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Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2024

OR

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

For the transition period from          to

Commission file number 001-38650

Y-mAbs Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

47-4619612

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

230 Park Avenue

Suite 3350

New York, NY 10169

(Address of principal executive offices)

(Zip Code)

(646)-885-8505

(Registrant’s telephone number, including area code)

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

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, $0.0001 par value

YMAB

Nasdaq Global Select Market

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

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

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

Large accelerated filer 

    

Accelerated filer 

Non-accelerated filer 

Smaller reporting company 

Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  

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

There were 43,882,638 shares of Common Stock ($0.0001 par value) outstanding as of April 30, 2024.

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FORWARD-LOOKING STATEMENTS

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

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

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements\, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we made. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, licensing agreements, collaborations, joint ventures, or investments that we may make.

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

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

SUMMARY OF RISK FACTORS

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

1

Table of Contents

These risks are discussed more fully below under “Risk Factors” and include, but are not limited to the following:

We may not be able to successfully implement our business model, including our plans to expand the commercialization of DANYELZA® (naxitamab-gqgk), referred to as DANYELZA, and to develop, obtain regulatory approval of and commercialize our other product candidates;
Our expectations with respect to the rate and degree of market acceptance and clinical utility for DANYELZA or any current or future product candidates for which we may receive marketing approval may not be realized;
Our expectations with respect to the commercial value of any of our product candidates, including antibody constructs based on Self-Assembly Dis-Assembly Pre-targeted Radioimmunotherapy, or SADA PRIT, technology platform, may not be realized;
We may not be successful in implementing our business strategy, including our ability and plans in continuing to build out our commercial infrastructure and successfully launching, marketing, expanding the indications for, and selling DANYELZA and any current or future product candidates for which we may receive marketing approval. This includes our plans with respect to the focus and activities of our sales force, the nature of our marketing, market access and patient support activities of DANYELZA and related assumptions;
Our expectations with respect to the pricing, coverage and reimbursement of, and the extent to which patient assistance programs are utilized for DANYELZA or other product candidates for which we may receive marketing approval may not be realized;
Our expectations with respect to our ongoing and future clinical trials whether conducted by us or by any of our collaborators, may not be realized, including the timing of initiation of these trials, the pace of enrollment, the completion of enrollment, the availability of data from, and the outcome of, these trials, and expectations with respect to regulatory submissions and potential regulatory approvals may not be realized on the anticipated timing or at all;
The SADA PRIT Technology that we use has not been approved for commercial use by the FDA or any other regulatory authority and our clinical effort may not result in approval or marketable products;
The outcome of pre-clinical studies and early clinical trials may not be predictive of the success of later clinical trials, interim results of a clinical trial do not necessarily predict final results, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities, and if an adverse safety issue, clinical hold or other adverse finding occurs in one or more of our clinical trials of our product candidates, such event could adversely affect other clinical trials of our product candidates;
We may be unable to attract, integrate, manage and retain qualified personnel or key employees;
Our expectations with respect to the timing of and our ability to obtain and maintain regulatory, marketing and reimbursement approvals for our product candidates may not be realized;
We may be unable to successfully implement our commercialization, marketing and manufacturing capabilities and strategy;
If we are unable to establish and maintain sufficient intellectual property position, strategy and scope of protection for the intellectual property rights covering our product candidates and technology, or if the scope of the intellectual property protection obtained is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours and our ability to successfully commercialize our products, product candidates and other proprietary technologies, if approved, may be adversely affected;
We may be unable to identify and develop additional product candidates and technologies with significant commercial potential;
We may be unable to enter into collaborations or strategic partnerships for the development and commercialization of our product candidates and future operations, and the potential benefits of any such collaboration or partnership may not be realized;
Any collaboration agreement that we may enter into may not be successful, which could adversely affect our ability to develop and commercialize our products or to enter new therapeutic areas;

