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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from          to

Commission file number 001-38650

Y-mAbs Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

47-4619612

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

230 Park Avenue

Suite 3350

New York, NY 10169

(Address of principal executive offices)

(Zip Code)

(646)-885-8505

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, $0.0001 par value

YMAB

Nasdaq Global Select Market

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer 

    

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised 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  .

There were 43,677,767 shares of Common Stock ($0.0001 par value) outstanding as of May 1, 2023.

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FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, about us and our industry that involve that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our business strategy, future operations and results thereof, future financial position, future revenue, projected costs, prospects, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management, expected market growth and future results of current and anticipated products, are forward-looking statements. 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,” “continue,” “could,” “estimate,” “expect,” “contemplate,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, licensing agreements, collaborations, joint ventures or investments that we may make.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.

Unless expressly indicated or the context requires otherwise, the terms ”Y-mAbs,” "Company," "we," "us," and "our" in this document refer to Y-mAbs Therapeutics, Inc., a Delaware corporation, and, where appropriate, its subsidiaries.

SUMMARY OF RISK FACTORS

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects.

These risks are discussed more fully below and include, but are not limited to, risks related to, the following:

We may not be able to successfully implement our business model and our plans to obtain regulatory approval and develop and commercialize our other product candidates, including the potential clinical efficacy, safety and other benefits thereof;
Our expectations with respect to the rate and degree of market acceptance and clinical utility for DANYELZA or any current or future product candidate for which we may receive marketing approval may not be realized;

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We may not be successful in obtaining approval of our product candidates and expectations with respect to the commercial value of any of our product candidates may not be realized;
We may not be successful in implementing our business strategy, including our ability and plans in continuing to build out our commercial infrastructure and successfully launching, marketing, and selling DANYELZA and any current or future product candidate for which we may receive marketing approval, including our plans with respect to the focus and activities of our sales force, the nature of our marketing, market access and patient support activities of DANYELZA and related assumptions;
Expectations with respect to the pricing, coverage and reimbursement of, and the extent to which patient assistance programs are utilized for DANYELZA or other product candidates for which we may receive marketing approval may not be realized;
Expectations with respect to our ongoing and future clinical trials for DANYELZA and other product candidates, whether conducted by us or by any of our collaborators, may not be realized, including the timing of initiation of these trials, the pace of enrollment, the completion of enrollment, the availability of data from, and the outcome of, these trials, and expectations with respect to regulatory submissions and potential regulatory approvals may not be realized on the anticipated timing or at all;
We may be unable to attract, integrate, manage and retain qualified personnel or key employees;
We may not realize the expected benefits from our recent business restructuring and workforce reduction and we may incur additional costs implementing it or other difficulties;
Expectations with respect to the timing of and our ability to obtain and maintain regulatory, marketing and reimbursement approvals for our product candidates may not be realized;
We may be unable to successfully implement our commercialization, marketing and manufacturing capabilities and strategy;
If we are unable to establish and maintain sufficient intellectual property position, strategy and scope of protection for the intellectual property rights covering our product candidates and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours and our ability to successfully commercialize our products, product candidates and other proprietary technologies, if approved, may be adversely affected;
We may be unable to identify and develop additional product candidates and technologies with significant commercial potential;
We may be unable to enter into collaborations or strategic partnerships for the development and commercialization of our product candidates and future operations, and the potential benefits of any such collaboration or partnership may not be realized;
We are dependent on our ability to continue to maintain and leverage our relationship with Memorial Sloan Kettering Cancer Center, or MSK, including our exclusive rights to the 2015 MSK License Agreement (as amended), or MSK License, the 2020 SADA Technology License Agreement, or SADA License Agreement, and current and future technology and our relationship with MSK as a user of DANYELZA and any future products;
Our expectations related to the use of our cash and cash equivalents, and how long our cash resources are expected to last, may be inaccurate and we may require additional funding sooner than we expect;
We will require substantial additional funding to finance our operations, complete the development and commercialization of our product and product candidates and evaluate future product candidates, and programs or other operations;
The timing and amount of any future financing transaction and our common stock price and other factors may impact our ability to raise additional capital on favorable terms;
Expectations with respect to our financial performance, including our estimates regarding revenues, expenses, cash flow, and capital expenditure requirements may not be realized;
We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer or more effective than ours;
Our business, financial condition and results of operations have been and may in the future be adversely affected by the COVID-19 pandemic or similar health crises, macroeconomic conditions, such as rising inflation, uncertain global financial markets, supply chain disruptions, and by geopolitical events,

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including the invasion of Ukraine by Russia, and sanctions related thereto, which resulted in the suspension of our clinical trial and regulatory activities in Russia;
We currently depend on a small number of third-party CMOs and expect it would be difficult to find a suitable replacement for the complex and difficult manufacture of DANYELZA and our product candidates. The loss of any of these CMOs or the failure of any of them to meet their obligations to us could affect our ability to continue to sell DANYELZA or to develop our other product candidates in a timely manner; and
We are subject to government laws and regulations, and we may be unable to comply with healthcare laws and regulations in the United States and any applicable foreign countries, including, without limitation, those applying to the marketing and sale of pharmaceutical products.

3

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Page

PART I — FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements:

5

Consolidated Balance Sheets (unaudited) as of March 31, 2023 and December 31, 2022

5

Consolidated Statements of Net Loss and Comprehensive Loss (unaudited) for the three months ended March 31, 2023 and 2022

6

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2023 and 2022

7

Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2023 and 2022

8

Notes to Consolidated Financial Statements (unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

46

Item 4.

Controls and Procedures

46

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

46

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

113

Item 3.

Defaults on Senior Securities

113

Item 4.

Mine Safety Disclosures

113

Item 5.

Other Information

113

Item 6.

Exhibits

114

You should read this Quarterly Report and the documents we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from the plans, intentions, and expectations disclosed in the forward-looking statements we may make.

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PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

Y-MABS THERAPEUTICS, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share data)

    

As of

    

As of

March 31, 

    

December 31, 

2023

2022

ASSETS

 

  

 

  

CURRENT ASSETS

 

  

 

  

Cash and cash equivalents

$

92,629

$

105,762

Accounts receivable, net

18,702

12,531

Inventories

8,945

6,702

Other current assets

 

3,730

 

5,452

Total current assets

 

124,006

 

130,447

Property and equipment, net

 

511

 

604

Operating lease right-of-use assets

1,369

1,739

Intangible assets, net

2,898

2,986

Other assets

 

8,661

 

5,680

TOTAL ASSETS

$

137,445

$

141,456

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Accounts payable

$

8,843

$

14,175

Accrued liabilities

 

16,222

 

13,241

Operating lease liabilities, current portion

855

868

Total current liabilities

 

25,920

28,284

Accrued milestone and royalty payments

 

2,250

 

2,250

Operating lease liabilities, long-term portion

629

899

Other liabilities

817

802

TOTAL LIABILITIES

29,616

32,235

Commitments and contingencies (Note 9)

 

  

 

  

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.0001 par value, 5,500,000 shares authorized and none issued at
March 31, 2023 and December 31, 2022

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized at March 31, 2023 and
December 31, 2022; 43,677,767 and 43,670,109 shares issued at March 31, 2023 and
December 31, 2022, respectively

 

4

 

4

Additional paid in capital

 

549,233

 

543,929

Accumulated other comprehensive income

 

1,025

 

1,331

Accumulated deficit

 

(442,433)

 

(436,043)

TOTAL STOCKHOLDERS’ EQUITY

 

107,829

 

109,221

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

137,445

$

141,456

The accompanying notes are an integral part of the consolidated financial statements

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Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Net Loss and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

    

Three months ended March 31, 

    

2023

2022

REVENUES

Product revenue, net

$

20,251

$

10,486

Total revenues

20,251

10,486

OPERATING COSTS AND EXPENSES

 

  

 

 

Cost of goods sold

2,083

1,831

Research and development

13,418

22,912

Selling, general, and administrative

 

12,251

 

13,438

Total operating costs and expenses

 

27,752

 

38,181

Loss from operations

 

