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Table of Contents

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 September 30, 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 43,621,618 shares of Common Stock ($0.0001 par value) outstanding as of November 6, 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 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 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, including our plans to expand the commercialization of DANYELZA® (naxitamab-gqgk), referred to as DANYELZA, and to develop, obtain regulatory approval of and commercialize our other product candidates;
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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Our 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, expanding the indications for, and selling DANYELZA and any current or future product candidate for which we may receive marketing approval. This includes 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;
Our 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;
Our expectations with respect to our ongoing and future clinical trials 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;
Our 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 relationship with Memorial Sloan Kettering Cancer Center, or MSK, including our ability to maintain our exclusive rights under the 2015 MSK License Agreement (as amended), or MSK License, the 2020 SADA Technology License Agreement, or SADA License Agreement as well as 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, evaluate future product candidates, 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;
Our 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 health crises, macroeconomic conditions, such as inflation, uncertain global financial markets, supply-chain disruptions, and by geopolitical events, including the invasion of Ukraine by Russia, and sanctions related thereto, which resulted in the suspension of our clinical trial and regulatory activities in

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Russia; as well as the state of war between Israel and Hamas and the related risk of a larger regional conflict;
We currently depend on a small number of third-party contract manufacturing organizations, or 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.

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Page

PART I — FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements:

5

Consolidated Balance Sheets (unaudited) as of September 30, 2023 and December 31, 2022

5

Consolidated Statements of Net Loss and Comprehensive Loss (unaudited) for the three and nine months ended September 30, 2023 and 2022

6

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three and nine months ended September 30, 2023 and 2022

7

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 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

28

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

48

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

114

Item 3.

Defaults on Senior Securities

115

Item 4.

Mine Safety Disclosures

115

Item 5.

Other Information

115

Item 6.

Exhibits

116

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.  Consolidated Financial Statements

Y-MABS THERAPEUTICS, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share data and per share data)

    

As of

September 30, 

    

December 31, 

2023

2022

ASSETS

 

  

 

  

CURRENT ASSETS

 

  

 

  

Cash and cash equivalents

$

86,571

$

105,762

Accounts receivable, net

18,874

12,531

Inventories

7,113

6,702

Other current assets

 

2,302

 

5,452

Total current assets

 

114,860

 

130,447

Property and equipment, net

 

296

 

604

Operating lease right-of-use assets

1,593

1,739

Intangible assets, net

2,720

2,986

Other assets

 

9,415

 

5,680

TOTAL ASSETS

$

128,884

$

141,456

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Accounts payable

$

7,610

$

14,175

Accrued liabilities

 

13,304

 

13,241

Operating lease liabilities, current portion

898

868

Total current liabilities

 

21,812

28,284

Accrued milestone payments

 

5,375

 

2,250

Operating lease liabilities, long-term portion

725

899

Other liabilities

822

802

TOTAL LIABILITIES

28,734

32,235

Commitments and contingencies (Note 9)

 

  

 

  

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.0001 par value, 5,500,000 shares authorized and none issued at September 30, 2023 and December 31, 2022

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized at September 30, 2023 and December 31, 2022; 43,621,618 and 43,670,109 shares issued at September 30, 2023 and December 31, 2022, respectively

 

4

 

4

Additional paid-in capital

 

554,779

 

543,929

Accumulated other comprehensive income

 

1,849

 

1,331

Accumulated deficit

 

(456,482)

 

(436,043)

TOTAL STOCKHOLDERS’ EQUITY

 

100,150

 

109,221

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

128,884

$

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 September 30, 

    

Nine months ended September 30, 

2023

2022

    

2023

2022

REVENUES

Product revenue, net

$

19,954

$

12,537

$

60,956

$

32,820

License revenue

500

500

1,000

Total revenues

20,454

12,537

61,456

33,820

OPERATING COSTS AND EXPENSES

 

 

  

 

  

 

 

