10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2021

OR

oTRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

From the transition period from               to               .

Commission File Number 001-35798

Humanigen, Inc.

(Exact name of registrant as specified in its charter)

Delaware	77-0557236
(State or other jurisdiction of	(IRS Employer
incorporation)	Identification No.)

533 Airport Boulevard, Suite 400 Burlingame, CA 94010

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 243-3100

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

Title of each class	Trading Symbol(s)	Name of each exchange on with registered
Common Stock	HGEN	The Nasdaq Stock Market LLC

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   x No  o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  x  No  o

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

Large accelerated filer  o	Accelerated filer o
Non-accelerated filer  x	Smaller reporting company  x
	Emerging growth company  o

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. o

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes x  No o

As of May 5, 2021, there were 59,083,706 shares of common stock of the issuer outstanding.

TABLE OF CONTENTS

HUMANIGEN, INC.

FORM 10-Q

			Page
PART I. FINANCIAL INFORMATION			3
	Item 1.	Financial Statements (unaudited)	3
		Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	3
		Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020	4
		Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	5
		Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three Months Ended March 31, 2021 and 2020	6
		Notes to Condensed Consolidated Financial Statements	7
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
	Item 4.	Controls and Procedures	32
PART II. OTHER INFORMATION			33
	Item 1.	Legal Proceedings	33
	Item 1A.	Risk Factors	33
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	67
	Item 3.	Defaults Upon Senior Securities	67
	Item 4.	Mine Safety Disclosures	67
	Item 5.	Other Information	67
	Item 6.	Exhibits	68
SIGNATURES			69

2

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Humanigen, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	92,892		$	67,737
Other receivable		5,010			-
Prepaid expenses and other current assets		856			475
Total current assets		98,758			68,212
Other assets		90			90
Total assets	$	98,848		$	68,302
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	43,412		$	15,366
Accrued expenses		5,698			3,175
Deferred revenue		4,145			1,874
Total current liabilities		53,255			20,415
Non-current liabilities:
Deferred revenue		4,126			2,342
Long-term debt		24,444			-
Total liabilities		81,825			22,757
Stockholders’ equity:
Common stock, $0.001 par value: 225,000,000 shares authorized at March 31, 2021 and December 31, 2020; 53,656,689 and 51,626,508 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		54			52
Additional paid-in capital		456,966			419,923
Accumulated deficit		(439,997	)		(374,430	)
Total stockholders’ equity		17,023			45,545
Total liabilities and stockholders’ equity	$	98,848		$	68,302

See accompanying notes.

3

Humanigen, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Revenue:
License revenue	$	486		$	-
Total revenue		486			-
Operating expenses:
Research and development	$	59,934		$	659
General and administrative		4,948			1,398
Total operating expenses		64,882			2,057
Loss from operations		(64,396	)		(2,057	)
Other expense:
Interest expense		(19	)		(410	)
Other expense		(1,152	)		-
Net loss	$	(65,567	)	$	(2,467	)
Basic and diluted net loss per common share	$	(1.25	)	$	(0.11	)
Weighted average common shares outstanding used to calculate basic and diluted net loss per common share		52,655,756			22,854,106

See accompanying notes.

4

Humanigen, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2021			2020
Operating activities:
Net loss	$	(65,567	)	$	(2,467	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation expense		510			265
Issuance of common stock for payment of compensation		-			19
Issuance of common stock in exchange for services		-			13
Changes in operating assets and liabilities:
Other receivable		(5,010	)		-
Prepaid expenses and other assets		(381	)		16
Accounts payable		28,046			714
Accrued expenses		2,523			833
Deferred revenue		4,055			-
Net cash used in operating activities		(35,824	)		(607	)
Financing activities:
Net proceeds from issuance of common stock		36,106			65
Proceeds from exercise of stock options		429			-
Net proceeds from issuance of long-term debt		24,444			467
Net cash provided by financing activities		60,979			532
Net increase (decrease) in cash and cash equivalents		25,155			(75	)
Cash and cash equivalents, beginning of period		67,737			143
Cash and cash equivalents, end of period	$	92,892		$	68
Supplemental cash flow disclosure:
Cash paid for interest	$	4		$	2
Supplemental disclosure of non-cash investing and financing activities:
Issuance of stock options in lieu of cash compensation	$	-		$	133
Issuance of warrants for services	$	-		$	1

See accompanying notes.

5

Humanigen, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

(Unaudited)

	Three Months Ended March 31, 2021
					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balances at January 1, 2021		51,626,508	$	52	$	419,923	$	(374,430	)	$	45,545
Issuance of common stock, net of expenses		1,796,858		2		36,104		-			36,106
Issuance of common stock upon option exercise		233,323		-		429		-			429
Stock-based compensation expense		-		-		510		-			510
Net loss		-		-		-		(65,567	)		(65,567	)
Balances at March 31, 2021		53,656,689	$	54	$	456,966	$	(439,997	)	$	17,023
	Three Months Ended March 31, 2020
										Total
					Additional					Stockholders’
	Common Stock				Paid-In		Accumulated			Equity
	Shares		Amount		Capital		Deficit			(Deficit)
Balances at January 1, 2020		22,806,890	$	22	$	270,555	$	(284,895	)	$	(14,318	)
Issuance of common stock, net of expenses		40,000		-		65		-			65
Issuance of common stock in exchange for services		5,868		-		13		-			13
Issuance of stock options for payment of compensation		-		-		133		-			133
Issuance of common stock for payment of compensation		9,599		-		19		-			19
Issuance of warrant for services		-		-		1		-			1
Stock-based compensation expense		-		-		265		-			265
Net loss		-		-		-		(2,467	)		(2,467	)
Balances at March 31, 2020		22,862,357	$	22	$	271,051	$	(287,362	)	$	(16,289	)

See accompanying notes.

6

Humanigen, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Description of the Business

Humanigen, Inc. (the “Company”) was incorporated on March 15, 2000 in California, reincorporated as a Delaware corporation in September 2001 as KaloBios Pharmaceuticals, Inc., and in August 2017, the Company changed its name to Humanigen, Inc.

The Company is a clinical stage biopharmaceutical company, developing its portfolio of anti-inflammatory immunology and immuno-oncology monoclonal antibodies. The Company is focusing its efforts on the development of its lead product candidate, lenzilumab™, its proprietary Humaneered® (“Humaneered”) anti-human granulocyte-macrophage colony-stimulating factor (“GM-CSF”) monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated to neutralize GM-CSF, a cytokine that the Company believes is of critical importance in the hyperinflammatory cascade, sometimes referred to as cytokine release syndrome (“CRS”) or cytokine storm, associated with COVID-19, chimeric antigen receptor T-cell (“CAR-T”) therapy and acute Graft versus Host Disease (“GvHD”) associated with bone marrow transplants. The Company believes the results from its Phase 3 study in COVID-19 and its Phase 1b study in CAR-T support the mechanism of action of lenzilumab.  

On March 29, 2021, the Company announced top-line data on the primary endpoint and one secondary endpoint from a Phase 3, multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab (the “LIVE-AIR” study) as a potential therapeutic for newly hospitalized, hypoxic patients with COVID-19 pneumonia. Additional data from the trial, subsequently published on MedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint that showed lenzilumab improved the likelihood of survival without ventilation, (“SWOV”), sometimes referred to as “ventilator-free survival”, by 54% in the modified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.31, p=0.041). New analysis included in the publication showed that lenzilumab improved the likelihood of SWOV by 90% in the intent-to-treat (“ITT”) population (HR: 1.90; 1.02-3.52, nominal p=0.043) compared to placebo. SWOV also relatively improved by 92% in subjects who received both corticosteroids and remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 2.96-fold in subjects with C-reactive protein (“CRP”) levels <150 mg/L and age <85 years (2.96; 1.63–5.37, nominal p=0.0003); and by 88% in subjects hospitalized ≤2 days prior to randomization (1.88; 1.13-3.12, nominal p=0.015). Survival was improved by 2.17-fold in subjects with CRP<150 mg/L and age <85 years (2.17; 1.04-4.54, nominal p=0.040). The Company believes that the data published on MedRxiv, generated from the LIVE-AIR study support the conclusion that lenzilumab significantly improved SWOV in hospitalized, hypoxic subjects with COVID-19 pneumonia over and above treatment with remdesivir and/or corticosteroids. Subjects with CRP<150 mg/L and age <85 years demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab.

The Company shared the topline data on the primary endpoint and one secondary endpoint (the only data then available while the remaining analysis was pending) with the U.S. Food and Drug Administration (“FDA”) in a Pre-Emergency Use Authorization (“EUA”) Type B meeting in mid-April 2021. The Company is preparing to submit an EUA application at the end of May 2021. As requested by the FDA, the EUA application will include secondary endpoints and supplemental data analysis from LIVE-AIR, including those referenced in the MedRxiv publication, as well as additional stability and compatibility information required for the Chemistry Manufacturing and Control (“CMC”) section of the EUA application. There can be no assurance that the data published on MedRxiv will be sufficient for an EUA or that the FDA will not require additional information in order to grant an EUA. If the EUA is granted, the Company could begin to commercialize lenzilumab for the treatment of newly hospitalized COVID-19 pneumonia patients. COVID-19 infections are widespread and as of April 30, 2021 in the U.S., there were over 32 million cases, over 2.1 million hospitalizations and over 570 thousand deaths. Several vaccines have been developed which show efficacy in excess of 90%; even with the improvements in the rollout of vaccinations in the U.S., given the emergence of numerous COVID-19 variants, the Company believes the need for therapeutics to treat hospitalized COVID-19 patients will continue to exist as COVID-19 becomes endemic.

The Company has been in discussion with the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for the use of lenzilumab in COVID-19 patients in the United Kingdom and plans to initiate a rolling submission for Conditional Marketing Authorization (“CMA”) before the end of the second quarter of 2021. The Company also plans to submit for CMA to the European Medicines Agency (“EMA”) for the use of lenzilumab in the European Union. Further, the Company is reviewing the possibility of similar submissions for approval or compassionate use in other territories or countries worldwide.

7

As previously reported, lenzilumab has been selected to be part of the ongoing Accelerating COVID-19 Therapeutic Interventions and Vaccines (“ACTIV”)-5 and Big Effect Trial (“BET-B”), referred to as ACTIV-5/BET-B, study sponsored by the National Institutes of Health (“NIH”). ACTIV-5/BET-B is designed to determine whether certain approved therapies or investigational drugs in late-stage clinical development show promise against COVID-19 and, therefore, merit advancement into larger clinical trials. ACTIV-5/BET-B currently has 30 active U.S. sites enrolling and will evaluate lenzilumab with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, with approximately 100 patients expected to be assigned to each study arm. The Company is providing lenzilumab for the study, which is fully funded by NIH. The ACTIV-5/BET-B Data and Safety Monitoring Board (“DSMB”) met on May 7th and determined that the study should continue per protocol.

The Company intends to submit a Biologics License Application (“BLA”) to FDA in 2022, for the use of lenzilumab in hospitalized, hypoxic COVID-19 patients. Since BLAs typically require more than one study, the Company is currently evaluating the extent to which ACTIV-5/BET-B may serve as a basis for a BLA-confirmatory study for lenzilumab.

Lenzilumab has been studied in a multi-center Phase 1b trial as a sequenced therapy with Yescarta® (axicabtagene ciloleucel) to reduce CRS and neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) (NCT04314843). This study was a standard 3+3 design with three patients administered 600 mg lenzilumab (“cohort 1”) and three patients administered 1,800 mg lenzilumab (“cohort 2”) just prior to CAR-T. The recommended Phase 2 dose was determined to be 1,800 mg. On April 19, 2021, the Company announced positive data from the ZUMA-19 study. At the recommended Phase 2 dose of lenzilumab, the Objective Response Rate (“ORR”) was 100% and no patient experienced severe cytokine release syndrome (“CRS”) or severe neurotoxicity (“NT”). In the six study patients, the ORR reported was 83% (n=5) which included four complete responses (“CR”). In cohort 1, there was no severe CRS (≥ grade 3). One patient experienced grade 3 NT with a two-day duration. At the recommended Phase 2 dose (cohort 2), ORR was 100% (n=3) and the toxicity-free CR (CRS and NT < grade 2) was 66% (n = 2). There was no severe CRS or severe NT at the recommended Phase 2 dose. There were no adverse events attributed to lenzilumab across the study. Inflammatory markers were correlated with reduced rates of CRS and NT. Lenzilumab dose-dependently reduced myeloid cytokines IL-6, IL-8, MCP-1, and IP-10 (CXCL-10) and systemic inflammatory markers CRP, ferritin, and SAA in the patients studied. As a result of this positive data and the conclusion of the Phase 1b portion of the study, the Company elected to terminate the clinical collaboration with Kite Pharmaceuticals, Inc., a Gilead company (“Kite”), which markets Yescarta. The Company intends to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

The Company is also in the final planning stages for a Phase 2/3 trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for acute GvHD (the “Risk Adapted Therapy in Acute GvHD” or the “RATinG” study). The trial is expected to be conducted by the IMPACT Partnership, a collection of 22 stem cell transplant centers located in the United Kingdom. It is anticipated the RATinG study will begin in the fourth quarter of 2021. The Company will provide lenzilumab for this study and support certain laboratory tests related to the study. The majority of the study costs will be borne by the partner.

In addition, the Company is in partnership with the South Australian Health & Medical Research Institute (“SAHMRI”) and the University of Adelaide to conduct a Phase 2 Trial studying the efficacy of lenzilumab in combination with azacitadine. The study, (“PREcision Approach to Chronic Myelomonocytic Leukemia” or “PREACH-M”) is anticipated to begin enrollment in the third quarter of 2021 and to include four sites. The Company will provide lenzilumab for this study and the majority of the study costs will be borne by the partner.

The Company’s proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. The Company has developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied our Humaneered technology to produce them. Lenzilumab and the Company’s other two product candidates, ifabotuzumab and HGEN005, are Humaneered monoclonal antibodies. The Company’s Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their target but low immunogenicity. The Company believes its Humaneered antibodies offer additional advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related reactions.

8

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Quarterly Report on Form 10-Q for additional information regarding the business.

Liquidity

The Company has been continuing to advance its efforts to develop lenzilumab for use in hospitalized COVID-19 pneumonia patients. As of March 31, 2021, the Company had cash and cash equivalents of $92.9 million, which included a $25.0 million draw under the Company’s secured term loan with Hercules Capital, Inc. (“Hercules”) or the (“Term Loan”) (see Note 5 below). Together with approximately $94.1 million of net proceeds from the underwritten public offering completed in the second quarter of 2021, potential additional draws under the Term Loan, and potential revenues from the commercial sale of lenzilumab (if an EUA is granted), the Company expects to be able to fund its planned operations and capital expenditure requirements, although it may pursue other funding options on an opportunistic basis to support its liquidity.

As discussed in further detail in Note 6 below, the Company has entered into agreements with several contract manufacturing organizations (“CMOs”) to provide manufacturing, fill/finish and packaging services for lenzilumab, and is actively working with its existing and additional CMOs on additional agreements to bolster its ability to supply lenzilumab in the event of receipt of EUA or other conditional marketing authorization (“CMA”). Most of these additional manufacturing agreements, such as those currently in place, are expected to require payment of upfront fees upon execution and further payments against performance of the manufacturing services to be provided, often over a lengthy performance period. Given the competitive environment, it is not possible for the Company to predict when it will be in position to execute any additional manufacturing agreements, or to estimate the aggregate amount of potential future payments under such new agreements or the timing in which they may be made. If an EUA or other CMA were granted, the Company expects to be able to satisfy the bulk of the cash requirements associated with its manufacturing commitments from revenues from the commercial sale of lenzilumab, supplemented as necessary with proceeds from the sale of its equity securities; potential additional draws under the Term Loan; upfront and milestone payments from licensees; and government funding or financial support, if offered.

In the first quarter of 2021 the amounts included in Research and Development for lenzilumab COVID-19 clinical studies were $7.6 million and $51.7 million for production of lenzilumab finished good. The Company believes that its cash and cash equivalents will be sufficient to fund its planned operational requirements for at least the next 12 months. This evaluation is based on relevant conditions and events that are currently known or reasonably knowable. As a result, the Company could deplete its available capital resources sooner than it currently expects, and a delay in obtaining or failure to obtain an EUA could further constrain its cash resources. The Company has based these estimates on assumptions that may prove to be wrong, and its operating projections, including its projected net revenue following the potential receipt of an EUA for lenzilumab in COVID-19 patients, may change as a result of many factors currently unknown to it. If the Company is unable to raise additional capital when needed or on acceptable terms, it would be forced to delay, reduce or eliminate its research and development programs and commercialization efforts. Alternatively, the Company might raise funds through strategic collaborations, public or private financings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all. The financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties.

Reclassifications

Certain prior year amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current year's presentation. Such reclassifications had no effect on prior years’ Net loss or Stockholders’ equity.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements and include all adjustments necessary for the presentation of the Company’s condensed consolidated financial position, results of operations and cash flows for the periods presented.

9

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. These financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The December 31, 2020 Condensed Consolidated Balance Sheet was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any other future annual or interim period. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in accounting for the determination of revenue recognition, fair value-based measurement of stock-based compensation, accruals and warrants. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements.

2. 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, 2020. There have been no significant changes to the Company’s significant accounting policies during the three months ended March 31, 2021, from those previously disclosed in its 2020 Annual Report on Form 10-K.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted No. ASU 2019-12 on January 1, 2021 which did not have any impact to the Company’s Condensed Consolidated Financial Statements.

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from U.S. GAAP, separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for the Company’s financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company early adopted the new guidance on January 1, 2021, using the modified retrospective approach. The adoption did not have any impact to the Company’s Condensed Consolidated Financial Statements.

3. Potentially Dilutive Securities

The Company’s potentially dilutive securities, which include stock options and warrants and shares of common stock issuable upon conversion of convertible debt, have been excluded from the computation of diluted net loss per common share as the effect of including those securities would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in each period presented.

10

The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:

	As of March 31,
	2021		2020
Options to purchase common stock		4,224,111		3,420,930
Warrants to purchase common stock		51,238		66,239
Convertible debt		255,493		2,295,545
		4,530,842		5,782,714

4. License Revenue

On November 3, 2020, the Company entered into a License Agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”). Pursuant to the South Korea Agreement, among other things, the Company granted the Licensee a license under certain patents and other intellectual property to develop and commercialize lenzilumab for treatment of COVID-19 pneumonia, in South Korea and the Philippines (the “Territory”), subject to certain reservations and limitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in the Territory.

As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, payable promptly following the execution of the License Agreement, which was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

The Company assessed the South Korea Agreement in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers and ASC 808 – Collaborative Arrangements and determined that its performance obligations under the South Korea agreement include (i) the exclusive, royalty-bearing, sublicensable license to lenzilumab, (ii) the manufacturing supply services to be provided by the Company, (iii) cooperation and assistance to be provided by the Company to the Licensee with regulatory authorities in the Territory and (iv) its obligation to serve on a joint steering committee (Items (iii) and (iv) above collectively, the “Research and Development Services” or the “Services”). The Company concluded that in the initial period leading up to regulatory approval in the Territory (the “Initial Period”), the license was not distinct since it was of no benefit to Licensee without the aforementioned Services and that, as such, the license and the Services should be bundled as a single performance obligation.

The Company has concluded that the nature of its promise is to stand ready to provide Research and Development Services as needed during the Performance Period (as defined below). The Company has further concluded that for all of the increments of time during the Performance Period its promise of standing ready to provide the Services is substantially the same. While the specific tasks performed during each increment of time will vary, the nature of the overall promise to provide the Services remains the same throughout the Performance Period.

Since the provision of the license and the Services are considered a single performance obligation, the $6.0 million upfront payment (or $4.5 million net of withholding taxes and other fees and royalties) and the first milestone payment of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) which was met in the first quarter of 2021 and received in the second quarter of 2021, are being recognized as revenue ratably over the performance period through March 2023 (the “Performance Period”), the expected period over which the Company conservatively expects the Services to be performed with approval in the Territory expected by the end of March 2023. Therefore, in the three months ended March 31, 2021, the Company recognized license revenue totaling approximately $0.5 million.

Licensee’s purchases of lenzilumab for development purposes or for commercial requirements, represent options under the agreement and revenues will therefore be recognized when control of the product is transferred to Licensee.

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5. Long-Term Debt

Secured Term Loan Facility

On March 10, 2021, the Company executed a Loan and Security Agreement with Hercules as agent for its affiliates serving as lenders thereunder. The Term Loan provides a loan in the aggregate principal amount of $80 million. On March 29, 2021, the Company drew the initial $25.0 million tranche under the Term Loan. After giving effect to payment of fees and expenses associated with the draw, the Company received net proceeds of approximately $24.4 million.

In addition to the initial amount of $25.0 million, the Term Loan provides the Company with the potential for two additional tranches: a second tranche in the amount of $35.0 million or $25.0 million, which it may become entitled to draw through September 15, 2021 subject to the Company’s receipt of the EUA for lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia; and a third tranche of $20.0 million which the Company may become entitled to draw through June 15, 2022, at the discretion of Hercules if the Company requests additional funding in support of the Company’s strategic initiatives.

The Company will be required to repay amounts borrowed by March 1, 2025, subject to a one-year extension option that it may exercise if it has received FDA approval of a BLA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia, and the FDA-authorized label for lenzilumab is generally consistent with that sought in the Company’s BLA filing, and the Company has paid Hercules certain fees and expenses associated with the extension.

Amounts drawn bear interest at a floating rate equal to the greater of either (i) 8.75% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 8.75% (such greater amount, the “Base Interest Rate”). Subject to there not having occurred any default or event of default under the loan agreement, the Base Interest Rate will be reduced by 25 basis points upon the occurrence of each of the first three of the four following events to occur:

· if the Company achieves the protocol-specified primary efficacy endpoint for the pivotal Phase 3 study of lenzilumab for COVID-19, (clinicaltrials.gov identifier NCT04351152), and receives EUA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia;

· if the Company achieves product revenue from lenzilumab that is invoiced and/or recognized as revenue (as determined in accordance with GAAP) solely from the sale of lenzilumab (“Net Lenzilumab Product Revenue”) of at least $100.0 million;

· if the Company achieves Net Lenzilumab Product Revenue of at least $250.0 million; and

· if the Company achieves Net Lenzilumab Product Revenue of at least $350.0 million.

No principal payments will be due during an interest-only period, commencing on the initial borrowing date and continuing to April 1, 2023, subject to extension to April 1, 2024, and potentially October 1, 2024, under certain conditions. Following the interest-only period, the outstanding balance of the loan will be required to be repaid monthly, continuing through the maturity date.

The Company may prepay amounts drawn under the agreement in full prior to the maturity date then in effect, subject to payment of prepayment charges equal to:

· 2.0% of the amounts borrowed, if the prepayment occurs on or prior to March 29, 2022;

· 1.5% of the amounts borrowed, if the prepayment occurs after March 29, 2022 and before March 29, 2023; and

· 1.0% of the amounts borrowed, if the prepayment occurs after March 29, 2023 and before March 29, 2024.

In addition, on the earliest to occur of (i) the maturity date, (ii) the date the Company prepays the outstanding principal amount of the Term Loan, or (iii) the date the outstanding principal amount of the Term Loan otherwise becomes due, the Company will owe Hercules an end of term (“EOT”) charge equal to 6.75% of the aggregate amount of the Term Loan funded by Hercules.

As a condition to obtaining the term loan facility, the Company granted Hercules a security interest in substantially all of its assets and personal property not otherwise subject to existing or permitted liens. In addition, the loan agreement contains customary representations and warranties and events of default for a term loan facility of this size and type. Under the Term Loan, the Company also agreed to comply with certain customary affirmative and negative covenants that become effective upon the initial draw of the first tranche, including covenants to:

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· maintain $10.0 million unrestricted cash, which amount may be increased to $20.0 million if the Company borrows the second tranche of the Term Loan;

· comply with certain requirements to provide Hercules with financial information and other rights to inspect the Company’s books and records and the collateral for the Term Loan;

· refrain from incurring debt that is not expressly subordinated to the Term Loan; “Rule 144A-style” convertible notes in aggregate principal amount up to $250.0 million; and other permitted indebtedness;

· refrain from granting (or permitting to exist) liens on the Company’s assets and properties, other than certain permitted liens, including in respect of its patents and other intellectual property;

· refrain from making certain investments, other than permitted acquisitions and certain other permitted investments;

· refrain from repurchasing the Company’s stock or paying dividends, subject to limited exceptions;

· refrain from transferring any material portion of its assets; and

· refrain from entering into any merger or consolidation in which the Company is not the surviving entity.

All of these covenants will not apply upon repayment of any borrowings under the Term Loan.

Certain of the baskets for permitted investments and other exceptions to the covenants described above will increase in the event the Company raises more than $100.0 million in unrestricted net cash proceeds from one or more bona fide equity financings prior to March 31, 2022. Further, the covenants in the loan agreement will not prohibit the Company from pursuing its strategy of entering into out-bound license agreements for lenzilumab that may be exclusive as to specific geographic regions outside the U.S., nor will the covenants prohibit the Company from entering into co-development or co-promotion or commercialization agreements relating to lenzilumab, so long as such agreements generally are negotiated on arm’s length and commercially reasonable terms.

While the Term Loan is outstanding, the lenders will have the right to convert a portion of the principal amount outstanding under the Term Loan (ranging from $5.0 million to $10.0 million in the aggregate) into shares of the Company’s common stock at a conversion price equal to $19.57 per share, subject to customary anti-dilution adjustments.

The following table summarizes the outstanding future payments of principal and interest associated with the Company’s Term Loan as of March 31, 2021 (in thousands):

2021	$	1,501
2022		2,218
2023		10,800
2024		13,671
2025		5,153
Total payments		33,343
Less amount representing interest		(6,655	)
Notes payable, gross		26,688
Less: Unamortized portion of EOT charge		(1,688	)
Less: Unamortized discount on notes payable		(213	)
Less: Unamortized debt issuance costs		(343	)
Long-term debt		24,444
Less current portion		-
Long-term debt, net of current portion	$	24,444

Interest expense related to the Term Loan, recorded during the three months ended March 31, 2021, was approximately $18 thousand and the effective interest rate was 9.0%.

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6. Commitments and Contingencies

Eversana Agreement

On January 10, 2021, the Company announced that it had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide the Company multiple services from its integrated commercial platform in preparation for the potential commercialization of lenzilumab.

Under the Eversana Agreement, Eversana will serve as the Company’s end-to-end commercial partner, providing the Company with a full suite of services in connection with the potential launch of lenzilumab. Eversana services initially will comprise marketing, market access, consulting, field solutions, field operations, health economics and medical affairs. Additional services may be negotiated by the parties and set forth in statements of work delivered in accordance with the Eversana Agreement.

The Company will pay Eversana fees and reimburse it for expenses in performing the services as established in applicable statements of work. Eversana has agreed to defer its fees pending the Company’s receipt of an EUA from the FDA for lenzilumab for newly hospitalized and hypoxic COVID-19 patients. The Company has accrued $0.9 million for Eversana activities performed in the first quarter of 2021, which are included in Accrued expenses in the Condensed Consolidated Balance Sheets, with the anticipated payment upon receipt of the EUA.

The Eversana Agreement provides for a one-year term and will renew for subsequent one-year terms unless either party provides a notice of non-renewal. After the first year, the Company may terminate the Eversana Agreement upon advance written notice to Eversana. The Eversana Agreement contains customary provisions allowing either party to terminate the Eversana Agreement as a result of certain changes in law and material breaches and certain insolvency events by or relating to the other party.

The Eversana Agreement imposes customary mutual obligations on the parties to protect and not disclose the confidential information and intellectual property of the other, and contains insurance, non-solicitation, indemnification and limitation of liability provisions customary for service contracts of this type.

Manufacturing Agreements

The Company has entered into agreements with several contract manufacturing organizations (“CMOs”) to manufacture bulk drug substance (“BDS”) and fill/finish/drug product (“DP”) for our lenzilumab clinical trial activities related to COVID-19 as well as to manufacture BDS and DP for a potential launch of lenzilumab in anticipation of an EUA in 2021. The Company has also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. As of March 31, 2021, the Company estimates that its commitments remaining to be incurred during 2021 will amount to approximately $169 million. The agreements contain customary cancellation clauses.

7. Stockholders’ Equity

Reverse Stock Split

Effective September 11, 2020 (the “Effective Date”), the Company amended its charter to effect a reverse stock split at a ratio of 1-for-5 (the “Split Ratio”). No fractional shares were issued in connection with the reverse stock split. Stockholders of record otherwise entitled to receive fractional shares of common stock received cash (without interest or deduction) in lieu of such fractional share interests.

The reverse stock split reduced the total number of shares of the Company’s common stock outstanding as of the Effective Date from approximately 210.9 million shares to approximately 42.2 million shares. The par value per share and other terms of the Company’s common stock were not affected by the reverse stock split, and the number of authorized shares of the Company’s common stock remains at 225,000,000.

The reverse stock split resulted in a proportionate adjustment in the number of shares reserved for issuance under the 2020 Equity Plan, such that a total of 7,000,000 shares of the Company’s common stock were reserved for issuance under the 2020 Equity Plan following the Effective Date. In addition, proportionate adjustments were made to the number of shares covered by, and the exercise price applicable to, each outstanding stock option award under the 2012 Equity Plan and outstanding warrants issued by the Company, in each case to give effect to the Split Ratio and the reverse stock split.

The reverse stock split was accounted for retroactively and is reflected in our common stock, stock option and warrant activity as of and during the period ended December 31, 2020 and the periods ended March 31, 2021 and 2020. Unless stated otherwise, all share data in this Quarterly Report on Form 10-Q have been adjusted, as appropriate, to reflect the reverse stock split.

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Controlled Equity Offering

On December 31, 2020, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), under which the Company could issue and sell from time-to-time shares of the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as sales agent. Through March 31, 2021, the Company issued and sold 1,796,858 shares of its common stock under the Sales Agreement for net proceeds of $36.1 million.

2021 Underwritten Public Offering

On March 30, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several` underwriters (the “Underwriters”), in connection with the public offering of 5,000,000 shares of the Company’s common stock. Pursuant to the Underwriting Agreement, the Company granted the underwriters a 30-day option to purchase an additional 750,000 shares of common stock. See Note 11 for additional information.

8. Stock-Based Compensation

A summary of stock option activity for the three months ended March 31, 2021 under all the Company’s options plans is as follows:

	Options			Weighted Average Exercise Price
Outstanding at January 1, 2021		3,728,149		$	5.57
Granted		758,240			16.13
Exercised		(250,242	)		(3.13	)
Cancelled (forfeited)		(11,932	)		(3.33	)
Cancelled (expired)		(104	)		(162.09	)
Outstanding at March 31, 2021		4,224,111		$	7.61

The weighted average fair value of options granted during the three months ended March 31, 2021 was $13.30 per share.

The Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption terms for the three months ended March 31, 2021:

	Three Months Ended
	March 31, 2021
Exercise price	$16.07 - $17.79
Market value	$16.07 - $17.79
Expected term	6 years
Expected volatility	109%
Risk-free interest rate	1.06% - 1.08%
Expected dividend yield	-%

The Company recorded stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows (in thousands):

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	Three Months Ended March 31,
	2021		2020
General and administrative	$	364	$	211
Research and development	$	146	$	54
Total stock-based compensation	$	510	$	265

At March 31, 2021, the Company had $12.8 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to outstanding stock options that will be recognized over a weighted-average period of 2.7 years.

9. License and Collaboration Agreements

Kite Agreement

On May 30, 2019, the Company entered into a clinical collaboration agreement with Kite, providing in part for conduct of a multi-center Phase 1b study of lenzilumab with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma, including DLBCL. On April 19, 2021, the Company announced positive data from this study. As a result of this positive data and the conclusion of the Phase 1b portion of the study, the Company elected to terminate the clinical collaboration agreement with Kite (see Note 11). The Company intends to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

Mayo Agreement

On June 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Mayo Agreement”) with the Mayo Foundation for Medical Education and Research (“Mayo”) for certain technologies used to create CAR-T cells lacking GM-CSF expression through various gene-editing tools including CRISPR-Cas9 (GM-CSF knock-out). The license covers various patent applications and know-how developed by Mayo in collaboration with the Company. These licensed technologies complement and broaden the Company’s position in the GM-CSF neutralization space and expand the Company’s discovery platform aimed at improving CAR-T to include gene-edited CAR-T cells.

Pursuant to the Mayo Agreement, the Company paid $0.2 million to Mayo in June 2020, which payment was accrued in Research and development expense in June 2019. The Mayo Agreement also requires the payment of milestones and royalties upon the achievement of certain regulatory and commercialization milestones.

Zurich Agreement

On July 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Zurich Agreement”) with the University of Zurich (“UZH”) for technology used to prevent or treat Graft versus Host Disease (“GvHD”) through GM-CSF neutralization. The Zurich Agreement covers various patent applications filed by UZH which complement and broaden the Company’s position in the application of GM-CSF and expands the Company’s development platform to include improving allogeneic Hematopoietic Stem Cell Transplantation (“HSCT”).

Pursuant to the Zurich Agreement, the Company paid $0.1 million to UZH in July 2019. The Zurich Agreement also requires the payment of annual maintenance fees and milestones and royalties upon the achievement of certain regulatory and commercialization milestones. The license payment of $0.1 million was recorded as Research and development expense in July 2019.

Clinical Trial Agreement with the National Institute of Allergy and Infectious Diseases

On July 24, 2020, the Company entered into a clinical trial agreement (the “ACTIV-5 Clinical Trial Agreement”) with the National Institute of Allergy and Infectious Diseases (“NIAID”), part of NIH, which is part of the U.S. Government Department of Health and Human Services, as represented by the Division of Microbiology and Infectious Diseases. Pursuant to the ACTIV-5 Clinical Trial Agreement, lenzilumab is being evaluated in the NIAID-sponsored ACTIV-5/BET-B in hospitalized patients with COVID-19.

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The NIH created the ACTIV public-private partnership and selected lenzilumab to be evaluated in its ACTIV-5/BET-B, which is comparing lenzilumab in combination with Gilead’s investigational antiviral, remdesivir, versus placebo plus remdesivir in hospitalized COVID-19 patients. The trial is expected to enroll 100 patients in each arm of the study.

Pursuant to the ACTIV-5 Clinical Trial Agreement, NIAID will serve as sponsor and will be responsible for funding, supervising and overseeing ACTIV-5/BET-B. The Company will be responsible for providing lenzilumab to NIAID without charge and in quantities to ensure a sufficient supply of lenzilumab. The ACTIV-5 Clinical Trial Agreement imposes additional obligations on the Company that are reasonable and customary for clinical trial agreements of this nature, including in respect of compliance with data privacy laws and potential indemnification obligations. The Company will have access to data from ACTIV-5/BET-B once concluded.

CRADA

On November 5, 2020, the Company and the Department of Defense (“DoD”) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CBRND” or “JPEO”) entered into a Cooperative Research and Development Agreement (“CRADA”) in collaboration with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) at the U.S. Department of Health and Human Services (“HHS”), in support of Operation Warp Speed (“OWS”), to assist in the development of lenzilumab, in connection with a potential EUA for COVID-19.

On January 22, 2021, the Company announced an expansion of the CRADA that it had previously entered with JPEO on November 5, 2020, was subsequently co-signed by BARDA. This provides the Company with access to manufacturing capacity reserved by BARDA for fill-finish product to accelerate the drug product manufacturing of lenzilumab.

Pursuant to the CRADA, the Company has been provided access to a full-scale, integrated team of OWS manufacturing, and regulatory subject matter experts, leading decision makers and statistical support in anticipation of applying for EUA and subsequently a BLA for lenzilumab as a potential treatment for COVID-19. The CRADA also provides that OWS regulatory experts will work with the Company on FDA communications, meetings and regulatory filings. The CRADA aims to support the lenzilumab Phase 3 clinical trial output, focusing on efficiently generating an EUA and BLA submission. In addition to providing access under EUA, a goal of the CRADA is to ensure lenzilumab receives the benefits provided by Public Law 115-92. The Company may receive advance purchase contracts or other benefits under Public Law 115-92, if FDA issues an EUA or BLA.

10. Litigation

Savant Litigation

On February 29, 2016, the Company entered into a binding letter of intent (the “LOI”) with Savant Neglected Diseases, LLC (“Savant”). The LOI provided that the Company would acquire certain worldwide rights relating to benznidazole from Savant. On June 30, 2016, the Company and Savant entered into an Agreement for the Manufacture, Development and Commercialization of Benznidazole for Human Use (the “MDC Agreement”), pursuant to which the Company acquired certain worldwide rights relating to benznidazole. The MDC Agreement consummates the transactions contemplated by the LOI.

In addition, on June 30, 2016, the Company and Savant also entered into a Security Agreement (the “Security Agreement”), pursuant to which the Company granted Savant a continuing senior security interest in the assets and rights acquired by the Company pursuant to the MDC Agreement and certain future assets developed from those acquired assets.

On June 30, 2016, in connection with the MDC Agreement, the Company issued to Savant a five-year warrant to purchase 40,000 shares of the Company’s Common Stock, at an exercise price of $11.25 per share, subject to adjustment.

On May 26, 2017, the Company submitted its benznidazole Investigational New Drug Application (“IND”) to the FDA which became effective on June 26, 2017. The Company recorded expense of $1.0 million during the year ended December 31, 2017 as Research and development expense related to the milestone achievement associated with the IND being declared effective.

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On July 10, 2017, FDA notified the Company that it granted Orphan Drug Designation to benznidazole for the treatment of Chagas disease. The Company recorded expense of $1.0 million during the year ended December 31, 2017 as Research and development expense related to the milestone achievement associated with Orphan Drug Designation.

The $2.0 million in milestone payments due Savant are included in Accrued expenses in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020.

On July 10, 2017, the Company filed a complaint against Savant in the Superior Court for the State of Delaware, New Castle County (the “Delaware Court”). KaloBios Pharmaceuticals, Inc. v. Savant Neglected Diseases, LLC, No. N17C-07-068 PRW-CCLD. The Company asserted breach of contract and declaratory judgment claims against Savant arising under the MDC Agreement. The Company alleges that Savant has breached its MDC Agreement obligations to pay cost overages that exceed a budgetary threshold as well as other related MDC Agreement representations and obligations. In the litigation, the Company has alleged that as of June 30, 2017, Savant was responsible for aggregate cost overages of approximately $3.4 million, net of a $0.5 million deductible under the MDC. The Company asserts that it is entitled to offset $2.0 million in milestone payments due Savant against the cost overages.

On July 12, 2017, Savant removed the case to the Bankruptcy Court, claiming that the action is related to or arises under the Bankruptcy Case from which the Company emerged in July 2016. In re KaloBios Pharmaceuticals, Inc., No. 15-12628 (LSS) (Bankr. D. Del.). On July 27, 2017, Savant filed an Answer and Counterclaims. Savant’s filing alleges breaches of contracts under the MDC Agreement and the Security Agreement, claiming that the Company breached its obligations to pay the milestone payments and other related representations and obligations. On August 1, 2017, the Company moved to remand the case back to the Delaware Court (the “Motion to Remand”).

On August 2, 2017, Savant sent a foreclosure notice to the Company, demanding that it provide the Collateral as defined in the Security Agreement for inspection and possession on August 9, 2017, with a public sale to be held on September 1, 2017. The Company moved for a Temporary Restraining Order (the “TRO”) and Preliminary Injunction in the Bankruptcy Court on August 4, 2017. Savant responded on August 7, 2017. On August 7, 2017, the Bankruptcy Court granted the Company’s motion for a TRO, entering an order prohibiting Savant from collecting on or selling the Collateral, entering our premises, issuing any default notices to us, or attempting to exercise any other remedies under the MDC Agreement or the Security Agreement. On August 9, 2017, the parties have stipulated to continue the provisions of the TRO in full force and effect until further order of the appropriate court, which the Bankruptcy Court signed that same day (the “Stipulated Order”).

On January 22, 2018, Savant wrote to the Bankruptcy Court requesting dissolution of the TRO and the Stipulated Order. On January 29, 2018, the Bankruptcy Court granted the Motion to Remand and denied Savant’s request to dissolve the TRO and Stipulated Order, ordering that any request to dissolve the TRO and Stipulated Order be made to the Delaware Court.

On February 13, 2018 Savant made a letter request to the Delaware Court to dissolve the TRO and Stipulated Order. Also, on February 13, 2018, the Company filed its Answer and Affirmative defenses to Savant’s Counterclaims. On February 15, 2018 the Company filed a letter of opposition to Savant’s request to dissolve the TRO and Stipulated Order and requesting a status conference. A hearing on Savant’s request to dissolve the TRO and Stipulated Order was held before the Delaware Court on March 19, 2018. The Delaware Court denied Savant’s request to dissolve the TRO and Stipulated order, which remain in effect.

On April 11, 2018, the Company advised the Delaware Court that it would meet and confer with Savant regarding a proposed case management order and date for trial. On April 26, 2018 the Delaware Court so-ordered a proposed case management order submitted by the Company and Savant. The schedule in the case management order was modified by stipulation on August 24, 2018.

On April 8, 2019, the Company moved to compel Savant to produce documents in response to the Company’s document requests.  The parties thereafter agreed to a discovery schedule through June 30, 2019, which the Superior Court so ordered, and the parties produced documents to each other. 

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On June 4, 2019, Savant filed a complaint against the Company and Madison Joint Venture LLC (“Madison”) in the Delaware Court of Chancery (the “Chancery Action”) seeking to “recover as damages that amounts owed to it under the MDC Agreement, and to reclaim Savant’s intellectual property,” among other things.  Savant also requested leave to move to dismiss the Company’s complaint on the grounds that the Company’s transfer of assets to Madison was champertous.  On June 10, 2019, the Company requested by letter that the Superior Court hold a contempt hearing because the Chancery Action violated the TRO entered by the Bankruptcy Court, the terms of which have been extended by stipulation of the parties.  On June 18, 2019, the Superior Court held a telephonic status conference.  The parties agreed that the Chancery Action should be consolidated with the Superior Court action, after which the Superior Court would address the parties’ motions. 

On July 22, 2019, the Company moved for contempt against Savant.  Savant filed its opposition on July 29, 2019.  On August 12, 2019, the Superior Court denied the Company’s motion for contempt. 

On July 23, 2019, Savant moved for summary judgment on the issue of champerty.  The Company filed its response and cross-motion for summary judgment on August 27, 2019.  Savant filed its reply on September 10, 2019 and the Company filed its cross-reply on September 20, 2019.  The motion is fully briefed and was argued at a hearing on February 3, 2020.  On August 17, 2020 the Superior Court issued a memorandum opinion denying Savant’s motion for summary judgment on the issue of champerty.

On July 26, 2019, the Company moved to modify the previously agreed-upon discovery schedule to extend discovery through December 31, 2019, which the Superior Court granted.  In subsequent orders, the discovery schedule was further extended until the end of June 2020.

On July 30, 2019, the Company filed a motion to dismiss Savant’s Chancery Action.  Savant filed an amended complaint on September 4, 2019, and the Company filed its opening brief in support of its motion to dismiss on October 11, 2019.  That motion is fully briefed and was argued at a hearing on February 3, 2020. On August 17, 2020 the Superior Court issued a memorandum opinion denying the Company’s motion to dismiss Savant’s Chancery Action.

On August 19, 2019, Savant moved to dismiss the Company’s amended Superior Court complaint.  On September 27, 2019, the Company filed an opposition to Savant’s motion and, in the alternative, requested leave to file a second amended complaint against Savant.  Savant consented to the filing of the second amended complaint and withdrew their motion to dismiss.  Savant filed a partial motion to dismiss against a co-defendant on October 30, 2019.  That motion is fully briefed and was argued at a hearing on February 3, 2020. At the February 3, 2020 hearing, the Court reserved judgment on the parties’ reciprocal motions. On August 17, 2020, the Superior Court issued a memorandum opinion granting in part and denying in part Savant’s motion to dismiss the Company’s amended Superior Court complaint. The Superior Court found the Company lacked standing because it assigned its interest to its co-plaintiff Madison. However, the Superior Court found that Madison had standing to proceed. Although the Company was dismissed from all counts of the Superior Court Action it continues to possess an interest in the Superior Court Action because of its ownership of Madison and remains a litigant because of Savant’s Chancery Action. Savant’s motion to dismiss the Company’s amended Superior Court complaint was denied in all other respects.

On May 22, 2020, upon the request of the parties, the Superior Court stayed both Delaware actions until July 29, 2020.

On June 30, 2020, Savant exercised 20,000 warrants in a cashless exercise resulting in 10,909 shares being issued to Savant.

On July 24, 2020, the parties submitted a joint status report in the Delaware actions. The parties also requested a status conference with the Court to discuss moving the trial from October 2020 to some later time.

On August 20, 2020, the Court held the requested status conference and ordered that a consolidated trial for the Superior Court Action and Chancery Action would be held in April 2021. The parties subsequently agreed to a five-day trial starting on April 12, 2021.

On September 29, 2020, upon the request of the parties, the Superior Court revised the existing discovery schedule. Under the revised discovery schedule fact discovery closed on November 9, 2020 and expert discovery closed on December 18, 2020.

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On October 7, 2020, Savant moved for leave to amend its complaint in the Chancery Action to add a claim for breach of contract related to its exercise of 20,000 warrants on June 30, 2020. Savant claims that the Company’s issuance of 10,909 shares was insufficient under the warrant. On November 23, 2020, the Superior Court granted Savant’s motion for leave to amend its complaint in the Chancery Action. The Company answered the second amended complaint in the Chancery Action on December 11, 2020.

On November 30, 2020, the Superior Court revised the discovery schedule to permit the Company to take additional discovery regarding Savant’s second amended complaint in the Chancery Action. Under this revised schedule, the Company had until December 18, 2020 to take additional discovery. Further, the deadline to complete expert discovery was moved to January 5, 2021. A consolidated trial for the Superior Court Action and Chancery Action remained scheduled for April 2021.

On December 18, 2020, fact discovery closed.

On January 5, 2021, the Company moved for leave to amend the Superior Court complaint to add Scott Freeman as a defendant. Savant opposed the motion for leave to amend on February 5, 2021. Briefing was completed on March 5, 2021. Further, the deadline for expert discovery closed.

On January 19, 2021, the Company and Savant filed competing motions for summary judgment on their respective claims in the Superior Court Action and Chancery Action. Oppositions to the motions for summary judgment were filed on February 5, 2021 and replies were filed on February 24, 2021.

On March 18, 2021, the Court held a hearing on the summary judgment motions and the Company’s motion for leave to amend. The Court reserved decision on the summary judgment motions, denied the Company’s motion for leave to amend and postponed the April 2021 trial. The Company is awaiting the Court’s availability to proceed with trial.

