atra-10q_20190331.htm

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ 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 ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of outstanding shares of the Registrant’s Common Stock as of April 30, 2019 was 46,320,773 shares.

	March 31,			December 31,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	56,168		$	60,698
Short-term investments		181,377			248,933
Restricted cash - short-term		194			194
Prepaid expenses and other current assets		13,091			11,664
Total current assets		250,830			321,489
Property and equipment, net		58,119			68,576
Operating lease assets		14,041			—
Restricted cash - long-term		1,200			1,200
Other assets		536			574
Total assets	$	324,726		$	391,839

Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	6,168		$	3,719
Accrued compensation		7,459			10,636
Accrued research and development expenses		6,194			19,210
Other current liabilities		5,354			6,414
Total current liabilities		25,175			39,979
Operating lease liabilities - long-term		14,437			—
Other long-term liabilities		1,180			13,003
Total liabilities		40,792			52,982

Commitments and contingencies (Note 8)

Stockholders’ equity:
Common stock—$0.0001 par value, 500,000 shares authorized as of March 31, 2019 and December 31, 2018; 46,307 and 45,951 shares issued and outstanding as of March 31, 2019 and December 31, 2018, respectively		5			5
Additional paid-in capital		877,133			866,541
Accumulated other comprehensive income (loss)		38			(340	)
Accumulated deficit		(593,242	)		(527,349	)
Total stockholders’ equity		283,934			338,857
Total liabilities and stockholders’ equity	$	324,726		$	391,839

	Three Months Ended March 31,
	2019			2018
Operating expenses:
Research and development	$	48,668		$	28,460
General and administrative		19,223			13,992
Total operating expenses		67,891			42,452
Loss from operations		(67,891	)		(42,452	)
Interest and other income, net		1,634			1,009
Net loss		(66,257	)		(41,443	)
Unrealized gain (loss) on available-for-sale securities		378			(373	)
Comprehensive loss	$	(65,879	)	$	(41,816	)
Net loss per common share:
Basic and diluted net loss per common share	$	(1.44	)	$	(1.05	)

Weighted-average shares outstanding used to calculate basic and diluted net loss per common share		46,124			39,596

								Accumulated
	Common				Additional			Other						Total
	Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
For the Three Months Ended March 31, 2019	Shares		Amount		Capital			Loss			Deficit			Equity
Balance as of December 31, 2018		45,951	$	5	$	866,541		$	(340	)	$	(527,349	)	$	338,857
Effect of the adoption of ASC topic 842 (Leases)		—		—		—			—			364			364
Balance as of January 1, 2019		45,951	$	5	$	866,541		$	(340	)	$	(526,985	)	$	339,221
RSU settlements, net of shares withheld		197		—		(4,575	)		—			—			(4,575	)
Issuance of common stock pursuant to employee stock awards		159		—		2,898			—			—			2,898
Stock-based compensation expense		—		—		12,269			—			—			12,269
Net loss		—		—		—			—			(66,257	)		(66,257	)
Unrealized gain on available-for-sale securities		—		—		—			378			—			378
Balance as of March 31, 2019		46,307	$	5	$	877,133		$	38		$	(593,242	)	$	283,934

								Accumulated
	Common				Additional			Other						Total
	Stock				Paid-in			Comprehensive			Accumulated			Stockholders’
For the Three Months Ended March 31, 2018	Shares		Amount		Capital			Loss			Deficit			Equity
Balance as of December 31, 2017		30,730	$	3	$	474,662		$	(151	)	$	(296,650	)	$	177,864
Issuance of common stock through underwritten offerings, net of commissions and offering costs of $526		12,604		1		293,288			—			—			293,289
RSU settlements, net of shares withheld		250		—		(3,363	)		—			—			(3,363	)
Issuance of common stock pursuant to employee stock awards		309		—		6,196			—			—			6,196
Stock-based compensation expense		—		—		7,014			—			—			7,014
Net loss		—		—		—			—			(41,443	)		(41,443	)
Unrealized loss on available-for-sale securities		—		—		—			(373	)		—			(373	)
Balance as of March 31, 2018		43,893	$	4	$	777,797		$	(524	)	$	(338,093	)	$	439,184