Cost of goods sold

2,595

2,475

9,327

5,447

License royalties

 

50

 

 

50

 

100

Research and development

15,358

22,453

40,831

71,785

Selling, general, and administrative

 

10,200

 

13,626

 

33,721

 

50,146

Total operating costs and expenses

 

28,203

 

38,554

 

83,929

 

127,478

Loss from operations

 

(7,749)

 

(26,017)

 

(22,473)

 

(93,658)

OTHER INCOME/(LOSS), NET

 

  

 

  

 

  

 

  

Interest and other income/(loss)

 

189

 

(1,509)

 

2,400

 

(3,067)

LOSS BEFORE INCOME TAXES

(7,560)

(27,526)

(20,073)

(96,725)

Provision for income taxes

187

366

NET LOSS

$

(7,747)

$

(27,526)

$

(20,439)

$

(96,725)

Other comprehensive income

 

  

 

  

 

  

 

  

Foreign currency translation

 

806

 

1,598

 

518

 

3,331

COMPREHENSIVE LOSS

$

(6,941)

$

(25,928)

$

(19,921)

$

(93,394)

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

$

(0.18)

$

(0.63)

$

(0.47)

$

(2.21)

Weighted average common shares outstanding, basic and diluted

 

43,620,532

 

43,718,351

 

43,651,536

 

43,715,451

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

Stock-based compensation expense

1,873

13,633

13,633

Foreign currency translation

1,422

1,422

Net loss

(41,131)

(41,131)

Balance June 30, 2022

43,720,038

$

4

$

537,962

$

3,104

$

(409,674)

$

131,396

Exercise of stock options

4,000

52

52

Stock-based compensation expense

1,979

3,341

3,341

Retirement of treasury shares – refer to Note 10

(57,887)

(963)

(963)

Foreign currency translation

1,598

1,598

Net loss

(27,526)

(27,526)

Balance September 30, 2022

43,668,130

$

4

$

540,392

$

4,702

$

(437,200)

$

107,898

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

Retirement of treasury shares – refer to Note 10

(58,763)

(480)

(480)

Stock-based compensation expense

1,188

3,616

3,616

Foreign currency translation

18

18

Net loss

(6,302)

(6,302)

Balance June 30, 2023

43,620,192

$

4

$

552,369

$

1,043

$

(448,735)

$

104,681

Stock-based compensation expense

1,426

2,410

2,410

Foreign currency translation

806

806

Net loss

(7,747)

(7,747)

Balance September 30, 2023

43,621,618

$

4

$

554,779

$

1,849

$

(456,482)

$

100,150

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)

Nine months ended September 30, 

2023

2022

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

Net loss

$

(20,439)

$

(96,725)

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

 

 

  

Depreciation and amortization

 

574

 

609

Stock-based compensation

 

11,330

 

22,065

Foreign currency transactions and other transactions

 

(369)

 

3,698

Changes in assets and liabilities:

 

 

Accounts receivable, net

(6,343)

(1,539)

Inventories

(411)

(730)

Other current assets

 

2,671

 

2,919

Other assets

 

(3,735)

 

(2,430)

Accounts payable

 

(6,196)

 

171

Accrued liabilities and other

 

3,722

 

4,702

NET CASH USED IN OPERATING ACTIVITIES

 

(19,196)

 

(67,260)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from exercised stock options

84

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

 

84

Effect of exchange rates on cash and cash equivalents

 

5

 

138

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(19,191)

 

(67,038)

Cash and cash equivalents at the beginning of period

 

105,762

 

181,564

Cash and cash equivalents at the end of period

$

86,571

$

114,526

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

 

  

 

  

Acquisition of treasury shares upon repayment of secured promissory note – refer to Note 10

$

480

$

963

Intangible assets acquisition in accrued milestones and royalty payments

$

$

1,500

Right-of-use assets obtained in exchange for lease obligations

$

636

$

347

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. The Company is leveraging its 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 payor 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 consolidated 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 $456,482,000 as of September 30, 2023, and $436,043,000 as of December 31, 2022. Through September 30, 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 sales of DANYELZA and from the sale of the Company’s Priority Review Voucher (“PRV”) obtained upon FDA approval of DANYELZA.