Private Placement Litigation

On June 15, 2020, a complaint was filed against the Company and Dr. Durrant in the Commercial Division of the Supreme Court of the State of New York. The case caption is Alliance Texas Holdings, LLC et al. v. Humanigen, Inc. et al., Index No. 652490/2020 (“Alliance Texas Holdings Case”). The plaintiffs in the Alliance Texas Holdings Case comprise a group of 17 prospective investors introduced to Humanigen by Noble Capital Markets, Inc. (“Noble”), which had been engaged by the Company as a non-exclusive placement agent in connection with a private placement of its common stock (the “Private Placement”). The plaintiffs had indicated interest in purchasing shares of common stock in the Private Placement but, due to the strength of demand for shares from other prospective investors, the plaintiffs were not allocated any investment amount. The plaintiffs allege that the Company and Dr. Durrant breached a contractual obligation to deliver shares of common stock to the plaintiffs. The plaintiffs seek to recover for losses due to alleged fraudulent misstatements and the Company’s failure to deliver shares to them and seek equitable relief in the form of specific performance. A motion to dismiss the complaint in the Alliance Texas Holdings Case has been fully briefed and is currently being considered by the court.

The Company believes that the claims made in the Alliance Texas Holdings Case are without merit, and it is prepared to defend itself vigorously.

On April 19, 2021, the Company and Noble entered into a confidential settlement agreement in respect of a separate lawsuit brought by Noble related to the Private Placement (the “Noble Case”) captioned Noble Capital Markets, Inc. v. Humanigen, Inc., Case No. 9:20-CV-81131-WPD, pursuant to which the Noble Case was dismissed with prejudice. 

11. Subsequent Events

On March 30, 2021, the Company entered into the Underwriting Agreement providing for the public offering of 5,000,000 shares of the Company’s common stock. In addition, the Company granted the underwriters a 30-day option to purchase an additional 750,000 shares of its common stock. The initial sale of 5,000,000 shares closed on April 5, 2021. On May 3, 2021, the Company closed on the sale of an additional 427,017 shares of its common stock related to the exercise of the underwriters’ 30-day option.

The net proceeds from this offering, after deducting underwriting discounts and estimated offering costs, are estimated to be approximately $94.1 million. The Company expects to use the net proceeds for manufacturing and inventory costs in connection with its efforts to prepare for potential commercialization of lenzilumab in the event of receipt of an EUA or other CMA for use in COVID-19 patients, as well as for working capital and other general corporate purposes.

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On April 19, 2021, the Company announced positive data with lenzilumab in the Phase 1b study evaluating the efficacy and safety of lenzilumab with Yescarta, the CAR-T therapy developed by Kite in patients with DLBCL. In addition, the Company announced its plans to initiate a randomized, multicenter, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. In connection with its announcement of its decision to pursue the Phase 2 study, the Company also announced the termination of the clinical collaboration agreement with Kite effective on May 18, 2021, the 30^th day following the Company’s notice of termination. The parties are expected to collaborate on the wind down of activities related to the Phase 1b study as the Company prepares to initiate a Company-sponsored Phase 2 study with all commercially available CD19 CAR-T therapies in DLBCL.

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

You should read the following discussion and analysis together with our financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, 2020. This Quarterly Report on Form 10-Q contains statements that discuss future events or expectations, projections of results of operations or financial condition, trends in our business, business prospects and strategies and other “forward-looking” information. In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or “continue” or the negative of those words and other comparable words. These statements may relate to, among other things, our expectations regarding the scope, progress, timing, expansion, and costs of researching, developing and commercializing our product candidates; our expectations relating to regulatory pathways to emergency use or other conditional marketing authorizations and the opportunity to benefit from various regulatory incentives; expectations for our financial results, revenue, operating expenses and other financial measures in future periods; and the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures, and other liquidity requirements. Among the factors that could cause actual results to differ materially are the factors discussed under “Risk Factors” in this Quarterly Report on Form 10-Q, and each subsequently filed Quarterly Report on Form 10-Q. Some additional factors that could cause actual results to differ include:

· the timing of the initiation, enrollment and completion and results of ongoing or planned clinical trials;

· the evolution of scientific discovery around the coronavirus, COVID-19 and the lung and other organ and systems dysfunction resulting in some patients may indicate that cytokine release syndrome (“CRS”) or cytokine storm is caused by or results from something other than elevated granulocyte-macrophage colony-stimulating factor (“GM-CSF”) levels;

· the possibility that FDA might not grant an Emergency Use Authorization (“EUA”) for lenzilumab in COVID-19 patients or, if one were granted, that its duration might be shorter than anticipated or the EUA might be conditioned to a greater degree than anticipated;

· the duration and impact of the COVID-19 pandemic and the potential that the National Emergency concerning the COVID-19 pandemic declared in March 2020 and currently set to expire in July 2021 without extension, may end at any time and without advanced notice;

· our ability to timely source adequate supply of bulk drug substance and bulk drug product for our development and if approved, commercial products from third-party manufacturers on which we depend;

· the negative impact that may result from manufacturing delays due to displacement of scheduled production at certain of our Contract Manufacturing Organizations (“CMOs”) as mandated from Rated Orders issued under the Defense Production Act (“DPA”) or the shortage of raw materials and critical components we are experiencing and expect to continue to experience relating to Rated Orders and increased demand for production at our CMOs;

· our ability to attain conditional marketing approvals for lenzilumab in COVID-19 patients in markets outside the U.S.;

· if an EUA or other conditional marketing approval is granted for lenzilumab, our ability to accurately forecast and predict future revenues in the U.S. and outside the U.S. coupled with our ability to produce sufficient quantities on a timely basis to meet demand;

· our ability to research, develop and commercialize our product candidates, including our ability to do so before our competitors develop and commercialize competing products or alternative therapies or vaccines that may reduce the demand for our product candidates;

· our ability to initiate a study of lenzilumab with commercially available chimeric antigen receptor T-cell (“CAR-T”) therapies in diffuse large B-cell lymphoma (“DLBCL”);

· our ability to execute our strategy and business plan focused on developing our proprietary monoclonal antibody portfolio and our GM-CSF knockout gene-editing CAR-T platform;

· our ability to enter into partnerships with potential collaborators with development, regulatory and commercialization expertise to enable us to pursue the other initiatives in our development pipeline;

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· our ability to attain the additional financing we may need to pursue our development initiatives, manufacturing requirements and commercialize our product candidates on favorable terms or at all;

· the potential, if any, for future development of any of our present or future products;

· increasing levels of market acceptance of CAR-T therapies and stem cell transplants and the development of a market for lenzilumab in these therapies;

· our ability to identify and develop additional uses for our products;

· our ability to maintain licenses with third parties;

· our ability to attain market exclusivity and/or to obtain, maintain, protect and enforce our intellectual property and to operate our business without infringing, misappropriating or otherwise violating, the intellectual property rights of others;

· the outcome of pending, threatened or future litigation;

· acquisitions or in-licensing or out-licensing transactions that we may pursue may fail to perform as expected;

· our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions;

· limitations and/or warnings in the label of an approved product candidate or one that is granted an EUA or other conditional marketing authorization (“CMA”) outside the U.S.;

· changes in the regulatory landscape that may prevent us from pursuing or realizing any of the expected benefits from the various regulatory incentives, or the imposition of regulations that affect our products; and

· the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing.

These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Risk Factors” in Item 1A of Part II below. You should review these risk factors for a more complete understanding of the risks associated with an investment in our securities. However, we operate in a competitive and rapidly changing environment and new risks and uncertainties emerge, are identified or become apparent from time-to-time. It is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Form 10-Q. You should be aware that the forward-looking statements contained in this Form 10-Q are based on our current views and assumptions. We undertake no obligation to revise or update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law.

Overview

Humanigen, Inc. is a clinical stage biopharmaceutical company, developing its portfolio of anti-inflammatory immunology and immuno-oncology monoclonal antibodies. We are focusing our efforts on the development of our lead product candidate, lenzilumab™, our proprietary Humaneered® (“Humaneered”) anti-human GM-CSF monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated to neutralize GM-CSF, a cytokine that we believe is of critical importance in the hyperinflammatory cascade, sometimes referred to CRS or cytokine storm, associated with COVID-19, CAR-T therapy and acute GvHD associated with bone marrow transplants. We believe the results from our Phase 3 study in COVID-19 and our Phase 1b study in CAR-T support the mechanism of action of lenzilumab.

We believe that we have built a strong intellectual property position in the area of GM-CSF neutralization through multiple approaches and mechanisms, as they pertain to COVID-19, CAR-T, GvHD and multiple other oncology/transplantation, inflammation, fibrosis and autoimmune conditions which may be driven by GM-CSF.

On March 29, 2021, we announced top-line data on the primary endpoint and one secondary endpoint from a Phase 3, multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab (the “LIVE-AIR” study) as a potential therapeutic for newly hospitalized, hypoxic patients with COVID-19 pneumonia. Additional data from the trial, subsequently published on MedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint, which showed that patients who received lenzilumab and other treatments, including steroids and/or remdesivir, had a 54% greater relative likelihood of survival without ventilation, (“SWOV”), sometimes referred to as “ventilator-free survival” compared with patients receiving placebo and other treatments. Further information about the data generated in the trial and our subsequent meeting with the FDA is presented below under “—Recent Developments.”

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Lenzilumab is part of the Accelerating COVID-19 Therapeutic Interventions and Vaccines (“ACTIV”)-5 and Big Effect Trial (“BET-B”), referred to as ACTIV-5/BET-B. This study is sponsored by the National Institutes of Health (“NIH”). ACTIV-5/BET-B is designed to determine whether certain approved therapies or investigational drugs in late-stage clinical development show promise against COVID-19 and, therefore, merit advancement into larger clinical trials. ACTIV-5/BET-B currently has 27 active U.S. sites enrolling and is evaluating lenzilumab in combination with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, with approximately 100 patients expected to be assigned to each study arm. We are providing lenzilumab for the study, which is fully funded by NIH. The ACTIV-5/BET-B Data and Safety Monitoring Board (“DSMB”) met on May 7th and determined that the study should proceed per protocol.

Lenzilumab has also been studied in a multi-center Phase 1b trial as a sequenced therapy with Yescarta® (axicabtagene ciloleucel) to reduce CRS and neurotoxicity in patients with relapsed or refractory DLBCL (NCT04314843), for which we recently announced positive results. Further information about the data generated in the trial is presented below under “—Recent Developments.” This trial was conducted in partnership with Kite Pharmaceuticals, Inc., a Gilead company (“Kite”), which markets Yescarta. As a result of this positive data and the conclusion of the Phase 1b portion of the study, we elected to terminate the clinical collaboration with Kite. We intend to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

We are also in the final planning stages for a Phase 2/3 trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for acute GvHD known as the RATinG study. The trial is expected to be conducted by the IMPACT Partnership, a collection of 22 stem cell transplant centers located in the United Kingdom, and to begin enrollment in the fourth quarter of 2021. We will provide lenzilumab for this study and support certain laboratory tests related to the study. The majority of the study costs will be borne by the partner.

In addition, we are in partnership with SAHMRI and the University of Adelaide to conduct a Phase 2 Trial studying the efficacy of lenzilumab in combination with azacitadine. The study, PREACH-M, is anticipated to begin enrollment in the third quarter of 2021 and to include four sites. We will provide lenzilumab for this study and the majority of the study costs will be borne by the partner.

Our proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. We have developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied our Humaneered technology to produce them. Lenzilumab and our other two product candidates, ifabotuzumab and HGEN005, are Humaneered monoclonal antibodies. Our Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their target but low immunogenicity. We believe our Humaneered antibodies offer additional advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related reactions.

Our Pipeline

In addition to our ongoing work with lenzilumab described above, our pipeline also includes two other monoclonal antibodies, ifabotuzumab and HGEN005.

Ifabotuzumab

Ifabotuzumab, a Humaneered monoclonal antibody, formerly referred to as KB004, is a non-fucosylated IgG1κ antibody targeting the EphA3 receptor. EphA3 is a tumor-restricted antigen expressed in the tumor vasculature and tumor stroma of various solid tumors including breast, colon, lung, prostate, melanoma, and glioblastoma multiforme (“GBM”), a highly aggressive type of cancer that begins within the brain. On April 10, 2021, we announced positive results from a Phase 1 study of ifabotuzumab in GBM at the American Association for Cancer Research (“AACR”) 2021 Annual Meeting, as described below. We believe that ifabotuzumab, as part of an antibody drug conjugate (“ADC”), has the potential for treating solid tumors, hematologic malignancies and serious pulmonary conditions.

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HGEN005

HGEN005 is a Humaneered monoclonal antibody which targets the EMR1, and in which the antibody carbohydrate chains lack fucose, thereby enhancing the targeted cell-killing activity of the antibody. A major limitation of current eosinophil-targeted therapies is incomplete depletion of tissue eosinophils and/or lack of cell selectivity. In preclinical work, HGEN005’s anti-EMR1 activity resulted in dramatically enhanced NK killing of eosinophils from normal and eosinophilic donors and also induced a rapid and sustained depletion of eosinophils in a non-human primate model without any clinically significant adverse events. In 2020, we engaged with NIH to discuss expanding the initial work they have conducted utilizing HGEN005. Given the COVID-19 pandemic the development of HGEN005 and discussions with a leading center in the U.S. to perform the IND- enabling work are on hold.

Except for the potential of lenzilumab for COVID-19 under an EUA or other CMA outside the U.S., our product candidates are in the clinical stage of development and will require substantial time, resources, research and development, and regulatory approval prior to commercialization. Furthermore, it may be years before any of our products are approved for use, if at all. Our current pipeline is depicted below:

¹ UK

² Australia

Recent Developments

On March 29, 2021, we announced top-line data on the primary endpoint and one secondary endpoint from the LIVE-AIR study. Additional data from the trial, subsequently published on MedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint that showed lenzilumab improved the likelihood of SWOV, sometimes referred to as ”ventilator-free survival”, by 54% in the modified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.31, p=0.041) ). New analysis included in the publication showed that lenzilumab improved the likelihood of SWOV aby 90% in the intent-to-treat (“ITT”) population (HR: 1.90; 1.02-3.52, nominal p=0.043) compared to placebo. SWOV also relatively improved by 92% in subjects who received both corticosteroids and remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 2.96-fold in subjects with C-reactive protein (CRP) levels <150 mg/L and age <85 years (2.96; 1.63–5.37, nominal p=0.0003); and by 88% in subjects hospitalized ≤2 days prior to randomization (1.88; 1.13-3.12, nominal p=0.015). Survival was improved by 2.17-fold in subjects with CRP<150 mg/L and age <85 years (2.17; 1.04-4.54, nominal p=0.040). We believe the data published on MedRxiv, generated from the LIVE-AIR study, support the conclusion that lenzilumab significantly improved SWOV in hospitalized, hypoxic subjects with COVID-19 pneumonia over and above treatment with remdesivir and/or corticosteroids. Subjects with CRP<150 mg/L and age <85 years demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab.

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We have shared the top-line data on just the primary endpoint and one secondary endpoint (the only data then available while the remaining analysis was pending) with the FDA in a Pre-EUA Type B meeting in mid-April 2021. We are preparing to submit an EUA application at the end of May 2021. As requested by the FDA, the EUA application will include secondary endpoints and supplemental data analysis from LIVE-AIR, including those referenced in the MedRxiv publication, as well as additional stability and compatibility information required for the CMC section of the EUA application. There can be no assurance that the data published on MedRxiv will be sufficient for an EUA or that the FDA will not require additional information in order to grant an EUA. If the EUA is granted, we could begin to commercialize lenzilumab for the treatment of newly hospitalized COVID-19 pneumonia patients.

We have also been in discussion with the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for the use of lenzilumab in COVID-19 patients in the United Kingdom and we plan to initiate a rolling submission for CMA before the end of the second quarter of 2021. We also plan to submit for CMA to the European Medicines Agency (“EMA”) for the use of lenzilumab in the European Union. Further, we are reviewing the possibility of similar submissions for approval or compassionate use in other territories or countries worldwide.

We intend to submit a Biologics License Application (“BLA”) to FDA in 2022, for the use of lenzilumab in hospitalized, hypoxic COVID-19 patients. Since BLAs typically require more than one study, we are currently evaluating the extent to which ACTIV-5/BET-B may serve as a basis for a BLA-confirmatory study for lenzilumab.

On March 30, 2021, we entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several underwriters, in connection with the public offering of 5,000,000 shares of our common stock. In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial offering closed on April 5, 2021. On May 3, 2021, we closed on the sale of an additional 427,017 shares of our common stock related to the exercise of the underwriters’ 30-day option. The aggregate gross proceeds from the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and estimated offering costs, will be approximately $94.1 million.

On April 10, 2021, we presented top-line results from the Phase 1 safety and bioimaging trial of ifabotuzumab in patients with GBM at the AACR 2021 Annual Meeting. The Phase 1 study primarily sought to determine the safety and recommended Phase 2 dose of ifabotuzumab in patients with GBM, the most frequent and lethal primary brain neoplasm, with 5-year survival rates of 10%. It is estimated there are more than 18,000 deaths from brain cancer annually in the U.S. The results of the study show in all patients for both doses, that ifabotuzumab demonstrates highly sensitive, specific, and reproducible targeting of the tumor and tumor microenvironment. There were no dose-limiting toxicities observed and all adverse events were readily manageable. Additional studies are being planned to evaluate ifabotuzumab as an antibody-drug conjugate in patients with solid tumors, such as lung, colon, breast, prostate, melanoma and pancreatic cancer.

On April 19, 2021, we announced positive data from the ZUMA-19 study. At the recommended Phase 2 dose of lenzilumab, the Objective Response Rate (“ORR”) was 100% and no patient experienced severe cytokine release syndrome (“CRS”) or severe neurotoxicity (“NT”). This study was a standard 3+3 design with three patients administered 600 mg lenzilumab (“cohort 1”) and three patients administered 1,800 mg lenzilumab (“cohort 2”) just prior to CAR-T. The recommended Phase 2 dose was determined to be 1,800 mg. In the six study patients, the ORR reported was 83% (n=5) which included four complete responses (“CR”). In cohort 1, there was no severe CRS (≥ grade 3). One patient experienced grade 3 NT with a two-day duration. At the recommended Phase 2 dose (cohort 2), ORR was 100% (n=3) and the toxicity-free CR (CRS and NT < grade 2) was 66% (n = 2). There was no severe CRS or severe NT at the recommended Phase 2 dose. There were no adverse events attributed to lenzilumab across the study. Inflammatory markers were correlated with reduced rates of CRS and NT. Lenzilumab dose-dependently reduced myeloid cytokines IL-6, IL-8, MCP-1, and IP-10 (CXCL-10) and systemic inflammatory markers CRP, ferritin, and SAA in the patients studied. As a result of this positive data and the conclusion of the Phase 1b portion of the study, we elected to terminate the clinical collaboration with Kite. We intend to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

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Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S., or GAAP. The preparation of our financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Our management believes judgment is involved in determining revenue recognition, the fair value-based measurement of stock-based compensation, and accruals. Our management evaluates estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements. If our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our statements of operations, liquidity and financial condition.

There were no significant and material changes in our critical accounting policies and use of estimates during the three months ended March 31, 2021, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates” in our 2020 Annual Report on Form 10-K, filed with the SEC on March 10, 2021.

Results of Operations

At March 31, 2021, we had an accumulated deficit of $440.0 million primarily as a result of research and development and general and administrative expenses. While we may in the future generate revenue from a variety of sources, including license fees, milestone payments, and research and development payments in connection with strategic partnerships, our product candidates may never be successfully developed or commercialized and we may therefore never realize revenue from any product sales, particularly because most of our product candidates are at an early stage of development. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits.

Comparison of Three Months Ended March 31, 2021 and 2020

The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages):

	Three Months Ended March 31,						Increase/ (Decrease)
(in thousands)	2021			2020			Amount			%
Revenue:
License revenue	$	486		$	-		$	486			100
Total revenue		486			-			486
Operating expenses:
Research and development		59,934			659			59,275			8,995
General and administrative		4,948			1,398			3,550			254
Total operating expenses		64,882			2,057			62,825			3,054
Loss from operations		(64,396	)		(2,057	)		62,339			3,031
Other expense:
Interest expense		(19	)		(410	)		(391	)		(95	)
Other expense		(1,152	)		-			1,152			100
Net loss	$	(65,567	)	$	(2,467	)	$	63,100			2,558

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Revenue

Revenue represents license revenue under the license agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”).

Research and Development Expenses

Conducting research and development is central to our business model. We expense both internal and external research and development costs as incurred. We track external research and development costs incurred by project for each of our clinical programs. Our external research and development costs consist primarily of:

· expenses incurred under agreements with contract research organizations, investigative sites, and consultants that conduct our clinical trials and our pre-clinical activities;

· the cost of acquiring and manufacturing clinical trial, pre-commercial and other materials, the cost to transfer the manufacturing process for bulk drug substance and fill/finish production, development of and periodic performance of a variety of tests and assays for stability, release, comparability and product characterization, costs associated with quality management, the preparation of documents and information necessary to file with regulatory authorities; and

· other costs associated with development activities, including additional studies.

Other research and development costs consist primarily of internal research and development costs such as salaries and related fringe benefit costs for our employees, stock-based compensation charges, and travel costs not allocated to one of our clinical programs. Internal research and development costs generally benefit multiple projects and are not separately tracked per project.

Research and development expenses increased by $59.2 million from $0.7 million for the three months ended March 31, 2020 to $59.9 million for the three months ended March 31, 2021. The increase is primarily due to a $7.5 million increase in clinical trial expenses and a $51.4 million increase in lenzilumab manufacturing costs related to the trial in COVID-19, which began in May 2020. We expect our development costs will continue to increase throughout 2021 as a result of securing additional manufacturing capacity, the production of lenzilumab for commercial use and preparation of the materials necessary to file for an EUA in the U.S. and for conditional approval in the UK and Europe. In addition, we anticipate clinical trial costs to increase due to the enrollment of patients in the planned clinical trials.

The following table shows our total research and development expenses for the three months ended March 31, 2021 and 2020:

	Three Months Ended March 31,
(in thousands)	2021		2020
External Costs
Lenzilumab	$	59,332	$	483
Ifabotuzumab		25		25
Internal costs		577		151
Total research and development	$	59,934	$	659

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs (including stock-based compensation), professional fees for legal and patent expenses, consulting, audit and tax services, public, governmental and investor relations costs, and other general operating expenses not otherwise included in research and development.

General and administrative expenses increased by $3.5 million from $1.4 million for the three months ended March 31, 2020 to $4.9 million for the three months ended March 31, 2021. The increase for the three months ended March 31, 2021, is primarily due to increases in consulting and other professional services fees of $1.8 million, personnel-related expenses of $1.0 million attributable to five new hires since the first quarter of 2020, including our Chief Operating Officer and Chief Financial Officer, and our Chief Commercial Officer, public and investor relations expenses of $0.5 million, and business insurance-related expenses of $0.2 million, all in support of our increased operating activities to support the trial for COVID-19 and prepare for potential commercialization of lenzilumab. We expect our overall general and administrative costs to increase in 2021 as we continue to scale our support operations in connection with additional clinical development activities, and increase our commercial operations spending in preparation for potential commercialization under an EUA or other CMA outside the U.S.

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Interest Expense

Interest expense decreased $0.4 million to $19 thousand for the three months ended March 31, 2021, reflecting the payoff of substantially all of our debt with proceeds from the private placement of our common stock in June 2020. On March 10, 2021, we executed a Loan and Security Agreement with Hercules Capital, Inc., (“Hercules”), as agent for its affiliates serving as lenders thereunder. The agreement provides a loan in the aggregate principal amount of $80 million (the “Term Loan”). On March 29, 2021, the Company drew the initial $25.0 million under the Term Loan. After giving effect to payment of fees and expenses associated with the draw, the Company received net proceeds of approximately $24.4 million. See Note 5 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information on the Term Loan.

Other Expense

Other expense increased by $1.2 million for the three months ended March 31, 2021, primarily due to litigation settlement costs.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through proceeds from the public offerings of our common stock, private placements of our common and preferred stock, debt financings, interest income earned on cash, and cash equivalents, and marketable securities, and borrowings against lines of credit, and more recently, with the proceeds under the South Korea Agreement. Specifically, under the South Korea Agreement, we received a $6.0 million upfront payment (or $4.5 million, net of withholding taxes and other fees and royalties) in the fourth quarter of 2020 and the first milestone payment of $6.0 million (or $4.5 million, net of withholding taxes and other fees and royalties) which was met in the first quarter of 2021 and received in the second quarter of 2021. At March 31, 2021, we had cash and cash equivalents of $92.9 million. In the second quarter of 2021, we sold an aggregate of 5,427,017 shares of our common stock in connection with an underwritten public offering, raising net proceeds of approximately $94.1 million after deducting underwriting discounts and estimated offering costs.

Primary Sources of and Uses of Cash

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:

	Three  Months Ended March 31,
(In thousands)	2021			2020
Net cash (used in) provided by:
Operating activities	$	(35,824	)	$	(607	)
Financing activities		60,979			532
Net increase (decrease) in cash and cash equivalents	$	25,155		$	(75	)

Net cash used in operating activities was $35.8 million and $0.6 million for the three months ended March 31, 2021 and 2020, respectively. Cash used in operating activities of $35.8 million for the three months ended March 31, 2021, primarily related to our net loss of $65.6 million, adjusted for non-cash items, such as $0.5 million in stock-based compensation, and a net increase in operating assets and liabilities of $29.2 million.

Cash used in operating activities of $0.6 million for the three months ended March 31, 2020 primarily related to our net loss of $2.5 million, adjusted for non-cash items, such as $0.3 million in stock-based compensation, and a net increase in operating assets and liabilities of $1.6 million.

Net cash provided by financing activities was $61.0 million for the three months ended March 31, 2021 and consists primarily of $36.1 million received from the issuance of common stock in connection with the Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), $24.4 million in net proceeds received from the Term Loan, and $0.4 million received from the exercise of stock options.

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Net cash provided by financing activities was $0.5 million for the three months ended March 31, 2020 and consisted primarily of $0.4 million received from the March 2020 issuance of two convertible redeemable promissory notes which we subsequently paid off in June 2020, and $0.1 million received from the issuance of common stock under an equity line of credit, which we terminated in June 2020.

Recent Financings

Controlled Equity Offering

On December 31, 2020, the Company entered into the Sales Agreement (the “Sales Agreement”) with Cantor, under which the Company could issue and sell shares of the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as sales agent. During the period from January 1, 2021 through March 31, 2021, the Company issued and sold 1,796,858 shares of its common stock under the Sales Agreement, raising net proceeds of $36.1 million.

2021 Underwritten Public Offering

On March 30, 2021, we entered into the Underwriting Agreement in connection with the public offering of 5,000,000 shares of our common stock. In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial offering closed on April 5, 2021. On May 3, 2021, closed on the sale of an additional 427,017 shares of our common stock related to the exercise of the underwriters’ 30-day option.

The aggregate gross proceeds from the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and estimated offering costs, will be approximately $94.1 million. We expect to use the net proceeds from the offering for manufacturing and inventory costs in connection with our efforts to prepare for commercialization of lenzilumab in the event of receipt of an EUA for use in COVID-19 patients, as well as for working capital and other general corporate purposes.

Term Loan with Hercules

On March 10, 2021, we entered into the Term Loan with Hercules which provided us with the ability to draw an initial amount of $25.0 million, which we drew on March 29, 2021, and with up to an additional $55.0 million available for future draws subject to achievement of future milestones and satisfaction of other conditions. See Note 5 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for additional information on the Term Loan.

Liquidity

We continue to advance our efforts in support of the development of lenzilumab as a therapy for hospitalized COVID-19 pneumonia patients. As of March 31, 2021, we had cash and cash equivalents of $92.9 million, which included a $25 million draw under the Term Loan. Together with approximately $94.1 million of net proceeds from the underwritten public offering completed in the second quarter of 2021, potential additional draws under the Term Loan, and potential revenues from the commercial sale of lenzilumab (if an EUA or other CMA is granted), we expect to be able to fund our planned operations and capital expenditure requirements in the near-term, although we may pursue other funding options on an opportunistic basis to support our liquidity.

In the long-term, we expect we will need to obtain additional financing to fund our future operations, including for the development, manufacturing, distribution and potential commercialization of lenzilumab for patients with COVID-19 pneumonia and other indications and our other product candidates. We may need to obtain additional financing to conduct additional trials for the approval of our product candidates if requested by regulatory authorities in the U.S. and other countries, and to complete the development of any additional product candidates we own or might acquire. Moreover, our fixed expenses such as salaries, committed payments to our contract manufacturers, and other contractual commitments, including those for our other research and clinical collaborations, are substantial and are expected to increase in the future. Our need to raise funds will depend on a number of factors, including our ability to establish additional relationships for the manufacture of lenzilumab and our ability to commence commercialization and begin generating revenues from product sales if lenzilumab were to receive any applicable authorization or approval.

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Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, grant financing and support from governmental agencies, convertible debt, borrowings under our Term Loan with Hercules and other debt financings, collaborations, strategic alliances and marketing, supply, distribution, or licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs, our commercialization efforts or our manufacturing commitments and capacity. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, supply, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

Capital Commitments and Capital Resources

We intend to submit an application for EUA for lenzilumab at the end of May 2021. If the EUA is granted, we could begin to commercialize lenzilumab, subject to the terms and conditions of such EUA, for the treatment of newly hospitalized COVID-19 pneumonia patients. We also plan to submit for Conditional Marketing Authorization in the UK and in the European Union.

To support our application for EUA and the potential launch of lenzilumab under an EUA, we have entered into agreements with several organizations for clinical trial services, contract manufacturing services and commercialization services, as more fully described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 1. Business—Manufacturing and Raw Materials.” We expect to be able to fund the cash commitments related to these agreements from our cash and cash equivalents of $92.9 million as of March 31, 2021, together with approximately $94.1 million of net proceeds from the underwritten public offering completed in the second quarter of 2021, potential additional draws under our Term Loan, and revenues from the commercial sale of lenzilumab (if an EUA is granted), although we may pursue other funding options on an opportunistic basis to support our liquidity.

As discussed in further detail in Note 6 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, we have entered into agreements with several CMOs to provide manufacturing, fill/finish and packaging services for lenzilumab, and we are actively working with our existing and additional CMOs on additional agreements to bolster our ability to supply lenzilumab in the event of receipt of EUA or other CMA. Most of these additional manufacturing agreements, such as those currently in place, are expected to require payment of upfront fees upon execution and further payments against performance of the manufacturing services to be provided, often over a lengthy performance period. Given the competitive environment, it is not possible for us to predict when we will be in position to execute any additional manufacturing agreements, or to estimate the aggregate amount of potential future payments under such new agreements or the timing in which they may be made. If an EUA or other CMA were granted, we expect to be able to satisfy the bulk of the cash requirements associated with our manufacturing commitments from revenues from the commercial sale of lenzilumab, supplemented as necessary with proceeds from the sale of our equity securities; the incurrence of debt; upfront and milestone payments from licensees; and government funding or financial support, if offered.

While our clinical manufacturing agreements specify maximum payment terms, they also generally contain standard terms that provide us the right to cancel pending orders prior to the initiation of manufacturing and, if the manufacturer is able to fill the manufacturing slots with other products, to do so with limited further payment obligations to the manufacturers. Accordingly, in the event we do not receive an EUA or other CMA, we would seek to terminate these agreements and related commitments. Given our sense of the demand for biologic manufacturing, sterile fill/finish capacity and the materials and components required, in the event of cancellation of production orders, we believe, the spending under these agreements would be limited.

See “Contracts” below for additional information regarding our agreements with Eversana and our contract manufacturers.

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Contracts

Eversana Agreement

On January 10, 2021, we announced that we had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will serve as our end-to-end commercial partner, providing us with a full suite of services in connection with the potential launch of lenzilumab.

We will pay Eversana fees and reimburse it for expenses in performing the services as established in applicable statements of work. Eversana has agreed to defer its fees pending our receipt of an EUA from the FDA for lenzilumab for hospitalized and hypoxic COVID-19 patients. We accrued $0.9 million for Eversana activities performed in the first quarter of 2021, which is included in Accrued expenses in the Condensed Consolidated Balance Sheets, with the anticipated payment upon receipt of the EUA.

Manufacturing Agreements

We have entered into agreements with several CMOs to manufacture bulk drug substance (“BDS”) and fill/finish/drug product (“DP”) for our lenzilumab clinical trial activities in COVID-19 as well as to manufacture BDS and DP for a potential launch of lenzilumab in anticipation of an EUA in 2021. We have also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. As of March 31, 2021, we estimate that our commitments remaining to be incurred during 2021 will amount to approximately $169 million. The agreements contain customary cancellation clauses.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements, such as structured finance, special purpose entities or variable interest entities.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are not required to provide the information specified under this item.

Item 4. Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of disclosure controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

Please see Note 10 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for a summary of legal proceedings and developments during the quarter ended March 31, 2021.

Item 1A. Risk Factors.

Risk Factor Summary

The following summary highlights the material risks that may affect our business, operating results, financial condition and prospects, as more fully described in the pages that follow this summary.

· If our competitors receive FDA approval for treatments or vaccines for COVID-19, our commercial opportunity may be reduced or eliminated, if such treatments directly compete for the same segment of patients that lenzilumab targets or indirectly compete for the same patients by preventing hospitalization.

· The scientific rationale behind the hypothesis that GM-CSF is a cause, or the main cause, of the cytokine storm that leads to adverse results in COVID-19 patients is still being tested and may not prove accurate.

· We face risks related to the development, manufacturing and distribution of lenzilumab as a treatment for COVID-19, which has not been granted an EUA or approved by FDA. We cannot provide any assurance that lenzilumab will receive an EUA or be approved by FDA.

· Manufacturing problems at our third-party manufacturers or their requirements to displace our reserved manufacturing slots to comply with government orders could cause inventory shortages and delay or impair our ability to obtain an EUA or BLA or other regulatory approval or delay shipments of lenzilumab for commercial use, which may adversely affect our results of operations.

· We may not be able to obtain materials or supplies necessary to conduct clinical trials or, following requisite regulatory authorizations or approvals, to manufacture and sell our products, which could limit our ability to generate revenues.

· If an EUA or other conditional marketing approval is granted for lenzilumab, we may be unable to accurately predict demand for lenzilumab or to produce sufficient quantities on a timely basis to meet demand.

· There can be no assurance that lenzilumab, even if approved, would ever become profitable, due to government or healthcare provider or payer interest and public perception regarding vaccines and treatments for COVID-19 related complications. Competing products that are subsequently developed also may diminish demand for lenzilumab or impair its profitability.

· The regulatory pathway for lenzilumab is highly dynamic and continues to evolve and may result in unexpected or unforeseen challenges. It may also be affected by the duration and the impact of the COVID-19 pandemic.

· We currently have no internal sales and marketing capabilities and will rely on partners such as Eversana and other third parties to market and sell lenzilumab if we attain an EUA or other regulatory approval for its commercialization, and any product candidates we may successfully develop. We or they may not be able to effectively market and sell any such product candidates.

· We may experience significant volatility in the market price of our common stock following announcements and releases regarding our ongoing development of lenzilumab as a potential COVID-19 therapy.

· We have a history of operating losses and we may never become profitable.

· We will need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates.

· Our business depends on the success of our current product candidates. We cannot be certain that we will be able to obtain Emergency Authorization, Conditional Marketing Authorization or regulatory approval for, or successfully commercialize, any of our product candidates.

· The adoption of CAR-T therapies as the potential standard of care for treatment of certain cancers is uncertain and, and dependent on the efforts of a limited number of market entrants, and if not adopted as anticipated, the market for lenzilumab or next-generation gene-edited CAR-T therapies may be limited or not develop.

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· Our business could target benefits from various regulatory incentives, such as EUA, orphan drug exclusivity, breakthrough therapy designation, fast track designation, and priority review, but we may not ultimately qualify for or benefit from these arrangements.

· We may experience delays in commencing or conducting our clinical trials, in receiving data from third parties or in the continuation or completion of clinical testing, which could result in increased costs to us, delay our ability to generate product candidate revenue or, ultimately, render us unable to complete the development and commercialization of our product candidates.

· We face risks associated with clinical operations abroad and we may not be able to receive conditional marketing approvals for lenzilumab in COVID-19 patients in markets outside the U.S.

· If our competitors develop similar or comparable treatments for the target indications of our product candidates that are approved more quickly, marketed more successfully or are demonstrated to be safer or more effective than our product candidates, or if FDA approves generic or biosimilar competitors to our products post-approval, our commercial opportunity will be reduced or eliminated.

· We may encounter difficulties in managing our growth and expanding our operations successfully.

· Even if we are able to obtain regulatory approval for our product candidates, we will continue to be subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

· Currently pending, threatened or future litigation or governmental proceedings or inquiries could result in material adverse consequences, including judgments or settlements.

· We may not be able to protect our intellectual property rights in the U.S. and throughout the world.

· Our stock price is volatile and purchasers of our common stock could incur substantial losses.

· Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.

In addition to the other information set forth in this Quarterly Report on Form 10-Q and other filings we have made and will make in the future with the SEC, you should carefully consider the following risk factors and uncertainties, which could materially affect our business, financial condition or results of operations in future periods. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

Risks Related to Our Business and Industry

Risks Related to COVID-19 and Lenzilumab

The fluid and unpredictable nature of the COVID-19 pandemic, which began in late 2019 and has spread worldwide, may affect our ability to conduct the clinical trial with NIH, the IMPACT Partnership and SAHMRI and the University of Adelaide, delay the initiation of planned and future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial volatility in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on our business and operations.

In December 2019, an outbreak of the respiratory illness COVID-19 caused by a strain of novel coronavirus, SARS-Cov-2, was first reported in China. The COVID-19 outbreak has spread worldwide, causing many governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restrictions, heightened border scrutiny, and other measures. COVID-19 infections are widespread and as of April 30, 2021, in the U.S., there were over 32 million cases, over 2.1 million hospitalizations and over 570 thousand deaths. Several vaccines have been developed which show efficacy in excess of 90%, however the rollout of inoculations and the emergence of numerous COVID-19 variants lead us to believe the need for therapeutics to treat COVID-19 currently exists and will continue to exist for the next several years. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations are uncertain.

We and our third-party CRO clinical sites and contract manufacturing organizations (“CMOs”) may experience disruptions in supply of product candidates and/or procuring items that are essential for our research, development and manufacturing activities, including raw materials and components used in the manufacturing of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies, in each case, for which there may be shortages because of ongoing efforts to address the outbreak. These delays have impacted our overall manufacturing supply chain operations to date, and we continue to explore back up or alternative sources of supply, any future disruption in the supply chain from the COVID-19 outbreak, or any continued outbreak could have a material adverse impact on our clinical trial plans and business operations.

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Additionally, we will seek to enroll patients in several planned studies. Patients in our clinical trials are at sites located in many areas affected by COVID-19 and, as a result, our trials may be impacted. In addition, even if sites are actively recruiting, we may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the outbreak. Prolonged delays or closure to enrollment in our trials or patient discontinuations could have a material adverse impact on our clinical trial plans and timelines.

In addition, our ability to collect all data requested of patients enrolled in our clinical trials during this pandemic is being impacted to varying degrees by COVID-19. Clinical trial data collection generally continues for each of our clinical trials, but at a slower pace, and in some instances, we encounter disruption of collection of complete study data. This could have a material adverse impact on our data analysis.

The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.

Any negative impact that the COVID-19 pandemic has on the ability of our suppliers to provide materials for our product candidates or on recruiting or retaining patients in our clinical trials or our ability to collect patient data could cause delays to clinical trial activities including collection of the final results from LIVE-AIR study, which could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our financial results. Furthermore, any negative impact that the outbreak has on the ability of our CROs to deliver data sets and execute on experimentation has caused and could cause substantial delays for our discovery activities and materially impact our ability to fuel our pipeline with new product candidates.

Any negative impact that the COVID-19 pandemic has on recruiting or retaining patients in our clinical trials, obtaining complete clinical trial data or on the ability of our suppliers to provide materials for our product candidates could cause additional delays to clinical trial and developmental activities, which could materially and adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, affect our ability to raise additional capital, and have a material adverse effect on our financial results.

The COVID-19 pandemic has caused significant volatility in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds through public offerings and may also impact the volatility of our stock price and trading in our stock. Moreover, the pandemic has significantly impacted economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business. It has the potential to adversely affect our business, financial condition, results of operations, and prospects.

If our competitors develop and receive FDA approval for treatments or vaccines for COVID-19, our commercial opportunity may be reduced or eliminated, if such treatments directly compete for the same segment of patients that lenzilumab targets or indirectly compete for the same patients by preventing hospitalization.

On October 22, 2020, FDA approved remdesivir for use in adult and certain pediatric patients for the treatment of COVID-19 requiring hospitalization. Baricitinib has also been approved for use with remdesivir for the treatment of COVID-19. Baricitinib may not be used with corticosteroids. Several neutralizing antibodies have been approved to prevent progression in the early stages of infection. Three vaccines have been authorized by the FDA with efficacy rates ranging from less than 50% in certain populations in excess of 90%. There are numerous other companies working on therapies to treat COVID-19 and/or vaccines to prevent or treat COVID-19, including oral antiviral compounds. If additional competing therapies are approved, such approval could have a material adverse impact on our ability to commercialize lenzilumab as a therapy for COVID-19. The speed at which all parties are acting to create and test many treatments and vaccines for COVID-19 is unusual and evolving or changing plans or priorities within the FDA and other branches of the U.S. government involved in the fight against the pandemic, including changes based on new knowledge of COVID-19 and new COVID-19 variants This can all impact how the disease affects the human body and may significantly affect the regulatory timeline for lenzilumab. In addition, there are numerous clinical trial programs in progress for COVID-19 therapies which are all competing for largely the same patient population for enrollment. This problem is exacerbated by changing rates of infection and spread, which make it challenging to ensure there are sufficient centers and patients to be enrolled in additional studies. Results from clinical testing may raise new questions and require us to redesign proposed clinical trials. Many of our competitors and potential competitors have substantially greater scientific, research, and product development capabilities, as well as greater financial, marketing, sales and human resources capabilities than we do. In addition, many specialized biotechnology firms have formed collaborations with large, established companies to support the research, development and commercialization of products that may be competitive with ours.

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The scientific rationale behind the hypothesis that GM-CSF is a cause, or the main cause, of the cytokine storm that leads to adverse results in COVID-19 patients is still being tested and may not prove accurate.

The hypothesis that elevated GM-CSF levels may contribute to cytokine storm-induced immune mechanisms that places patients at greater risk of ICU admission and mortality with the current pandemic strain of coronavirus is unproven. However, a paper in Science Immunology attributed GM-CSF to be a key factor in COVID-19. The data for this paper were drawn from the largest study conducted to date and the study was supported financially by the UK government. While supportive of our hypothesis, additional clinical data will be needed to confirm the role of GM-CSF in patients with COVID-19. Certain additional data on the role of GM-CSF are also the subject of publications as well as pre-publication papers that have not been peer-reviewed and may not be substantiated. If this hypothesis is not ultimately proven through clinical trials which are underway, the potential for lenzilumab to play a meaningful role in a COVID-19 therapy likely would decrease or be eliminated. We cannot assure you that our exploratory efforts in this respect will be fruitful.

We face risks related to the development, manufacturing and distribution of lenzilumab as a treatment for COVID-19, which has not been granted an EUA or approved by FDA. We cannot provide any assurance that lenzilumab will receive an EUA or be approved by FDA.

While we achieved favorable results in our Phase 3 multi-center, randomized, placebo-controlled, double-blinded, clinical trial of lenzilumab as a potential treatment for COVID-19 , there is no assurance of favorable results from future clinical trials, including the NIH sponsored ACTIV-5/BET-B or any other studies we may initiate.

Based on a meeting, the FDA has requested that the EUA application for lenzilumab include secondary endpoints and supplemental data analysis from the first arm of the Phase 3 study (also known as LIVE-AIR), including those referenced in the MedRxiv publication, as well as additional stability and compatibility information required for the CMC section of the EUA application. There can be no assurance that the data published on MedRxiv will be sufficient for an EUA or that the FDA will not require additional information in order to grant an EUA. It is also possible that FDA and other regulatory authorities may not grant an EUA or subsequently approve lenzilumab for the treatment of COVID-19, or that any such EUA or approval, if granted, may have significant limitations on its use. Widespread uptake of a safe, effective, scalable and affordable vaccine may have a negative impact on the demand for lenzilumab over the long term, even if an EUA or approval were issued, although substantial numbers of patients may continue to be hospitalized until there is widespread vaccination/herd immunity, notwithstanding the impact of current and future variants. As a result, we may never successfully commercialize lenzilumab in COVID-19 or realize a return on our significant investment in the development, supply, and commercialization of lenzilumab for this purpose.

Furthermore, even if an EUA were granted to permit lenzilumab to be commercialized for use in the treatment of COVID-19, the authorization is only in effect while it is determined that a “Public Health Emergency” is still underway and might be expressly conditioned or limited by FDA. An EUA does not take the place of the formal BLA submission, review and approval process. We intend to submit a BLA to FDA in 2022, for the use of lenzilumab in hospitalized, hypoxic COVID-19 patients. Since BLAs typically require more than one study, we are currently evaluating the extent to which ACTIV-5/BET-B may serve as a basis for a BLA-confirmatory study for lenzilumab. There can be no assurance that the ACTIV-5/BET-B will be sufficient for a BLA or that the FDA will not require additional information in order to grant a BLA. Furthermore, there is no assurance of favorable results from the ongoing ACTIV-5/BET-B clinical trial, or that this trial will be completed in anticipated timelines or at all. It is also possible that FDA and other regulatory authorities may not approve lenzilumab for the treatment of COVID-19, or that any marketing approvals, if granted, may have significant limitations on its use. Further, we may make a strategic decision to discontinue development of lenzilumab in this indication if other parties are successful in developing a more effective treatment for COVID-19. As a result, we may never successfully commercialize lenzilumab for use in COVID-19 patients.

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Manufacturing problems at our third-party manufacturers or their requirements to displace our reserved manufacturing slots to comply with government orders could cause inventory shortages and delay or impair our ability to obtain an EUA or BLA or other regulatory approval or delay shipments of lenzilumab for commercial use, which may adversely affect our results of operations.

We believe that our ability to obtain an EUA and, ultimately, a BLA to permit lenzilumab to be used commercially for patients with COVID-19 depends at least in part on our ability to demonstrate to FDA that we will be able to scale the manufacturing to produce a sufficient quantity of dosages to address the potential demand for the product. We have contracted and expect to continue to contract with third-party manufacturers to produce lenzilumab. We depend on these third parties to perform the manufacturing of lenzilumab effectively, timely, and in compliance with Good Manufacturing Practices (“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record-keeping and quality standards as defined by FDA. Similar regulations are in effect in other jurisdictions.

