found to be in violation of any of the laws described above or any other government regulations that apply to us, we may besubject to various significant penalties, any of which could harm our ability to operate our business and our financial results. In addition, theapproval and commercialization of our product candidates outside the United States will also likely subject us to foreign equivalents of thehealthcare laws mentioned above, among other foreign laws.Risks Related to our Financial Position and Need for Additional CapitalWe have incurred net losses in every year since our inception and anticipate that we will continue to incur substantial net losses in theforeseeable future.We are a clinical-stage biopharmaceutical company with a limited operating history, and we are early on in our development efforts. Investment inbiopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk thatany potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain marketing approval and becomecommercially viable. We have financed our operations primarily through the sale of equity securities and our collaboration with Celgene. Since ourinception, most of our resources have been dedicated to the preclinical and clinical development of vopratelimab, JTX-4014, and JTX-8064 andpreclinical and planned clinical development of other future product candidates and discovery programs. The size of our future net losses willdepend, in part, on our future expenses and our ability to generate additional revenue, if any. We have no products approved for commercial saleand have not generated any revenue from product sales to date, and we continue to incur significant research and development and otherexpenses related to our ongoing operations. As a result, we have incurred losses in each annual period since our inception. For the years endedDecember 31, 2018 and 2017, we reported net losses of $27.4 million and $16.4 million, respectively. As of December 31, 2018, we had anaccumulated deficit of $163.9 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses toincrease as we continue our research and development of, and seek marketing approvals for vopratelimab, JTX-4014, JTX-8064 and other futureproduct candidates.Even if we succeed in receiving marketing approval for and commercialize our product candidate, we will continue to incur substantial researchand development and other expenditures to develop and market additional potential products. We may encounter unforeseen expenses, difficulties,complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, onthe rate of future growth of our expenses and our ability to generate revenue. Our prior losses and expected future losses have had and willcontinue to have an adverse effect on our stockholders’ equity and working capital.42Table of ContentsWe have never generated any revenue from product sales and our ability to generate revenue from product sales and become profitabledepends on our success on a number of factors.We have no products approved for commercial sale, have not generated any revenue from product sales, and do not anticipate generating anyrevenue from product sales until some time after we have received marketing approval for the commercial sale of a product candidate, if ever. Ourability to generate revenue and achieve profitability depends significantly on our success in many factors, including:•completing clinical development of vopratelimab and JTX-4014, preclinical and clinical development of JTX-8064, and research, discovery,preclinical and clinical development of other future product candidates;•obtaining marketing approvals for vopratelimab, JTX-4014, JTX-8064 and other future product candidates for which we complete clinicaltrials;•developing a sustainable and scalable manufacturing process for our product candidates, including establishing and maintainingcommercially viable supply and manufacturing relationships with third parties;•launching and commercializing our product candidates for which we obtain marketing approvals, either directly or with a collaborator ordistributor;•obtaining market acceptance of vopratelimab, JTX-4014, JTX-8064 and other future product candidates as viable treatment options;•addressing any competing technological and market developments;•identifying, assessing, acquiring and developing new product candidates;•negotiating favorable terms in any collaboration, licensing, or other arrangements into which we may enter;•obtaining, maintaining, protecting, and expanding our portfolio of intellectual property rights, including patents, trade secrets and know-how; and•attracting, hiring and retaining qualified personnel.Even if our product candidates or other future product candidates that we develop are approved for commercial sale, we anticipate incurringsignificant costs associated with commercializing any approved product candidate. These costs may fluctuate or exceed our expectations and ourrevenues will depend on many factors that we cannot control or estimate. If we are not able to generate revenue from the sale of any approvedproducts, we may never become profitable.We will require substantial additional financing to achieve our goals, and a failure to obtain this necessary capital when needed couldforce us to delay, limit, reduce or terminate our product development or commercialization efforts.Our operations have consumed substantial amounts of cash since inception. As of December 31, 2018, our cash, cash equivalents andinvestments were $195.9 million. We expect to continue to spend substantial amounts to continue the clinical development of vopratelimab andJTX-4014 and preclinical and clinical development of JTX-8064 and other future product candidates. If we are able to gain marketing approval forany of our product candidates, we will require significant additional amounts of cash in order to launch and commercialize those productcandidates to the extent that such launch and commercialization are not the responsibility of a collaborator. In addition, other unanticipated costsmay arise. Because the design and outcome of our planned and anticipated clinical trials are highly uncertain, we cannot reasonably estimate theactual amounts necessary to successfully complete the development and commercialization of vopratelimab, JTX-4014, JTX-8064 and otherfuture product candidates. Our future capital requirements depend on many factors, including:•the scope, progress, results and costs of researching and developing our product candidates, and conducting preclinical studies andclinical trials;•the timing of, and the costs involved in, obtaining marketing approvals for our product candidates if clinical trials are successful;•the success of our collaboration with Celgene;•whether Celgene exercises its licensing and co-development options under our Celgene Collaboration Agreement, each of which wouldtrigger additional payments to us;43Table of Contents•the continuation of activities under our Celgene Collaboration Agreement without disruption following the anticipated acquisition of Celgeneby BMS;•the cost of commercialization activities for our product candidates, that are approved for sale, including marketing, sales and distributioncosts;•the cost of manufacturing our product candidates for clinical trials in preparation for marketing approval and in preparation forcommercialization;•our ability to establish and maintain strategic licensing or other arrangements and the financial terms of such agreements;•the costs involved in preparing, filing, prosecuting, maintaining, expanding, defending and enforcing patent claims, including litigationcosts and the outcome of such litigation;•the timing, receipt, and amount of sales of, or royalties on, our future products, if any;•the emergence of competing cancer therapies and other adverse market developments; and•the requirement for and cost of developing complementary diagnostics and/or companion diagnostics.We do not have any committed external source of funds or other support for our development efforts, other than our collaboration with Celgene,which is limited in scope and duration. We will not receive any option-exercise fees or milestone payments prior to Celgene exercising a licensingor co-development option. Until we can generate sufficient product and royalty revenue to finance our cash requirements, which we may never do,we expect to finance our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategicalliances, licensing arrangements and other marketing or distribution arrangements. Based on our research and development plans, we expect thatour existing cash, cash equivalents and investments will enable us to fund our operating expenses and capital expenditure requirements for atleast the next 24 months.If we are unable to obtain adequate financing on favorable terms when needed, we may have to delay, reduce the scope of or suspend one or moreof our clinical trials or research and development programs or our commercialization efforts.Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to ourtechnologies or vopratelimab, JTX-4014, JTX-8064 and other future product candidates.Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of privateand public equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. To the extent that we raise additionalcapital through the sale of common stock or securities convertible or exchangeable into common stock, stockholders’ ownership interest will bediluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. Debt financing,if available, would increase our fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability totake specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.If we are unable to raise additional funds through equity or debt financings when needed, and instead raise additional capital through marketing anddistribution agreements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certainvaluable rights to vopratelimab, JTX-4014, JTX-8064 and other future product candidates, technologies, future revenue streams or discoveryprograms or grant licenses on terms that may not be favorable to us.Risks Related to Intellectual PropertyIf we are unable to obtain, maintain and protect our intellectual property rights for our product candidates or if our intellectual propertyrights are inadequate, our competitive position could be harmed.Our commercial success will depend in part on our ability to obtain and maintain patent and other intellectual property protection in the UnitedStates and other countries with respect to our product candidates. We rely on trade secret, patent, copyright and trademark laws, andconfidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. We currently, or will inthe future, seek to protect our proprietary position by filing and prosecuting patent applications in the United States and abroad related tovopratelimab, JTX-4014, JTX-8064, other future product candidates, and any future novel technologies that are important to our business.44Table of ContentsThe steps we or our licensors have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietaryinformation or infringement of our intellectual property rights, both inside and outside of the United States.If we or our licensors are unable to obtain and maintain patent protection for vopratelimab, JTX-4014, JTX-8064 or other future product candidates,or if the scope of the patent protection obtained is not sufficient, our competitors could develop and commercialize products similar or superior toours, and our ability to successfully commercialize vopratelimab, JTX-4014, JTX-8064 and other future product candidates and future technologiesmay be adversely affected.Our pending applications cannot be enforced against third parties unless and until a patent issues from such applications and, even after issuance,such patents may be challenged in the courts or patent offices in the United States and abroad. Such proceedings may result in the loss of patentprotection, the narrowing of claims in such patents or the invalidity or unenforceability of such patents, which could limit our ability to stop othersfrom using or commercializing similar or identical products or limit the duration of the patent protection for vopratelimab, JTX-4014, JTX-8064 andother future product candidates. In addition, we cannot predict whether any of our future patent applications will result in the issuance of patentsthat effectively protect vopratelimab, JTX-4014, JTX-8064 and other future product candidates, or if any of our issued patents or if any of ourlicensor’s issued patents will effectively prevent others from commercializing competitive products. In some cases, it may be difficult orimpossible to detect third-party infringement or misappropriation of our intellectual property rights, even in relation to issued patent claims, andproving any such infringement may be even more difficult. If we are unable to obtain, maintain, and protect our intellectual property our competitiveadvantage could be harmed, and it could result in a material adverse effect on our business, financial condition, and the results of operations andprospects.Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time, and vopratelimab,JTX-4014, JTX-8064 and other future product candidates for which we intend to seek approval as biologic products may face competitionsooner than anticipated.Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting suchcandidates might expire before or shortly after such candidates are commercialized. We expect to seek patent term extensions of patent terms inthe United States for our issued patents, licensed patents and any patents we own in the future and, if available, in other countries where that maybe available when we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permitsa patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication. However, theapplicable authorities, including the FDA and the United States Patent and Trademark Office, or USPTO, in the United States, and any equivalentregulatory authority in other countries, may not agree with our assessment of whether such extensions are available, and may refuse to grantextensions to our patents, or may grant more limited extensions than we request. We may not be granted an extension because of, for example,failure to exercise due diligence during the testing phase or regulatory review process, failure to apply within applicable deadlines, failure to applyprior to expiration of relevant patents or otherwise failing to satisfy applicable requirements. If we are unable to obtain patent term extension or theterm of any such extension is less than we request, our competitors may be able to take advantage of our investment in development and clinicaltrials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case, which could result in amaterial adverse effect on our business, financial condition, results of operation and prospects.The Biologics Price Competition and Innovation Act of 2009, or BPCIA, established legal authority for the FDA to review and approve biosimilarbiologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. Under theBPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the original branded product was approved undera BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, andmeaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA,any such processes could have a material adverse effect on the future commercial prospects for our biological products.We intend to seek market exclusivity for our biological product candidates that is subject to its own BLA for 12 years in the United States,10 years in Europe and other durations in other markets. However, the term of the patents that cover such product candidates may not extendbeyond the applicable market exclusivity awarded by a particular country. For example, in the United States, if all of the patents that cover ourparticular biologic product expire before the 12-year market exclusivity expires, a third party could submit a marketing application for a biosimilarproduct four years after approval of our biologic product, and the FDA could immediately review the application and approve the biosimilar productfor marketing 12 years after approval of our biologic. Alternatively, a third party could submit a BLA45Table of Contentsfor a similar or identical product any time after approval of our biologic product, and the FDA could immediately review and approve the similar oridentical product for marketing and the third party could begin marketing the similar or identical product upon expiry of all of the patents that coverour particular biologic product.Additionally, there is a risk that this exclusivity could be shortened due to congressional action, potentially creating the opportunity for biosimilarcompetition sooner than anticipated. The extent to which a biosimilar, once approved, will be substituted for any one of our reference products in away that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace andregulatory factors that are still developing.If we are unable to protect the confidentiality of our proprietary information and know-how, the value of our technology and productscould be adversely affected.In addition to seeking patent protection, we also rely on other proprietary rights, including protection of trade secrets, know-how and confidentialand proprietary information. To maintain the confidentiality of our trade secrets and proprietary information, we enter into confidentiality agreementswith our employees, consultants, collaborators and other third parties who have access to our trade secrets. These agreements require that allconfidential information developed by the individual or made known to the individual by us during the course of the individual’s relationship with usbe kept confidential and not disclosed to third parties. Our agreements with employees also provide that any inventions conceived by the individualin the course of rendering services to us shall be our exclusive property. However, we may not obtain these agreements in all circumstances, andindividuals with whom we have these agreements may not comply with their terms. The assignment of intellectual property rights may not be self-executing or the assignment agreements may be breached, and we may be forced to bring claims against third parties, or defend claims that theymay bring against us, to determine the ownership of what we regard as our intellectual property. In addition, in the event of unauthorized use ordisclosure of our trade secrets or proprietary information, these agreements, even if obtained, may not provide meaningful protection, particularlyfor our trade secrets or other confidential information.Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. Enforcing a claim that a partyillegally disclosed or misappropriated a trade secret is difficult, expensive, and time consuming, and the outcome is unpredictable. In addition,some courts are less willing or unwilling to protect trade secrets. The disclosure of our trade secrets or the independent development of our tradesecrets by a competitor or other third party would impair our competitive position and may materially harm our business, financial condition, resultsof operations and prospects.Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which wouldbe uncertain and could harm our business.Our commercial success depends on our ability and the ability of our current or future collaborators to develop, manufacture, market and sell ourproduct candidates, and to use our related proprietary technologies without infringing, misappropriating or otherwise violating the intellectualproperty and proprietary rights of third parties. The biotechnology and pharmaceutical industries are characterized by extensive litigation regardingpatents and other intellectual property rights. We may become party to, or threatened with, adversarial proceedings or litigation regardingintellectual property rights with respect to our current and future product candidates. For example, we are aware of third-party patents generallydirected to methods of treating certain indications with an anti-PD-1 monoclonal antibody and/or an anti‑ICOS monoclonal antibody that may beconstrued to cover one or more of our current and future product candidates. If we are found to infringe a third-party’s intellectual property rights,and we are unsuccessful in demonstrating that such intellectual property rights are invalid or unenforceable, we could be required to obtain alicense from such third party to continue developing, manufacturing and commercializing our product candidates. However, we may not be able toobtain any required license on commercially reasonable terms or at all. Even if we were able to obtain a license, it could be non-exclusive, therebygiving our competitors and other third parties access to the same technologies licensed to us, and it could require us to make substantial licensingand royalty payments. We also could be forced, including by court order, to cease developing, manufacturing, and commercializing our productcandidates. In addition, in any such proceeding or litigation, we could be found liable for significant monetary damages, including treble damagesand attorneys’ fees, if we are found to have willfully infringed a patent or other intellectual property right. Any of the foregoing could have a materialadverse effect on our business, financial condition, results of operations and prospects.In addition, we are testing vopratelimab and JTX-4014 and expect to test JTX-8064 and future product candidates with other products that arecovered by patents held by other companies or institutions. In the event that a labeling instruction is required in product packaging recommendingthat combination, we could be accused of, or held liable for, infringement of the third-party patents covering the product candidate or productrecommended for administration with our product candidates. In such a case, we could be required to obtain a license from the other company or46Table of Contentsinstitution to use the required or desired package labeling, which may not be available on commercially reasonable terms, or at all.If we breach any of our license agreements or collaboration agreements, it could have a material adverse effect on ourcommercialization efforts for our product candidates.Our commercial success depends on our ability, and at times, the ability of our licensors and current or future collaborators to develop,manufacture, market, and sell our product candidates, and use our licensors proprietary technologies without infringing the property rights of thirdparties. For example, we have entered into our Celgene Collaboration Agreement relating to vopratelimab, JTX-4014, JTX-8064 and other productcandidates, and an exclusive license agreement with Sloan Kettering Institute for Cancer Research, Memorial Sloan Kettering Cancer Center andMemorial Hospital for Cancer and The University of Texas MD Anderson Cancer Center related to certain uses of our vopratelimab, and we mayenter into additional licenses in the future. These and other licenses may not provide exclusive rights to use such intellectual property andtechnology in all relevant fields of use and in all territories in which we may wish to develop or commercialize our products in the future. As aresult, we may not be able to prevent competitors from developing and commercializing competitive products in territories included in all ourlicenses.In addition, we may not have the right to control the preparation, filing, prosecution, maintenance, enforcement and defense of patents and patentapplications covering the technology that we license from third parties. For example, under our Celgene Collaboration Agreement, under certaincircumstances, Celgene has the first right to enforce, maintain or defend our intellectual property rights with respect to certain licensed programs.Therefore, we cannot be certain that these patents and patent applications will be prepared, filed, prosecuted, maintained, enforced, and defendedin a manner consistent with the best interests of our business. If our licensors fail to prosecute, maintain, enforce and defend such patents, or loserights to those patents or patent applications, the rights we have licensed may be reduced or eliminated and our right to develop andcommercialize our product candidates that are the subject of such licensed rights could be adversely affected. Furthermore, our owned and in-licensed patents may be subject to a reservation of rights by one or more third parties.Certain of our license agreements also require us to meet development thresholds to maintain the license, including establishing a set timeline fordeveloping and commercializing products. If we fail to comply with the obligations under our license agreements, including payment and diligenceterms, our licensors may have the right to terminate our agreements. Such an occurrence could materially adversely affect the value of theproduct candidate being developed under any such agreement. Termination of our license agreements or reduction or elimination of our rightsunder them may result in our having to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or atall.If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements oncommercially acceptable terms, we may be unable to successfully develop and commercialize the affected product candidates, which could havea material adverse effect on our business, financial conditions, results of operations and prospects.Further, the resolution of any contract interpretation disagreement that may arise could narrow what we believe to be the scope of our rights to therelevant intellectual property or technology, or increase what we believe to be our financial or other obligations under the relevant agreement, eitherof which could have a material adverse effect on our business, financial condition, results of operations and prospects.We may not be successful in obtaining necessary rights to our product candidates we may develop or obtain through acquisitions andin-licenses.We currently have rights to intellectual property, through licenses from third parties, for certain uses of vopratelimab. Because vopratelimab, JTX-4014, JTX-8064 and other future product candidates may require the use of proprietary rights held by third parties, the growth of our business likelywill depend, in part, on our ability to acquire, in-license or use these proprietary rights. We may be unable to acquire or in-license anycompositions, methods of use, processes or other intellectual property rights from third parties that we identify as necessary for vopratelimab,JTX-4014, JTX-8064 and other future product candidates. The licensing or acquisition of third-party intellectual property rights is a competitivearea, and several more established companies may pursue strategies to license or acquire third-party intellectual property rights that we mayconsider attractive. These established companies may have a competitive advantage over us due to their size, capital resources and greaterclinical development and commercialization capabilities.If we are unable to successfully obtain required third-party intellectual property rights or maintain the existing intellectual property rights we have,we may have to abandon or alter our plans for the development or commercialization of the47Table of Contentsrelevant program or product candidate, which could have a material adverse effect on our business, financial condition, results of operations andprospects.We may not be able to protect our intellectual property and proprietary rights throughout the world.Filing, prosecuting and defending patents on vopratelimab, JTX-4014, JTX-8064 and all other future product candidates throughout the world wouldbe prohibitively expensive, and intellectual property rights in some countries outside the United States can be less extensive than those in theUnited States.Many companies have encountered significant problems in protecting and defending intellectual property rights in certain foreign jurisdictions. Anyefforts to enforce our intellectual property and proprietary rights around the world may be inadequate to obtain a significant commercial advantagefrom the intellectual property we develop or license.Moreover, many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. If we orany of our licensors is forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position maybe impaired, and our business and results of operations may be adversely affected.Generic or biosimilar product manufacturers may develop, seek approval for, and launch biosimilar versions or generic versions, respectively, ofour products. The FDA has published draft guidance documents on biosimilar product development. For the FDA to approve a biosimilar productas interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical resultsas the reference product and, for products administered multiple times, the biosimilar and the reference biologic may be switched after one hasbeen previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. Ifvopratelimab, JTX-4014, JTX-8064 and other future product candidates are approved by the FDA, the approval of a biosimilar product to one of ourproducts could have a material impact on our business. In particular, a biosimilar product could be significantly less costly to bring to market andpriced significantly lower than our products, if approved by the FDA.Obtaining and maintaining patent protection depends on compliance with various procedural, document submission, fee payment andother requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.The USPTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payments andother similar provisions during the patent application process and to maintain patents after they are issued. In certain circumstances, we rely onour licensing partners to take the necessary action to comply with these requirements with respect to our licensed intellectual property. While anunintentional lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules, there are situations in whichnoncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in therelevant jurisdiction. If we fail to obtain and maintain the patents and patent applications covering our products or procedures, we may not be ableto stop a competitor from marketing products that are the same as or similar to vopratelimab, JTX-4014, JTX-8064 and other future productcandidates, which would have a material adverse effect on our business.Changes to the patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairingour ability to protect our product candidates.As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtainingand enforcing patents in the biopharmaceutical industry involves both technological and legal complexity and is therefore costly, time consumingand inherently uncertain. Changes in either the patent laws or interpretation of the patent laws in the United States could increase the uncertaintiesand costs.The U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the scope of patent protection available in certaincircumstances or weakening the rights of patent owners in certain situations. Depending on future actions by the U.S. Congress, the U.S. courts,the USPTO and the relevant law-making bodies in other countries, the laws and regulations governing patents could change in unpredictable waysthat would weaken our ability to obtain new patents or to enforce our existing patents and patents that we might obtain in the future. Changes inpatent law could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of ourissued patents, all of which could have a material adverse effect on our business, financial condition, results of operations and prospects.48Table of ContentsWe may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time-consuming andunsuccessful and have a material adverse effect on the success of our business.Competitors may infringe our licensed patents or any patent we own in the future or misappropriate or otherwise violate our intellectual propertyrights. We may also be required to defend against claims of infringement and our licensed patents and any patents we own in the future maybecome involved in priority or other intellectual property related disputes. To counter infringement or unauthorized use, litigation may be necessaryto enforce or defend our intellectual property rights or to determine the validity and scope of our own intellectual property rights or the proprietaryrights of others. Also, third parties may initiate legal proceedings against us or our licensors to assert that we are infringing their intellectualproperty rights or to challenge the validity or scope of our owned or licensed intellectual property rights. Litigation and other intellectual propertyrelated proceedings could result in substantial costs and diversion of management resources, which could harm our business and financial results.Despite our best efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. In addition,an adverse result in any litigation or other intellectual property related proceeding could put one or more of our patents at risk of being invalidated,held unenforceable or interpreted narrowly.Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some ofour confidential information could be disclosed during this type of litigation. There could also be public announcements of the results of hearings,motions or other interim proceedings or developments in any such proceedings. If securities analysts or investors perceive these results to benegative, it also could have a material adverse effect on the price of shares of our common stock. Any of the foregoing may have a materialadverse effect on our business, financial condition, results of operations and prospects.We may be subject to claims by third parties asserting that our collaborators, licensors, employees or we have misappropriated theirintellectual property, have wrongfully used or disclosed confidential information of third parties or are in breach of non-competition ornon-solicitation agreements with our competitors.Many of our employees, our collaborators’ employees and our licensors’ employees, including our senior management, are currently or previouslywere employed at universities or other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some ofthese employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements,or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietaryinformation or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectualproperty of any such individual’s current or former employer. In addition, we could be subject to claims that we or our employees haveinadvertently or otherwise used or disclosed alleged trade secrets or other confidential information of former employers or competitors, that wecaused an employee to breach the terms of his or her non-competition or non-solicitation agreement, or that we or these individuals have,inadvertently or otherwise, used or disclosed the alleged trade secrets or other proprietary information of a former employer or competitor. Litigationmay be necessary to defend against such claims. If we fail in defending any such claims, we may lose valuable intellectual property rights orpersonnel or sustain monetary damages. Even if we are successful in defending against such claims, litigation could result in substantial costsand be a distraction to management. Any of the foregoing may have a material adverse effect on our business, financial condition, results ofoperations and prospects.Issued patents covering vopratelimab, JTX-4014, JTX-8064 and other future product candidates could be found invalid or unenforceableif challenged in court or before the USPTO or comparable foreign authority.If we or one of our licensing partners initiate legal proceedings against a third party to enforce a patent covering one of vopratelimab, JTX-4014,JTX-8064 or other future product candidates, the defendant could counterclaim that the patent covering our product candidate is invalid orunenforceable. The outcome following legal assertions of invalidity and unenforceability is unpredictable. If a third party were to prevail on a legalassertion of invalidity and/or unenforceability, we would lose at least part, and perhaps all, of the patent protection on vopratelimab, JTX-4014,JTX-8064 and other future product candidates. Such a loss of patent protection could have a material adverse impact on our business.49Table of ContentsRisks Related to Employee Matters, Managing our Growth and Other Risks Related to our BusinessWe currently have no marketing and sales organization and have no experience in marketing products. If we are unable to establishmarketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not beable to generate product revenue.We currently have no sales, marketing, or distribution capabilities and have no experience in marketing products. If any of our product candidatesreceives appropriate regulatory approval, we intend to develop an in-house marketing organization and sales force, which will require significantcapital expenditures, management resources and time. We will have to compete with other pharmaceutical and biotechnology companies torecruit, hire, train and retain marketing and sales personnel.If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangementsregarding the sales and marketing of our products; however, we cannot assure stockholders that we will be able to establish or maintain suchcollaborative arrangements, on favorable terms if at all. We cannot assure stockholders that we will be able to develop in-house sales anddistribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any current or future productcandidates.We will need to grow the size of our organization, and we may experience difficulties in managing this growth.As of December 31, 2018, we had 115 full-time employees, including 86 employees engaged in research and development. As our developmentand commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and otherpersonnel. Future growth would impose significant added responsibilities on members of management, including:•identifying, recruiting, integrating, maintaining and motivating additional employees;•managing our internal development efforts effectively, including the clinical and FDA review process for vopratelimab, JTX-4014, JTX-8064 and other future product candidates, while complying with our contractual obligations to contractors and other third parties; and•improving our operational, financial and management controls, reporting systems and procedures.Our future financial performance and our ability to commercialize vopratelimab, JTX-4014, JTX-8064 and other future product candidates willdepend, in part, on our ability to effectively expand our organization by hiring new employees and expand our groups of consultants andcontractors and manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors andconsultants to provide certain services, including substantially all aspects of marketing approval, clinical management, and manufacturing. Wecannot assure stockholders that we can effectively manage our outsourced activities.We are highly dependent on our key personnel, and if we are not successful in attracting, motivating and retaining highly qualifiedpersonnel, we may not be able to successfully implement our business strategy.Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract, motivate andretain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, particularly our chief executiveofficer, Richard Murray, and our scientific and medical personnel. The loss of the services of any of our executive officers, key employees, andscientific and medical advisors, and our inability to find suitable replacements, could result in delays in product development and harm ourbusiness.We conduct our operations at our facility in Cambridge, Massachusetts, in a region that is home to many other biopharmaceutical companies andmany academic and research institutions. Competition for skilled personnel is intense and the turnover rate can be high, which may limit our abilityto hire and retain highly qualified personnel on acceptable terms or at all. We expect that we will need to recruit talent from outside of our regionand doing so may be costly and difficult.To induce valuable employees to remain at our Company, in addition to salary and cash incentives, we have provided equity awards that vest overtime. The value to employees of these equity grants that vest over time may be significantly affected by movements in our stock price that arebeyond our control and may at any time be insufficient to counteract more lucrative offers from other companies. Although we have employmentagreements with our key employees, these employment agreements provide for at-will employment, meaning that such employees could leave ouremployment50Table of Contentsat any time, with or without notice. We do not maintain “key man” insurance policies on the lives of all of these individuals or the lives of any of ourother employees.If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incurcosts that could have a material adverse effect on the success of our business.We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and thehandling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammablematerials, including chemicals and biological and radioactive materials. Our operations also produce hazardous waste products. We generallycontract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from thesematerials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages,and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employeesresulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities. We do not maintaininsurance for environmental liability or toxic tort claims that may be asserted against us in connection with our storage or disposal of biological,hazardous or radioactive materials.Our internal computer systems, or those used by our CROs or other collaborators, may fail or suffer security breaches and cyber-attacks,which could compromise our intellectual property or other sensitive information and could result in a material disruption of ourbusiness.Despite the implementation of security measures, our internal computer systems are vulnerable to damage from computer viruses andunauthorized access. While we have not to our knowledge experienced any such material system failure or security breach to date, if such anevent were to occur, it could result in a material disruption of our business operations. Likewise, we rely on third parties for many aspects of ourbusiness, including manufacturing product candidates and conducting clinical trials. The secure maintenance of this information is critical to ourbusiness and reputation. We believe that companies have been increasingly subject to a wide variety of security incidents, cyber-attacks andother attempts to gain unauthorized access. These threats can come from a variety of sources, ranging in sophistication from an individual hackerto a state-sponsored attack. Cyber threats may be generic, or they may be custom-crafted against our information systems. Over the past fewyears, cyber-attacks have become more prevalent and much harder to detect and defend against.Our network and storage applications and those of our CROs, collaborators and vendors may be subject to unauthorized access by hackers orbreached due to operator error, malfeasance or other system disruptions. It is often difficult to anticipate or immediately detect such incidents andthe damage caused by them. These data breaches and any unauthorized access or disclosure of our information or intellectual property couldcompromise our intellectual property and expose sensitive business information. A data security breach could also lead to public exposure ofpersonal information of our employees. Cyber-attacks could cause us to incur significant remediation costs, disrupt key business operations anddivert attention of management and key information technology resources. Our network security and data recovery measures and those of ourCROs, collaborators and vendors may not be adequate to protect against such security breaches and disruptions. To the extent that anydisruption, security breach or cyber-attack were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure ofconfidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates couldbe delayed.We, or the third parties upon whom we depend, may be adversely affected by natural disasters and our business continuity and disasterrecovery plans may not adequately protect us from a serious disaster.Natural disasters could severely disrupt our operations and have a material adverse effect on our business. If a natural disaster, power outage orother event occurred that damaged critical infrastructure, such as our headquarters or the manufacturing facilities of our third-party contractmanufacturers, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for asubstantial period of time. The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a seriousdisaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuityplans, which, could have a material adverse effect on our business.51Table of ContentsOur employees, independent contractors, vendors, principal investigators, CROs and consultants may engage in misconduct or otherimproper activities, including non-compliance with regulatory standards and requirements and insider trading.We are exposed to the risk that our employees, independent contractors, vendors, principal investigators, CROs and consultants may engage infraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure ofunauthorized activities to us that violate the regulations of the FDA and comparable foreign regulatory authorities, including those laws requiringthe reporting of true, complete and accurate information to such authorities; healthcare fraud and abuse laws and regulations in the United Statesand abroad; or laws that require the reporting of financial information or data accurately. In particular, sales, marketing and business arrangementsin the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and otherabusive practices. We have adopted a code of conduct applicable to all of our employees, but it is not always possible to identify and determisconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks orlosses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws orregulations. Additionally, we are subject to the risk that a person could allege such fraud or other misconduct, even if none occurred. If any suchactions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in significantpenalties and could have a material adverse effect on our ability to operate our business and our results of operations.If we engage in future acquisitions or strategic partnerships, this may increase our capital requirements, dilute our stockholders, causeus to incur debt or assume contingent liabilities, and subject us to other risks.We may evaluate various acquisitions and additional strategic partnerships, including licensing or acquiring complementary products, intellectualproperty rights, technologies, or businesses. Any potential acquisition or strategic partnership may entail numerous risks, including:•increased operating expenses and cash requirements;•the assumption of additional indebtedness or contingent liabilities;•the issuance of our equity securities;•assimilation of operations, intellectual property and products of an acquired company, including difficulties associated with integrating newpersonnel;•the diversion of our management’s attention from our existing product programs and initiatives in pursuing such a strategic merger oracquisition;•retention of key employees, the loss of key personnel, and uncertainties in our ability to maintain key business relationships;•risks and uncertainties associated with the other party to such a transaction, including the prospects of that party and their existingproducts or product candidates and marketing approvals; and•our inability to generate revenue from acquired technology and/or products sufficient to meet our objectives in undertaking the acquisitionor even to offset the associated acquisition and maintenance costs.In addition, if we undertake acquisitions, we may issue dilutive securities, assume or incur debt obligations, incur large one-time expenses andacquire intangible assets that could result in significant future amortization expense. Moreover, we may not be able to locate suitable acquisitionopportunities and this inability could impair our ability to grow or obtain access to technology or products that may be important to the developmentof our business.Unstable market and economic conditions may have serious adverse consequences on our business, financial condition and stockprice.Our general business strategy may be adversely affected by any economic downturn, volatile business environment or unpredictable and unstableconditions in global credit and financial markets. We cannot assure stockholders that deterioration of the global credit and financial markets wouldnot negatively impact our stock price, our current portfolio of cash equivalents or investments, or our ability to meet our financing objectives. If thecurrent equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive.Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy,financial performance and stock price and could require us to delay or abandon clinical development plans.52Table of ContentsRisks Related to our Common StockOur ability to utilize our net operating loss carryforwards and certain other tax attributes has been limited by “ownership changes” andmay be further limited.Under Section 382 of the Internal Revenue Code of 1986, as amended, or the IRC, if a corporation undergoes an “ownership change” (generallydefined as a greater than 50 percent change (by value) in the ownership of its equity over a three-year period), the corporation’s ability to use itspre-change net operating loss, or NOL, carryforwards and certain other pre-change tax attributes to offset its post-change income may be limited.An IRC Section 382 study, completed in August 2016, identified three previous ownership changes for purposes of IRC Section 382. As a result ofthese ownership changes, our net operating loss and tax credit carryforwards allocable to the periods preceding each such ownership change aresubject to limitations under IRC Section 382. We may experience ownership changes in the future as a result subsequent shifts in our stockownership, some of which are outside our control, which may also be subject to limitations by “ownership changes” in the future, which could resultin increased tax liability to us.The price of our common stock may be volatile and fluctuate substantially, which could result in substantial losses for purchasers of ourcommon stock.Our stock price is likely to be volatile. The stock market in general and the market for biopharmaceutical companies in particular have experiencedextreme volatility that has often been unrelated to the operating performance of particular companies. The market price for our common stock maybe influenced by many factors, including:•the success of competitive products or technologies;•results of our clinical trials or those of our competitors;•regulatory or legal developments in the United States and other countries;•developments or disputes concerning patent applications, issued patents or other proprietary rights;•the recruitment or departure of key personnel;•the level of expenses related to our product candidates or clinical development programs;•the success of our collaboration with Celgene and, if the transaction with BMS is completed, our ability to maintain the collaboration withBMS;•the results of our efforts to discover, develop, acquire or in-license additional product candidates or drugs;•actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities analysts;•variations in our financial results or those of companies that are perceived to be similar to us;•changes in the structure of healthcare payment systems;•market conditions in the pharmaceutical and biotechnology sectors;•general economic, industry and market conditions; and•the other factors described in this “Risk Factors” section.We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.We currently anticipate that we will retain future earnings for the development, operation and expansion of our business and do not anticipatedeclaring or paying any cash dividends for the foreseeable future. Any return to stockholders will therefore be limited to the appreciation of theirstock.Our executive officers, directors, principal stockholders and their affiliates will continue to exercise control over our Company, whichwill limit your ability to influence corporate matters and could delay or prevent a change in corporate control.As of December 31, 2018, our executive officers and directors, combined with our stockholders who owned more than five percent of ouroutstanding common stock, and their affiliates, beneficially owned approximately 54 percent of our outstanding common stock. As a result, thesestockholders, if they act together, will be able to control the outcome of matters submitted to our stockholders for approval, including the electionof directors and any sale, merger,53Table of Contentsconsolidation, or sale of all or substantially all of our assets. In addition, this concentration of ownership might adversely affect the market price ofour common stock by:•delaying, deferring or preventing a change of control;•impeding a merger, consolidation, takeover or other business combination; or•discouraging a potential acquiror from making a tender offer or otherwise attempting to obtain control.We are incurring and will continue to incur significantly increased costs as a result of operating as a public company, and ourmanagement is now required to devote substantial time to new compliance initiatives.As a public company, we are incurring and will continue to incur significant legal, accounting and other expenses, particularly after we are nolonger an emerging growth company. We are subject to the reporting requirements of the Exchange Act, as well as various requirements imposedby the Sarbanes-Oxley Act, rules subsequently adopted by the SEC and Nasdaq to implement provisions of the Sarbanes-Oxley Act, and theDodd-Frank Wall Street Reform and Consumer Protection Act. Stockholder activism, the current political environment and the current high level ofgovernment intervention and regulatory reform may lead to substantial new regulations and disclosure obligations, which may lead to additionalcompliance costs and impact the manner in which we operate our business in ways we cannot currently anticipate.We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to makesome activities more time-consuming and more costly. For example, we expect these rules and regulations to make it more difficult and moreexpensive for us to obtain director and officer liability insurance and we may be required to incur substantial costs to maintain the same or similarcoverage. We also expect that we will need to hire additional accounting, finance and other personnel in connection with our efforts to comply withthe requirements of being a public company, and our management and other personnel will need to devote a substantial amount of time towardsmaintaining compliance with these requirements. We cannot predict or estimate the amount or timing of additional costs we may incur to respondto these requirements. The impact of these requirements could also make it more difficult for us to attract and retain qualified persons to serve onour board of directors, our board committees or as executive officers.We are a “smaller reporting company,” and the reduced disclosure requirements applicable to smaller reporting companies may makeour common stock less attractive to investors.We are considered a “smaller reporting company” under Rule 12b-2 of the Exchange Act. We are therefore entitled to rely on certain reduceddisclosure requirements, such as an exemption from providing selected financial data and executive compensation information. These exemptionsand reduced disclosures in our SEC filings due to our status as a smaller reporting company also mean our auditors are not required to review ourinternal control over financial reporting and may make it harder for investors to analyze our results of operations and financial prospects. Wecannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find ourcommon stock less attractive as a result, there may be a less active trading market for our common stock and our common stock prices may bemore volatile. We will remain a smaller reporting company until our public float exceeds $250 million or our annual revenues exceed $100 millionwith a public float greater than $700 million.Sales of a substantial number of shares of our common stock in the public market could cause our stock price to fall.Certain stockholders hold a substantial number of shares of our common stock. If such stockholders sell, or indicate an intention to sell,substantial amounts of our common stock in the public market, the trading price of our common stock could decline.In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our stock incentive planswill become eligible for sale in the public market extent permitted by the provisions of various vesting schedules and Rule 144 and Rule 701 underthe Securities Act of 1933, as amended, or the Securities Act, and, in any event, we have filed a registration statement permitting shares ofcommon stock issued on exercise of options to be freely sold in the public market. If these additional shares of common stock are sold, or if it isperceived that they will be sold, in the public market, the trading price of our common stock could decline.Certain holders of our common stock are entitled to rights with respect to the registration of their shares under the Securities Act. Registration ofthese shares under the Securities Act would result in the shares becoming freely tradable without restriction under the Securities Act, except forshares held by affiliates. Any sales of securities by these54Table of Contentsstockholders who have exercised registration rights could have a material adverse effect on the trading price of our common stock.Our operating results may fluctuate significantly, which makes our future operating results difficult to predict and could cause ouroperating results to fall below expectations or our guidance.Our quarterly and annual operating results may fluctuate significantly, which makes it difficult for us to predict our future operating results. Fromtime to time, we may enter into license or collaboration agreements with other companies that include development funding and significant upfrontand milestone payments and/or royalties, which may become an important source of our revenue. Accordingly, our revenue may depend ondevelopment funding and the achievement of development and clinical milestones under current and any potential future license and collaborationagreements and sales of our products, if approved. These upfront and milestone payments may vary significantly from period to period and anysuch variance could cause a significant fluctuation in our operating results from one period to the next.Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult topredict, including the following:•the timing and cost of, and level of investment in, research and development activities relating to our current and other future productcandidates, which will change from time to time;•our ability to enroll patients in clinical trials and the timing of enrollment;•the cost of manufacturing our current and other future product candidates, which may vary depending on FDA guidelines andrequirements, the quantity of production and the terms of our agreements with manufacturers;•expenditures that we will or may incur to acquire or develop additional product candidates and technologies;•the timing and outcomes of clinical trials for vopratelimab, JTX-4014, JTX-8064 and other future product candidates or competing productcandidates;•competition from existing and future products that may compete with vopratelimab, JTX-4014, JTX-8064 and other future productcandidates, and changes in the competitive landscape of our industry, including consolidation among our competitors or partners;•any delays in regulatory review or approval of vopratelimab, JTX-4014, JTX-8064 or other future product candidates;•the level of demand for vopratelimab, JTX-4014, JTX-8064 and other future product candidates, if approved, which may fluctuatesignificantly and be difficult to predict;•our ability to commercialize vopratelimab, JTX-4014, JTX-8064 and other future product candidates, if approved;•the success of our collaboration with Celgene and our ability to establish and maintain other collaborations, licensing or otherarrangements;•our ability to adequately support future growth;•potential unforeseen business disruptions that increase our costs or expenses;•future accounting pronouncements or changes in our accounting policies; and•the changing and volatile global economic environment.The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As aresult, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as anindication of our future performance. If our revenue or operating results fall below the expectations of analysts or investors or below any forecastswe may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of ourcommon stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenueand/or earnings guidance we may provide.Moreover, securities class action litigation has often been brought against a company following a decline in the market price of its securities. Thisrisk is especially relevant for us as pharmaceutical companies have experienced significant stock price volatility in recent years. If we face suchlitigation, it could result in substantial costs and a diversion of management’s attention and resources.55Table of ContentsIf securities analysts do not publish research or reports about our business or if they publish negative evaluations of our stock, the priceof our stock could decline.The trading market for our common stock will rely, in part, on the research and reports that industry or financial analysts publish about us or ourbusiness. If one or more of the analysts covering our business downgrade their evaluations of our stock, the price of our stock could decline. Ifone or more of these analysts cease to cover our stock, we could lose visibility in the market for our stock, which, in turn, could cause our stockprice to decline.Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us, which may be beneficial toour stockholders, more difficult and may prevent attempts by our stockholders to replace or remove our current management.Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may delay or prevent an acquisition of us ora change in our management. These provisions include a classified board of directors, a prohibition on actions by written consent of ourstockholders and the ability of our board of directors to issue preferred stock without stockholder approval. In addition, because we areincorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which limits the ability ofstockholders owning in excess of 15 percent of our outstanding voting stock to merge or combine with us. Although we believe these provisionscollectively provide for an opportunity to obtain greater value for stockholders by requiring potential acquirors to negotiate with our board ofdirectors, they would apply even if an offer rejected by our board were considered beneficial by some stockholders. In addition, these provisionsmay 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, which is responsible for appointing the members of our management.Our bylaws designate the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions andproceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum fordisputes with us or our directors, officers or employees.Our bylaws, provide that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole andexclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owedby any of our directors, officers and employees to us or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of theDelaware General Corporation Law, our certificate of incorporation or our bylaws, or (iv) any action asserting a claim that is governed by theinternal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named asdefendants therein. Any person purchasing or otherwise acquiring any interest in any shares of our capital stock shall be deemed to have notice ofand to have consented to this provision of our bylaws. This choice of forum provision may limit a stockholder’s ability to bring a claim in a judicialforum that it finds favorable for disputes with us or our directors, officers or employees, which may discourage such lawsuits against us and ourdirectors, officers and employees even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in theCourt of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near the State ofDelaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholderconsidering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to usthan to our stockholders. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable to,or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs, which could have amaterial adverse effect on our business, financial condition or results of operations.Item 1B. Unresolved Staff CommentsNot applicable.Item 2. PropertiesWe lease a facility containing our research and development, laboratory and office space, which consists of approximately 51,000 square feetlocated at 780 Memorial Drive, Cambridge, Massachusetts. Our lease expires on March 31, 2025. This facility is our corporate headquarters. Webelieve that our facilities are sufficient to meet our current needs.56Table of ContentsItem 3. Legal ProceedingsWe are not currently a party to any material legal proceedings.Item 4. Mine Safety DisclosuresNot applicable.57Table of ContentsPART IIItem 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity SecuritiesMarket Information and HoldersOur common stock trades on the Nasdaq Global Select Market under the symbol “JNCE”. As of March 1, 2019, we had approximately 22 holdersof record of our common stock. This number does not include beneficial owners whose shares were held by nominees in street name.Dividend PolicyWe have never declared or paid cash dividends on our capital stock. We currently intend to retain all available funds and any future earnings, ifany, to fund the development and expansion of our business and we do not anticipate paying any cash dividends in the foreseeable future. Anyfuture determination to pay dividends will be made at the discretion of our board of directors and will depend on various factors, includingapplicable laws, our results of operations, financial condition, future prospects, then applicable contractual restrictions and any other factorsdeemed relevant by our board of directors. Investors should not purchase our common stock with the expectation of receiving cash dividends.Recent Sales of Unregistered SecuritiesNone.Purchase of Equity SecuritiesWe did not purchase any of our registered equity securities during the period covered by this Annual Report on Form 10‑K.Item 6. Selected Financial DataWe are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.58Table of ContentsItem 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financialstatements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical information, this discussion andanalysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from thoseanticipated in these forward-looking statements as a result of certain factors. We discuss factors that we believe could cause or contribute tothese differences below and elsewhere in this Annual Report on Form 10-K, including those factors set forth in the section entitled “CautionaryNote Regarding Forward-Looking Statements and Industry Data” and in the section entitled “Risk Factors” in Part I, Item 1A.OverviewWe are a clinical-stage immunotherapy company dedicated to transforming the treatment of cancer by developing therapies that enable theimmune system to attack tumors and provide long-lasting benefits to patients. We have developed a suite of integrated technologies that compriseour Translational Science Platform, enabling us to comprehensively interrogate the cellular and molecular composition of tumors. By focusing onspecific cell types, both immune and non-immune, within tumors, we can prioritize targets and then identify related biomarkers designed to matchthe right therapy to the right patient. Through this scientific understanding of the tumor microenvironment, or TME, our goal is to effectively andefficiently identify and develop new cancer immunotherapies designed to benefit patients with tumors across the spectrum from highly inflamed, or“hot,” to poorly inflamed, or “cold,” and especially those not well served by current therapies.Our most advanced product candidate, vopratelimab (formerly JTX-2011), is a clinical-stage monoclonal antibody that binds to and activates theInducible T cell CO-Stimulator, or ICOS, a protein on the surface of certain T cells commonly found in many solid tumors. Vopratelimab wasassessed in a Phase 1/2 clinical trial that we refer to as ICONIC. In the initial Phase 1/2 portion of ICONIC, vopratelimab was found to be safe andwell-tolerated, both alone and in combination with nivolumab, an anti-PD-1 antibody. At the June 2018 annual meeting of the American Society ofClinical Oncology, or ASCO, we reported Response Evaluation Criteria in Solid Tumors, or RECIST, responses and other tumor reductions asdetermined by investigator assessment that were associated with an ICOS pharmacodynamic biomarker. We subsequently reported that theseresponses were durable, lasting six or more months and that all responders, as determined by investigator assessments, remained on study formore than one year. ICONIC also includes an on-going dose-escalation Phase 1 portion to assess vopratelimab in combination withpembrolizumab, an anti-PD-1 antibody, and in combination with ipilimumab, an antibody that binds to CTLA-4 on certain T cells. This Phase 1portion established the safety of vopratelimab in combination with each of ipilimumab and pembrolizumab. We plan to initiate additional Phase 2clinical studies, including one or more new dosing schedules and combination sequences, in 2019 and expect to report preliminary efficacy datafrom these additional clinical studies in 2020. These anticipated Phase 2 clinical studies will evaluate vopratelimab in combination with ipilimumab,and, separately, using a predictive biomarker approach, will evaluate vopratelimab alone and/or in combination with a PD-1 inhibitor. Theseadditional clinical studies are designed to determine whether vopratelimab can offer a treatment alternative to patients who otherwise do notdisplay an effective response to currently approved therapies, and/or whether it can enhance the therapeutic benefit of currently approvedtherapies.Our second product candidate, JTX-4014, is a clinical-stage anti-PD-1 antibody that we are developing primarily for potential use in combinationwith future product candidates, as we believe that combination therapy has the potential to be a mainstay of cancer immunotherapy. In December2018, we commenced enrollment in a Phase 1 clinical trial of JTX‑4014 monotherapy and completed enrollment in the first cohort in the fourthquarter of 2018. This Phase 1 clinical trial is designed to assess safety and to determine the recommended Phase 2 dose. We expect to identifythe recommended Phase 2 dose in 2019.JTX-8064, our third product candidate, is an antibody that binds to LILRB2, which is a cell surface receptor expressed on macrophages. JTX-8064is the first tumor-associated macrophage candidate to emerge from our Translational Science Platform. We believe therapies targeting theseinnate immune cells may have the potential to benefit patients with tumors that are less likely to respond to existing T cell-focused approaches.We are currently conducting IND-enabling activities for JTX-8064, with the goal of filing an investigational new drug application, or IND, andinitiating a Phase 1 clinical trial in 2019.Beyond our product candidates, we are discovering and developing immunotherapies by leveraging our Translational Science Platform tosystematically and comprehensively interrogate cell types within the TME. This enables us to develop therapies with the potential to benefitpatients with tumors across the spectrum from hot to59Table of Contentscold tumor characteristics, including focusing on adaptive and innate immune cells. Therapies targeting these cell types and cell subsets mayhave the potential to complement existing approaches that focus on T effector cells and thereby benefit many patients who do not respond to thecurrently approved T effector cell-focused immunotherapies. In addition, we are discovering and developing multiple approaches, includingtargeting stromal cells, with the potential to convert cold tumors to hot tumors, thereby making the tumors more amenable to immunotherapy,perhaps in combination approaches.In July 2016, we entered into a Master Research and Collaboration Agreement, or the Celgene Collaboration Agreement, and a Series B-1Preferred Stock Purchase Agreement with Celgene Corporation, or Celgene. Under the terms of these agreements, we received a $225.0 millionupfront cash payment and $36.1 million from the sale of 10,448,100 shares of our Series B-1 convertible preferred stock, which shares convertedinto 2,831,463 shares of common stock upon the completion of our initial public offering, or IPO, in 2017.Under the Celgene Collaboration Agreement, we granted Celgene exclusive options to develop and commercialize our lead product candidate,vopratelimab, and up to four early-stage programs, or the Lead Program and Other Programs, consisting of targets to be selected from a pool ofcertain B cell, T regulatory cell and tumor-associated macrophage targets. Additionally, Celgene has an exclusive option to develop andcommercialize our product candidate JTX-4014, which, upon exercise of such option, will be a shared program that may be used by both parties inand outside of the collaboration. Prior to Celgene exercising any of its options, we are responsible for all research and development activities underthe Celgene Collaboration Agreement.Upon the exercise of each program option, the parties will enter into a co-development and co-commercialization agreement, or the Co-CoAgreements, or, in the case of JTX-4014, a license agreement, or the JTX-4014 License Agreement, that governs the development andcommercialization of the applicable program. Although the agreements will not be executed unless and until Celgene exercises an option, theparties have agreed to the terms of the Co-Co Agreements and the JTX-4014 License Agreement as part of the Celgene Collaboration Agreement.Under the Co-Co Agreements and the JTX-4014 License Agreement, we will share with Celgene the United States profits or losses anddevelopment costs on such collaboration program.If Celgene exercises its option for a program other than JTX-4014, we will enter into a Co-Co Agreement pursuant to which Celgene will have theexclusive right to develop and commercialize the products arising out of such collaboration program outside of the United States, and we will beeligible to receive tiered royalties ranging from a high single digit to mid-teen percentage rate on net product sales outside of the United States.Under each Co-Co Agreement, we will also have the right to opt out of profit sharing and instead receive milestones and royalties.Furthermore, if Celgene exercises its option for JTX-4014, we will enter into the JTX-4014 License Agreement, pursuant to which Celgene and wewill each have equal rights to develop and commercialize JTX-4014 in combination with other proprietary molecules in their or our respectivepipelines or in combination with products arising out of collaboration programs. Subject to terms specified in the license agreement for JTX-4014,the party owning the proprietary molecule that is combined with JTX-4014, if such molecule does not arise from a collaboration program withCelgene, will be solely responsible for all development and commercialization costs related to such combination. If JTX-4014 is combined with aproduct arising from a collaboration program, then the parties will share costs and, if co-packaged or co-formulated, profits or losses in accordancewith the Co-Co Agreements for such other product.Celgene may extend the initial four-year research term of the collaboration for up to three additional one-year periods upon payment of anextension fee for each additional year. Additionally, under the terms of the agreement, if Celgene exercises all of its options, all programs meet allmilestones, including regulatory approvals in the United States and outside the United States, and Celgene extends the initial four-year researchterm for three additional years, we are eligible to earn up to approximately $2.6 billion in clinical, regulatory, and/or commercialization milestonepayments, option-exercise fees and research term extension fees.The Co-Co Agreements and the JTX-4014 License Agreement outline the terms of potential development, regulatory and commercial milestonepayments. The development milestones are payable on initiation of certain clinical trials and range from $32.5 million to $105.0 million, perprogram, with an aggregate total of $290.0 million. The regulatory approval milestones are payable upon regulatory approval in the United Statesand outside the United States and range from $7.5 million to $50.0 million per milestone, with an aggregate total of $700.0 million. The commercialmilestones are payable upon achievement of specified aggregate product sales outside the United States for each program and range from$40.0 million to $200.0 million per milestone, with an aggregate total of $1.270 billion. We are also eligible to receive royalties on product salesoutside the United States ranging from high single digit to mid-teen royalties. If Celgene elects to exercise any of the program options, Celgene willpay us an60Table of Contentsoption-exercise fee of $10.0 million to $60.0 million that varies by program, with an aggregate of $182.5 million if Celgene exercises all six programoptions. The initial research term of the collaboration is four years, which can be extended, at Celgene’s option, annually for up to three additionalyears for additional consideration that ranges from $30.0 million to $45.0 million per year, for an aggregate of $120.0 million if the term is extendedfor an additional three years. As of December 31, 2018, we had not received any option exercise, research term extension, milestone or royaltypayments under the Celgene Collaboration Agreement.Since inception, our operations have focused on organizing and staffing our company, business planning, raising capital, developing ourTranslational Science Platform and conducting research, preclinical studies and clinical trials. We do not have any products approved for sale. Weare subject to a number of risks comparable to those of other similar companies, including dependence on key individuals; the need to developcommercially viable products; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequateadditional financing to fund the development of our products. We have funded our operations through December 31, 2018 primarily throughproceeds received from our IPO, the upfront payment received under the Celgene Collaboration Agreement and private placements of ourconvertible preferred stock.On February 1, 2017, we closed our IPO of 7,319,750 shares of our common stock at a public offering price of $16.00 per share, including 954,750shares of our common stock issued upon the full exercise by the underwriters of their option to purchase additional shares. The gross proceedsfrom the IPO were $117.1 million, and net proceeds were $106.4 million, after deducting underwriting discounts and commissions and otheroffering expenses paid by us.Due to our significant research and development expenditures, we have generated substantial operating losses in each annual period since ourinception. We have incurred an accumulated deficit of $163.9 million through December 31, 2018. We expect to incur substantial additional lossesin the future as we expand our research and development activities.Financial Operations OverviewRevenueFor the year ended December 31, 2018, we recognized $65.2 million of collaboration revenue under the Celgene Collaboration Agreement related tothe $225.0 million upfront payment received in 2016. We had $97.9 million of deferred revenue as of December 31, 2018, which is classified aseither current or net of current portion in our consolidated balance sheets based on the period over which the revenue is expected to berecognized. As of December 31, 2018, we had not received any option exercise, research term extension, milestone or royalty payments under theCelgene Collaboration Agreement.In the future, we expect to continue to generate revenue from the Celgene Collaboration Agreement and may generate revenue from product salesor other collaboration agreements, strategic alliances and licensing arrangements. We expect that our revenue will fluctuate from quarter-to-quarterand year-to-year based upon our pattern of performance under the Celgene Collaboration Agreement and as a result of the timing and amount oflicense fees, milestones, reimbursement of costs incurred and other payments and product sales, to the extent any are successfullycommercialized. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, ourability to generate future revenue, and our results of operations and financial position, would be materially adversely affected.Operating ExpensesResearch and Development ExpensesResearch and development expenses represent costs incurred by us for the discovery, development and manufacture of vopratelimab, JTX-4014,JTX-8064 and our potential future product candidates and include: external research and development expenses incurred under arrangements withthird parties, including academic and non-profit institutions, contract research organizations, contract manufacturing organizations and consultants;salaries and personnel-related costs, including non-cash stock-based compensation expense; license fees to acquire in-process technology andother expenses, which include direct and allocated expenses for laboratory, facilities and other costs.We use our employee and infrastructure resources across multiple research and development programs directed toward developing ourTranslational Science Platform and for identifying, testing and developing product61Table of Contentscandidates. We manage certain activities such as contract research and manufacture of our product candidates and discovery programs throughour third-party vendors.At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete thedevelopment of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales of ourproduct candidates. This is due to the numerous risks and uncertainties associated with developing such product candidates, including theuncertainty of:•addition and retention of key research and development personnel;•establishing an appropriate safety profile with IND-enabling toxicology studies;•the cost to acquire or make therapies to study in combination with our immunotherapies;•successful enrollment in and completion of clinical trials;•establishing agreements with third-party contract manufacturing organizations for clinical supply for our clinical trials and commercialmanufacturing, if our product candidates are approved;•receipt of marketing approvals from applicable regulatory authorities;•commercializing products, if and when approved, whether alone or in collaboration with others;•the cost to develop complementary diagnostics and/or companion diagnostics as needed for each of our development programs;•the costs associated with the development of any additional product candidates we acquire through third-party collaborations or identifythrough our Translational Science Platform;•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone paymentsthereunder;•obtaining and maintaining patent and trade secret protection and regulatory exclusivity for our products if and when approved; and•continued acceptable safety profiles of the products following approval.A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change thecosts, timing and viability associated with the development of that product candidate. We plan to increase our research and developmentexpenses for the foreseeable future as we advance our product candidates through clinical trials and continue the enhancement of ourTranslational Science Platform, our collaboration with Celgene and the progression of our pipeline.Due to the inherently unpredictable nature of preclinical and clinical development, we do not allocate all of our internal research and developmentexpenses on a program-by-program basis as they primarily relate to personnel and lab consumables costs which are deployed across multipleprograms under development. Our research and development expenses also include external costs, which we do track on a program-by-programbasis following the program’s nomination as a development candidate. We began incurring such external costs for vopratelimab in 2015, JTX-4014in 2016 and JTX-8064 in 2017.Included below are external research and development and external clinical and regulatory costs for vopratelimab, JTX-4014, JTX-8064 and ourpre-development candidates: Year Ended December 31,(in thousands)2018 2017Vopratelimab$19,647 $21,904JTX-40147,585 6,460JTX-80642,634 369Pre-development candidates1,022 1,250Total external research and development and clinical and regulatory costs$30,888 $29,983Research and development activities account for a significant portion of our operating expenses. As we continue to implement our businessstrategy, we expect our research and development expenses to increase over the next several years. We expect that these expenses will increaseas we:62Table of Contents•continue our Phase 1/2 clinical trial of vopratelimab;•initiate further Phase 2 clinical trials of vopratelimab;•continue our Phase 1 clinical trial of JTX-4014 and initiate future clinical trials;•continue our IND-enabling activities for JTX-8064 and advance this product candidate into clinical trials;•continue to identify and develop potential predictive biomarkers and complementary diagnostics and/or companion diagnostics for ourproduct candidates;•continue to develop and enhance our Translational Science Platform and advance our pipeline of immunotherapy programs and our earlyresearch activities into later stages of development; and•increase our headcount to meet our evolving needs.Product candidates in later stages of clinical development generally incur higher development costs than those in earlier stages of clinicaldevelopment, primarily due to the increased size and duration of later-stage clinical trials.General and Administrative ExpensesGeneral and administrative expenses consist of salaries and personnel-related costs, including non-cash stock-based compensation expense, forour personnel in executive, business development, legal, finance and accounting, human resources and other administrative functions, consultingfees, facility costs not otherwise included in research and development expenses, fees paid for accounting and tax services and non-litigationlegal costs. Non-litigation legal costs include general corporate legal fees, patent legal fees and related costs. We anticipate that our general andadministrative expenses will increase in the future to support our continued operations.Other Income, NetOther income, net, consists primarily of interest and investment income on our cash, cash equivalents and investments.Critical Accounting Policies and EstimatesOur management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements,which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these consolidatedfinancial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements andaccompanying notes. On an ongoing basis, we evaluate our estimates which include, but are not limited to, estimates related to revenuerecognized under the Celgene Collaboration Agreement (including estimates of internal and external costs expected to be incurred to satisfyperformance obligations), accrued expenses, stock-based compensation expense and income taxes. We base our estimates on historicalexperience and other market specific or other relevant assumptions we believe to be reasonable under the circumstances. Actual results coulddiffer from those estimates.While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere inthis Annual Report on Form 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in thepreparation of our consolidated financial statements.Revenue RecognitionEffective January 1, 2018, we adopted Accounting Standards Codification, or ASC, 606, Revenue from Contracts with Customers. Under ASC606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the considerationthat the entity expects to receive in exchange for those goods or services. In applying ASC 606, we perform the following five steps: (i) identify thecontract(s) with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocatethe transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy the performanceobligations. We only apply the five-step model to contracts when it is probable that we will collect the consideration to which we are entitled inexchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope ofASC 606, we assess the goods or services promised within each contract, determine those that are performance obligations and assess whethereach promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respectiveperformance obligation when (or as) the performance obligation is63Table of Contentssatisfied. See Note 3 to our consolidated financial statements included within Part IV, Item 15 of this Annual Report on Form 10-K for furtherinformation on the application of ASC 606 to the Celgene Collaboration Agreement.Accrued Research and Development ExpensesAs part of the process of preparing our consolidated financial statements, we are required to estimate our accrued expenses as of each balancesheet date. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that havebeen performed on our behalf and estimating the level of service performed and the associated cost incurred for the service when we have not yetbeen invoiced or otherwise notified of the actual cost. The majority of our service providers invoice us monthly in arrears for services performed orwhen contractual milestones are met.We make estimates of our accrued expenses as of each balance sheet date based on facts and circumstances known to us at that time. Weperiodically confirm the accuracy of our estimates with the service providers and make adjustments if necessary. The significant estimates in ouraccrued research and development expenses include the costs incurred for services performed by our vendors in connection with research anddevelopment activities for which we have not yet been invoiced. We record our expenses related to research and development activities on ourestimates of the services received and efforts expended pursuant to quotes and contracts with vendors that conduct research and development onour behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven paymentflows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of theresearch and development expenses. In accruing service fees, we estimate the time period over which services will be performed and the level ofeffort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjustthe accrual or prepaid expense accordingly. Non-refundable advance payments for goods and services that will be used in future research anddevelopment activities are expensed when the activity has been performed or when the goods have been received rather than when the payment ismade.Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of the status and timing ofservices performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or toolow in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actuallyincurred.Stock-based CompensationWe account for share-based payments in accordance with ASC 718, Compensation—Stock Compensation. ASC 718 requires all share-basedpayments to employees, including grants of employee stock options, restricted stock awards and restricted stock units, to be recognized asexpense in the consolidated statements of operations based on their grant date fair values. For stock options granted to employees and tomembers of our board of directors for their services on the board of directors, we estimate the grant date fair value of each stock option using theBlack-Scholes option-pricing model. For restricted stock awards and restricted stock units granted to employees, we estimate the grant date fairvalue of each award using intrinsic value, which is based on the value of the underlying common stock less any purchase price. For share-basedpayments subject to service-based vesting conditions, we recognize stock-based compensation expense equal to the grant date fair value ofshare-based payment on a straight-line basis over the requisite service period. The Black‑Scholes option pricing model requires the input of certain subjective assumptions, including (i) the calculation of expected term of theshare-based payment, (ii) the risk‑free interest rate, (iii) the expected stock price volatility and (iv) the expected dividend yield. We use thesimplified method as prescribed by SEC Staff Accounting Bulletin No. 107 to calculate the expected term for stock options granted to employeesas we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term. We determine therisk‑free interest rate based on a treasury instrument whose term is consistent with the expected term of the stock options. Because there hadbeen no public market for our common stock prior to the IPO, there is a lack of historical and implied volatility data. Accordingly, we base ourestimates of expected volatility on the historical volatility of a group of publicly-traded companies with similar characteristics to us, including stageof product development and therapeutic focus within the life sciences industry. Historical volatility is calculated over a period of timecommensurate with the expected term of the share-based payment. We use an assumed dividend yield of zero as we have never paid dividendson our common stock, nor do we expect to pay dividends on our common stock in the foreseeable future.We account for forfeitures of all share-based payments when such forfeitures occur.64Table of ContentsIncome TaxesIncome taxes are recorded in accordance with ASC 740, Income Taxes, which provides for deferred taxes using an asset and liability approach.We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidatedfinancial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement andtax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuationallowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some or all of thedeferred tax assets will not be realized.We account for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. The evaluationof uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions taken orexpected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts or circumstancesrelated to a tax position.Recent Accounting PronouncementsSee Note 2 to our consolidated financial statements included within Part IV, Item 15 of this Annual Report on Form 10-K for a description of recentaccounting pronouncements applicable to our business.Results of OperationsComparison of the Years Ended December 31, 2018 and 2017The following table summarizes our results of operations for the years ended December 31, 2018 and 2017: Year Ended December 31, (in thousands)2018 2017 $ ChangeRevenue: Collaboration revenue—related party$65,201 $71,644 $(6,443)Operating expenses: Research and development70,052 67,798 2,254General and administrative26,443 23,061 3,382Total operating expenses96,495 90,859 5,636Operating loss(31,294) (19,215) (12,079)Other income, net3,961 2,808 1,153Loss before provision for income taxes(27,333) (16,407) (10,926)Provision for income taxes46 36 10Net loss$(27,379) $(16,443) $(10,936)Collaboration RevenueCollaboration revenue for the years ended December 31, 2018 and 2017 was solely related to the recognition of the upfront payment we receivedunder our Celgene Collaboration Agreement that was executed in July 2016. Effective January 1, 2018, we adopted ASC 606. Under ASC 606, wehave transitioned from recognizing revenue on a straight-line basis over the estimated performance period for each unit of accounting, which was apermitted method of revenue recognition under previous accounting guidance, to recognizing revenue based on our pattern of performance for eachperformance obligation. As we adopted ASC 606 using the modified retrospective method, collaboration revenue for the year ended December 31,2017 continues to be presented under previous accounting guidance.65Table of ContentsResearch and Development ExpensesThe following table summarizes our research and development expenses for years ended December 31, 2018 and 2017: Year Ended December 31, (in thousands)2018 2017 $ ChangeEmployee compensation$21,977 $18,839 $3,138External research and development14,211 16,297 (2,086)External clinical and regulatory16,677 13,686 2,991Lab consumables7,411 9,364 (1,953)Consulting research1,601 1,096 505Facility costs5,726 6,127 (401)Other research2,449 2,389 60Total research and development expenses$70,052 $67,798 $2,254Research and development expenses increased by $2.3 million from $67.8 million for the year ended December 31, 2017 to $70.1 million for theyear ended December 31, 2018. The increase in research and development expenses was primarily attributable to the following:•$3.1 million of increased employee compensation costs, including $1.7 million of increased stock-based compensation expense; and•$3.0 million of increased external clinical and regulatory costs related to our ongoing vopratelimab Phase 1/2 clinical trial, as well as theinitiation of our JTX-4014 Phase 1 clinical trial.These increases were offset by the following decreases:•$2.1 million of decreased external research and development costs primarily attributable to the manufacture of clinical trial materials andrelated activities for vopratelimab during the year ended December 31, 2017; and•$2.0 million of decreased lab consumables costs.General and Administrative ExpensesThe following table summarizes our general and administrative expenses for the years ended December 31, 2018 and 2017: Year Ended December 31, (in thousands)2018 2017 $ ChangeEmployee compensation$13,049 $9,055 $3,994Professional services4,880 5,016 (136)Facility costs4,516 5,216 (700)Other3,998 3,774 224Total general and administrative expenses$26,443 $23,061 $3,382General and administrative expenses increased by $3.4 million from $23.1 million for the year ended December 31, 2017 to $26.4 million for theyear ended December 31, 2018. The increase in general and administrative expenses was primarily attributable to $4.0 million of increasedemployee compensation costs, including $2.9 million of increased stock-based compensation expense. This increase was partially offset by $0.7million of decreased facility costs associated with our exit of our previous corporate headquarters in May 2017.Other Income, netOther income, net, increased by $1.2 million from $2.8 million for the year ended December 31, 2017 to $4.0 million for the year ended December31, 2018. The change in other income, net, is attributable to increased interest and investment income on our cash, cash equivalents andinvestments as a result of an overall increased rate of return.66Table of ContentsLiquidity and Capital ResourcesSources of LiquidityWe have funded our operations through December 31, 2018 primarily through net proceeds from our IPO of $106.4 million, a non-refundable upfrontpayment of $225.0 million received in connection with the Celgene Collaboration Agreement and gross proceeds from private placements of ourconvertible preferred stock of $139.1 million. As of December 31, 2018, we had cash, cash equivalents and investments of $195.9 million.Funding RequirementsOur plan of operation is to continue implementing our business strategy, the research and development of our product candidates vopratelimab,JTX-4014 and JTX-8064, our preclinical development activities, the expansion of our research pipeline and the enhancement of our internalresearch and development capabilities. Due to the inherently unpredictable nature of preclinical and clinical development and given the early stageof our programs and product candidates, we cannot reasonably estimate the costs we will incur and the timelines that will be required to completedevelopment, obtain marketing approval, and commercialize our products, if and when approved. For the same reasons, we are also unable topredict when, if ever, we will generate revenue from product sales or whether, or when, if ever, we may achieve profitability. Clinical and preclinicaldevelopment timelines, the probability of success, and development costs can differ materially from expectations. In addition, we cannot forecastwhich products, if and when approved, may be subject to future collaborations, when such arrangements will be secured, if at all, and to whatdegree such arrangements would affect our development plans and capital requirements.Due to our significant research and development expenditures, we have generated substantial operating losses since inception. We have incurredan accumulated deficit of $163.9 million through December 31, 2018. We expect to incur substantial additional losses in the future as we expandour research and development activities and continue to advance our programs. Based on our research and development plans, we expect that ourexisting cash, cash equivalents and investments of $195.9 million will enable us to fund our operating expenses and capital expenditurerequirements for at least the next 24 months. However, we have based this estimate on assumptions that may prove to be incorrect, and we couldexhaust our capital resources sooner than we expect. The timing and amount of our operating expenditures will depend largely on:•the timing and progress of preclinical and clinical development activities;•the cost to access, acquire, or develop therapies to study in combination with our immunotherapies;•successful enrollment in and completion of clinical trials;•the cost to develop complementary diagnostics and/or companion diagnostics as needed for each of our development programs;•our ability to establish agreements with third-party manufacturers for clinical supply for our clinical trials and, if our product candidate isapproved, commercial manufacturing;•the costs associated with the development of any additional product candidates we acquire through acquisition, third-party collaborationsor identify through our Translational Science Platform;•our ability to maintain our current research and development programs and enhancement of our Translational Science Platform;•addition and retention of key research and development personnel;•our efforts to enhance operational, financial and information management systems, and hire additional personnel, including personnel tosupport development of our product candidates;•the legal patent costs involved in prosecuting patent applications and enforcing patent claims and other intellectual property claims;•the costs and ongoing investments to in-license or acquire additional technologies, including the in-license of intellectual property relatedto our potential product candidates, the effectiveness of which is subject to certain conditions; and•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any option and milestonepayments thereunder.67Table of ContentsA change in the outcome of any of these or other variables with respect to the development of any of our product candidates could significantlychange the costs and timing associated with the development of that product candidate. Furthermore, our operating plans may change in thefuture, and we may need additional funds to meet operational needs and capital requirements associated with such operating plans.In addition to the variables described above, if and when any of our product candidates successfully complete development, we expect to incursubstantial additional costs associated with regulatory filings, marketing approval, post-marketing requirements, maintaining our intellectualproperty rights, and regulatory protection, in addition to other costs. We cannot reasonably estimate these costs at this time.Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity ordebt financings and collaboration arrangements, including our Celgene Collaboration Agreement. We currently do not have a credit facility orcommitted sources of capital. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interests of ourstockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of ourexisting common stockholders. If we raise additional funds through the issuance of debt securities, these securities could contain covenants thatwould restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be availableon reasonable terms, or at all. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuablerights to our technologies, future revenue streams or product candidates, or grant licenses on terms that may not be favorable to us. If we areunable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce, or terminatedevelopment or future commercialization efforts, or grant rights to develop and market product candidates that we would otherwise prefer todevelop and market ourselves.Cash FlowsThe following table provides information regarding our cash flows for the years ended December 31, 2018 and 2017: Year Ended December 31,(in thousands)2018 2017Net cash (used in) provided by: Operating activities$(63,613) $(90,988)Investing activities86,414 (38,021)Financing activities1,546 107,470Net increase (decrease) in cash, cash equivalents and restricted cash$24,347 $(21,539)Cash Used in Operating ActivitiesNet cash used in operating activities for the year ended December 31, 2018 was $63.6 million, compared to net cash used in operating activities of$91.0 million for the year ended December 31, 2017. Cash used in operating activities decreased by $27.4 million primarily due to $16.8 million ofstate and federal income tax refunds received during the year ended December 31, 2018 as compared to $16.8 million of state and federal taxincome payments made during the year ended December 31, 2017, partially offset by increased operating expenses.Cash Provided by (Used in) Investing ActivitiesNet cash provided by investing activities for the year ended December 31, 2018 was $86.4 million, compared to net cash used in investingactivities of $38.0 million for the year ended December 31, 2017. This net change of $124.4 million was primarily due to purchases of investmentsduring the year ended December 31, 2017, using the net proceeds received from our IPO in 2017. During the year ended December 31, 2018,proceeds from maturities and sales of investments of $340.7 million were either re-invested or used to fund operations. In addition, purchases ofproperty and equipment decreased by $13.7 million primarily due to purchases of leasehold improvements and laboratory equipment associatedwith our corporate headquarters during the year ended December 31, 2017.68Table of ContentsCash Provided by Financing ActivitiesNet cash provided by financing activities for the year ended December 31, 2018 was $1.5 million, compared to net cash provided by financingactivities of $107.5 million for the year ended December 31, 2017. Cash provided by financing activities decreased by $105.9 million primarily dueto the receipt of $106.4 million of net proceeds from our IPO, after deducting underwriting discounts and commissions and other offering expensespaid by us. A portion of these offering expenses were paid during the year ended December 31, 2016. No such financings occurred during the yearended December 31, 2018. This decrease was partially offset by an increase of $1.1 million in proceeds received from the exercise of stockoptions during the year ended December 31, 2018 as compared to the year ended December 31, 2017.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 applicableSEC rules.Item 7A. Quantitative and Qualitative Disclosures about Market RiskWe are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information under this item.Item 8. Financial Statements and Supplementary DataThe financial statements required to be filed pursuant to this Item 8 are appended to this Annual Report on Form 10-K. An index of those financialstatements is found in Part IV, Item 15.Item 9. Changes in and Disagreements with Accountants on Accounting and Financial DisclosureNone.Item 9A. Controls and ProceduresEvaluation of Disclosure Controls and ProceduresOur management, with the participation of our principal executive officer and our principal financial officer, evaluated the effectiveness of ourdisclosure controls and procedures as of December 31, 2018. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and15d-15(e) under the Securities Exchange Act of 1934, or the Exchange Act, means controls and other procedures of a company that are designedto ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded,processed, summarized and reported, within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosurecontrols and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by acompany in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management,including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisionsregarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31,2018, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures wereeffective at the reasonable assurance level.Management’s Report on Internal Control Over Financial ReportingOur management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financialreporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’sprincipal executive officer and principal financial officer, or persons performing similar functions, and effected by a company’s board of directors,management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:69Table of Contents•pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of acompany’s assets;•provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordancewith generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance withauthorizations of the company’s management and directors; and•provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets thatcould have a material effect on the financial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluationof effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that thedegree of compliance with the policies or procedures may deteriorate.Under the supervision of and with the participation of our principal executive officer and principal financial officer, our management assessed theeffectiveness of our internal control over financial reporting as of December 31, 2018 based on the criteria set forth by the Committee ofSponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013). Based on this assessment,management concluded that our internal control over financial reporting was effective as of December 31, 2018.This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm due to a transitionperiod established by rules of the SEC for newly public companies.Changes in Internal Control over Financial ReportingThere was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) thatoccurred during the fourth quarter of the year ended December 31, 2018 that has materially affected, or is reasonably likely to materially affect, ourinternal control over financial reporting.Item 9B. Other InformationNone.70Table of ContentsPART IIIItem 10. Directors, Executive Officers and Corporate GovernanceBoard of DirectorsBoard Composition and StructureThe Board of Directors is currently comprised of eight members. Below is a list of the names, ages as of March 1, 2019, and classification of theindividuals who currently serve as our directors.Name Age PositionLuis A. Diaz, Jr., M.D. 48 Director (Class II)Barbara Duncan 54 Director (Class II)J. Duncan Higgons 64 Director (Class I)Robert Kamen, Ph.D. 74 Director (Class II)Perry Karsen 63 Chairman of the Board of Directors (Class III)Richard Murray, Ph.D. 60 Director (Class III); Chief Executive Officer and PresidentCary Pfeffer, M.D. 56 Director (Class III)Robert Tepper, M.D. 63 Director (Class I)Director BiographiesLuis Diaz, Jr., M.D.—Dr. Diaz has served as the head of the solid tumor oncology division and a faculty member at the Memorial Sloan KetteringCancer Center since December 2016. From 2004 to December 2016, Dr. Diaz was a faculty member and physician at Johns Hopkins UniversitySchool of Medicine. Dr. Diaz is also a founder and board member, and from 2010 to April 2016 served as president, chief executive officer andchief medical officer, of Personal Genome Diagnostics Inc., a private cancer genome analysis company. He received his M.D. from the Universityof Michigan, where he also received his B.S. in Microbiology. We believe Dr. Diaz is qualified to serve on our board of directors due to hisbackground as a physician focused on oncology and his experience as a faculty member at a major hospital and medical center.Barbara Duncan—Ms. Duncan served as the chief financial officer of Intercept Pharmaceuticals Inc., a public biopharmaceutical company, from2009 to June 2016 and as treasurer from 2010 to September 2016. She has served on the board of directors of Adaptimmune Therapeutics plcsince June 2016, Aevi Genomic Medicine, Inc. (formerly Medgenics, Inc.) since June 2015, ObsEva SA since December 2016, OvidTherapeutics, Inc. since June 2017 and Innoviva, Inc. from September 2016 to April 2018, all of which are public companies. Ms. Duncan holds anM.B.A. from the Wharton School of Business and a B.S. from Louisiana State University. We believe Ms. Duncan is qualified to serve on ourboard of directors because of her experience in the biopharmaceutical industry, her experience in the financial sector and membership on boards ofdirectors of other public and private companies.J. Duncan Higgons—Mr. Higgons served as chief operating officer of Agios Therapeutics, Inc., a public biopharmaceutical company, from 2009 toJanuary 2016. Mr. Higgons serves on the board of directors of Rheos Medicines, Inc., a private biopharmaceutical company, Auron Therapeutics,Inc., a private cancer therapeutics company, and PsiOxus Therapeutics Ltd., a private cancer therapeutics company. He holds a B.Sc. inMathematics from King's College University of London and a M.Sc. in Economics from London Business School. We believe that Mr. Higgons isqualified to serve on our board of directors due to his leadership and management experience.Robert Kamen, Ph.D.—Dr. Kamen has been a venture partner at Third Rock Ventures, LLC, or TRV, since December 2017, and he previouslyserved as an entrepreneur-in-residence at TRV from 2010 through 2017. Dr. Kamen also served as our interim chief technology officer fromFebruary 2013 to December 2015. Dr. Kamen has served on the board of directors of Neon Therapeutics, Inc., a public immuno-oncologycompany, since 2015 and serves on the boards of directors for several private companies, including EpimAb Biotherapeutics, Inc. and LyceraCorporation. Dr. Kamen holds a Ph.D. in biochemistry and molecular biology from Harvard University and a B.S. in biophysics from AmherstCollege. We believe that Dr. Kamen is qualified to serve on our board of directors because of his experience in the venture capital and lifesciences industries, membership on various other boards of directors, and his leadership and management experience.71Table of ContentsPerry Karsen—Mr. Karsen has served as the chairman of our board of directors since April 2016. Previously, Mr. Karsen was the chief executiveofficer of the Celgene Cellular Therapeutics division of Celgene Corporation, or Celgene, a global biopharmaceutical company, from May 2013 untilhis retirement in December 2015. Mr. Karsen served as executive vice president and chief operations officer of Celgene from 2010 to May 2013,and as senior vice president and head of worldwide business development of Celgene from 2004 to 2009. Mr. Karsen was also a venture partner atTRV from January 2016 through January 2018. He has served as the chairman of the board of directors of Intellia Therapeutics, Inc. since April2016, as a member of the board of directors and executive chairman of OncoMed Pharmaceuticals, Inc. since January 2016 and January 2018,respectively, and a member of the board of directors of Voyager Therapeutics, Inc. since July 2015, all of which are public life sciencescompanies. Previously, Mr. Karsen served on the boards of directors of Alliqua Biomedical, Inc. from November 2012 through February 2016,Agios Pharmaceuticals, Inc. from November 2011 through March 2016, and Navidea Biopharmaceuticals, Inc. from February 2014 through July2015. Mr. Karsen received a Masters of Management from Northwestern University's Kellogg Graduate School of Management, a Masters of Artsin Teaching of Biology from Duke University and a B.S. in Biological Sciences from the University of Illinois, Urbana-Champaign. We believeMr. Karsen is qualified to serve on our board of directors because of his executive leadership experience and membership on boards of directors ofother public companies.Richard Murray, Ph.D.—Dr. Murray has served as our president, chief executive officer and a member of our board of directors since July 2014.Prior to joining Jounce, Dr. Murray served as senior vice president of biologics and vaccines research and development at Merck & Co., a globalhealthcare company, from 2009 to June 2014, where he was responsible for the advancement of biologics and vaccines, including Merck's cancerimmunotherapy pipeline. Dr. Murray holds a Ph.D. in microbiology and immunology from the University of North Carolina at Chapel Hill and a B.S.in microbiology from the University of Massachusetts, Amherst. We believe that Dr. Murray is qualified to serve on our board of directors due tohis operating and historical experience gained from serving as our president, chief executive officer and as a board member, combined with hisexperience in drug research and development.Cary Pfeffer, M.D.—Dr. Pfeffer is a partner at TRV, which he joined in 2007. Dr. Pfeffer served as the chairman of our board from July 2014 toApril 2016 and as our interim chief executive officer from February 2013 to July 2014. Dr. Pfeffer was the interim chief executive officer of NeonTherapeutics, Inc. from October 2015 to September 2016, the interim chief business officer of Rheos Medicines, Inc. from March 2018 toNovember 2018, and the interim chief business officer of Casma Therapeutics, Inc. from May 2018 to December 2018. Dr. Pfeffer has served as adirector of Neon Therapeutics, Inc. since May 2015 and is currently the chairman of the board; he also serves on the boards of directors forseveral private companies, including Casma Therapeutics, Inc., Edimer Pharmaceuticals, Inc., Rheos Medicines, Inc. and Tango Therapeutics,Inc. From August 2009 to September 2016, Dr. Pfeffer was a member of the board of directors of Eleven Biotherapeutics, Inc., a public biologicsoncology company, and served as its chief business officer from February 2010 to September 2011. Dr. Pfeffer received an M.B.A. from theWharton School of Business, an M.D. from the University of Pennsylvania School of Medicine and a B.A. in biochemistry from ColumbiaUniversity. We believe that Dr. Pfeffer is qualified to serve on our board of directors because of his experience in the venture capital industry, lifesciences industry, membership on various other boards of directors, his prior service as our president and chief executive officer, and hisleadership and management experience.Robert Tepper, M.D.