(7,501)

 

(27,695)

OTHER INCOME / (LOSS), NET

 

  

 

  

Interest and other income / (loss)

 

1,111

 

(373)

NET LOSS

$

(6,390)

$

(28,068)

Other comprehensive income / (loss)

 

  

 

  

Foreign currency translation

 

(306)

 

311

COMPREHENSIVE LOSS

$

(6,696)

$

(27,757)

Net loss per share attributable to common stockholders, basic and diluted

$

(0.15)

$

(0.64)

Weighted average common shares outstanding, basic and diluted

 

43,671,589

 

43,709,238

The accompanying notes are an integral part of the consolidated financial statements

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Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

(In thousands, except share data)

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Income / (Loss)

    

Deficit

    

Equity

Balance December 31, 2021

43,694,716

$

4

$

519,206

$

1,371

$

(340,475)

$

180,106

Exercise of stock options

16,000

32

32

Stock-based compensation expense

7,449

5,091

5,091

Foreign currency translation

311

311

Net loss

(28,068)

(28,068)

Balance March 31, 2022

43,718,165

$

4

$

524,329

$

1,682

$

(368,543)

$

157,472

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Income / (Loss)

    

Deficit

    

Equity

Balance December 31, 2022

 

43,670,109

$

4

$

543,929

$

1,331

$

(436,043)

$

109,221

Stock-based compensation expense

 

7,658

5,304

5,304

Foreign currency translation

 

(306)

(306)

Net loss

 

(6,390)

(6,390)

Balance March 31, 2023

43,677,767

$

4

$

549,233

$

1,025

$

(442,433)

$

107,829

The accompanying notes are an integral part of the consolidated financial statements

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Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

Three months ended March 31, 

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

Net loss

$

(6,390)

$

(28,068)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

Depreciation and amortization

 

182

 

195

Stock-based compensation

 

5,304

 

5,091

Foreign currency and other transactions

 

(456)

 

311

Changes in assets and liabilities:

 

 

Accounts receivable, net

(6,171)

(1,612)

Inventories

(2,243)

(76)

Other current assets

 

1,722

 

1,370

Other assets

 

(2,983)

 

(3,668)

Accounts payable

 

(4,771)

 

1,109

Accrued liabilities and other

 

2,682

 

423

NET CASH USED IN OPERATING ACTIVITIES

 

(13,124)

 

(24,925)

CASH FLOWS FROM INVESTING ACTIVITIES

 

NET CASH PROVIDED BY INVESTING ACTIVITIES

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from exercised stock options

32

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

32

Effect of exchange rates on cash and cash equivalents

 

(9)

 

53

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(13,133)

 

(24,840)

Cash and cash equivalents at the beginning of period

 

105,762

 

181,564

Cash and cash equivalents at the end of period

$

92,629

$

156,724

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

 

  

 

  

Intangible assets acquisition in accrued milestones and royalty payments

$

$

1,500

The accompanying notes are an integral part of the consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS

Y-mAbs Therapeutics, Inc. (“we,” “us,” “our,” the “Company,” or “Y-mAbs”) is a commercial stage biopharmaceutical company focused on the development and commercialization of novel, antibody based therapeutic products for the treatment of cancer. We are leveraging our proprietary antibody platforms and deep expertise in the field of antibodies to develop a broad portfolio of innovative medicines.

The Company is headquartered in New York and was incorporated on April 30, 2015 under the laws of the State of Delaware.

NOTE 2—BASIS OF PRESENTATION

The Company has incurred losses in almost all quarters since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development; technological uncertainty; uncertainty regarding patents and proprietary rights; uncertainty in obtaining the FDA approval in the United States and regulatory approval in other jurisdictions; marketing or sales capability or experience; uncertainty in getting adequate payer coverage and reimbursement; dependence on key personnel; compliance with government regulations and the need to obtain additional financing. The Company’s drug candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance reporting capabilities.

The Company’s drug candidates are in various stages of development. DANYELZA (naxitamab-gqgk) received accelerated approval by the FDA in November 2020, but there can be no assurance that the Company’s other research and development efforts will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development and commercialization efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

The Company’s financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations since inception, and had an accumulated deficit of $442,433,000 as of March 31, 2023 and $436,043,000 as of December 31, 2022. Through March 31, 2023, the Company has funded its operations primarily through proceeds from sales of shares of its common stock, including its initial public offering in September 2018 and its subsequent public offerings in November 2019 and February 2021, as well as additional funding from the proceeds from the sales of DANYELZA and from proceeds from the sale of the DANYELZA PRV.

As of March 31, 2023, the Company had cash and cash equivalents of $92,629,000, and as of December 31, 2022 the Company had cash and cash equivalents of $105,762,000. As of the issuance date of the financial statements for the first quarter ended March 31, 2023, the Company expects that its cash and cash equivalents at March 31, 2023 will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months, irrespective of whether any additional product approvals are obtained.

The Company may raise additional capital to fund future operations through the sale of its equity securities, incurring debt, entering into licensing or collaboration agreements with partners, grants or other sources of financing. These financing sources are in addition to successful commercialization of DANYELZA and our product candidates which we may obtain regulatory approval and marketing authorization. The Company’s commercialization strategy may be either directly or with a collaborator or distributor. Sufficient funds may not be available to the Company on attractive

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terms or at all when needed from equity or debt financing. If the Company is unable to obtain additional financing from these or other sources when needed, it will likely be necessary to take other actions to enhance the Company’s liquidity position which may include significantly reducing the current rate of spending through delaying or scaling back current operations, or suspending certain research and development programs and other operational programs.

The accompanying unaudited consolidated financial statements reflect the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, Accounting Standards Codification (“ASC”) Topic 270-10 and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim financial statements include all adjustments (consisting only of normal recurring nature) necessary in the judgment of management for a fair statement of the results for the periods presented. All intercompany balances and transactions have been eliminated. The Company has evaluated subsequent events through the date of this filing. Operating results for the three-month period ended March 31, 2023 are not necessarily indicative of the results that may be expected for the year ended December 31, 2023, any other interim periods, or any future year or period. The December 31, 2022 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim consolidated financial statements in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2022.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three months or less from date of purchase to be cash equivalents. All cash and cash equivalents are held in highly rated securities including a Treasury money market fund which is unrestricted as to withdrawal or use. To date, the Company has not experienced any losses on its cash and cash equivalents. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term and liquid nature. The Company maintains cash balances in excess of insured limits. The Company monitors the financial performance, credit ratings and liquidity of the money market fund to timely assess and respond to any changes in the asset values of the fund. The Company does not anticipate any losses with respect to such cash balances.

Trade Accounts Receivables

The Company’s trade accounts receivable balance consists of amounts due from sales of our approved product, DANYELZA. Receivables from product sales are recorded net of allowances which generally include chargebacks, doubtful accounts, rebates, returns, and discounts. The allowance is based primarily on assessment of specific identifiable customer accounts considered at risk or uncollectible, as well as an analysis of current receivables aging and expected future write-offs. The Company has not historically experienced any significant credit losses. All customer accounts are actively managed, and no losses are currently expected.

The Company has not experienced any write-offs related to our customers and has not recognized any allowance for doubtful accounts nor reversed any allowances in the three months ended March 31, 2023.

Concentration of Credit Risk

The Company’s product sales are made through arrangements primarily with three national specialty distributors in the United States of America. As of March 31, 2023, the accounts receivable balances from such distributors totaled 79% of our outstanding accounts receivable. The Company has contractual payment terms with each of its customers and the Company monitors their financial performance, historical payment terms and credit worthiness to timely assess and respond to any changes in their credit profile.

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Inventory

The Company values its inventories at the lower of cost or net realizable value on a first-in, first-out basis. The Company’s inventory cost includes amounts related to materials, third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs. Raw and intermediate materials that may be utilized for both commercial and clinical programs are identical and given the alternative future use such amounts are initially classified as inventory. Amounts in inventory associated with clinical development programs are charged to research and development expense when the product enters the research and development process and can no longer be used for commercial purposes and, therefore, does not have an alternative future use.