As of September 30, 2023, the Company had cash and cash equivalents of $86,571,000, and as of December 31, 2022, the Company had cash and cash equivalents of $105,762,000. As of the issuance date of the consolidated financial statements for the third quarter ended September 30, 2023, the Company expects that its cash and cash equivalents at September 30, 2023, will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months.

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, for which the Company may obtain regulatory approval and marketing authorization. The Company’s commercialization

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strategy may include working with a collaborator or distributor. Sufficient funds may not be available to the Company on attractive 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 the instructions to Form 10-Q. Accordingly, these consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim consolidated 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- and nine-month periods ended September 30, 2023, are not necessarily indicative of the results that may be expected for the year ending 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 its 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 a loss 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 loss with respect to such cash balances.

Accounts Receivable, Net

The Company’s accounts receivable, net 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.

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 September 30, 2023, the accounts receivable balances from such distributors totaled 69% of the Company’s outstanding accounts receivable. The remainder of the Company’s accounts receivable as of September 30, 2023 represented balances from international distribution partners. 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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Inventories

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. The Company had inventory write-downs totaling $375,000 and $831,000 in the three and nine months ended September 30, 2023, respectively, and $1,200,000 in the three and nine months ended September 30, 2022, which were each recorded in cost of goods sold on the Consolidated Statements of Net Loss and Comprehensive Loss.

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.

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 September 30, 2023 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

82,964

$

$

82,964

Total

$

$

82,964

$

$

82,964

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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 three and nine months ended September 30, 2023, there were no transfers between Level 1, Level 2, and Level 3.

Operating Lease Right-of-Use Assets and Operating Lease Liabilities

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, the Company will not recognize right-of-use assets or liabilities. The Company also elects 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.

Revenue Recognition

To determine revenue recognition for product revenue and license revenue 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

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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, the Company allocates 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.

Product revenue, net

The Company recognizes revenue from sales of DANYELZA at a point in time when its customer is deemed to have obtained control of the product, which generally occurs upon receipt at the end-user hospital for sales in the United States, and upon delivery to the distributors for sales in the international territories.

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 deducts these estimated amounts from its 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.

Discounts and distribution-related fees

The Company provides invoice discounts on DANYELZA sales to its 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, the Company expects its distributors to earn these discounts and fees and deduct the full amount of these discounts and fees from its gross product revenue at the time such revenues are recognized.

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Returns

The Company offers its 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 accounts receivable.

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 or sales-based milestone payments or royalty arrangements under this distribution agreement. The Company recognizes revenue when WEP obtains control of the product upon delivery. 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 September 30, 2023, within accounts receivable on the Consolidated Balance Sheets.

License revenue

The Company’s license agreements include regulatory-based milestone payments and sales-based milestone payments, in addition to royalties. The Company determines whether the achievement of each regulatory-based milestone within the agreement is constrained as they are contingent upon regulatory approvals, which are not within the control of the Company, and therefore not deemed probable. The Company expects that the sales-based milestones and royalty payments will be recognized when the milestone is achieved or the related sales occur. The Company re-evaluates the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur, it assesses whether this resolves the constraint and it is appropriate to recognize 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, of which $15,000,000 has already been recognized and received, 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 November 2020, the Company 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, of 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. The Company expects 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, the Company 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 or sales-based milestone payments or royalty arrangements under this distribution agreement.