2

Table of Contents

We currently depend on third parties for a portion of our operations, and we may not be able to control their work as effectively as if we performed these functions ourselves. If the third parties fail to comply with regulations, our financial results and financial condition could be adversely affected;
We are dependent on our relationship with Memorial Sloan Kettering Cancer Center, or MSK, including our ability to maintain our exclusive rights under the 2015 MSK License Agreement (as amended), or the MSK License Agreement, and the 2020 SADA License Agreement, or the SADA License Agreement as well as our relationship with MSK as a user of DANYELZA and any future products;
Our expectations related to the use of our cash and cash equivalents, and how long our cash resources are expected to last, may be inaccurate and we may require additional funding sooner than we expect;
We will require substantial additional funding to finance our operations, complete the development and commercialization of our product and product candidates, and evaluate future product candidates, programs or other operations;
The timing and amount of any future financing transaction and our common stock price and other factors may impact our ability to raise additional capital on favorable terms;
Our expectations with respect to our financial performance, including our estimates regarding revenues, expenses, cash flow, and capital expenditure requirements may not be realized;
We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer or more effective than ours;
Our business, financial condition and results of operations have been and may in the future be adversely affected by health crises, macroeconomic conditions, such as inflation and high interest rates, uncertain global financial markets, supply-chain disruptions, and by geopolitical events, including the invasion of Ukraine by Russia, and sanctions related thereto, which resulted in the suspension of our clinical trial and regulatory activities in Russia; as well as the state of the war involving Israel and the related risk of a more global conflict;
We currently depend on a small number of third-party contract manufacturing organizations, or CMOs, and expect it would be difficult to find a suitable replacement for the complex and difficult manufacture of DANYELZA and our product candidates. The loss of any of these CMOs or the failure of any of them to meet their obligations to us could affect our ability to continue to sell DANYELZA or to develop our other product candidates in a timely manner;
We are subject to government laws and regulations, and we may be unable to comply with healthcare laws and regulations in the United States and any applicable foreign countries, including, without limitation, those applying to the marketing and sale of pharmaceutical products;
Any litigation to which we are a party could result in substantial damages or other adverse consequences to our business and may divert management’s time and attention from our business. Any litigation that is successful against us may result in the incurrence of substantial liability if our insurance is inadequate.

3

Table of Contents

TABLE OF CONTENTS

Page

PART I — FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements:

5

Consolidated Balance Sheets (unaudited) as of March 31, 2024 and December 31, 2023

5

Consolidated Statements of Net Loss and Comprehensive Loss (unaudited) for the three months ended March 31, 2024 and 2023

6

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2024 and 2023

7

Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2024 and 2023

8

Notes to Consolidated Financial Statements (unaudited)

9

Item 2.

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

29

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

41

Item 4.

Controls and Procedures

42

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

42

Item 1A.

Risk Factors

43

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

112

Item 3.

Defaults on Senior Securities

112

Item 4.

Mine Safety Disclosures

112

Item 5.

Other Information

112

Item 6.

Exhibits

113

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

4

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements.

Y-MABS THERAPEUTICS, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share and per share data)

March 31, 

    

December 31, 

2024

2023

ASSETS

 

  

 

  

CURRENT ASSETS

 

  

 

  

Cash and cash equivalents

$

75,749

$

78,637

Accounts receivable, net

20,588

22,454

Inventories

8,448

5,065

Other current assets

 

3,482

 

4,955

Total current assets

 

108,267

 

111,111

Property and equipment, net

 

153

 

224

Operating lease right-of-use assets

1,179

1,412

Intangible assets, net

2,543

2,631

Other assets

 

11,173

 

12,491

TOTAL ASSETS

$

123,315

$

127,869

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Accounts payable

$

6,728

$

6,060

Accrued liabilities

 

9,989

 

13,166

Operating lease liabilities, current portion

888

902

Total current liabilities

 

17,605

20,128

Accrued milestone and royalty payments

 

5,375

 