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. For DANYELZA, the Company commenced capitalization of inventory at the receipt of FDA approval.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment occurs. Such impairment charges, should they occur, are recorded within cost of goods sold. The determination of whether inventory costs will be realizable requires estimates by management. No material inventory write-downs occurred in the three months ended March 31, 2023.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

• Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;

• Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and

• Level 3 — Unobservable inputs for the asset or liability, which include management's own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

Cash equivalents held in money market funds are valued using other significant observable inputs, which represent a Level 2 measurement within the fair value hierarchy. The Company has no other cash equivalents.

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The following tables present the Company’s fair value hierarchy for its cash equivalents, which are measured at fair value on a recurring basis (in thousands):

Fair Value Measurements at March 31, 2023 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

86,894

$

$

86,894

Total

$

$

86,894

$

$

86,894

Fair Value Measurements at December 31, 2022 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

86,965

$

$

86,965

Total

$

$

86,965

$

$

86,965

During the quarter ended March 31, 2023, there were no transfers between Level 1, Level 2, and Level 3.

Operating Leases

The Company determines if an arrangement includes a lease at inception. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses its estimated incremental borrowing rate based on information available at the lease commencement date. Because most of the Company’s leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. The Company’s incremental borrowing rate for a lease is the estimated rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that it will exercise any such options. None of the Company’s leases contain any residual value guarantees. Lease expense is recognized on a straight-line basis over the expected lease term. Related variable lease costs incurred are not material to the Company.

The Company currently elects the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize right-of-use assets or liabilities, and this includes not recognizing right-of-use assets or liabilities for existing short-term leases of those assets in transition. We also elect the practical expedient to not separate lease and non-lease components for all of our leases. The Company has made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component. See the Lease Agreements section in NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS for the related disclosures.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, net product revenues, the accrual for research and development expenses, the accrual of milestone and royalty payments, and the valuation of stock options. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

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Revenue Recognition

Product revenue

To determine revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following five steps: (i) identify the contract(s) with a customer, (ii) identify the performance obligations in the contract, (iii) determine the transaction price, (iv) allocate the transaction price to the performance obligations in the contract, and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The company only applies the five-step model to arrangements that meet the definition of a contract with a customer under ASC 606, including when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of ASC 606, the company assesses the goods or services promised within each contract, determines those that are performance obligations, and assesses whether each promised good or service is distinct. The company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Under the practical expedient permitted under Topic 606, the Company expenses incremental costs of obtaining a contract as and when incurred if the expected amortization period of the assets is one year or less. If there are multiple distinct performance obligations, we allocate the transaction price to each distinct performance obligation based on its relative standalone selling price. The Company also considers the intended benefit of the contract in assessing whether a promised good or service is separately identifiable from other promises in the contract. If a promised good or service is not distinct, the Company combines that good or service with other promised goods or services until it identifies a bundle of goods or services that is distinct. The standalone selling price is generally determined based on the prices charged to customers.

The Company recognizes revenue from sales of DANYELZA at a point in time when our customer is deemed to have obtained control of the product, which generally occurs upon receipt at the end-user hospital.

The amount of revenue the Company recognizes from sales of DANYELZA varies due to rebates, chargebacks and discounts provided under governmental and other programs, distribution related fees and other sales-related deductions. In order to determine those deductions, the Company estimates, utilizing the expected value method, the amount of revenue that it will ultimately be entitled to. This estimate is based upon contracts with customers and government agencies, statutorily-defined discounts applicable to government-funded programs, estimated payor mix, and other relevant factors. Calculating these amounts involves estimates and judgments, and the Company reviews these estimates quarterly. If actual results vary from its original estimates, the Company will adjust these estimates quarterly, which would affect net product revenue and earnings in the period such variances occur.

Rebates and chargebacks

The Company contracts with United States governmental agencies to ensure that DANYELZA will be eligible for coverage under the various programs administered by the agencies. The Company estimates the rebates and chargebacks to be provided and deduct these estimated amounts from our gross product revenues. These reserves are recorded in the same period the revenue is recognized, resulting in a reduction of product revenue and the establishment of accrued liabilities for the rebates and a reduction of accounts receivable for the chargebacks. The Company develops estimates for rebates and chargebacks based upon (i) the Company’s contracts with these agencies, (ii) the government-mandated discounts applicable to government-funded programs, and (iii) information obtained from hospitals and third-party consultants regarding the payor mix. The Company’s liability for these rebates and chargebacks mainly consists of claims for which invoices have not yet been received and paid. The Company does not maintain material levels of inventory in the wholesale or retail channel.

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Discounts and distribution-related fees

The Company provides invoice discounts on DANYELZA sales to our distributors for prompt payment and fees for distribution services and invoice discounts reduce the original accounts receivable balances. The payment terms for sales to distributors generally include a 2% discount for prompt payment or fees for distribution services which are based on contractual rates agreed with the respective distributors. Based on historical data and experiences with the distributors, we expect our distributors to earn these discounts and fees and deduct the full amount of these discounts and fees from our gross product revenue at the time such revenues are recognized.

Returns

The Company offers our customers limited product return rights for damaged, defective, or expiring products. The Company estimates returns on sales of DANYELZA mainly based on information provided to the Company from the hospitals and distributors. The return reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and an establishment of an accrued liability.

In December 2022, the Company announced a distribution agreement with WEP Clinical Ltd., or WEP, in connection with an early access program for DANYELZA in Europe. There are no regulatory-based, sales-based milestone payments or royalty arrangements under this distribution agreement. The Company recognizes revenue when the customer obtains control of the product upon delivery to WEP. The Company invoices WEP based on the terms of the distribution agreement, where a portion is billed upon shipment of product and the unbilled portion is billed at a later date based on terms of the distribution agreement. The Company has an unconditional right to the unbilled portion of the receivable and the Company estimates that the receivable will be collected within one year and therefore has recorded the balance at March 31, 2023 within other current assets on the Consolidated Balance Sheets.

License revenue

In December 2020, the Company entered into a development and commercialization arrangement with SciClone International Pharmaceuticals Ltd., or SciClone, for certain indications of DANYELZA and omburtamab for Greater China, including Mainland China, Taiwan, Hong Kong and Macau. Based on the terms of the agreement, the Company may receive regulatory-based milestone payments up to $40,000,000 and sales-based milestone payments up to $60,000,000 and is entitled to royalties based upon the net sales generated by SciClone related to the product indications in the territory. In December 2022, the Company received a regulatory-based milestone payment of $15,000,000 for the conditional approval of DANYELZA in China. We determined that the achievement of the remaining regulatory-based milestones within the agreement are constrained as they are contingent upon regulatory approvals which are not within our control and therefore not deemed probable. We expect that the sales-based milestones and royalty payments will be recognized when the milestone is achieved or the related sales occur. We reevaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur, we assess whether this resolves the constraint and it is appropriate to recognize revenue.

In November 2020, we entered into an exclusive license and distribution agreement for DANYELZA and omburtamab with Takeda Israel, a wholly owned subsidiary of Takeda Pharmaceutical Company Limited covering the State of Israel, West Bank and Gaza Strip. Based on the terms of the arrangement, the Company may receive regulatory-based milestone payments up to $750,000, which $250,000 has already been recognized, and sales-based milestone payments up to $500,000 and is entitled to royalties based upon the net sales generated by Takeda related to the product in the territory. We expect that the remaining regulatory-based and sales-based milestones will be recognized when the milestone is achieved, or the related sales occur.

In December 2020, we entered into a distribution agreement for DANYELZA and omburtamab with Swixx BioPharma AG for the Eastern European territories Bosnia & Herzegovina, Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Russia, Serbia, Slovakia and Slovenia. There are no regulatory-based, sales-based milestone payments or royalty arrangements under this distribution agreement.