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, of which $1,000,000 has already been recognized and received prior to 2023. In addition, the Company is entitled to royalties based upon DANYELZA net sales generated by Adium in Latin America. The agreement with Adium does not contain a regulatory-based milestone related to the Brazilian Health Regulatory Agency’s approval for marketing authorization, which was granted during the three months ended June 30, 2023. During the three and nine months ended September 30, 2023, the Company recognized $500,000 in regulatory-

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based license revenue from Adium pursuant to the distribution agreement in connection with the September 2023 achievement of marketing authorization for DANYELZA in Mexico. The Company expects that the sales-based milestones and royalty payments will be recognized when and if the milestones are achieved or the related sales occur.

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

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, NET

The Company’s product revenue, net was generated from sales of DANYELZA and totaled $19,954,000 and $12,537,000 for the three months ended September 30, 2023 and 2022, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the three months ended September 30, 2023, were $16,072,000 and $3,882,000, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the three months ended September 30, 2022, was $12,420,000 and $117,000, respectively. The Company’s product revenue, net from other countries for the three months ended September 30, 2023, included $3,048,000 of product revenue from the Company’s distribution partner, WEP.

The Company’s product revenue, net was generated from sales of DANYELZA and totaled $60,956,000 and $32,820,000 for the nine months ended September 30, 2023 and 2022, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the nine months ended September 30, 2023, were $48,756,000 and $12,200,000, respectively. The geographic breakout for the product revenue, net between the United States and other countries for the nine months ended September 30, 2022 was $30,872,000 and $1,948,000, respectively. The Company’s product revenue, net from other countries for the nine months ended September 30, 2023, included $3,535,000 of product revenue and related royalties for the commercial launch initial inventory stocking order from the Company’s distribution partner, SciClone, which launched commercial sales in China in June 2023. The Company’s product revenue, net from other countries for the nine months ended September 30, 2023, also included $5,579,000 of product revenue, net from the Company’s distribution partner, WEP.

Under the Company’s distribution agreement with WEP, the Company is entitled to receive all payments based on the net product sales and pays WEP a service fee in exchange for its services. The Company recorded $3,048,000 and $5,579,000 product revenue, net from WEP in the three and nine months ended September 30, 2023. There was no product revenue, net from WEP in the three and nine months ended September 30, 2022. As of September 30, 2023, the Company has recorded on its Consolidated Balance Sheets accounts receivable of approximately $4,120,000, and accrued liabilities of $267,000 related to product sales to WEP during the nine months ended September 30, 2023.

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 without contractual right of offset and other sales-related deductions are recorded within accrued liabilities. As of September 30, 2023, the Company had recorded accounts receivable allowances of approximately $910,000 and accrued liabilities of approximately $3,482,000

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related to product sales during the nine months ended September 30, 2023. As of December 31, 2022, the Company had recorded accounts receivable allowances of approximately $508,000 and accrued liabilities of $2,474,000 related to product sales.

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

179

7,296

519

7,994

Payments/credits relating to sales in current year

(164)

(5,445)

(220)

(5,829)

Change in estimate related to sales in the prior year

(755)

(755)

Balance September 30, 2023

$

48

$

4,001

$

343

$

4,392

The vast majority of the Company’s product sales were in the United States with additional sales in China, Europe, Latin America and Israel through sublicenses and distribution agreements. The Company had product sales to certain customers that accounted for more than 10% of total product revenue, net, for the three and nine months ended September 30, 2023 and September 30, 2022, respectively. McKesson, AmerisourceBergen, WEP and Cardinal Health accounted for 48%, 18%, 15% and 14% respectively, of the Company’s product revenue, net, for the three months ended September 30, 2023. McKesson and AmerisourceBergen accounted for 78% and 14%, respectively, of the Company’s product revenue, net, for the three months ended September 30, 2022. McKesson, AmerisourceBergen and Cardinal Health accounted for 45%, 22% and 13%, respectively, of the Company’s product revenue, net, for the nine months ended September 30, 2023. McKesson and AmerisourceBergen accounted for 69% and 16%, respectively, of the Company’s product revenue, net, for the nine months ended September 30, 2022. The Company recognized royalty revenue from its distribution partners of $427,000 and $58,000 in the three months ended September 30, 2023 and 2022, respectively, and $3,814,000 and $1,412,000 in the nine months ended September 30, 2023 and 2022, respectively.