Our complete reliance on third-party manufacturers to produce lenzilumab subjects us to additional risks, including the possible breach of the manufacturing agreement by the third party, the possible cancellation, delay or modification of contracted manufacturing slots by the third party, or the termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. In addition, in an effort to increase the availability of needed medical products, vaccinations or related therapies in response to the COVID-19 pandemic, governments have required and may continue require our third-party manufacturers or our suppliers to allocate manufacturing capacity (for example pursuant to the U.S Defense Production Act, “DPA”) in a way that adversely affects our ability to obtain regulatory approval for and to commercialize lenzilumab . During the latter half of 2020, and continuing into 2021, it has become more challenging and expensive to obtain these slots due to increased demand for production at our CMOs, many of which also manufacture vaccines and other therapeutics. Even after being reserved and paid for, the manufacturing slots for which we contract are subject to risk of displacement as mandated from Rated Orders issued under the DPA. This displacement risk has caused us to expend significant efforts to manage our supply chain and add additional CMOs. Despite those efforts, we have experienced and expect to continue to experience shortages of raw materials and critical components we necessary for our manufacturing processes. Accordingly, the inability to manage our manufacturing capacity could delay our ability to gain approval and ultimately generate revenues from sales of lenzilumab.

Our third-party manufacturers are independent entities subject to their own unique operational and financial risks that are out of our control. If we or any of these third-party manufacturers fail to perform as required, this could cause delays in our clinical trials and applications for regulatory approval. Further, we may have to pay the costs of manufacturing any batch that fails to pass quality inspection or meet regulatory approval. In addition, we, our third-party manufacturers may only be able to produce some of our products at one or a limited number of facilities and, therefore, we have limited manufacturing capacity for certain products, and we may not be able to locate additional or replacement facilities on a reasonable basis or at all. Our sales of such products could also be adversely impacted by our reliance on such limited number of facilities. To the extent these risks materialize and affect their performance obligations to us, our financial results may be adversely affected.

In addition, the process of manufacturing biologics is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral, foreign substances or other contaminations are discovered in our products or in the manufacturing facilities in which our products are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Lenzilumab produced in these facilities may be quarantined or recalled and not available for clinical or commercial use. We have encountered and may continue to encounter these difficulties, our ability to manufacture and sell any products that may be authorized or approved for commercial use could be impaired, which could have an adverse effect on our business.

We may not be able to obtain materials or supplies necessary to conduct clinical trials or, following requisite regulatory authorizations or approvals, to manufacture and sell our products, which could limit our ability to generate revenues.

We need access to certain supplies and products to conduct our clinical trials and, if an EUA or BLA or other approval were to be received, to manufacture and sell our products. If we are unable to purchase sufficient quantities of these materials or find suitable alternative materials in a timely manner, our development efforts for our product candidates may be delayed or our ability to manufacture our products could be limited, which could limit our ability to generate revenues.

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Suppliers of key components and materials must be named in the EUA, BLA or other marketing authorization application filed with the regulatory authority for any product candidate for which we are seeking marketing approval, and significant delays can occur if the qualification of a new supplier is required. Even after a manufacturer is qualified by the regulatory authority, the manufacturer must continue to expend time, money and effort in the area of production and quality control to ensure full compliance with GMP. Manufacturers are subject to regular periodic inspections by regulatory authorities following initial approval. If, as a result of these inspections, a regulatory authority determines that the equipment, facilities, laboratories or processes do not comply with applicable regulations and conditions of product approval, the regulatory authority may suspend the manufacturing operations. If the manufacturing operations of any of the single suppliers for our products are suspended, we may be unable to generate sufficient quantities of commercial or clinical supplies of product to meet market demand, which could in turn decrease our revenues and harm our business. In addition, if deliveries of materials from our suppliers were interrupted for any reason, we may be unable to supply our product candidates in development for clinical trials or ship them to customers, if authorized or approved for commercial use. In addition, some of our products and the materials that we utilize in our operations are manufactured at only one facility or from a single vendor, which we may not be able to replace in a timely manner and on commercially reasonable terms, or at all. Problems with any of the single suppliers we depend on, including in the event of a natural disaster, power or equipment failure or other difficulty, may negatively impact our development and commercialization efforts.

A significant portion of the raw materials and intermediates used to manufacture our product candidates are supplied by third-party manufacturers and corporate partners outside of the U.S. As a result, any political or economic factors in a specific country or region, including any changes in or interpretations of trade regulations, compliance requirements or tax legislation, that would limit or prevent third parties outside of the U.S. from supplying these materials could adversely affect our ability conduct our pending or contemplated clinical trials.

If we were to encounter any of these difficulties, our ability to conduct clinical trials on product candidates and to manufacture and sell any products that may be authorized or approved for commercial use could be impaired, which could have an adverse effect on our business.

Interim, topline or preliminary data from our clinical trials that we announce or publish from time-to-time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time-to-time, we may publicly disclose preliminary, “topline” or other data from our clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, such results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Such data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, topline, or preliminary data should be viewed with caution until the final data are available and such data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between such data and final data could significantly harm our business prospects. Further, disclosure of interim, topline or preliminary data by us or by our competitors could result in volatility in the price of shares of our common stock.

Further, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product and our business in general. In addition, the information we choose to publicly disclose or to publish via a preprint publication regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, product candidate or our business. If the top-line data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize in our current or any our future product candidate, our business, operating results, prospects or financial condition may be harmed.

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If an EUA or other conditional marketing approval is granted for lenzilumab, we may be unable to accurately predict demand for lenzilumab or to produce sufficient quantities on a timely basis to meet demand.

We may be unable to accurately predict demand for lenzilumab, or other approved or unapproved products for COVID-19, as demand depends on a number of factors, including rollout and effectiveness of approved vaccines, competing drug products and other treatments that may be developed for COVID-19 and other illnesses and conditions and federal and state social measures design to slow the spread of COVID-19. If lenzilumab is commercialized, we may be unsuccessful in estimating user demand and may not be effective in matching inventory levels and locations to actual end user demand, in particular if the COVID-19 pandemic, including emerging variants, is effectively contained or the risk of patients being hospitalized as a result of coronavirus infection is significantly diminished. In addition, adverse changes in economic conditions, increased competition, including through approved vaccines or other therapeutic, or other factors may cause hospitals or other users or distributors of lenzilumab to reduce inventories of our products, which would reduce their orders for lenzilumab, even if end user demand has not changed. As a result, even if lenzilumab receives an EUA or BLA approval for use in COVID-19 patients, our revenues may be difficult to predict and vulnerable to extreme fluctuations.

There can be no assurance that lenzilumab, even if approved, would ever become profitable, due to government or healthcare provider or payer interest and public perception regarding vaccines and treatments for COVID-19 related complications.

As a result of the emergency situations in many countries, there is a heightened risk that a COVID-19 therapy or other treatments for COVID-19 pneumonia and symptoms may be subject to adverse governmental actions in certain countries, including intellectual property expropriation, compulsory licenses, strict price controls or other actions. Additionally, we may need to, or we may be required by governmental or non-governmental authorities to, set aside specific quantities of doses of lenzilumab for designated purposes or geographic areas. We may face challenges related to the allocation of supply of lenzilumab, particularly with respect to geographic distribution. Thus, even if lenzilumab is approved, such governmental actions may limit our ability to recoup our current and future expenses incurred to develop and commercialize lenzilumab.

Furthermore, public sentiment regarding commercialization of a COVID-19 therapy or other treatment may limit or negate our ability to generate revenues from sales of lenzilumab. Given that COVID-19 has been designated as a National Emergency and represents an urgent public health crisis, we are likely to face significant public attention and scrutiny over any future business models and pricing decisions with respect to lenzilumab. If we are unable to successfully manage these risks, we could face significant reputational harm, which could negatively affect the price of our common stock.

The regulatory pathway for lenzilumab is highly dynamic and continues to evolve and may result in unexpected or unforeseen challenges. It may also be affected by the duration and the impact of the COVID-19 pandemic.

To date, lenzilumab has moved rapidly through the regulatory review process of FDA. The speed at which all parties are acting to create and test many therapeutics and vaccines for COVID-19 is unusual and evolving or changing plans or priorities within FDA and foreign regulatory authorities, including changes based on new knowledge of COVID-19 and how the disease affects the human body, may significantly affect the regulatory timeline for lenzilumab. Results from clinical testing may raise new questions and require us to redesign proposed clinical trials, including revising proposed endpoints or adding new clinical trial sites or cohorts of subjects.

Although we intend to design any future clinical trials for lenzilumab in accordance with FDA and other applicable regulatory guidance, we cannot be certain that, as the regulatory pathway continues to evolve, we will be able to complete a clinical trial in accordance with FDA’s guidance and regulations then in effect. A failure to complete a clinical trial in accordance with guidance and regulations then in effect could impair our ability to obtain approval for lenzilumab, which may adversely affect our operating results, reputation and ability to raise capital and enter into or maintain collaborations to advance lenzilumab.

Additionally, FDA has the authority to grant an EUA to allow unapproved medical products to be used in an emergency to diagnose, treat, or prevent serious or life-threatening diseases or conditions when there are no adequate, approved, and available alternatives. If we are granted an EUA for lenzilumab, we would be able to commercialize lenzilumab prior to FDA approval. However, because EUA authorization is only in effect while it is determined that a Public Health Emergency is underway, FDA may revoke an EUA where it is determined that the underlying Public Health Emergency no longer exists or warrants such authorization. Widespread vaccination programs and potential “herd immunity” may result in the public perception that the medical emergency posed by COVID-19 has diminished to the point of no longer necessitating EUA for therapies for COVID-19. Accordingly, even if granted, we cannot predict how long, if ever, an EUA would remain in place. Such revocation could adversely impact our business in a variety of ways, including if lenzilumab is not yet approved by FDA and if we and our manufacturing partners have invested in the supply chain to provide lenzilumab under an EUA.

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Even if EUA or regulatory approval is received for lenzilumab, the later discovery of previously unknown problems associated with the use of lenzilumab may result in restrictions, including withdrawal of the product from the market, and lead to significant liabilities and reputational damage.

Because the path to marketing approval of any vaccine for COVID-19, or drug used to treat COVID-19 pneumonia or other symptoms is unclear, lenzilumab may be widely used and in circulation in the U.S. or another country prior to our receipt of marketing approval. Unexpected safety issues, including any that we have not yet observed in our Phase 3 clinical trial for lenzilumab, could lead to patient harm and significant reputational damage to us and our platforms going forward and other issues, including delays in our other programs, the need for re-design of our clinical trial and the need for significant additional financial resources.

We also may be restricted or prohibited from marketing or manufacturing lenzilumab, even after obtaining product approval, if previously unknown problems with lenzilumab or its manufacture are subsequently discovered. We cannot provide assurance that newly discovered or developed safety issues will not arise following regulatory approval. With the use of any drug product or treatment by a wide patient population, serious adverse events may occur from time-to-time that did not arise in the clinical trials of the product or that initially appeared to be unrelated to the vaccine itself and only with the collection of subsequent information were found to be causally related to the product. Any such safety issues could cause us to suspend or cease marketing of our approved products, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenue and our financial condition.

We currently have no internal sales and marketing capabilities and will rely on partners such as Eversana and other third parties to market and sell lenzilumab if we attain an EUA or other regulatory approval for its commercialization, and any product candidates we may successfully develop. We or they may not be able to effectively market and sell any such product candidates.

While we have entered into several agreements with commercial partners who will provide sales and marketing support as well as logistic and distribution services, we currently do not have the internal sales and marketing infrastructure in place that would be necessary to sell and market products. As is the case with many, if not most, small companies seeking to commercialize their products and who have not yet partnered with a larger biotech or pharmaceutical company, we have engaged a contract commercial organization, Eversana, to serve as our end-to-end commercial partner in marketing and selling lenzilumab, if authorized and/or approved, and have entered into other arrangements with distribution partners as described in our 2020 Annual Report on Form 10-K under “Item 1. Business—Sales and Marketing.” There can be no assurance that our partners will be effective in marketing and selling lenzilumab.

If we or Eversana fail to hire, train, retain and manage qualified sales personnel, market our product successfully or on a cost-effective basis or otherwise terminate our agreement, our ability to generate revenue will be limited and we will need to identify and retain an alternative third-party, or develop our own sales and marketing capability. The establishment of an in-house sales and marketing operation can be expensive and time consuming and could delay any product candidate launch.

We may experience significant volatility in the market price of our common stock following announcements and releases regarding our ongoing development of lenzilumab as a potential COVID-19 therapy.

Biopharmaceutical companies that are developing potential therapeutics and vaccines to combat COVID-19, including our company, have experienced significant volatility in the price of their securities upon publication of preclinical and clinical data as well as news about their development programs. Since our initial announcement of our plans to develop lenzilumab as a therapy for COVID-19 patients, our common stock has experienced wide variations in daily trading volume and price movements. The volatility in the price per share is further exacerbated by the large percentage of retail shareholders. We expect that over the coming months we may make public several additional data, and clinical and regulatory updates with respect to lenzilumab and our commercialization efforts for lenzilumab. We cannot predict public reaction or the impact on the market price of our common stock once further announcements regarding lenzilumab or developments from our on-going clinical trial are announced. Given the attention being paid to the COVID-19 pandemic and the public scrutiny of COVID-19 development announcements and data releases to date, we expect that any public announcements we make in the coming months regarding the ongoing development and commercialization of lenzilumab will attract significant attention and scrutiny and that, as a result, the price of our common stock may be particularly volatile during this time.

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Other Risks Related to Our Business and Industry

We have a history of operating losses, we expect to continue to incur losses, and we may never become profitable.

We have incurred net losses in nearly every year since our inception. For the three months ended March 31, 2021, we incurred a net loss of $65.6 million, and we have an accumulated deficit of $440.0 million as of March 31, 2021. Since inception, we have recognized a nominal amount of revenue from payments for license or collaboration fees, $0.5 million of which was recognized in the first quarter of 2021. We expect to make substantial expenditures and incur additional operating losses in the future to further develop and commercialize our product candidates. Our accumulated deficit is expected to increase significantly as we continue our development and clinical trial efforts. Our ability to achieve and sustain profitability depends on obtaining regulatory approvals for and successfully commercializing our product candidates, either alone or with third parties. We do not currently have the required approvals to market any of our product candidates and we may never receive them. We may not be profitable even if we or any future development partners succeed in commercializing any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

Our ability to execute on all of the initiatives in our development pipeline is substantially dependent on third parties to plan and conduct the referenced studies and clinical trials.

Our success depends on our ability to negotiate agreements with third parties with resources to plan and conduct the initiatives, studies and clinical trials we are pursuing. If we are not able to reach agreements with current or future partners for it, we will not be able to execute on each of these particular initiatives, studies and trials. Our inability to identify and complete negotiations with any such third party therefore could have a material and adverse impact on our ability to pursue our business plan in respect of the applicable element of our pipeline, which in turn could have a material adverse effect on our business.

We will need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates.

We believe that our cash and cash equivalents will be sufficient to fund our planned operations and capital expenditure requirements for at least the next 12 months. This evaluation is based on relevant conditions and events that are currently known or reasonably knowable. As a result, we could deplete our available capital resources sooner than we currently expect, and a delay in obtaining or failure to obtain an EUA could further constrain our cash resources. We have based these estimates on assumptions that may prove to be wrong, and our operating projections, including our projected net revenue following the potential receipt of an EUA for lenzilumab in COVID-19 patients, may change as a result of many factors currently unknown to us.

We may need to obtain additional financing to fund our future operations, including for clinical development, manufacturing, distribution and commercialization of lenzilumab for patients with COVID-19 and other indications including CAR-T, GvHD and CMML and our other product candidates. We may need to obtain additional financing to conduct additional trials for the approval of our product candidates if requested by regulatory authorities in the U.S. and other countries, and to complete the development of any additional product candidates we own or might acquire. Moreover, our fixed expenses such as salaries, committed payments to our contract manufacturers, and other contractual commitments, are substantial and are expected to increase in the future. Our need to raise funds will depend on a number of factors, including our ability to establish additional relationships for the manufacture of lenzilumab and our ability to commence commercialization and begin generating revenues from product sales if lenzilumab were to be issued an EUA and eventually approved under a BLA.

Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, grant financing and support from governmental agencies, convertible debt, other debt financings including the Term Loan from Hercules, collaborations, strategic alliances and marketing, supply, distribution or licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs, our commercialization efforts or our manufacturing commitments and capacity. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, supply, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

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Our business depends on the success of our current product candidates. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, any of our product candidates.

We have a limited pipeline of product candidates and we do not plan to conduct active research at this time for discovery of new molecules or antibodies. We depend on the successful continued development and regulatory approval of our current product candidates for our future business success. Since the fall of 2017, our primary focus has been the clinical development of lenzilumab. We are also working to create next-generation gene-edited CAR-T therapies using GM-CSF gene knockout technologies, as well as working to develop ifabotuzumab and related products. We will need to successfully enroll and complete clinical trials of lenzilumab and ifabotuzumab, and potentially obtain regulatory approval to market these products. The future clinical, regulatory and commercial success of our product candidates is subject to a number of risks, including the following:

· we may not be able to enroll adequate numbers of eligible patients in the clinical trials we propose to conduct, whether alone or through collaborations, including the collaboration with NIH, the IMPACT Partnership, SAHMRI and the University of Adelaide and other partnerships;

· we may not have sufficient financial and other resources to fund our clinical trials or collaborations;

· we may not be able to provide acceptable evidence of safety and efficacy for our product candidates;

· the results of our clinical trials or collaborations may not meet the level of statistical or clinical significance, or product safety, required to move to the next stage of development or, ultimately, obtain marketing approval from the FDA;

· we may not be able to obtain, maintain and enforce our patents and other intellectual property rights; and

· we may not be able to obtain and maintain commercial manufacturing arrangements with third-party manufacturers or establish commercial-scale manufacturing capabilities.

Furthermore, even if we do receive regulatory approval to market any of our product candidates, any such approval may be subject to limitations on the indicated uses for which we may market the product. If any of our product candidates are unsuccessful, that could have a substantial negative impact on our business.

Accordingly, we cannot assure you that our product candidates will be successfully developed or commercialized. If we or any future development partners are unable to develop, or obtain regulatory approval for or, if approved, successfully commercialize, one or more of our product candidates, we may not be able to generate sufficient revenue to continue our business.

Our product candidates are at an early stage of development and may not be successfully developed or commercialized.

Our product candidates are in the early stages of development and will require substantial clinical development, testing, and regulatory approval prior to commercialization. Of the large number of drugs in development, only a small percentage successfully completes the FDA regulatory approval process and are commercialized. Accordingly, we cannot assure you that our product candidates will be successfully developed or commercialized. If we or any future development partners are unable to develop, or obtain regulatory approval for or, if approved, successfully commercialize, one or more of our product candidates, we may not be able to generate sufficient revenue to continue our business.

The adoption of CAR-T therapies as the potential standard of care for treatment of certain cancers is uncertain, and dependent on the efforts of a limited number of market entrants, and if not adopted as anticipated, the market for lenzilumab or next-generation gene-edited CAR-T therapies may be limited or not develop.

We are seeking to advance the development of lenzilumab to address, among other things, the serious and potentially fatal side effects associated with CAR-T therapies and to improve the efficacy of these treatments. We are also working to create next-generation gene-edited CAR-T therapies using GM-CSF gene knockout technologies. Although five CAR-T therapies have been approved by FDA to date, the use of engineered T cells as a potential cancer treatment is a recent development and may not be broadly accepted by physicians, patients, hospitals, cancer treatment centers, payers and others in the medical community. The degree of market acceptance of any approved product candidates will depend on a number of factors, including:

· the efficacy and safety as demonstrated in clinical trials;

· the clinical indications for which the product candidate is approved;

· acceptance by physicians, major operators of hospitals and clinics, and patients of the product candidate as a safe and effective treatment;

· the potential and perceived advantages of product candidates over alternative treatments;

· the safety of product candidates seen in a broader patient group, including its use outside the approved indications;

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· competitive approaches to tackle similar issues;

· the cost of treatment in relation to alternative treatments;

· the availability of adequate reimbursement and pricing by payers;

· relative convenience and ease of administration;

· the prevalence and severity of adverse events;

· the effectiveness of sales and marketing efforts; and

· the ability to manage any unfavorable publicity relating to the product candidate.

If the medical and payer community is not sufficiently persuaded of the safety, efficacy and cost-effectiveness of CAR-T therapy and the potential advantages of using lenzilumab compared to existing and future therapeutics, and there is not significant market acceptance of CAR-T therapy as the standard of care for treatment of certain cancers, the market for lenzilumab or next-generation gene-edited CAR-T therapies may be limited or not develop, and our stock price could be adversely affected.

CAR-T therapies currently in early development purport to incorporate technology that may minimize or eliminate the adverse side-effects and improve on efficacy, that we believe have impaired the uptake of the approved CAR-T therapies. If these developing therapies are proven safer and equally or more efficacious in their proposed indications and approved for use by FDA and other regulatory agencies, the market growth for the currently approved CAR-T therapies may be limited, impairing demand for lenzilumab.

In recent years, several biotechnology companies describing business plans focusing on development of CAR-T therapies have completed or announced they are pursuing initial public offerings (“IPOs”). Several of these companies have described their belief that their therapies will not result in the same level of CRS or NT as has been experienced in use of previously FDA-approved CAR-T therapies. While these products are in early-stage development, the data is limited and these products have not yet been approved for use by FDA, if any such product were also proven equally efficacious and subsequently approved, the market for lenzilumab may not develop or grow as anticipated. Recently the FDA approved Breyanzi™, (liso-cel), a new CAR-T cell therapy for adults with relapsed or refractory Large B-cell Lymphoma. Grade ≥3 cytokine release syndrome and Grade ≥3 neurologic toxicities following Breyanzi treatment occurred in 4% and 12% of patients, respectively. If new CAR-T therapies with lower occurrences of CRS and NT are approved, the market for lenzilumab in conjunction with CAR-T therapy may be diminished. Any such failure of a market for lenzilumab to develop could adversely affect our stock price. In addition, if new CAR-T therapies that offer improved efficacy, either with or without improved safety, the market for lenzilumab in conjunction with CAR-T therapy may be diminished.

Our business could target benefits from various regulatory incentives, such as EUA, orphan drug exclusivity, breakthrough therapy designation, fast track designation, and priority review, but we may not ultimately qualify for or benefit from these arrangements.

We may seek various regulatory incentives, such as EUA, orphan drug exclusivity, breakthrough therapy designation, fast track designation, accelerated approval, priority review and Priority Review Vouchers (“PRVs”), where available, that provide for certain periods of exclusivity, expedited review and/or other benefits, and we may also seek similar designations elsewhere in the world. Often, regulatory agencies have broad discretion in determining whether or not products qualify for such regulatory incentives and benefits. We cannot guarantee that we will be able to receive orphan drug status from FDA or equivalent regulatory designations elsewhere. We also cannot guarantee that we will obtain breakthrough therapy or fast track designation, which may provide certain potential benefits such as more frequent meetings with FDA to discuss the development plan, intensive guidance on an efficient drug development program, and potential eligibility for rolling review or priority review. Legislative developments in the U.S., including proposed legislation that would restrict eligibility for PRVs, may affect our ability to qualify for these programs in the future.

Even if we are successful in obtaining beneficial regulatory designations by FDA or other regulatory agency for our product candidates, such designations may not lead to faster development or regulatory review or approval, and it does not increase the likelihood that our product candidates will receive marketing approval. We may not be able to obtain or maintain such designations for our product candidates, and our competitors may obtain these designations for their product candidates, which could impact our ability to develop and commercialize our product candidates or compete with such competitors, which would adversely impact our business, financial condition or results of operations.

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There is a limited amount of information about us upon which investors can evaluate our product candidates and business prospects, including because we have a limited operating history developing product candidates, have not yet successfully commercialized any products, and have a relatively small management team.

Our primary focus is developing our proprietary monoclonal antibody portfolio, which comprises lenzilumab, ifabotuzumab and HGEN005. We are also currently developing our GM-CSF knockout gene-editing CAR-T platform to create next-generation CAR-T therapies that preserve the benefits of CAR-T therapy while altogether avoiding its serious and potentially life-threatening side-effects. Our limited operating history developing clinical-stage product candidates may make it more difficult for us to succeed or for investors to be able to evaluate our business and prospects. In addition, as an early-stage clinical development company, we have limited experience in development activities, including conducting clinical trials, or seeking and obtaining regulatory approvals, even though our executives have had relevant experience at other companies. We currently have eleven full-time employees and therefore are heavily dependent on external consultants and expert vendors for scientific, clinical manufacturing and regulatory expertise. To execute our business plan we will need to successfully:

· execute our product candidate development activities, including successfully completing our clinical trial programs, including our collaborations and partnerships;

· obtain required regulatory approvals or authorizations for the development and commercialization of our product candidates;

· manage our costs and expenses related to clinical trials, regulatory approvals, manufacturing and commercialization;

· secure substantial additional funding;

· develop and maintain successful strategic relationships;

· build and maintain a strong intellectual property portfolio;

· build and maintain appropriate clinical, sales, manufacturing, distribution, and marketing capabilities on our own or through third parties; and

· gain market acceptance and favorable reimbursement status for our product candidates.

If we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, raise capital, expand our business, or continue our operations.

In addition to our collaboration with the NIH, IMPACT Partnership and SAHMRI and the University of Adelaide, we may, in the future, seek to enter into collaborations with other third parties for the discovery, development and commercialization of our product candidates. If our collaborators cease development efforts under our collaboration agreements, or if any of those agreements are terminated, these collaborations may fail to lead to commercial products, and we may never receive milestone payments or future royalties under these agreements.

We may in the future seek to enter into agreements with other third-party collaborators for research, development and commercialization of other therapeutic technologies or product candidates. Biopharmaceutical companies are our likely future collaborators for any marketing, distribution, development, licensing, or broader collaboration arrangements. If we fail to enter into future collaborations on commercially reasonable terms, or at all, or such collaborations are not successful, we may not be able to execute our strategy to develop our product candidates or therapies that we believe could benefit from the resources of either larger biopharmaceutical companies or those specialized in a particular area of relevance.

With respect to our existing collaboration agreements, we have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Moreover, our ability to generate revenues from these arrangements will depend on our collaborators' abilities to successfully perform the functions assigned to them in these arrangements.

Collaborations involving our product candidates pose the following risks to us:

· collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;

· collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on preclinical studies or clinical trial results, changes in the collaborators' strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

· collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

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· collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

· collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;

· collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation or potential liability;

· collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;

· disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and

· collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

As a result of the foregoing, our current and any future collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. Any failure to successfully develop or commercialize our product candidates pursuant to our current or any future collaboration agreements could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Moreover, to the extent that any of our existing or future collaborators were to terminate a collaboration agreement, we may be forced to independently develop these product candidates, including funding preclinical studies or clinical trials, assuming marketing and distribution costs and defending intellectual property rights, or, in certain instances, abandon product candidates altogether, any of which could result in a change to our business plan and have a material adverse effect on our business, financial condition, results of operations and prospects.

We have relied and may in the future rely on third parties to conduct ISTs of our products, which is cost-effective for us but affords the investigators the ability to retain significant control over the design and conduct of the trials, as well as the use of the data generated from their efforts.

We have relied and may in the future rely on third parties to conduct and sponsor clinical trials relating to lenzilumab, our GM-CSF gene knockout platform and our other immunotherapies, ifabotuzumab and HGEN005. Such ISTs may provide us with valuable clinical data that can inform our future development strategy in a cost-efficient manner, but we do not control the design or conduct of the ISTs, and it is possible that the FDA or non-U.S. regulatory authorities will not view these ISTs as providing adequate support for future clinical trials, whether controlled by us or third parties, for any one or more reasons, including elements of the design or execution of the trials or safety concerns or other trial results.

These arrangements provide us limited information rights with respect to the ISTs, including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from the ISTs. However, we would not have control over the timing and reporting of the data from ISTs, nor would we own the data from the ISTs. If we are unable to confirm or replicate the results from the ISTs or if negative results are obtained, we would likely be further delayed or prevented from advancing further clinical development. Further, if investigators or institutions breach their obligations with respect to the clinical development of our product candidates, or if the data proves to be inadequate compared to the first-hand knowledge, we might have gained had the ISTs been sponsored and conducted by us, then our ability to design and conduct any future clinical trials ourselves may be adversely affected.

If the third parties conducting our clinical trials do not conduct the trials in accordance with our agreements with them, our ability to pursue our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. Therefore, the timing of the initiation and completion of these trials is uncertain and may occur on substantially different timing from our estimates. We also use CROs to conduct our clinical trials and rely on medical institutions, clinical investigators, CROs, and consultants to conduct our trials in accordance with our clinical protocols and regulatory requirements. Our CROs, investigators, and other third parties play a significant role in the conduct of these trials and subsequent collection and analysis of data.

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There is no guarantee that any CROs, investigators, or other third parties on which we rely for administration and conduct of our clinical trials will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fails to meet expected deadlines, fails to adhere to our clinical protocols, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed, or terminated. If any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in our ongoing clinical trials unless we are able to transfer those subjects to another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time-to-time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be jeopardized.

We may experience delays in commencing or conducting our clinical trials, in receiving data from third parties or in the continuation or completion of clinical testing, which could result in increased costs to us, delay our ability to generate product candidate revenue or, ultimately, render us unable to complete the development and commercialization of our product candidates.

We have product candidates in clinical development and preclinical development. As with most small biotech companies, the risk of failure for our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Before we can initiate clinical trials in the U.S. for any new product candidates, we are required to submit the results of preclinical testing to FDA as part of an IND application, along with other information including information about product candidate chemistry, manufacturing, and controls and our proposed clinical trial protocol. For our programs already underway, we are required to report or provide information to appropriate regulatory authorities in order to continue with our testing programs. If we are unable to make timely regulatory submissions for any of our programs, it will delay our plans for our clinical trials. If those third parties do not make the required data available to us, we will likely have to identify and contract with another third party, and/or develop all necessary preclinical and clinical data on our own, which will lead to significant delays and increase development costs of the product candidate. In addition, FDA may require us to conduct additional preclinical testing for any product candidate before it allows us to initiate clinical testing under any IND application, which may lead to additional delays and increase the costs of our preclinical development. Moreover, despite the presence of an active IND application for a product candidate, clinical trials can be delayed for a variety of reasons, including delays in:

· identifying, recruiting, and enrolling qualified subjects to participate in a clinical trial;

· identifying, recruiting, and training suitable clinical investigators;

· reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation, may be subject to modification from time-to-time, and may vary significantly among different CROs and trial sites;

· obtaining and maintaining sufficient quantities of a product candidate for use in clinical trials, either as a result of transferring the manufacturing of a product candidate to another site or manufacturer, deferring ordering or production of product in order to conserve resources or mitigate risk, having product in inventory become no longer suitable for use in humans, or other reasons that reduce or delay availability of drug supply;

· obtaining and maintaining Institutional Review Board (“IRB”) or ethics committee approval to conduct a clinical trial at an existing or prospective site;

· retaining or replacing participants who have initiated a clinical trial but may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process, or personal issues;

· developing any companion diagnostic necessary to ensure the study enrolls the target population;

· being required by the FDA to add more patients or sites or to conduct additional trials; or

· the FDA placing a clinical trial on hold.

Once a clinical trial has begun, recruitment and enrollment of subjects may be slower than we anticipate. Numerous companies and institutions are conducting clinical studies in similar patient populations which can result in competition for qualified patients. In addition, clinical trials will take longer than we anticipate if we are required, or believe it is necessary, to enroll additional subjects than originally planned. Clinical trials may also be delayed as a result of ambiguous or negative interim results. Further, a clinical trial may be suspended or terminated by us, an IRB, an ethics committee, or a data safety monitoring committee overseeing the clinical trial, any of our clinical trial sites with respect to that site, or FDA or other regulatory authorities, due to several factors, including:

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· failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;

· inspection of the clinical trial operations or clinical trial site by the FDA or other regulatory authorities;

· inability to provide timely supply of drug product due to shortages or other issues with the drug product;

· unforeseen safety issues, known safety issues that occur at a greater frequency or severity than we anticipate, or any determination that the clinical trial presents unacceptable health risks; or

· lack of adequate funding to continue the clinical trial or unforeseen significant incremental costs related to the trial.

Additionally, if any future development partners do not develop the licensed product candidates in the time and manner that we expect, or at all, the clinical development efforts related to these licensed product candidates could be delayed or terminated. In addition, our ability to enforce our partners’ obligations under any future collaboration efforts may be limited due to time and resource constraints, competing corporate priorities of our future partners, and other factors.

Any delays in the commencement of our clinical trials may delay or preclude our ability to further develop or pursue regulatory approval for our product candidates. Changes in U.S. and foreign regulatory requirements and guidance also may occur, and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for re-examination, which may affect the costs, timing, and likelihood of a successful completion of a clinical trial.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or do not meet the standard for acceptability by regulatory authorities or if there are safety concerns, we may:

· be delayed in obtaining marketing approval for our product candidates;

· not obtain marketing approval or EUA at all;

· obtain approval for indications or patient populations that are not as broad as intended or desired;

· obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;

· be subject to additional post-marketing testing requirements; or

· have the product removed from the market after obtaining marketing approval.

Our product development costs will also increase if we experience delays in testing or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. We may also determine to change the design or protocol of one or more of our clinical trials, including to add additional arms or patient populations, which could result in increased costs and expenses and/or delays. If we or any future development partners experience delays in the completion of, or if we or any future development partners must terminate, any clinical trial of any product candidate our ability to obtain regulatory approval for that product candidate will be delayed and the commercial prospects, if any, for the product candidate may suffer as a result. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of these factors may also ultimately lead to the denial of regulatory approval of a product candidate.

Our product candidates are subject to extensive regulation, compliance with which is costly and time consuming, may cause unanticipated delays, or may prevent the receipt of the required approvals to commercialize our product candidates.

The clinical development, approval, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing, and distribution of our product candidates are subject to extensive regulation by FDA in the U.S. and by comparable authorities in foreign markets. In the U.S., we are not permitted to market our product candidates until we receive regulatory approval from FDA. The process of obtaining regulatory approval is expensive, often takes many years, and can vary substantially based upon the type, complexity, and novelty of the products involved, as well as the target indications. Approval policies or regulations may change, and FDA has substantial discretion in the drug approval process, including the ability to delay, limit, or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. FDA or other comparable foreign regulatory authorities can delay, limit, or deny approval of a product candidate for many reasons, including:

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· such authorities may disagree with the design or implementation of our or any future development partners’ clinical trials;

· such authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the standard of care is potentially different from the U.S.;

· the results of clinical trials may not demonstrate the safety or efficacy required by such authorities for approval;

· we or any future development partners may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;

· such authorities may disagree with our interpretation of data from preclinical studies or clinical;

· such authorities may find deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we or any future development partners contract for clinical and commercial supplies; or

· the approval policies or regulations of such authorities may significantly change in a manner rendering our or any future development partners’ clinical data insufficient for approval. 

With respect to foreign markets, approval procedures vary widely among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative review periods, and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased caution by FDA and comparable foreign regulatory authorities in reviewing new drugs based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals may delay or prevent us or any future development partners from commercializing our product candidates.

The results of preclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

Drug development has substantial inherent risk. We or any future development partners will be required to demonstrate through adequate and well-controlled clinical trials that our product candidates are effective, with a favorable benefit-risk profile, for use in their target populations for their intended indications before we can seek regulatory approvals for their commercial sale. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials. Success in early clinical trials does not mean that later clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing. Furthermore, our future trials will need to demonstrate sufficient safety and efficacy for approval by regulatory authorities in larger patient populations. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. In addition, only a small percentage of drugs under development result in the submission of an NDA or BLA to FDA, and even fewer are approved for commercialization.

In addition, serious adverse or undesirable side effects may emerge or be identified during later stages of development that were not observed in earlier stages. If our product candidates, either alone or in combination with other therapeutics, are associated with serious adverse events or undesirable side effects or unacceptable drug-drug interactions in clinical trials or have characteristics that are unexpected in clinical trials or preclinical testing, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In pharmaceutical development, many compounds that initially show promise in early-stage or clinical testing are later found to cause side effects that prevent further development of the compound. In addition, if third parties manufacture or use our product candidates without our permission, and generate adverse events or unacceptable side effects, this could also have an adverse impact on our development efforts.

Unacceptable adverse events caused by any of our product candidates that we advance into clinical trials could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in the denial of regulatory approval by FDA or other regulatory authorities for any or all targeted indications and markets. This in turn could prevent us from completing development or commercializing the affected product candidate and generating revenue from its sale. We have not yet successfully completed testing of any of our product candidates for the treatment of the indications for which we intend to seek approval in humans, and we currently do not know the extent of adverse events, if any, that will be observed in individuals who receive any of our product candidates. If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product candidates.

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 We face risks associated with clinical operations abroad, which may adversely affect our financial condition and results of operations, and we may not be able to receive conditional marketing approvals for lenzilumab in COVID-19 patients in markets outside the U.S.

The Mexican regulatory agency, COFEPRIS, granted us permission to expand the Phase 3 study of lenzilumab in patients with COVID-19 in Mexico. We did not open any sites in Mexico or enroll any patients in that country; however, we may do so in the future. Partners also are conducting or planning to conduct clinical trials involving lenzilumab in Korea, Australia and the United Kingdom, as well as potentially in other countries in patients with COVID-19 and other indications. In addition, we are working to seek conditional marketing authorization (“CMA”) for lenzilumab in hospitalized COVID-19 patients in the European Union and the United Kingdom. We have not received any authorization or approval to sell lenzilumab in any country but would expect to commence commercial operations, through a partner or on our own, only after such authorization or approval were received. As with our development programs in the U.S., our product candidates must be approved for marketing and sale by regulatory authorities in each jurisdiction to which we may apply for approval and, once approved, are subject to extensive regulation by regulatory agencies in other countries. We anticipate that we may file for marketing approval in additional countries and for additional indications and products over the next several years. These and any future marketing applications we file may not be approved by the regulatory authorities on a timely basis, or at all. Even if marketing approval is granted for these products, there may be significant limitations on their use. We cannot state with certainty when or whether any of our product candidates under development will be approved by any foreign regulators or launched; whether we will be able to develop, license or acquire additional product candidates or products; or whether any products, once launched, will be commercially successful.

In addition, operations abroad are accompanied by certain financial, political, economic and other risks, including those listed below:

· Foreign Currency Exchange: Operations internationally may subject us to risks related to foreign currency exchange risks as we make payments, or incur obligations, denominated in foreign currencies. We cannot predict future fluctuations in the foreign currency exchange rates of the U.S. dollar. If the U.S. dollar appreciates significantly against certain currencies and our practices do not sufficiently offset the effects of such appreciation, our results of operations would be adversely affected, and our stock price may decline.

· Anti-Bribery: We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws that will govern our international operations with respect to payments to government officials. Our international operations would be heavily regulated and require significant interaction with foreign officials. In certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state controlled, in a manner that is different than local custom. In addition, despite our efforts, our policies and procedures may not protect us from reckless or criminal acts committed by persons who act on our behalf. Enforcement activities under anti-bribery laws could subject us to administrative and legal proceedings and actions, which could result in civil and criminal sanctions, including monetary penalties and exclusion from health care programs.

· Other risks inherent in conducting foreign operations include:

o International operations, including any use of third-party manufacturers, distributors, CROs and collaboration arrangements outside the U.S., expose us to increased risk of theft of our intellectual property and other proprietary technology, particularly in jurisdictions with less robust intellectual property protections than the U.S., as well as restrictive government actions against our intellectual property and other foreign assets such as nationalization, expropriation or the imposition of compulsory licenses.

o We may be subject to protective economic policies taken by foreign governments, such as trade protection measures and import and export licensing requirements, which may result in the imposition of trade sanctions or similar restrictions by the U.S. or other governments.

o Our foreign operations, third-party manufacturers, CROs or strategic partners could be subject to business interruptions for which we or they may be uninsured or inadequately insured.

o Our operations may also be adversely affected if there is political instability or disruption in any other geographic region where we may have operations, which could impact our ability to do business in those areas.

If we were to encounter any of these risks, our foreign operations may be adversely affected, which could have an adverse effect on our overall business and results of operations.

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If we fail to attract and retain key management and clinical development personnel, or if the attention of such personnel is diverted, we may be unable to successfully manage our business and develop or commercialize our product candidates.

We will need to effectively manage our managerial, operational, financial, and other resources in order to successfully pursue our clinical development and commercialization efforts. As a company with a limited number of personnel, we are heavily affected by turnover and highly dependent on the expertise of the members of our senior management, in particular our Chief Executive Officer, Dr. Cameron Durrant, and Dr. Dale Chappell, the controlling owner of the Black Horse Entities (as defined below), our current Chief Scientific Officer and a director. Furthermore, we rely on third party consultants for a variety of services. We cannot predict the impact of the loss of such individuals or the loss of services of any of our other senior management, should they occur, or the difficulty in replacing such individuals. Such losses could delay or prevent the further development and potential commercialization of our product candidates and, if we are not successful in finding suitable replacements, could harm our business.

If our competitors develop similar or comparable treatments for the target indications of our product candidates that are approved more quickly, marketed more successfully or are demonstrated to be safer or more effective than our product candidates, or if FDA approves generic or biosimilar competitors to our products post-approval, our commercial opportunity will be reduced or eliminated.

We compete in an industry characterized by rapidly advancing technologies, intense competition, a changing regulatory and legislative landscape and a strong emphasis on the benefits of intellectual property protection and regulatory exclusivities. Our competitors include pharmaceutical companies, other biotechnology companies, academic institutions, government agencies and other private and public research organizations. We compete with these parties in immunotherapy and oncology treatments and in recruiting highly qualified personnel. Our product candidates, if successfully developed and approved, may compete with established therapies, with new treatments that may be introduced by our competitors, including competitors relying on our biologics approvals under section 351(k) of the Public Health Service Act, or with generic copies of our products approved by FDA under an abbreviated new drug application (“ANDA”), referencing our drug products. We believe that competitors are actively developing competing products to our product candidates. See “Competition” in the “Business” section of our 2020 Annual Report on Form 10-K for a discussion of competition with respect to our current product candidates.

Many of our competitors and potential competitors have substantially greater scientific, research, and product development capabilities, as well as greater financial, marketing, sales and human resources capabilities than we do. In addition, many specialized biotechnology firms have formed collaborations with large, established companies to support the research, development and commercialization of products that may be competitive with ours. Accordingly, our competitors may be more successful with respect to their products than we may be in developing, commercializing, and achieving widespread market acceptance for our products. If a competitor obtains approval for an orphan drug that is the same drug or the same biologic as one of our candidates before we do, we will be blocked from obtaining FDA approval for seven years from the date of the competitor’s product, unless we can establish that our product is clinically superior to the previously-approved competitor’s product or we can meet another exception, such as by showing that the competitor has failed to provide an adequate supply of its product to patients after approval. In addition, our competitors’ products may be more effective or more effectively marketed and sold than any treatment we or our development partners may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses related to developing and supporting the commercialization of any of our product candidates. Developments by competitors may render our product candidates obsolete or noncompetitive. After one of our product candidates is approved, FDA may also approve a generic version with the same dosage form, safety, strength, route of administration, quality, performance characteristics and intended use as our product. These generic equivalents would be less costly to bring to market and could generally be offered at lower prices, thereby limiting our ability to gain or retain market share.

The acquisition or licensing of pharmaceutical products is also very competitive, and a number of more established companies, which have acknowledged strategies to in-license or acquire products, may have competitive advantages as may other emerging companies taking similar or different approaches to product acquisitions. The more established companies may have a competitive advantage over us due to their size, cash flows, institutional experience and historical corporate reputation.

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We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our products.

We are wholly dependent on third party contract manufacturers for the timely supply of adequate quantities of our products which meet or exceed requisite quality and production standards for use in clinical and nonclinical studies. Given the extensive risks, scope, complexity, cost, regulatory requirements, and commitment of resources associated with developing the capabilities to manufacture one or more of our products, we have no present plan or intention of developing in-house manufacturing capabilities for nonclinical, clinical or commercial scale production, beyond our current supervision and management of our third-party contract manufacturers. In addition, in order to balance risk and conserve financial and human resources, we have and may continue from time-to-time to defer commitment to production of product, which could result in delays to the continued progress of our clinical and nonclinical testing.

In addition to the foregoing, the process of manufacturing our products is complex, highly regulated, and subject to several risks, including but not limited to the following:

· We, and our contract manufacturers, must comply with FDA’s current Good Manufacturing Practice, (“cGMP”), regulations and guidance. We, and our contract manufacturers, may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We, and our contract manufacturers, are subject to inspections by FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory requirements. Any failure to follow cGMP or other regulatory requirements or any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our products as a result of a failure of our facilities or the facilities or operations of third parties to comply with regulatory requirements, or a failure to pass any regulatory authority inspection, could significantly impair our ability to develop and commercialize our products, including leading to significant delays in the availability of products for our clinical studies or the termination or hold on a clinical study, or the delay or prevention of a filing or approval of marketing applications for our product candidates. Significant noncompliance could also result in the imposition of sanctions, including injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions, adverse publicity, and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain regulatory compliance, we may not be permitted to market our products and/or may be subject to product recalls, seizures, injunctions, or criminal prosecution. Any adverse developments affecting manufacturing operations for our products may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. Once our product candidates are approved, we may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.

· The manufacturing facilities in which our products are made could be adversely affected by equipment failures, plant closures, capacity constraints, competing customer priorities or changes in corporate strategy or priorities, process changes or failures, changes in business models or operations, materials or labor shortages, natural disasters, power failures and numerous other factors.

· We are wholly dependent upon third party CMOs for the timely supply of adequate quantities of requisite quality product for our nonclinical, clinical and, if approved by regulatory authorities, commercial scale production.

If any product candidate that we successfully develop does not achieve broad market acceptance among physicians, patients, healthcare payers and the medical community, the revenue that it generates may be limited.

Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients, healthcare payers, and the medical community. Coverage and reimbursement of our product candidates by third-party payers, including government payers, generally is also necessary for commercial success. The degree of market acceptance of any approved product candidates will depend on several factors, including:

· the efficacy and safety as demonstrated in clinical trials;

· the clinical indications for which the product candidate is approved;

· acceptance by physicians, major operators of hospitals and clinics, and patients of the product candidate as a safe and effective treatment;

· the potential and perceived advantages of product candidates over alternative treatments;

· the safety of product candidates seen in a broader patient group, including its use outside the approved indications;

· the cost of treatment in relation to alternative treatments;

· the availability of adequate reimbursement and pricing by payers;

· relative convenience and ease of administration;

· the prevalence and severity of adverse events;

· the effectiveness of our sales and marketing efforts; and

· the ability to manage any unfavorable publicity relating to the product candidate.

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If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payers, and patients, we may not generate sufficient revenue from that product candidate and may not become or remain commercially attractive as a standalone indication for that product.

Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.