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In May 2021, the Company entered into an exclusive distribution agreement with Adium Pharma S.A. (“Adium”) for Adium to be the exclusive distributor in Latin America of the Company’s antibodies omburtamab, if approved, and DANYELZA. Under the terms of the agreement, the Company may receive regulatory-based milestone payments up to an aggregate of $3,000,000. The Company received the first of these milestone payments totaling $1,000,000 in April 2022 upon the submission of the updated FDA BLA dossier for DANYELZA. In addition, the Company is entitled to royalties based upon DANYELZA net sales generated by Adium in Latin America. We determined that the achievement of the remaining regulatory-based milestones within the agreement are constrained as they are contingent upon regulatory approvals which are not within the Company’s control and therefore not deemed probable. The Company expects that the sales-based milestones and royalty payments will be recognized when the milestones are achieved or the related sales occur. The Company reevaluates the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur, the Company assesses whether this resolves the constraint and it is appropriate to recognize revenue.

The Company did not recognize license revenue in the three months ended March 31, 2023 and 2022.

Segment Information

The Company is engaged solely in the discovery, development, distribution and commercialization of novel antibody-based therapeutic products for the treatment of cancer. Accordingly, the Company has determined that it operates in one operating segment.

Recently Issued Accounting Pronouncements – Adopted

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, and are adopted by the Company as of the specific effective date. The Company adopted ASU 2022-04, ASU 2022-02, ASU 2022-01 and ASU 2021-08 effective January 1, 2023, and the adoption of these new standards did not have a material impact on the Company’s consolidated financial statements or disclosures.

The Company has evaluated accounting pronouncements recently issued but not yet adopted and believes that these pronouncements do not apply to the Company’s operations and therefore will not have a material impact on the Company’s consolidated financial statements or disclosures.

NOTE 4—PRODUCT REVENUE

The Company’s product revenues were generated from sales of DANYELZA and totaled $20,251,000 for three months ended March 31, 2023 and $10,486,000 for the three months ended March 31, 2022. The geographic breakout for the $20,251,000 of product revenue, net between in the United States and other countries were $16,833,000 and $3,418,000, respectively. Our revenue to other countries for the three months ended March 31, 2023 includes $2,516,000 of product revenue to the Company’s distribution partner, WEP, in connection with the Company’s early access program for DANYELZA in Europe. The product revenue generated in the three months ended March 31, 2023 was an initial inventory stocking and the Company does not anticipate this level to be the run rate for future quarters. Please refer to below for further discussion regarding the WEP distribution agreement.

Revenue from product sales is recorded net of applicable provisions for rebates, chargebacks, discounts, distribution-related fees and other sales-related deductions. Accruals for chargebacks and discounts are recorded as a direct reduction to accounts receivable. Accruals for rebates, distribution-related fees and other sales-related deductions are recorded within accrued liabilities. As of March 31, 2023, the company had recorded accounts receivable allowances of approximately $508,000 and accrued liabilities of $3,722,000 related to product sales during the three months ended March 31, 2023. As of December 31, 2022, the company had recorded accounts receivable allowances of approximately $508,000 and accrued liabilities of $3,722,000 related to product sales.

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An analysis of the change in reserves for discounts and allowances is summarized as follows:

    

Contractual

 

    

    

Allowances and

Discounts

Government Rebates

 

Returns

Total

(in thousands)

Balance, December 31, 2022

$

33

$

2,905

$

44

$

2,982

Current provisions relating to sales in current year

59

3,138

88

3,285

Payments/credits relating to sales in current year

(35)

(1,914)

(88)

(2,037)

Balance, March 31, 2023

$

57

$

4,129

$

44

$

4,230

The vast majority of the Company’s product sales were in the United States with additional sales outside the United States in China, Europe and Israel through sublicenses and distribution agreements. The Company had product sales to certain customers that accounted for more than 10% of total gross product revenue for the three months ended March 31, 2023 and March 31, 2022. McKesson, AmerisourceBergen, Cardinal Health, and WEP accounted for 45%, 29%, 13%, and 12%, respectively, of our gross product revenue for the three months ended March 31, 2023. McKesson, AmerisourceBergen, and Cardinal Health accounted for 60%, 25%, and 11%, respectively, of our gross product revenue for the three months ended March 31, 2022.

In December 2022, the Company announced a distribution agreement with WEP in connection with an early access program for DANYELZA in Europe. There are no regulatory-based, sales-based milestone payments or royalty arrangements under this distribution agreement. The Company recognizes revenue from sales of DAYELZA at a point of time when WEP is deemed to have obtained control of the product, which occurs upon delivery to WEP. The Company is entitled to receive all payments based on net product sales and pays WEP a service fee in exchange for its services, whereby the service fee represents a percent of gross selling price and is included within product revenues, net on the Consolidated Statements of Net Loss and Comprehensive Loss. The product revenue recognized for the three months ended March 31, 2023 was $2,516,000. There was no product revenue, net in the three months ended March 31, 2022. As of March 31, 2023, the company had recorded on the Consolidated Balance Sheets accounts receivable of approximately $2,770,000, and accrued liabilities, for allowances, of $219,000 related to product sales to the distribution partner during the three months ended March 31, 2023.

NOTE 5—NET LOSS PER SHARE

Basic net loss per share (“EPS”) is calculated by dividing net income or loss attributable to common stockholders by the weighted average common stock outstanding. Diluted EPS is calculated by adjusting weighted average common shares outstanding for the dilutive effect of common stock options and restricted stock units. In periods in which a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be antidilutive. Securities that could potentially dilute basic EPS in the future were not included in the computation of diluted EPS because to do so would have been antidilutive. The calculations of basic and diluted net loss per share are as follows (in thousands, except per share amounts):

Three months ended March 31, 

    

2023

2022

(in thousands, except per share amounts)

Net loss (numerator)

$

(6,390)

$

(28,068)

Weighted-average shares (denominator), basic and diluted

 

43,672

 

43,709

Basic and diluted net loss per share

$

(0.15)

$

(0.64)

Potentially dilutive securities excluded from the computation of diluted earnings per share relate to stock options and unvested restricted share units (“RSUs”) outstanding totaled 8,894,258 shares as of March 31, 2023 and 6,686,168 shares as of March 31, 2022.

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NOTE 6—INVENTORIES

Inventories consist of the following (in thousands):

    

March 31, 2023

December 31, 2022

Work In Progress

$

14,304

$

11,317

Finished Goods

2,583

666

Total inventories

$

16,887

$

11,983

Inventories are classified on the Consolidated Balance Sheets in each respective period (in thousands):

    

March 31, 2023

December 31, 2022

CURRENT ASSETS

Inventories

$

8,945

$

6,702

Total recorded in Current Assets

8,945

6,702

NONCURRENT ASSETS

Other assets

7,942

5,281

Total recorded in Noncurrent Assets

7,942

5,281

Total Inventories

$

16,887

$

11,983

As of March 31, 2023 and December 31, 2022, the Company has classified $7,942,000 and $5,281,000, respectively, of work in progress inventories as noncurrent assets based on its current demand schedule and expectation that such inventory will be utilized in excess of one year from the balance sheet date. Changes in noncurrent assets are reflected on the consolidated statements of cash flows within the caption of other assets.

NOTE 7—INTANGIBLE ASSETS

The company’s intangible assets, net as of March 31, 2023 totaled $2,898,000, which were net of $402,000 of accumulated amortization, and related to capitalized milestone payments made following FDA and other regulatory approvals and commercialization of DANYELZA.

The company’s intangible assets as of December 31, 2022 totaled $2,986,000, which were net of $314,000 of accumulated amortization, and related to capitalized milestone payments made following FDA and other regulatory approvals and commercialization of DANYELZA.

Intangible assets are amortized on a straight-line basis based on a 10-year useful life of the assets. Annual amortization expense is expected to be $355,000 each year for the five-year period from 2023 to 2027, and $1,123,000 thereafter.