	Three Months Ended March 31,
	2019			2018
Operating activities
Net loss	$	(66,257	)	$	(41,443	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation expense		12,269			7,014
Accretion of investment discounts		(458	)		(217	)
Depreciation and amortization expense		1,648			333
Non-cash interest expense		—			64
Asset retirement obligation accretion expense		17			—
Changes in operating assets and liabilities:
Prepaid expenses and other current assets		(1,434	)		(189	)
Operating lease assets		331			—
Other assets		38			160
Accounts payable		2,672			(2,119	)
Accrued compensation		(3,177	)		(1,352	)
Accrued research and development expenses		(13,016	)		2,330
Other current liabilities		(2,572	)		544
Operating lease liabilities		(261	)		—
Other long-term liabilities		—			53
Net cash used in operating activities		(70,200	)		(34,822	)
Investing activities
Purchases of short-term investments		(7,427	)		(292,467	)
Sales of short-term investments		12,512			35,890
Maturities of short-term investments		63,307			26,468
Purchases of property and equipment		(796	)		(19,808	)
Net cash provided by (used in) investing activities		67,596			(249,917	)
Financing activities
Proceeds from sale of common stock in underwritten offerings, net		—			293,290
Taxes paid related to net share settlement of restricted stock units		(4,575	)		(3,364	)
Proceeds from employee stock awards		2,747			6,186
Principal payments on capital lease obligations		(98	)		(101	)
Net cash (used in) provided by financing activities		(1,926	)		296,011
(Decrease) increase in cash, cash equivalents and restricted cash		(4,530	)		11,272
Cash, cash equivalents and restricted cash at beginning of period		62,092			80,617
Cash, cash equivalents and restricted cash at end of period	$	57,562		$	91,889
Non-cash investing and financing activities
Property and equipment purchases included in accounts payable and other accrued liabilities	$	666		$	4,105
Capitalized lease obligations	$	—		$	441
Interest capitalized during construction period for build-to-suit lease transaction	$	—		$	77
Asset retirement cost	$	—		$	88
Receivable for options exercised	$	151		$	10

Atara Biotherapeutics, Inc. (“Atara”, “we”, “our” or “the Company”) was incorporated in August 2012 in Delaware. Atara is a leading off-the-shelf, allogeneic T-cell immunotherapy company that is developing novel treatments for patients with cancer, autoimmune and viral diseases. We have several T-cell immunotherapies in clinical development and are progressing a next-generation allogeneic chimeric antigen receptor T-cell, or CAR T, program.

We licensed rights to T-cell product candidates from Memorial Sloan Kettering Cancer Center (“MSK”) in June 2015 and licensed rights related to our next-generation CAR T programs from MSK in May 2018 and December 2018 and from Moffitt Cancer Center in August 2018. Additionally, we licensed rights to know-how and technology from the Council of the Queensland Institute of Medical Research (“QIMR Berghofer”) in October 2015, September 2016 and June 2018. See Note 6 for further information.

We have incurred significant operating losses since inception and have relied on public and private equity financings to fund our operations. As of March 31, 2019, we had an accumulated deficit of $593.2 million. As we continue to incur losses, our transition to profitability will depend on the successful development, approval and commercialization of product candidates and on the achievement of sufficient revenues to support our cost structure. We may never achieve profitability, and unless and until we do, we will need to continue to raise additional capital. Management expects that our cash, cash equivalents and short-term investments will be sufficient to fund our planned operations to mid-2020.

The accompanying unaudited condensed consolidated financial statements include the accounts of Atara and its wholly-owned subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirements of the Securities and Exchange Commission (“SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, except for the recognition of operating lease assets and operating lease liabilities effective January 1, 2019, in accordance with newly-adopted accounting pronouncements relating to leases as discussed below. In the opinion of management, the condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the Company’s consolidated financial statements. The results of operations for the three month period ended March 31, 2019 are not necessarily indicative of the results to be expected for the full year or any other future period. The condensed consolidated balance sheet as of December 31, 2018 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete consolidated financial statements.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates, assumptions, and judgments that affect the amounts reported in the financial statements and accompanying notes. Significant estimates relied upon in preparing these financial statements include estimates related to clinical trial and other accruals, stock-based compensation expense and income taxes. Actual results could differ materially from those estimates.