Market acceptance and sales of our product candidates will depend significantly on the availability of adequate insurance coverage and reimbursement from third-party payers for any of our product candidates and may be affected by existing and future health care reform measures. Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Reimbursement by a third-party payer may depend upon a number of factors including the third-party payer’s determination that use of a product candidate is:

· a covered benefit under its health plan;

· safe, effective, and medically necessary;

· appropriate for the specific patient;

· cost-effective; and

· neither experimental nor investigational.

Obtaining coverage and reimbursement approval for a product candidate from a government or other third-party payer is a time-consuming and costly process that could require us to provide supporting scientific, clinical, and cost effectiveness data for the use of our product candidates to the payer. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our product candidates. If reimbursement is not available or is available only to limited levels or with restrictions, we may not be able to commercialize certain of our product candidates profitably, or at all, even if approved.

In the U.S. and in certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could affect our ability to sell our product candidates profitably. In particular, the Medicare Modernization Act of 2003 revised the payment methods for many product candidates under Medicare. This has resulted in lower rates of reimbursement. There have been numerous other federal and state initiatives designed to reduce payment for pharmaceuticals.

As a result of legislative proposals and the trend toward managed health care in the U.S., third-party payers are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drugs. They may also refuse to provide coverage of approved product candidates for medical indications other than those for which FDA has granted market approvals. As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the pricing of drugs. We could be subject to pricing pressures in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations, and additional legislative proposals as well as country, regional, or local healthcare budget limitations. Similar concerns about the costs of treatment have been raised in Europe and the United Kingdom.

Governments may impose price controls, which may adversely affect our future profitability.

We intend to seek approval to market our future product candidates in the U.S. and potentially in foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions, we will be subject to rules and regulations in those jurisdictions relating to our product candidates. In some foreign countries, particularly in the European Union and the United Kingdom, the pricing of prescription pharmaceuticals and biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product candidate. If reimbursement of our future products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, we may be unable to achieve or sustain profitability.

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We face potential product liability exposure and, if successful claims are brought against us, we may incur substantial liability for a product candidate and may have to limit its commercialization.

The use of our product candidates in clinical trials and the sale of any product candidates for which we may obtain marketing approval expose us to the risk of product liability claims. Product liability claims may be brought against us or any future development partners by participants enrolled in our clinical trials, patients, health care providers, or others using, administering, or selling our product candidates. If we cannot successfully defend ourselves against any such claims, or have insufficient insurance protection, we would incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:

· withdrawal of clinical trial participants;

· termination of clinical trial sites or entire trial programs;

· costs of related litigation;

· substantial monetary awards to trial participants or other claimants;

· decreased demand for our product candidates and loss of revenue;

· impairment of our business reputation;

· diversion of management and scientific resources from our business operations; and

· the inability to commercialize our product candidates.

We have obtained limited product liability insurance coverage for our clinical trials domestically and in selected foreign countries where we are conducting clinical trials. As such, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to product liability. We intend to expand our insurance coverage for product candidates to include the sale of commercial products if we obtain marketing approval for our product candidates in development; however, we may be unable to obtain commercially reasonable product liability insurance for any product candidates approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our working capital and adversely affect our business.

Our employees and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards, which could have a material adverse effect on our business.

We are exposed to the risk of employee fraud or other misconduct.  Misconduct by employees or consultants could include intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, failure to provide accurate information to FDA or comparable foreign regulatory authorities, failure to comply with manufacturing standards, failure to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, failure to report financial information or data accurately, violations of anti-bribery laws, or failure to disclose unauthorized activities to us.  In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices.  These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.  Employee or consultant misconduct could also involve the improper use of confidential information obtained in the course of our business, which could result in civil or criminal legal actions, regulatory sanctions, or serious harm to our reputation.  We have adopted a Code of Business Conduct and Ethics and other corporate policies, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations.  If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

We may encounter difficulties in managing our growth and expanding our operations successfully.

As we seek to advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, marketing, and sales capabilities, and contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various development partners, suppliers, and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend in part on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively. We may not be able to accomplish these tasks and our failure to accomplish any of them could prevent us from successfully growing our company. 

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We and any future development partners, third-party manufacturers and suppliers use hazardous materials, and any claims relating to improper handling, storage, or disposal of these materials could be time consuming or costly.

We and any future development partners, third-party manufacturers and suppliers may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. Our operations and the operations of our development partner, third-party manufacturers and suppliers also produce hazardous waste products. Federal, state, and local laws and regulations govern the use, generation, manufacture, storage, handling, and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage and our property, casualty, and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

Healthcare reform measures, when implemented, could hinder or prevent our commercial success.

There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of health care and containing or lowering the overall cost of health care. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, and other payers of healthcare services to contain or reduce costs of health care may adversely affect:

· the demand for any drug products for which we may obtain regulatory approval;

· our ability to set a price that we believe is fair for our product candidates;

· our ability to gain reimbursement at commercially acceptable levels;

· our ability to generate revenue and achieve or maintain profitability;

· the level of taxes that we are required to pay; and

· the availability of capital.

We and any of our future development partners will be required to report to regulatory authorities if any of our approved products cause or contribute to adverse medical events, and any failure to do so would result in sanctions that would materially harm our business.

If we and any future development partners are successful in commercializing our products, FDA and foreign regulatory authorities would require that we and any future development partners report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event as well as the nature of the event. We and any future development partners may fail to report adverse events we become aware of within the prescribed timeframe. We and any future development partners may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we and any future development partners fail to comply with our reporting obligations, FDA or a foreign regulatory authority could take action including criminal prosecution, the imposition of civil monetary penalties, seizure of our products, or delay in approval or clearance of future products.

Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.

With the enactment of the Biologics Price Competition and Innovation Act of 2009, or the BPCIA, as part of the Affordable Care Act, an abbreviated pathway for the approval of biosimilar and interchangeable biological products was created. The abbreviated regulatory pathway establishes legal authority for FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as ‘‘interchangeable’’ based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

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We believe that any of our product candidates, such as lenzilumab, ifabotuzumab and/or HGEN005, if approved as biological products under a BLA, should qualify for the 12-year period of exclusivity. However, there is a risk that FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. Finally, there is a risk that the 12-year exclusivity period could be reduced which could negatively affect our products.

In addition, foreign regulatory authorities may also provide for exclusivity periods for approved biological products. For example, biological products in Europe may be eligible for a 10-year period of exclusivity. However, biosimilar products have been approved under a sub-pathway of the centralized procedure since 2006. The pathway allows sponsors of a biosimilar product to seek and obtain regulatory approval based in part on the clinical trial data of an originator product to which the biosimilar product has been demonstrated to be ‘‘similar.’’ In many cases, this allows biosimilar products to be brought to market without conducting the full suite of clinical trials typically required of originators. It is unclear whether we and our development partner would face competition to our products in European markets sooner than anticipated.

We may in the future be subject to various U.S. federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violations by us of such laws could result in fines or other penalties.

If one or more of our product candidates is approved, we will likely be subject to the various U.S. federal and state laws intended to prevent health care fraud and abuse. The federal anti-kickback statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid, or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced-price items and services. Many states have similar laws that apply to their state health care programs as well as private payers. Violations of the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and criminal penalties.

The False Claims Act imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The False Claims Act has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. The False Claims Act includes a whistleblower provision that allows individuals to bring actions on behalf of the federal government and share a portion of the recovery of successful claims. If our marketing or other arrangements were determined to violate the False Claims Act or anti-kickback or related laws, then our revenue could be adversely affected, which would likely harm our business, financial condition, and results of operations.

State and federal authorities have aggressively targeted medical technology companies for alleged violations of these anti-fraud statutes, based on improper research or consulting contracts with doctors, certain marketing arrangements that rely on volume-based pricing, off-label marketing schemes, and other improper promotional practices. Companies targeted in such prosecutions have paid substantial fines in the hundreds of millions of dollars or more, have been forced to implement extensive corrective action plans or corporate integrity agreements, and have often become subject to consent decrees severely restricting the manner in which they conduct their business. If we become the target of such an investigation or prosecution based on our contractual relationships with providers or institutions, or our marketing and promotional practices, we could face similar sanctions, which would materially harm our business.

Also, the Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners, collaborators, or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties, or prosecution and have a negative impact on our business, results of operations and reputation.

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Legislative or regulatory healthcare reforms in the U.S. may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to produce, market, and distribute our products after approval is obtained.

From time-to-time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our current product candidates or any future product candidates. We cannot determine what effect changes in regulations, statutes, legal interpretation, or policies, when and if promulgated, enacted or adopted may have on our business in the future. Such changes could, among other things, require:

· changes to manufacturing methods;

· additional studies, including clinical studies;

· recall, replacement, or discontinuance of one or more of our products; and

· additional record-keeping.

Each of these would likely entail substantial time and cost and could materially harm our business and our financial results. In addition, delays in receipt of or failure to receive regulatory approvals for any future products would harm our business, financial condition, and results of operations.

Even if we are able to obtain regulatory approval for our product candidates, we will continue to be subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

If we receive regulatory approval for our product candidates, we will be subject to ongoing FDA obligations and continued regulatory oversight and review, such as continued safety reporting requirements, and we may also be subject to additional FDA post-marketing obligations. If we are not able to maintain regulatory compliance, we may not be permitted to market our product candidates and/or may be subject to product recalls or seizures.

If the FDA approves any of our product candidates, the labeling, manufacturing, packaging, storage, distribution, export, adverse event reporting, advertising, promotion and record-keeping for our products will be subject to extensive regulatory requirements. Violations of these regulatory requirements or the subsequent discovery of previously unknown problems with the products, including adverse events of unanticipated severity or frequency, may result in:

· the issuance of warning or untitled letters;

· requirements to conduct post-marking clinical trials;

· restrictions on the marketing and distribution of the product, including potential withdrawal of the product from the market;

· suspension of ongoing clinical trials;

· the issuance of product recalls, import and export restrictions, seizures, and detentions; and

· the issuance of injunctions, or imposition of other civil and/or criminal penalties.

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be subject to certain limitations.

We have incurred substantial losses during our history and do not expect to become profitable in the foreseeable future and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. The Tax Cuts and Jobs Act, enacted in 2017, limited the use of net operating loss carryforwards for periods beginning after 2017 to eighty percent of taxable income in the period to which the losses were carried. However, this limitation on the use of the carryforwards was eliminated by the Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act) for tax years beginning before January 1, 2021. In addition, Section 382 of the Internal Revenue Code of 1986, as amended, may limit the utilization of net operating loss carryforwards. Under Section 382, if a corporation undergoes an ‘‘ownership change’’ (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have recently and in the past experienced ownership changes that have resulted in limitations on the use of a portion of our net operating loss carryforwards. If we experience further ownership changes our ability to utilize our net operating loss carryforwards could be further limited.

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We rely completely on third parties to supply drug substance and manufacture drug product for our clinical trials and preclinical studies and intend to rely on other third parties to produce commercial supplies of product candidates, and our dependence on third parties could adversely impact our business.

We are dependent on third-party suppliers. We regularly evaluate potential alternate sources of supply of raw materials, various components used in production, drug substance and drug product, but there can be no assurance that any such suppliers would be available, acceptable, or successful. The costs of manufacturing our drug candidates are high, and we will require additional capital to ensure that we can maintain an adequate supply to conduct our contemplated development programs.

If our third-party suppliers do not supply sufficient quantities for product candidates to us on a timely basis and in accordance with applicable specifications and other regulatory requirements, there could be a significant interruption of our supplies, which would adversely affect clinical development of the product candidate, including affecting our ability to enroll in and timely progress clinical trials. Furthermore, if any of our contract manufacturers cannot successfully manufacture material that conforms to our specifications and with regulatory requirements, we will not be able to secure and/or maintain regulatory approval, if any, for our product candidates.

We will also rely on our contract manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our anticipated clinical trials. There are a small number of suppliers for certain capital equipment and raw materials used to manufacture our product candidates. We do not have any control over the process or timing of the acquisition of these raw materials by our contract manufacturers. Moreover, we currently do not have agreements in place for the commercial production of these raw materials. Any significant delay in the supply of a product candidate or the raw material components thereof for an ongoing clinical trial could considerably delay completion of that clinical trial, product candidate testing, and potential regulatory approval of that product candidate.

We do not expect to have the resources or capacity to commercially manufacture any of our proposed product candidates, if approved, and will likely continue to be dependent on third-party manufacturers. Our dependence on third parties to manufacture and supply us with clinical trial materials and any approved product candidates may adversely affect our ability to develop and commercialize our product candidates on a timely basis.

We may not be successful in establishing and maintaining development partnerships and licensing agreements, which could adversely affect our ability to develop and commercialize product candidates.

Part of our strategy is to enter into development partnerships and licensing agreements. We face significant competition in seeking appropriate partners and the negotiation process is time consuming and complex. Even if we are successful in securing a development partnership, we may not be able to continue it. Moreover, we may not be successful in our efforts to establish a development partnership or other alternative arrangements for any of our other existing or future product candidates and programs because, among other reasons, our research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative effort and/or third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy. Even if we are successful in our efforts to establish new development partnerships, the terms that we agree upon may not be favorable to us and we may not be able to maintain such development partnerships if, for example, development or approval of a product candidate is delayed or sales of an approved product candidate are disappointing. Any delay in entering into new development partnership agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness if they reach the market.

Moreover, if we fail to establish and maintain additional development partnerships related to our product candidates:

· the development of our current or future product candidates may be terminated or delayed;

· our cash expenditures related to development of certain of our current or future product candidates would increase significantly and we may need to seek additional financing;

· we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have not budgeted; and

· we will bear all of the risk related to the development of any such product candidates.

Our or any new partner’s failure to develop, manufacture or effectively commercialize our product would result in a material adverse effect on our business and results of operations and would likely cause our stock price to decline.

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Currently pending, threatened or future litigation or governmental proceedings or inquiries could result in material adverse consequences, including judgments or settlements.

We are, or may from time-to-time become, involved in lawsuits and other legal or governmental proceedings. See Note 10 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding currently pending litigation that could have a material impact on the Company. Many of these matters raise complicated factual and legal issues and are subject to uncertainties and complexities, all of which make the matters costly to address. The timing of the final resolutions to any such lawsuits, inquiries, and other legal proceedings is uncertain.

Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our consolidated financial condition, results of operations and cash flows. Any judgment against us, the entry into any settlement agreement, or the imposition of any fine could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.

The terms of our loan agreement with Hercules may restrict our current and future operations, particularly our ability to respond to changes in business or to take certain actions, including to pay dividends to our stockholders.

On March 10, 2021, we entered into the Loan and Security Agreement with Hercules Capital, Inc. (the “Term Loan”). As of March 31, 2021, we had approximately $24.4 million of accrued debt under the Term Loan. The Term Loan has a scheduled maturity date of March 1, 2025 and is secured by a first priority security interest in substantially all of our assets. The Term Loan contains, and any future indebtedness we incur will likely contain, a number of restrictive covenants that impose operating restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interests. The Term Loan includes covenants that, among other things, restrict our ability to (i) declare dividends or redeem or repurchase equity interests; (ii) incur additional liens; (iii) make loans and investments; (iv) incur additional indebtedness; (v) engage in mergers, acquisitions, and asset sales; (vi) transact with affiliates; (vii) undergo a change in control; (viii) add or change business locations; and (ix) engage in businesses that are not related to our existing business. The Term Loan also requires that we at all times maintain unrestricted cash of not less than $10.0 million, which amount may be increased to $20.0 million if we borrow the second tranche of the Term Loan.

A breach of any of these covenants could result in an event of default under the Loan Agreement. Upon the occurrence of such an event of default, Hercules may, at its discretion, accelerate and demand payment of all or any part of the outstanding advances, together with a prepayment charge, end of term charge, and all interest due and payable under the Term Loan. Hercules also may seek to realize on the collateral we have pledged as security for the Term Loan. If our indebtedness is accelerated, we cannot assure you that we will have sufficient assets to repay the indebtedness. The restrictions and covenants in the Term Loan and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.

Future acquisitions of and investments in new businesses could impact our business and financial condition.

From time-to-time, we may acquire or invest in businesses or partnerships that we believe could complement our business and drug candidates. The pursuit of such acquisitions or investments may divert the attention of management and cause us to incur various expenses, regardless of whether the acquisition or investment is ultimately completed. In addition, acquisitions and investments may not perform as expected and we may be unable to realize the expected benefits, synergies, or developments that we may initially anticipate. Further, if we are able to successfully identify and acquire additional businesses, we may not be able to successfully integrate the acquired personnel or operations, or effectively manage the combined business following the acquisition, any of which could harm our business and financial condition.

In addition, to the extent we finance any acquisition or investment in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with shares of our common or preferred stock, it could be dilutive to our current stockholders. To the extent we finance any acquisition or investment with the proceeds from the incurrence of debt, this would increase our level of indebtedness and could negatively affect our liquidity, credit rating and restrict our operations. Moreover, we may face contingent liabilities in connection with any acquisitions or investments.

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Risks Related to Intellectual Property

If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish, and our business and competitive position would suffer.

Our success, competitive position and future revenues will depend in part on our ability and the abilities of our licensors and licensees to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. We have an active patent protection program that includes filing patent applications on new compounds, formulations, delivery systems and methods of making and using products and prosecuting these patent applications in the U.S. and abroad. As patents issue, we also file continuation applications as appropriate. Although we have taken steps to build what we believe to be a strong patent portfolio, we cannot predict:

· the degree and range of protection any patents will afford us against competitors, including whether third parties find ways to invalidate or otherwise circumvent our licensed patents;

· if and when patents will issue in the U.S. or any other country;

· whether or not others will obtain patents claiming aspects similar to those covered by our licensed patents and patent applications;

· whether we will need to initiate litigation or administrative proceedings to protect our intellectual property rights, which may be costly whether we win or lose;

· whether any of our patents will be challenged by our competitors alleging invalidity or unenforceability and, if opposed or litigated, the outcome of any administrative or court action as to patent validity, enforceability or scope;

· whether a competitor will develop a similar compound that is outside the scope of protection afforded by a patent or whether the patent scope is inherent in the claims modified due to interpretation of claim scope by a court;

· whether there were activities previously undertaken by a licensor that could limit the scope, validity or enforceability of licensed patents and intellectual property; or

· whether a competitor will assert infringement of its patents or intellectual property, whether or not meritorious, and what the outcome of any related litigation or challenge may be.

Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our licensors, sublicensees and contractors. To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all employees, consultants and board members to enter into agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired, and our business and competitive position would suffer.

Due to legal and factual uncertainties regarding the scope and protection afforded by patents and other proprietary rights, we may not have meaningful protection from competition.

Our long-term success will substantially depend upon our ability to protect our proprietary technologies from infringement, misappropriation, discovery and duplication and avoid infringing the proprietary rights of others. Our patent rights, and the patent rights of biopharmaceutical companies in general, are highly uncertain and include complex legal and factual issues. These uncertainties also mean that any patents that we own or may obtain in the future could be subject to challenge, and even if not challenged, may not provide us with meaningful protection from competition. Patents already issued to us or our pending applications may become subject to dispute, and any dispute could be resolved against us.

If some or all of our or any licensor’s patents expire or are invalidated or are found to be unenforceable, or if some or all of our patent applications do not result in issued patents or result in patents with narrow, overbroad, or unenforceable claims, or claims that are not supported in regard to written description or enablement by the specification, or if we are prevented from asserting that the claims of an issued patent cover a product of a third party, we may be subject to competition from third parties with products in the same class of products as our product candidates or products with the same active pharmaceutical ingredients as our product candidates, including in those jurisdictions in which we have no patent protection.

Our commercial success will depend in part on obtaining and maintaining patent and trade secret protection for our product candidates, as well as the methods for treating patients in the product indications using these product candidates. We will be able to protect our product candidates and the methods for treating patients in the applicable product indications using these product candidates from unauthorized use by third parties only to the extent that we or our exclusive licensor owns or controls such valid and enforceable patents or trade secrets.

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Even if our product candidates and the methods for treating patients for prescribed indications using these product candidates are covered by valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the patents will provide protection only for a limited amount of time. Our and any licensor’s ability to obtain patents can be highly uncertain and involve complex and in some cases unsettled legal issues and factual questions. Furthermore, different countries have different procedures for obtaining patents, and patents issued in different countries provide different degrees of protection against the use of a patented invention by others. Therefore, if the issuance to us or any licensor, in a given country, of a patent covering an invention is not followed by the issuance, in other countries, of patents covering the same invention, or if any judicial interpretation of the validity, enforceability, or scope of the claims in, or the utility, written description or enablement in, a patent issued in one country is not similar to the interpretation given to the corresponding patent issued in another country, our ability to protect our intellectual property in those countries may be limited. Changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may materially diminish the value of our intellectual property or narrow the scope of our patent protection.

We may be subject to competition from third parties with products in the same class of products as our product candidates, or products with the same active pharmaceutical ingredients as our product candidates in those jurisdictions in which we have no patent protection. Even if patents are issued to us or any licensor regarding our product or methods of using them, those patents can be challenged by our competitors who can argue such patents are invalid or unenforceable on a variety of grounds, including lack of utility, lack sufficient written description or enablement, utility, or that the claims of the issued patents should be limited or narrowly construed. Patents also will not protect our product candidates if competitors devise ways of making or using these products without legally infringing our patents. The current U.S. regulatory environment may have the effect of encouraging companies to challenge branded drug patents or to create non-infringing versions of a patented product in order to facilitate the approval of ANDAs for generic substitutes. These same types of incentives encourage competitors to submit NDAs that rely on literature and clinical data not prepared for or by the drug sponsor, providing another less burdensome pathway to approval.

If we infringe the rights of third parties, we could be prevented from selling products and be forced to defend against litigation and pay damages.

There is a risk that we may be inadvertently infringing the proprietary rights of third parties because numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields that are the focus of our development and manufacturing efforts. Others might have been the first to make the inventions covered by each of our or any licensor’s pending patent applications and issued patents and/or might have been the first to file patent applications for these inventions. In addition, because patent applications take many months to publish and patent applications can take many years to issue, there may be currently pending applications, unknown to us or any licensor, which may later result in issued patents that cover the production, manufacture, synthesis, commercialization, formulation or use of our product candidates. In addition, the production, manufacture, synthesis, commercialization, formulation or use of our product candidates may infringe existing patents of which we are not aware. Defending ourselves against third-party claims, including litigation in particular, would be costly and time consuming and would divert management’s attention from our business, which could lead to delays in our development or commercialization efforts. If third parties are successful in their claims, we might have to pay substantial damages or take other actions that are adverse to our business.

If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and may have to:

· obtain licenses, which may not be available on commercially reasonable terms, if at all;

· redesign our products or processes to avoid infringement, which may not be possible or could require substantial funds and time;

· stop using the subject matter claimed in patents held by others, which could cause us to lose the use of one or more of our drug candidates;

· pay damages royalties, or other amounts; or

· grant a cross license to our patents to another patent holder.

We expect that, as our drug candidates move further into clinical trials and commercialization and our public profile is raised, we will be more likely to be subject to such claims.

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We may fail to comply with any of our obligations under existing agreements pursuant to which we license or have otherwise acquired rights or technology, which could result in the loss of rights or technology that are material to our business.

We are a party to technology licenses and have acquired certain assets and rights that are important to our business and we may enter into additional licenses or acquire additional assets and rights in the future. We currently hold licenses from Ludwig Institute for Cancer Research (“LICR”), BioWa, Inc. (“BioWa”), Lonza Sales AG (“Lonza”) Mayo Foundation (“Mayo”) and the University of Zurich (“UZH”). These licenses impose various commercial, contingent payments, royalty, insurance, indemnification, and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license or take back rights or assets, in which event we would lose valuable rights under our collaboration agreements, potential claims and our ability to develop product candidates. 

We may be subject to claims that our consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to us.

As is common in the biotechnology and pharmaceutical industry, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants were previously employed at or may have previously or may be currently providing consulting services to, other biotechnology or pharmaceutical companies including our competitors or potential competitors. We may become subject to claims that our company or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team.

We may not be able to protect our intellectual property rights throughout the world.

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and we intend to seek patent protection only in selected countries. Our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Risks Related to Our Common Stock

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market or the perception in the market that the holders of a large number of shares intend to sell shares, could depress the market price of our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities. In addition, holders of a substantial number of shares of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

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We also have registered all shares of common stock that we may issue under our equity compensation plans or that are issuable upon exercise of outstanding options. These shares can be freely sold in the public market upon issuance and once vested, subject to volume limitations applicable to affiliates. If any of these additional shares are sold, or if it is perceived that they will be sold, in the public market, the market price of our common stock could decline.

We have also entered into a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co., under which we may issue and sell from time-to-time shares of common stock having an aggregate gross sales price of up to $100 million through Cantor Fitzgerald, as sales agent. Through March 31, 2021, we issued and sold 1,796,858 shares of its common stock under the Sales Agreement for net proceeds of $36.1 million. While we have committed that we will not make any sales of our securities pursuant to the Sales Agreement, unless and until a new prospectus supplement or a new registration statement is filed, the Sales Agreement remains in full force and effect. Sales of a substantial number of shares under the Sales Agreement, or the perception that those sales may occur, could cause the market price of our common stock to decline.

Further, certain shares of our common stock that are currently outstanding but have not been registered for resale may currently be sold under Rule 144 under the Securities Act or the Securities Act. Sales of a substantial number of these shares in the public market, or the perception that those sales may occur, could cause the market price of our common stock to decline.

Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to significantly influence all matters submitted to stockholders for approval, and this concentration of ownership may contribute to volatility in our stock price.

We have a relatively small public float due to the ownership percentage of our executive officers and directors, and greater than 5% stockholders. Our directors, executive officers, and the other holders of more than 5% of our common stock together with their affiliates beneficially owned approximately 27.3% of our common stock as of April 16, 2021.

Some of these persons or entities may have interests that are different from our other stockholders, which could prevent or discourage unsolicited acquisition proposals or offers for our common stock that may be in the best interest of our other stockholders. This may also adversely affect the trading price of our common stock because investors may perceive disadvantages in owning stock in companies with a significant concentration of ownership.

As a result of our small public float, our common stock may be less liquid, experience reduced daily trading volume and have greater stock price volatility than the common stock of companies with broader public ownership. In addition, the trading of a relatively small volume of shares of our common stock may result in significant volatility in our stock price. If and to the extent ownership of our common stock becomes more concentrated, whether due to increased ownership by our directors and executive officers or other principal stockholders, or other factors, our public float would further decrease, which in turn would likely result in increased stock price volatility.

Additionally, because a large amount of our stock is closely held, we may experience low trading volume or large fluctuations in share price and volume due to sales by our principal stockholders. If our existing stockholders, particularly our directors, executive officers and the holders of more than 5% of our common stock, or their affiliates or associates, sell substantial amounts of our common stock in the public market, or are perceived by the public market as intending to sell substantial amounts of our common stock, the trading price of our common stock could decline significantly. 

Despite our listing on the Nasdaq Capital Market, there can be no assurance that an active trading market for our common stock will develop or be sustained, and the Nasdaq Capital Market may subsequently delist our common stock if we fail to comply with ongoing listing standards.

On September 18, 2020, our common stock commenced trading on the Nasdaq Capital Market under the symbol “HGEN.” The Nasdaq Capital Market’s rules for listed companies will require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock. To satisfy the initial listing standards for the Nasdaq Capital Market, we have had to execute a reverse stock split. In addition to specific listing and maintenance standards, the Nasdaq Capital Market has broad discretionary authority over the continued listing of securities, which it could exercise with respect to the listing of our common stock.

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As a listed company, we are required to meet the continued listing requirements applicable to all Nasdaq Capital Market companies. If we fail to meet those standards, as applied by Nasdaq in its discretion, our common stock may be subject to delisting. We intend to take all commercially reasonable actions to maintain our Nasdaq listing. If our common stock is delisted in the future, it is not likely that we will be able to list our common stock on another national securities exchange and, as a result, we expect our securities would be quoted on an over-the-counter market; however, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our common stock and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock is listed on Nasdaq, shares of our common stock qualify as covered securities under the statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not qualify as covered securities under the statute, and we would be subject to regulation in each state in which we offer our securities.

Further, there can be no assurance that an active trading market for our common stock will be sustained despite our listing on the Nasdaq Capital Market.

Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.

To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance could result in further dilution to our stockholders by causing a reduction in their proportionate ownership and voting power.

Any future debt financing may involve covenants that restrict our operations, including, among other restrictions, limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. In addition, if we raise additional funds through licensing arrangements, it may be necessary to grant potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.

Any material weaknesses in our internal control over financing reporting that we may identify in the future could adversely affect investor confidence, impair the value of our common stock and increase our cost of raising capital.

If we were to identify any material weaknesses or significant deficiencies in our internal controls over financial reporting in the future, our operating results might be harmed, we may fail to meet our reporting obligations or fail to prevent or detect material misstatements in our financial statements. Any such failure could, in turn, affect the future ability of our management to certify that internal control over our financial reporting is effective. Inferior internal control over financial reporting could also subject us to the scrutiny of the SEC and other regulatory bodies which could cause investors to lose confidence in our reported financial information and could subject us to civil or criminal penalties or stockholder litigation, which could have an adverse effect on our results of operations and the market price of our common stock.

In addition, if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our share price. Furthermore, deficiencies could result in future non-compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Such non-compliance could subject us to a variety of administrative sanctions, including review by the SEC or other regulatory authorities.

Our stock price is volatile and purchasers of our common stock could incur substantial losses.

The market price of our common stock may fluctuate significantly in response to a number of factors. These factors include those discussed in this “Risk Factors” section of this Quarterly Report and others such as:

· the U.S. Government ending the National Emergency declared for the COVID-19 pandemic;

· delay or failure in initiating or completing preclinical studies or clinical trials, or unsatisfactory results of these trials and the resulting impact on ongoing product development;

· the success, progress, timing and costs of our efforts to evaluate or consummate various strategic alternatives if in the best interests of our stockholders;

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· our ability to maintain the listing of our common stock on the Nasdaq Capital Market;

· announcements regarding equity or debt financing transactions;

· sales or potential sales of substantial amounts of our common stock or securities convertible into our common stock;

· announcements or social media comments about us or about our competitors including clinical trial results, regulatory approvals, or new product candidate introductions;

· developments concerning our development partner, licensors or product candidate manufacturers;

· litigation and other developments relating to our patents or other proprietary rights or those of our competitors;

· conditions in the pharmaceutical or biotechnology industries and the economy as a whole;

· governmental regulation and legislation;

· recruitment or departure of members of our board of directors, management team or other key personnel;

· changes in our operating results;

· any financial projections we may provide to the public, any changes in these projections, our failure to meet these projections, or changes in recommendations by any securities analysts that elect to follow our common stock;

· change in securities analysts’ estimates of our performance, or our failure to meet analysts’ expectations; and

· price and volume fluctuations in the overall stock market or resulting from inconsistent trading volume levels of our shares.

In recent years, the stock market in general, and the market for pharmaceutical and biotechnological companies in particular, has experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to changes in the operating performance of the companies whose stock is experiencing those price and volume fluctuations. Broad market and industry factors may seriously affect the market price of our common stock, regardless of our actual operating performance.

In addition, public statements by us, government agencies, traditional and social media or others relating to the COVID-19 pandemic (including currently authorized or approved vaccines and therapeutics and efforts to develop additional COVID-19 vaccines, treatments or therapies) have in the past resulted, and may in the future result, in significant fluctuations in our stock price. Given the global focus on the COVID-19 pandemic, any information in the public arena on this topic, whether or not accurate, could have an outsized impact (either positive or negative) on our stock price. Information related to progress towards our EUA or BLA, the ACTIV-5/BET-B trial or any other studies, or our development, manufacturing and distribution efforts with respect to lenzilumab, or information regarding such efforts by competitors, may also impact our stock price.

We have never paid and do not intend to pay cash dividends and, consequently, the ability to achieve a return on any investment in our common stock will depend on appreciation in the price of our common stock.

We have never paid cash dividends on any of our capital stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our business. Therefore, a holder of our stock is not likely to receive any dividends on our common stock for the foreseeable future. Since we do not intend to pay dividends, the ability to receive a return on an investment in our common stock will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which it was purchased.

Anti-takeover provisions in our charter documents and Delaware law, could discourage, delay, or prevent a change in control of our company and may affect the trading price of our common stock.

We are a Delaware corporation, and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders.

Our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), and our Second Amended and Restated Bylaws (the “Bylaws”) may discourage, delay, or prevent a change in our management or control over us that stockholders may consider favorable. Our Charter and Bylaws:

· provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;

· do not provide stockholders with the ability to cumulate their votes; and

· require advance notification of stockholder nominations and proposals.

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In addition, our Charter permits the Board to issue up to 25 million shares of preferred stock with such powers, rights, terms and conditions as may be designated by the Board upon the issuance of shares of preferred stock at one or more times in the future. Specifically, the Charter permits the Board to approve the future issuance of all or any shares of the preferred stock in one or more series, to determine the number of shares constituting any series and to determine any voting powers, conversion rights, dividend rights, and other designations, preferences, limitations, restrictions and rights relating to such shares without any further authorization by our stockholders. The Board’s power to issue preferred stock could have the effect of delaying, deterring or preventing a transaction or a change in control of our company that might otherwise be in the best interest of our stockholders.

General Risk Factors

Our internal computer systems, or those of our third-party vendors, collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

Our internal computer systems and those of our current and any future third-party vendors, collaborators and other contractors or consultants are vulnerable to damage or interruption from computer viruses, computer hackers, malicious code, employee theft or misuse, denial-of-service attacks, sophisticated nation-state and nation-state-supported actors, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we seek to protect our information technology systems from system failure, accident and security breach, if such an event were to occur and cause interruptions in our operations, it could result in a disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions. For example, the loss of clinical trial data from clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. If we were to experience a significant cybersecurity breach of our information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects could be material. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our third-party vendors’, collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed. Any of the above could have a material adverse effect on our business, financial condition, results of operations or prospects.

Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, property, inventory and cargo, auto, workers’ compensation, products liability, and directors’ and officers’ insurance. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant, uninsured liability may require us to pay substantial amounts, which would adversely affect our working capital and results of operations.

If securities analysts do not publish research or publish unfavorable research about our business, our stock price and trading volume could decline.

The trading market for a company’s common stock often is based in part on the research and reports that securities and industry analysts publish about the company. If additional analyst coverage does develop, and an analyst downgrades our stock or publishes unfavorable research about our business, or if our clinical trials or operating results fail to meet the analysts’ expectations, our stock price would likely decline.

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Changes in laws or regulations relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

We are, and may increasingly become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations or prospects.

In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security. In particular, regulations promulgated pursuant to the Health Insurance Portability and accountability Act of 1996 (“HIPAA”) establish privacy and security standards that limit the use and disclosure of protected health information and require the implementation of safeguards to protect the privacy, integrity and availability of protected health information. Determining whether protected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and may be subject to changing interpretation. If we fail to comply with applicable HIPAA privacy and security standards, we could face civil and criminal penalties. In addition, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. We cannot be sure how these regulations will be interpreted, enforced or applied to our operations.

Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international, or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act (“CCPA”), which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation.

Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the E.U. General Data Protection Regulation (“GDPR”), which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data. EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater.

All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training associates and engaging consultants, which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our results of operations, financial condition and cash flows. Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies or customers, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

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We review and explore strategic alternatives on an on-going basis, but there can be no assurance that we will be successful in identifying or completing any strategic alternative or that any such strategic alternative will yield additional value for our stockholders.

We regularly review strategic alternatives to ensure our current structure optimizes our ability to execute our strategic plan and to maximize stockholder value. The review of strategic alternatives could result in, among other things, a sale, merger, consolidation or business combination, asset divestiture, partnering, licensing or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction.

In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in our current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business or product candidates and the availability of financing to potential buyers on reasonable terms. 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Reference is made to the disclosures in Note 5 to the Condensed Consolidated Financial Statements appearing in Part 1, Item 1, of this Quarterly Report on Form 10-Q regarding the portion of the principal amount of the Term Loan with Hercules that may be converted into shares of our common stock. The transaction with Hercules was exempt from registration under the Securities Act by virtue of Section 4(a)(2) thereof. Any shares of common stock that may be issued upon such conversion also would be exempt under Section 4(a)(2) or Section 3(a)(9) of the Securities Act.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits.

		Incorporated by Reference			Filed or
Exhibit No.	Exhibit Description	Form+	Date	Number	Furnished Herewith
3.1	Amended and Restated Certificate of Incorporation of the Registrant.	8-K	July 6, 2016	3.1
3.1.1	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant.	8-K	August 7, 2017	3.1
3.1.2	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, as amended.	8-K	February 28, 2018	3.1
3.1.3	Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, as amended	8-K	September 11, 2020	3.1
3.2	Second Amended and Restated Bylaws of the Registrant.	8-K	August 7, 2017	3.2
10.1†	Master Services Agreement effective as of January 8, 2021 between Humanigen, Inc. and EVERSANA Life Science Services, LLC.	8-K	January 14, 2021	10.1
10.2	Amended and Restated Cooperative Research and Development Agreement, dated as of January 21, 2021, by and among the Registrant, Joint Program Executive Office for Chemical, Biological, Radiological, and Nuclear Defense and Nuclear Defense and Biomedical Advanced Research and Development Authority, Office of the Assistant Secretary for Preparedness and Response	10-K	March 10, 2021	10.19
10.3§	Loan and Security Agreement, dated March 10, 2021, by and between the Registrant and Hercules Capital, Inc.				X
31.1	Certification of Chief Executive Officer pursuant to Rule 13a-14(a)or 15d-14(a) of the Securities Exchange Act of 1934, as amended.				X
31.2	Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended.				X
32.1***	Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350.				X
32.2***	Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350.				X

101.INS	XBRL Instance Document
101.SCH	XBRL Taxonomy Extension Schema
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

§  Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. The Registrant agrees to furnish supplementally a copy of any omitted schedule upon request by the SEC. 

† Certain portions of this exhibit have been omitted pursuant to Item 601(b)(10)(iv) of Regulation S-K. The Company will furnish supplementally an unredacted copy of such exhibit to the U.S. Securities and Exchange Commission or its staff upon request.

***The certifications attached as Exhibits 32.1 and 32.2 that accompanies this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	HUMANIGEN, INC.
Date: May 13, 2021	By:	/s/ Cameron Durrant
		Cameron Durrant
		Chief Executive Officer
		(Principal Executive Officer)
Date: May 13, 2021	By:	/s/ Timothy Morris
		Timothy Morris
		Chief Operating Officer and Chief Financial Officer
		(Principal Accounting and Financial Officer)

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EX-10.3

EXHIBIT 10.3

LOAN AND SECURITY AGREEMENT

THIS LOAN AND SECURITY AGREEMENT is made and dated as of March 10, 2021 and is entered into by and among HUMANIGEN, INC., a Delaware corporation, and each of the Qualified Subsidiaries (hereinafter collectively referred to as the “Borrower”), the several banks and other financial institutions or entities from time to time parties to this Agreement (collectively, referred to as the “Lenders”) and HERCULES CAPITAL, INC., a Maryland corporation, in its capacity as administrative agent and collateral agent for itself and the Lenders (in such capacity, the “Agent”).

RECITALS

A.          Borrower has requested the Lenders make available to Borrower a loan in an aggregate principal amount of up to Eighty Million Dollars ($80,000,000) (the “Term Loan”); and

B.           The Lenders are willing to make the Term Loan on the terms and conditions set forth in this Agreement.

AGREEMENT

NOW, THEREFORE, Borrower, Agent and the Lenders agree as follows:

SECTION 1. DEFINITIONS AND RULES OF CONSTRUCTION

1.1       Unless otherwise defined herein, the following capitalized terms shall have the following meanings:

“Account Control Agreement(s)” means any agreement entered into by and among the Agent, Borrower and a third party bank or other institution (including a Securities Intermediary) in which Borrower maintains a Deposit Account or an account holding Investment Property and which perfects Agent’s first priority security interest in the subject account or accounts.

“ACH Authorization” means the ACH Debit Authorization Agreement in substantially the form of Exhibit H, which account numbers shall be redacted for security purposes if and when filed publicly by the Borrower.

“Acquired Assets” has the meaning set forth in the MDC Agreement.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of a Person, or of any business, line of business or division or other unit of operation of a Person, (b) the acquisition of fifty percent (50%) or more of the Equity Interests of any Person, whether or not involving a merger, consolidation or similar transaction with such other Person, or otherwise causing any Person to become a Subsidiary of Borrower, or (c) the acquisition of, or the right to use, develop or sell (in each case, including through licensing), any product, product line or Intellectual Property of or from any other Person.

“Advance(s)” means a Term Loan Advance.

“Advance Date” means the funding date of any Advance.

“Advance Request” means a request for an Advance submitted by Borrower to Agent in substantially the form of Exhibit A, which account numbers shall be redacted for security purposes if and when filed publicly by the Borrower.

“Affiliate” means (a) any Person that directly or indirectly controls, is controlled by, or is under common control with the Person in question, (b) any Person directly or indirectly owning, controlling or holding with power to vote twenty percent (20%) or more of the outstanding voting securities of another Person, (c) any Person twenty percent (20%) or more of whose outstanding voting securities are directly or indirectly owned, controlled or held by another Person with power to vote such securities, or (d) any Person related by blood or marriage to any Person described in subsection (a), (b) or (c) of this paragraph. As used in the definition of “Affiliate,” the term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Agreement” means this Loan and Security Agreement, as amended from time to time.

“Amortization Date” means April 1, 2023; provided, however, that (i) if the Interest Only Extension Conditions 1 are satisfied, then April 1, 2024 and (ii) if the Interest Only Extension Conditions 2 are satisfied, then October 1, 2024.

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to Borrower or any of its Affiliates from time to time concerning or relating to bribery or corruption, including without limitation the United States Foreign Corrupt Practices Act of 1977, as amended, the UK Bribery Act 2010 and other similar legislation in any other jurisdictions.

“Anti-Terrorism Laws” means any laws, rules, regulations or orders relating to terrorism or money laundering, including without limitation Executive Order No. 13224 (effective September 24, 2001), the USA PATRIOT Act, the laws comprising or implementing the Bank Secrecy Act, and the laws administered by OFAC.

“Biologics License Application” means an application for licensure of a biological product submitted to the FDA under 42 U.S.C. § 262(k) for permission to introduce, or deliver for introduction, a biologic product into interstate commerce.

“BLA Milestone” means that Borrower shall have received written notice from the FDA indicating that: (a) the FDA has approved Borrower’s Biologics License Application for the use of lenzilumab for the treatment of hospitalized patients with severe or critical COVID-19 pneumonia, and (b) the FDA-authorized label for lenzilumab is generally consistent with the label sought in the Borrower’s initial Biologics License Application submission for the use of lenzilumab in hospitalized COVID-19 patients.

“Blocked Person” means any Person: (a) listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (b) a Person owned or controlled by, or acting for or on behalf of, any Person that is listed in the annex to, or is otherwise subject to the provisions of, Executive Order No. 13224, (c) a Person with which any Lender is prohibited from dealing or otherwise engaging in any transaction by any Anti-Terrorism Law, (d) a Person that commits, threatens or conspires to commit or supports “terrorism” as defined in Executive Order No. 13224, or (e) a Person that is named a “specially designated national” or “blocked person” on the most current list published by OFAC or other similar list.

“Borrower Products” means all products, software, service offerings, technical data or technology currently being designed, manufactured or sold by Borrower or which Borrower intends to sell, license, or distribute in the future including any products or service offerings under development, collectively, together with all products, software, service offerings, technical data or technology that have been sold, licensed or distributed by Borrower since its incorporation.

“Borrower’s Books” means Borrower’s or any of its Subsidiaries’ books and records including ledgers, federal, state, local and foreign tax returns, records regarding Borrower’s or its Subsidiaries’ assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.

“Business Day” means any day other than Saturday, Sunday and any other day on which banking institutions in the State of California are closed for business.

“Capital Raise Milestone” means Borrower has raised and received at least an amount equal to One Hundred Million Dollars ($100,000,000) in unrestricted (including not subject to any redemption, clawback, escrow or similar encumbrance or restriction, other than in the case of any Permitted Convertible Debt financing) net cash proceeds from one or more bona fide equity financings, in each case after the Effective Date and prior to March 31, 2022, subject to verification by Agent (including supporting documentation reasonably requested by Agent).

“Cash” means all cash, cash equivalents and liquid funds.

“CFC” means a “controlled foreign corporation” as defined in Section 957 of the Code.

“Change in Control” means any (x) reorganization, recapitalization, consolidation or merger (or similar transaction or series of related transactions) of Borrower, sale or exchange of outstanding shares (or similar transaction or series of related transactions) of Borrower in which the holders of Borrower’s outstanding shares immediately before consummation of such transaction or series of related transactions do not, immediately after consummation of such transaction or series of related transactions, retain shares representing more than fifty percent (50%) of the voting power of the surviving entity of such transaction or series of related transactions (or the parent of such surviving entity if such surviving entity is wholly owned by such parent), in each case without regard to whether Borrower is the surviving entity or (y) “change of control”, “fundamental change”, “make-whole fundamental change” or any comparable term under and as defined in any indenture governing any Permitted Convertible Debt has occurred.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Common Stock” means the Common Stock, $0.001 par value per share, of the Borrower.

“Contingent Obligation” means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to (i) any Indebtedness, lease, dividend, letter of credit or other obligation of another, including any such obligation directly or indirectly guaranteed, endorsed, co-made or discounted or sold with recourse by that Person, or in respect of which that Person is otherwise directly or indirectly liable; (ii) any obligations with respect to undrawn letters of credit, corporate credit cards or merchant services issued for the account of that Person; and (iii) all obligations arising under any interest rate, currency or commodity swap agreement, interest rate cap agreement, interest rate collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; provided, however, that the term “Contingent Obligation” shall not include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined by such Person in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations under the guarantee or other support arrangement. For the avoidance of doubt, no Permitted Bond Hedge Transaction or Permitted Warrant Transaction will be considered a Contingent Obligation of Borrower.

“Conversion Election Notice” means a notice in the form attached hereto as Exhibit G.

“Conversion Election Period” means the period commencing on the Initial Advance Date and ending on the earlier of (a) the three (3) year anniversary of the Initial Advance Date and (b) the payment in full of the Loans.

“Conversion Price” means $19.57, provided that in the event that on or after the Effective Date, a stock split, stock combination, reclassification, payment of stock dividend, recapitalization or other similar transaction of such character that the shares of Common Stock shall be changed into or become exchangeable for a larger or small number of shares is consummated (each, a “Stock Event”), the Conversion Price shall be proportionately increased or decreased as necessary to reflect the proportionate change in shares of Common Stock issued and outstanding as a result of such Stock Event.

“Copyright License” means any written agreement granting any right to use any Copyright or Copyright registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

“Copyrights” means all copyrights, whether registered or unregistered, held pursuant to the laws of the United States of America, any State thereof, or of any other country.