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NOTE 8—ACCRUED LIABILITIES

Accrued short-term liabilities at March 31, 2023 and December 31, 2022 are as follows (in thousands):

March 31, 

    

December 31, 

    

2023

2022

Accrued licensing, milestone and royalty payments

$

1,903

$

4,002

Accrued clinical costs

 

846

 

932

Accrued compensation and board fees

 

4,138

 

2,445

Accrued manufacturing costs

5,294

2,977

Accrued sales reserves

3,722

2,474

Other

 

319

 

411

Total

$

16,222

$

13,241

NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS

The Company has entered into two license agreements and certain other agreements with Memorial Sloan Kettering Cancer Center (“MSK”). The license agreements are the MSK License Agreement and the CD33 License Agreement. Through a 2019 Settlement and Assumption and Assignment of the MSK License and Y-mAbs Sublicense Agreement, or SAAA, with MabVax Therapeutics Holdings, Inc. and MabVax Therapeutics, Inc., or together, MabVax, and MSK, the Company has established a direct license with MSK relating to the GD2-GD3 Vaccine, which was originally sublicensed by the Company in 2018 from MabVax. In addition, the Company entered the SADA License Agreement with MSK and Massachusetts Institute of Technology (“MIT”) in 2020. These license agreements with MSK and MIT grant the Company certain patent rights and intellectual property rights, and in consideration thereof, the Company agreed to make certain payments and issue shares of the Company’s common stock to MSK and MIT. Certain of the payments are contingent milestone and royalty payments, as disclosed in the table below. Amounts disclosed in NOTE 8—ACCRUED LIABILITIES for accrued milestone and royalty payments are inclusive of obligations under the MSK License Agreement, CD33 License Agreement, MabVax Agreement and SADA License Agreement, collectively.

MSK License

The MSK License requires us to pay to MSK mid to high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by the Company and the Company’s affiliates and sublicensees. The Company is required to pay annual minimum royalties of $80,000 over the royalty term, which amounts are non-refundable but are creditable against royalty payments otherwise due thereunder. The Company is also obligated to pay to MSK certain clinical, regulatory and sales-based milestone payments under the MSK License, which payments become due upon achievement of the related clinical, regulatory or sales-based milestones. Certain of these clinical and regulatory milestone payments become due at the earlier of completion of the related milestone activity or the date indicated in the MSK License. Total clinical and regulatory milestones potentially due under the MSK License are $2,450,000 and $9,000,000, respectively. There are also sales-based milestones that become due should the Company achieve certain amounts of sales of licensed products resulting from the license arrangement with MSK, with total potential sales-based milestones potentially due of $20,000,000. As product candidates progress through clinical development, regulatory approval and commercialization, certain milestone payments will come due either as a result of the milestones having been met or the passage of time even if the milestones have not been met. The Company will also owe MSK mid to high single-digit royalties on commercial sales of the Company’s approved products. In addition, to the extent the Company enters into sublicense arrangements, the Company is required to pay to MSK a percentage of certain payments that the Company receives from sublicensees of the rights licensed to the Company by MSK, which percentage will be based upon the date the Company receives such payments or the achievement of certain clinical milestones. The Company has entered into sublicenses and distribution agreements related to DANYELZA and

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omburtamab under the MSK License with Takeda Israel, Swixx BioPharma AG and SciClone in 2020, with Adium in 2021 and WEP December 2022.

The terms of the MSK License provide that MSK is entitled to receive 40% of the income generated from the sale of the first PRV, and 33% of any income generated from the sale of any subsequent PRV or the sale of other comparable incentives provided by any non-U.S. jurisdiction. The Company sold the PRV received upon FDA approval of DANYELZA to United Therapeutics for $105,000,000. Pursuant to the agreement with MSK, the Company was entitled to retain 60% of the net proceeds from monetization of the PRV, and the remaining 40% was due to MSK. The Company received their portion of the net proceeds of from the sale of the PRV in the amount of approximately $62,000,000 when the transaction was consummated in January 2021.

The MSK License will expire, on a country by country basis, and on a licensed product by licensed product or licensed service by licensed service basis, on the later of (i) the expiration of the last to expire of the patents and patent applications covering such licensed product or service in such country, (ii) the expiration of any market exclusivity period granted by a regulatory authority for such licensed product or service in such country, or (iii) 15 years from the first commercial sale of such licensed product or service in such country.

MSK may terminate the MSK License upon prior written notice in the event of our uncured material breach, or upon prior written notice if such breach is of a payment obligation. MSK may also terminate the MSK License upon written notice in the event of our bankruptcy or insolvency or our conviction of a felony relating to the licensed products, or if the Company challenges the validity or enforceability of any licensed patent right. In addition, the Company has the right to terminate the MSK License in its entirety at will upon prior written notice to MSK, but if the Company has commenced the commercialization of licensed products and/or licensed services the Company can only terminate at will if the Company ceases all development and commercialization of such licensed products and/or licensed services.

The Company’s failure to meet certain conditions under the MSK License could cause the related license to such licensed product to be canceled and could result in termination of the MSK License by MSK.

CD33 License

On November 13, 2017, the Company entered into the MSK CD33 License, with MSK, which grants the Company a worldwide, sub-licensable license to MSK’s rights in certain patent rights and intellectual property rights related to certain know-how to develop, make and commercialize licensed products and to perform services for all therapeutic and diagnostic uses in the field of cancer diagnostics in connection with certain CD33 antibodies generated in a specific principal investigator’s laboratory at MSK and constructs thereof. The CD33 License is exclusive with respect to such patent rights and tangible materials within such know-how, and nonexclusive with respect to MSK’s rights in such know-how and related intellectual property rights. As product candidates progress through clinical development, regulatory approval and commercialization, certain milestone payments will come due either as a result of the milestones having been met or the passage of time even if the milestones have not been met. Also, the Company will owe MSK customary royalties on commercial sales of the Company’s approved products, if any. Total potential milestones due under the CD33 License are $550,000, $500,000 and $7,500,000 for clinical, regulatory and sales-based milestones, respectively. In addition, the CD33 License contains minimum royalty payments that become due beginning in year 10 of $40,000 per year over the royalty term, increasing to $60,000 once a patent within the licensed rights is issued, subject to increase and creditable against any royalty payments due based on sales in the future. The Company is required to pay mid to high single-digit royalties on sales of licensed products. Additionally, the terms of the CD33 License provide that MSK is entitled to receive 25% of any income generated from the sale of any PRV or the sale of other comparable incentives provided by any non-U.S. jurisdiction.

The MSK CD33 License will expire, on a country-by-country basis, and on a licensed product-by-licensed-product or licensed-service-by-licensed-service basis, on the later of (I) the expiration of the last to expire of the patents and patent applications covering such licensed product or service in such country, (ii) the expiration of any market exclusivity period granted by a regulatory authority for such licensed product or service in such country, or (iii) 15 years from the first commercial sale of such licensed product or service in such country.

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MSK may terminate the CD33 License upon prior written notice in the event of our uncured material breach, or upon prior written notice if such breach is of a payment obligation. MSK may also terminate the CD33 License upon written notice in the event of the Company’s bankruptcy or insolvency or the Company’s conviction of a felony relating to the licensed products, or if the Company challenges the validity or enforceability of any licensed patent right. In addition, the Company has the right to terminate the CD33 License in its entirety at will upon prior written notice to MSK, but if the Company has commenced the commercialization of licensed products and/or licensed services the Company can only terminate at will if the Company ceases all development and commercialization of such licensed products and/or licensed services.

MabVax/MSK License

On December 2, 2019, the Company entered into the SAAA, of MSK License and Y mAbs Sublicense Agreement, or the MabVax/Y-mAbs Sublicense, between the Company and MabVax dated June 27, 2018, with MabVax and MSK, which became effective on December 13, 2019. Pursuant to the MabVax/Y mAbs Sublicense, MabVax sublicensed to the Company certain patent rights and know-how for development and commercialization of products for the prevention or treatment of NB by means of administering a bi-valent ganglioside vaccine granted to MabVax, pursuant to an exclusive license agreement dated June 20, 2008 between MabVax and MSK, as amended, or the MabVax/MSK License Agreement.