We lease office space in multiple locations. We determine if an arrangement is a lease at inception. Operating leases are included in operating lease assets, other current liabilities, and operating lease liabilities on our condensed consolidated balance sheets. Leases with an initial term of 12 months or less are not recorded on the balance sheet; we recognize lease expense for these leases on a straight-line basis over the lease term. Finance leases are included in property and equipment, other current liabilities, and other long-term liabilities on our condensed consolidated balance sheets.

Operating lease assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The incremental borrowing rate for our leases is determined based on lease term and currency in which lease payments are made, adjusted for impacts of collateral. The operating lease asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term.

Our facilities and equipment operating leases have lease and non-lease components and we have made a policy election to account for the lease and non-lease components as a single lease component.

Through December 31, 2018, the leases were reviewed for classification as operating, capital or build-to-suit leases. For operating leases, rent was recognized on a straight-line basis over the lease period. For capital leases, we recorded the leased asset with a corresponding liability for principal and interest. Payments were recorded as reductions to these liabilities with interest being charged to interest expense in our condensed consolidated statements of operations and comprehensive loss.

We analyzed the nature of the renovations and our involvement during the construction period of our manufacturing facility and determined that we were the deemed “owner” of the construction project during the construction period. As a result, we were required to capitalize the fair value of the building as well as the construction costs incurred on our condensed consolidated balance sheet along with a corresponding financing liability for landlord-paid construction costs (i.e. “build-to-suit” accounting).

Once construction was complete, the Company considered the requirements for sale-leaseback accounting treatment, including evaluating whether all risks of ownership have been transferred back to the landlord, as evidenced by a lack of continuing involvement in the leased property. Since the arrangement did not qualify for sale-leaseback accounting treatment, the building asset remained on the Company’s condensed consolidated balance sheets at its historical cost, and such asset was depreciated over its estimated useful life. The Company bifurcated its lease payments into a portion allocated to the building and a portion allocated to the parcel of land on which the building has been built. The portion of the lease payments allocated to the land was treated for accounting purposes as operating lease payments, and therefore was recorded as rent expense in the condensed consolidated statements of operations and comprehensive loss. The portion of the lease payments allocated to the building was further bifurcated into a portion allocated to interest expense and a portion allocated to reduce the build-to-suit lease obligation. The initial recording of these assets and liabilities were classified as non-cash investing and financing items, respectively, for purposes of the condensed consolidated statements of cash flows. The build-to-suit asset and corresponding lease obligation was derecognized upon adoption of the new lease standard as we did not control the building during the construction period.

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses: Measurement of Credit Losses on Financial Instruments. ASU 2016-13 requires that expected credit losses relating to financial assets measured on an amortized cost basis and available-for-sale debt securities be recorded through an allowance for credit losses. ASU 2016-13 limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and also requires the reversal of previously recognized credit losses if fair value increases. The new standard will be effective for us on January 1, 2020, with early adoption permitted on January 1, 2019. We have not yet determined the potential effect the new standard will have on our consolidated financial statements.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract (ASU 2018-15), which clarifies the accounting for implementation costs in cloud computing arrangements. The new standard is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2019, with early adoption permitted. We have not yet determined the potential effect the new standard will have on our consolidated financial statements.

We adopted ASU No. 2016-02, Leases (Topic 842), as of January 1, 2019, using the optional transition method, which allows for the initial application of the new accounting standard at the adoption date and the recognition of a cumulative-effect adjustment to the opening balance of retained earnings as of the beginning of the period of adoption. In addition, we elected the package of practical expedients permitted under the transition guidance within the new standard, which among other things, allowed us to carry forward the historical lease classification. In addition, we elected the hindsight practical expedient to determine the lease term for existing leases.

Adoption of the new standard resulted in the recording of additional operating lease assets and operating lease liabilities of approximately $14.3 million and $15.3 million, respectively, as of January 1, 2019. This was partially offset by de-recognition of the build-to-suit asset and corresponding lease obligation of approximately $10.3 million for our Thousand Oaks manufacturing facility lease as we did not control the building during the construction period (see Note 7). The cumulative effect adjustment to the opening balance of accumulated deficit was a decrease of $0.4 million. The standard did not have a significant impact on our condensed consolidated statements of operations and comprehensive loss, changes in stockholders’ equity, and cash flow for the three months ended March 31, 2019 and 2018.