— Dr. Tepper is a partner at TRV, which he co-founded in 2007. From February 2013 to January 2015, Dr. Tepper served asour interim chief scientific officer. He also served as interim chief science officer of Casma Therapeutics, Inc. from May 2018 to December 2018,and of Neon Therapeutics, Inc. from October 2015 to November 2016. Dr. Tepper serves on the boards of directors of AllenaPharmaceuticals, Inc., Constellation Pharmaceuticals, Inc., and Neon Therapeutics, Inc., all public biopharmaceutical companies, as well asCasma Therapeutics, Inc., a private biotechnology company. Previously, Dr. Tepper served on the board of directors of bluebird bio, Inc. fromSeptember 2010 through March 2015, Kala Pharmaceuticals, Inc. from December 2009 through June 2018 and various other private life sciencecompanies. Dr. Tepper received an M.D. from Harvard Medical School and an A.B. in biochemistry from Princeton University. We believe thatDr. Tepper is qualified to serve on our board of directors due to his experience in the venture capital industry, particularly with biotech andpharmaceutical companies, combined with his experience building and leading research and development operations, serving on the boards ofpublic and private life sciences companies and as faculty and advisory board members of several healthcare institutions.Code of EthicsWe have adopted a written code of business conduct and ethics that applies to our directors, officers, and employees, including our principalexecutive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. A copy of the code isposted on the Corporate Governance section of our website, which is located at www.jouncetx.com. If we make any substantive amendments to,or grant any waivers from, the code of72Table of Contentsbusiness conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a currentreport on Form 8-K. We will provide any person, without charge, a copy of such Code of Business Conduct and Ethics upon written request, whichmay be mailed to 780 Memorial Drive, Cambridge, MA 02139, Attn: Corporate Secretary.Additional information required by this Item 10 will be included in the sections captioned “Proposal 1 - Election of Three Class II Directors,”“Corporate Governance” and “Section 16(a) Beneficial Ownership Reporting Compliance” in our definitive Proxy Statement for our 2019 AnnualMeeting of Stockholders to be filed with the SEC within 120 days of December 31, 2018, which information is incorporated herein by reference.Item 11. Executive CompensationThe information required by this Item 11 will be included in the section captioned “Executive and Director Compensation” in our definitive ProxyStatement for our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31, 2018, which information isincorporated herein by reference.Item 12. Security Ownership of Certain of Beneficial Owners and Management and Related Stockholder MattersThe information required by this Item 12 will be included in the section captioned “Principal Stockholders” and “Equity Compensation PlanInformation” in our definitive Proxy Statement for our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days ofDecember 31, 2018, which information is incorporated herein by reference.Item 13. Certain Relationships and Related Transactions and Director IndependenceThe information required by this Item 13 will be included in the sections captioned “Corporate Governance” and “Transactions with RelatedPersons” in our definitive Proxy Statement for our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days of December 31,2018, which information is incorporated herein by reference.Item 14. Principal Accounting Fees and ServicesThe information required by this Item 14 will be included in the section captioned “Ratification of Selection of Independent Registered PublicAccounting Firm” in our definitive Proxy Statement for our 2019 Annual Meeting of Stockholders to be filed with the SEC within 120 days ofDecember 31, 2018, which information is incorporated herein by reference.73Table of ContentsPART IVItem 15. Exhibits and Financial Statement Schedules(1) Financial StatementsThe following documents are attached hereto and are filed as part of this Annual Report on Form 10-K. Report of Independent Registered Public Accounting FirmF-1Consolidated Balance SheetsF-2Consolidated Statements of OperationsF-3Consolidated Statements of Comprehensive LossF-4Consolidated Statements of Convertible Preferred Stock, Contingently Redeemable Common Stock and Stockholders’ (Deficit)EquityF-5Consolidated Statements of Cash FlowsF-6Notes to Consolidated Financial StatementsF-7(2) Financial Statement SchedulesSchedules have been omitted since they are either not required or not applicable or the information is otherwise included herein.(3) ExhibitsThe exhibits filed or furnished as part of this Annual Report on Form 10-K are listed in the Exhibit Index immediately preceding the signatures,which Exhibit Index is incorporated herein by reference.Item 16. Form 10-K SummaryNone.74Table of ContentsReport of Independent Registered Public Accounting FirmTo the Stockholders and the Board of Directors of Jounce Therapeutics, Inc.Opinion on the Financial StatementsWe have audited the accompanying consolidated balance sheets of Jounce Therapeutics, Inc. (the “Company”) as of December 31, 2018 and2017, the related consolidated statements of operations, comprehensive loss, convertible preferred stock, contingently redeemable common stockand stockholders’ (deficit) equity, and cash flows for each of the two years in the period ended December 31, 2018, and the related notes(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in allmaterial respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows foreach of the two years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.Adoption of ASC 606As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for revenue in 2018 due to theadoption of Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic 606), and the related amendments.Basis for OpinionThese financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’sfinancial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (UnitedStates) (“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 audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is notrequired to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required toobtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of theCompany’s internal control over financial reporting. Accordingly, we express no such opinion.Our audits included performing procedures to 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 anddisclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made bymanagement, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis forour opinion./s/ Ernst & Young LLPWe have served as the Company’s auditor since 2013.Boston, MassachusettsMarch 6, 2019F-1Table of ContentsJounce Therapeutics, Inc.Consolidated Balance Sheets(amounts in thousands, except par value amounts) December 31, 2018 2017Assets: Current assets: Cash and cash equivalents$47,906 $23,559Short-term investments141,968 212,093Prepaid expenses and other current assets2,335 19,945Total current assets192,209 255,597Property and equipment, net13,540 16,151Long-term investments5,990 22,199Other non-current assets 2,713 2,713Total assets $214,452 $296,660Liabilities and stockholders’ equity: Current liabilities: Accounts payable$3,272 $2,849Accrued expenses6,952 8,454Deferred rent and lease incentive, current61 61Deferred revenue, current—related party55,157 51,142Other current liabilities 104 45Total current liabilities65,546 62,551Deferred rent and lease incentive, net of current portion2,062 1,955Deferred revenue, net of current portion—related party42,715 65,018Other non-current liabilities— 27Total liabilities110,323 129,551Commitments and contingencies (Note 15) Stockholders’ equity: Preferred stock, $0.001 par value: 5,000 shares authorized at December 31, 2018 and 2017; no shares issued oroutstanding at December 31, 2018 or 2017— —Common stock, $0.001 par value: 160,000 shares authorized at December 31, 2018 and 2017; 32,948 and 32,265shares issued at December 31, 2018 and 2017, respectively; 32,941 and 32,249 shares outstanding at December 31,2018 and 2017, respectively33 32Additional paid-in capital268,081 257,101Accumulated other comprehensive loss(78) (409)Accumulated deficit(163,907) (89,615)Total stockholders’ equity104,129 167,109Total liabilities and stockholders’ equity$214,452 $296,660The accompanying notes are an integral part of these consolidated financial statements.F-2Table of ContentsJounce Therapeutics, Inc.Consolidated Statements of Operations(amounts in thousands, except per share amounts) Year Ended December 31, 2018 2017Revenue: Collaboration revenue—related party$65,201$71,644Operating expenses: Research and development70,05267,798General and administrative26,44323,061Total operating expenses96,495 90,859Operating loss(31,294) (19,215)Other income, net3,961 2,808Loss before provision for income taxes(27,333) (16,407)Provision for income taxes46 36Net loss$(27,379) $(16,443) Reconciliation of net loss to net loss attributable to common stockholders: Net loss$(27,379) $(16,443)Accrued dividends on Series A convertible preferred stock— (268)Accrued dividends on Series B convertible preferred stock— (318)Accrued dividends on Series B-1 convertible preferred stock— (208)Net loss attributable to common stockholders$(27,379) $(17,237)Net loss per share attributable to common stockholders, basic and diluted$(0.84) $(0.57)Weighted-average common shares outstanding, basic and diluted32,56730,055The accompanying notes are an integral part of these consolidated financial statements.F-3Table of ContentsJounce Therapeutics, Inc.Consolidated Statements of Comprehensive Loss(amounts in thousands) Year Ended December 31, 2018 2017Net loss$(27,379) $(16,443)Other comprehensive income: Unrealized gain on available-for-sale securities 331 24Comprehensive loss$(27,048) $(16,419)The accompanying notes are an integral part of these consolidated financial statements.F-4Table of ContentsJounce Therapeutics, Inc.Consolidated Statements of Convertible Preferred Stock, Contingently Redeemable Common Stock and Stockholders’ (Deficit) Equity(amounts in thousands) Series A ConvertiblePreferred Stock Series B ConvertiblePreferred Stock Series B-1 ConvertiblePreferred Stock ContingentlyRedeemableCommon Stock Common Stock AdditionalPaid-InCapital AccumulatedOtherComprehensiveLoss AccumulatedDeficit TotalStockholders’(Deficit)Equity Shares Amount Shares Amount Shares Amount Amount Shares Amount Balance atDecember 31, 201647,000 47,112 24,779 55,849 10,448 36,077 1,921 2,424 2 4,515 (433) (73,172) (69,088)Issuance ofcommon stock frominitial public offering,net of issuancecosts of $2,529— — — — — — — 7,320 7 106,381 — — 106,388Conversion ofconvertiblepreferred stock intocommon stock uponclosing of initialpublic offering(47,000) (47,112) (24,779) (55,849) (10,448) (36,077) — 22,284 23 139,015 — — 139,038Reclassification ofrestricted stockawards upontermination of putoption— — — — — — (2,191) — — 2,191 — — 2,191Exercise ofcommon stockoptions— — — — — — — 144 — 462 — — 462Vesting of restrictedstock awards— — — — — — — 77 — 32 — — 32Stock-basedcompensationexpense— — — — — — 270 — — 4,505 — — 4,505Othercomprehensiveincome— — — — — — — — — — 24 — 24Net loss— — — — — — — — — — — (16,443) (16,443)Balance atDecember 31, 2017— — — — — — — 32,249 32 257,101 (409) (89,615) 167,109Exercise ofcommon stockoptions— — — — — — — 683 1 1,545 — — 1,546Vesting of restrictedstock awards— — — — — — — 9 — 28 — — 28Stock-basedcompensationexpense— — — — — — — — — 9,407 — — 9,407Othercomprehensiveincome— — — — — — — — — — 331 — 331Cumulative effectadjustment uponadoption of ASC 606— — — — — — — — — — — (46,913) (46,913)Net loss— — — — — — — — — — — (27,379) (27,379)Balance atDecember 31, 2018— $— — $— — $— $— 32,941 $33 $268,081 $(78) $(163,907) $104,129The accompanying notes are an integral part of these consolidated financial statements.F-5Table of ContentsJounce Therapeutics, Inc.Consolidated Statements of Cash Flows(amounts in thousands) Year Ended December 31, 2018 2017Operating activities: Net loss$(27,379) $(16,443)Adjustments to reconcile net loss to net cash used in operating activities: Stock-based compensation expense9,407 4,775Depreciation expense3,831 4,422Net amortization of premiums and discounts on investments(1,107) 1,172Loss on disposal of property and equipment— 75Changes in operating assets and liabilities: Taxes receivable16,737 —Prepaid expenses and other current assets873 (17,416)Other non-current assets— (266)Accounts payable562 373Accrued expenses and other current liabilities(1,443) 4,120Deferred revenue—related party(65,201) (71,644)Deferred rent107 (156)Net cash used in operating activities(63,613)(90,988)Investing activities: Purchases of investments(252,918) (179,874)Proceeds from maturities of investments336,694 141,322Proceeds from sales of investments3,997 15,638Purchases of property and equipment(1,359) (15,107)Net cash provided by (used in) investing activities86,414(38,021)Financing activities: Proceeds from initial public offering of common stock, net of issuance costs— 107,008Proceeds from exercise of stock options1,546 462Net cash provided by financing activities 1,546107,470Net increase (decrease) in cash, cash equivalents and restricted cash24,347 (21,539)Cash, cash equivalents and restricted cash, beginning of period24,829 46,368Cash, cash equivalents and restricted cash, end of period$49,176$24,829Non-cash investing and financing activities: Purchases of property and equipment in accounts payable and accrued expenses$31 $170Supplemental cash flow information: Cash paid for income taxes$— $16,750The accompanying notes are an integral part of these consolidated financial statements.F-6Table of ContentsJounce Therapeutics, Inc.Notes to Consolidated Financial Statements1. Nature of BusinessJounce Therapeutics, Inc. (the “Company”) is a clinical-stage immunotherapy company dedicated to transforming the treatment of cancer bydeveloping therapies that enable the immune system to attack tumors and provide long-lasting benefits to patients. The Company is subject to anumber of risks similar to those of other clinical-stage immunotherapy companies, including dependence on key individuals; the need to developcommercially viable products; competition from other companies, many of which are larger and better capitalized; and the need to obtain adequateadditional financing to fund the development of its products.On February 1, 2017, the Company closed its initial public offering (“IPO”) of 7,319,750 shares of the Company’s common stock at a publicoffering price of $16.00 per share, including 954,750 shares of common stock issued upon the full exercise by the underwriters of their option topurchase additional shares. The gross proceeds from the IPO were $117.1 million and net proceeds were $106.4 million, after deductingunderwriting discounts and commissions and other offering expenses paid by the Company.Upon completion of the IPO, all outstanding preferred stock was automatically converted into an aggregate of 22,283,690 shares of commonstock. In connection with the IPO, the board of directors and the stockholders of the Company approved a one-for-3.69 reverse stock split of theCompany’s issued and outstanding common stock. The reverse stock split became effective on January 13, 2017. All share and per shareamounts in the consolidated financial statements have been retroactively adjusted for all periods presented to give effect to the reverse stocksplit, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.As of December 31, 2018, the Company had cash, cash equivalents, and investments of $195.9 million. The Company expects that its existingcash, cash equivalents and investments will enable it to fund its expected operating expenses and capital expenditure requirements for at least 12months from March 6, 2019, the filing date of this Annual Report on Form 10-K. The Company expects to finance its future cash needs through acombination of equity or debt financings and collaboration arrangements, including potential cash inflows from its Master Research andCollaboration Agreement (the “Celgene Collaboration Agreement”) with Celgene Corporation (“Celgene”).2. Basis of Presentation and Summary of Significant Accounting PoliciesBasis of Presentation and ConsolidationThe accompanying consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities andExchange Commission (the “SEC”) and generally accepted accounting principles in the United States of America (“GAAP”) as found in theAccounting Standards Codification (“ASC”) of the Financial Accounting Standards Board (“FASB”). These consolidated financial statementsinclude the accounts of Jounce Therapeutics, Inc. and its wholly-owned subsidiary, Jounce Mass Securities, Inc., which was established in July2016. All intercompany transactions and balances have been eliminated in consolidation.Segment InformationOperating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chiefoperating decision-maker in deciding how to allocate resources and assess performance. The Company and the Company’s chief operatingdecision maker, the Company’s chief executive officer, views the Company’s operations and manages its business as a single operating segment.The Company operates only in the United States.F-7Table of ContentsUse of EstimatesThe preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect theamounts reported in the financial statements and accompanying notes. On an ongoing basis, the Company’s management evaluates its estimateswhich include, but are not limited to, estimates related to revenue recognized under the Celgene Collaboration Agreement (including estimates ofinternal and external costs expected to be incurred to satisfy performance obligations), accrued expenses, stock-based compensation expenseand income taxes. The Company bases its estimates on historical experience and other market specific or other relevant assumptions it believesto be reasonable under the circumstances. Actual results could differ from those estimates.Fair Value of Financial InstrumentsASC 820, Fair Value Measurement, establishes a fair value hierarchy for instruments measured at fair value that distinguishes betweenassumptions based on market data (observable inputs) and the Company’s own assumptions (unobservable inputs). Observable inputs are inputsthat market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company.Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset orliability, and are developed based on the best information available in the circumstances.ASC 820 identifies fair value as the exchange price, or exit price, representing the amount that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants. As a basis for considering market participant assumptions in fair valuemeasurements, ASC 820 establishes a three-tier fair value hierarchy that distinguishes between the following:•Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities.•Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly orindirectly.•Level 3 inputs are unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would usein pricing the asset or liability. Financial assets and liabilities are classified in their entirety based on the lowest level of input that issignificant to the fair value measurement.To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fairvalue requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instrumentscategorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant tothe fair value measurement.Cash EquivalentsCash equivalents are highly-liquid investments that are readily convertible into cash with original maturities of three months or less whenpurchased. These assets include investment in money market funds that invests in U.S. Treasury obligations.InvestmentsShort-term investments consist of investments with maturities greater than ninety days and less than one year from the balance sheet date. Long-term investments consist of investments with maturities of greater than one year that are not expected to be used to fund current operations. TheCompany classifies all of its investments as available-for-sale securities. Accordingly, these investments are recorded at fair value. Realizedgains and losses, amortization and accretion of discounts and premiums are included in other income, net. Unrealized gains and losses onavailable-for-sale securities are included in other comprehensive income as a component of stockholders’ equity until realized.Property and EquipmentProperty and equipment is recorded at cost and consists of laboratory equipment, furniture and office equipment, computer equipment, leaseholdimprovements, and construction in progress. The Company capitalizes property andF-8Table of Contentsequipment that is acquired for research and development activities and that has alternate future use. Expenditures for maintenance and repairs arerecorded to expense as incurred, whereas major betterments are capitalized as additions to property and equipment. Leasehold improvements aredepreciated over the lesser of their useful life or the term of the lease. Depreciation is calculated over the estimated useful lives of the assetsusing the straight-line method.Impairment of Long-lived AssetsThe Company reviews its property and equipment whenever events or changes in circumstances indicate that the carrying value of certain assetsmight not be recoverable and recognizes an impairment loss when it is probable that an asset’s realizable value is less than the carrying value.Revenue Recognition (Subsequent to Adoption of ASC 606)Effective January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers. Under ASC 606, an entity recognizesrevenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects toreceive in exchange for those goods or services. In applying ASC 606, the Company performs the following five steps: (i) identify the contract(s)with a customer; (ii) identify the promises and performance obligations in the contract; (iii) determine the transaction price; (iv) allocate thetransaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performanceobligations. The Company only applies the five-step model to contracts when it is probable that it will collect the consideration to which it isentitled in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within thescope of ASC 606, the Company assesses the goods or services promised within each contract, determines those that are performanceobligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of thetransaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. See Note 3,“Celgene Collaboration Agreement”, for further information on the application of ASC 606 to the Celgene Collaboration Agreement.Revenue Recognition (Prior to Adoption of ASC 606)Prior to January 1, 2018, the Company recognized revenue in accordance with ASC 605, Revenue Recognition. Revenue was recognized when allof the following criteria were met:•persuasive evidence of an arrangement exists;•delivery has occurred or services have been rendered;•the seller’s price to the buyer is fixed or determinable; and•collectability is reasonably assured.Amounts received prior to satisfying the revenue recognition criteria were recognized as deferred revenue in the Company’s consolidated balancesheets. Amounts expected to be recognized as revenue within the twelve months following the balance sheet date were classified as deferredrevenue, current. Amounts not expected to be recognized as revenue within the twelve months following the balance sheet date were classified asdeferred revenue, net of current portion.Multiple-Element Arrangements (Prior to Adoption of ASC 606)Determination of Units of AccountingWhen evaluating multiple-element arrangements pursuant to ASC 605-25, Revenue Recognition—Multiple-Element Arrangements, the Companyconsidered whether the deliverables under the arrangement represented separate units of accounting. This evaluation required subjectivedeterminations and required management to make judgments about the individual deliverables and whether such deliverables are separable fromthe other aspects of the contractual relationship. In determining the units of accounting, management evaluated certain criteria, including whetherthe deliverables had standalone value, based on the consideration of the relevant facts and circumstances for each arrangement. Theconsideration received was allocated among the separate units of accounting using the relative selling price method, and the applicable revenuerecognition criteria were applied to each of the separateF-9Table of Contentsunits. Deliverables were considered separate units of accounting provided that: (i) the delivered item(s) had value to the customer on a standalonebasis and (ii) if the arrangement included a general right of return relative to the delivered item(s), delivery or performance of the undelivereditem(s) was considered probable and substantially in the control of the Company. In assessing whether an item had standalone value, theCompany considered factors such as the research, manufacturing and commercialization capabilities of the collaboration partner and theavailability of the associated expertise in the general marketplace. In addition, the Company considered whether the collaboration partner coulduse the deliverable(s) for their intended purpose without the receipt of the remaining element(s), whether the value of the deliverable wasdependent on the undelivered item(s) and whether there were other vendors that can provide the undelivered element(s).Under multiple-element arrangements, options were considered substantive if, at the inception of the arrangement, the Company was at risk as towhether the collaboration partner would choose to exercise the option. Factors that the Company considered in evaluating whether an option wassubstantive included the overall objective of the arrangement, the benefit the collaborator might obtain from the arrangement without exercising theoption, the likelihood the option would be exercised, and the cost to exercise the option. When an option was considered substantive, theCompany did not consider the option or item underlying the option to be a deliverable at the inception of the arrangement and the associated optionfees were not included in the allocable arrangement consideration, assuming the option was not priced at a significant and incremental discount.When an option was not considered substantive, the Company would consider the option, including other deliverables contingent upon the exerciseof the option, to be a deliverable at the inception of the arrangement and a corresponding amount would be included in the allocable arrangementconsideration. In addition, if the price of the option included a significant incremental discount, the discount inherent in the option price would beincluded as a deliverable at the inception of the arrangement.Allocation of Arrangement ConsiderationArrangement consideration that is fixed or determinable was allocated among the separate units of accounting using the relative selling pricemethod. Then, the applicable revenue recognition criteria in ASC 605-25 were applied to each of the separate units of accounting in determiningthe appropriate period and pattern of recognition. The Company determined the selling price of a unit of accounting following the hierarchy ofevidence prescribed by ASC 605-25. Accordingly, the Company determined the estimated selling price for units of accounting within eacharrangement using vendor-specific objective evidence (“VSOE”) of selling price, if available, third-party evidence (“TPE”) of selling price if VSOE isnot available, or best estimate of selling price (“BESP”) if neither VSOE nor TPE is available. The Company typically used BESP to estimate theselling price, since it generally did not have VSOE or TPE of selling price for its units of accounting. Determining the BESP for a unit ofaccounting required significant judgment. In developing the BESP for a unit of accounting, the Company considered applicable market conditionsand relevant entity-specific factors, including factors that were contemplated in negotiating the agreement with the customer and estimated costs.The Company validated the BESP for units of accounting by evaluating whether changes in the key assumptions used to determine the BESPwould have a significant effect on the allocation of arrangement consideration between multiple units of accounting.Patterns of RecognitionThe Company recognized arrangement consideration allocated to each unit of accounting when all of the revenue recognition criteria in ASC 605were satisfied for that particular unit of accounting. The Company recognized revenue associated with substantive options upon exercise of theoption if the underlying license had standalone value from the other deliverables to be provided subsequent to delivery of the license. If the licensedid not have standalone value, the amounts allocated to the license option would be combined with the related undelivered items as a single unit ofaccounting.The Company recognized the revenue amounts associated with research and development services and other service related deliverables ratablyover the associated period of performance. If there was no discernible pattern of performance or objectively measurable performance measures didnot exist, then the Company recognized revenue under the arrangement on a straight-line basis over the period the Company was expected tocomplete its performance obligations. If the pattern of performance in which the service is provided to the customer could be determined andobjectively measurable performance existed, then the Company recognized revenue under the arrangement using the proportional performancemethod. Revenue recognized was limited to the lesser of theF-10Table of Contentscumulative amount of payments received and the cumulative amount of revenue earned, as determined using the straight-line method orproportional performance, as applicable, as of each reporting period.Recognition of Milestones and RoyaltiesAt the inception of an arrangement that included milestone payments, the Company evaluated whether each milestone was substantive and at riskto both parties on the basis of the contingent nature of the milestone. This evaluation included an assessment of whether (i) the consideration