5,375

Operating lease liabilities, long-term portion

293

517

Other liabilities

853

864

TOTAL LIABILITIES

24,126

26,884

Commitments and contingencies (Note 9)

 

  

 

  

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.0001 par value, 5,500,000 shares authorized and none issued at March 31, 2024 and December 31, 2023

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized at March 31, 2024 and December 31, 2023; 43,852,638 and 43,672,112 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively

 

4

 

4

Additional paid-in capital

 

562,436

 

558,002

Accumulated other comprehensive income

 

848

 

449

Accumulated deficit

 

(464,099)

 

(457,470)

TOTAL STOCKHOLDERS’ EQUITY

 

99,189

 

100,985

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

123,315

$

127,869

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

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Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Net Loss and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

    

Three months ended March 31, 

    

2024

2023

REVENUES

Product revenue, net

$

19,431

$

20,251

License revenue

500

Total revenues

19,931

20,251

OPERATING COSTS AND EXPENSES

 

  

 

 

Cost of goods sold

2,097

2,083

License royalties

 

50

 

Research and development

13,267

13,418

Selling, general, and administrative

 

11,425

 

12,251

Total operating costs and expenses

 

26,839

 

27,752

Loss from operations

 

(6,908)

 

(7,501)

OTHER INCOME, NET

 

  

 

  

Interest and other income

 

439

 

1,111

LOSS BEFORE INCOME TAXES

(6,469)

(6,390)

Provision for income taxes

160

NET LOSS

$

(6,629)

$

(6,390)

Other comprehensive income/(loss)

 

  

 

  

Foreign currency translation

 

399

 

(306)

COMPREHENSIVE LOSS

$

(6,230)

$

(6,696)

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

$

(0.15)

$

(0.15)

Weighted average common shares outstanding, basic and diluted

 

43,779,456

 

43,671,589

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

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Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

(In thousands, except share data)

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

Stockholders’

Shares

    

Amount

    

Paid-in Capital

    

Income / (Loss)

    

Deficit

    

Equity

Balance December 31, 2022

43,670,109

$

4

$

543,929

$

1,331

$

(436,043)

$

109,221

Stock-based compensation expense

7,658

5,304

5,304

Foreign currency translation

(306)

(306)

Net loss

(6,390)

(6,390)

Balance March 31, 2023

43,677,767

$

4

$

549,233

$

1,025

$

(442,433)

$

107,829

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Income / (Loss)

    

Deficit

    

Equity

Balance December 31, 2023

 

43,672,112

$

4

$

558,002

$

449

$

(457,470)

$

100,985

Exercise of stock options

71,550

588

588

Stock-based compensation expense

 

108,976

3,846

3,846

Foreign currency translation

 

399

399

Net loss

 

(6,629)

(6,629)

Balance March 31, 2024

43,852,638

$

4

$

562,436

$

848

$

(464,099)

$

99,189

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

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Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

Three months ended March 31, 

2024

2023

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

Net loss

$

(6,629)

$

(6,390)

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

 

 

  

Depreciation and amortization

 

159

 

182

Stock-based compensation

 

3,846

 

5,304

Foreign currency and other transactions

 

492

 

(456)

Changes in assets and liabilities:

 

 

Accounts receivable, net

1,866

(6,171)

Inventories

(3,383)

(2,243)

Other current assets

 

1,473

 

1,722

Other assets

 

1,318

 

(2,983)

Accounts payable

 

176

 

(4,771)

Accrued liabilities and other

 

(2,795)

 

2,682

NET CASH USED IN OPERATING ACTIVITIES

 

(3,477)

 

(13,124)

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from exercised stock options

588

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

588

 

Effect of exchange rates on cash and cash equivalents

 

1

 

(9)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

(2,888)

 

(13,133)

Cash and cash equivalents at the beginning of period

 

78,637

 

105,762

Cash and cash equivalents at the end of period

$

75,749

$

92,629

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS

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

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

NOTE 2—BASIS OF PRESENTATION

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

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

The Company’s consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations since inception and had an accumulated deficit of $464,099,000 as of March 31, 2024 and $457,470,000 as of December 31, 2023. Through March 31, 2024, the Company has funded the operations primarily through proceeds from sales of shares of the Company’s common stock, including the initial public offering in September 2018 and the Company’s subsequent public offerings in November 2019 and February 2021, as well as additional funding from the sales of DANYELZA and from the sale of the Company’s Priority Review Voucher (“PRV”) obtained upon FDA approval of DANYELZA.