On March 21, 2019, MabVax filed a voluntary petition for relief under Chapter 11 of the Bankruptcy Code. The essence of the transaction created by the SAAA was for the Company, in light of the Chapter 11 bankruptcy proceedings affecting MabVax, to preserve the MabVax/MSK License Agreement and the rights granted to the Company under the MabVax/Y mAbs Sublicense and for the Company to create a direct relationship with MSK with respect to the rights covered under the MabVax/Y mAbs Sublicense. Pursuant to the SAAA, MabVax agreed to assume the MabVax/Y mAbs Sublicense and the MabVax/Y mAbs License Agreement pursuant to Section 365 of the Bankruptcy Code and concurrently to assign both of these agreements to MSK. The Company remains responsible for any potential downstream payment obligations to MSK related to the GD2 GD3 Vaccine that were specified in the MabVax/MSK License Agreement. This includes the obligation to pay development milestones totaling $1,400,000 and mid-single-digit royalty payments to MSK. In addition, if the Company obtains FDA approval for the GD2 GD3 Vaccine, then the Company is obligated to file with the FDA for a PRV. The SAAA stipulates that, if the Company is granted a PRV from the FDA covering a licensed product under the MabVax/Y mAbs Sublicense and the PRV is subsequently sold, the Company will pay directly to MabVax and to MSK, respectively, a total of twenty percent of the proceeds from the sale thereof. The MabVax/MSK License Agreement will expire with effect for the Company, on a country-by-country basis, on the later of the expiration of (i) 10 years from the first commercial sale of the licensed product in such country or (ii) the last to expire valid claim covering such licensed product rights at the time of and in the country of sale.

SADA License

On April 15, 2020, we entered into a license agreement (the “SADA License Agreement”) with MSK and Massachusetts Institute of Technology (“MIT”) that grants us an exclusive worldwide, sublicensable license to MSK’s and MIT’s rights to certain patent and intellectual property to develop, make, and commercialize licensed products and to perform services for all therapeutic and diagnostic uses in the field of cancer diagnostics and cancer treatments using the SADA BiDE Pre-targeted Radioimmunotherapy Platform (“SADA technology”). At the time of entering into the arrangement, we assessed the licensing and other rights acquired and given the lack of outputs upon acquisition and that no employees were acquired, among other factors, we have concluded that the licensing rights represented an asset acquisition.

Further, we concluded that the technology acquired under the licensing arrangement had no alternative future use. This conclusion was based on consideration of the rights conveyed under the agreement, extent of further development necessary and presence of uncertainty prior to obtaining regulatory approval for any product.

The SADA License Agreement requires us to pay to MSK and MIT mid to high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by us and our affiliates and sublicensees. We are obligated to pay annual minimum royalties of $40,000, increasing to $60,000 once a patent has been issued, over

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the royalty term, commencing on the tenth anniversary of the license agreement. These amounts are non-refundable but are creditable against royalty payments otherwise due under the SADA License Agreement.

The Company is also obligated to pay MSK and MIT certain clinical, regulatory and sales-based milestone payments under the SADA License Agreement. Certain of the clinical and regulatory milestone payments become due at the earlier of completion of the related milestone activity or the date indicated in the SADA License Agreement.

In addition, to the extent we enter into sublicense arrangements, we are obligated to pay to MSK and MIT a percentage of certain payments received from sublicensees of the rights licensed to us by MSK and MIT, which percentage will be based upon the achievement of certain clinical milestones. The Company has not entered into any sublicenses related to the SADA License Agreement. For each of the constructs previously generated by MSK using the SADA technology and sold for the Company by a sublicensee, the Company may pay sales milestones up to $60,000,000, in total, based on the achievement of various levels of cumulative net sales made by the sublicensee.

Failure by the Company to meet certain conditions under the arrangement could cause the related license to such licensed products to be canceled and could result in termination of the entire arrangement with MSK and MIT. In addition, the Company may terminate the SADA License Agreement with prior written notice.

Summary of Significant License Agreements and Related Commitments

The Company has the following significant license agreements and related commitments which include all obligations that have been paid or accrued as of and for the period ending March 31, 2023 (in thousands):

    

    

    

    

    

Accrued

    

Accrued

    

Accrued

    

Accrued

Cash paid

    

Cash paid

    

Expense

    

Expense

    

liabilities

    

liabilities

    

liabilities

    

liabilities

Three months

Three months

Three months

Three months

Current

Noncurrent

Current

Noncurrent

ended

ended

ended

ended

as of

as of

as of

as of

March

March

March

March

March

March

December

December

Agreements

2023

2022

2023

2022

2023

2023

2022

2022

MSK

$ 3,245

$ 1,223

$ 677

$ 1,298

$ 1,950

$ 3,397

$ 1,950

CD33

300

300

MabVax

SADA

605

605

Minimum royalties and certain clinical and regulatory milestones that become due based upon the passage of time under the CD33 License Agreement, the SADA Agreement and the MabVax Agreement are excluded from the above table as the Company does not consider such obligations to be probable as of March 31, 2023.

The below table represents the maximum clinical, regulatory or sales-based milestones as reflected within the agreements, certain of which have been paid in prior periods or are accrued as presented in the table above (in thousands):

    

Maximum

    

Maximum

    

Maximum

    

Agreements

Clinical Milestones

Regulatory Milestones

Sales-based milestones

MSK

$ 2,450

$ 9,000

$ 20,000

CD33

550

500

7,500

MabVax

200

1,200

SADA

4,730

18,125

23,750

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Research and development is inherently uncertain and should such research and development fail the MSK License Agreement, the CD33 License Agreement, the SADA License Agreement and the MabVax Agreement are cancelable at the Company’s option. The Company will also consider the development risk and each party’s termination rights under the respective agreement when considering whether any clinical or regulatory based milestone payments, certain of which also contain time-based payment requirements, are probable. The Company records milestones in the period in which the contingent liability is probable and the amount is reasonably estimable.

The Company did not have an expense related to milestones under the SADA License Agreement in the first quarters of 2023 and 2022 and had $605,000 in accrued liabilities as of March 31, 2023 and December 31, 2022 which was accrued upon entry into the arrangement in 2020. The Company’s first SADA molecule to enter clinical development is the GD2-SADA for potential use in GD2 positive solid tumors. The Company had its first clinical patient dosed in April 2023. The Company will assess the clinical progress to determine whether the milestones under the agreement are deemed probable. The company anticipates having the necessary data during the second half of 2023. The Company does not consider any other milestones under the SADA License Agreement to be probable as of March 31, 2023 and December 31, 2022.

Other agreements

The Company has also entered into various other support agreements with MSK including a sponsored research agreement to provide research services related to the intellectual property licensed under the MSK License Agreement; a master data services agreement, for services provided by approximately five full time employees at MSK, who are engaged in transferring clinical data, databases, regulatory files and other know how included in the MSK License Agreement to the Company; a master clinical trial agreement pursuant to which we committed to fund certain clinical trials at MSK; two separate core facility service agreements pursuant to which we committed to obtaining certain laboratory services from MSK; and in October 2020 we entered into a SADA sponsored research agreement pursuant to which we agreed to pay MSK to provide research services over a period of three years related to the intellectual property licensed under the SADA License Agreement. The scientific research took place over a period that commenced in September 2020 and ended in February 2022.

For the quarters ended March 31, 2023 and 2022, we incurred research and development expenses of $40,000 and $697,000, respectively, under these agreements.

Lease Agreements

In July 2019, the Company entered a development, manufacturing and supply agreement with SpectronRx in South Bend, Indiana, to secure access to clinical and commercial scale radiolabeling capacity for omburtamab. Under the terms of the agreement, SpectronRx had agreed to establish a manufacturing unit designated for the Company within its existing facilities, at which both clinical and commercial supply of radiolabeled omburtamab could be produced. Since the Company possessed the right to substantially all the economic benefits and directs the use of the production area, the Company accounted for the payments related to the access to the manufacturing space under ASC 842 as an operating lease. The original term of the lease was two years from the commencement date of August 31, 2020, which was subsequently extended to December 2022. The Company entered into an additional one-month extension that terminated in January 2023 for a de minimis cost.