Basic net loss per common share is calculated by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, without consideration of common share equivalents. Diluted net loss per common share is computed by dividing net loss by the weighted-average number of shares of common stock and common share equivalents outstanding for the period. Common share equivalents are only included in the calculation of diluted net loss per common share when their effect is dilutive.

Potential dilutive securities, which include, unvested restricted stock units (“RSUs”), vested and unvested options to purchase common stock and shares to be issued under our employee stock purchase plan (“ESPP”) have been excluded from the computation of diluted net loss per share as the effect is antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in all periods presented.

The following table represents the potential common shares issuable pursuant to outstanding securities as of the related period end dates that were excluded from the computation of diluted net loss per common share as their inclusion would have an antidilutive effect:

Our financial assets are measured at fair value on a recurring basis using the following hierarchy to prioritize valuation inputs, in accordance with applicable GAAP:

We review the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels of certain securities within the fair value hierarchy. We recognize transfers into and out of levels within the fair value hierarchy in the period in which the actual event or change in circumstances that caused the transfer occurs. There have been no transfers between Level 1, Level 2 and Level 3 in any periods presented.

Financial assets and liabilities are considered Level 2 when their fair values are determined using inputs that are observable in the market or can be derived principally from or corroborated by observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, Level 2 financial instruments are valued using comparisons to like-kind financial instruments and models that use readily observable market data as their basis. U.S. Treasury, government agency and corporate debt obligations, commercial paper and asset-backed securities are valued primarily using market prices of comparable securities, bid/ask quotes, interest rate yields and prepayment spreads and are included in Level 2.

Financial assets and liabilities are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. We have no Level 3 financial assets or liabilities.

The following tables summarize the estimated fair value and related valuation input hierarchy of our available-for-sale securities as of each period end:

		Total			Total		Total			Total
		Amortized			Unrealized		Unrealized			Estimated
As of March 31, 2019:	Input Level	Cost			Gain		Loss			Fair Value
		(in thousands)
Money market funds	Level 1	$	25,338		$	—	$	—		$	25,338
U.S. Treasury obligations	Level 2		94,616			42		(17	)		94,641
Government agency obligations	Level 2		8,351			1		(14	)		8,338
Corporate debt obligations	Level 2		86,373			80		(45	)		86,408
Commercial paper	Level 2		7,439			—		—			7,439
Asset-backed securities	Level 2		9,679			—		(9	)		9,670
Total available-for-sale securities			231,796			123		(85	)		231,834
Less amounts classified as cash equivalents			(50,457	)		—		—			(50,457	)
Amounts classified as short-term investments		$	181,339		$	123	$	(85	)	$	181,377

		Total			Total		Total			Total
		Amortized			Unrealized		Unrealized			Estimated
As of December 31, 2018:	Input Level	Cost			Gain		Loss			Fair Value
		(in thousands)
Money market funds	Level 1	$	38,708		$	—	$	—		$	38,708
U.S. Treasury obligations	Level 2		111,164			4		(80	)		111,088
Government agency obligations	Level 2		15,206			1		(32	)		15,175
Corporate debt obligations	Level 2		121,017			15		(217	)		120,815
Commercial paper	Level 2		12,935			—		—			12,935
Asset-backed securities	Level 2		11,894			—		(31	)		11,863
Total available-for-sale securities			310,924			20		(360	)		310,584
Less amounts classified as cash equivalents			(61,651	)		—		—			(61,651	)
Amounts classified as short-term investments		$	249,273		$	20	$	(360	)	$	248,933

The amortized cost and fair value of our available-for-sale securities by contractual maturity were as follows:

As of March 31, 2019, certain available-for-sale securities had been in a continuous unrealized loss position, each for less than twelve months. As of this date, no significant facts or circumstances were present to indicate a deterioration in the creditworthiness of the respective issuers, and the Company has no requirement or intention to sell these securities before maturity or recovery of their amortized cost basis. During the three months ended March 31, 2019 and 2018, we did not recognize any other-than-temporary impairment losses.

In addition, restricted cash collateralized by money market funds is a financial asset measured at fair value and is a Level 1 financial instrument under the fair value hierarchy. As of March 31, 2019 and December 31, 2018, restricted cash was $1.4 million.