wascommensurate with either the Company’s performance to achieve the milestone or the enhancement of performance to achieve the milestone,(ii) the consideration related solely to past performance and (iii) the consideration was reasonable relative to all of the deliverables and paymentterms within the arrangement. The Company evaluated factors such as clinical, regulatory, commercial and other risks that must be overcome toachieve the respective milestone and the level of effort and investment required to achieve the respective milestone in making this assessment.There was considerable judgment involved in determining whether a milestone satisfied all of the criteria required to conclude that a milestone wassubstantive. In accordance with ASC 605-28, Revenue Recognition—Milestone Method, clinical and regulatory milestones that were consideredsubstantive would be recognized as revenue in their entirety upon successful accomplishment of the milestone, assuming all other revenuerecognition criteria were met. Milestones that were not considered substantive would be recognized as revenue over the remaining period ofperformance, assuming all other revenue recognition criteria were met. Revenue from commercial milestones payments would be recorded asrevenue upon achievement of the milestone, assuming all other recognition criteria were met.Research and Development ExpensesExpenditures relating to research and development are expensed as incurred. Research and development expenses include external expensesincurred under arrangements with third parties, academic and non-profit institutions and consultants; salaries and personnel-related costs, includingnon-cash stock-based compensation expense; license fees to acquire in-process technology and other expenses, which include direct andallocated expenses for laboratory, facilities and other costs.Intellectual Property ExpensesThe Company expenses costs associated with intellectual property-related matters as incurred and classifies such costs as general andadministrative expenses within the consolidated statements of operations.Stock-based CompensationThe Company accounts for share-based payments in accordance with ASC 718, Compensation—Stock Compensation. ASC 718 requires allshare-based payments to employees, including grants of employee stock options, restricted stock awards (“RSAs”) and restricted stock units(“RSUs”), to be recognized as expense in the consolidated statements of operations based on their grant date fair values. For stock optionsgranted to employees and to members of the Company’s Board of Directors for their services on the Board of Directors, the Company estimatesthe grant date fair value of each stock option using the Black-Scholes option-pricing model. For RSUs and RSAs granted to employees, theCompany estimates the grant date fair value of each award using intrinsic value, which is based on the value of the underlying common stock lessany purchase price. For share-based payments subject to service-based vesting conditions, the Company recognizes stock-based compensationexpense equal to the grant date fair value of share-based payment on a straight-line basis over the requisite service period. The Black‑Scholes option pricing model requires the input of certain subjective assumptions, including (i) the calculation of expected term of theshare-based payment, (ii) the risk‑free interest rate, (iii) the expected stock price volatility and (iv) the expected dividend yield. The Company usesthe simplified method as proscribed by SEC Staff Accounting Bulletin No. 107 to calculate the expected term for stock options granted toemployees as the Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expectedterm. The Company determines the risk‑free interest rate based on a treasury instrument whose term is consistent with the expected term of thestock options. Because there had been no public market for the Company’s common stock prior to the IPO, there is a lack of Company‑specifichistorical and implied volatility data. Accordingly, the Company bases its estimates of expected volatility on the historical volatility of a group ofpublicly-traded companiesF-11Table of Contentswith similar characteristics to itself, including stage of product development and therapeutic focus within the life sciences industry. Historicalvolatility is calculated over a period of time commensurate with the expected term of the share-based payment. The Company uses an assumeddividend yield of zero as the Company has never paid dividends on its common stock, nor does it expect to pay dividends on its common stock inthe foreseeable future.The Company accounts for forfeitures of all share-based payments when such forfeitures occur.Income TaxesIncome taxes are recorded in accordance with ASC 740, Income Taxes, which provides for deferred taxes using an asset and liability approach.The Company recognizes deferred tax assets and liabilities for the expected future tax consequences of events that have been included in theconsolidated financial statements or tax returns. Deferred tax assets and liabilities are determined based on the difference between the financialstatement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Avaluation allowance against deferred tax assets is recorded if, based on the weight of the available evidence, it is more likely than not that some orall of the deferred tax assets will not be realized.The Company accounts for uncertain tax positions using a more-likely-than-not threshold for recognizing and resolving uncertain tax positions. Theevaluation of uncertain tax positions is based on factors, including, but not limited to, changes in the law, the measurement of tax positions takenor expected to be taken in tax returns, the effective settlement of matters subject to audit, new audit activity and changes in facts orcircumstances related to a tax position.Comprehensive LossComprehensive loss is comprised of net loss and other comprehensive income. Other comprehensive income for all periods presented consistssolely of unrealized gains on available-for-sale securities.Net Loss per ShareBasic net loss per share is calculated by dividing net loss attributable to common stockholders by the weighted average number of share commonshares outstanding during the period. Diluted net loss per share is calculated by dividing the net loss attributable to common stockholders by theweighted-average number of common equivalent shares outstanding for the period, including any dilutive effect from convertible preferred stock,outstanding stock options, unvested RSAs or unvested RSUs.The Company follows the two-class method when computing net loss per share for periods when issued shares that meet the definition ofparticipating securities are outstanding. The two-class method calls for the calculation of net loss per share for each class of common andparticipating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class methodrequires income available to common stockholders to be allocated between common and participating securities based upon their respective rightsto received dividends as if all income for the period had been distributed. Net losses are not allocated to the Company’s preferred stockholders asthey do not have an obligation to share in the Company’s net losses.Concentrations of Credit Risk and Off-Balance Sheet RiskFinancial instruments that potentially expose the Company to concentrations of credit risk primarily consist of cash, cash equivalents andinvestments. The Company maintains its cash and cash equivalent balances with high-quality financial institutions and, consequently, theCompany believes that such funds are subject to minimal credit risk. The Company’s cash equivalents and investments are comprised of moneymarket funds that are invested in U.S. Treasury obligations, corporate debt securities, U.S. Treasury obligations and government agencysecurities. Credit risk in these securities is reduced as a result of the Company’s investment policy to limit the amount invested in any singleissuer and to only invest in securities of a high credit quality. The Company has no significant off-balance sheet risk such as foreign exchange contracts, option contracts or other foreign hedgingarrangements.F-12Table of ContentsRecent Accounting PronouncementsIn May 2014, the FASB issued Accounting Standards Update (“ASU”) 2014-09, Revenue from Contracts with Customers (Topic 606), whichsupersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company torecognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects toreceive for those goods or services. This guidance was originally effective for interim and annual periods beginning after December 15, 2016 andallowed for adoption using a full retrospective method, or a modified retrospective method. Subsequent to the issuance of ASU 2014-09, the FASBalso issued the following updates related to ASC 606:•In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers (Topic 606): Deferral of the Effective Date,whereby the effective date for the new revenue standard was deferred by one year. As a result of ASU 2015-14, the new revenue standardis now effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2017, and early adoptionwas permitted for annual periods beginning after December 15, 2016, including interim periods within that annual period.•In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers (Topic 606): Principal versus AgentConsiderations (Reporting Revenue Gross versus Net), to clarify the implementation guidance on principal versus agent considerations.•In April 2016, the FASB issued ASU 2016-10, Revenue from Contracts with Customers (Topic 606): Identifying Performance Obligationsand Licensing, to clarify the principle for determining whether a good or service is “separately identifiable” from other promises in thecontract and to clarify the categorization of licenses of intellectual property.•In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements andTechnical Expedients, to clarify guidance on transition, determining collectability, non-cash consideration and the presentation of salesand other similar taxes.•In December 2016, the FASB issued ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts withCustomers, that allows entities not to make qualitative disclosures about remaining performance obligations in certain cases, addsdisclosure requirements for entities that elect certain optional exemptions and adds twelve additional technical corrections andimprovements to the new revenue standard.The Company adopted ASC 606 effective January 1, 2018 under the modified retrospective method. The modified retrospective method requiresthat the cumulative effect of initially applying ASC 606 be recognized as an adjustment to the opening balance of retained earnings or accumulateddeficit of the annual period that includes the date of initial application. Accordingly, during the first quarter of 2018, the Company recorded anincrease to the opening balance of accumulated deficit and a corresponding increase to deferred revenue of $46.9 million related to the CelgeneCollaboration Agreement.Additionally, the following tables present a summary of the amount by which each financial statement line item was affected as of and during theyear ended December 31, 2018 by the application of ASC 606 as compared to ASC 605, the revenue recognition guidance that was in effectbefore this change in accounting principle (in thousands, except per share amounts): December 31, 2018 ASC 606 ASC 605 DifferenceDeferred revenue, current—related party$55,157 $42,174 $12,983Deferred revenue, net of current portion—related party$42,715 $22,844 $19,871Total liabilities$110,323 $77,469 $32,854Accumulated deficit$(163,907) $(131,053) $(32,854)Total stockholders’ equity$104,129 $136,983 $(32,854)F-13Table of Contents Year Ended December 31, 2018 ASC 606 ASC 605 DifferenceCollaboration revenue—related party$65,201 $51,142 $14,059Net loss$(27,379) $(41,438) $14,059Net loss per share attributable to common stockholders, basic and diluted$(0.84) $(1.27) $0.43The application of ASC 606 did not have an impact on the Company’s net cash used in operating activities for the year ended December 31, 2018,but did result in offsetting adjustments to net loss and the change in deferred revenue presented within the consolidated statement of cash flowsfor that period.Both the cumulative adjustment of $46.9 million recorded upon the initial application of ASC 606 and the differences outlined above are primarilyattributable to the transition from recognizing revenue on a straight-line basis over the estimated performance period for each unit of accounting,which was a permitted method of revenue recognition under ASC 605, to recognizing revenue based on the Company’s pattern of performance foreach performance obligation under ASC 606. As part of the adoption of ASC 606, the Company implemented new processes to objectivelymeasure the performance under the Celgene Collaboration Agreement. See Note 3, “Celgene Collaboration Agreement”, for further information onthe application of ASC 606 to the Celgene Collaboration Agreement.In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which requires a lessee to recognize assets and liabilities on the balancesheet for operating leases and changes many key definitions, including the definition of a lease. The new standard includes a short-term leaseexception for leases with a term of 12 months or less, as part of which a lessee can make an accounting policy election not to recognize leaseassets and lease liabilities. Lessees will continue to differentiate between finance leases (previously referred to as capital leases) and operatingleases using classification criteria that are substantially similar to the previous guidance. In July 2018, the FASB also issued ASU 2018-11,Leases (Topic 842): Targeted Improvements, which permits entities to continue applying legacy guidance in ASC 840, Leases, including itsdisclosure requirements, in the comparative periods presented in the year that the entity adopts the new leasing standard. The new standard willbe effective for annual reporting periods beginning after December 15, 2018, including interim periods within those annual reporting periods, andearly adoption is permitted for public entities. The Company will adopt this new standard on January 1, 2019 using the transition method permittedby ASU 2018-11. The Company has identified the population of leases subject to this new guidance, and it expects to utilize the package ofpractical expedients outlined within ASC 842-10-65-1(f), the hindsight practical expedient outlined within ASC 842-10-65-1(g) and the practicalexpedient related to not separating nonlease components permitted by ASC 842-10-15-37. The Company expects to record lease assets and leaseliabilities upon adoption of this guidance, and it is in the process of completing its calculation of these amounts.In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and CashPayments, which is intended to reduce diversity in practice in how entities present certain types of cash transactions in the statement of cashflows. This guidance also clarifies how the predominance principle should be applied when classifying cash receipts and cash payments that haveattributes of more than one class of cash flows. This guidance became effective for annual reporting periods beginning after December 15, 2017,including interim periods within those annual reporting periods. Accordingly, the Company adopted ASU 2016-15 effective January 1, 2018, andthere was not a material impact to the consolidated financial statements as a result of the adoption of this guidance.In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which requires entities to show thechange in the total of cash, cash equivalents, restricted cash and restricted cash equivalents within the statement of cash flows. As a result,entities no longer separately present transfers between unrestricted cash and restricted cash. This guidance became effective for annual reportingperiods beginning after December 15, 2017, including interim periods within those annual reporting periods. Accordingly, the Company adoptedASU 2016-18 effective January 1, 2018 using a retrospective transition method, and there was not a material impact to the consolidated financialstatements as a result of the adoption of this guidance. See Note 7, “Restricted Cash”, for incremental disclosures associated with the adoption ofASU 2016-18.F-14Table of ContentsIn May 2017, the FASB issued ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting. This guidanceis intended to provide clarity and reduce diversity in practice as to when changes to the terms or conditions of share-based payments areaccounted for as modifications. Under this new guidance, entities are required to apply modification accounting if the fair value, vesting conditionsor classification of the award changes. This guidance became effective for annual reporting periods beginning after December 15, 2017, includinginterim periods within those annual reporting periods, and early adoption was permitted. The guidance per ASU 2017-09 is to be adoptedprospectively to an award modified on or after the adoption date. The Company adopted ASU 2017-09 effective January 1, 2018, and there was noimpact to the consolidated financial statements as a result of the adoption of this guidance.In June 2018, the FASB issued ASU 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-BasedPayment Accounting. This guidance is intended to simplify the accounting for share-based payments to nonemployees by aligning it with theaccounting for share-based payments to employees, with certain exceptions. This guidance will be effective for annual reporting periods beginningafter December 15, 2018, including interim periods within those annual reporting periods, and early adoption is permitted. The Company does notanticipate a material impact to the consolidated financial statements as a result of the adoption of this guidance.In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the DisclosureRequirements for Fair Value Measurement, which eliminates, adds and modifies certain disclosure requirements for fair value measurements. Thisguidance will be effective for annual reporting periods beginning after December 15, 2019, including interim periods within those annual reportingperiods, and early adoption is permitted. More specifically, an entity is permitted to early adopt any removed or modified disclosure requirementsimmediately and delay adoption of additional disclosure requirements until the effective date of this guidance. The Company does not anticipate amaterial impact to the consolidated financial statements as a result of the adoption of this guidance.In November 2018, the FASB issued ASU 2018-18, Collaborative Arrangements (Topic 808): Clarifying the Interaction between Topic 808 andTopic 606, which clarifies that certain transactions between participants in a collaborative arrangement should be accounted for under ASC 606when the counterparty is a customer. In addition, ASU 2018-18 adds unit-of-account guidance to ASC Topic 808, Collaborative Arrangements, inorder to align this guidance with ASC 606 and also precludes an entity from presenting consideration from a transaction in a collaborativearrangement as revenue from contracts with customers if the counterparty is not a customer for that transaction. This guidance will be effective forannual reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods, and early adoption ispermitted. The Company is currently evaluating the potential impact that ASU 2018-18 may have on the consolidated financial statements.3. Celgene Collaboration AgreementIn July 2016, the Company entered into the Celgene Collaboration Agreement. The primary goal of the collaboration is to co-develop and co-commercialize innovative biologic immunotherapies that either activate or suppress the immune system by binding to targets identified byleveraging the Company’s Translational Science Platform. Under the Celgene Collaboration Agreement, the Company granted Celgene exclusiveoptions to develop and commercialize the Company’s lead product candidate, vopratelimab (formerly JTX-2011), and up to four early-stageprograms, consisting of targets to be selected from a pool of certain B cell, T regulatory cell and tumor-associated macrophage targets.Additionally, Celgene has an exclusive option to develop and commercialize the Company’s product candidate JTX-4014, an anti-PD-1 antibody,which, upon exercise of such option, will be a shared program that may be used by both parties in and outside of the collaboration. Prior toCelgene exercising any of its options, the Company is responsible for all research and development activities under the Celgene CollaborationAgreement.The Company received a non-refundable upfront cash payment of $225.0 million in July 2016 upon the execution of the Celgene CollaborationAgreement. The Company also received $36.1 million from the sale of 10,448,100 shares of Series B-1 convertible preferred stock upon theexecution of a Series B-1 Preferred Stock Purchase Agreement with Celgene, which shares converted into 2,831,463 shares of common stockupon the completion of the IPO. If Celgene elects to exercise any of the program options, Celgene will pay the Company an option-exercise fee of$10.0 million to $60.0 million that varies by program, with an aggregate of $182.5 million if Celgene exercises all six program options. The initialresearch term of the collaboration is four years, which can be extended, at Celgene’sF-15Table of Contentsoption, annually for up to three additional years for additional consideration that ranges from $30.0 million to $45.0 million per year, for anaggregate of $120.0 million if the term is extended for an additional three years.In January 2019, Celgene and Bristol-Myers Squibb Company (“BMS”) announced an agreement under which Celgene will be acquired by BMS,subject to shareholder and regulatory approvals.Worldwide Development Cost and U.S. Operating Profit and Loss SharingUpon the exercise of each program option, the parties will enter into a co-development and co-commercialization agreement (“Co-Co Agreements”)or, in the case of JTX-4014, a license agreement (“JTX-4014 License Agreement”) that governs the development and commercialization of theapplicable program. Although the agreements will not be executed unless and until Celgene exercises an option, the parties have agreed to theterms of the Co-Co Agreements and the JTX-4014 License Agreement as part of the Celgene Collaboration Agreement.Under the Co-Co Agreements and the JTX-4014 License Agreement, the Company will share with Celgene the U.S. profits or losses anddevelopment costs on such collaboration program as follows:•The Company will retain 60 percent of the U.S. operating profits or losses arising from commercialization of vopratelimab, with 40 percentallocated to Celgene.•The Company will retain 25 percent of the U.S. operating profits or losses arising from commercialization of the first program (the “LeadProgram”), other than vopratelimab or JTX-4014, for which an IND is filed under the collaboration, with 75 percent allocated to Celgene.Celgene has a one-time right to substitute and swap the economics and governance of this program with that of another program for whichit exercises an option (other than vopratelimab and JTX-4014).•The Company and Celgene will equally share U.S. operating profits or losses arising from commercialization of up to three additionalprograms (other than vopratelimab, JTX-4014 or the Lead Program) (the “Other Programs”).•The Company and Celgene will share all development costs, other than for JTX-4014, in accordance with the applicable Co-CoAgreements, of which Celgene’s portion of the costs range from 67 percent to 85 percent.If Celgene exercises its option for a program other than JTX-4014, the Company will enter into a Co-Co Agreement, pursuant to which Celgene willhave the exclusive right to develop and commercialize the products arising out of such collaboration program outside of the United States, and theCompany will be eligible to receive tiered royalties ranging from a high single digit to mid-teen percentage rate on net product sales outside of theUnited States. Under each Co-Co Agreement, the Company will also have the right to opt out of profit sharing and instead receive milestones androyalties.Furthermore, if Celgene exercises its option for JTX-4014, the Company will enter into the JTX-4014 License Agreement, pursuant to whichCelgene and the Company will each have equal rights to develop and commercialize JTX-4014 in combination with other proprietary molecules intheir or the Company’s respective pipelines or in combination with products arising out of collaboration programs. Subject to terms specified in thelicense agreement for JTX-4014, the party owning the proprietary molecule that is combined with JTX-4014, if such molecule does not arise from acollaboration program with Celgene, will be solely responsible for all development and commercialization costs related to such combination. If JTX-4014 is combined with a product arising from a collaboration program, then the parties will share costs and, if co-packaged or co-formulated, profitsor losses in accordance with the Co-Co Agreements for such other product.F-16Table of ContentsMilestones and RoyaltiesUnder the Co-Co Agreements and the JTX-4014 License Agreement, Celgene is required to pay the Company for specified development,regulatory and commercial milestones, if achieved, up to approximately $2.3 billion, across all collaboration programs. The developmentmilestones are payable on initiation of certain clinical trials and range from $32.5 million to $105.0 million, per program, with an aggregate total of$290.0 million. The regulatory approval milestones are payable upon regulatory approval in the United States and outside the United States andrange from $7.5 million to $50.0 million per milestone, with an aggregate total of $700.0 million. The commercial milestones are payable uponachievement of specified aggregate product sales outside the United States for each program and range from $40.0 million to $200.0 million permilestone, with an aggregate total of $1.270 billion. The Company is also eligible to receive royalties on product sales outside the United Statesranging from high single digit to mid-teen royalties.Exercise of OptionsCelgene may exercise its option for a program at any time until the expiration of an option term for that program. For each program, the option termends 45 to 60 days following Celgene’s receipt of a data package that includes certain information relating to the program’s research anddevelopment activities. The data package for a program may be delivered to Celgene after the applicable development milestone for such programhas been achieved. Depending on the program, the applicable development milestone is (i) IND acceptance, (ii) availability of certain Phase 1adata or (iii) availability of certain Phase 1/2 data. If Celgene fails to exercise its option during the option term for a program, the Company willcontinue to retain all rights to such program. If Celgene exercises its option for a program other than JTX-4014, then the Company will enter into aCo-Co Agreement with Celgene for such program in substantially the form attached to the agreement as an exhibit.Under the Co-Co Agreement for vopratelimab and one additional program for which Celgene opts in, other than JTX-4014, the Company will beresponsible for leading development and commercialization activities in the United States and Celgene will be responsible for development andcommercialization activities outside the United States. For all other additional programs for which Celgene opts in, other than JTX-4014, Celgenewill lead development and commercialization activities worldwide.If Celgene exercises its option for JTX-4014, the Company and Celgene will enter into a license agreement, in substantially the form attached tothe agreement as an exhibit, pursuant to which the Company and Celgene will both be able to equally access JTX-4014 for combinations withineach other’s portfolios and with other molecules that are subject to the agreement, subject to joint governance. Once Celgene opts in with respectto a given program, Celgene and the Company must each use commercially reasonable efforts to develop and commercialize the correspondingproduct in the United States.TerminationAt any point during the Celgene Collaboration Agreement, including during the research, development and clinical trial process, or during the termof the applicable co-development and co-commercialization or license agreement, respectively, Celgene can terminate the applicable agreementwith the Company in its entirety, or with respect to any program under the Celgene Collaboration Agreement, upon 120 days’ notice and canterminate the entire agreement with the Company in connection with a material breach of the agreement by the Company that remains uncured for90 days.ExclusivityDuring the Celgene Collaboration Agreement’s research term (i.e., for four years plus up to three one-year extensions that Celgene may elect), theCompany may not alone, or with a third party, research, develop, manufacture or commercialize a biologic that binds to ICOS or a defined pool ofB cell, T regulatory cell or tumor-associated macrophage targets that meet certain criteria, each termed a “Collaboration Exclusive Target”, andinhibit, activate or otherwise modulate the activity of such Collaboration Exclusive Target. In addition, if Celgene exercises its option for a programwithin the Celgene Collaboration Agreement, other than JTX-4014, then until termination or expiration of the applicable Co-Co Agreement for suchprogram, the Company may not directly or indirectly research, develop, manufacture or commercialize, outside of the Celgene CollaborationAgreement, any biologic with specified activity against that program’s Collaboration Exclusive Target.F-17Table of ContentsAccounting Analysis under ASC 606Identification of the Contract(s)The Company assessed the Celgene Collaboration Agreement