“Cross-Default Reference Obligation” has the meaning assigned to such term in the definition of “Permitted Convertible Debt.”

“Deposit Accounts” means any “deposit accounts,” as such term is defined in the UCC, and includes any checking account, savings account, or certificate of deposit.

“Designated Holder” means a Lender or any Affiliate designated by a Lender in the Conversion Election Notice.

“Domestic Subsidiary” means any Subsidiary organized under the laws of the United States of America, any State thereof, the District of Columbia, or any other jurisdiction within the United States of America.

“Due Diligence Fee” means $45,000, which fee has been paid to the Lenders prior to the Effective Date, and shall be deemed fully earned on such date regardless of the early termination of this Agreement.

“Effective Date” means the date of this Agreement.

“Equity Interests” means, with respect to any Person, the capital stock, partnership or limited liability company interest, or other equity securities or equity ownership interests of such Person.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“EUA” means emergency use authorization, granted by the FDA pursuant to 21 U.S.C. § 360bbb-3 to temporarily authorize the marketing of a medical product in the United States.

“EUA Milestone 1” means that Borrower shall have received EUA authorizing the use of lenzilumab for the treatment of hospitalized patients with severe or critical COVID-19 pneumonia.

“EUA Milestone 2” means that (a) Borrower shall have achieved the protocol-specified primary efficacy endpoint for the pivotal Phase 3 study of lenzilumab for COVID-19, clinicaltrials.gov identifier NCT04351152, and (b) the EUA Milestone 1 shall have been (and shall at the time of the achievement of clause (a) continue to be) achieved.

“Excluded Subsidiary” means any Foreign Subsidiary (including any dormant Foreign Subsidiary) that (i) has no more than $250,000 in net assets in the aggregate for such Excluded Subsidiary and, combined with all other Excluded Subsidiaries, has no more than $1,000,000 in net assets in the aggregate and (ii) has no rights to, and holds no, Intellectual Property other than in connection with licenses to any such Foreign Subsidiary permitted by clause (ii) of the definition of Permitted Transfers.

“Excluded Trade Payables” means trade credit of Borrower disclosed in Schedule 1A in an aggregate amount not to exceed $2,400,000.

“Exploit” and “Exploitation” have the respective meanings set forth in the MDC Agreement.

“FDA” means the U.S. Food and Drug Administration or any successor thereto.

“Foreign Subsidiary” means any Subsidiary other than a Domestic Subsidiary.

“Future Assets” has the meaning set forth in the MDC Agreement.

“GAAP” means generally accepted accounting principles in the United States of America, as in effect from time to time.

“Indebtedness” means indebtedness of any kind, including (a) all indebtedness for borrowed money or the deferred purchase price of property or services (excluding trade credit entered into in the ordinary course of business (i) due within one hundred twenty (120) days or (ii) in respect of the Excluded Trade Payables), including reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes, bonds, debentures or similar instruments, (c) all capital lease obligations, (d) equity securities of any Person subject to repurchase or redemption other than at the sole option of such Person, (e) “earnouts”, purchase price adjustments (other than customary post-closing working capital adjustments), profit sharing arrangements, deferred purchase money amounts and similar payment obligations or continuing obligations of any nature arising out of purchase and sale contracts, (f) non-contingent obligations to reimburse any bank or Person in respect of amounts paid under a letter of credit, banker’s acceptance or similar instrument, and (g) all Contingent Obligations. For the avoidance of doubt no Permitted Warrant Transaction shall be considered Indebtedness of the Borrower.

“Initial Advance Date” means the Advance Date of the Tranche 1 Advance.

“Initial Facility Charge” means Two Hundred Twelve Thousand Five Hundred Dollars ($212,500), which is payable to the Lenders in accordance with Section 4.1(f).

“Insolvency Proceeding” means any proceeding by or against any Person under the United States Bankruptcy Code, or any other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions generally with its creditors, or proceedings seeking reorganization, arrangement, or other similar relief.

“Intellectual Property” means all of Borrower’s Copyrights; Trademarks; Patents; Licenses; trade secrets and inventions; mask works; Borrower’s applications therefor and reissues, extensions, or renewals thereof; and Borrower’s goodwill associated with any of the foregoing, together with Borrower’s rights to sue for past, present and future infringement of Intellectual Property and the goodwill associated therewith.

“Interest Only Extension Conditions 1” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) the Tranche 2 Advance has been fully drawn.

“Interest Only Extension Conditions 2” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; (b) the Tranche 2 Advance has been fully drawn; and (c) achievement of the BLA Milestone.

“Interest Rate Reduction Conditions 1” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) achievement of EUA Milestone 2.

“Interest Rate Reduction Conditions 2” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) Net Lenzilumab Product Revenue of at least $100,000,000.

“Interest Rate Reduction Conditions 3” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) Net Lenzilumab Product Revenue of at least $250,000,000.

“Interest Rate Reduction Conditions 4” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) Net Lenzilumab Product Revenue of at least $350,000,000.

“Investment” means (a) any beneficial ownership (including stock, partnership, limited liability company interests, or other securities) of or in any Person, (b) any loan, advance or capital contribution to any Person or (c) any Acquisition.

“IRS” means the United States Internal Revenue Service.

“Joinder Agreement” means for each Subsidiary, a completed and executed Joinder Agreement in substantially the form attached hereto as Exhibit F.

“License” means any Copyright License, Patent License, Trademark License or other license of rights or interests.

“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment for security, security interest, encumbrance, levy, lien or charge of any kind, whether voluntarily incurred or arising by operation of law or otherwise, against any property, any conditional sale or other title retention agreement, and any lease in the nature of a security interest.

“Loan” means the Advances made under this Agreement.

“Loan Documents” means this Agreement, the promissory notes (if any), the ACH Authorization, the Account Control Agreements, the Joinder Agreements, all UCC Financing Statements, the Pledge Agreement and any other documents executed in connection with the Secured Obligations or the transactions contemplated hereby, as the same may from time to time be amended, modified, supplemented or restated.

“Madison” means Madison Joint Venture LLC, a Delaware limited liability company.

“Market Capitalization” means, as of any date of determination, the product of (a) number of outstanding shares of Common Stock publicly disclosed in the most recent filing of Borrower with the United States Securities Exchange Commission as outstanding as of such date and (b) the volume-weighted average price over the three consecutive trading days prior to (and including) such date.

“Material Adverse Effect” means a material adverse effect upon: (i) the business, operations, properties, assets or financial condition of Borrower and its Subsidiaries taken as a whole; or (ii) the ability of Borrower to perform or pay the Secured Obligations in accordance with the terms of the Loan Documents, or the ability of Agent or the Lenders to enforce any of its rights or remedies with respect to the Secured Obligations; or (iii) the Collateral or Agent’s Liens on the Collateral or the priority of such Liens.

“Maximum Term Loan Amount” means Eighty Million Dollars ($80,000,000).

“MDC Agreement” means that certain Agreement for the Manufacture, Development and Commercialization of Benznidazole for Human Use, dated as of June 30, 2016 between Savant Neglected Diseases, LLC and KaloBios Pharmaceuticals, Inc.

“Net Lenzilumab Product Revenue” means Borrower’s product revenue from lenzilumab that is invoiced and/or recognized as revenue (as determined in accordance with GAAP) solely from the sale of lenzilumab, calculated in a manner consistent with Borrower’s audited financial statements delivered pursuant to Section 7.1(c); provided that Net Lenzilumab Product Revenue shall exclude all revenue arising from royalties (including pursuant to any Permitted Royalty Transactions), profit sharing arrangements and milestone payments.

“Non-Core Intellectual Property” means any Intellectual Property (a) in connection with a Non-Core Indication or (b) that is not material to Borrower’s business in Agent’s discretion.

“Non-Core Therapeutic Indications” means (a) any indication not including any of the following: (i) for lenzilumab, (1) prevention or treatment of COVID-19, (2) combination treatment with CAR-T therapies, (3) prevention or treatment of acute GvHD and (4) hematologic malignancies and (ii) for Ifabotuzumab, any indications covering solid tumors and (b) any other indication that Agent determines, in consultation with Borrower, to not be “core” to Borrower.

“Non-Disclosure Agreement” means that certain Non-Disclosure Agreement by and between the Agent and the Borrower, dated as of January 20, 2021.

“OFAC” is the U.S. Department of Treasury Office of Foreign Assets Control.

“OFAC Lists” are, collectively, the Specially Designated Nationals and Blocked Persons List maintained by OFAC pursuant to Executive Order No. 13224, 66 Fed. Reg. 49079 (Sept. 25, 2001) and/or any other list of terrorists or other restricted Persons maintained pursuant to any of the rules and regulations of OFAC or pursuant to any other applicable Executive Orders.

“Patent License” means any written agreement granting any right with respect to any invention on which a Patent is in existence or a Patent application is pending, in which agreement Borrower now holds or hereafter acquires any interest.

“Patents” means all letters patent of, or rights corresponding thereto, in the United States of America or in any other country, all registrations and recordings thereof, and all applications for letters patent of, or rights corresponding thereto, in the United States of America or any other country.

“Permitted Acquisition” means any Acquisition which is conducted in accordance with the following requirements:

(a)       of a business or Person or product engaged in a line of business related to that of the Borrower or its Subsidiaries;

(b)       if such Acquisition is structured as a stock acquisition, then the Person so acquired shall either (i) become a wholly-owned Subsidiary of Borrower or of a Subsidiary and the Borrower shall comply, or cause such Subsidiary to comply, with 7.13 hereof or (ii) such Person shall be merged with and into Borrower (with the Borrower being the surviving entity);

(c)       if such Acquisition is structured as the acquisition or in-licensing of assets, such assets shall be acquired by Borrower or a Qualified Subsidiary that has executed and delivered to Agent a Joinder Agreement pursuant to Section 7.13, and shall be free and clear of Liens other than Permitted Liens;

(d)       the Borrower shall have delivered to the Lenders not less than fifteen (15) nor more than forty five (45) days prior to the date of consummation of such Acquisition, notice of such Acquisition together with pro forma projected financial information, copies of all material documents relating to such acquisition, and historical financial statements for such acquired entity, division or line of business, in each case in form and substance satisfactory to the Lenders and demonstrating compliance with the covenants set forth in Section 7.20 hereof on a pro forma basis as if the Acquisition occurred on the first day of the most recent measurement period;

(e)        both immediately before and after such Acquisition no Default or Event of Default shall have occurred and be continuing; and

(f)        the sum of the purchase price of such proposed new Acquisition, computed on the basis of total acquisition consideration paid or incurred, or to be paid or incurred, by Borrower with respect thereto, including the amount of Permitted Indebtedness assumed or to which such assets, businesses or business or ownership interest or shares, or any Person so acquired, is subject, shall not be greater than (i) $25,000,000 in any fiscal year or (ii) $100,000,000 for all acquisitions during the term of this Agreement; provided that the cash consideration for all such Acquisitions cannot exceed (x) prior to the achievement of the Capital Raise Milestone, (A) $5,000,000 in any fiscal year or (B) $15,000,000 for all such Acquisitions during the term of this Agreement and (y) at all times following the achievement of the Capital Raise Milestone, (A) $10,000,000 in any fiscal year or (B) $30,000,000 for all such Acquisitions during the term of this Agreement; provided further that, for any Acquisition that is not located entirely within the United States of America, the cash consideration for such Acquisitions cannot exceed (x) prior to the achievement of the Capital Raise Milestone, (A) $2,000,000 in any fiscal year or (B) $10,000,000 for all such Acquisitions during the term of this Agreement and (y) at all times following the achievement of the Capital Raise Milestone, (A) $4,000,000 in any fiscal year or (B) $20,000,000 for all such Acquisitions during the term of this Agreement.

“Permitted Bond Hedge Transaction” means any call or capped call option (or substantively equivalent derivative transaction) relating to the Common Stock (or other securities or property following a merger event or other change of the Common Stock) purchased by Borrower in connection with the issuance of any Permitted Convertible Debt and as may be amended in accordance with its terms; provided that, the net purchase price of any such call option transaction less the amount received by Borrower in respect of any Permitted Warrant Transaction in connection with such issuance of Permitted Convertible Debt shall not exceed 20% of the gross proceeds to Borrower from such issuance of Permitted Convertible Debt; provided further that the terms, conditions and covenants of each such call option transaction are customary for agreements of such type, as determined in good faith by the board of directors of the Borrower or a committee thereof.

“Permitted Convertible Debt” means Indebtedness of the Borrower that is convertible into a fixed number (subject to customary anti-dilution adjustments, “make-whole” increases and other customary changes thereto) of shares of Common Stock (or other securities or property following a merger event or other change of the Common Stock), cash or any combination thereof (with the amount of such cash or such combination determined by reference to the market price of such Common Stock or such other securities); provided that such Indebtedness shall (a) not require any scheduled amortization or otherwise require payment of principal prior to, or have a scheduled maturity date, earlier than, one hundred eighty (180) days after the Term Loan Maturity Date, (b) (x) be unsecured and/or (y) (i) contain usual and customary subordination terms for offerings of senior subordinated convertible notes and (ii) specifically designate this Agreement and all Secured Obligations as “designated senior indebtedness” or similar term so that the subordination terms referred to in the preceding clause (i) specifically refer to such notes as being subordinated to the Secured Obligations pursuant to such subordination terms, (c) not be guaranteed by any Subsidiary of Borrower, and (d) be on terms and conditions customary for Indebtedness of such type, as determined in good faith by the board of directors of the Borrower or a committee thereof; provided further, that any cross-default or cross-acceleration event of default (each howsoever defined) provision contained therein that relates to indebtedness or other payment obligations of Borrower (or any of its Subsidiaries) (such indebtedness or other payment obligations, a “Cross-Default Reference Obligation”) contains a cure period of at least fifteen (15) calendar days (after written notice to the issuer of such Indebtedness by the trustee or to such issuer and such trustee by holders of at least 25% in aggregate principal amount of such Indebtedness then outstanding) before a default, event of default, acceleration or other event or condition under such Cross-Default Reference Obligation results in an event of default under such cross-default or cross-acceleration provision.

“Permitted Indebtedness” means:

(i)            Indebtedness of Borrower in favor of the Lenders or Agent arising under this Agreement or any other Loan Document;

(ii)           Indebtedness existing on the Effective Date which is disclosed in Schedule 1B;

(iii)          Indebtedness of up to (x) prior to the achievement of the Capital Raise Milestone, $1,000,000 and (y) at all times following the achievement of the Capital Raise Milestone, $2,000,000, in each case outstanding at any time secured by a Lien described in clause (vii) of the defined term “Permitted Liens”; provided that such Indebtedness does not exceed the cost of the Equipment financed with such Indebtedness;

(iv)         (x) Indebtedness to trade creditors incurred in the ordinary course of business (1) that is due within 120 days or (2) in respect of the Excluded Trade Payables and (y) Indebtedness incurred in the ordinary course of business with corporate credit cards in an amount not to exceed at any time outstanding (1) prior to the achievement of the Capital Raise Milestone, $250,000 and (2) at all times following the achievement of the Capital Raise Milestone, $500,000;

(v)          Indebtedness that also constitutes a Permitted Investment;

(vi)         Subordinated Indebtedness;

(vii)        Permitted Convertible Debt not to exceed $250,000,000 in aggregate principal amount at any one time outstanding;

(viii)       Indebtedness with respect to a Permitted Royalty Transaction that (a) is subordinated to the Secured Obligations pursuant to a subordination or intercreditor agreement on terms and conditions satisfactory to Agent, (b) does not have a scheduled maturity date earlier than one hundred eighty (180) days after the Term Loan Maturity Date, (c) is in an aggregate amount not to exceed $250,000,000 and (d) shall specifically designate this Agreement and all Secured Obligations as “designated senior indebtedness” or similar term so that the subordination terms referred to in clause (a) of this clause specifically refer to such notes as being subordinated to the Secured Obligations pursuant to such subordination terms;

(ix)          reimbursement obligations in connection with (x) standby letters of credit that are secured by Cash and issued on behalf of the Borrower or a Subsidiary thereof in an amount not to exceed (1) prior to the achievement of the Capital Raise Milestone, $500,000 and (2) at all times following the achievement of the Capital Raise Milestone, $1,000,000, in each case at any time outstanding and (y) documentary letters of credit entered into in the ordinary course of the Borrower’s business in connection with the shipment of raw materials, Inventory and other goods;

(x)           other unsecured Indebtedness in an amount not to exceed (x) prior to the achievement of the Capital Raise Milestone, $500,000 and (y) at all times following the achievement of the Capital Raise Milestone, $1,000,000, in each case at any time outstanding;

(xi)          intercompany Indebtedness as long as either (A) each of the Subsidiary obligor and the Subsidiary obligee under such Indebtedness is a Subsidiary that has executed a Joinder Agreement; and

(xii)         extensions, refinancings and renewals of any items of Permitted Indebtedness; provided that the principal amount is not increased or the terms modified to impose materially more burdensome terms upon Borrower or its Subsidiary, as the case may be.

“Permitted Investment” means:

(i)            Investments existing on the Effective Date which are disclosed in Schedule 1C;

(ii)           (a) marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof maturing within one year from the date of acquisition thereof currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Services, (b) commercial paper maturing no more than one year from the date of creation thereof and currently having a rating of at least A-2 or P-2 from either Standard & Poor’s Corporation or Moody’s Investors Service, (c) certificates of deposit issued by any bank with assets of at least $500,000,000 maturing no more than one year from the date of investment therein, and (d) money market accounts;

(iii)          repurchases of stock from former employees, directors, or consultants of Borrower under the terms of applicable repurchase agreements at the original issuance price of such securities in an aggregate amount not to exceed (x) prior to the achievement of the Capital Raise Milestone, $250,000 and (y) at all times following the achievement of the Capital Raise Milestone, $500,000, in each case in any fiscal year; provided that no Event of Default has occurred, is continuing or could exist after giving effect to the repurchases; provided further that the exercise (including the net exercise) of employee stock options (including the issuance of Borrower’s stock upon the exercise thereof) and the awarding of other reasonable and customary equity-based incentive compensation to officers, directors and employees shall not be deemed to constitute an Investment hereunder;

(iv)         Investments accepted in connection with Permitted Transfers;

(v)          Investments (including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of Borrower’s business;

(vi)         Investments consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates, in the ordinary course of business; provided that this subparagraph (vi) shall not apply to Investments of Borrower in any Subsidiary;

(vii)        Investments consisting of loans not involving the net transfer on a substantially contemporaneous basis of cash proceeds to employees, officers or directors relating to the purchase of capital stock of Borrower pursuant to employee stock purchase plans or other similar agreements approved by Borrower’s Board of Directors;

(viii)       Investments consisting of travel advances in the ordinary course of business;

(ix)          Investments in newly-formed Subsidiaries; provided that each such Subsidiary enters into a Joinder Agreement promptly after its formation by Borrower and execute such other documents as shall be reasonably requested by Agent;

(x)           Investments in Foreign Subsidiaries (1) constituting Excluded Subsidiaries not to exceed $250,000 in the aggregate for any such Foreign Subsidiary or $1,000,000 in the aggregate for all such Foreign Subsidiaries and (2) otherwise approved in advance in writing by Agent;

(xi)          joint ventures or strategic alliances in the ordinary course of Borrower’s business consisting of the nonexclusive licensing of technology, the development of technology or the providing of technical support; provided that any cash Investments by Borrower do not exceed (x) prior to the achievement of the Capital Raise Milestone, $100,000 and (y) at all times following the achievement of the Capital Raise Milestone, $200,000, in each case in the aggregate in any fiscal year;

(xii)         Permitted Acquisitions;

(xiii)        Investments in the manufacturing facilities of any contract manufacturing organization of Borrower required to be made pursuant to agreements between such contract manufacturing organization and Borrower, in an aggregate amount not to exceed (x) prior to the achievement of the Capital Raise Milestone, $10,000,000 and (y) at all times following the achievement of the Capital Raise Milestone, $25,000,000;

(xiv)        Borrower’s entry into (including payments of premiums in connection therewith), and the performance of obligations under, any Permitted Bond Hedge Transactions and Permitted Warrant Transactions in accordance with their terms; and

(xv)         additional Investments that do not exceed in the aggregate (x) prior to the achievement of the Capital Raise Milestone, $1,000,000 and (y) at all times following the achievement of the Capital Raise Milestone, $2,000,000.

“Permitted Liens” means:

(i)            Liens in favor of Agent or the Lenders;

(ii)           Liens existing on the Effective Date which are disclosed in Schedule 1D;

(iii)          Liens for taxes, fees, assessments or other governmental charges or levies, either not yet due or being contested in good faith by appropriate proceedings diligently conducted; provided that Borrower maintains adequate reserves therefor on Borrower’s Books in accordance with GAAP;

(iv)          Liens securing claims or demands of materialmen, artisans, mechanics, carriers, warehousemen, landlords and other like Persons arising in the ordinary course of Borrower’s business and imposed without action of such parties; provided that the payment thereof is not yet required;

(v)           Liens arising from judgments, decrees or attachments in circumstances which do not constitute an Event of Default hereunder;

(vi)          the following deposits, to the extent made in the ordinary course of business: deposits under worker’s compensation, unemployment insurance, social security and other similar laws, or to secure the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure indemnity, performance or other similar bonds for the performance of bids, tenders or contracts (other than for the repayment of borrowed money) or to secure statutory obligations (other than Liens arising under ERISA or environmental Liens) or surety or appeal bonds, or to secure indemnity, performance or other similar bonds;

(vii)         Liens on Equipment or software or other intellectual property constituting purchase money Liens and Liens in connection with capital leases securing Indebtedness permitted in clause (iii) of “Permitted Indebtedness”;

(viii)        Liens incurred in connection with Subordinated Indebtedness;

(ix)           leasehold interests in leases or subleases and licenses granted in the ordinary course of business and not interfering in any material respect with the business of the licensor;

(x)           Liens in favor of customs and revenue authorities arising as a matter of law to secure payment of custom duties that are promptly paid on or before the date they become due;

(xi)          Liens on insurance proceeds securing the payment of financed insurance premiums that are promptly paid on or before the date they become due (provided that such Liens extend only to such insurance proceeds and not to any other property or assets);

(xii)        statutory and common law rights of set-off and other similar rights as to deposits of cash and securities in favor of banks, other depository institutions and brokerage firms;

(xiii)        easements, zoning restrictions, rights-of-way and similar encumbrances on real property imposed by law or arising in the ordinary course of business so long as they do not materially impair the value or marketability of the related property;

(xiv)       (A) Liens on Cash securing obligations permitted under clause (ix) of the definition of Permitted Indebtedness and (B) security deposits in connection with real property leases, the combination of (A) and (B) in an aggregate amount not to exceed at any time (1) prior to the achievement of the Capital Raise Milestone, $250,000 and (2) at all times following the achievement of the Capital Raise Milestone, $500,000;

(xv)         Liens solely on the royalty interests purchased pursuant to a Permitted Royalty Transaction and proceeds thereon; provided that no Liens shall be granted with respect to any Intellectual Property of Borrower or its Subsidiaries; and

(xvi)        Liens incurred in connection with the extension, renewal or refinancing of the Indebtedness secured by Liens of the type described in clauses (i) through (xi) and (xv) above; provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced (as may have been reduced by any payment thereon) does not increase.

“Permitted Royalty Transaction” means any synthetic royalty participation (and not royalty purchases or buyouts) in the ordinary course of business and on terms (including, without limitation, that any security granted in connection with such Permitted Royalty Transaction is limited solely to the respective Intellectual Property being financed by such facility), and with a purchaser, in each case, satisfactory to Agent, as long as (i) such transaction does not result in a transfer of any Intellectual Property, (ii) such transaction does not result in a transfer of any Rights to Payment of any Intellectual Property, (iii) the beneficiary is Borrower or a Qualified Subsidiary that has executed and delivered to Agent a Joinder Agreement pursuant to Section 7.13 and (iv) all fees and payments with respect to such transaction (including, without limitation, with respect to the underlying Intellectual Property and Rights to Payment) are payable to Borrower or such Qualified Subsidiary, as applicable, and made to an Account subject to an Account Control Agreement.

“Permitted Transfers” means:

(i)           sales of Inventory in the ordinary course of business and transfers of raw materials, work in process or finished Inventory to, between or among the Borrower’s contract manufacturing counterparties, without duplication of Investments permitted by clause (xiii) of the definition of Permitted Investments,

(ii)           licenses and similar arrangements for the use of Intellectual Property in the ordinary course of business, including in connection with business development transactions, that could not result in a legal transfer of title of the licensed property and that (A) may be exclusive in respects other than territory or (B) may be exclusive as to territory but only (x) as to discreet geographical areas outside of the United States of America in the ordinary course of business or (y) for Non-Core Intellectual Property or Non-Core Therapeutic Indications,

(iii)          co-development, co-promotion and/or co-commercialization agreements for territories including the United States of America; provided that (A) any such arrangement is on arm’s length and commercially reasonable terms in Lender’s reasonable discretion and (B) each counterparty to any such arrangement is an established pharmaceutical company,

(iv)         dispositions of worn-out, obsolete or surplus Equipment at fair market value in the ordinary course of business,

(v)          Permitted Royalty Transactions,

(vi)         to the extent constituting a transfer, any other transaction that is expressly permitted by this Agreement (excluding Section 7.8), including, but not limited to, the granting of Permitted Liens and the making of Permitted Investments; and

(vii)        other dispositions of assets having a fair market value of not more than (x) prior to the achievement of the Capital Raise Milestone, $2,500,000 and (y) at all times following the achievement of the Capital Raise Milestone, $5,000,000, in each case in the aggregate in any fiscal year.

“Permitted Warrant Transaction” means any call option, warrant or right to purchase (or substantively equivalent derivative transaction) relating to Common Stock (or other securities or property following a merger event or other change of the Common Stock) and/or cash (in an amount determined by reference to the price of such Common Stock) sold by Borrower substantially concurrently with any purchase by Borrower of a related Permitted Bond Hedge Transaction and as may be amended in accordance with its terms; provided that (x) that the terms, conditions and covenants of each such call option transaction are customary for agreements of such type, as determined in good faith by the board of directors of the Borrower or a committee thereof and (y) such call option transaction would be classified as an equity instrument in accordance with GAAP.

“Person” means any individual, sole proprietorship, partnership, joint venture, trust, unincorporated organization, association, corporation, limited liability company, institution, other entity or government.

“Pledge Agreement” means the Pledge Agreement dated as of the Effective Date between Borrower and Agent, as the same may from time to time be amended, restated, modified or otherwise supplemented.

“Qualified Cash” means the amount of Borrower’s Cash held in accounts subject to an Account Control Agreement in favor of Agent.

“Qualified Cash A/P Amount” means the amount of Borrower’s accounts payable that have not been paid within one hundred twenty (120) days from the invoice date of the relevant account payable (other than Excluded Trade Payables).

“Qualified Subsidiary” means any direct or indirect Subsidiary other than an Excluded Subsidiary.

“Receivables” means (i) all of Borrower’s Accounts, Instruments, Documents, Chattel Paper, Supporting Obligations, letters of credit, proceeds of any letter of credit, and Letter of Credit Rights, and (ii) all customer lists, software, and business records related thereto.

“Redemption Conditions” means, with respect to any payment of cash in respect of the principal amount of any Permitted Convertible Debt, satisfaction of each of the following events: (a) no Default or Event of Default shall exist or result therefrom, and (b) both immediately before and at all times after such redemption, Borrower’s Qualified Cash shall be no less than 125% of the outstanding Secured Obligations.

“Register” has the meaning specified in Section 11.7.

“Required Lenders” means at any time, the holders of more than 50% of the sum of the aggregate unpaid principal amount of the Term Loans then outstanding.

“Restricted License” means any material License or other agreement with respect to which Borrower is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such License or agreement or any other property, or (b) for which a default under or termination of could interfere with the Agent’s right to sell any Collateral.

“Royalty Transaction” means any royalty or asset level financing entered into by Borrower and one or more third party investors or lenders acceptable to Agent in its sole discretion and on terms and conditions acceptable to Agent in its sole discretion.

“Sanctioned Country” means, at any time, a country or territory which is the subject or target of any Sanctions.

“Sanctioned Person” means, at any time, (a) any Person listed in any Sanctions-related list of designated Persons maintained by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or by the United Nations Security Council, the European Union or any EU member state, (b) any Person operating, organized or resident in a Sanctioned Country or (c) any Person controlled by any such Person.

“Sanctions” means economic or financial sanctions or trade embargoes imposed, administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State, or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“Savant Litigation” means KaloBios Pharmaceuticals, Inc. v. Savant Neglected Diseases, LLC, No. N17C-07-068 PRW-CCLD and all claims, counterclaims and crossclaims thereunder or related thereto whether now existing or hereafter arising.

“Secured Obligations” means Borrower’s obligations under this Agreement and any Loan Document, including any obligation to pay any amount now owing or later arising.

“Subordinated Indebtedness” means Indebtedness subordinated to the Secured Obligations in amounts and on terms and conditions satisfactory to Agent in its sole discretion and subject to a subordination agreement in form and substance satisfactory to Agent in its sole discretion.

“Subsequent Financing” means any firm commitment underwritten public offering by Borrower of Common Stock occurring after the Effective Date.

“Subsidiary” means an entity, whether a corporation, partnership, limited liability company, joint venture or otherwise, in which Borrower owns or controls, either directly or indirectly, 50% or more of the outstanding voting securities, including each entity listed on Schedule 1 hereto.

“Taxes” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any governmental authority, including any interest, additions to tax or penalties applicable thereto.

“Term Commitment” means as to any Lender, the obligation of such Lender, if any, to make a Term Loan Advance to the Borrower in a principal amount not to exceed the amount set forth under the heading “Term Commitment” opposite such Lender’s name on Schedule 1.1.

“Term Loan Advance” means each Tranche 1 Advance, Tranche 2 Advance, Tranche 3 Advance and any other Term Loan funds advanced under this Agreement.

“Term Loan Interest Rate” means for any day a per annum rate of interest equal to the greater of either (i) 8.75% plus the prime rate as reported in The Wall Street Journal minus 3.25% and (ii) 8.75% (such greater amount, the “Base Interest Rate”); provided that the Base Interest Rate shall be permanently reduced by an aggregate amount not to exceed 75 basis points upon the occurrence of each of the first three of the four following events to occur: (w) if the Interest Rate Reduction Conditions 1 are satisfied, then the Base Interest Rate shall be reduced by 25 basis points; (x) if the Interest Rate Reduction Conditions 2 are satisfied, then the Base Interest Rate shall be reduced by 25 basis points; (y) if the Interest Rate Reduction Conditions 3 are satisfied, then the Base Interest Rate shall be reduced by 25 basis points; and (z) if the Interest Rate Reduction Conditions 4 are satisfied, then the Base Interest Rate shall be reduced by 25 basis points.

“Term Loan Maturity Date” means March 1, 2025; provided that, if the Term Loan Maturity Extension Conditions are satisfied, then March 1, 2026; provided further, in each case, that, if such day is not a Business Day, the Term Loan Maturity Date shall be the immediately preceding Business Day.

“Term Loan Maturity Extension Conditions” shall mean satisfaction of each of the following events: (a) no default or Event of Default shall have occurred; and (b) achievement of the BLA Milestone.

“Trademark License” means any written agreement granting any right to use any Trademark or Trademark registration, now owned or hereafter acquired by Borrower or in which Borrower now holds or hereafter acquires any interest.

“Trademarks” means all trademarks (registered, common law or otherwise) and any applications in connection therewith, including registrations, recordings and applications in the United States Patent and Trademark Office or in any similar office or agency of the United States of America, any State thereof or any other country or any political subdivision thereof.

“Tranche 2 Availability Conditions” means (a) (x) in respect of clause (i) of Section 2.2(a), achievement of the EUA Milestone 1 or (y) in respect of clause (ii) of Section 2.2(a), achievement of the EUA Milestone 2, (b) no Event of Default shall have occurred and be continuing and (c) the occurrence of the Initial Advance Date.

“Tranche 2 Facility Charge” means (a) following the achievement of EUA Milestone 1, Sixty-Two Thousand Five Hundred Dollars ($62,500), or (b) following the achievement of EUA Milestone 2, Eighty-Seven Thousand Five Hundred Dollars ($87,500), which, in each case, is payable to the Lenders in accordance with Section 4.3(d)(i).

“Tranche 3 Facility Charge” means One Hundred Thousand Dollars ($100,000), which is payable to the Lenders in accordance with Section 4.3(d)(ii).

“UCC” means the Uniform Commercial Code as the same is, from time to time, in effect in the State of California; provided that, in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection or priority of, or remedies with respect to, Agent’s Lien on any Collateral is governed by the Uniform Commercial Code as the same is, from time to time, in effect in a jurisdiction other than the State of California, then the term “UCC” shall mean the Uniform Commercial Code as in effect, from time to time, in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority or remedies and for purposes of definitions related to such provisions.

“U.S. Person” means any Person that is a “United States person” as defined in Section 7701(a)(30) of the Code.

1.2            The following terms are defined in the Sections or subsections referenced opposite such terms:

Defined Term	Section
Agent	Preamble
Assignee	11.14
Borrower	Preamble
Claims	11.11
Collateral	3.1
Confidential Information	11.13
Conversion Amount	8.2(a)
Conversion Shares	8.2(a)
End of Term Charge	2.6
Event of Default	9
Financial Statements	7.1
Indemnified Person	6.3
Lenders	Preamble
Liabilities	6.3
Maximum Rate	2.3
Minimum Cash Reduction Amount	7.20(b)
Open Source License	5.10
Participant Register	11.8
Prepayment Charge	2.5
Publicity Materials	11.19
Register	11.7
Rights to Payment	3.1
Rights to Payment	3.1
Tranche 1 Advance	2.2(a)
Tranche 2 Advance	2.2(a)
Tranche 3 Advance	2.2(a)

1.3       Unless otherwise specified, all references in this Agreement or any Annex or Schedule hereto to a “Section,” “subsection,” “Exhibit,” “Annex,” or “Schedule” shall refer to the corresponding Section, subsection, Exhibit, Annex, or Schedule in or to this Agreement. Unless otherwise specifically provided herein, any accounting term used in this Agreement or the other Loan Documents shall have the meaning customarily given such term in accordance with GAAP, and all financial computations hereunder shall be computed in accordance with GAAP, consistently applied. Unless otherwise defined herein or in the other Loan Documents, terms that are used herein or in the other Loan Documents and defined in the UCC shall have the meanings given to them in the UCC. For all purposes under the Loan Documents, in connection with any division or plan of division under Delaware law (or any comparable event under a different jurisdiction’s laws): (a) if any asset, right, obligation or liability of any Person becomes the asset, right, obligation or liability of a different Person, then it shall be deemed to have been transferred from the original Person to the subsequent Person and (b) if any new Person comes into existence, such new Person shall be deemed to have been organized on the first date of its existence by the holders of its Equity Interests at such time.

1.4       Notwithstanding anything to the contrary in this Agreement or any other Loan Document, all terms of an accounting or financial nature used herein shall be construed, and all computations of amounts and ratios referred to herein shall be made without giving effect to any treatment of Indebtedness in respect of convertible debt instruments under Accounting Standards Codification 470-20 (or any other Accounting Standards Codification or Financial Accounting Standard having a similar result or effect) to value any such Indebtedness in a reduced or bifurcated manner as described therein, and such Indebtedness shall at all times be valued at the full stated principal amount thereof. For the avoidance of doubt, and without limitation of the foregoing, Permitted Convertible Debt shall at all times be valued at the full stated principal amount thereof and shall not include any reduction or appreciation in value of the shares deliverable upon conversion thereof. Additionally, all leases of any Person that are or would be characterized as operating leases in accordance with GAAP in effect prior to December 15, 2018 (whether or not such operating leases were in effect on such date) shall be accounted for as operating leases (and not as capital leases) for purposes of this Agreement and the other Loan Documents regardless of any change in GAAP following such date that would otherwise require such leases to be recharacterized as capital leases. In addition, for all purposes of this Agreement and the other Loan Documents, capital leases shall not include embedded leases deemed to arise in connection with contract management organizations or under any other service contract due to the application of ASC 840 and/or 842.

SECTION 2. THE LOAN

2.1       [Reserved].

2.2       Term Loan.

(a)       Advances. Subject to the terms and conditions of this Agreement, the Lenders will severally (and not jointly) make in an amount not to exceed its respective Term Commitment, and Borrower agrees to draw, a Term Loan Advance of Twenty Five Million Dollars ($25,000,000) during the period beginning on the Effective Date and continuing through March 23, 2021 (or such later date as Borrower and Agent may mutually agree) (the “Tranche 1 Advance”). Subject to the terms and conditions of this Agreement and satisfaction of the applicable Tranche 2 Availability Conditions, (i) beginning on the Initial Advance Date and continuing through September 15, 2021, Borrower may request and the Lenders shall severally (and not jointly) make an additional Term Loan Advance in a principal amount of Twenty Five Million Dollars ($25,000,000) or (ii) beginning on the Initial Advance Date and continuing through September 15, 2021, Borrower may request and the Lenders shall severally (and not jointly) make an additional Term Loan Advance in a principal amount of Thirty Five Million Dollars ($35,000,000) (in either case, the “Tranche 2 Advance”). Subject to the terms and conditions of this Agreement and approval by the Lenders’ investment committee in its sole discretion, beginning on the Initial Advance Date and continuing through June 15, 2022, Borrower may request and the Lenders shall severally (and not jointly) make an additional Term Loan Advance in a principal amount of Twenty Million Dollars ($20,000,000) (the “Tranche 3 Advance”). The aggregate outstanding Term Loan Advances may be up to the Maximum Term Loan Amount.

(b)        Advance Request. To obtain a Term Loan Advance, Borrower shall complete, sign and deliver an Advance Request at least five (5) Business Days (or, with respect to the Term Loan Advance on the Initial Advance Date, such shorter period as Agent may agree) before each Advance Date to Agent. The Lenders shall fund the Term Loan Advance in the manner requested by the Advance Request provided that each of the conditions precedent to such Term Loan Advance is satisfied as of the requested Advance Date.

(c)       Interest. The principal balance shall bear interest thereon from such Advance Date at the Term Loan Interest Rate based on a year consisting of 360 days, with interest computed daily based on the actual number of days elapsed. The Term Loan Interest Rate will float and change on the day the prime rate changes from time to time.

(d)       Payment. Borrower will pay interest on each Term Loan Advance on the first Business Day of each month, beginning the month after the Advance Date. Borrower shall repay the aggregate Term Loan principal balance that is outstanding on the day immediately preceding the Amortization Date, in equal monthly installments of principal and interest (mortgage style) beginning on the Amortization Date and continuing on the first Business Day of each month thereafter until the Secured Obligations (other than inchoate indemnity obligations) are repaid. The entire Term Loan principal balance and all accrued but unpaid interest hereunder, shall be due and payable on the Term Loan Maturity Date. Borrower shall make all payments under this Agreement without setoff, recoupment or deduction and regardless of any counterclaim or defense. If a payment hereunder becomes due and payable on a day that is not a Business Day, the due date thereof shall be the immediately preceding Business Day. The Lenders will initiate debit entries to the Borrower’s account as authorized on the ACH Authorization (i) on each payment date of all periodic obligations payable to the Lenders under each Term Loan Advance and (ii) out-of-pocket legal fees and costs incurred by Agent or the Lenders in connection with Section 11.12 of this Agreement; provided that, with respect to clause (i) above, in the event that the Lenders or Agent informs Borrower that the Lenders will not initiate a debit entry to Borrower’s account for a certain amount of the periodic obligations due on a specific payment date, Borrower shall pay to the Lenders such amount of periodic obligations in full in immediately available funds on such payment date; provided, further, that, with respect to clause (i) above, if the Lenders or Agent informs Borrower that the Lenders will not initiate a debit entry as described above later than the date that is three (3) Business Days prior to such payment date, Borrower shall pay to the Lenders such amount of periodic obligations in full in immediately available funds on the date that is three (3) Business Days after the date on which the Lenders or Agent notifies Borrower of such; provided, further, that, with respect to clause (ii) above, in the event that the Lenders or Agent informs Borrower that the Lenders will not initiate a debit entry to Borrower’s account for certain amount of such out-of-pocket legal fees and costs incurred by Agent or the Lenders, Borrower shall pay to the Lenders such amount in full in immediately available funds within three (3) Business Days.

2.3       Maximum Interest. Notwithstanding any provision in this Agreement or any other Loan Document, it is the parties’ intent not to contract for, charge or receive interest at a rate that is greater than the maximum rate permissible by law that a court of competent jurisdiction shall deem applicable hereto (which under the laws of the State of California shall be deemed to be the laws relating to permissible rates of interest on commercial loans) (the “Maximum Rate”). If a court of competent jurisdiction shall finally determine that Borrower has actually paid to the Lenders an amount of interest in excess of the amount that would have been payable if all of the Secured Obligations had at all times borne interest at the Maximum Rate, then such excess interest actually paid by Borrower shall be applied as follows: first, to the payment of the Secured Obligations consisting of the outstanding principal; second, after all principal is repaid, to the payment of the Lenders’ accrued interest, costs, expenses, professional fees and any other Secured Obligations; and third, after all Secured Obligations are repaid, the excess (if any) shall be refunded to Borrower.

2.4       Default Interest. In the event any payment is not paid on the scheduled payment date, an amount equal to five percent (5%) of the past due amount shall be payable on demand. In addition, at the election of the Required Lenders, upon the occurrence and during the continuation of an Event of Default hereunder, all Secured Obligations, including principal, interest, compounded interest, and professional fees, shall bear interest at a rate per annum equal to the rate set forth in Section 2.2(c) plus five percent (5%) per annum. In the event any interest is not paid when due hereunder, delinquent interest shall be added to principal and shall bear interest on interest, compounded at the rate set forth in Section 2.2(c) or Section 2.4, as applicable.

2.5       Prepayment. At its option upon at least seven (7) Business Days’ prior written notice to Agent, Borrower may prepay all, but not less than all, of the outstanding Advances by paying the entire principal balance, all accrued and unpaid interest thereon, together with a prepayment charge equal to the following percentage of the Advance amount being prepaid: with respect to each Advance, if such Advance amounts are prepaid in any of the first twelve (12) months following the Initial Advance Date, 2.00%; after twelve (12) months but prior to twenty four (24) months, 1.50%; and after twenty four (24) months but prior to thirty six (36) months, 1.00% (each, a “Prepayment Charge”). Borrower agrees that the Prepayment Charge is a reasonable calculation of the Lenders’ lost profits in view of the difficulties and impracticality of determining actual damages resulting from an early repayment of the Advances. Borrower shall prepay the outstanding amount of all principal and accrued interest through the prepayment date and the Prepayment Charge upon the occurrence of a Change in Control or any other prepayment hereunder. Notwithstanding the foregoing, Agent and the Lenders agree to waive the Prepayment Charge if Agent and the Lenders (in their sole and absolute discretion) agree in writing to refinance the Advances prior to the Term Loan Maturity Date. Any amounts paid under this Section shall be applied by Agent to the then unpaid amount of any Secured Obligations (including principal and interest) in such order and priority as Agent may choose in its sole discretion. For the avoidance of doubt, if a payment hereunder becomes due and payable on a day that is not a Business Day, the due date thereof shall be the immediately preceding Business Day.

2.6       End of Term Charge. On the earliest to occur of (i) the Term Loan Maturity Date, (ii) the date that Borrower prepays the outstanding Secured Obligations (other than any inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) in full, or (iii) the date that the Secured Obligations become due and payable, Borrower shall pay the Lenders a charge equal to 6.75% of the aggregate principal amount of the Loan funded during the term of this Agreement (the “End of Term Charge”). Notwithstanding the required payment date of such End of Term Charge, the applicable pro rata portion of the End of Term Charge shall be deemed earned by the Lenders as of each date a Term Loan Advance is made. For the avoidance of doubt, if a payment hereunder becomes due and payable on a day that is not a Business Day, the due date thereof shall be the immediately preceding Business Day.

2.7       Pro Rata Treatment. Each payment (including prepayment) on account of any fee and any reduction of the Term Loans shall be made pro rata according to the Term Commitments of the relevant Lender.

2.8       Taxes; Increased Costs. The Borrower, the Agent and the Lenders each hereby agree to the terms and conditions set forth on Addendum 1 attached hereto.

2.9       Treatment of Prepayment Charge and End of Term Charge. Borrower agrees that any Prepayment Charge and any End of Term Charge payable shall be presumed to be the liquidated damages sustained by each Lender as the result of the early termination, and Borrower agrees that it is reasonable under the circumstances currently existing and existing as of the Effective Date. The Prepayment Charge and the End of Term Charge shall also be payable in the event the Secured Obligations (and/or this Agreement) are satisfied or released by foreclosure (whether by power of judicial proceeding), deed in lieu of foreclosure, or by any other means. Borrower expressly waives (to the fullest extent it may lawfully do so) the provisions of any present or future statute or law that prohibits or may prohibit the collection of the foregoing Prepayment Charge and End of Term Charge in connection with any such acceleration. Borrower agrees (to the fullest extent that each may lawfully do so): (a) each of the Prepayment Charge and the End of Term Charge is reasonable and is the product of an arm’s length transaction between sophisticated business people, ably represented by counsel; (b) each of the Prepayment Charge and the End of Term Charge shall be payable notwithstanding the then prevailing market rates at the time payment is made; (c) there has been a course of conduct between the Lenders and Borrower giving specific consideration in this transaction for such agreement to pay the Prepayment Charge and the End of Term Charge as a charge (and not interest) in the event of prepayment or acceleration; (d) Borrower shall be estopped from claiming differently than as agreed to in this paragraph. Borrower expressly acknowledges that their agreement to pay each of the Prepayment Charge and the End of Term Charge to the Lenders as herein described was on the Effective Date and continues to be a material inducement to the Lenders to provide the Term Loans.

SECTION 3. SECURITY INTEREST

3.1       As security for the prompt and complete payment when due (whether on the payment dates or otherwise) of all the Secured Obligations, Borrower grants to Agent a security interest in all of Borrower’s right, title, and interest in, to and under all of Borrower’s personal property and other assets including without limitation the following (except as set forth herein) whether now owned or hereafter acquired (collectively, the “Collateral”): (a) Receivables; (b) Equipment; (c) Fixtures; (d) General Intangibles (other than Intellectual Property); (e) Inventory; (f) Investment Property; (g) Deposit Accounts; (h) Cash; (i) Goods; (j) all Commercial Tort Claims; and all other tangible and intangible personal property of Borrower whether now or hereafter owned or existing, leased, consigned by or to, or acquired by, Borrower and wherever located, and any of Borrower’s property in the possession or under the control of Agent; and, to the extent not otherwise included, all Proceeds of each of the foregoing and all accessions to, substitutions and replacements for, and rents, profits and products of each of the foregoing; provided, however, that the Collateral shall include all Accounts and General Intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights in, the Intellectual Property (the “Rights to Payment”).