The Company had cash and cash equivalents of $75,749,000 and $78,637,000 as of March 31, 2024 and December 31, 2023, respectively. As of the issuance date of the consolidated financial statements for the quarter ended March 31, 2024, the Company expects that the cash and cash equivalents as of March 31, 2024 will be sufficient to fund the Company’s operating expenses and capital expenditure requirements as currently planned through at least the next 12 months from the date of the financial statements are issued.

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

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

The accompanying unaudited consolidated financial statements reflect the accounts of the Company and the Company’s wholly-owned subsidiary and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, Accounting Standards Codification (“ASC”) Topic 270-10 and the instructions to Form 10-Q. Accordingly, these consolidated financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim consolidated financial statements include all adjustments (consisting only of normal recurring nature) necessary in the judgment of management for a fair statement of the results for the periods presented. All intercompany balances and transactions have been eliminated. The Company has evaluated subsequent events through the date of this filing. Operating results for the three-month period ended March 31, 2024, are not necessarily indicative of the results that may be expected for the year ending December 31, 2024, any other interim periods, or any future year or period. The consolidated balance sheet data as of December 31, 2023 was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim consolidated financial statements in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company’s significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2023.

Use of Estimates

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

Cash and Cash Equivalents

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

Accounts Receivable, Net

The Company’s accounts receivable, net balance consists of amounts due from sales of our approved product, DANYELZA. Receivables from product sales are recorded net of allowances which generally include chargebacks, doubtful accounts, rebates, returns, and discounts. The allowance is based primarily on assessment of specific identifiable customer accounts considered at risk or uncollectible, as well as an analysis of current receivables aging and

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expected future write-offs. The Company has not historically experienced any significant credit losses. All customer accounts are actively managed, and no losses are currently expected.

The Company has not experienced any write-offs related to customer accounts receivable and has not recognized any allowance for doubtful accounts nor reversed any allowances in the three months ended March 31, 2024 and 2023.

Concentration of Credit Risk

The Company’s product sales are made through arrangements primarily with three national United States (“U.S.”) specialty distributors. As of March 31, 2024, the accounts receivable balances from such distributors totaled 76% of the Company’s outstanding accounts receivable. See NOTE 4 – PRODUCT REVENUE, NET, for details of product sales to certain customers that accounted for more than 10% of total product revenue, net. The remainder of the Company’s accounts receivable as of March 31, 2024 represented balances from international distribution partners. The Company has contractual payment terms with each customer and monitors their financial performance, historical payment terms and credit worthiness to timely assess and respond to any changes in their credit profile.

Inventories

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

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

The Company performs an assessment of the recoverability of capitalized inventories during each reporting period and writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment occurs. Such impairment charges, should they occur, are recorded within cost of goods sold. The determination of whether inventory costs will be realizable requires estimates by management. No material inventory write-downs occurred in the three months ended March 31, 2024 and 2023.

Fair Value Measurements

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

Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;
Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and

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

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

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

Fair Value Measurements as of March 31, 2024

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

71,466

$

$

71,466

Total

$

$

71,466

$

$

71,466

Fair Value Measurements as of December 31, 2023

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

75,501

$

$

75,501

Total

$

$

75,501

$

$

75,501

During the quarter ended March 31, 2024 and 2023, there were no transfers between Level 1, Level 2, and Level 3.