In February 2019, the Company entered into a lease agreement in connection with its 4,548 square feet laboratory in New Jersey. In December 2019, we expanded the space with an additional 235 square feet. The original term of the lease is three years from the date the Company occupied the premises, with an option to extend for an additional two years which expires in January 2024, which the Company exercised and has included in the determination of the related lease liability. Fixed rent payable under the lease is approximately $144,000 per annum and is payable in equal monthly installments of approximately $12,000 per month.

January 2018, the Company entered into a lease agreement in connection with its corporate headquarters in New York. The term of the lease is six years from the date the Company began to occupy the premises and the lease

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expires in April 2024. Fixed rent payable under the lease is approximately $384,000 per annum and is payable in equal monthly installments of approximately $32,000, which are recognized on a straight-line basis.

In February 2018, the Company entered into a lease agreement for certain office space in Denmark, which has been amended several times. The lease was renewed on November 1, 2021 with a four-year term that expires in November 2025. The lease is payable in monthly installments of approximately $41,000, which are recognized on a straight-line basis. In January 2023, the Company notified the landlord of their intention to reduce the leased premise as a result of the Company’s strategic restructuring plan, which was approved by the Company’s Board of Directors on January 4, 2023. The lease modification resulted in an immaterial charge in the three months ended March 31, 2023.

Total operating lease costs were $340,000 and $704,000 for the three months ended March 31, 2023 and 2022, respectively. During the three months ended March 31, 2023, the expenses were recorded as $283,000 in research and development expense and $57,000 in selling, general, and administrative expense. During the three months ended March 31, 2022, the expenses were recorded as $638,000 in research and development expense and $66,000 in selling, general, and administrative expense.

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2023 and 2022 was $259,000 and $607,000, respectively, and was included in net cash used in operating activities in the Company’s Consolidated Statements of Cash Flows.

Maturities of operating lease liabilities at March 31, 2023 were as follows (in thousands):

Operating Leases

    

at March 31, 2023

Remainder of 2023

$

797

Years ending December 31,

2024

477

2025

370

2026

Total lease payments

1,644

Less: Imputed interest

(160)

Total operating lease liabilities at March 31, 2023

$

1,484

Maturities of operating lease liabilities at December 31, 2022 were as follows (in thousands):

Operating Leases

Years ending December 31,

    

at December 31, 2022

2023

$

997

2024

490

2025

419

Total lease payments

1,906

Less: Imputed interest

(139)

Total operating lease liabilities at December 31, 2022

$

1,767

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company uses its estimate of its incremental borrowing rate based on the information available at the lease commencement date. As of March 31, 2023, the weighted average remaining lease term is 2.16 years and the weighted average discount rate used to determine the

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operating lease liability was 8.5%. As of December 31, 2022, the weighted average remaining lease term is 2.36 years and the weighted average discount rate used to determine the operating lease liability was 8.3%.

Former Chief Executive Officer Contractual Severance Related Benefits

On April 27, 2022, the Company announced certain executive management changes. Effective April 22, 2022, Dr. Claus Juan Møller San Pedro stepped down from his positions as Chief Executive Officer and as a member of the Company’s Board of Directors. There were no disagreements with the Company expressed by Dr. Møller on any matters relating the Company’s operations, policies or practices. Dr. Møller’s contractual severance related benefits provided for cash compensation of $1,589,000, which includes salary and certain benefits continuation. Also, under terms of the equity award agreement, Dr. Møller’s outstanding stock option awards will continue to vest as scheduled and become exercisable when vested. This resulted in a non-cash share-based compensation expense charge of $9,286,000 that the Company recognized in the year ended December 31, 2022 as there is no longer a service condition related to such awards. The total charge of $10,875,000 related to executive management change was recorded in selling, general and administrative expenses during the year ended December 31, 2022. There was no impact in the three months ended March 31, 2023 and 2022 due to the April 22, 2022 timing of the separation.

Legal Matters

Donoghue vs. Y-mAbs Therapeutics, Inc., and Gad

The Company has been named a nominal defendant in a lawsuit filed in the U.S. District Court, Southern District of New York, on August 25, 2021, by one of the Company’s stockholders, Deborah Donoghue (Case No. 1:21-cv-07182). The suit names the Company’s President, Interim Chief Executive Officer and Head of Business Development and Strategy, and member of the Company’s board of directors, Mr. Thomas Gad as an additional defendant, and it seeks to compel Mr. Gad to disgorge alleged short swing profits stemming from a certain transaction involving the Company’s common stock undertaken by Mr. Gad on March 10, 2021 together with appropriate interest and costs of the lawsuit. On December 17, 2021, Mr. Gad filed a Motion to Dismiss the lawsuit. On August 8, 2022, the Court denied Mr. Gad’s Motion to Dismiss the lawsuit. The parties have completed documentary discovery and depositions. The Company is of the opinion that the claim is without merit and intends to maintain this position in the proceedings. In addition, the Company has been informed by Mr. Gad that he also believes the claim is without merit, that he has strong defenses against such claim and that he intends to vigorously defend the action. The Company has assessed the proceedings and does not believe that it is probable that a gain or a liability will be realized by the Company. As a result, the Company did not record any loss or gain contingencies for this matter.

In re Y-mAbs Therapeutics, Inc. Securities Litigation

On January 18, 2023, a purported Y-mAbs stockholder filed a putative class action lawsuit against the Company and certain of its current and former officers for alleged violations of the U.S. federal securities laws in the United States District Court, Southern District of New York (Case No.: 1:23-cv-00431). The complaint asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, on behalf of a proposed class consisting of those who acquired the Company’s common stock between October 6, 2020 and October 28, 2022. The complaint alleges that there were material misrepresentations and/or omissions regarding the FDA’s consideration of the Company’s BLA for omburtamab for the treatment of pediatric patients with CNS/leptomeningeal metastasis from neuroblastoma firstly submitted in 2020 and resubmitted in 2022. The complaint seeks unspecified damages, and costs and expenses, including attorneys’ fees. On April 4, 2023, the Court appointed a lead plaintiff for the putative class. On April 17, the Court entered a scheduling order under which the lead plaintiff has until May 23, 2023 to file an amended complaint and defendants have until July 11, 2023 to file their motion to dismiss. The Company believes that these claims are without merit and intends to vigorously defend against these claims. The Company has not established a liability for this claim as of March 31, 2023 as the Company does not consider the loss on the claim to be probable.

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Hazelton vs. Y-mAbs Therapeutics Inc., et al.

The Company has been named a nominal defendant in a lawsuit filed in the Court of Chancery of the State of Delaware, on February 8, 2023, by a purported stockholder, Jeffrey Hazelton (Case No. 2023-0147-LWW). The complaint purports to bring claims on behalf of the Company against current and former members of the Company’s board of directors for allegedly awarding themselves excessive compensation for fiscal years 2020 and 2021. The complaint seeks, among other things, recovery of alleged excessive compensation, an order directing the Company to undertake certain corporate governance reforms, and an award of costs and expenses, including attorneys’ fees. On April 6, 2023, Defendants filed a motion to dismiss. Plaintiff has until May 19, 2023 to file their opposition to the motion, and defendants will then have until June 14, 2023 to file their reply for the motion. The Company is of the opinion that the claims are without merit and intends to maintain this position in the proceedings. The Company has not established a liability for this claim as of March 31, 2023 as the Company does not consider the loss on the claim to be probable.

NOTE 10—STOCKHOLDERS’ EQUITY

Authorized Stock

As of March 31, 2023 and December 31, 2022, the Company has authorized a total of 105,500,000 shares, 100,000,000 of which are common stock, par value $0.0001 per share, and 5,500,000 of which are preferred stock, par value $0.0001 per share.

Common Stock

Each share of common stock is entitled to one vote. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to preferential dividend rights of the preferred stock, none of which have been issued. The Company had issued 43,677,767 shares of its common stock as of March 31, 2023 and 43,670,109 shares of its common stock as of December 31, 2022.

Preferred Stock

Preferred stock may be issued from time to time in one or more series with such designations, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions as approved by the Company’s Board of Directors. No preferred stock has been issued as of March 31, 2023 or December 31, 2022.