3.2       Notwithstanding the broad grant of the security interest set forth in Section 3.1, above, the Collateral shall not include (a) nonassignable licenses or contracts, which by their terms require the consent of the licensor thereof or another party (but only to the extent such prohibition on transfer is enforceable under applicable law, including, without limitation, Sections 9406, 9407 and 9408 of the UCC), (b) more than 65% of the voting Equity Interests of any Excluded Subsidiary for which the pledge of all of the Equity Interests of such Subsidiary as Collateral would result in demonstrable material adverse tax consequences to the Borrower (provided, however, that, immediately upon any change in the U.S. tax laws that would allow the pledge of a greater percentage of such voting Equity Interests without material adverse tax consequences to the Borrower, the Collateral shall automatically and without further action required by, and without notice to, any Person include such greater percentage of voting Equity Interests of such Excluded Subsidiary from that time forward), (c) any Acquired Assets and Future Assets and any related assets or items, in each pursuant to the terms of the MDC Agreement as in effect on the Effective Date, (d) any Equity Interests in Madison and (e) the Savant Litigation including any Commercial Tort Claim of Borrower in respect thereof; provided that any proceeds of the Savant Litigation actually received by Borrower in connection with the final disposition and discharge thereof (whether as a result of the final binding determination or ruling of a court of law, settlement or otherwise) shall constitute Collateral except and to the extent such proceeds would otherwise be excluded from the Collateral pursuant to this Section 3.2.

SECTION 4. CONDITIONS PRECEDENT TO LOAN

The obligations of the Lenders to make the Loan hereunder are subject to the satisfaction by Borrower of the following conditions:

4.1       Effectiveness. On or prior to the Effective Date, Borrower shall have delivered to Agent the following:

(a)       executed copies of the Loan Documents and all other documents and instruments reasonably required by Agent to effectuate the transactions contemplated hereby or to create and perfect the Liens of Agent with respect to all Collateral, in all cases in form and substance reasonably acceptable to Agent;

(b)       a legal opinion of Borrower’s counsel in form and substance reasonably acceptable to Agent;

(c)       certified copy of resolutions of Borrower’s board of directors evidencing approval of (i) the Loan and other transactions evidenced by the Loan Documents;

(d)       certified copies of the Certificate of Incorporation and the Bylaws, as amended through the Effective Date, of Borrower;

(e)       a certificate of good standing for Borrower from its state of incorporation and similar certificates from all other jurisdictions in which it does business and where the failure to be qualified could have a Material Adverse Effect;

(f)       payment of the Due Diligence Fee;

(g)       all certificates of insurance and copies of each insurance policy required hereunder; and

(h)       such other documents as Agent may reasonably request.

4.2       Initial Advance. On or prior to the Initial Advance Date, Borrower shall have delivered to Agent:

(a)       valid, enforceable and effective Account Control Agreements, in form and substance satisfactory to Agent, over each Deposit Account and each account holding Investment Property (other than Excluded Accounts);

(b)       payment of the Initial Facility Charge and reimbursement of Agent’s and the Lenders’ current expenses reimbursable pursuant to this Agreement, which amounts may be deducted from the initial Advance; and

(c)       such other documents as Agent may reasonably request.

4.3       All Advances. On each Advance Date:

(a)       Agent shall have received (i) an Advance Request for the relevant Advance as required by Section 2.2(b), each duly executed by Borrower’s Chief Executive Officer or Chief Financial Officer, and (ii) any other documents Agent may reasonably request.

(b)       The representations and warranties set forth in this Agreement shall be true and correct in all material respects on and as of the Advance Date with the same effect as though made on and as of such date, except to the extent such representations and warranties expressly relate to an earlier date.

(c)       Borrower shall be in compliance with all the terms and provisions set forth herein and in each other Loan Document on its part to be observed or performed, and at the time of and immediately after such Advance no Event of Default shall have occurred and be continuing.

(d)       (i) With respect to the Tranche 2 Advance, Borrower shall concurrently with such Advance pay the Tranche 2 Facility Charge and (ii) with respect to the Tranche 3 Advance, Borrower shall concurrently with such Advance pay the Tranche 3 Facility Charge.

(e)       Each Advance Request shall be deemed to constitute a representation and warranty by Borrower on the relevant Advance Date as to the matters specified in paragraphs (b) and (c) of this Section 4.3 and as to the matters set forth in the Advance Request.

4.4       No Default. As of the Effective Date and each Advance Date, (i) no fact or condition exists that could (or could, with the passage of time, the giving of notice, or both) constitute an Event of Default and (ii) no event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing.

4.5       Post-Close Obligations. Borrower shall deliver to Agent, within fourteen (14) days of the Effective Date, additional insured endorsements for liability and lender’s loss payable endorsements for all risk property damage insurance, in each case in form and substance reasonably satisfactory to Agent.

SECTION 5. REPRESENTATIONS AND WARRANTIES OF BORROWER

Borrower represents and warrants that:

5.1       Corporate Status. Borrower is a corporation duly organized, legally existing and in good standing under the laws its state of incorporation, and is duly qualified as a foreign corporation in all jurisdictions in which the nature of its business or location of its properties require such qualifications and where the failure to be qualified could reasonably be expected to have a Material Adverse Effect. Borrower’s present name, former names (if any), locations, place of formation, Tax identification number, organizational identification number and other information are correctly set forth in Exhibit B, as may be updated by Borrower in a written notice (including any Compliance Certificate) provided to Agent after the Effective Date.

5.2       Collateral. Borrower owns the Collateral and the Intellectual Property, free of all Liens, except for Permitted Liens (except that there are no Liens whatsoever on the Intellectual Property). Borrower has the corporate power and authority to grant to Agent a Lien in the Collateral as security for the Secured Obligations.

5.3       Consents. Borrower’s execution, delivery and performance of this Agreement and all other Loan Documents (i) have been duly authorized by all necessary corporate action of Borrower, (ii) will not result in the creation or imposition of any Lien upon the Collateral, other than Permitted Liens and the Liens created by this Agreement and the other Loan Documents, (iii) do not violate any provisions of Borrower’s Certificate of Incorporation, bylaws, or any, law, regulation, order, injunction, judgment, decree or writ to which Borrower is subject and (iv) except as described on Schedule 5.3, do not violate any material contract or agreement or require the consent or approval of any other Person which has not already been obtained. The individual or individuals executing the Loan Documents are duly authorized to do so.

5.4       Material Adverse Effect. No event that has had or could reasonably be expected to have a Material Adverse Effect has occurred and is continuing. Borrower is not aware of any event likely to occur that is reasonably expected to result in a Material Adverse Effect.

5.5       Actions Before Governmental Authorities. There is no action, suit or proceeding at law or in equity or by or before any governmental authority now pending or, to the knowledge of Borrower, threatened against or affecting Borrower or its property, that is reasonably expected to result in a Material Adverse Effect.

5.6       Laws. Neither Borrower nor any of its Subsidiaries is in violation of any law, rule or regulation, or in default with respect to any judgment, writ, injunction or decree of any governmental authority, where such violation or default is reasonably expected to result in a Material Adverse Effect. Borrower is not in default in any manner under any provision of any agreement or instrument evidencing material Indebtedness, or any other material agreement to which it is a party or by which it is bound.

Neither Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” under the Investment Company Act of 1940, as amended. Neither Borrower nor any of its Subsidiaries is engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower and each of its Subsidiaries has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Neither Borrower’s nor any of its Subsidiaries’ properties or assets has been used by Borrower or such Subsidiary or, to Borrower’s Knowledge, by previous Persons, in disposing, producing, storing, treating, or transporting any hazardous substance other than in material compliance with applicable laws. Borrower and each of its Subsidiaries has obtained all material consents, approvals and authorizations of, made all declarations or filings with, and given all notices to, all Governmental Authorities that are necessary to continue their respective businesses as currently conducted.

None of Borrower, any of its Subsidiaries, or, to Borrower’s knowledge, any of Borrower’s or its Subsidiaries’ Affiliates or any of their respective agents acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement is (i) in violation of any Anti-Terrorism Law, (ii) engaging in or conspiring to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding or attempts to violate, any of the prohibitions set forth in any Anti-Terrorism Law, or (iii) is a Blocked Person. None of Borrower, any of its Subsidiaries, or to the knowledge of Borrower and any of their Affiliates or agents, acting or benefiting in any capacity in connection with the transactions contemplated by this Agreement, (x) conducts any business or engages in making or receiving any contribution of funds, goods or services to or for the benefit of any Blocked Person, or (y) deals in, or otherwise engages in any transaction relating to, any property or interest in property blocked pursuant to Executive Order No. 13224, any similar executive order or other Anti-Terrorism Law. None of the funds to be provided under this Agreement will be used, directly or indirectly, (a) for any activities in violation of any applicable anti-money laundering, economic sanctions and anti-bribery laws and regulations laws and regulations or (b) for any payment to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the United States Foreign Corrupt Practices Act of 1977, as amended.

5.7       Information Correct and Current. No information, report, Advance Request, financial statement, exhibit or schedule furnished, by or on behalf of Borrower to Agent in connection with any Loan Document or included therein or delivered pursuant thereto contained, or, when taken as a whole, contains or will contain any material misstatement of fact or, when taken together with all other such information or documents, omitted, omits or will omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were, are or will be made, not materially misleading at the time such statement was made or deemed made. Additionally, any and all financial or business projections provided by Borrower to Agent, whether prior to or after the Effective Date, shall be (i) provided in good faith and based on the most current data and information available to Borrower, and (ii) the most current of such projections provided to Borrower’s Board of Directors, in each case, as such projections may be updated in accordance with this Agreement.

5.8       Tax Matters. Except as described on Schedule 5.8, (a) Borrower and its Subsidiaries have filed all federal and state income Tax returns and other material Tax returns that they are required to file, (b) Borrower and its Subsidiaries have duly paid all federal and state income Taxes and other material Taxes or installments thereof that they are required to pay, except Taxes being contested in good faith by appropriate proceedings and for which Borrower and its Subsidiaries maintain adequate reserves in accordance with GAAP, and (c) to Borrower’s knowledge, no proposed or pending Tax assessments, deficiencies, audits or other proceedings with respect to Borrower or any Subsidiary have had, or could reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.

5.9       Intellectual Property Claims. Borrower is the sole owner of, or otherwise has the right to use, the Intellectual Property material to Borrower’s business. Except as described on Schedule 5.9, (i) each of the material Copyrights, Trademarks and Patents is valid and enforceable, (ii) no material part of the Intellectual Property has been judged invalid or unenforceable, in whole or in part, and (iii) no claim has been made to Borrower that any material part of the Intellectual Property violates the rights of any third party. Exhibit C is a true, correct and complete list of each of Borrower’s Patents, registered Trademarks, registered Copyrights, and material agreements under which Borrower licenses Intellectual Property from third parties (other than shrink-wrap software licenses), together with application or registration numbers, as applicable, owned by Borrower or any Subsidiary, in each case as of the Effective Date. Borrower is not in material breach of, nor has Borrower failed to perform any material obligations under, any of the foregoing contracts, licenses or agreements and, to Borrower’s knowledge, no third party to any such contract, license or agreement is in material breach thereof or has failed to perform any material obligations thereunder.

5.10       Intellectual Property. Except as described on Schedule 5.10, Borrower has all material rights with respect to Intellectual Property necessary or material in the operation or conduct of Borrower’s business as currently conducted and proposed to be conducted by Borrower. Without limiting the generality of the foregoing, and in the case of Licenses, except for restrictions that are unenforceable under Division 9 of the UCC, Borrower has the right, to the extent required to operate Borrower’s business, to freely transfer, license or assign Intellectual Property necessary or material in the operation or conduct of Borrower’s business as currently conducted and proposed to be conducted by Borrower, without condition, restriction or payment of any kind (other than license payments in the ordinary course of business) to any third party, and Borrower owns or has the right to use, pursuant to valid licenses, all software development tools, library functions, compilers and all other third-party software and other items that are material to Borrower’s business and used in the design, development, promotion, sale, license, manufacture, import, export, use or distribution of Borrower Products except customary covenants in inbound license agreements and equipment leases where Borrower is the licensee or lessee. Borrower is not a party to, nor is it bound by, any Restricted License.

No material software or other materials used by Borrower or any of its Subsidiaries (or used in any Borrower Products or any Subsidiaries’ products) are subject to an open-source or similar license (including but not limited to the General Public License, Lesser General Public License, Mozilla Public License, or Affero License) (collectively, “Open Source Licenses”) in a manner that would cause such software or other materials to have to be (i) distributed to third parties at no charge or a minimal charge (royalty-free basis); (ii) licensed to third parties to modify, make derivative works based on, decompile, disassemble, or reverse engineer; or (iii) used in a manner that does could require disclosure or distribution in source code form.

5.11       Borrower Products. Except as described on Schedule 5.11, no Intellectual Property owned by Borrower or Borrower Product has been or is subject to any actual or, to the knowledge of Borrower, threatened litigation, proceeding (including any proceeding in the United States Patent and Trademark Office or any corresponding foreign office or agency) or outstanding decree, order, judgment, settlement agreement or stipulation that restricts in any manner Borrower’s use, transfer or licensing thereof or that may affect the validity, use or enforceability thereof. There is no decree, order, judgment, agreement, stipulation, arbitral award or other provision entered into in connection with any litigation or proceeding that obligates Borrower to grant licenses or ownership interest in any future Intellectual Property related to the operation or conduct of the business of Borrower or Borrower Products. Borrower has not received any written notice or claim, or, to the knowledge of Borrower, oral notice or claim, challenging or questioning Borrower’s ownership in any Intellectual Property (or written notice of any claim challenging or questioning the ownership in any licensed Intellectual Property of the owner thereof) or suggesting that any third party has any claim of legal or beneficial ownership with respect thereto nor, to Borrower’s knowledge, is there a reasonable basis for any such claim. Neither Borrower’s use of its Intellectual Property nor the production and sale of Borrower Products infringes the Intellectual Property or other rights of others.

5.12       Financial Accounts. Exhibit D, as may be updated by the Borrower in a written notice provided to Agent after the Effective Date, is a true, correct and complete list of (a) all banks and other financial institutions at which Borrower or any Subsidiary maintains Deposit Accounts and (b) all institutions at which Borrower or any Subsidiary maintains an account holding Investment Property, and such exhibit correctly identifies the name, address and telephone number of each bank or other institution, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

5.13       Employee Loans. Borrower has no outstanding loans to any employee, officer or director of the Borrower nor has Borrower guaranteed the payment of any loan made to an employee, officer or director of the Borrower by a third party.

5.14       Subsidiaries. Borrower does not own any stock, partnership interest or other securities of any Person, except as shown on Schedule 5.14 and except for Permitted Investments. Attached as Schedule 5.14, as may be updated by Borrower in a written notice provided after the Effective Date, is a true, correct and complete list of each Subsidiary.

5.15       Benznidazole Matters. As of the Effective Date:

(a)       the MDC Agreement has not been as amended, modified or restated in any manner; and

(b)       Borrower and its Affiliates have ceased all Exploitation of all Acquired Assets and all Future Assets.

SECTION 6. INSURANCE; INDEMNIFICATION

6.1       Coverage. Borrower shall cause to be carried and maintained commercial general liability insurance, on an occurrence form, against risks customarily insured against in Borrower’s line of business and appropriate for Borrower’s organizational structure and business practices. Borrower must maintain a minimum of $1,000,000 of commercial general liability insurance and coverage under an umbrella policy in the minimum amount of $4,000,000 for each occurrence. Borrower has and agrees to maintain a minimum of $2,000,000 of directors’ and officers’ insurance for each occurrence and $5,000,000 in the aggregate, subject, in each case, to customary retentions for such insurance policies. So long as there are any Secured Obligations outstanding, Borrower shall also cause to be carried and maintained insurance upon the Collateral, insuring against all risks of physical loss or damage howsoever caused, in an amount not less than the full replacement cost of the Collateral; provided that such insurance may be subject to standard exceptions and deductibles. If Borrower fails to obtain the insurance called for by this Section 6.1 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document or which may be required to preserve the Collateral, Agent may obtain such insurance or make such payment, and all amounts so paid by Agent are immediately due and payable, bearing interest at the then highest rate applicable to the Secured Obligations, and secured by the Collateral.  Agent will make reasonable efforts to provide Borrower with notice of Agent obtaining such insurance at the time it is obtained or within a reasonable time thereafter.  No payments by Agent are deemed an agreement to make similar payments in the future or Agent’s waiver of any Event of Default.

6.2       Certificates. Borrower shall deliver to Agent certificates of insurance that evidence Borrower’s compliance with its insurance obligations in Section 6.1 and the obligations contained in this Section 6.2. Borrower’s insurance certificate shall state Agent (shown as “Hercules Capital, Inc., as Agent”) is an additional insured for commercial general liability, a lenders loss payable for all risk property damage insurance, subject to the insurer’s approval, and a lenders loss payable for property insurance and additional insured for liability insurance for any future insurance that Borrower may acquire from such insurer. Subject to Section 4.5, attached to the certificates of insurance will be additional insured endorsements for liability and lender’s loss payable endorsements for all risk property damage insurance. All certificates of insurance will provide for a minimum of thirty (30) days advance written notice to Agent of cancellation (other than cancellation for non-payment of premiums, for which ten (10) days’ advance written notice shall be sufficient). Any failure of Agent to scrutinize such insurance certificates for compliance is not a waiver of any of Agent’s rights, all of which are reserved. Borrower shall provide Agent with copies of each insurance policy, and upon entering or amending any insurance policy required hereunder, Borrower shall provide Agent with copies of such policies and shall promptly deliver to Agent updated insurance certificates with respect to such policies.

6.3       Indemnity. Borrower agrees to indemnify and hold Agent, the Lenders and their officers, directors, employees, agents, in-house attorneys, representatives and shareholders (each, an “Indemnified Person”) harmless from and against any and all claims, costs, expenses, damages and liabilities (including such claims, costs, expenses, damages and liabilities based on liability in tort, including strict liability in tort), including reasonable attorneys’ fees and disbursements (for a single firm of outside counsel to all similarly situated Indemnified Persons, other than in the case of (x) local counsel and bankruptcy counsel and (y) an actual or potential conflict of interest among Indemnified Persons) and other costs of investigation or defense (including those incurred upon any appeal) (collectively, “Liabilities”), that may be instituted or asserted against or incurred by such Indemnified Person as the result of credit having been extended, suspended or terminated under this Agreement and the other Loan Documents or the administration of such credit, or in connection with or arising out of the transactions contemplated hereunder and thereunder, or any actions or failures to act in connection therewith, or arising out of the disposition or utilization of the Collateral, excluding in all cases Liabilities to the extent resulting solely from any Indemnified Person’s gross negligence or willful misconduct. This Section 6.3 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages, etc. arising from any non-Tax claim. In no event shall any Indemnified Person be liable on any theory of liability for any special, indirect, consequential or punitive damages (including any loss of profits, business or anticipated savings). This Section 6.3 shall survive the repayment of indebtedness under, and otherwise shall survive the expiration or other termination of, this Agreement.

SECTION 7. COVENANTS OF BORROWER

Borrower agrees as follows:

7.1       Financial Reports. Borrower shall furnish to Agent the financial statements and reports listed hereinafter (the “Financial Statements”):

(a)       if Borrower’s Market Capitalization determined as of the last trading day of any month is less than $500,000,000, as soon as practicable (and in any event within thirty (30) days) after the end of each such month, unaudited interim and year-to-date financial statements as of the end of such month (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that could reasonably be expected to have a Material Adverse Effect, all certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, (ii) that they are subject to normal year end adjustments, and (iii) they do not contain certain non-cash items that are customarily included in quarterly and annual financial statements;

(b)       as soon as practicable (and in any event within forty-five (45) days) after the end of each calendar quarter, unaudited interim and year-to-date financial statements as of the end of such calendar quarter (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows accompanied by a report detailing any material contingencies (including the commencement of any material litigation by or against Borrower) or any other occurrence that could reasonably be expected to have a Material Adverse Effect, certified by Borrower’s Chief Executive Officer or Chief Financial Officer to the effect that they have been prepared in accordance with GAAP, except (i) for the absence of footnotes, and (ii) that they are subject to normal year end adjustments;

(c)       as soon as practicable (and in any event within ninety (90) days) after the end of each fiscal year, unqualified (other than a going concern qualification) audited financial statements as of the end of such year (prepared on a consolidated and consolidating basis, if applicable), including balance sheet and related statements of income and cash flows, and setting forth in comparative form the corresponding figures for the preceding fiscal year, certified by a firm of independent certified public accountants selected by Borrower and reasonably acceptable to Agent, accompanied by any management report from such accountants;

(d)       (i) if Borrower’s Market Capitalization determined as of the last trading day of any month is less than $500,000,000, as soon as practicable (and in any event within 30 days) after the end of each such month, a Compliance Certificate in the form of Exhibit E; (ii) if Borrower’s Market Capitalization determined as of the last trading day of any month is equal to or greater than $500,000,000, a Compliance Certificate in the form of Exhibit E solely with respect to Qualified Cash certifications for each month as well as other information regarding verification and certification of compliance with the financial covenants set forth in Section 7.20; and (iii) as soon as practicable (and in any event within 45 days) after the end of each quarter, a Compliance Certificate in the form of Exhibit E;

(e)       [reserved];

(f)       promptly after the sending or filing thereof, as the case may be, copies of any proxy statements, financial statements or reports that Borrower has made available to holders of its preferred stock and copies of any regular, periodic and special reports or registration statements that Borrower files with the Securities and Exchange Commission or any governmental authority that may be substituted therefor, or any national securities exchange;

(g)       [reserved];

(h)       an annual budget and financial and business projections promptly following their approval by Borrower’s Board of Directors, and in any event, within 45 days after the end of Borrower’s fiscal year; and

(i)       immediate notice if Borrower or any Subsidiary has knowledge that Borrower, or any Subsidiary or Affiliate of Borrower, is listed on the OFAC Lists or (a) is convicted on, (b) pleads nolo contendere to, (c) is indicted on, or (d) is arraigned and held over on charges involving money laundering or predicate crimes to money laundering.

The executed Compliance Certificate and all Financial Statements required to be delivered pursuant to clauses (a), (b), (c) and (d) shall be sent via e-mail to financialstatements@htgc.com with a copy to legal@htgc.com and hbhalla@htgc.com; provided that, if e-mail is not available or sending such Financial Statements via e-mail is not possible, they shall be faxed to Agent at: (650) 473-9194, attention Account Manager: Humanigen, Inc.

Notwithstanding the foregoing, documents required to be delivered under Sections 7.1(a), (b), (c) or (f) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date so filed with the SEC.

7.2       Management Rights. Borrower shall make available to Agent and the Lenders, and their respective attorneys and accountants, the books of account and records, including records regarding the Collateral, of Borrower by providing access to an electronic data room containing such information or otherwise electronically delivering such information to Agent upon not less than five (5) days’ prior written notice from Agent; provided that, to the extent Borrower has physical records of any of the foregoing, Borrower shall permit Agent and the Lenders, and their respective attorneys and accountants, to inspect the Collateral and examine and make copies and abstracts of the books of account and records of Borrower at reasonable times and upon reasonable notice during normal business hours; provided, however, that so long as no Event of Default has occurred and is continuing, such requests and examinations shall be limited to no more often than once per fiscal year. In addition, Agent and the Lenders, and their respective attorneys and accountants, shall have the right to meet with management and officers of Borrower at a mutually acceptable location to discuss such books of account and records; provided that, solely to the extent that Agent and Borrower mutually and reasonably agree that meeting in person is not practical due to the COVID-19 pandemic, such meetings may be by teleconference. In addition, Agent or the Lenders shall be entitled at reasonable times and intervals to consult with and advise the management and officers of Borrower concerning significant business issues affecting Borrower. Such consultations shall not unreasonably interfere with Borrower’s business operations. The parties intend that the rights granted Agent and the Lenders shall constitute “management rights” within the meaning of 29 C.F.R. Section 2510.3-101(d)(3)(ii), but that any advice, recommendations or participation by Agent or the Lenders with respect to any business issues shall not be deemed to give Agent or the Lenders, nor be deemed an exercise by Agent or the Lenders of, control over Borrower’s management or policies.

7.3       Further Assurances. Borrower shall from time to time execute, deliver and file, alone or with Agent, any financing statements, security agreements, collateral assignments, notices, control agreements, promissory notes or other documents to perfect, give the highest priority to Agent’s Lien on the Collateral (subject to any Permitted Liens permitted by this Agreement to have superior priority to Agent’s Lien on the Collateral) or otherwise evidence Agent’s rights herein. Borrower shall from time to time procure any instruments or documents as may be reasonably requested by Agent, and take all further action that may be necessary, or that Agent may reasonably request, to perfect and protect the Liens granted hereby and thereby. In addition, and for such purposes only, Borrower hereby authorizes Agent to execute and deliver on behalf of Borrower and to file such financing statements (including an indication that the financing statement covers “all assets or all personal property” of Borrower in accordance with Section 9-504 of the UCC), collateral assignments, notices, control agreements, security agreements and other documents without the signature of Borrower either in Agent’s name or in the name of Agent as agent and attorney-in-fact for Borrower. Borrower shall protect and defend Borrower’s title to the Collateral and Agent’s Lien thereon against all Persons claiming any interest adverse to Borrower or Agent other than Permitted Liens.

7.4       Indebtedness. Borrower shall not create, incur, assume, guarantee or be or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness, or prepay any Indebtedness or take any actions which impose on Borrower an obligation to prepay any Indebtedness, except for (a) the conversion of Indebtedness into equity securities and the payment of cash in lieu of fractional shares in connection with such conversion, (b) purchase money Indebtedness pursuant to its then applicable payment schedule, (c) prepayment by any Subsidiary of (i) intercompany Indebtedness owed by such Subsidiary to any Borrower, or (ii) if such Subsidiary is not a Borrower, intercompany Indebtedness owed by such Subsidiary to another Subsidiary that is not a Borrower or (d) as otherwise permitted hereunder or approved in writing by Agent.

Notwithstanding anything to the contrary in the foregoing, the issuance of, performance of obligations under (including any payments of interest), and conversion, exercise, repurchase, redemption (including, for the avoidance of doubt, a required repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the stock price of the Common Stock), settlement or early termination or cancellation of (whether in whole or in part and including by netting or set-off) (in each case, whether in cash, Common Stock, following a merger event or other change of the Common Stock, other securities or property), or the satisfaction of any condition that would permit or require any of the foregoing, any Permitted Convertible Debt shall not constitute a prepayment of Indebtedness by Borrower for the purposes of this Section 7.4; provided that principal payments in cash (other than cash in lieu of fractional shares) shall only be allowed if the Redemption Conditions are satisfied in respect of such payment and at all times after such payment; provided further that, to the extent both (a) the aggregate amount of cash payable upon conversion or payment of any Permitted Convertible Debt (excluding any required payment of interest with respect to such Permitted Convertible Debt and excluding any payment of cash in lieu of a fractional share due upon conversion thereof) exceeds the aggregate principal amount thereof and (b) such conversion or payment does not trigger or correspond to an exercise or early unwind or settlement of a corresponding portion of the Permitted Bond Hedge Transactions relating to such Permitted Convertible Debt (including, for the avoidance of doubt, the case where there is no Bond Hedge Transaction relating to such Permitted Convertible Debt), the payment of such excess cash shall not be permitted by the preceding sentence.

Notwithstanding the foregoing, Borrower may repurchase, exchange or induce the conversion of Permitted Convertible Debt by delivery of shares of Common Stock and/or a different series of Permitted Convertible Debt and/or by payment of cash (in an amount that does not exceed the proceeds received by Borrower from the substantially concurrent issuance of Common Stock and/or Permitted Convertible Debt plus the net cash proceeds, if any, received by Borrower pursuant to the related exercise or early unwind or termination of the related Permitted Bond Hedge Transactions and Permitted Warrant Transactions, if any, pursuant to the immediately following proviso); provided that, substantially concurrently with, or a commercially reasonable period of time before or after, the related settlement date for the Permitted Convertible Debt that is so repurchased, exchanged or converted, Borrower shall exercise or unwind or terminate early (whether in cash, shares or any combination thereof) the portion of the Permitted Bond Hedge Transactions and Permitted Warrant Transactions, if any, corresponding to such Permitted Convertible Debt that are so repurchased, exchanged or converted.

7.5       Collateral. Borrower shall at all times keep the Collateral, the Intellectual Property and all other property and assets used in Borrower’s business or in which Borrower now or hereafter holds any interest free and clear from any legal process or Liens whatsoever (except for Permitted Liens), and shall give Agent prompt written notice of any legal process affecting the Collateral, the Intellectual Property and such other property and assets, or any Liens thereon; provided, however, that the Collateral and such other property and assets may be subject to Permitted Liens, except that there shall be no Liens whatsoever on Intellectual Property. Borrower shall not agree with any Person other than Agent or the Lenders not to encumber its property (including the Intellectual Property). Borrower shall not enter into or suffer to exist or become effective any agreement that prohibits or limits the ability of any Borrower to create, incur, assume or suffer to exist any Lien upon any of its property (including Intellectual Property), whether now owned or hereafter acquired, to secure its obligations under the Loan Documents to which it is a party other than (a) this Agreement and the other Loan Documents, (b) any agreements governing any purchase money Liens or capital lease obligations otherwise permitted hereby (in which case, any prohibition or limitation shall only be effective against the assets financed thereby) and (c) customary restrictions on the assignment of leases, licenses and other agreements. Borrower shall cause its Subsidiaries to protect and defend such Subsidiary’s title to its assets from and against all Persons claiming any interest adverse to such Subsidiary, and Borrower shall cause its Subsidiaries at all times to keep such Subsidiary’s property and assets free and clear from any legal process or Liens whatsoever (except for Permitted Liens; provided, however, that there shall be no Liens whatsoever on Intellectual Property), and shall give Agent prompt written notice of any legal process affecting such Subsidiary’s assets.

7.6       Investments. Borrower shall not directly or indirectly acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries to do so, other than Permitted Investments.

7.7       Distributions. Borrower shall not, and shall not allow any Subsidiary to, (a) repurchase or redeem any class of stock or other Equity Interest other than pursuant to employee, director or consultant repurchase plans or other similar agreements; provided, however, in each case the repurchase or redemption price does not exceed the original consideration paid for such stock or Equity Interest, or (b) declare or pay any cash dividend or make any other cash distribution on any class of stock or other Equity Interest, except that a Subsidiary may pay dividends or make other distributions to Borrower or any Subsidiary of Borrower, or (c) lend money to any employees, officers or directors or guarantee the payment of any such loans granted by a third party in excess of (i) prior to the achievement of the Capital Raise Milestone, $250,000 and (ii) at all times following the achievement of the Capital Raise Milestone, $500,000, in each case in the aggregate or (d) waive, release or forgive any Indebtedness owed by any employees, officers or directors in excess of (i) prior to the achievement of the Capital Raise Milestone, $250,000 and (ii) at all times following the achievement of the Capital Raise Milestone, $500,000, in each case in the aggregate.

Notwithstanding the foregoing, and for the avoidance of doubt, this Section 7.7 shall not prohibit the conversion by holders of (including any payment upon conversion, whether in cash, Common Stock or a combination thereof), or required payment of any principal or premium on (including, for the avoidance of doubt, in respect of a required repurchase in connection with the redemption of Permitted Convertible Debt upon satisfaction of a condition related to the stock price of the Common Stock) or required payment of any interest with respect to, any Permitted Convertible Debt in each case, in accordance with the terms of the indenture governing such Permitted Convertible Debt; provided that principal payments in cash (other than cash in lieu of fractional shares) shall only be allowed if the Redemption Conditions are satisfied in respect of such payment and at all times after such payment; provided further that, to the extent both (a) the aggregate amount of cash payable upon conversion or payment of any Permitted Convertible Debt (excluding any required payment of interest with respect to such Permitted Convertible Debt and excluding any payment of cash in lieu of a fractional share due upon conversion thereof) exceeds the aggregate principal amount thereof and (b) such conversion or payment is not offset by an exercise or early unwind or settlement of a corresponding portion of the Bond Hedge Transactions relating to such Permitted Convertible Debt (including, for the avoidance of doubt, the case where there is no Bond Hedge Transaction relating to such Permitted Convertible Debt), the payment of such excess cash shall not be permitted by the preceding sentence.

Notwithstanding the foregoing, Borrower may repurchase, exchange or induce the conversion of Permitted Convertible Debt by delivery of Common Stock and/or a different series of Permitted Convertible Debt and/or by payment of cash (in an amount that does not exceed the proceeds received by Borrower from the substantially concurrent issuance of Common Stock and/or Permitted Convertible Debt plus the net cash proceeds, if any, received by Borrower pursuant to the related exercise or early unwind or termination of the related Permitted Bond Hedge Transactions and Permitted Warrant Transactions, if any, pursuant to the immediately following proviso); provided that, substantially concurrently with, or a commercially reasonable period of time before or after, the related settlement date for the Permitted Convertible Debt that is so repurchased, exchanged or converted, Borrower shall exercise or unwind or terminate early (whether in cash, shares or any combination thereof) the portion of the Permitted Bond Hedge Transactions and Permitted Warrant Transactions, if any, corresponding to such Permitted Convertible Debt that are so repurchased, exchanged or converted.

7.8       Transfers. Except for Permitted Transfers, Borrower shall not, and shall not allow any Subsidiary to, voluntarily or involuntarily transfer, sell, lease, license, lend or in any other manner convey any equitable, beneficial or legal interest in any material portion of its assets.

7.9       Mergers and Consolidations. Borrower shall not merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business organization (other than (i) Permitted Acquisitions and (ii) mergers or consolidations of (a) a Subsidiary which is not a Borrower into another Subsidiary or into Borrower or (b) a Borrower into another Borrower).

7.10       Taxes. Borrower shall, and shall cause each of its Subsidiaries to, pay when due all material Taxes of any nature whatsoever now or hereafter imposed or assessed against Borrower or the Collateral or upon Borrower’s ownership, possession, use, operation or disposition thereof or upon Borrower’s rents, receipts or earnings arising therefrom. Borrower shall, and shall cause each of its Subsidiaries to, accurately file on or before the due date therefor (taking into account proper extensions) all federal and state income Tax returns and other material Tax returns required to be filed. Notwithstanding the foregoing, Borrower and its Subsidiaries may contest, in good faith and by appropriate proceedings diligently conducted, Taxes for which Borrower and its Subsidiaries maintain adequate reserves in accordance with GAAP.

7.11       Corporate Changes. Neither Borrower nor any Subsidiary shall change its corporate name, legal form or jurisdiction of formation without twenty (20) days’ prior written notice to Agent. Neither Borrower nor any Subsidiary shall suffer a Change in Control. Neither Borrower nor any Subsidiary shall relocate its chief executive office or its principal place of business unless: (i) it has provided prior written notice to Agent; and (ii) such relocation shall be within the continental United States of America. Neither Borrower nor any Subsidiary shall relocate any item of Collateral (other than (x) sales of Inventory in the ordinary course of business, (y) relocations of Equipment having an aggregate value of up to (1) prior to the achievement of the Capital Raise Milestone, $150,000 and (2) at all times following the achievement of the Capital Raise Milestone, $300,000, in each case in any fiscal year, and (z) relocations of Collateral from a location described on Exhibit B to another location described on Exhibit B) unless (i) it has provided prompt written notice to Agent, (ii) such relocation is within the continental United States of America and, (iii) if such relocation is to a third party bailee, it has delivered a bailee agreement in form and substance reasonably acceptable to Agent. Notwithstanding the foregoing, it is understood and agreed that (1) Permitted Transfers and (2) the possession and use by employees, including remote employees, of mobile equipment, including phones, tablets and computers, and other similar items necessary for such employees to perform their respective jobs, in each case, in the ordinary course of Borrower’s business and not otherwise prohibited by this Agreement shall not constitute a violation of this Section 7.11.

7.12       Deposit Accounts. Neither Borrower nor any Subsidiary shall maintain any Deposit Accounts, or accounts holding Investment Property, except with respect to which Agent has an Account Control Agreement; provided that no Account Control Agreement shall be required with respect to Deposit Accounts (a) used solely to fund payroll or employee benefits maintained in the ordinary course of business, so long as such Deposit Accounts do not have more than the amount required to fund the next two payroll cycles on deposit therein or (b) which at no time have more than $250,000 on deposit therein (such Deposit Accounts in clauses (a) and (b), “Excluded Accounts”).

7.13       Additional Qualified Subsidiaries. Borrower shall notify Agent of each Subsidiary formed subsequent to the Effective Date and, within 15 Business Days of formation, shall cause any such Subsidiary that is a Qualified Subsidiary to execute and deliver to Agent a Joinder Agreement. With respect to any Subsidiary that is not a Qualified Subsidiary at such time, immediately upon any change in the U.S. tax laws that would result in such Subsidiary ceasing to be an Excluded Subsidiary, Borrower shall cause such Subsidiary to execute and deliver to Agent a Joinder Agreement.

7.14       Benznidazole Matters.

(a)       Borrower shall not and shall not permit any Affiliate to amend, modify or restate the MDC Agreement in any manner without the prior written consent of Agent or as required by applicable law or court order (including, without limitation, in connection with any settlement of the Savant Litigation or any other litigation related thereto).

(b)       Borrower shall not and shall not permit any Affiliate to Exploit any Acquired Assets or any Future Assets without the prior written consent of Agent or as required by applicable law or court order (including, without limitation, in connection with any settlement of the Savant Litigation or any other litigation related to the MDC Agreement).

7.15       Notification of Event of Default. Borrower shall notify Agent promptly upon, and in any event within three Business Days of, Borrower obtaining knowledge of the occurrence of any Event of Default.

7.16       [Reserved].

7.17       Use of Proceeds. Borrower agrees that the proceeds of the Loans shall be used solely to pay related fees and expenses in connection with this Agreement and for working capital and general corporate purposes. The proceeds of the Loans Credit will not be used in violation of Anti-Corruption Laws or applicable Sanctions.

7.18       [Reserved].

7.19       Compliance with Laws.

Borrower shall maintain, and shall cause its Subsidiaries to maintain, compliance in all material respects with all applicable laws, rules or regulations (including any law, rule or regulation with respect to the making or brokering of loans or financial accommodations), and shall, or cause its Subsidiaries to, obtain and maintain all required governmental authorizations, approvals, licenses, franchises, permits or registrations reasonably necessary in connection with the conduct of Borrower’s business.

Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries permit any Affiliate to, directly or indirectly, knowingly enter into any documents, instruments, agreements or contracts with any Person listed on the OFAC Lists. Neither Borrower nor any of its Subsidiaries shall, nor shall Borrower or any of its Subsidiaries, permit any Affiliate to, directly or indirectly, (i) conduct any business or engage in any transaction or dealing with any Blocked Person, including, without limitation, the making or receiving of any contribution of funds, goods or services to or for the benefit of any Blocked Person, (ii) deal in, or otherwise engage in any transaction relating to, any property or interests in property blocked pursuant to Executive Order No. 13224 or any similar executive order or other Anti-Terrorism Law, or (iii) engage in or conspire to engage in any transaction that evades or avoids, or has the purpose of evading or avoiding, or attempts to violate, any of the prohibitions set forth in Executive Order No. 13224 or other Anti-Terrorism Law.

Borrower has implemented and maintains in effect policies and procedures designed to ensure compliance by the Borrower, its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Borrower, its Subsidiaries and their respective officers and employees and to the knowledge of Borrower its directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects.

None of Borrower, any of its Subsidiaries or any of their respective directors, officers or employees, or to the knowledge of Borrower, any agent for Borrower or its Subsidiaries that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Loan, use of proceeds or other transaction contemplated by this Agreement will violate Anti-Corruption Laws or applicable Sanctions.

7.20       Financial Covenants.

(a)       Minimum Cash.

(i)       Borrower shall maintain, at all times, Qualified Cash in an amount greater than or equal to, subject to clause (b) below, (A) after the Initial Advance Date and until the achievement of the EUA Milestone 1, $10,000,000 plus the Qualified Cash A/P Amount and (B) on and after the Advance Date for any Tranche 2 Advance and until achievement of the BLA Milestone, $20,000,000 plus the Qualified Cash A/P Amount. The requirements in this Section 7.20(a)(i) shall be waived for any date that Borrower’s Market Capitalization exceeds $700,000,000 on such date.

(ii)       If Borrower makes a cash payment in respect of Permitted Convertible Debt subject to satisfaction of the Redemption Conditions, Borrower shall, at all times thereafter, maintain Qualified Cash in the amount required by the defined term “Redemption Conditions”.

(b)       If Lenders have converted a portion of the Loan into shares of Common Stock pursuant to Section 8.2, the minimum amounts of Qualified Cash required by Section 7.20(a)(i)(A) and (B) shall be permanently reduced by the amount equal to (such amount, the “Minimum Cash Reduction Amount”) 50% of the Loan that has so been converted into Common Stock pursuant to Section 8.2.

7.21       Intellectual Property. Each Borrower shall (i) protect, defend and maintain the validity and enforceability of its material Intellectual Property; (ii) promptly advise Agent in writing of material infringements of its Intellectual Property; and (iii) not allow any Intellectual Property material to Borrowers’ business to be abandoned, forfeited or dedicated to the public without Agent’s written consent.

7.22       Transactions with Affiliates. Borrower shall not and shall not permit any Subsidiary to, directly or indirectly, enter into or permit to exist any transaction of any kind with any Affiliate of Borrower or such Subsidiary on terms that are less favorable to Borrower or such Subsidiary, as the case may be, than those that might be obtained in an arm’s length transaction from a Person who is not an Affiliate of Borrower or such Subsidiary.

SECTION 8. RIGHT TO invest; RIGHT TO CONVERT

8.1       Borrower shall use commercially reasonable efforts to cause the managing underwriters of any Subsequent Offering conducted on or prior to the thirty six (36) month anniversary of the Initial Advance Date to offer Hercules Capital, Inc. the right, in its respective sole discretion, to participate in such Subsequent Financing in an amount of up to $2,000,000 on the same terms, conditions and pricing afforded to other unaffiliated prospective investors participating in any such Subsequent Financing. This Section 8.1, and all rights and obligations hereunder, shall survive the repayment of indebtedness under, and otherwise shall survive the expiration or other termination of, this Agreement.

8.2       Conversion at Lenders’ Election.

(a)       Conversion Election. Lenders may jointly elect at any time and from time to time during the Conversion Election Period to convert any portion of the principal amount of the Loans then outstanding (the “Conversion Amount”) into shares of Common Stock (“Conversion Shares”) at the Conversion Price pursuant to a Conversion Election Notice, to be delivered at the direction of Lenders by Agent to Borrower, provided that the aggregate principal amount converted to Common Stock in accordance with this Section 8.2 shall not exceed $5,000,000 (if the Conversion Election Notice is delivered after achievement of the BLA Milestone) or $10,000,000 (if the Conversion Election Notice is delivered by or before achievement of the BLA Milestone), as applicable. A Conversion Election Notice, once delivered, shall be irrevocable unless otherwise agreed in writing by Borrower. Not later than the third trading day after a Conversion Election Notice has been duly delivered in accordance with the foregoing, Borrower shall credit to each Designated Holder a number of Conversion Shares equal to (x) the Conversion Amount indicated in the applicable Conversion Election Notice divided by (y) Conversion Price. For the avoidance of doubt, no premium or penalty shall apply to principal amounts converted pursuant to this Section 8.2.

(b)       Reservation of Shares. Borrower shall reserve from its duly authorized capital stock not less than the number of shares of Common Stock that may be issuable pursuant to this Section 8.2. Upon issuance of Conversion Shares pursuant to this Section 8.2, such shares shall be validly issued, fully paid and non-assessable and free from all preemptive or similar rights, taxes, liens and charges with respect to the issue thereof.

(c)       Rule 144. With a view to making available to Designated Holders the benefits of Rule 144 (or its successor rule) and any other rule or regulation of the Securities and Exchange Commission (the “SEC”) that may at any time permit Designated Holders to sell shares of Common Stock issued pursuant to a Conversion Election Notice to the public without registration, Borrower covenants and agrees to: (i) use commercially reasonable efforts to make and keep public information available, as those terms are understood and defined in Rule 144, until six (6) months after such date as all of Conversion Shares issued may be sold without restriction by Designated Holders pursuant to Rule 144 or any other rule of similar effect; (ii) use commercially reasonable efforts to file with the SEC in a timely manner (or obtain extensions in respect thereof and file within the applicable grace period) all reports and other documents required of Borrower under the 1934 Act; and (iii) furnish to Designated Holders, upon request, as long as Designated Holders own any shares of Common Stock issued pursuant to a Conversion Election Notice, such information as may be reasonably requested in order to avail Designated Holders of any rule or regulation of the SEC that permits the selling of any Conversion Shares issued without registration.

(d)       [Reserved].

(e)       [Reserved].

(f)       Limitations on Conversion.

(i)        Beneficial Ownership. Notwithstanding anything herein to the contrary, Borrower shall not issue a number of Conversion Shares pursuant to this Section 8.2 to the extent that, upon such issuance, the number of shares of Common Stock then beneficially owned by each Designated Holder and its Affiliates and any group of other Persons whose beneficial ownership of Common Stock would be aggregated with such Designated Holder’s for purposes of Section 13(d) of the Exchange Act would exceed 9.985% of the total number of shares of Common Stock then issued and outstanding (the “9.985% Cap”); provided that the 9.985% Cap shall only apply to the extent that the Common Stock is deemed to constitute an “equity security” pursuant to Rule 13d-1(i) promulgated under the Exchange Act, provided further that Lenders shall have the right, upon 61 days’ prior written notice to Borrower, to waive the 9.985% Cap.

(ii)       Principal Market Regulation. Borrower shall not issue a number of Conversion Shares pursuant to this Section 8.2, if the issuance of such shares together with any previously issued Conversion Shares, would result in (A) the issuance of more than 19.99% of the Common Stock outstanding as of the date of this Agreement or (B) Lenders, together with their Affiliates and any group of other Persons whose beneficial ownership of Common Stock would be aggregated with such Designated Holder’s for purposes of Section 13(d) of the Exchange Act, beneficially owning in excess of 19.99% of the then outstanding Common Stock.

(iii)       Beneficial Ownership Determination. For purposes of this Section 8.2, “group” has the meaning set forth in Section 13(d) of the Exchange Act and applicable regulations of the SEC, and the percentage held by each Designated Holder shall be determined in a manner consistent with the provisions of Section 13(d) of the Exchange Act. Upon the written request of Agent, Borrower shall, within two (2) trading days, confirm to Agent the number of Shares then outstanding. As used herein, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act.