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

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

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

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

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Revenue Recognition

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

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

Product revenue, net

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

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

Rebates and chargebacks

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

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Discounts and distribution-related fees

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

Returns

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

In December 2022, the Company announced a distribution agreement with WEP Clinical Ltd., or WEP, in connection with an early access program for DANYELZA in Europe. There are no regulatory-based or sales-based milestone payments or royalty arrangements under this distribution agreement. The Company recognizes revenue when WEP obtains control of the product upon delivery. The Company invoices WEP based on the terms of the distribution agreement, where a portion is billed upon shipment of product and the unbilled portion is billed at a later date based on terms of the distribution agreement. The Company has an unconditional right to the unbilled portion of the receivable and the Company estimates that the receivable will be collected within one year and therefore has recorded the balance at March 31, 2024, within accounts receivable on the Consolidated Balance Sheets.

License revenue

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

In December 2020, the Company entered into a development and commercialization arrangement with SciClone International Pharmaceuticals Ltd., or SciClone, for certain indications of DANYELZA and omburtamab for Greater China, including Mainland China, Taiwan, Hong Kong and Macau. Based on the terms of the agreement, the Company may receive regulatory-based milestone payments up to $40,000,000, of which $15,000,000 has already been recognized and received in December 2022 for the conditional approval of DANYELZA in China, and sales-based milestone payments up to $60,000,000 and is entitled to royalties based upon the net sales generated by SciClone related to the product indications in the territory. The Company expects that the remaining regulatory-based and sales-based milestones will be recognized when each milestone is achieved.

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

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

In May 2021, the Company entered into an exclusive distribution agreement with Adium Pharma S.A. (“Adium”) for Adium to be the exclusive distributor of DANYELZA in Latin America. Under the terms of the agreement, the Company may receive regulatory-based milestone payments up to $3,000,000, of which $2,000,000 has already been recognized, and is entitled to royalties based upon DANYELZA net sales generated by Adium in Latin America. In April 2022, the Company received $1,000,000 upon the submission of the updated FDA Biologics License Applications (“BLA”) dossier for DANYELZA. In addition, during third quarter of 2023, the Company recognized $500,000 in regulatory-based license revenue from Adium pursuant to the distribution agreement in connection with the September 2023 achievement of marketing authorization for DANYELZA in Mexico. Lastly, in January 2024, the Company accepted the price approval for the first product in Brazil from the Brazilian Medicines Market Regulation Chamber, or CMED. The Company received $500,000 regulatory-based payment from Adium in connection with the price approval from CMED in the three months ended March 31, 2024. The Company expects that the sales-based milestones and royalty payments will be recognized when and if the milestones are achieved or the related sales occur.

In December 2022, the Company announced a distribution agreement with WEP Clinical Ltd., or WEP, in connection with an early access program for DANYELZA in Europe. There are no regulatory, or sales-based milestone payments or royalties under this distribution agreement.

Stock-Based Compensation

The Company measures stock options granted to employees and directors based on the fair value on the date of the grant and recognizes compensation expense of those awards, over the requisite service period, which for employees and directors is the vesting period of the respective award. Forfeitures are accounted for as they occur. The Company issues stock options with only service based and records the expense for these awards using the straight-line method over the requisite service period.

The fair value of each stock option grant is estimated on the grant date using the Black Scholes option pricing model. The Company’s public trading commenced in September 2018, and, as a result, there is limited available historical volatility experience. Therefore, the Company estimates expected stock volatility based on the weighting of the Company’s historical volatility with the historical volatility of a group of publicly traded peer companies, and the Company expects to continue to do so until there is adequate historical data regarding the volatility of the Company’s traded stock prices. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards as the Company has limited historical data to support the expected term assumption. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.

The fair value of restricted stock units is determined at the grant-date price of the Company’s common stock.