During the quarter and nine months ended September 30, 2023, the Company recorded a change in estimate related to assessed Medicaid claims data experience and reserves for historical earned periods. The change in estimate resulted in a benefit of $1,586,000 to the quarter ended September 30, 2023, of which $755,000 related to the deductions for sales occurring in the prior year.

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):

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Three months ended September 30, 

Nine months ended September 30, 

    

2023

2022

    

2023

2022

(in thousands, except per share amounts)

Net loss (numerator)

$

(7,747)

$

(27,526)

$

(20,439)

$

(96,725)

Weighted-average shares (denominator), basic and diluted

 

43,621

 

43,718

 

43,652

 

43,715

Basic and diluted net loss per share

$

(0.18)

$

(0.63)

$

(0.47)

$

(2.21)

Potentially dilutive securities excluded from the computation of diluted earnings per share relate to stock options and unvested restricted stock units outstanding, which totaled 9,015,719 shares and 7,119,332 shares as of September 30, 2023 and September 30, 2022, respectively.

NOTE 6—INVENTORIES

Inventories consist of the following (in thousands):

    

September 30, 2023

December 31, 2022

Work In Progress

$

13,745

$

11,317

Finished Goods

2,219

666

Total Inventories

$

15,964

$

11,983

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

    

September 30, 2023

December 31, 2022

CURRENT ASSETS

Inventories

$

7,113

$

6,702

Total recorded in Current Assets

7,113

6,702

NONCURRENT ASSETS

Other assets

8,851

5,281

Total recorded in Noncurrent Assets

8,851

5,281

Total Inventories

$

15,964

$

11,983

As of September 30, 2023 and December 31, 2022, the Company has classified $8,851,000 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 after one year from the balance sheet date.

During the three months ended September 30, 2023 and 2022, the Company recorded charges to write-off inventory of $375,000 and $1,200,000, respectively. During the nine months ended September 30, 2023 and 2022, the Company recorded charges to write-off inventory of $831,000 and $1,200,000, respectively.

Changes in noncurrent assets are reflected on the Consolidated Statements of Cash Flows within the caption of other assets.

NOTE 7—INTANGIBLE ASSETS, NET

The Company’s intangible assets, net as of September 30, 2023 totaled $2,720,000, which were net of $580,000 of accumulated amortization, and related to capitalized milestone payments made following FDA and other regulatory approvals and commercialization of DANYELZA.

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The Company’s intangible assets, net 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 $945,000 thereafter.

NOTE 8—ACCRUED LIABILITIES

Accrued liabilities as of September 30, 2023 and December 31, 2022, are as follows (in thousands):

September 30, 

    

December 31, 

    

2023

2022

Accrued licensing, milestone and royalty payments

$

2,137

$

4,002

Accrued clinical costs

 

1,049

 

932

Accrued compensation and board fees

 

2,805

 

2,445

Accrued manufacturing costs

3,086

2,977

Accrued sales reserves

3,482

2,474

Other

 

745

 

411

Total

$

13,304

$

13,241

NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS

The Company has entered into three license agreements and certain other agreements with Memorial Sloan Kettering Cancer Center (“MSK”). The license agreements are the MSK License Agreement, dated August 20, 2015, between the Company and MSK (the “MSK License”), and the CD33 License Agreement, dated November 13, 2017, between the Company and MSK (the “CD33 License Agreement”). Through the Settlement and Assumption and Assignment of the MSK License and Y-mAbs Sublicense Agreement, dated December 2, 2019, among MabVax Therapeutics Holdings, Inc. and MabVax Therapeutics, Inc., (together “MabVax”), the Company and MSK (the “SAAA”), 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 into the License Agreement, dated April 15, 2020, with MSK and Massachusetts Institute of Technology (“MIT”) (the “SADA License Agreement”). 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 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/MSK Agreement and SADA License Agreement, collectively.