SECTION 9. EVENTS OF DEFAULT

The occurrence of any one or more of the following events shall be an Event of Default:

9.1       Payments. Borrower fails to pay any amount (i) of principal or interest due under this Agreement or any of the other Loan Documents on the due date or (ii) fees and other amounts due under this Agreement or any of the other Loan Documents within three (3) Business Days following the due date thereof; provided, however, that an Event of Default shall not occur on account of a failure to pay due solely to an administrative or operational error of Agent or the Lenders or Borrower’s bank if Borrower had the funds to make the payment when due and makes the payment within three (3) Business Days following Borrower’s knowledge of such failure to pay; or

9.2       Covenants. Borrower breaches or defaults in the performance of any covenant or Secured Obligation under this Agreement, or any of the other Loan Documents or any other agreement among Borrower, Agent and the Lenders, and (a) with respect to a default under any covenant under this Agreement (other than under Sections 4.5, 6 and 7), any other Loan Document, or any other agreement among Borrower, Agent and the Lenders, such default continues for more than twenty (20) days after the earlier of the date on which (i) Agent or the Lenders has given notice of such default to Borrower and (ii) Borrower has actual knowledge of such default or (b) with respect to a default under any of Sections 4.5, 6 and 7, the occurrence of such default; or

9.3       Material Adverse Effect. A circumstance has occurred that could reasonably be expected to have a Material Adverse Effect; provided that, solely for purposes of this Section 9.3, the occurrence of any of the following, in and of itself, shall not constitute a Material Adverse Effect: (i) adverse results or delays in any nonclinical or clinical trial, including, without limitation, the failure to demonstrate the desired safety or efficacy of any drug or companion diagnostic; (ii) the denial, delay or limitation of approval of, or taking of any other regulatory action by, the United States Food and Drug Administration or any other governmental entity with respect to any drug or companion diagnostic; or (iii) any failure to achieve the BLA Milestone, the Capital Raise Milestone, the EUA Milestone 1 or the EUA Milestone 2, so long as in each case the same does not affect the ability of Borrower to perform the Secured Obligations; or

9.4       Representations. Any representation or warranty made by Borrower in any Loan Document shall have been false or misleading in any material respect when made or when deemed made; or

9.5       Insolvency. Borrower (A) (i) shall make an assignment for the benefit of creditors; or (ii) shall be unable to pay its debts as they become due, or be unable to pay or perform under the Loan Documents, or shall become insolvent; or (iii) shall file a voluntary petition in bankruptcy; or (iv) shall file any petition, answer, or document seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation pertinent to such circumstances; or (v) shall seek or consent to or acquiesce in the appointment of any trustee, receiver, or liquidator of Borrower or of all or any substantial part (i.e., 33-1/3% or more) of the assets or property of Borrower; or (vi) shall cease operations of its business as its business has normally been conducted, or terminate substantially all of its employees; or (vii) Borrower or its directors or majority shareholders shall take any action initiating any of the foregoing actions described in clauses (i) through (vi); or (B) either (i) forty five (45) days shall have expired after the commencement of an involuntary action against Borrower seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future statute, law or regulation, without such action being dismissed or all orders or proceedings thereunder affecting the operations or the business of Borrower being stayed; or (ii) a stay of any such order or proceedings shall thereafter be set aside and the action setting it aside shall not be timely appealed; or (iii) Borrower shall file any answer admitting or not contesting the material allegations of a petition filed against Borrower in any such proceedings; or (iv) the court in which such proceedings are pending shall enter a decree or order granting the relief sought in any such proceedings; or (v) forty five (45) days shall have expired after the appointment, without the consent or acquiescence of Borrower, of any trustee, receiver or liquidator of Borrower or of all or any substantial part of the properties of Borrower without such appointment being vacated; or

9.6       Attachments; Judgments. Any portion of Borrower’s assets is attached or seized, or a levy is filed against any such assets with a fair market value in excess of, or a judgment or judgments is/are entered for the payment of money (not covered by independent third party insurance as to which liability has not been rejected by such insurance carrier), individually or in the aggregate, of at least $5,000,000, or Borrower is enjoined or in any way prevented by court order from conducting any part of its business; or

9.7       Other Obligations. The occurrence of any default under any agreement or obligation of Borrower involving any Indebtedness in excess of (a) prior to the achievement of the Capital Raise Milestone, $2,500,000 and (b) at all times following the achievement of the Capital Raise Milestone, $5,000,000, or any other material agreement or obligation, or any early payment is required or unwinding or termination occurs with respect to any Permitted Bond Hedge Transaction or Permitted Warrant Transaction, or any condition giving rise to the foregoing is met, in each case, with respect to which Borrower or its Affiliate is the “affected party” or “defaulting party” under the terms of such Permitted Bond Hedge Transaction or Permitted Warrant Transaction, if a Material Adverse Effect could reasonably be expected to result from such default, early payment, unwinding or termination.

SECTION 10. REMEDIES

10.1       General. Upon the occurrence of any one or more Events of Default, Agent may, and at the direction of the Required Lenders shall, accelerate and demand payment of all or any part of the Secured Obligations together with a Prepayment Charge and declare them to be immediately due and payable (provided that, upon the occurrence of an Event of Default of the type described in Section 9.5, all of the Secured Obligations (including, without limitation, the Prepayment Charge and the End of Term Charge) shall automatically be accelerated and made due and payable, in each case without any further notice or act). Borrower hereby irrevocably appoints Agent as its lawful attorney-in-fact to:  (a) exercisable following the occurrence of an Event of Default, (i) sign Borrower’s name on any invoice or bill of lading for any account or drafts against account debtors; (ii) demand, collect, sue, and give releases to any account debtor for monies due, settle and adjust disputes and claims about the accounts directly with account debtors, and compromise, prosecute, or defend any action, claim, case, or proceeding about any Collateral (including filing a claim or voting a claim in any bankruptcy case in Agent’s or Borrower’s name, as Agent may elect); (iii) make, settle, and adjust all claims under Borrower’s insurance policies; (iv) pay, contest or settle any Lien, charge, encumbrance, security interest, or other claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to terminate or discharge the same; (v) transfer the Collateral into the name of Agent or a third party as the UCC permits; and (vi) receive, open and dispose of mail addressed to Borrower; and (b) regardless of whether an Event of Default has occurred, (i) endorse Borrower’s name on any checks, payment instruments, or other forms of payment or security; and (ii) notify all account debtors to pay Agent directly.  Borrower hereby appoints Agent as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to perfect or continue the perfection of Agent’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Secured Obligations have been satisfied in full and the Loan Documents have been terminated.  Agent’s foregoing appointment as Borrower’s attorney in fact, and all of Agent’s rights and powers, coupled with an interest, are irrevocable until all Secured Obligations have been fully repaid and performed and the Loan Documents have been terminated. Agent may, and at the direction of the Required Lenders shall, exercise all rights and remedies with respect to the Collateral under the Loan Documents or otherwise available to it under the UCC and other applicable law, including the right to release, hold, sell, lease, liquidate, collect, realize upon, or otherwise dispose of all or any part of the Collateral and the right to occupy, utilize, process and commingle the Collateral. All Agent’s rights and remedies shall be cumulative and not exclusive.

10.2       Collection; Foreclosure. Upon the occurrence and during the continuance of any Event of Default, Agent may, and at the direction of the Required Lenders shall, at any time or from time to time, apply, collect, liquidate, sell in one or more sales, lease or otherwise dispose of, any or all of the Collateral, in its then condition or following any commercially reasonable preparation or processing, in such order as Agent may elect. Any such sale may be made either at public or private sale at its place of business or elsewhere. Borrower agrees that any such public or private sale may occur upon ten (10) calendar days’ prior written notice to Borrower. Agent may require Borrower to assemble the Collateral and make it available to Agent at a place designated by Agent that is reasonably convenient to Agent and Borrower. The proceeds of any sale, disposition or other realization upon all or any part of the Collateral shall be applied by Agent in the following order of priorities:

First, to Agent and the Lenders in an amount sufficient to pay in full Agent’s and the Lenders’ reasonable costs and professionals’ and advisors’ fees and expenses as described in Section 11.12;

Second, to the Lenders in an amount equal to the then unpaid amount of the Secured Obligations (including principal, interest, and the Default Rate interest), in such order and priority as Agent may choose in its sole discretion; and

Finally, after the full and final payment in Cash of all of the Secured Obligations (other than inchoate obligations), to any creditor holding a junior Lien on the Collateral, or to Borrower or its representatives or as a court of competent jurisdiction may direct.

Agent shall be deemed to have acted reasonably in the custody, preservation and disposition of any of the Collateral if it complies with the obligations of a secured party under the UCC.

10.3       No Waiver. Agent shall be under no obligation to marshal any of the Collateral for the benefit of Borrower or any other Person, and Borrower expressly waives all rights, if any, to require Agent to marshal any Collateral.

10.4       Cumulative Remedies. The rights, powers and remedies of Agent hereunder shall be in addition to all rights, powers and remedies given by statute or rule of law and are cumulative. The exercise of any one or more of the rights, powers and remedies provided herein shall not be construed as a waiver of or election of remedies with respect to any other rights, powers and remedies of Agent.

SECTION 11. MISCELLANEOUS

11.1       Severability. Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by or invalid under such law, such provision shall be ineffective only to the extent and duration of such prohibition or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

11.2       Notice. Except as otherwise provided herein, any notice, demand, request, consent, approval, declaration, service of process or other communication (including the delivery of Financial Statements) that is required, contemplated, or permitted under the Loan Documents or with respect to the subject matter hereof shall be in writing, and shall be deemed to have been validly served, given, delivered, and received upon the earlier of: (i) the day of transmission by electronic mail or hand delivery or delivery by an overnight express service or overnight mail delivery service; or (ii) the third calendar day after deposit in the United States of America mails, with proper first class postage prepaid, in each case addressed to the party to be notified as follows; provided that any such written communication to Borrower shall be provided by electronic mail to the address noted below:

(a)            If to Agent:

HERCULES CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer and Himani Bhalla
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
email: legal@htgc.com and hbhalla@htgc.com
Telephone: 650-289-3060

(b)            If to the Lenders:

HERCULES CAPITAL, INC.
Legal Department
Attention: Chief Legal Officer and Himani Bhalla
400 Hamilton Avenue, Suite 310
Palo Alto, CA 94301
email: legal@htgc.com and hbhalla@htgc.com
Telephone: 650-289-3060

(c)            If to Borrower:

HUMANIGEN, INC.

Attention: Chief Operating Officer/Chief Financial Officer
533 Airport Blvd. Suite 400
Burlingame, CA 94010
email: tmorris@humanigen.com and info@humanigen.com

or to such other address as each party may designate for itself by like notice.

11.3       Entire Agreement; Amendments.

(a)       This Agreement and the other Loan Documents constitute the entire agreement and understanding of the parties hereto in respect of the subject matter hereof and thereof, and supersede and replace in their entirety any prior proposals, term sheets, non-disclosure or confidentiality agreements, letters, negotiations or other documents or agreements, whether written or oral, with respect to the subject matter hereof or thereof (including Agent’s revised proposal letter dated February 7, 2021 and the Non-Disclosure Agreement).

(b)       Neither this Agreement, any other Loan Document, nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of this Section 11.3(b). The Required Lenders and Borrower party to the relevant Loan Document may, or, with the written consent of the Required Lenders, the Agent and the Borrower party to the relevant Loan Document may, from time to time, (i) enter into written amendments, supplements or modifications hereto and to the other Loan Documents for the purpose of adding any provisions to this Agreement or the other Loan Documents or changing in any manner the rights of the Lenders or of the Borrower hereunder or thereunder or (ii) waive, on such terms and conditions as the Required Lenders or the Agent, as the case may be, may specify in such instrument, any of the requirements of this Agreement or the other Loan Documents or any default or Event of Default and its consequences; provided, however, that no such waiver and no such amendment, supplement or modification shall (A) forgive the principal amount or extend the final scheduled date of maturity of any Loan, extend the scheduled date of any amortization payment in respect of any Term Loan, reduce the stated rate of any interest (or fee payable hereunder) or extend the scheduled date of any payment thereof, in each case without the written consent of each Lender directly affected thereby; (B) eliminate or reduce the voting rights of any Lender under this Section 11.3(b) without the written consent of such Lender; (C) reduce any percentage specified in the definition of Required Lenders, consent to the assignment or transfer by the Borrower of any of its rights and obligations under this Agreement and the other Loan Documents, release all or substantially all of the Collateral or release a Borrower from its obligations under the Loan Documents, in each case without the written consent of all Lenders; or (D) amend, modify or waive any provision of Section 11.18 or Addendum 2 without the written consent of the Agent. Any such waiver and any such amendment, supplement or modification shall apply equally to each Lender and shall be binding upon Borrower, the Lender, the Agent and all future holders of the Loans.

11.4       No Strict Construction. The parties hereto have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement.

11.5       No Waiver. The powers conferred upon Agent and the Lenders by this Agreement are solely to protect its rights hereunder and under the other Loan Documents and its interest in the Collateral and shall not impose any duty upon Agent or the Lenders to exercise any such powers. No omission or delay by Agent or the Lenders at any time to enforce any right or remedy reserved to it, or to require performance of any of the terms, covenants or provisions hereof by Borrower at any time designated, shall be a waiver of any such right or remedy to which Agent or the Lenders is entitled, nor shall it in any way affect the right of Agent or the Lenders to enforce such provisions thereafter.

11.6       Survival. All agreements, representations and warranties contained in this Agreement and the other Loan Documents or in any document delivered pursuant hereto or thereto shall be for the benefit of Agent and the Lenders and shall survive the execution and delivery of this Agreement. Sections 6.3, 8.1, 11.14, 11.15 and 11.17 shall survive the termination of this Agreement.

11.7       Successors and Assigns. The provisions of this Agreement and the other Loan Documents shall inure to the benefit of and be binding on Borrower and its permitted assigns (if any). Borrower shall not assign its obligations under this Agreement or any of the other Loan Documents without Agent’s express prior written consent, and any such attempted assignment shall be void and of no effect. Agent and the Lenders may assign, transfer, or endorse its rights hereunder and under the other Loan Documents without prior notice to Borrower, and all of such rights shall inure to the benefit of Agent’s and the Lenders’ successors and assigns; provided that, as long as no Event of Default has occurred and is continuing, (a) neither Agent nor any Lender shall sell or assign all or any part of its interest hereunder to a non-Affiliate without the consent of Borrower (not to be unreasonably withheld, delayed or conditioned); provided that Borrower shall be deemed to have consented to any such sale or assignment if such sale or assignment is not rejected within ten (10) Business Days of the request for consent therefor and (b) neither Agent nor any Lender may assign, transfer or endorse its rights hereunder or under the Loan Documents to any party that is a direct competitor of Borrower (as reasonably determined by Agent), it being acknowledged that in all cases, any transfer to an Affiliate of any Lender or Agent shall be allowed. Notwithstanding the foregoing, (x) in connection with any assignment by a Lender as a result of a forced divestiture at the request of any regulatory agency, the restrictions set forth herein shall not apply and Agent and the Lenders may assign, transfer or indorse its rights hereunder and under the other Loan Documents to any Person or party and (y) in connection with a Lender’s own financing or securitization transactions, the restrictions set forth herein shall not apply and Agent and the Lenders may assign, transfer or indorse its rights hereunder and under the other Loan Documents to any Person or party providing such financing or formed to undertake such securitization transaction and any transferee of such Person or party upon the occurrence of a default, event of default or similar occurrence with respect to such financing or securitization transaction; provided that no such sale, transfer, pledge or assignment under this clause (y) shall release such Lender from any of its obligations hereunder or substitute any such Person or party for such Lender as a party hereto until Agent shall have received and accepted an effective assignment agreement from such Person or party in form satisfactory to Agent executed, delivered and fully completed by the applicable parties thereto, and shall have received such other information regarding such assignee as Agent reasonably shall require. The Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at one of its offices in the United States a register for the recordation of the names and addresses of the Lender(s), and the Term Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “Register”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Agent and the Lender(s) shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Borrower and any Lender, at any reasonable time and from time to time upon reasonable prior notice.

11.8          Participations. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each participant and the principal amounts (and stated interest) of each participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any participant or any information relating to a participant’s interest in any commitments, loans, its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Agent (in its capacity as Agent) shall have no responsibility for maintaining a Participant Register. Borrower agrees that each participant shall be entitled to the benefits of the provisions in Addendum 1 attached hereto (subject to the requirements and limitations therein, including the requirements under Section 7 of Addendum 1 attached hereto (it being understood that the documentation required under Section 7 of Addendum 1 attached hereto shall be delivered to the participating Lender)) to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 11.7; provided that such participant shall not be entitled to receive any greater payment under Addendum 1 attached hereto, with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a change in law that occurs after the participant acquired the applicable participation.

11.9          Governing Law. This Agreement and the other Loan Documents have been negotiated and delivered to Agent and the Lenders in the State of California, and shall have been accepted by Agent and the Lenders in the State of California. Payment to Agent and the Lenders by Borrower of the Secured Obligations is due in the State of California. This Agreement and the other Loan Documents shall be governed by, and construed and enforced in accordance with, the laws of the State of California, excluding conflict of laws principles that would cause the application of laws of any other jurisdiction.

11.10        Consent to Jurisdiction and Venue. All judicial proceedings (to the extent that the reference requirement of Section 11.11 is not applicable) arising in or under or related to this Agreement or any of the other Loan Documents may be brought in any state or federal court located in the State of California. By execution and delivery of this Agreement, each party hereto generally and unconditionally: (a) consents to nonexclusive personal jurisdiction in Santa Clara County, State of California; (b) waives any objection as to jurisdiction or venue in Santa Clara County, State of California; (c) agrees not to assert any defense based on lack of jurisdiction or venue in the aforesaid courts; and (d) irrevocably agrees to be bound by any judgment rendered thereby in connection with this Agreement or the other Loan Documents. Service of process on any party hereto in any action arising out of or relating to this Agreement shall be effective if given in accordance with the requirements for notice set forth in Section 11.2, and shall be deemed effective and received as set forth in Section 11.2. Nothing herein shall affect the right to serve process in any other manner permitted by law or shall limit the right of either party to bring proceedings in the courts of any other jurisdiction.

11.11        Mutual Waiver of Jury Trial / Judicial Reference.

(a)       Because disputes arising in connection with complex financial transactions are most quickly and economically resolved by an experienced and expert Person and the parties wish applicable state and federal laws to apply (rather than arbitration rules), the parties desire that their disputes be resolved by a judge applying such applicable laws. EACH OF BORROWER, AGENT AND THE LENDERS SPECIFICALLY WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY OF ANY CAUSE OF ACTION, CLAIM, CROSS-CLAIM, COUNTERCLAIM, THIRD PARTY CLAIM OR ANY OTHER CLAIM (COLLECTIVELY, “CLAIMS”) ASSERTED BY BORROWER AGAINST AGENT, THE LENDERS OR THEIR RESPECTIVE ASSIGNEE OR BY AGENT, THE LENDERS OR THEIR RESPECTIVE ASSIGNEE AGAINST BORROWER. This waiver extends to all such Claims, including Claims that involve Persons other than Agent, Borrower and the Lenders; Claims that arise out of or are in any way connected to the relationship among Borrower, Agent and the Lenders; and any Claims for damages, breach of contract, tort, specific performance, or any equitable or legal relief of any kind, arising out of this Agreement, any other Loan Document.

(b)       If the waiver of jury trial set forth in Section 11.11(a) is ineffective or unenforceable, the parties agree that all Claims shall be resolved by reference to a private judge sitting without a jury, pursuant to Code of Civil Procedure Section 638, before a mutually acceptable referee or, if the parties cannot agree, a referee selected by the Presiding Judge of the Santa Clara County, California. Such proceeding shall be conducted in Santa Clara County, California, with California rules of evidence and discovery applicable to such proceeding.

(c)       In the event Claims are to be resolved by judicial reference, either party may seek from a court identified in Section 11.10, any prejudgment order, writ or other relief and have such prejudgment order, writ or other relief enforced to the fullest extent permitted by law notwithstanding that all Claims are otherwise subject to resolution by judicial reference.

11.12       Professional Fees. Borrower promises to pay Agent’s and the Lenders’ fees and expenses necessary to finalize the loan documentation, including but not limited to reasonable attorneys’ fees, UCC searches, filing costs, and other miscellaneous expenses. In addition, Borrower promises to pay any and all reasonable attorneys’ and other professionals’ fees and expenses incurred by Agent and the Lenders after the Effective Date in connection with or related to: (a) the Loan; (b) the administration, collection, or enforcement of the Loan; (c) the amendment or modification of the Loan Documents; (d) any waiver, consent, release, or termination under the Loan Documents; (e) the protection, preservation, audit, field exam, sale, lease, liquidation, or disposition of Collateral or the exercise of remedies with respect to the Collateral; (f) any legal, litigation, administrative, arbitration, or out of court proceeding in connection with or related to Borrower or the Collateral, and any appeal or review thereof; and (g) any bankruptcy, restructuring, reorganization, assignment for the benefit of creditors, workout, foreclosure, or other action related to Borrower, the Collateral, the Loan Documents, including representing Agent or the Lenders in any adversary proceeding or contested matter commenced or continued by or on behalf of Borrower’s estate, and any appeal or review thereof.

11.13       Confidentiality. Agent and the Lenders acknowledge that certain items of Collateral and information provided to Agent and the Lenders by Borrower are confidential and proprietary information of Borrower, if and to the extent such information either (x) is marked as confidential by Borrower at the time of disclosure, or (y) should reasonably be understood to be confidential (the “Confidential Information”). Accordingly, Agent and the Lenders agree that any Confidential Information it may obtain in the course of acquiring, administering, or perfecting Agent’s security interest in the Collateral shall not be disclosed to any other Person or entity in any manner whatsoever, in whole or in part, without the prior written consent of Borrower, except that Agent and the Lenders may disclose any such information: (a) to its Affiliates and its partners, investors, lenders, directors, officers, employees, agents, advisors, counsel, accountants, counsel,

representative and other professional advisors if Agent or the Lenders in their sole discretion determines that any such party should have access to such information in connection with such party’s responsibilities in connection with the Loan or this Agreement and; provided that such recipient of such Confidential Information either (i) agrees to be bound by the confidentiality provisions of this paragraph or (ii) is otherwise subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (b) if such information is generally available to the public or to the extent such information becomes publicly available other than as a result of a breach of this Section or becomes available to Agent or any Lender, or any of their respective Affiliates on a non-confidential basis from a source other than the Borrower; (c) if required or appropriate in any report, statement or testimony submitted to any governmental authority having or claiming to have jurisdiction over Agent or the Lenders and any rating agency; (d) if required or appropriate in response to any summons or subpoena or in connection with any litigation, to the extent permitted or deemed advisable by Agent’s or the Lenders’ counsel; (e) to comply with any legal requirement or law applicable to Agent or the Lenders or demanded by any governmental authority; (f) to the extent reasonably necessary in connection with the exercise of, or preparing to exercise, or the enforcement of, or preparing to enforce, any right or remedy under any Loan Document (including Agent’s sale, lease, or other disposition of Collateral after default), or any action or proceeding relating to any Loan Document; (g) to any participant or assignee of Agent or the Lenders or any prospective participant or assignee; provided that such participant or assignee or prospective participant or assignee is subject to confidentiality restrictions that reasonably protect against the disclosure of Confidential Information; (h) to any investor or potential investor (and each of their respective Affiliates or clients) in the Agent or Lender (or each of their respective Affiliates); provided that such investor, potential investor, Affiliate or client is subject to confidentiality obligations with respect to the Confidential Information; (i) otherwise to the extent consisting of general portfolio information that does not identify Borrower; or (j) otherwise with the prior consent of Borrower; provided that any disclosure made in violation of this Agreement shall not affect the obligations of Borrower or any of its Affiliates or any guarantor under this Agreement or the other Loan Documents. Agent’s and the Lenders’ obligations under this Section 11.13 shall supersede all of their respective obligations under the Non-Disclosure Agreement.

11.14       Assignment of Rights. Borrower acknowledges and understands that Agent or the Lenders may, subject to Section 11.7, sell and assign all or part of its interest hereunder and under the Loan Documents to any Person or entity (an “Assignee”). After such assignment the term “Agent” or “Lender” as used in the Loan Documents shall mean and include such Assignee, and such Assignee shall be vested with all rights, powers and remedies of Agent and the Lenders hereunder with respect to the interest so assigned; but with respect to any such interest not so transferred, Agent and the Lenders shall retain all rights, powers and remedies hereby given. No such assignment by Agent or the Lenders shall relieve Borrower of any of its obligations hereunder. the Lenders agrees that in the event of any transfer by it of the promissory note(s) (if any), it will endorse thereon a notation as to the portion of the principal of the promissory note(s), which shall have been paid at the time of such transfer and as to the date to which interest shall have been last paid thereon.

11.15       Revival of Secured Obligations. This Agreement and the Loan Documents shall remain in full force and effect and continue to be effective if any petition is filed by or against Borrower for liquidation or reorganization, if Borrower becomes insolvent or makes an assignment for the benefit of creditors, if a receiver or trustee is appointed for all or any significant part of Borrower’s assets, or if any payment or transfer of Collateral is recovered from Agent or the Lenders. The Loan Documents and the Secured Obligations and Collateral security shall continue to be effective, or shall be revived or reinstated, as the case may be, if at any time payment and performance of the Secured Obligations or any transfer of Collateral to Agent, or any part thereof is rescinded, avoided or avoidable, reduced in amount, or must otherwise be restored or returned by, or is recovered from, Agent, the Lenders or by any obligee of the Secured Obligations, whether as a “voidable preference,” “fraudulent conveyance,” or otherwise, all as though such payment, performance, or transfer of Collateral had not been made. In the event that any payment, or any part thereof, is rescinded, reduced, avoided, avoidable, restored, returned, or recovered, the Loan Documents and the Secured Obligations shall be deemed, without any further action or documentation, to have been revived and reinstated except to the extent of the full, final, and indefeasible payment to Agent or the Lenders in Cash.

11.16       Counterparts. This Agreement and any amendments, waivers, consents or supplements hereto may be executed in any number of counterparts, and by different parties hereto in separate counterparts, each of which when so delivered shall be deemed an original, but all of which counterparts shall constitute but one and the same instrument.

11.17       No Third Party Beneficiaries. No provisions of the Loan Documents are intended, nor will be interpreted, to provide or create any third-party beneficiary rights or any other rights of any kind in any Person other than Agent, the Lenders and Borrower unless specifically provided otherwise herein, and, except as otherwise so provided, all provisions of the Loan Documents will be personal and solely among Agent, the Lenders and the Borrower.

11.18       Agency. Agent and each Lender hereby agree to the terms and conditions set forth on Addendum 2 attached hereto. Borrower acknowledges and agrees to the terms and conditions set forth on Addendum 2 attached hereto.

11.19       Publicity. None of the parties hereto nor any of its respective member businesses and Affiliates shall, without the other parties’ prior written consent (which shall not be unreasonably withheld or delayed), publicize or use (a) the other party’s name (including a brief description of the relationship among the parties hereto), logo or hyperlink to such other parties’ web site, separately or together, in written and oral presentations, advertising, promotional and marketing materials, client lists, public relations materials or on its web site (together, the “Publicity Materials”); (b) the names of officers of such other parties in the Publicity Materials; and (c) such other parties’ name, trademarks, servicemarks in any news or press release concerning such party; provided however, notwithstanding anything to the contrary herein, no such consent shall be required (i) to the extent necessary to comply with the requests of any regulators, legal requirements or laws applicable to such party, pursuant to any listing agreement with any national securities exchange (so long as such party provides prior notice to the other party hereto to the extent reasonably practicable) and (ii) to comply with Section 11.13.

11.20       Initial Advance. This Agreement shall terminate, and all amounts owed by Borrower pursuant to Section 11.12 shall become immediately due and payable, if the Initial Advance Date has not occurred on or prior to March 23, 2021 (or such later date as Borrower and Agent may mutually agree).

11.21       Electronic Execution of Certain Other Documents. The words “execution,” “execute”, “signed,” “signature,” and words of like import in or related to any document to be signed in connection with this Agreement and the transactions contemplated hereby (including without limitation assignments, assumptions, amendments, waivers and consents) shall be deemed to include electronic signatures, the electronic matching of assignment terms and contract formations on electronic platforms approved by the Agent, or the keeping of records in electronic form, each of which shall be of the same legal effect, validity or enforceability as a manually executed signature or the use of a paper-based recordkeeping system, as the case may be, to the extent and as provided for in any applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the California Uniform Electronic Transaction Act, or any other similar state laws based on the Uniform Electronic Transactions Act.

(SIGNATURES TO FOLLOW)

IN WITNESS WHEREOF, Borrower, Agent and the Lenders have duly executed and delivered this Loan and Security Agreement as of the day and year first above written.

BORROWER:
HUMANIGEN, INC.
Signature:	/s/ Timothy Morris
Print Name:	Timothy Morris
Title:	Chief Operating Officer and Chief Financial Officer

Accepted in Palo Alto, California:

AGENT:
HERCULES CAPITAL, INC.
Signature:	/s/ Zhuo Huang
Print Name:	Zhuo Huang
Title:	Associate General Counsel

LENDERS:
HERCULES CAPITAL, INC.
Signature:	/s/ Zhuo Huang
Print Name:	Zhuo Huang
Title:	Associate General Counsel

Table of Addenda, Exhibits and Schedules

Addendum 1:	Taxes; Increased Costs
Addendum 2:	Agent and Lender Terms
Exhibit A:	Advance Request Attachment to Advance Request
Exhibit B:	Name, Locations, and Other Information for Borrower
Exhibit C:	Borrower’s Patents, Trademarks, Copyrights and Licenses
Exhibit D:	Borrower’s Deposit Accounts and Investment Accounts
Exhibit E:	Compliance Certificate
Exhibit F:	Joinder Agreement
Exhibit G:	Conversion Election Notice
Exhibit H:	ACH Debit Authorization Agreement
Exhibit I:	[Reserved]
Exhibit J-1:	Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit J-2:	Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit J-3:	Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Exhibit J-4:	Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)
Schedule 1.1	Commitments
Schedule 1	Subsidiaries
Schedule 1A	Excluded Trade Payables
Schedule 1B	Existing Permitted Indebtedness
Schedule 1C	Existing Permitted Investments
Schedule 1D	Existing Permitted Liens
Schedule 5.3	Consents, Etc.
Schedule 5.8	Tax Matters
Schedule 5.9	Intellectual Property Claims
Schedule 5.10	Intellectual Property
Schedule 5.11	Borrower Products
Schedule 5.14	Subsidiaries

EX-31.1

Exhibit 31.1

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATIONS

I, Cameron Durrant, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Humanigen, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2021

/s/ Cameron Durrant

Cameron Durrant

Chief Executive Officer

(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

CERTIFICATIONS

I, Timothy Morris, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Humanigen, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 13, 2021

/s/ Timothy Morris

Timothy Morris

Chief Operating Officer and Chief Financial Officer

(Principal Accounting and Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION OF

PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Cameron Durrant, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Humanigen, Inc. for the quarter ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Humanigen, Inc.

Date: May 13, 2021

By:	/s/ Cameron Durrant
Name:	Cameron Durrant
Title:	Chief Executive Officer
	(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION OF

PRINCIPAL FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Timothy Morris, certify, to the best of my knowledge, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q of Humanigen, Inc. for the quarter ended March 31, 2021 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in such Quarterly Report on Form 10-Q fairly presents in all material respects the financial condition and results of operations of Humanigen, Inc.

Date: May 13, 2021

By:	/s/ Timothy Morris
Name:	Timothy Morris
Title:	Chief Operating Officer and Chief
Financial Officer
(Principal Accounting and Financial Officer)

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2021	May 05, 2021
Document and Entity Information
Entity Registrant Name	HUMANIGEN, INC
Entity Central Index Key	0001293310
Document Type	10-Q
Document Period End Date	Mar. 31, 2021
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		59,083,706
Document Fiscal Year Focus	2021
Document Fiscal Period Focus	Q1
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	DE
Entity File Number	001-35798
Document Quarterly Report	true
Document Transition Report	false
Entity Shell Company	false

XML

Condensed Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Current assets:
Cash and cash equivalents	$ 92,892	$ 67,737
Other receivable	5,010
Prepaid expenses and other current assets	856	475
Total current assets	98,758	68,212
Other assets	90	90
Total assets	98,848	68,302
Current liabilities:
Accounts payable	43,412	15,366
Accrued expenses	5,698	3,175
Deferred revenue	4,145	1,874
Total current liabilities	53,255	20,415
Non-current liabilities:
Deferred revenue	4,126	2,342
Long-term debt	24,444
Total liabilities	81,825	22,757
Stockholders' equity:
Common stock, $0.001 par value: 225,000,000 shares authorized at March 31, 2021 and December 31, 2020; 53,656,689 and 51,626,508 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	54	52
Additional paid-in capital	456,966	419,923
Accumulated deficit	(439,997)	(374,430)
Total stockholders' equity	17,023	45,545
Total liabilities and stockholders' equity	$ 98,848	$ 68,302

XML

Condensed Consolidated Balance Sheets (Unaudited) (Parenthetical) - $ / shares	Mar. 31, 2021	Dec. 31, 2020
Statement of Financial Position [Abstract]
Common stock, par value	$ 0.001	$ 0.001
Common stock, shares authorized	225,000,000	225,000,000
Common stock, shares issued	53,656,689	51,626,508
Common stock, shares outstanding	53,656,689	51,626,508

XML

Condensed Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Revenue:
Total revenue	$ 486
Operating expenses:
Research and development	59,934	659
General and administrative	4,948	1,398
Total operating expenses	64,882	2,057
Loss from operations	(64,396)	(2,057)
Other expense:
Interest expense	(19)	(410)
Other expense	(1,152)
Net loss	$ (65,567)	$ (2,467)
Basic and diluted net loss per common share	$ (1.25)	$ (0.11)
Weighted average common shares outstanding used to calculate basic and diluted net loss per common share	52,655,756	22,854,106
License [Member]
Revenue:
Total revenue	$ 486

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Condensed Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Operating activities:
Net loss	$ (65,567)	$ (2,467)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation expense	510	265
Issuance of common stock for payment of compensation		19
Issuance of common stock in exchange for services		13
Changes in operating assets and liabilities:
Other receivable	(5,010)
Prepaid expenses and other assets	(381)	16
Accounts payable	28,046	714
Accrued Expenses	2,523	833
Deferred revenue	4,055
Net cash used in operating activities	(35,824)	(607)
Financing activities:
Net proceeds from issuance of common stock	36,106	65
Proceeds from exercise of stock options	429
Net proceeds from issuance of long-term debt	24,444	467
Net cash provided by financing activities	60,979	532
Net increase (decrease) in cash and cash equivalents	25,155	(75)
Cash and cash equivalents, beginning of period	67,737	143
Cash and cash equivalents, end of period	92,892	68
Supplemental cash flow disclosure:
Cash paid for interest	4	2
Supplemental disclosure of non-cash investing and financing activities:
Issuance of stock options in lieu of cash compensation		133
Issuance of warrants for services		$ 1

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Condensed Consolidated Statements of Stockholders' Equity (Deficit) (Unaudited) - USD ($) $ in Thousands	Common Stock [Member]	Additional Paid-In Capital [Member]	Accumulated Deficit [Member]	Total
Balances at Dec. 31, 2019	$ 22	$ 270,555	$ (284,895)	$ (14,318)
Balances (in shares) at Dec. 31, 2019	22,806,890
Issuance of common stock, net of expenses		65		65
Issuance of common stock, net of expenses, shares	40,000
Issuance of common stock in exchange for services		13		13
Issuance of common stock in exchange for services, shares	5,868
Issuance of stock options for payment of compensation		133		133
Issuance of stock options for payment of compensation, shares
Issuance of common stock for payment of compensation		19		19
Issuance of common stock for payment of compensation, shares	9,599
Issuance of warrant for services		1		1
Stock-based compensation expense		265		265
Net loss			(2,467)	(2,467)
Balances at Mar. 31, 2020	$ 22	271,051	(287,362)	(16,289)
Balances (in shares) at Mar. 31, 2020	22,862,357
Balances at Dec. 31, 2020	$ 52	419,923	(374,430)	45,545
Balances (in shares) at Dec. 31, 2020	51,626,508
Issuance of common stock, net of expenses	$ 2	36,104		36,106
Issuance of common stock, net of expenses, shares	1,796,858
Issuance of common stock upon option exercise		429		429
Issuance of common stock upon option exercise, shares	233,323
Stock-based compensation expense		510		510
Net loss			(65,567)	(65,567)
Balances at Mar. 31, 2021	$ 54	$ 456,966	$ (439,997)	$ 17,023
Balances (in shares) at Mar. 31, 2021	53,656,689

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Nature of Operations

3 Months Ended

Mar. 31, 2021

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Nature of Operations

1. Nature of Operations

Description of the Business

Humanigen, Inc. (the “Company”) was incorporated on March 15, 2000 in California, reincorporated as a Delaware corporation in September 2001 as KaloBios Pharmaceuticals, Inc., and in August 2017, the Company changed its name to Humanigen, Inc.

The Company is a clinical stage biopharmaceutical company, developing its portfolio of anti-inflammatory immunology and immuno-oncology monoclonal antibodies. The Company is focusing its efforts on the development of its lead product candidate, lenzilumab™, its proprietary Humaneered® (“Humaneered”) anti-human granulocyte-macrophage colony-stimulating factor (“GM-CSF”) monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated to neutralize GM-CSF, a cytokine that the Company believes is of critical importance in the hyperinflammatory cascade, sometimes referred to as cytokine release syndrome (“CRS”) or cytokine storm, associated with COVID-19, chimeric antigen receptor T-cell (“CAR-T”) therapy and acute Graft versus Host Disease (“GvHD”) associated with bone marrow transplants. The Company believes the results from its Phase 3 study in COVID-19 and its Phase 1b study in CAR-T support the mechanism of action of lenzilumab.  

On March 29, 2021, the Company announced top-line data on the primary endpoint and one secondary endpoint from a Phase 3, multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab (the “LIVE-AIR” study) as a potential therapeutic for newly hospitalized, hypoxic patients with COVID-19 pneumonia. Additional data from the trial, subsequently published on MedRxiv, a non-peer reviewed journal, on May 5, 2021, support the previously reported primary endpoint that showed lenzilumab improved the likelihood of survival without ventilation, (“SWOV”), sometimes referred to as “ventilator-free survival”, by 54% in the modified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.31, p=0.041). New analysis included in the publication showed that lenzilumab improved the likelihood of SWOV by 90% in the intent-to-treat (“ITT”) population (HR: 1.90; 1.02-3.52, nominal p=0.043) compared to placebo. SWOV also relatively improved by 92% in subjects who received both corticosteroids and remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 2.96-fold in subjects with C-reactive protein (“CRP”) levels <150 mg/L and age <85 years (2.96; 1.63–5.37, nominal p=0.0003); and by 88% in subjects hospitalized ≤2 days prior to randomization (1.88; 1.13-3.12, nominal p=0.015). Survival was improved by 2.17-fold in subjects with CRP<150 mg/L and age <85 years (2.17; 1.04-4.54, nominal p=0.040). The Company believes that the data published on MedRxiv, generated from the LIVE-AIR study support the conclusion that lenzilumab significantly improved SWOV in hospitalized, hypoxic subjects with COVID-19 pneumonia over and above treatment with remdesivir and/or corticosteroids. Subjects with CRP<150 mg/L and age <85 years demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab.

The Company shared the topline data on the primary endpoint and one secondary endpoint (the only data then available while the remaining analysis was pending) with the U.S. Food and Drug Administration (“FDA”) in a Pre-Emergency Use Authorization (“EUA”) Type B meeting in mid-April 2021. The Company is preparing to submit an EUA application at the end of May 2021. As requested by the FDA, the EUA application will include secondary endpoints and supplemental data analysis from LIVE-AIR, including those referenced in the MedRxiv publication, as well as additional stability and compatibility information required for the Chemistry Manufacturing and Control (“CMC”) section of the EUA application. There can be no assurance that the data published on MedRxiv will be sufficient for an EUA or that the FDA will not require additional information in order to grant an EUA. If the EUA is granted, the Company could begin to commercialize lenzilumab for the treatment of newly hospitalized COVID-19 pneumonia patients. COVID-19 infections are widespread and as of April 30, 2021 in the U.S., there were over 32 million cases, over 2.1 million hospitalizations and over 570 thousand deaths. Several vaccines have been developed which show efficacy in excess of 90%; even with the improvements in the rollout of vaccinations in the U.S., given the emergence of numerous COVID-19 variants, the Company believes the need for therapeutics to treat hospitalized COVID-19 patients will continue to exist as COVID-19 becomes endemic.

The Company has been in discussion with the Medicines and Healthcare Products Regulatory Agency (“MHRA”) for the use of lenzilumab in COVID-19 patients in the United Kingdom and plans to initiate a rolling submission for Conditional Marketing Authorization (“CMA”) before the end of the second quarter of 2021. The Company also plans to submit for CMA to the European Medicines Agency (“EMA”) for the use of lenzilumab in the European Union. Further, the Company is reviewing the possibility of similar submissions for approval or compassionate use in other territories or countries worldwide.

As previously reported, lenzilumab has been selected to be part of the ongoing Accelerating COVID-19 Therapeutic Interventions and Vaccines (“ACTIV”)-5 and Big Effect Trial (“BET-B”), referred to as ACTIV-5/BET-B, study sponsored by the National Institutes of Health (“NIH”). ACTIV-5/BET-B is designed to determine whether certain approved therapies or investigational drugs in late-stage clinical development show promise against COVID-19 and, therefore, merit advancement into larger clinical trials. ACTIV-5/BET-B currently has 30 active U.S. sites enrolling and will evaluate lenzilumab with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, with approximately 100 patients expected to be assigned to each study arm. The Company is providing lenzilumab for the study, which is fully funded by NIH. The ACTIV-5/BET-B Data and Safety Monitoring Board (“DSMB”) met on May 7th and determined that the study should continue per protocol.

The Company intends to submit a Biologics License Application (“BLA”) to FDA in 2022, for the use of lenzilumab in hospitalized, hypoxic COVID-19 patients. Since BLAs typically require more than one study, the Company is currently evaluating the extent to which ACTIV-5/BET-B may serve as a basis for a BLA-confirmatory study for lenzilumab.

Lenzilumab has been studied in a multi-center Phase 1b trial as a sequenced therapy with Yescarta® (axicabtagene ciloleucel) to reduce CRS and neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) (NCT04314843). This study was a standard 3+3 design with three patients administered 600 mg lenzilumab (“cohort 1”) and three patients administered 1,800 mg lenzilumab (“cohort 2”) just prior to CAR-T. The recommended Phase 2 dose was determined to be 1,800 mg. On April 19, 2021, the Company announced positive data from the ZUMA-19 study. At the recommended Phase 2 dose of lenzilumab, the Objective Response Rate (“ORR”) was 100% and no patient experienced severe cytokine release syndrome (“CRS”) or severe neurotoxicity (“NT”). In the six study patients, the ORR reported was 83% (n=5) which included four complete responses (“CR”). In cohort 1, there was no severe CRS (≥ grade 3). One patient experienced grade 3 NT with a two-day duration. At the recommended Phase 2 dose (cohort 2), ORR was 100% (n=3) and the toxicity-free CR (CRS and NT < grade 2) was 66% (n = 2). There was no severe CRS or severe NT at the recommended Phase 2 dose. There were no adverse events attributed to lenzilumab across the study. Inflammatory markers were correlated with reduced rates of CRS and NT. Lenzilumab dose-dependently reduced myeloid cytokines IL-6, IL-8, MCP-1, and IP-10 (CXCL-10) and systemic inflammatory markers CRP, ferritin, and SAA in the patients studied. As a result of this positive data and the conclusion of the Phase 1b portion of the study, the Company elected to terminate the clinical collaboration with Kite Pharmaceuticals, Inc., a Gilead company (“Kite”), which markets Yescarta. The Company intends to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

The Company is also in the final planning stages for a Phase 2/3 trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for acute GvHD (the “Risk Adapted Therapy in Acute GvHD” or the “RATinG” study). The trial is expected to be conducted by the IMPACT Partnership, a collection of 22 stem cell transplant centers located in the United Kingdom. It is anticipated the RATinG study will begin in the fourth quarter of 2021. The Company will provide lenzilumab for this study and support certain laboratory tests related to the study. The majority of the study costs will be borne by the partner.

In addition, the Company is in partnership with the South Australian Health & Medical Research Institute (“SAHMRI”) and the University of Adelaide to conduct a Phase 2 Trial studying the efficacy of lenzilumab in combination with azacitadine. The study, (“PREcision Approach to Chronic Myelomonocytic Leukemia” or “PREACH-M”) is anticipated to begin enrollment in the third quarter of 2021 and to include four sites. The Company will provide lenzilumab for this study and the majority of the study costs will be borne by the partner.

The Company’s proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. The Company has developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied our Humaneered technology to produce them. Lenzilumab and the Company’s other two product candidates, ifabotuzumab and HGEN005, are Humaneered monoclonal antibodies. The Company’s Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their target but low immunogenicity. The Company believes its Humaneered antibodies offer additional advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related reactions.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations in Item 2 of this Quarterly Report on Form 10-Q for additional information regarding the business.

Liquidity

The Company has been continuing to advance its efforts to develop lenzilumab for use in hospitalized COVID-19 pneumonia patients. As of March 31, 2021, the Company had cash and cash equivalents of $92.9 million, which included a $25.0 million draw under the Company’s secured term loan with Hercules Capital, Inc. (“Hercules”) or the (“Term Loan”) (see Note 5 below). Together with approximately $94.1 million of net proceeds from the underwritten public offering completed in the second quarter of 2021, potential additional draws under the Term Loan, and potential revenues from the commercial sale of lenzilumab (if an EUA is granted), the Company expects to be able to fund its planned operations and capital expenditure requirements, although it may pursue other funding options on an opportunistic basis to support its liquidity.

As discussed in further detail in Note 6 below, the Company has entered into agreements with several contract manufacturing organizations (“CMOs”) to provide manufacturing, fill/finish and packaging services for lenzilumab, and is actively working with its existing and additional CMOs on additional agreements to bolster its ability to supply lenzilumab in the event of receipt of EUA or other conditional marketing authorization (“CMA”). Most of these additional manufacturing agreements, such as those currently in place, are expected to require payment of upfront fees upon execution and further payments against performance of the manufacturing services to be provided, often over a lengthy performance period. Given the competitive environment, it is not possible for the Company to predict when it will be in position to execute any additional manufacturing agreements, or to estimate the aggregate amount of potential future payments under such new agreements or the timing in which they may be made. If an EUA or other CMA were granted, the Company expects to be able to satisfy the bulk of the cash requirements associated with its manufacturing commitments from revenues from the commercial sale of lenzilumab, supplemented as necessary with proceeds from the sale of its equity securities; potential additional draws under the Term Loan; upfront and milestone payments from licensees; and government funding or financial support, if offered.