The fair value of performance-based restricted stock units (“PRSU”) is determined using a Monte-Carlo simulation model. The vesting of each tranche of the award depends on the fulfillment of both a service condition and the achievement of a stock price hurdle at the end of each tranche’s performance period, based on an average of the closing stock price over the 30 consecutive trading days immediately preceding each tranche’s vesting date. The stock price volatility is simulated using the Company’s historical volatility calculated from daily stock returns over a lookback term which equals the remaining service period from the grant date. The risk-free rate is determined using the zero-coupon risk-free interest rate derived from the Treasury Constant Maturities yield curve on the grant date. The expected dividend yield is based on the fact that the Company has never paid cash dividends on common shares and does not expect to pay any cash dividends in the foreseeable future.

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Earnings Per Share

The Company reports net earnings per share in accordance with ASC 260, Earnings per Share. Basic net loss per share (“EPS”) is calculated by dividing net income or loss attributable to common stockholders by the weighted average common stock outstanding. Diluted EPS is calculated by adjusting weighted average common shares outstanding for the dilutive effect of common stock options and restricted stock units. In periods in which a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be antidilutive. Similarly, securities that could potentially dilute basic EPS in the future are not included in the computation of diluted EPS because to do so would have been antidilutive.

Segment Information

The Company is engaged solely in operations related to the discovery, development, distribution and commercialization of novel antibody-based therapeutic products for the treatment of cancer, which the Company defines as one operating segment.

Recently Issued Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, and are adopted by the Company as of the specific effective date. The Company adopted ASU 2021-01 (as amended by ASU 2022-06), ASU 2020-06, ASU 2022-03, ASU 2022-04, ASU 2023-01, ASU 2023-02 and ASU 2023-07 effective January 1, 2024, and the adoption of these new standards did not have a material impact on the Company’s consolidated financial statements or disclosures.

In December 2023, the FASB issued ASU 2023-09, Improvement to income tax disclosures (Topic 740). ASU 2023-09 addresses annual disclosures related to the income tax rate reconciliation and the income taxes paid within the tax note. ASU 2023-09 requires consistent categories and greater disaggregation of information in the income tax rate reconciliation as well as a disaggregation of taxes paid by jurisdiction for the income taxes paid. ASU 2023-09 is required to be adopted by the Company for annual periods beginning after December 15, 2024. Early adoption is permitted for annual consolidated financial statements that have not yet been issued or made available for issuance. The Company is evaluating the impact of this update on the Company’s disclosures.

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

NOTE 4—PRODUCT REVENUE, NET

The Company’s product revenue, net was generated from sales of DANYELZA and consists of the following (in thousands):

Three months ended March 31, 

    

2024

2023

United States

$

18,610

$

16,833

Other countries

821

3,418

Total product revenue, net

$

19,431

$

20,251

The majority of the Company’s product sales were in the United States with additional sales in China, Europe, Latin America, and Israel through sublicenses and distribution agreements. The Company’s product revenue, net from other countries for the three months ended March 31, 2023 included $2,516,000 of product revenue, net from the Company’s distribution partner, WEP, in connection with the Company’s early access program for DANYELZA in Europe. There is no product revenue, net from WEP in the three months ended March 31, 2024. The Company

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recognized royalty revenue from the distribution partners of $462,000 and $658,000 in the three months ended March 31, 2024 and 2023, respectively.

The Company had product sales to certain customers that accounted for more than 10% of total product revenue, net for the three months ended March 31, 2024 and 2023. McKesson, AmerisourceBergen and Cardinal Health, accounted for 51%, 25%, and 22%, respectively, of the Company’s product revenue, net for the three months ended March 31, 2024. McKesson, AmerisourceBergen, Cardinal Health and WEP accounted for 45%, 29%, 13% and 12%, respectively, of the Company’s product revenue, net for the three months ended March 31, 2023.

As of March 31, 2024, the Company had recorded on the Consolidated Balance Sheets accounts receivable of approximately $20,588,000, of which $2,241,000 represents an unbilled portion to which the Company has unconditional rights to collect the consideration, and accrued liabilities of $198,000 related to product sales to WEP during the year ended December 31, 2023.