The following table provides a reconciliation of cash, cash equivalents and restricted cash within the condensed consolidated balance sheets that sum to the total of the same such amounts in the condensed consolidated statement of cash flows:

	March 31,			December 31,
	2019			2018
	(in thousands)
Leasehold improvements	$	48,888		$	47,609
Build-to-suit asset (see Note 7)		—			10,686
Construction in progress		4,259			4,682
Computer equipment and software		3,211			3,049
Lab equipment		3,345			3,019
Machinery and equipment		3,131			2,980
Furniture and fixtures		1,842			1,628
Property and equipment, gross		64,676			73,653
Less accumulated depreciation and amortization		(6,557	)		(5,077	)
Property and equipment, net	$	58,119		$	68,576

Construction in progress represents capitalized costs for our manufacturing facility in Thousand Oaks, California and capitalizable costs incurred for development of internal use software. Depreciation and amortization expense was $1.6 million and $0.3 million for the three months ended March 31, 2019 and 2018, respectively.

MSK Agreements – In June 2015, we entered into an exclusive license agreement with MSK for three clinical stage T-cell therapies. In connection with the execution of the agreement, the Company paid $4.5 million in cash to MSK.

We are required to make additional payments of up to $33.0 million to MSK based on achievement of specified regulatory and sales-related milestones, as well as mid-single-digit percentage tiered royalty payments based on future sales of products resulting from the development of the licensed product candidates, if any. In addition, under certain circumstances, we are required to make certain minimum annual royalty payments to MSK, which are creditable against earned royalties owed for the same annual period. We are also required to pay a low double-digit percentage of any consideration we receive for sublicensing the licensed rights. The license agreement expires on a product-by-product and country-by-country basis on the later of: (i) expiration of the last licensed patent rights related to each licensed product, (ii) expiration of any market exclusivity period granted by law with respect to each licensed product, and (iii) a specified number of years after the first commercial sale of the licensed product in each country. Upon expiration of the license agreement, Atara will retain non-exclusive rights to the licensed products.

In December 2018, we licensed additional technology from MSK. In connection with the effectiveness of this license agreement, we made upfront cash payments of $12.5 million in the first quarter of 2019, which were recorded as research and development expense in our consolidated statement of operations and comprehensive loss in the fourth quarter of 2018. We are obligated to make additional milestone payments based on achievement of specified development, regulatory and sales-related milestones as well as mid-single-digit percentage tiered royalty payments based on future sales of products resulting from the development of the licensed product candidates, if any.

QIMR Berghofer Agreements – In October 2015, we entered into an exclusive license agreement and a research and development collaboration agreement with QIMR Berghofer. In consideration for the exclusive license, the Company paid $3.0 million in cash to QIMR Berghofer.

Under the terms of the license agreement, we obtained an exclusive, worldwide license to develop and commercialize allogeneic T-cell therapy programs utilizing technology and know-how developed by QIMR Berghofer. In September 2016, the exclusive license agreement and research and development collaboration agreement were amended and restated. Under the amended and restated agreements, we obtained an exclusive, worldwide license to develop and commercialize additional T-cell programs as well as the option to license additional technology in exchange for $3.3 million in cash, which was recorded as research and development expense in our condensed consolidated statement of operations and comprehensive loss in the third quarter of 2016. We exercised this option in June 2018. The amended and restated license agreement also provides for various milestone and royalty payments to QIMR Berghofer based on future product sales, if any.

Under the terms of the amended and restated research and development collaboration agreement, we are also required to reimburse the cost of agreed-upon development activities related to programs developed under the collaboration. These payments are expensed on a straight-line basis over the related development periods. The agreement also provides for various milestone payments to QIMR Berghofer based on achievement of certain developmental and regulatory milestones.

From time to time, we have entered into other license and collaboration agreements with other parties. For example, we licensed additional rights related to our next-generation CAR T programs from MSK in May 2018 and from Moffitt Cancer Center in August 2018, and agreed to collaborate in connection with each of these licenses.

Milestones and royalties under each of the above agreements are contingent upon future events and will be recorded as expense when it is probable that the milestones will be achieved or royalties are due. As of March 31, 2019 and December 31, 2018, there were no outstanding obligations for milestones and royalties under our license and collaboration agreements.

Cognate Agreement – In August 2015, Atara entered into a Development and Manufacturing Services Agreement (the “Manufacturing Agreement”) with Cognate Bioservices, Inc. (“Cognate”). The Manufacturing Agreement was amended in December 2017 to provide for additional rights for Atara in relation to the conduct of the services and amended again in May 2018 to modify certain financial provisions with respect to manufacturing services. Pursuant to the Manufacturing Agreement, Cognate provides process development and manufacturing services for certain Atara product candidates.