In the past, the Company had defined MSK as a related-party under the Company’s related-party policy. During the nine months ended September 30, 2023, the Company updated the related-party policy to remove MSK as a related-party as MSK does not participate on the Company’s Board of Directors, does not have a significant ownership in the Company and MSK is not in a position to exert decision making power. The Company has entered into several agreements with MSK, which include the MSK License Agreement, the SADA License Agreement, the CD33 License Agreement, and the MabVax Agreement, all as noted above.

The Company’s material license agreements are detailed in NOTE 9— LICENSE AGREEMENTS AND COMMITMENTS to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

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MSK License Agreement

The MSK License relates to intellectual property for DANYELZA and requires the Company 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 at the earlier of completion of the related milestone activity or the date indicated in the MSK License.

SADA License Agreement

Pursuant to the SADA License Agreement, the Company was granted 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”).

The SADA License Agreement requires the Company to pay MSK and MIT mid to high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by the Company and its affiliates and sublicensees. The Company is obligated to pay non-refundable annual minimum royalties of $40,000, increasing to $60,000 once a patent has been issued, over the royalty term, commencing on the tenth anniversary of the license agreement, which are creditable against royalty payments otherwise due under the SADA License Agreement. Pursuant to the SADA License Agreement, the Company is also obligated to pay MSK and MIT certain clinical, regulatory and sales-based milestone payments, which become due at the earlier of completion of the related milestone activity or the date indicated in the SADA License Agreement. The Company may terminate the SADA License Agreement with prior written notice. The Company’s SADA License Agreement is detailed in NOTE 9— LICENSE AGREEMENTS AND COMMITMENTS in the Company’s Consolidated Financial Statements included in its Annual Report on Form 10-K for the year ended December 31, 2022.

The Company recognized an expense of $4,125,000 related to clinical milestones under the SADA License Agreement during the three and nine months ended September 30, 2023, as the Company determined certain time-based clinical milestones within the agreement are probable based on the availability of necessary data and the assessment of clinical progress in the third quarter of 2023. The Company did not recognize any expense related to milestones under the SADA License Agreement during the three and nine months ended September 30, 2022. The Company had $4,125,000 and $605,000 in accrued liabilities as of September 30, 2023 and December 31, 2022, respectively. The Company made a payment of $605,000 in the nine months ended September 30, 2023 related to achievement of the milestone for dosing the first patient in the Phase 1 trial of GD2-SADA in April 2023.

For the MSK License Agreement and the SADA License Agreement, in addition to any milestone payments, to the extent the Company enters into sublicense arrangements, it is obligated to pay to MSK, as indicated in MSK License Agreement, and MSK and MIT, as indicated in SADA License Agreement, a percentage of certain payments received from sublicensees of the rights licensed to it by MSK, or MSK and MIT, which percentage will be based upon the achievement of certain clinical milestones. See NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for sublicense agreements related to MSK License Agreements by the Company.

Failure by the Company to meet certain conditions under each arrangement could cause the related licenses to such licensed products to be canceled and could result in termination of the respective arrangement with MSK, or MSK and MIT.

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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 for the three and nine months ended September 30, 2023 and 2022, and as of September 30, 2023 and December 31, 2022 (in thousands):

    

Cash paid

    

Cash paid

    

Expense

    

Expense

    

Expense

    

Expense

Accrued

    

Accrued

    

Accrued

    

Accrued

    

Nine

Nine

Three

Nine

Three

Nine

liabilities

    

liabilities

    

liabilities

    

liabilities

    

months

months

months

months

months

months

Current

Non-current

Current

Non-current

ended

ended

ended

ended

ended

ended

as of

as of

as of

as of

September 30, 

September 30, 

September 30, 

September 30, 

September 30,