and concluded that it represents a contract with a customer within the scope ofASC 606. The Company also concluded that each of the Co-Co Agreements and the JTX-4014 License Agreement, if executed in the future, wouldrepresent separate contracts apart from the Celgene Collaboration Agreement.Identification of Promises and Performance ObligationsThe Company determined that the Celgene Collaboration Agreement contains the following promises: (i) research and development services for theproduct candidate, vopratelimab (“Vopratelimab Research Services”) (ii) research and development services for the product candidate, JTX-4014(“JTX-4014 Research Services”) (iii) research and development services associated with the Lead Program and Other Programs (“Lead and OtherPrograms Research Services”), (iv) research services associated with target screening (“Target Screening Services”), (v) non-transferable, limitedsub-licensable and non-exclusive licenses to use the Company’s intellectual property and the Company’s rights in the collaboration intellectualproperty to conduct certain activities, on a program-by-program basis (the “Research Licenses”), (vi) various record-keeping and reportingrequirements on a program-by-program basis, (vii) exclusivity provisions with respect to each Collaboration Exclusive Target and biologics bindingto such Collaboration Exclusive Targets and (viii) establishment of and participation in a joint steering committee (the “JSC”) and a joint patentcommittee (the “JPC”). The Company also evaluated the six program options as well as the research term extension options and concluded thatnone convey a material right to Celgene. Accordingly, neither the program options nor the research term extension options are considered to bepromises within the Celgene Collaboration Agreement.The Company assessed the above promises and concluded that each of the Vopratelimab Research Services, JTX-4014 Research Services, Leadand Other Programs Research Services and Target Screening Services are both capable of being distinct and distinct within the context of theCelgene Collaboration Agreement. Therefore, the Company has concluded that each of the Vopratelimab Research Services, JTX-4014 ResearchServices, Lead and Other Programs Research Services and Target Screening Services represent separate performance obligations.The Company determined that the Research Licenses are not distinct within the context of the Celgene Collaboration Agreement as the ResearchLicenses allow Celgene to evaluate the results of the research and development services performed by the Company and the right to perform itsduties under the Celgene Collaboration Agreement, but do not provide Celgene with any commercialization rights. Celgene can only benefit fromthe Research Licenses in conjunction with the related research and development services. Accordingly, the Research Licenses related tovopratelimab, JTX-4014 and the Lead and Other Programs have been combined with their respective research and development servicesperformance obligations.Similarly, the Company also determined that the various record-keeping and reporting requirements related to each program and the exclusivityprovisions with respect to each Collaboration Exclusive Target and biologics binding to such Collaboration Exclusive Targets are not distinct withinthe context of the Celgene Collaboration Agreement. Accordingly, the various record-keeping and reporting requirements on a program-by-programbasis and the exclusivity provisions with respect to each Collaboration Exclusive Target and biologics binding to such Collaboration ExclusiveTargets have been combined with their respective research and development services performance obligations.Finally, the Company assessed its participation in the JSC and the JPC and concluded that, while it does meet the definition of a performanceobligation, it is both quantitatively and qualitatively immaterial in the context of the Celgene Collaboration Agreement. Accordingly, the Companyhas disregarded its participation in the JSC and the JPC as a performance obligation.Determination of Transaction PriceAs noted above, the Company received a non-refundable upfront cash payment of $225.0 million upon the execution of the Celgene CollaborationAgreement. This upfront payment represents an element of fixed consideration under the Celgene Collaboration Agreement. Celgene alsopurchased 10,448,100 shares of Series B-1 convertible preferred stock (“Series B-1 Preferred Stock”) for gross proceeds of $36.1 million, whichF-18Table of Contentsshares converted into 2,831,463 shares of common stock upon the completion of the IPO. The Company determined the shares of Series B-1Preferred Stock were sold at fair value. Therefore, the proceeds from the issuance of Series B-1 Preferred Stock did not impact the transactionprice to be allocated to the performance obligations.The Company evaluated as possible variable consideration the milestones, royalties, development cost sharing and profit sharing provisionsdiscussed above. The Company concluded that none of these items represent variable consideration under the Celgene Collaboration Agreementas all such amounts are dependent upon the execution of a related Co-Co Agreement or the JTX-4014 License Agreement. The Co-Co Agreementsand the JTX-4014 License Agreement, if executed in the future, would represent separate contracts apart from the Celgene CollaborationAgreement.The Company also considered the existence of any significant financing component within the Celgene Collaboration Agreement given its upfrontpayment structure. Based upon this assessment, the Company concluded that any difference between the promised consideration and the cashselling price of the services under the Celgene Collaboration Agreement arises for reasons other than the provision of financing, and the differencebetween those amounts is proportional to the reason for the difference. Accordingly, the Company has concluded that the upfront paymentstructure of the Celgene Collaboration Agreement does not result in the existence of a significant financing component.Based upon the above considerations, the Company has concluded that the transaction price associated with the Celgene CollaborationAgreement consists solely of the upfront payment of $225.0 million.Allocation of Transaction Price to Performance ObligationsThe Company has allocated the transaction price to each performance obligation on a relative standalone selling price basis. For all performanceobligations, the Company determined the standalone selling price using estimates of the costs to perform the research and development services,including expected internal and external costs for services and supplies, adjusted to reflect a reasonable profit margin. The total estimated cost ofthe research and development services reflects the nature of the services to be performed and the Company’s best estimate of the length of timerequired to perform the services.Recognition of RevenueThe Company recognizes revenue related to the Celgene Collaboration Agreement over time as the services related to each performanceobligation are rendered. The Company has concluded that an input method under ASC 606 is a representative depiction of the transfer of servicesunder the Celgene Collaboration Agreement. The method of measuring progress towards delivery of the services incorporates actual internal andexternal costs incurred, relative to total internal and external costs expected to be incurred to satisfy the performance obligations. The period overwhich total costs are estimated reflects the Company’s estimate of the period over which it will perform the research and development services todeliver a pre-defined data package to Celgene for each program subject to an option. The Company recognizes revenue for each performanceobligation over periods ranging from twelve months to four years. Changes in estimates of total internal and external costs expected to be incurredare recognized in the period of change as a cumulative catch-up adjustment.For the year ended December 31, 2018, the Company recognized collaboration revenue of $65.2 million under the Celgene CollaborationAgreement related to the $225.0 million upfront payment received in 2016. As of December 31, 2018, the Company has $97.9 million of deferredrevenue, which is classified as either current or net of current portion in the accompanying consolidated balance sheets based on the period overwhich the revenue is expected to be recognized. This deferred revenue balance represents the aggregate amount of the transaction price allocatedto the performance obligations that are partially unsatisfied as of December 31, 2018. The Company expects to recognize revenue related to theseperformance obligations through July 2020.F-19Table of ContentsThe following table presents changes in the Company’s contract liabilities during the year ended December 31, 2018 (in thousands): Balance as of Balance as of January 1, 2018 Additions Reductions December 31, 2018Contract liabilities: Deferred revenue$163,073 $— $(65,201) $97,872Totals$163,073 $— $(65,201) $97,872The reductions to the deferred revenue contract liability during the year ended December 31, 2018 were comprised of revenue recognized forresearch and development services performed, as well as a cumulative catch-up adjustment of $7.1 million arising from changes in costsestimated to be incurred under the Celgene Collaboration Agreement.All revenue recognized during the year ended December 31, 2018 was included within the beginning balance of the deferred revenue contractliability.As of December 31, 2018, the Company had not received any option exercise, research term extension, milestone or royalty payments under theCelgene Collaboration Agreement.Accounting Analysis under ASC 605Prior to January 1, 2018, the Company recognized revenue related the Celgene Collaboration Agreement in accordance with ASC 605. Under ASC605, the Company determined that the Celgene Collaboration Agreement included six deliverables: (i) the Vopratelimab Research Services, (ii) theJTX-4014 Research Services, (iii) the Lead and Other Programs Research Services, (iv) the Target Screening Services, (v) the Research Licensesand (vi) participation in the JSC.The six program options were considered substantive as the Company was at risk with regard to whether Celgene would exercise the options as aresult of the significant uncertainties related to drug discovery, research and development given the significant development risk of the targetssubject to the options. Additionally, there was also significant uncertainty regarding Celgene’s exercise of the option for JTX-4014 because,although not a novel immunotherapy agent, the Company identified a significant development risk associated with its ability to advance thedevelopment of JTX-4014 in a commercially viable manner in a short time frame. The research term extensions were also considered substantiveoptions based upon the risk that Celgene would exercise the research term extension. In addition, the substantial option exercise paymentspayable by Celgene upon exercise of each option were not priced at a significant and incremental discount. Accordingly, the substantive optionswere not considered deliverables at the inception of the arrangement and the associated option exercise payments were not included in allocablearrangement consideration. The Company also determined that any obligations contingent upon the exercise of a substantive option were notconsidered deliverables at the outset of the arrangement.The Target Screening Services and participation in the JSC deliverables each had standalone value from the other undelivered elements andtherefore were separate units of accounting. The Company determined that the research licenses for the vopratelimab and JTX-4014 programs didnot have value to Celgene on a standalone basis primarily as a result of the fact that the research licenses allow Celgene to evaluate the results ofthe research and development services performed by the Company and the right to perform its duties under the agreement, but do not provideCelgene with any commercialization rights. Therefore, the Company determined that the research licenses did not have value to Celgene withoutthe performance of the Vopratelimab Research Services and JTX-4014 Research Services and therefore were not separable from the VopratelimabResearch Services and JTX-4014 Research Services. The Vopratelimab Research Services were separate and distinct from the JTX-4014Research Services, and therefore, the research license and the Vopratelimab Research Services were a separate combined unit of accounting andthe research license and the JTX-4014 Research Services were a separate combined unit of accounting. The Lead and Other Programs ResearchServices deliverable did not include separate and distinct services and Celgene could use the Lead and Other Programs Research Services for itsintended purpose without receipt of the research licenses that could be delivered for the Lead Program and Other Programs. The Lead and OtherPrograms Research Services therefore were combined with the licenses that could beF-20Table of Contentsdelivered for the Lead Program and Other Programs, which had an insignificant value, as a separate combined unit of accounting.The allocable arrangement consideration consisted of the upfront fee of $225.0 million. As described above, Celgene also purchased 10,448,100shares of Series B-1 Preferred Stock for gross proceeds of $36.1 million. The Company determined the shares of Series B-1 Preferred Stock weresold at fair value. Therefore, the proceeds from the issuance of Series B-1 convertible preferred stock did not have an impact on the arrangementconsideration that was allocated to the units of accounting. The Company allocated the allocable arrangement consideration based on the relativeselling price of each unit of accounting. For all units of accounting, the Company determined the selling price using BESP. The Companydetermined the BESP based on internal estimates of the costs to perform the services, including expected internal and external costs for servicesand supplies, adjusted to reflect a reasonable profit margin. The total cost of the research and development services reflected the nature of theservices to be performed and the Company’s best estimate of the length of time required to perform the services. The Company determined thatthe BESP of the participation in the JSC was insignificant and therefore no consideration was allocated to this unit of accounting. Therefore, thetotal allocable arrangement consideration was allocated to the Vopratelimab Research Services, the JTX-4014 Research Services, the Lead andOther Programs Research Services and the Target Screening Services.The Company recognized the consideration allocated to each unit of accounting on a straight-line basis, as there was no discernible pattern orobjective measure of performance of the services, over the estimated performance period. The estimated performance period reflected theCompany’s estimate of the period over which it would perform the separate and distinct research and development services to deliver a pre-defineddata package to Celgene for each program subject to an option. The performance periods for each unit of accounting ranged from twelve months tofour years.The Company evaluated the milestones in the Celgene Collaboration Agreement, the Co-Co Agreements, and the JTX-4014 License Agreement todetermine if they were substantive. In evaluating if a milestone was substantive, the Company assessed whether: (i) the consideration wascommensurate with either the Company’s performance to achieve the milestone or the enhancement of the value of the delivered item(s) as aresult of a specific outcome resulting from the Company’s performance to achieve the milestone, (ii) the consideration related solely to pastperformance and (iii) the consideration was reasonable relative to all of the deliverables and payment terms within the arrangement. Alldevelopment and regulatory milestones in the Celgene Collaboration Agreement, the Co-Co Agreements and the JTX-4014 License Agreementwere considered substantive on the basis of the contingent nature of the milestone, specifically reviewing factors such as the scientific, clinical,regulatory and other risks that must be overcome to achieve the milestone as well as the level of effort and investment required. Accordingly, theCompany concluded that such amounts would be recognized in the period in which the associated milestone was achieved, assuming all otherrevenue recognition criteria were met. All commercial milestones would be accounted for in the same manner as royalties and recorded as revenueupon achievement of the milestone, assuming all other revenue recognition criteria were met.Under ASC 605, the Company recognized collaboration revenue of $71.6 million for year ended December 31, 2017. As of December 31, 2017, theCompany had $116.2 million of deferred revenue, which was classified as either “current” or “net of current portion” in the accompanyingconsolidated balance sheets based on the period over which the revenue was expected to be recognized.4. Fair Value MeasurementsThe Company measures the fair value of money market funds, U.S. Treasuries and government agency securities based on quoted prices inactive markets for identical securities. Investments also include corporate debt securities which are valued either based on recent trades ofsecurities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated byobservable market data.The carrying amounts reflected in the consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable andaccrued expenses approximate their fair values, due to their short-term nature.F-21Table of ContentsAssets measured at fair value on a recurring basis as of December 31, 2018 were as follows (in thousands): Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) Significant UnobservableInputs(Level 3)Money market funds, included in cash equivalents$41,434 $41,434 $— $—Investments: Corporate debt securities67,843 — 67,843 —U.S. Treasuries53,758 53,758 — —Government agency securities32,829 32,829 — —Totals$195,864 $128,021 $67,843 $—Assets measured at fair value on a recurring basis as of December 31, 2017 were as follows (in thousands): Total Quoted Prices inActive Markets forIdentical Assets(Level 1) Significant OtherObservable Inputs(Level 2) Significant UnobservableInputs(Level 3)Money market funds, included in cash equivalents$21,059 $21,059 $— $—Investments: Corporate debt securities65,173 — 65,173 —U.S. Treasuries110,948 110,948 — —Government agency securities58,171 58,171 — —Totals$255,351 $190,178 $65,173 $—There were no changes in valuation techniques or transfers between the fair value measurement levels during the years ended December 31, 2018or 2017. There were no liabilities measured at fair value on a recurring basis as of December 31, 2018 or 2017.5. InvestmentsShort-term investments consist of investments with maturities greater than ninety days and less than one year from the balance sheet date. Long-term investments consist of investments with maturities of greater than one year that are not expected to be used to fund current operations. TheCompany classifies all of its investments as available-for-sale securities. Accordingly, these investments are recorded at fair value. Realizedgains and losses, amortization and accretion of discounts and premiums are included in other income, net. Unrealized gains and losses onavailable-for-sale securities are included in other comprehensive income as a component of stockholders’ equity until realized.F-22Table of ContentsCash equivalents, short-term investments and long-term investments as of December 31, 2018 were comprised as follows (in thousands): December 31, 2018 Amortized Cost Unrealized Gains Unrealized Losses Fair ValueCash equivalents and short-term investments: Money market funds, included in cash equivalents$41,434 $— $— $41,434Corporate debt securities65,887 2 (39) 65,850U.S. Treasuries53,765 1 (8) 53,758Government agency securities28,866 — (34) 28,832Total cash equivalents and short-term investments189,952 3(81)189,874Long-term investments: Corporate debt securities2,001 — (8) 1,993Government agency securities3,989 8 — 3,997Total long-term investments5,990 8(8)5,990Total cash equivalents and investments$195,942 $11$(89)$195,864Cash equivalents, short-term investments and long-term investments as of December 31, 2017 were comprised as follows (in thousands): December 31, 2017 Amortized Cost Unrealized Gains Unrealized Losses Fair ValueCash equivalents and short-term investments: Money market funds, included in cash equivalents$21,059 $— $— $21,059Corporate debt securities58,136 — (64) 58,072U.S. Treasuries111,049 — (101) 110,948Government agency securities43,204 — (131) 43,073Total cash equivalents and short-term investments233,448 — (296) 233,152Long-term investments: Corporate debt securities7,117 — (16) 7,101Government agency securities15,195 — (97) 15,098Total long-term investments22,312 — (113) 22,199Total cash equivalents and investments$255,760 $— $(409) $255,351As of December 31, 2018 and 2017, the aggregate fair value of securities that were in an unrealized loss position for less than twelve months was$81.4 million and $113.9 million, respectively. As of December 31, 2018 and 2017, the aggregate fair value of securities that were in an unrealizedloss position for more than twelve months was $22.3 million and $107.9 million, respectively. As of December 31, 2018, the Company did notintend to sell, and would not be more likely than not required to sell, the securities in an unrealized loss position before recovery of their amortizedcost bases. Furthermore, the Company determined that there was no material change in the credit risk of these securities. As a result, theCompany determined it did not hold any securities with any other-than-temporary impairment as of December 31, 2018.There were immaterial realized gains and losses on available-for-sale securities during the years ended December 31, 2018 and 2017.F-23Table of Contents6. Prepaid Expenses and Other Current AssetsPrepaid expenses and other current assets as of December 31, 2018 and 2017 were comprised as follows (in thousands): December 31, 2018 2017Prepaid expenses$1,921 $2,196Taxes receivable— 16,737Interest receivable on investments414 969Other current assets— 43Total prepaid expenses and other current assets$2,335 $19,945Taxes receivable decreased from December 31, 2017 to December 31, 2018 due to the Company’s receipt of $16.8 million in federal and stateincome tax refunds during the year ended December 31, 2018.7. Restricted CashAs of both December 31, 2018 and 2017, the Company maintained non-current restricted cash of $1.3 million. This amount is included within“Other non-current assets” in the accompanying consolidated balance sheets and is comprised solely of a letter of credit required pursuant to thelease for the Company’s corporate headquarters.The following table provides a reconciliation of cash, cash equivalents and restricted cash that sums to the total of the same such amounts shownin the consolidated statements of cash flows (in thousands): Year EndedDecember 31, 2018 Year EndedDecember 31, 2017 Beginning of Period End of Period Beginning of Period End of PeriodCash and cash equivalents$23,559 $47,906 $44,848 $23,559Restricted cash1,270 1,270 1,520 1,270Cash, cash equivalents and restricted cash$24,829 $49,176 $46,368 $24,8298. Property and Equipment, NetProperty and equipment, net as of December 31, 2018 and 2017 was comprised as follows (in thousands): Estimated Useful Life (inYears) December 31, 2018 2017Laboratory equipment5 $10,435 $9,409Furniture and office equipment4 1,071 1,038Computer equipment3 1,505 1,380Leasehold improvementsShorter of useful life orremaining lease term 8,534 8,498Total property and equipment, gross 21,545 20,325Less: accumulated depreciation (8,005) (4,174)Total property and equipment, net $13,540 $16,151Depreciation expense for the years ended December 31, 2018 and 2017 was $3.8 million and $4.4 million, respectively.F-24Table of Contents9. Accrued ExpensesAccrued expenses as of December 31, 2018 and 2017 were comprised as follows (in thousands): December 31, 2018 2017Employee compensation and benefits$4,063 $3,683External research and professional services2,796 4,647Lab consumables and other93 124Total accrued expenses$6,952$8,45410. Common StockThe Company is authorized to issue 160,000,000 shares of common stock. Holders of common stock are entitled to one vote per share. Holdersof common stock are entitled to receive dividends, if and when declared by the Board of Directors.As of December 31, 2018 and 2017, the Company had reserved for future issuance the following number of shares of common stock (inthousands): December 31, 2018 2017Shares reserved for vesting of restricted stock awards7 16Shares reserved for vesting of restricted stock units371 —Shares reserved for exercises of outstanding stock options5,023 4,868Shares reserved for future issuances under the 2017 Stock Option and Incentive Plan1,114 1,032Total shares reserved for future issuance6,515 5,91611. Preferred StockSeries A Preferred StockAt various closing dates during the years ended December 31, 2015, 2014 and 2013, the Company issued 47,000,000 shares of Series Aconvertible preferred stock (“Series A Preferred Stock”) for $1.00 per share. The shares were issued in exchange for cash proceeds of $44.6million, net of issuance costs of $0.1 million, and the exchange of approximately $2.3 million in outstanding convertible promissory notes,including accrued interest.Series B Preferred StockDuring the year ended December 31, 2015, the Company issued 24,778,761 shares of Series B convertible preferred stock (“Series B PreferredStock”) for $2.26 per share. This issuance resulted in cash proceeds of $55.8 million, net of issuance costs of $0.2 million.Series B-1 Preferred StockDuring the year ended December 31, 2016, the Company issued 10,448,100 shares of Series B-1 Preferred Stock to Celgene for $3.46 per share.This issuance resulted in cash proceeds of $36.1 million, net of issuance costs of $0.1 million.Conversion of Preferred Stock Upon IPOPrior to the Company’s IPO, the holders of the Company’s Series A Preferred Stock, Series B Preferred Stock and Series B-1 Preferred Stock hadcertain voting rights, dividend rights, liquidation preferences and conversion privileges. Upon completion of the Company’s IPO, all shares ofoutstanding convertible preferred stock were automatically converted into an aggregate of 22,283,690 shares of common stock. All rights,preferences and privileges associated with the outstanding convertible preferred stock were terminated upon this conversion.F-25Table of ContentsThe Company is now authorized to issue 5,000,000 shares of undesignated preferred stock in one or more series. As of December 31, 2018, noshares of preferred stock were issued or outstanding.12. Stock-based Compensation2013 Stock Option and Grant PlanIn February 2013, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2013 Stock Option and Grant Plan(the “2013 Plan”), as amended and restated, under which it could grant incentive stock options (“ISOs”), non-qualified stock options, RSAs andRSUs to eligible employees, officers, directors, and consultants. The 2013 Plan was subsequently amended in January 2015, April 2015, July2015, March 2016 and October 2016 to allow for the issuance of additional shares of common stock.2017 Stock Option and Incentive PlanIn January 2017, the Company’s Board of Directors adopted and the Company’s stockholders approved the 2017 Stock Option and Incentive Plan(the “2017 Plan”), which became effective immediately prior to the effectiveness of the Company’s IPO. Upon the adoption of the 2017 Plan, nofurther awards will be granted under the 2013 Plan.The 2017 Plan provides for the grant of ISOs, non-qualified stock options, RSAs, RSUs, stock appreciation rights and other stock-based awards.The Company’s employees, officers, directors and consultants and advisors are eligible to receive awards under the 2017 Plan. The terms ofawards, including vesting requirements, are determined by the Board of Directors, subject to the provisions of the 2017 Plan.The Company initially registered 1,753,758 shares of common stock under the 2017 Plan, which was comprised of (i) 1,510,000 shares of commonstock reserved for issuance under the 2017 Plan, plus (ii) 243,758 shares of common stock originally reserved for issuance under the 2013 Planthat became available for issuance under the 2017 Plan upon the completion of the Company’s IPO. The 2017 Plan also provides that anadditional number of shares will automatically be added to the shares authorized for issuance under the 2017 Plan on January 1, 2018 and eachJanuary 1st thereafter. The number of shares added each year will be equal to the lesser of (i) 4% of the outstanding shares on the immediatelypreceding December 31st or (ii) such amount as determined by the Compensation Committee of the Board of Directors. Effective January 1, 2018,1,290,609 additional shares were automatically added to the shares authorized for issuance under the 2017 Plan.As of December 31, 2018, there were 1,113,539 shares available for future issuance under the 2017 Plan.2017 Employee Stock Purchase PlanIn January 2017, the Board of Directors adopted and the Company’s stockholders approved the 2017 Employee Stock Purchase Plan (the “2017ESPP”), which became effective upon the closing of the Company’s IPO. The Company initially reserved 302,000 shares of common stock forfuture issuance under the 2017 ESPP. The 2017 ESPP also provides that an additional number of shares will automatically be added to the sharesauthorized for issuance under the 2017 ESPP on January 1, 2018 and each January 1st thereafter through January 1, 2027. The number of sharesadded each year will be equal to the lesser of (i) 1% of the outstanding shares on the immediately preceding December 31st, (ii) 603,000 shares or(iii) such amount as determined by the Compensation Committee of the