We lease our corporate headquarters in South San Francisco, California under a non-cancellable lease agreement that expires in April 2021. In connection with the lease, we are required to maintain a letter of credit in the amount of $0.2 million to the landlord, which expires and is renewed every 12 months, and is classified as restricted cash in our condensed consolidated balance sheet. In November 2018, we entered into a lease agreement for additional office space in Thousand Oaks, California that expires in February 2026.

In February 2017, we entered into a lease agreement for approximately 90,580 square feet of office, lab and cellular therapy manufacturing space in Thousand Oaks, California. The initial 15-year term of the lease commenced on February 15, 2018, upon the substantial completion of landlord’s work as defined under the agreement. The contractual obligations during the initial term are $16.4 million in aggregate. We have the option to extend the lease for two additional periods of ten and nine years, respectively, after the initial term. In connection with the lease, we were required to issue a letter of credit in the amount of $1.2 million to the landlord, which was recorded as long-term restricted cash in our condensed consolidated balance sheet.

Based on the terms of the lease agreement and on our involvement in certain aspects of the construction, we were deemed the owner of the building during the construction period in accordance with U.S. GAAP in effect prior to January 1, 2019. Under this build-to-suit lease arrangement, we recognized construction in progress based on all construction costs incurred by both us and the landlord. We also recognized a financing obligation equal to all costs funded by the landlord.

Due to completion of the construction by the landlord and not having met the criteria for sale-lease back accounting, we transferred the $10.3 million of landlord’s construction costs previously capitalized as construction in progress to a build-to-suit asset, and have recognized a corresponding long-term financing obligation for the same amount in long-term liabilities in our condensed consolidated balance sheets. In addition, we recorded $0.3 million of capitalized interest during the construction period through December 31, 2018. A portion of the monthly lease payment was allocated to land rent and recorded as an operating lease expense and the non-interest portion of the amortized lease payments to the landlord related to rent of the building was applied to the lease financing liability.

Future minimum payments under our operating, finance and capital leases as of December 31, 2018 were as follows:

	Operating Leases			Finance Leases		Capital Leases
Years Ending December 31,		(in thousands)
2019	$		1,107	$	934	$	540
2020			1,666		962		234
2021			1,555		991		29
2022			1,337		1,020		—
2023			1,375		1,051		—
Thereafter			3,122		11,458		—
Total minimum payments	$		10,162	$	16,416	$	803
Less: amount representing interest							65
Present value of capital lease obligations							738
Less: current portion							490
Capital lease obligation, net of current portion						$	248

Rent expense under operating leases for the three months ended March 31, 2018 was 0.4 million.

The maturities of lease liabilities under our operating and finance leases as of March 31, 2019 were as follows:

Delaware		46-0920988
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
611 Gateway Blvd., Suite 900 South San Francisco, CA		94080
(Address of principal executive offices)		(Zip Code)

		Page
PART I.	FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3

	Condensed Consolidated Balance Sheets	3

	Condensed Consolidated Statements of Operations and Comprehensive Loss	4

	Condensed Consolidated Statements of Changes in Stockholders’ Equity	5

	Condensed Consolidated Statements of Cash Flows	6

	Notes to Condensed Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26

Item 4.	Controls and Procedures	26

PART II.	OTHER INFORMATION

Item 1.	Legal Proceedings	27

Item 1A.	Risk Factors	27

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	59

	Signatures	60

	As of March 31,
	2019		2018
Unvested RSUs		1,860,374		1,899,505
Vested and unvested options		6,842,443		5,466,825
ESPP share purchase rights		37,538		60,317
Total		8,740,355		7,426,647

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Small reporting company	☐
Emerging growth company	☐

	As of March 31, 2019				As of December 31, 2018
	Amortized		Estimated		Amortized		Estimated
	Cost		Fair Value		Cost		Fair Value
	(in thousands)				(in thousands)
Maturing within one year	$	216,066	$	216,062	$	287,755	$	287,469
Maturing in one to five years		15,730		15,772		23,169		23,115
Total available-for-sale securities	$	231,796	$	231,834	$	310,924	$	310,584