Stock grant agreements with non-employees

In April 2020, in connection with the SADA License Agreement, the Company entered into certain stock grant agreements pursuant to which it agreed to issue a total of 213,996 shares to two non-employee researchers who were involved in the development of the SADA-BiDE (2-step Self-Assembly and DisAssembly-Bispecific DOTA-Engaging antibody system) Pre-targeted Radioimmunotherapy Platform (the “SADA Technology”) licensed from MSK and MIT in consideration for their prior service. All 213,996 shares were issued in April 2020 into escrow with 40% of the shares immediately vesting at the time of issuance and the remaining 60% of the shares subject to vesting ratably over the next three years on the anniversary date of the agreement. As of March 31, 2023, the two non-employee researchers have vested in 80% of the total grant with the final 20% vesting on the anniversary date of the agreement in April 2023. There is no cash settlement feature, and no future service is required for the non-employee researchers to vest and receive the shares. In April 2020, the Company recognized a research and development expense of $7,376,000, which reflected the fair value of the issued shares on the grant date. There is no future expense related to these awards.

In July 2020, pursuant to the stock grant agreements, the Company also loaned the two researchers a total of $2,610,000 related to their individual tax payments due in conjunction with the stock grants. Each of the loans are evidenced by a three-year Secured Promissory Note, which had maturity dates of April 2023 and June 2023. The outstanding principal amounts of the loans, together with all accrued interest thereon at the rate of 1% per annum, is due

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and payable on the maturity date of the loans. The loans are secured by Pledge and Security Agreements, pursuant to which the researchers have pledged the shares as security for repayment of the loans. In July 2022, one of the researchers repaid their Secured Promissory Note, which had a maturity date of April 2023, and accrued interest, which resulted in a de minimis loss compared to the amortized cost of the loan, in exchange for 57,887 shares that were pledged as part of their security. Upon receipt, the Company recorded treasury shares at an acquisition cost of $963,000, based on the share price on the settlement date. The Company subsequently cancelled the acquired treasury shares resulting in a reduction of outstanding common stock and a reduction of additional paid-in-capital totaling $963,000. During the fourth quarter of 2022, the Company concluded that the other loan receivable, with a maturity date of June 2023, was impaired resulting in a $1,051,000 charge for the year-ended December 31, 2022. The remaining loan receivable balance is included in other current assets on the Company’s Consolidated Balance Sheets as of March 31, 2023 and December 31, 2022.

NOTE 11—SHARE-BASED COMPENSATION

2015 Equity Incentive Plan

The Company’s board of directors and stockholders have approved and adopted the 2015 Plan, which provided for the grant of incentive stock options, within the meaning of Section 422 of the Code (the Internal Revenue Code), to the Company’s employees and any parent and subsidiary corporations’ employees, and for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units to the Company’s employees, directors and consultants and its parent and subsidiary corporations’ employees and consultants. A total of 4,500,000 shares of the Company’s common stock were reserved for issuance pursuant to the 2015 Plan. Options granted under the 2015 Plan vest according to the schedule specified in the grant agreements, which is generally a four-year period and generally become immediately exercisable upon the occurrence of a change in control, as defined.

2018 Equity Incentive Plan

The Company’s board of directors and stockholders approved and adopted the 2018 Plan. However, options outstanding under the 2015 Plan continue to be governed by the 2015 Plan. The 2018 Plan which became effective upon the Company’s initial public offering in September 2018 and which provides for the grant of incentive stock options, within the meaning of Section 422 of the Code (the Internal Revenue Code), to the Company’s employees and any parent and subsidiary corporations’ employees, and for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units to the Company’s employees, directors and consultants and the Company’s parent and subsidiary corporations’ employees and consultants. A total of 5,500,000 shares of the Company’s common stock, inclusive of the awards previously granted under the 2015 Equity Incentive Plan were initially reserved for issuance pursuant to the 2018 Plan. In addition, the number of shares available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year beginning in 2019 through 2029, equal to 4% of the outstanding shares of common stock as of the last day of the Company’s immediately preceding fiscal year or by a lesser amount determined by the board of directors. The exercise price of options granted under the plans must at least be equal to the fair market value of the Company’s common stock on the date of grant. The term of an incentive stock option may not exceed 10 years, except that with respect to any participant who owns more than 10% of the voting power of all classes of the Company’s outstanding stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the administrator, as well as other types of consideration permitted by applicable law. Options granted under the 2018 Plan vest according to the schedule specified in the grant agreements, which is generally between one and four years and generally become immediately exercisable upon the occurrence of a change in control, as defined in the Plan Agreement.

Stock Options

During the three-month periods ended March 31, 2023 and 2022, stock-based compensation for stock option grants were $5,117,000 and $5,017,000, respectively, for options granted to employees and directors. The expense for the three months ended March 31, 2023 was inclusive of an acceleration of stock-based compensation of $1,706,000, as described further in NOTE 15— RESTRUCTURING CHARGE. During the three months ended March 31, 2023, the

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expenses were recorded as $2,180,000 in research and development expense and $2,937,000 in selling, general, and administrative expense. During the three months ended March 31, 2022, the expenses were recorded as $1,779,000 in research and development expense and $3,238,000 in selling, general, and administrative expense.

The following table summarizes common stock options issued and outstanding:

    

    

    

    

Weighted

Weighted

Aggregate

average

average

intrinsic

remaining

exercise

value

contractual

Options

price

(in thousands)

life (years)

Outstanding and expected to vest at December 31, 2022

 

7,079,767

$

21.27

$

3,112

6.45

Granted

 

1,536,700

4.66

Forfeited

(110,067)

10.54

Outstanding and expected to vest at March 31, 2023

 

8,506,400

$

18.41

$

3,867

6.81

Exercisable at March 31, 2023

 

5,172,608

$

19.99

$

3,344

5.39

The weighted average fair value of stock options granted for the three months ended March 31, 2023 was $3.40 There were no stock options granted in the three months ended March 31, 2022.

There were 1,105,500 options granted in the three months ended March 31, 2023 under the Company’s retention program, which were granted to the continuing employees that were not subject to the Company’s strategic restructuring plan.

All of the options granted in the three months ended March 31, 2023, have a maximum contractual term of ten years and have a vesting schedule in which 25% vest on the first anniversary of the grant date and the remainder vest ratably on a monthly basis over the next 36 months, provided in each case that the recipient remains an employee of the Company through each vesting date. The expected term for the options granted in the three months ended March 31, 2023 was 6.25 years and the risk-free interest rate was approximately 3.5%.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company’s public trading commenced in September 2018, and, as a result, there is only limited available historical volatility experience. Therefore, we estimate our expected share price volatility based on a combination of the historical volatility of a group of publicly traded peer companies and the historical volatility of the Y-mAbs share price, and we expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded share price. The expected term of our stock options has been determined utilizing the “simplified” method for awards as we have limited historical data to support the expected term assumption. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that we have never paid cash dividends on shares of our common stock and do not expect to pay any cash dividends in the foreseeable future. There were no significant changes to the inputs included in the Black-Scholes option pricing model during the period ended March 31, 2023.

As of March 31, 2023, we had $23,597,000 of unrecognized compensation related to employee stock options that are expected to vest over a period of 2.83 years.

Restricted Stock Unit Activity

For the three months ended March 31, 2023 and March 31, 2022, stock-based compensation for restricted stock unit grants was $187,000 and $74,000, respectively. During the three months ended March 31, 2023, the expenses were recorded as $126,000 in research and development expense and $61,000 in selling, general, and administrative expense.

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During the three months ended March 31, 2022, the expenses were recorded as $68,000 in research and development expense and $6,000 in selling, general, and administrative expense. The following table summarizes restricted stock units issued and outstanding:

    

    

    

Weighted

    

Weighted

average

average

remaining

grant

vesting

Restricted Stock Units

price

life (years)

Outstanding and expected to vest at December 31, 2022

33,355

$

17.77

 

1.77

Granted

366,655

4.74

 

Vested

(7,658)

13.58

 

Forfeited

(4,494)

18.27

Outstanding and expected to vest at March 31, 2023