In the first quarter of 2021 the amounts included in Research and Development for lenzilumab COVID-19 clinical studies were $7.6 million and $51.7 million for production of lenzilumab finished good. The Company believes that its cash and cash equivalents will be sufficient to fund its planned operational requirements for at least the next 12 months. This evaluation is based on relevant conditions and events that are currently known or reasonably knowable. As a result, the Company could deplete its available capital resources sooner than it currently expects, and a delay in obtaining or failure to obtain an EUA could further constrain its cash resources. The Company has based these estimates on assumptions that may prove to be wrong, and its operating projections, including its projected net revenue following the potential receipt of an EUA for lenzilumab in COVID-19 patients, may change as a result of many factors currently unknown to it. If the Company is unable to raise additional capital when needed or on acceptable terms, it would be forced to delay, reduce or eliminate its research and development programs and commercialization efforts. Alternatively, the Company might raise funds through strategic collaborations, public or private financings or other arrangements. Such funding, if needed, may not be available on favorable terms, or at all. The financial statements included herein do not include any adjustments that might result from the outcome of these uncertainties.

Reclassifications

Certain prior year amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current year's presentation. Such reclassifications had no effect on prior years’ Net loss or Stockholders’ equity.

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements and include all adjustments necessary for the presentation of the Company’s condensed consolidated financial position, results of operations and cash flows for the periods presented.

The Condensed Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. These financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The December 31, 2020 Condensed Consolidated Balance Sheet was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, 2021, or for any other future annual or interim period. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s 2020 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in accounting for the determination of revenue recognition, fair value-based measurement of stock-based compensation, accruals and warrants. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements.

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Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2021

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. 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, 2020. There have been no significant changes to the Company’s significant accounting policies during the three months ended March 31, 2021, from those previously disclosed in its 2020 Annual Report on Form 10-K.

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted No. ASU 2019-12 on January 1, 2021 which did not have any impact to the Company’s Condensed Consolidated Financial Statements.

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from U.S. GAAP, separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity, and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for the Company’s financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company early adopted the new guidance on January 1, 2021, using the modified retrospective approach. The adoption did not have any impact to the Company’s Condensed Consolidated Financial Statements.

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Potentially Dilutive Securities

3 Months Ended

Mar. 31, 2021

Potentially Dilutive Securities

Potentially Dilutive Securities

3. Potentially Dilutive Securities

The Company’s potentially dilutive securities, which include stock options and warrants and shares of common stock issuable upon conversion of convertible debt, have been excluded from the computation of diluted net loss per common share as the effect of including those securities would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in each period presented. 

The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:

	As of March 31,
	2021		2020
Options to purchase common stock		4,224,111		3,420,930
Warrants to purchase common stock		51,238		66,239
Convertible debt		255,493		2,295,545
		4,530,842		5,782,714

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License Revenue

3 Months Ended

Mar. 31, 2021

License Revenue

License Revenue

4. License Revenue

On November 3, 2020, the Company entered into a License Agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”). Pursuant to the South Korea Agreement, among other things, the Company granted the Licensee a license under certain patents and other intellectual property to develop and commercialize lenzilumab for treatment of COVID-19 pneumonia, in South Korea and the Philippines (the “Territory”), subject to certain reservations and limitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in the Territory.

As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, payable promptly following the execution of the License Agreement, which was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

The Company assessed the South Korea Agreement in accordance with Accounting Standards Codification (“ASC”) 606 – Revenue from Contracts with Customers and ASC 808 – Collaborative Arrangements and determined that its performance obligations under the South Korea agreement include (i) the exclusive, royalty-bearing, sublicensable license to lenzilumab, (ii) the manufacturing supply services to be provided by the Company, (iii) cooperation and assistance to be provided by the Company to the Licensee with regulatory authorities in the Territory and (iv) its obligation to serve on a joint steering committee (Items (iii) and (iv) above collectively, the “Research and Development Services” or the “Services”). The Company concluded that in the initial period leading up to regulatory approval in the Territory (the “Initial Period”), the license was not distinct since it was of no benefit to Licensee without the aforementioned Services and that, as such, the license and the Services should be bundled as a single performance obligation.

The Company has concluded that the nature of its promise is to stand ready to provide Research and Development Services as needed during the Performance Period (as defined below). The Company has further concluded that for all of the increments of time during the Performance Period its promise of standing ready to provide the Services is substantially the same. While the specific tasks performed during each increment of time will vary, the nature of the overall promise to provide the Services remains the same throughout the Performance Period.

Since the provision of the license and the Services are considered a single performance obligation, the $6.0 million upfront payment (or $4.5 million net of withholding taxes and other fees and royalties) and the first milestone payment of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) which was met in the first quarter of 2021 and received in the second quarter of 2021, are being recognized as revenue ratably over the performance period through March 2023 (the “Performance Period”), the expected period over which the Company conservatively expects the Services to be performed with approval in the Territory expected by the end of March 2023. Therefore, in the three months ended March 31, 2021, the Company recognized license revenue totaling approximately $0.5 million.

Licensee’s purchases of lenzilumab for development purposes or for commercial requirements, represent options under the agreement and revenues will therefore be recognized when control of the product is transferred to Licensee.

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Long-Term Debt

3 Months Ended

Mar. 31, 2021

Debt Disclosure [Abstract]

Long-Term Debt

5. Long-Term Debt

Secured Term Loan Facility

On March 10, 2021, the Company executed a Loan and Security Agreement with Hercules as agent for its affiliates serving as lenders thereunder. The Term Loan provides a loan in the aggregate principal amount of $80 million. On March 29, 2021, the Company drew the initial $25.0 million tranche under the Term Loan. After giving effect to payment of fees and expenses associated with the draw, the Company received net proceeds of approximately $24.4 million.

In addition to the initial amount of $25.0 million, the Term Loan provides the Company with the potential for two additional tranches: a second tranche in the amount of $35.0 million or $25.0 million, which it may become entitled to draw through September 15, 2021 subject to the Company’s receipt of the EUA for lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia; and a third tranche of $20.0 million which the Company may become entitled to draw through June 15, 2022, at the discretion of Hercules if the Company requests additional funding in support of the Company’s strategic initiatives.

The Company will be required to repay amounts borrowed by March 1, 2025, subject to a one-year extension option that it may exercise if it has received FDA approval of a BLA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia, and the FDA-authorized label for lenzilumab is generally consistent with that sought in the Company’s BLA filing, and the Company has paid Hercules certain fees and expenses associated with the extension.

Amounts drawn bear interest at a floating rate equal to the greater of either (i) 8.75% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 8.75% (such greater amount, the “Base Interest Rate”). Subject to there not having occurred any default or event of default under the loan agreement, the Base Interest Rate will be reduced by 25 basis points upon the occurrence of each of the first three of the four following events to occur:

· if the Company achieves the protocol-specified primary efficacy endpoint for the pivotal Phase 3 study of lenzilumab for COVID-19, (clinicaltrials.gov identifier NCT04351152), and receives EUA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia;

· if the Company achieves product revenue from lenzilumab that is invoiced and/or recognized as revenue (as determined in accordance with GAAP) solely from the sale of lenzilumab (“Net Lenzilumab Product Revenue”) of at least $100.0 million;

· if the Company achieves Net Lenzilumab Product Revenue of at least $250.0 million; and

· if the Company achieves Net Lenzilumab Product Revenue of at least $350.0 million.

No principal payments will be due during an interest-only period, commencing on the initial borrowing date and continuing to April 1, 2023, subject to extension to April 1, 2024, and potentially October 1, 2024, under certain conditions. Following the interest-only period, the outstanding balance of the loan will be required to be repaid monthly, continuing through the maturity date.

The Company may prepay amounts drawn under the agreement in full prior to the maturity date then in effect, subject to payment of prepayment charges equal to:

· 2.0% of the amounts borrowed, if the prepayment occurs on or prior to March 29, 2022;

· 1.5% of the amounts borrowed, if the prepayment occurs after March 29, 2022 and before March 29, 2023; and

· 1.0% of the amounts borrowed, if the prepayment occurs after March 29, 2023 and before March 29, 2024.

In addition, on the earliest to occur of (i) the maturity date, (ii) the date the Company prepays the outstanding principal amount of the Term Loan, or (iii) the date the outstanding principal amount of the Term Loan otherwise becomes due, the Company will owe Hercules an end of term (“EOT”) charge equal to 6.75% of the aggregate amount of the Term Loan funded by Hercules.

As a condition to obtaining the term loan facility, the Company granted Hercules a security interest in substantially all of its assets and personal property not otherwise subject to existing or permitted liens. In addition, the loan agreement contains customary representations and warranties and events of default for a term loan facility of this size and type. Under the Term Loan, the Company also agreed to comply with certain customary affirmative and negative covenants that become effective upon the initial draw of the first tranche, including covenants to: 

· maintain $10.0 million unrestricted cash, which amount may be increased to $20.0 million if the Company borrows the second tranche of the Term Loan;

· comply with certain requirements to provide Hercules with financial information and other rights to inspect the Company’s books and records and the collateral for the Term Loan;

· refrain from incurring debt that is not expressly subordinated to the Term Loan; “Rule 144A-style” convertible notes in aggregate principal amount up to $250.0 million; and other permitted indebtedness;

· refrain from granting (or permitting to exist) liens on the Company’s assets and properties, other than certain permitted liens, including in respect of its patents and other intellectual property;

· refrain from making certain investments, other than permitted acquisitions and certain other permitted investments;

· refrain from repurchasing the Company’s stock or paying dividends, subject to limited exceptions;

· refrain from transferring any material portion of its assets; and

· refrain from entering into any merger or consolidation in which the Company is not the surviving entity.

All of these covenants will not apply upon repayment of any borrowings under the Term Loan.

Certain of the baskets for permitted investments and other exceptions to the covenants described above will increase in the event the Company raises more than $100.0 million in unrestricted net cash proceeds from one or more bona fide equity financings prior to March 31, 2022. Further, the covenants in the loan agreement will not prohibit the Company from pursuing its strategy of entering into out-bound license agreements for lenzilumab that may be exclusive as to specific geographic regions outside the U.S., nor will the covenants prohibit the Company from entering into co-development or co-promotion or commercialization agreements relating to lenzilumab, so long as such agreements generally are negotiated on arm’s length and commercially reasonable terms.

While the Term Loan is outstanding, the lenders will have the right to convert a portion of the principal amount outstanding under the Term Loan (ranging from $5.0 million to $10.0 million in the aggregate) into shares of the Company’s common stock at a conversion price equal to $19.57 per share, subject to customary anti-dilution adjustments.

The following table summarizes the outstanding future payments of principal and interest associated with the Company’s Term Loan as of March 31, 2021 (in thousands):

2021	$	1,501
2022		2,218
2023		10,800
2024		13,671
2025		5,153
Total payments		33,343
Less amount representing interest		(6,655	)
Notes payable, gross		26,688
Less: Unamortized portion of EOT charge		(1,688	)
Less: Unamortized discount on notes payable		(213	)
Less: Unamortized debt issuance costs		(343	)
Long-term debt		24,444
Less current portion		-
Long-term debt, net of current portion	$	24,444

Interest expense related to the Term Loan, recorded during the three months ended March 31, 2021, was approximately $18 thousand and the effective interest rate was 9.0%.

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Commitments and Contingencies

3 Months Ended

Mar. 31, 2021

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

6. Commitments and Contingencies

Eversana Agreement

On January 10, 2021, the Company announced that it had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide the Company multiple services from its integrated commercial platform in preparation for the potential commercialization of lenzilumab.

Under the Eversana Agreement, Eversana will serve as the Company’s end-to-end commercial partner, providing the Company with a full suite of services in connection with the potential launch of lenzilumab. Eversana services initially will comprise marketing, market access, consulting, field solutions, field operations, health economics and medical affairs. Additional services may be negotiated by the parties and set forth in statements of work delivered in accordance with the Eversana Agreement.

The Company will pay Eversana fees and reimburse it for expenses in performing the services as established in applicable statements of work. Eversana has agreed to defer its fees pending the Company’s receipt of an EUA from the FDA for lenzilumab for newly hospitalized and hypoxic COVID-19 patients. The Company has accrued $0.9 million for Eversana activities performed in the first quarter of 2021, which are included in Accrued expenses in the Condensed Consolidated Balance Sheets, with the anticipated payment upon receipt of the EUA.

The Eversana Agreement provides for a one-year term and will renew for subsequent one-year terms unless either party provides a notice of non-renewal. After the first year, the Company may terminate the Eversana Agreement upon advance written notice to Eversana. The Eversana Agreement contains customary provisions allowing either party to terminate the Eversana Agreement as a result of certain changes in law and material breaches and certain insolvency events by or relating to the other party.

The Eversana Agreement imposes customary mutual obligations on the parties to protect and not disclose the confidential information and intellectual property of the other, and contains insurance, non-solicitation, indemnification and limitation of liability provisions customary for service contracts of this type.

Manufacturing Agreements

The Company has entered into agreements with several contract manufacturing organizations (“CMOs”) to manufacture bulk drug substance (“BDS”) and fill/finish/drug product (“DP”) for our lenzilumab clinical trial activities related to COVID-19 as well as to manufacture BDS and DP for a potential launch of lenzilumab in anticipation of an EUA in 2021. The Company has also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. As of March 31, 2021, the Company estimates that its commitments remaining to be incurred during 2021 will amount to approximately $169 million. The agreements contain customary cancellation clauses.

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Stockholders' Equity

3 Months Ended

Mar. 31, 2021

Stockholders' Equity Note [Abstract]

Stockholders' Equity

7. Stockholders’ Equity

Reverse Stock Split

Effective September 11, 2020 (the “Effective Date”), the Company amended its charter to effect a reverse stock split at a ratio of 1-for-5 (the “Split Ratio”). No fractional shares were issued in connection with the reverse stock split. Stockholders of record otherwise entitled to receive fractional shares of common stock received cash (without interest or deduction) in lieu of such fractional share interests.

The reverse stock split reduced the total number of shares of the Company’s common stock outstanding as of the Effective Date from approximately 210.9 million shares to approximately 42.2 million shares. The par value per share and other terms of the Company’s common stock were not affected by the reverse stock split, and the number of authorized shares of the Company’s common stock remains at 225,000,000.

The reverse stock split resulted in a proportionate adjustment in the number of shares reserved for issuance under the 2020 Equity Plan, such that a total of 7,000,000 shares of the Company’s common stock were reserved for issuance under the 2020 Equity Plan following the Effective Date. In addition, proportionate adjustments were made to the number of shares covered by, and the exercise price applicable to, each outstanding stock option award under the 2012 Equity Plan and outstanding warrants issued by the Company, in each case to give effect to the Split Ratio and the reverse stock split.

The reverse stock split was accounted for retroactively and is reflected in our common stock, stock option and warrant activity as of and during the period ended December 31, 2020 and the periods ended March 31, 2021 and 2020. Unless stated otherwise, all share data in this Quarterly Report on Form 10-Q have been adjusted, as appropriate, to reflect the reverse stock split.

Controlled Equity Offering

On December 31, 2020, the Company entered into a Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), under which the Company could issue and sell from time-to-time shares of the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as sales agent. Through March 31, 2021, the Company issued and sold 1,796,858 shares of its common stock under the Sales Agreement for net proceeds of $36.1 million.

2021 Underwritten Public Offering

On March 30, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several` underwriters (the “Underwriters”), in connection with the public offering of 5,000,000 shares of the Company’s common stock. Pursuant to the Underwriting Agreement, the Company granted the underwriters a 30-day option to purchase an additional 750,000 shares of common stock. See Note 11 for additional information.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

8. Stock-Based Compensation

A summary of stock option activity for the three months ended March 31, 2021 under all the Company’s options plans is as follows:

	Options			Weighted Average Exercise Price
Outstanding at January 1, 2021		3,728,149		$	5.57
Granted		758,240			16.13
Exercised		(250,242	)		(3.13	)
Cancelled (forfeited)		(11,932	)		(3.33	)
Cancelled (expired)		(104	)		(162.09	)
Outstanding at March 31, 2021		4,224,111		$	7.61

The weighted average fair value of options granted during the three months ended March 31, 2021 was $13.30 per share.

The Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption terms for the three months ended March 31, 2021:

	Three Months Ended
	March 31, 2021
Exercise price	$16.07 - $17.79
Market value	$16.07 - $17.79
Expected term	6 years
Expected volatility	109%
Risk-free interest rate	1.06% - 1.08%
Expected dividend yield	-%

The Company recorded stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows (in thousands): 

	Three Months Ended March 31,
	2021		2020
General and administrative	$	364	$	211
Research and development	$	146	$	54
Total stock-based compensation	$	510	$	265

At March 31, 2021, the Company had $12.8 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to outstanding stock options that will be recognized over a weighted-average period of 2.7 years.

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License and Collaboration Agreements

3 Months Ended

Mar. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

License and Collaboration Agreements

9. License and Collaboration Agreements

Kite Agreement

On May 30, 2019, the Company entered into a clinical collaboration agreement with Kite, providing in part for conduct of a multi-center Phase 1b study of lenzilumab with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma, including DLBCL. On April 19, 2021, the Company announced positive data from this study. As a result of this positive data and the conclusion of the Phase 1b portion of the study, the Company elected to terminate the clinical collaboration agreement with Kite (see Note 11). The Company intends to initiate a randomized, multi-center, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. The study plans to enroll approximately 150 patients and the protocol is being submitted to FDA.

Mayo Agreement

On June 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Mayo Agreement”) with the Mayo Foundation for Medical Education and Research (“Mayo”) for certain technologies used to create CAR-T cells lacking GM-CSF expression through various gene-editing tools including CRISPR-Cas9 (GM-CSF knock-out). The license covers various patent applications and know-how developed by Mayo in collaboration with the Company. These licensed technologies complement and broaden the Company’s position in the GM-CSF neutralization space and expand the Company’s discovery platform aimed at improving CAR-T to include gene-edited CAR-T cells.

Pursuant to the Mayo Agreement, the Company paid $0.2 million to Mayo in June 2020, which payment was accrued in Research and development expense in June 2019. The Mayo Agreement also requires the payment of milestones and royalties upon the achievement of certain regulatory and commercialization milestones.

Zurich Agreement

On July 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Zurich Agreement”) with the University of Zurich (“UZH”) for technology used to prevent or treat Graft versus Host Disease (“GvHD”) through GM-CSF neutralization. The Zurich Agreement covers various patent applications filed by UZH which complement and broaden the Company’s position in the application of GM-CSF and expands the Company’s development platform to include improving allogeneic Hematopoietic Stem Cell Transplantation (“HSCT”).

Pursuant to the Zurich Agreement, the Company paid $0.1 million to UZH in July 2019. The Zurich Agreement also requires the payment of annual maintenance fees and milestones and royalties upon the achievement of certain regulatory and commercialization milestones. The license payment of $0.1 million was recorded as Research and development expense in July 2019.

Clinical Trial Agreement with the National Institute of Allergy and Infectious Diseases

On July 24, 2020, the Company entered into a clinical trial agreement (the “ACTIV-5 Clinical Trial Agreement”) with the National Institute of Allergy and Infectious Diseases (“NIAID”), part of NIH, which is part of the U.S. Government Department of Health and Human Services, as represented by the Division of Microbiology and Infectious Diseases. Pursuant to the ACTIV-5 Clinical Trial Agreement, lenzilumab is being evaluated in the NIAID-sponsored ACTIV-5/BET-B in hospitalized patients with COVID-19.

The NIH created the ACTIV public-private partnership and selected lenzilumab to be evaluated in its ACTIV-5/BET-B, which is comparing lenzilumab in combination with Gilead’s investigational antiviral, remdesivir, versus placebo plus remdesivir in hospitalized COVID-19 patients. The trial is expected to enroll 100 patients in each arm of the study.

Pursuant to the ACTIV-5 Clinical Trial Agreement, NIAID will serve as sponsor and will be responsible for funding, supervising and overseeing ACTIV-5/BET-B. The Company will be responsible for providing lenzilumab to NIAID without charge and in quantities to ensure a sufficient supply of lenzilumab. The ACTIV-5 Clinical Trial Agreement imposes additional obligations on the Company that are reasonable and customary for clinical trial agreements of this nature, including in respect of compliance with data privacy laws and potential indemnification obligations. The Company will have access to data from ACTIV-5/BET-B once concluded.

CRADA

On November 5, 2020, the Company and the Department of Defense (“DoD”) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CBRND” or “JPEO”) entered into a Cooperative Research and Development Agreement (“CRADA”) in collaboration with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) at the U.S. Department of Health and Human Services (“HHS”), in support of Operation Warp Speed (“OWS”), to assist in the development of lenzilumab, in connection with a potential EUA for COVID-19.

On January 22, 2021, the Company announced an expansion of the CRADA that it had previously entered with JPEO on November 5, 2020, was subsequently co-signed by BARDA. This provides the Company with access to manufacturing capacity reserved by BARDA for fill-finish product to accelerate the drug product manufacturing of lenzilumab.

Pursuant to the CRADA, the Company has been provided access to a full-scale, integrated team of OWS manufacturing, and regulatory subject matter experts, leading decision makers and statistical support in anticipation of applying for EUA and subsequently a BLA for lenzilumab as a potential treatment for COVID-19. The CRADA also provides that OWS regulatory experts will work with the Company on FDA communications, meetings and regulatory filings. The CRADA aims to support the lenzilumab Phase 3 clinical trial output, focusing on efficiently generating an EUA and BLA submission. In addition to providing access under EUA, a goal of the CRADA is to ensure lenzilumab receives the benefits provided by Public Law 115-92. The Company may receive advance purchase contracts or other benefits under Public Law 115-92, if FDA issues an EUA or BLA.

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Litigation

3 Months Ended

Mar. 31, 2021

Litigation Settlement [Abstract]

Litigation

10. Litigation

Savant Litigation

On February 29, 2016, the Company entered into a binding letter of intent (the “LOI”) with Savant Neglected Diseases, LLC (“Savant”). The LOI provided that the Company would acquire certain worldwide rights relating to benznidazole from Savant. On June 30, 2016, the Company and Savant entered into an Agreement for the Manufacture, Development and Commercialization of Benznidazole for Human Use (the “MDC Agreement”), pursuant to which the Company acquired certain worldwide rights relating to benznidazole. The MDC Agreement consummates the transactions contemplated by the LOI.

In addition, on June 30, 2016, the Company and Savant also entered into a Security Agreement (the “Security Agreement”), pursuant to which the Company granted Savant a continuing senior security interest in the assets and rights acquired by the Company pursuant to the MDC Agreement and certain future assets developed from those acquired assets.

On June 30, 2016, in connection with the MDC Agreement, the Company issued to Savant a five-year warrant to purchase 40,000 shares of the Company’s Common Stock, at an exercise price of $11.25 per share, subject to adjustment.

On May 26, 2017, the Company submitted its benznidazole Investigational New Drug Application (“IND”) to the FDA which became effective on June 26, 2017. The Company recorded expense of $1.0 million during the year ended December 31, 2017 as Research and development expense related to the milestone achievement associated with the IND being declared effective. 

On July 10, 2017, FDA notified the Company that it granted Orphan Drug Designation to benznidazole for the treatment of Chagas disease. The Company recorded expense of $1.0 million during the year ended December 31, 2017 as Research and development expense related to the milestone achievement associated with Orphan Drug Designation.

The $2.0 million in milestone payments due Savant are included in Accrued expenses in the accompanying Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020.

On July 10, 2017, the Company filed a complaint against Savant in the Superior Court for the State of Delaware, New Castle County (the “Delaware Court”). KaloBios Pharmaceuticals, Inc. v. Savant Neglected Diseases, LLC, No. N17C-07-068 PRW-CCLD. The Company asserted breach of contract and declaratory judgment claims against Savant arising under the MDC Agreement. The Company alleges that Savant has breached its MDC Agreement obligations to pay cost overages that exceed a budgetary threshold as well as other related MDC Agreement representations and obligations. In the litigation, the Company has alleged that as of June 30, 2017, Savant was responsible for aggregate cost overages of approximately $3.4 million, net of a $0.5 million deductible under the MDC. The Company asserts that it is entitled to offset $2.0 million in milestone payments due Savant against the cost overages.

On July 12, 2017, Savant removed the case to the Bankruptcy Court, claiming that the action is related to or arises under the Bankruptcy Case from which the Company emerged in July 2016. In re KaloBios Pharmaceuticals, Inc., No. 15-12628 (LSS) (Bankr. D. Del.). On July 27, 2017, Savant filed an Answer and Counterclaims. Savant’s filing alleges breaches of contracts under the MDC Agreement and the Security Agreement, claiming that the Company breached its obligations to pay the milestone payments and other related representations and obligations. On August 1, 2017, the Company moved to remand the case back to the Delaware Court (the “Motion to Remand”).

On August 2, 2017, Savant sent a foreclosure notice to the Company, demanding that it provide the Collateral as defined in the Security Agreement for inspection and possession on August 9, 2017, with a public sale to be held on September 1, 2017. The Company moved for a Temporary Restraining Order (the “TRO”) and Preliminary Injunction in the Bankruptcy Court on August 4, 2017. Savant responded on August 7, 2017. On August 7, 2017, the Bankruptcy Court granted the Company’s motion for a TRO, entering an order prohibiting Savant from collecting on or selling the Collateral, entering our premises, issuing any default notices to us, or attempting to exercise any other remedies under the MDC Agreement or the Security Agreement. On August 9, 2017, the parties have stipulated to continue the provisions of the TRO in full force and effect until further order of the appropriate court, which the Bankruptcy Court signed that same day (the “Stipulated Order”).

On January 22, 2018, Savant wrote to the Bankruptcy Court requesting dissolution of the TRO and the Stipulated Order. On January 29, 2018, the Bankruptcy Court granted the Motion to Remand and denied Savant’s request to dissolve the TRO and Stipulated Order, ordering that any request to dissolve the TRO and Stipulated Order be made to the Delaware Court.

On February 13, 2018 Savant made a letter request to the Delaware Court to dissolve the TRO and Stipulated Order. Also, on February 13, 2018, the Company filed its Answer and Affirmative defenses to Savant’s Counterclaims. On February 15, 2018 the Company filed a letter of opposition to Savant’s request to dissolve the TRO and Stipulated Order and requesting a status conference. A hearing on Savant’s request to dissolve the TRO and Stipulated Order was held before the Delaware Court on March 19, 2018. The Delaware Court denied Savant’s request to dissolve the TRO and Stipulated order, which remain in effect.

On April 11, 2018, the Company advised the Delaware Court that it would meet and confer with Savant regarding a proposed case management order and date for trial. On April 26, 2018 the Delaware Court so-ordered a proposed case management order submitted by the Company and Savant. The schedule in the case management order was modified by stipulation on August 24, 2018.

On April 8, 2019, the Company moved to compel Savant to produce documents in response to the Company’s document requests.  The parties thereafter agreed to a discovery schedule through June 30, 2019, which the Superior Court so ordered, and the parties produced documents to each other.  

On June 4, 2019, Savant filed a complaint against the Company and Madison Joint Venture LLC (“Madison”) in the Delaware Court of Chancery (the “Chancery Action”) seeking to “recover as damages that amounts owed to it under the MDC Agreement, and to reclaim Savant’s intellectual property,” among other things.  Savant also requested leave to move to dismiss the Company’s complaint on the grounds that the Company’s transfer of assets to Madison was champertous.  On June 10, 2019, the Company requested by letter that the Superior Court hold a contempt hearing because the Chancery Action violated the TRO entered by the Bankruptcy Court, the terms of which have been extended by stipulation of the parties.  On June 18, 2019, the Superior Court held a telephonic status conference.  The parties agreed that the Chancery Action should be consolidated with the Superior Court action, after which the Superior Court would address the parties’ motions. 

On July 22, 2019, the Company moved for contempt against Savant.  Savant filed its opposition on July 29, 2019.  On August 12, 2019, the Superior Court denied the Company’s motion for contempt. 

On July 23, 2019, Savant moved for summary judgment on the issue of champerty.  The Company filed its response and cross-motion for summary judgment on August 27, 2019.  Savant filed its reply on September 10, 2019 and the Company filed its cross-reply on September 20, 2019.  The motion is fully briefed and was argued at a hearing on February 3, 2020.  On August 17, 2020 the Superior Court issued a memorandum opinion denying Savant’s motion for summary judgment on the issue of champerty.

On July 26, 2019, the Company moved to modify the previously agreed-upon discovery schedule to extend discovery through December 31, 2019, which the Superior Court granted.  In subsequent orders, the discovery schedule was further extended until the end of June 2020.

On July 30, 2019, the Company filed a motion to dismiss Savant’s Chancery Action.  Savant filed an amended complaint on September 4, 2019, and the Company filed its opening brief in support of its motion to dismiss on October 11, 2019.  That motion is fully briefed and was argued at a hearing on February 3, 2020. On August 17, 2020 the Superior Court issued a memorandum opinion denying the Company’s motion to dismiss Savant’s Chancery Action.

On August 19, 2019, Savant moved to dismiss the Company’s amended Superior Court complaint.  On September 27, 2019, the Company filed an opposition to Savant’s motion and, in the alternative, requested leave to file a second amended complaint against Savant.  Savant consented to the filing of the second amended complaint and withdrew their motion to dismiss.  Savant filed a partial motion to dismiss against a co-defendant on October 30, 2019.  That motion is fully briefed and was argued at a hearing on February 3, 2020. At the February 3, 2020 hearing, the Court reserved judgment on the parties’ reciprocal motions. On August 17, 2020, the Superior Court issued a memorandum opinion granting in part and denying in part Savant’s motion to dismiss the Company’s amended Superior Court complaint. The Superior Court found the Company lacked standing because it assigned its interest to its co-plaintiff Madison. However, the Superior Court found that Madison had standing to proceed. Although the Company was dismissed from all counts of the Superior Court Action it continues to possess an interest in the Superior Court Action because of its ownership of Madison and remains a litigant because of Savant’s Chancery Action. Savant’s motion to dismiss the Company’s amended Superior Court complaint was denied in all other respects.

On May 22, 2020, upon the request of the parties, the Superior Court stayed both Delaware actions until July 29, 2020.

On June 30, 2020, Savant exercised 20,000 warrants in a cashless exercise resulting in 10,909 shares being issued to Savant.

On July 24, 2020, the parties submitted a joint status report in the Delaware actions. The parties also requested a status conference with the Court to discuss moving the trial from October 2020 to some later time.

On August 20, 2020, the Court held the requested status conference and ordered that a consolidated trial for the Superior Court Action and Chancery Action would be held in April 2021. The parties subsequently agreed to a five-day trial starting on April 12, 2021.

On September 29, 2020, upon the request of the parties, the Superior Court revised the existing discovery schedule. Under the revised discovery schedule fact discovery closed on November 9, 2020 and expert discovery closed on December 18, 2020. 

On October 7, 2020, Savant moved for leave to amend its complaint in the Chancery Action to add a claim for breach of contract related to its exercise of 20,000 warrants on June 30, 2020. Savant claims that the Company’s issuance of 10,909 shares was insufficient under the warrant. On November 23, 2020, the Superior Court granted Savant’s motion for leave to amend its complaint in the Chancery Action. The Company answered the second amended complaint in the Chancery Action on December 11, 2020.

On November 30, 2020, the Superior Court revised the discovery schedule to permit the Company to take additional discovery regarding Savant’s second amended complaint in the Chancery Action. Under this revised schedule, the Company had until December 18, 2020 to take additional discovery. Further, the deadline to complete expert discovery was moved to January 5, 2021. A consolidated trial for the Superior Court Action and Chancery Action remained scheduled for April 2021.

On December 18, 2020, fact discovery closed.

On January 5, 2021, the Company moved for leave to amend the Superior Court complaint to add Scott Freeman as a defendant. Savant opposed the motion for leave to amend on February 5, 2021. Briefing was completed on March 5, 2021. Further, the deadline for expert discovery closed.

On January 19, 2021, the Company and Savant filed competing motions for summary judgment on their respective claims in the Superior Court Action and Chancery Action. Oppositions to the motions for summary judgment were filed on February 5, 2021 and replies were filed on February 24, 2021.

On March 18, 2021, the Court held a hearing on the summary judgment motions and the Company’s motion for leave to amend. The Court reserved decision on the summary judgment motions, denied the Company’s motion for leave to amend and postponed the April 2021 trial. The Company is awaiting the Court’s availability to proceed with trial.

Private Placement Litigation

On June 15, 2020, a complaint was filed against the Company and Dr. Durrant in the Commercial Division of the Supreme Court of the State of New York. The case caption is Alliance Texas Holdings, LLC et al. v. Humanigen, Inc. et al., Index No. 652490/2020 (“Alliance Texas Holdings Case”). The plaintiffs in the Alliance Texas Holdings Case comprise a group of 17 prospective investors introduced to Humanigen by Noble Capital Markets, Inc. (“Noble”), which had been engaged by the Company as a non-exclusive placement agent in connection with a private placement of its common stock (the “Private Placement”). The plaintiffs had indicated interest in purchasing shares of common stock in the Private Placement but, due to the strength of demand for shares from other prospective investors, the plaintiffs were not allocated any investment amount. The plaintiffs allege that the Company and Dr. Durrant breached a contractual obligation to deliver shares of common stock to the plaintiffs. The plaintiffs seek to recover for losses due to alleged fraudulent misstatements and the Company’s failure to deliver shares to them and seek equitable relief in the form of specific performance. A motion to dismiss the complaint in the Alliance Texas Holdings Case has been fully briefed and is currently being considered by the court.

The Company believes that the claims made in the Alliance Texas Holdings Case are without merit, and it is prepared to defend itself vigorously.

On April 19, 2021, the Company and Noble entered into a confidential settlement agreement in respect of a separate lawsuit brought by Noble related to the Private Placement (the “Noble Case”) captioned Noble Capital Markets, Inc. v. Humanigen, Inc., Case No. 9:20-CV-81131-WPD, pursuant to which the Noble Case was dismissed with prejudice. 

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Subsequent Events

3 Months Ended

Mar. 31, 2021

Subsequent Events [Abstract]

Subsequent Events

11. Subsequent Events

On March 30, 2021, the Company entered into the Underwriting Agreement providing for the public offering of 5,000,000 shares of the Company’s common stock. In addition, the Company granted the underwriters a 30-day option to purchase an additional 750,000 shares of its common stock. The initial sale of 5,000,000 shares closed on April 5, 2021. On May 3, 2021, the Company closed on the sale of an additional 427,017 shares of its common stock related to the exercise of the underwriters’ 30-day option.

The net proceeds from this offering, after deducting underwriting discounts and estimated offering costs, are estimated to be approximately $94.1 million. The Company expects to use the net proceeds for manufacturing and inventory costs in connection with its efforts to prepare for potential commercialization of lenzilumab in the event of receipt of an EUA or other CMA for use in COVID-19 patients, as well as for working capital and other general corporate purposes.

On April 19, 2021, the Company announced positive data with lenzilumab in the Phase 1b study evaluating the efficacy and safety of lenzilumab with Yescarta, the CAR-T therapy developed by Kite in patients with DLBCL. In addition, the Company announced its plans to initiate a randomized, multicenter, potentially registrational, Phase 2 study to evaluate the efficacy and safety of lenzilumab combined with all commercially available CD19 CAR-T therapies in DLBCL. In connection with its announcement of its decision to pursue the Phase 2 study, the Company also announced the termination of the clinical collaboration agreement with Kite effective on May 18, 2021, the 30^th day following the Company’s notice of termination. The parties are expected to collaborate on the wind down of activities related to the Phase 1b study as the Company prepares to initiate a Company-sponsored Phase 2 study with all commercially available CD19 CAR-T therapies in DLBCL.

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Potentially Dilutive Securities (Tables)

3 Months Ended

Mar. 31, 2021

Potentially Dilutive Securities

Potentially Dilutive Securities Excluded From Computation of Diluted Net Loss Per Common Share

The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:

	As of March 31,
	2021		2020
Options to purchase common stock		4,224,111		3,420,930
Warrants to purchase common stock		51,238		66,239
Convertible debt		255,493		2,295,545
		4,530,842		5,782,714

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2021

Disclosure Text Block [Abstract]

Schedule of Outstanding Future Payments Associated Company's Term Loan

The following table summarizes the outstanding future payments of principal and interest associated with the Company’s Term Loan as of March 31, 2021 (in thousands):

2021	$	1,501
2022		2,218
2023		10,800
2024		13,671
2025		5,153
Total payments		33,343
Less amount representing interest		(6,655	)
Notes payable, gross		26,688
Less: Unamortized portion of EOT charge		(1,688	)
Less: Unamortized discount on notes payable		(213	)
Less: Unamortized debt issuance costs		(343	)
Long-term debt		24,444
Less current portion		-
Long-term debt, net of current portion	$	24,444

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Stock-Based Compensation (Tables)

3 Months Ended

Mar. 31, 2021

Share-based Payment Arrangement [Abstract]

Schedule of Summary of Stock Option Activity

A summary of stock option activity for the three months ended March 31, 2021 under all the Company’s options plans is as follows:

	Options			Weighted Average Exercise Price
Outstanding at January 1, 2021		3,728,149		$	5.57
Granted		758,240			16.13
Exercised		(250,242	)		(3.13	)
Cancelled (forfeited)		(11,932	)		(3.33	)
Cancelled (expired)		(104	)		(162.09	)
Outstanding at March 31, 2021		4,224,111		$	7.61

Schedule of Weighted-Average Assumption Terms

The Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption terms for the three months ended March 31, 2021:

	Three Months Ended
	March 31, 2021
Exercise price	$16.07 - $17.79
Market value	$16.07 - $17.79
Expected term	6 years
Expected volatility	109%
Risk-free interest rate	1.06% - 1.08%
Expected dividend yield	-%

Schedule of Stock-Based Compensation Expense

The Company recorded stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows (in thousands): 

	Three Months Ended March 31,
	2021		2020
General and administrative	$	364	$	211
Research and development	$	146	$	54
Total stock-based compensation	$	510	$	265

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Nature of Operations (Details) - USD ($) $ in Thousands		1 Months Ended	3 Months Ended
	Jul. 10, 2017	May 26, 2017	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020
Cash and cash equivalents			$ 92,892		$ 67,737
Secured term loan			25,000
Proceeds from the underwritten public offering			94,100
Research and development expense	$ 1,000	$ 1,000	59,934	$ 659
Lenzilumab COVID-19 clinical studies [Member]
Research and development expense			7,600
Production of lenzilumab finished good [Member]
Research and development expense			$ 51,700

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Potentially Dilutive Securities (Details) - shares	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computations of diluted net loss per common share	4,530,842	5,782,714
Options to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computations of diluted net loss per common share	4,224,111	3,420,930
Warrants to purchase common stock [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computations of diluted net loss per common share	51,238	66,239
Convertilbe debt [Member]
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive securities excluded from computations of diluted net loss per common share	255,493	2,295,545

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License Revenue (Details) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Mar. 31, 2021	Dec. 31, 2020
License Agreement Terms [Member]
Gross up-front license fee	$ 6.0
Aggregate licence payment received		$ 14.0
Description of licensing agreement	The Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer.
Revenue recognized performance obligation description of payment	Over the performance period through March 2023 (the “Performance Period”), the expected period over which the Company conservatively expects the Services to be performed with approval in the Territory expected by the end of March 2023.
License revenue	$ 0.5
Up-front Payment Arrangement [Member]
Upfront payment	$ 4.5

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Long-Term Debt (Narrative) (Details) - Secured Term Loan Facility [Member] - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended			3 Months Ended
	Mar. 10, 2021	Mar. 29, 2024	Mar. 29, 2023	Mar. 29, 2022	Mar. 31, 2021	Mar. 29, 2021
Debt Instrument [Line Items]
Aggregate principal amount	$ 80,000
Drew amount						$ 25,000
Net proceeds	$ 24,400
Interest rate description	Amounts drawn bear interest at a floating rate equal to the greater of either (i) 8.75% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 8.75% (such greater amount, the “Base Interest Rate”). Subject to there not having occurred any default or event of default under the loan agreement, the Base Interest Rate will be reduced by 25 basis points upon the occurrence of each of the first three of the four following events to occur:
Net Lenzilumab Product Revenue	$ 100,000
Interest rate	6.75%				9.00%
Unrestricted cash	$ 10,000
Unrestricted net cash proceeds	$ 100,000
Conversion price	$ 19.57
Interest expense					$ 18
Convertible Notes Payable [Member]
Debt Instrument [Line Items]
Aggregate principal amount	$ 250,000
Subsequent Event [Member]
Debt Instrument [Line Items]
Percentage of amount borrowed if repayment occurs		1.00%	1.50%	2.00%
Minimum [Member]
Debt Instrument [Line Items]
Net Lenzilumab Product Revenue	250,000
Converted principal amount	5,000
Maximum [Member]
Debt Instrument [Line Items]
Net Lenzilumab Product Revenue	350,000
Unrestricted cash	20,000
Converted principal amount	10,000
Second tranche [Member] | Minimum [Member]
Debt Instrument [Line Items]
Drew amount	25,000
Second tranche [Member] | Maximum [Member]
Debt Instrument [Line Items]
Drew amount	35,000
Third tranche [Member]
Debt Instrument [Line Items]
Drew amount	$ 20,000

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Long-Term Debt (Schedule of Outstanding Future Payments Associated Company's Term Loan) (Details) - USD ($) $ in Thousands	Mar. 31, 2021	Dec. 31, 2020
Debt Disclosure [Abstract]
2021	$ 1,501
2022	2,218
2023	10,800
2024	13,671
2025	5,153
Total payments	33,343
Less amount representing interest	(6,655)
Notes payable, gross	26,688
Less: Unamortized portion of EOT charge	(1,688)
Less: Unamortized discount on notes payable	(213)
Less: Unamortized debt issuance costs	(343)
Long-term debt	24,444
Less current portion
Long-term debt, net of current portion	$ 24,444

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Commitments and Contingencies (Details) $ in Thousands	Mar. 31, 2021 USD ($)
Commitments and Contingencies Disclosure [Abstract]
Accrued expenses	$ 900
Commitments remaining	$ 169,000

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Stockholders' Equity (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Sep. 11, 2020
Class of Stock [Line Items]
Reverse stock split	1-for-5
Common Stock, shares authorized upon the completion of the IPO	225,000,000		225,000,000	225,000,000
Total proceeds	$ 36,106	$ 65
Common stock, shares outstanding	53,656,689		51,626,508
Controlled Equity Offering SM Sales Agreement [Member] | Cantor Fitzgerald & Co. [Member]
Class of Stock [Line Items]
Total proceeds	$ 100,000
Private Placement [Member]
Class of Stock [Line Items]
Total proceeds	$ 36,100
Company issued shares	1,796,858
2021 Underwritten Public Offering [Member] | J.P. Morgan Securities LLC and Jefferies LLC [Member]
Class of Stock [Line Items]
Shares issued in public offering	5,000,000
Warrants to purchase common stock	750,000
2020 Equity Plan [Member]
Class of Stock [Line Items]
Shares available for future grant				7,000,000
Maximum [Member]
Class of Stock [Line Items]
Common stock, shares outstanding				210,900,000
Minimum [Member]
Class of Stock [Line Items]
Common stock, shares outstanding				42,200,000

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Stock-Based Compensation (Narrative) (Details) $ / shares in Units, $ in Thousands	3 Months Ended
	Mar. 31, 2021 USD ($) $ / shares
Share-based Payment Arrangement [Abstract]
Weighted average fair value of options granted | $ / shares	$ 13.30
Unrecognized compensation expense | $	$ 12,800
Weighted average period for recognition	2 years 8 months 12 days

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Stock-Based Compensation (Schedule of Summary of Stock Option Activity) (Details)	3 Months Ended
	Mar. 31, 2021 $ / shares shares
Options
Outstanding at January 1, 2021 | shares	3,728,149
Granted | shares	758,240
Exercised | shares	(250,242)
Cancelled (forfeited) | shares	(11,932)
Cancelled (expired) | shares	(104)
Outstanding at March 31, 2021 | shares	4,224,111
Weighted Average Exercise Price
Outstanding at January 1, 2021 | $ / shares	$ 5.57
Granted | $ / shares	16.13
Exercised | $ / shares	(3.13)
Cancelled (forfeited) | $ / shares	(3.33)
Cancelled (expired) | $ / shares	(162.09)
Outstanding at March 31, 2021 | $ / shares	$ 7.61

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Stock-Based Compensation (Schedule of Weighted-Average Assumption Terms) (Details)	3 Months Ended
	Mar. 31, 2021 $ / shares
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Expected term	6 years
Expected volatility	109.00%
Expected dividend yield
Minimum [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Exercise price	$ 16.07
Market value	$ 16.07
Risk-free interest rate	1.06%
Maximum [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Exercise price	$ 17.79
Market value	$ 17.79
Risk-free interest rate	1.08%

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Stock-Based Compensation (Stock-Based Compensation Expense) (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2021	Mar. 31, 2020
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 510	$ 265
General And Administrative Expense [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	364	211
Research And Development Expense [Member]
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]
Stock-based compensation expense	$ 146	$ 54

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License and Collaboration Agreements (Details) - USD ($) $ in Thousands	1 Months Ended	3 Months Ended
	Jul. 19, 2019	Mar. 31, 2021
Mayo Agreement [Member]
Amount paid in license agreement		$ 200
Zurich Agreement [Member]
Amount paid in license agreement	$ 100
Zurich Agreement [Member] | Research And Development Expense [Member]
Amount paid in license agreement		$ 100

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Litigation (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended				3 Months Ended
	Jul. 10, 2017	Jun. 19, 2020	Jun. 30, 2017	May 26, 2017	Jun. 30, 2016	Mar. 31, 2021	Mar. 31, 2020	Dec. 31, 2020	Oct. 07, 2020	Jun. 30, 2020
Research and development	$ 1,000			$ 1,000		$ 59,934	$ 659
Due to Savant						$ 2,000		$ 2,000
Savant Neglected Diseases, LLC [Member]
Number of shares called by warrant					40,000
Exercise price of warrant					$ 11.25
Exercise period of warrant					5 years
Private Placement [Member]
Amount sought under alledges		$ 4,000
Savant Neglected Diseases, LLC [Member]
Aggregate cost			$ 3,400
Deductible			500
Offset payment due			$ 2,000
Warrants exercised cashless										20,000
Shares issued										10,909
Savant Neglected Diseases, LLC [Member] | Insufficient under warrant [Member]
Shares issued									10,909
Savant Neglected Diseases, LLC [Member] | Breach of contract related to exercise of warrants [Member]
Warrants exercised cashless									20,000

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Subsequent Events (Details) - 2021 Underwritten Public Offering [Member] - USD ($) $ in Thousands		3 Months Ended
	Apr. 05, 2021	Mar. 31, 2021
Subsequent Event [Line Items]
Company issued common stock shares		5,000,000
Shares issued in public offering		750,000
Sale of additional shares of common stock		427,017
Proceeds from sale of shares after offering costs		$ 94,100
Subsequent Event [Member]
Subsequent Event [Line Items]
Company issued common stock shares	5,000,000