Board of Directors. Effective January 1, 2018, 322,652 additional shareswere automatically added to the shares authorized for issuance under the 2017 ESPP. No offering periods under the 2017 ESPP had been initiatedas of December 31, 2018.F-26Table of ContentsStock-based Compensation ExpenseTotal stock-based compensation expense recognized in the consolidated statements of operations for the years ended December 31, 2018 and2017 was as follows (in thousands): Year Ended December 31, 2018 2017Research and development$4,540 $2,840General and administrative4,867 1,935Total stock-based compensation expense$9,407 $4,775Founder AwardsFrom December 2012 to February 2013, the Company issued 1,395,659 shares of restricted stock to non-employee founders (the “Founders”). Ofthe total restricted stock awarded to the Founders, 1,043,357 shares vested over one to four years, based on each Founder’s continued servicerelationship with the Company in varying capacities as advisors, as prescribed by the grantee’s individual restricted stock purchase agreements.The remaining 352,302 shares vested upon the determination by the Board of Directors of a Founder’s achievement of certain performanceobjectives, as set forth in the agreements. These performance criteria were linked to certain milestones specific to the Company’s research anddevelopment goals, including but not limited to preclinical and clinical development milestones related to the Company’s product candidates. As ofDecember 31, 2018, all restricted stock awards issued to Founders were vested.Restricted stock awards granted to two Founders originally contained options that enabled the Founders to sell their vested shares back to theCompany at fair value upon both (i) the termination of the consulting agreement between the Founder and the Company for any reason and (ii) thedetermination by the Founder’s employer that the ownership of the restricted stock is in violation of the employer’s conflict of interest policy. Theoccurrence of these events was determined to be outside of the Founders’ and the Company’s control. As such, these restricted stock awardswere previously recorded on the consolidated balance sheet as contingently redeemable common stock, residing in temporary equity, inaccordance with the classification guidance of ASC 718, Compensation—Stock Compensation, and ASC 480, Distinguishing Liabilities fromEquity. In June 2017, the restricted stock purchase agreements related to the two Founders were amended such that these options expired onJuly 26, 2017. Accordingly, these restricted stock awards were reclassified from contingently redeemable common stock to additional paid-incapital as of that date.RSA ActivityPursuant to RSA agreements originally issued under the terms of the 2013 Plan, the Company, at its discretion, has the option to repurchaseunvested shares underlying RSAs at the initial purchase price if the employees or non-employees terminate their service relationships with theCompany. The shares underlying RSAs are recorded in stockholders’ equity as they vest.The following table summarizes RSA activity for the year ended December 31, 2018 (in thousands, except per share amounts): RSAs Weighted-Average GrantDate Fair Value per ShareUnvested as of December 31, 201716 $—Issued— $—Vested(9) $—Repurchased— $—Unvested as of December 31, 20187 $—The aggregate fair value of RSAs that vested during the years ended December 31, 2018 and 2017, based upon the fair values of the stockunderlying the RSAs on the day of vesting, was less than $0.1 million and $1.3 million, respectively.F-27Table of ContentsRSU ActivityThe Company has also granted RSUs to its employees under the 2017 Plan. The following table summarizes RSU activity for the year endedDecember 31, 2018 (in thousands, except per share amounts): RSUs Weighted-Average GrantDate Fair Value per ShareUnvested as of December 31, 2017— $—Issued388 $8.02Vested— $—Cancelled(17) $8.02Unvested as of December 31, 2018371 $8.02No RSUs vested during the years ended December 31, 2018 or 2017.As of December 31, 2018, there was unrecognized stock-based compensation expense related to unvested RSUs of $2.4 million, which theCompany expects to recognize over a weighted-average period of approximately 1.6 years.Stock Option ActivityThe fair value of stock options granted to employees and directors during the years ended December 31, 2018 and 2017 was calculated on thedate of grant using the following weighted-average assumptions: Year Ended December 31, 2018 2017Risk-free interest rate2.7% 2.1%Expected dividend yield—% —%Expected term (in years)6.0 6.1Expected volatility65.2% 70.1%Using the Black-Scholes option pricing model, the weighted-average grant date fair value of stock options granted to employees and directorsduring the years ended December 31, 2018 and 2017 was $12.88 and $10.96 per share, respectively.The following table summarizes changes in stock option activity during the year ended December 31, 2018 (in thousands, except per shareamounts): Options Weighted-AverageExercise Price Weighted-AverageRemaining ContractualTerm (in years) Aggregate IntrinsicValueOutstanding at December 31, 20174,868 $6.28 7.9 $35,178Granted1,581 $21.15 Exercised(683) $2.26 Cancelled(743) $14.95 Outstanding at December 31, 20185,023 $10.23 7.6 $3,133Exercisable at December 31, 20182,733 $5.91 6.8 $3,014The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018 and 2017 was $5.7 million and $1.9 million,respectively.As of December 31, 2018, there was unrecognized stock-based compensation expense related to unvested stock options of $19.7 million, whichthe Company expects to recognize over a weighted-average period of approximately 2.3 years.F-28Table of Contents13. Income TaxesThe provision for income taxes for the years ended December 31, 2018 and 2017 was comprised as follows (in thousands): Year Ended December 31, 2018 2017Current taxes: Federal$— $—State46 36Total current taxes46 36Deferred taxes: Federal— —State— —Total deferred taxes— —Total provision for income taxes$46 $36The Tax Cuts and Jobs Act (the “Tax Act”) was enacted on December 22, 2017 and introduced significant changes to United States income taxlaw. Among these changes, the federal statutory tax rate was reduced to 21%, net operating loss (“NOL”) carrybacks are no longer permitted andNOLs generated in years beginning after December 31, 2017 may be carried forward indefinitely, subject to a limitation of 80% of taxable income.In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”) to address the application of GAAP in situations when aregistrant does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete theaccounting for certain income tax effects of the Tax Act. Due to the timing of the enactment and the complexity involved in applying the provisionsof the Tax Act, the Company made reasonable estimates of the effects and recorded provisional amounts in its consolidated financial statementsas of and for the year ended December 31, 2017. In accordance with SAB 118, the Company determined that the revaluation of its deferred taxassets and associated valuation allowance reduction of $9.4 million were provisional amounts as of December 31, 2017. The accounting for thetax effects of the Tax Act was completed during the year ended December 31, 2018, and no adjustments were made to these provisional amounts.A reconciliation of the federal statutory income tax rate to the Company’s effective tax rate is as follows: Year Ended December 31, 2018 2017Income tax computed at federal statutory tax rate21.0 % 34.0 %Deferred tax effects from the Tax Act— % (57.2)%State taxes, net of federal benefit10.3 % 4.7 %Tax credit carryforwards12.2 % 26.8 %Non-deductible income (expense)— % (4.9)%Change in valuation allowance(42.7)% (1.8)%Other(1.0)% (1.8)%Effective tax rate(0.2)% (0.2)%F-29Table of ContentsThe principal components of the Company’s deferred tax assets and liabilities as of December 31, 2018 and 2017 were comprised as follows (inthousands): December 31, 2018 2017Deferred tax assets: Net operating loss carryforwards$37,417 $26,926Tax credit carryforwards12,751 8,432Deferred revenue26,739 31,735Deferred lease incentive103 120Deferred rent476 431Intangibles552 237Accrued expenses and other1,091 995Unrealized loss on available-for-sale securities39 112Stock-based compensation2,119 713Total deferred tax assets81,287 69,701Less: valuation allowance(55,348) (30,850)Net deferred tax assets25,939 38,851Deferred tax liabilities: Section 481(a) method change(25,653) (38,481)Depreciation(286) (370)Total deferred tax liabilities(25,939) (38,851)Net deferred taxes$— $—The Company has incurred NOLs since inception. As of December 31, 2018, the Company had federal and state NOL carryforwards of $136.4million and $138.7 million, respectively. Federal NOLs generated through the year ended December 31, 2017 expire at various dates from 2032through 2037, and federal NOLs generated during the year ended December 31, 2018 may be carried forward indefinitely. State NOLs expire atvarious dates from 2032 through 2038. As of December 31, 2018, the Company had federal research and development tax credit carryforwards of$9.3 million which expire at various dates from 2032 through 2038. In addition, as of December 31, 2018, the Company had state research anddevelopment and investment tax credit carryforwards of $3.8 million and $0.6 million, respectively. The state research and development tax creditcarryforwards expire at various dates from 2029 through 2033 and the state investment tax credit carryforwards expire at various dates from 2019through 2021.Management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are principallycomprised of NOL carryforwards, tax credit carryforwards, deferred revenue and stock-based compensation. Management has determined that it ismore likely than not that the Company will not realize the benefits of its deferred tax assets, and as a result, a valuation allowance of $55.3 millionhas been established at December 31, 2018. The increase in the valuation allowance of $24.5 million during the year ended December 31, 2018was primarily due to the increase in the deferred tax asset related to deferred revenue upon the adoption of ASC 606 as well as the additionaloperating loss generated by the Company.NOL and tax credit carryforwards are subject to review and possible adjustment by the Internal Revenue Service (“IRS”) and may become subjectto an annual limitation in the event of certain cumulative changes in the ownership interest of significant shareholders over a three-year period inexcess of 50% as defined under Sections 382 and 383 in the Internal Revenue Code (“IRC”). This could limit the amount of tax attributes that canbe utilized annually to offset future taxable income or tax liabilities. The amount of the annual limitation is determined based on the Company’svalue immediately prior to the ownership change. An IRC Section 382 study, completed in August 2016, identified three previous ownershipchanges for purposes of IRC Section 382. As a result of these ownership changes, the Company’s NOL and tax credit carryforwards allocable tothe periods preceding each such ownership change are subject to limitations under IRC Section 382. Subsequent ownership changes may furtheraffect the limitation in future years.F-30Table of ContentsThe Company had no unrecognized tax benefits as of either December 31, 2018 or 2017. During the year ended December 31, 2017, the Companycompleted a study of its research and development credit carryforwards generated during the years ended December 31, 2016 and 2015. TheCompany has not conducted a study of its research and development credit carryforwards generated during the year ended December 31, 2018.This study may result in an adjustment to the Company’s research and development credit carryforwards; however, until a study is completed andany adjustment is known, no amounts are being presented as an uncertain tax position. A full valuation allowance has been provided against theCompany’s research and development credit carryforwards, and if an adjustment is required, this adjustment would be offset by an adjustment tothe valuation allowance. Thus, there would be no impact to the consolidated statements of operations if an adjustment were required.Interest and penalty charges, if any, related to income taxes would be classified as a component of the provision for income taxes in theconsolidated statements of operations. As of December 31, 2018, the Company has not incurred any interest or penalty charges.The Company files income tax returns in the United States federal tax jurisdiction and the Massachusetts state tax jurisdiction. Since theCompany is in a loss carryforward position, it is generally subject to examination by federal and state tax authorities for all tax years in which aloss carryforward is available.14. Related-party TransactionsIn July 2016, the Company entered into the Celgene Collaboration Agreement and a Series B-1 Preferred Stock Purchase Agreement withCelgene. Under the Celgene Collaboration Agreement, the Company received a non-refundable upfront payment of $225.0 million. Under the SeriesB-1 Preferred Stock Purchase Agreement, Celgene purchased 10,448,100 shares of Series B-1 Preferred Stock for $36.1 million. These shares ofSeries B-1 Preferred Stock converted into 2,831,463 shares of common stock upon the completion of the Company’s IPO. In addition, an affiliateof Celgene purchased 625,000 shares of the Company’s common stock in the January 2017 IPO at the public offering price of $16.00 per share fora total of $10.0 million.15. Commitments and ContingenciesOperating LeasesIn November 2016, the Company entered into an operating lease agreement to occupy 51,000 square feet of laboratory and office space inCambridge, Massachusetts. This facility serves as the Company’s current corporate headquarters. The lease term began on November 1, 2016and extends to March 31, 2025. The Company has the option to extend the lease term for one consecutive five-year period, at the market rate, bygiving the landlord written notice of its election to exercise the extension at least twelve months prior to the original expiration of the lease term.The Company is recording rent expense on a straight-line basis through the end of the lease term and has recorded deferred rent on theconsolidated balance sheets. The lease also provided the Company with a tenant improvement allowance of $0.5 million. The Company recordedthe tenant improvement allowance as a deferred lease incentive and is amortizing the deferred lease incentive through a reduction of rent expenseratably over the lease term. Leasehold improvements related to this facility are being amortized over the shorter of their useful life or the leaseterm. The Company provided the landlord with a security deposit in the form of a letter of credit in the amount of $1.3 million, which is recorded asrestricted cash in other non-current assets in the consolidated balance sheets.F-31Table of ContentsAs of December 31, 2018, the future minimum lease payments due under the operating lease for the Company’s corporate headquarters are asfollows (in thousands):Years Ended December 31,Minimum Lease Payments2019$4,26020204,38020214,50520224,63320234,7642024 and thereafter6,142Total future minimum lease payments$28,684The Company leased its former corporate headquarters under an operating lease that was originally set to expire on October 15, 2018. Under thislease, the Company was recording rent expense on a straight-line basis through the end of the lease term and was recording deferred rent on theconsolidated balance sheets. The lease also provided the Company with a tenant improvement allowance of $2.8 million. The Company wasrecording the tenant improvement allowance as a deferred lease incentive and was amortizing the deferred lease incentive through a reduction ofrent expense ratably over the lease term. In March 2015, the Company entered into a three-year sublease agreement to lease additional lab andoffice facilities at the same location as its former corporate headquarters.On May 19, 2017, the Company entered into a Lease Termination Agreement and a Sublease Termination Agreement (collectively, the “LeaseTermination Agreements”) with its landlord related to the leases for its former corporate headquarters. As a result of the Lease TerminationAgreements, rental payments for the Company’s former corporate headquarters ceased on May 31, 2017, with the exception of certain space thatwas utilized through August 31, 2017. The Lease Termination Agreements required the Company to pay an aggregate early termination fee of $0.7million, which was paid in the second quarter of 2017. This early termination fee was recorded as a component of rent expense. In addition, theremaining deferred rent and deferred lease incentive balances related to the Company’s former corporate headquarters were recognized in full asreductions of rent expense.During the years ended December 31, 2018 and 2017, the Company recorded total rent expense of $4.0 million and $3.5 million, respectively.License and Collaboration AgreementsThe Company has entered into various license agreements for certain technology. The Company could be required to make aggregate technical,clinical development and regulatory milestone payments of up to $13.4 million and low single-digit royalty payments based on a percentage of netsales of licensed products. As of December 31, 2018, the Company had made $0.2 million in aggregate milestone payments under these licenseagreements. The Company may cancel these agreements at any time by providing 30 to 90 days’ notice to the licensors, and all payments notpreviously due would no longer be owed.The Company has also entered into collaboration agreements with various third parties for research services and access to proprietary technologyplatforms. Under these collaboration agreements, the Company could be required to make aggregate technical, clinical development and regulatorymilestones payments ranging from $12.5 million to $12.9 million per product candidate and low single-digit royalty payments based on apercentage of net sales on a product-by-product basis. As of December 31, 2018, the Company had made $0.5 million in aggregate milestonepayments under these collaboration agreements.16. 401(k) Savings PlanThe Company has a defined-contribution savings plan under Section 401(k) of the IRC (the “401(k) Plan”). The 401(k) Plan covers all employeeswho meet defined minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pretaxbasis. Beginning on January 1, 2018, the Company matches 50% of an employee’s 401(k) contributions up to a maximum of 6% of theparticipant’s salary, subject to employer match limitations under the IRC. As such, the Company made $0.5 million in contributions to the 401(k)Plan for the year ended December 31, 2018. The Company did not make any contributions to the 401(k) Plan for the year ended December 31,2017.F-32Table of Contents17. Net Loss per ShareFor purposes of the diluted loss per share calculation, outstanding stock options, unvested RSAs and unvested RSUs are considered to bepotentially dilutive securities, however the following amounts were excluded from the calculation of diluted net loss per share because their effectwould be anti-dilutive (in thousands): Year Ended December 31, 2018 2017Outstanding stock options5,023 4,868Unvested RSAs7 16Unvested RSUs371 —Total5,401 4,884F-33Table of ContentsEXHIBIT INDEXExhibit No. Description of Exhibit3.1 Fourth Amended and Restated Certificate of Incorporation of the Registrant (incorporated by reference to Exhibit 3.1 of the Registrant’s Annual Report onForm 10-K (File No. 001-37998) filed March 8, 2018)3.2 Amended and Restated Bylaws of the Registrant (incorporated by reference to Exhibit 3.2 of the Registrant’s Annual Report on Form 10-K (File No. 001-37998) filed March 8, 2018)4.1 Specimen Common Stock Certificate (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statement on Form S-1 (File No. 333-215372) filed December 30, 2016)4.2 Amended and Restated Investors’ Rights Agreement by and among the Registrant and certain of its stockholders, dated April 17, 2015 as amended(incorporated by reference to Exhibit 4.2 of the Registrant’s Registration Statement on Form S-1 (File No. 333-215372) filed December 30, 2016)10.1# Jounce Therapeutics, Inc. 2017 Stock Option and Grant Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.1 of theRegistrant’s Registration Statement on Form S-1/A (File No. 333-215372) filed January 17, 2017)10.2# Form of Restricted Stock Unit Award Agreement under 2017 Stock Option and Incentive Plan (for employees) (incorporated by reference to Exhibit 10.1of the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37998) filed August 9, 2018)10.3# Jounce Therapeutics, Inc. 2013 Stock Option and Grant Plan and forms of award agreements thereunder (incorporated by reference to Exhibit 10.2 of theRegistrant’s Annual Report on Form 10-K (File No. 001-37998) filed March 8, 2018)10.4# Jounce Therapeutics, Inc. 2017 Employee Stock Purchase Plan, As Amended (incorporated by reference to Exhibit 10.1 of the Registrant’s QuarterlyReport on Form 10-Q (File No. 001-37998) filed November 13, 2017)10.5# Amended and Restated Non-Employee Director Compensation Policy (incorporated by reference to Exhibit 10.1 of the Registrant’s Quarterly Report onForm 10-Q (File No. 001-37998) filed November 13, 2018)10.6# Amended and Restated Employment Agreement between Richard Murray and the Registrant, dated January 6, 2017 (incorporated by reference to Exhibit10.4 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-215372) filed January 17, 2017)10.7# Amended and Restated Employment Agreement between Kim Drapkin and the Registrant, dated January 6, 2017 (incorporated by reference to Exhibit10.5 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-215372) filed January 17, 2017)10.8# Amended and Restated Employment Agreement between Elizabeth Trehu and the Registrant, dated January 6, 2017 (incorporated by reference to Exhibit10.6 of the Registrant’s Registration Statement on Form S-1/A (File No. 333-215372) filed January 17, 2017)10.9# Employment Agreement between Hugh Cole and the Registrant, dated August 14, 2017 (incorporated by reference to Exhibit 10.8 of the Registrant’sAnnual Report on Form 10-K (File No. 001-37998) filed March 8, 2018)10.10# Form of Director Indemnification Agreement (incorporated by reference to Exhibit 10.12 of the Registrant’s Registration Statement on Form S-1 (File No.333-215372) filed December 30, 2016)10.11# Form of Officer Indemnification Agreement (incorporated by reference to Exhibit 10.13 of the Registrant’s Registration Statement on Form S-1/A (File No.333-215372) filed January 17, 2017)10.12# Senior Executive Cash Incentive Bonus Plan (incorporated by reference to Exhibit 10.14 of the Registrant’s Registration Statement on Form S-1/A (FileNo. 333-215372) filed January 17, 2017)10.13 Lease Agreement between ARE-770/784/790 Memorial Drive, LLC and the Registrant, dated November 1, 2016 (incorporated by reference to Exhibit10.11 of the Registrant’s Registration Statement on Form S-1 (File No. 333-215372) filed December 30, 2016)10.14 Lease Termination Agreement by and between Cambridge 1030 Mass Ave, LLC (as successor in interest to HCP/LFREP Ventures I, LLC) and theRegistrant, dated May 19, 2017 (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K (File No. 001-37998) filed May23, 2017)10.15 Sublease Termination Agreement by and between Manus Biosynthesis, Inc. and the Registrant, dated May 19, 2017 (incorporated by reference to Exhibit10.2 to the Registrant’s Current Report on Form 8-K (File No. 001-37998) filed May 23, 2017)10.16† Amended and Restated Exclusive License Agreement between Sloan Kettering Institute for Cancer Research, Memorial Sloan Kettering Cancer Centerand Memorial Hospital for Cancer and the Registrant, dated September 28, 2015 (incorporated by reference to Exhibit 10.9 of the Registrant’s RegistrationStatement on Form S-1 (File No. 333-215372) filed December 30, 2016)10.17† Master Research and Collaboration Agreement between Celgene Corporation, Celgene Rivot LLC and the Registrant, dated July 18, 2016 (incorporatedby reference to Exhibit 10.10 of the Registrant’s Registration Statement on Form S-1 (File No. 333-215372) filed December 30, 2016)21.1* List of Subsidiaries of the Registrant23.1* Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant toSection 302 of the Sarbanes-Oxley Act of 200231.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant toSection 302 of the Sarbanes-Oxley Act of 200232.1+ Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of theSarbanes-Oxley Act of 2002101* The following materials from the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, formatted in eXtensible BusinessReporting Language (XBRL): (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Operations, (iii) Consolidated Statements ofComprehensive Loss, (iv) Consolidated Statements of Convertible Preferred Stock, Contingently Redeemable Common Stock and Stockholders’ (Deficit)Equity, (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements * Filed herewith+ Furnished herewith# Indicates a management contract or any compensatory plan, contract or arrangement† Confidential treatment granted as to portions of the exhibit. Confidential materials omitted and filed separately with the Securities and Exchange Commission pursuant to Rule 406 of the Securities Act of 1933, as amended.Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signedon its behalf by the undersigned, thereunto duly authorized. JOUNCE THERAPEUTICS, INC. Date: March 6, 2019By:/s/ Richard Murray Richard Murray, Ph.D. President and Chief Executive OfficerPursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Signature Title Date/s/ Richard Murray President, Chief Executive Officer and Director (PrincipalExecutive Officer) March 6, 2019Richard Murray, Ph.D. /s/ Kim C. Drapkin Treasurer and Chief Financial Officer(Principal Financial and Accounting Officer) March 6, 2019Kim C. Drapkin /s/ Perry A. Karsen Chairman of the Board of Directors March 6, 2019Perry A. Karsen /s/ Barbara Duncan Director March 6, 2019Barbara Duncan /s/ Cary G. Pfeffer Director March 6, 2019Cary G. Pfeffer, M.D. /s/ J. Duncan Higgons Director March 6, 2019J. Duncan Higgons /s/ Robert Kamen Director March 6, 2019Robert Kamen, Ph.D. /s/ Robert Tepper Director March 6, 2019Robert Tepper, M.D. /s/ Luis A. Diaz, Jr. Director March 6, 2019Luis A. Diaz, Jr., M.D. Exhibit 21.1Subsidiaries of the RegistrantName Jurisdiction of Organization Percentage OwnershipJounce Mass Securities, Inc. Massachusetts 100% Exhibit 23.1Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-3 No. 333-223518) of Jounce Therapeutics, Inc.,(2)Registration Statement (Form S-8 No. 333-215794) pertaining to the Jounce Therapeutics, Inc. 2013 Stock Option and Grant Plan, theJounce Therapeutics, Inc. 2017 Stock Option and Incentive Plan and the Jounce Therapeutics, Inc. 2017 Employee Stock Purchase Plan,and(3)Registration Statement (Form S-8 No. 333-223519) pertaining to the Jounce Therapeutics, Inc. 2017 Stock Option and Incentive Plan andthe Jounce Therapeutics, Inc. 2017 Employee Stock Purchase Plan;of our report dated March 6, 2019, with respect to the consolidated financial statements of Jounce Therapeutics, Inc. included in this AnnualReport (Form 10-K) for the year ended December 31, 2018./s/ Ernst & Young LLP Boston, MassachusettsMarch 6, 2019Exhibit 31.1CERTIFICATIONSI, Richard Murray, certify that:1. I have reviewed this Annual Report on Form 10-K of Jounce 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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer 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 the registrant and have:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin 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 aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 6, 2019By:/s/ Richard Murray Richard Murray, Ph.D. President and Chief Executive Officer (Principal Executive Officer)Exhibit 31.2CERTIFICATIONSI, Kim C. Drapkin, certify that:1. I have reviewed this Annual Report on Form 10-K of Jounce 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 makethe statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered bythis report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respectsthe financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer 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 the registrant and have:a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under oursupervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by otherswithin 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 aboutthe effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; andd. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s mostrecent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely tomaterially affect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, tothe registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which arereasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; andb. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internalcontrol over financial reporting. Date: March 6, 2019By:/s/ Kim C. Drapkin Kim C. Drapkin Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)Exhibit 32.1 CERTIFICATIONS OF CEO AND CFO PURSUANT TO 18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TOSECTION 906 OF THE SARBANES-OXLEY ACT OF 2002In connection with this Annual Report on Form 10-K of Jounce Therapeutics, Inc. (the “Company”) for the year ended December 31, 2018, as filedwith the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company hereby certifies,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 her or hisknowledge:(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of theCompany. Date: March 6, 2019By:/s/ Richard Murray Richard Murray, Ph.D. President and Chief Executive Officer (Principal Executive Officer) Date: March 6, 2019By:/s/ Kim C. Drapkin Kim C. Drapkin Treasurer and Chief Financial Officer (Principal Financial and Accounting Officer)

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