Revenue from product sales is recorded net of applicable provisions for rebates, chargebacks, discounts, distribution-related fees and other sales-related deductions. Accruals for chargebacks and discounts are recorded as a direct reduction to accounts receivable. Accruals for rebates, distribution-related fees without contractual right of offset and other sales-related deductions are recorded within accrued liabilities. As of March 31, 2024, the Company had recorded accounts receivable allowances of approximately $617,000 and accrued liabilities of $1,910,000 related to product sales. As of December 31, 2023, the Company had recorded accounts receivable allowances of approximately $492,000 and accrued liabilities of $2,309,000 related to product sales.

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

    

Contractual

 

    

    

Allowances and

Discounts

Government Rebates

 

Returns

Total

Balance December 31, 2023

$

41

$

2,694

$

66

$

2,801

Current provisions relating to sales in current year

94

2,667

3

2,764

Payments/credits relating to sales in current year

(54)

(2,690)

(2,744)

Change in estimate related to sales in the prior year

(294)

(294)

Balance March 31, 2024

$

81

$

2,377

$

69

$

2,527

NOTE 5—NET LOSS PER SHARE

The calculations of basic and diluted net loss per share are as follows (in thousands, except per share amounts):

Three months ended March 31, 

    

2024

2023

Net loss (numerator)

$

(6,629)

$

(6,390)

Weighted-average shares (denominator), basic and diluted

 

43,779

 

43,672

Basic and diluted net loss per share

$

(0.15)

$

(0.15)

Potentially dilutive securities excluded from the computation of diluted earnings per share relate to stock options and unvested restricted share units outstanding totaled 11,226,739 shares and 8,894,258 shares as of March 31, 2024 and 2023, respectively.

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NOTE 6—INVENTORIES

Inventories consist of the following (in thousands):

    

March 31, 2024

December 31, 2023

Raw Material

$

261

$

Work In Progress

16,550

14,021

Finished Goods

2,378

2,992

Total Inventories

$

19,189

$

17,013

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

    

March 31, 2024

December 31, 2023

CURRENT ASSETS

Inventories

$

8,448

$

5,065

Total recorded in Current Assets

8,448

5,065

NONCURRENT ASSETS

Other assets

10,741

11,948

Total recorded in Noncurrent Assets

10,741

11,948

Total Inventories

$

19,189

$

17,013

As of March 31, 2024 and December 31, 2023, the Company has classified $10,741,000 and $11,948,000, respectively, of work-in-progress inventories as noncurrent assets based on the Company’s current demand schedule and expectation that such inventories will be utilized after one year from the balance sheet date. Changes in noncurrent assets are reflected on the Consolidated Statements of Cash Flows within the caption of other assets.

During the three months ended March 31, 2024 and 2023, the Company did not record any material charges to write off inventories.

NOTE 7—INTANGIBLE ASSETS, NET

The Company’s intangible assets, net related to capitalized milestone payments made following FDA and other regulatory approvals, and commercialization of DANYELZA. The Company’s intangible assets, net as of March 31, 2024 and December 31, 2023 are as follows (in thousands):

March 31, 2024

December 31, 2023

Gross

Net

Gross

Net

Carrying

Accumulated

Carrying

Carrying

Accumulated

Carrying

Amount

Amortization

Amount

Amount

Amortization

Amount

DANYELZA

$

3,300

$

757

$

2,543

$

3,300

$

669

$

2,631

Intangible assets are amortized on a straight-line basis based on a 10-year useful life of the assets. Annual amortization expense is expected to be $355,000 each year for the five-year period from 2024 to 2028, and $768,000 thereafter.

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NOTE 8—ACCRUED LIABILITIES

Accrued liabilities as of March 31, 2024 and December 31, 2023 are as follows (in thousands):

March 31, 

    

December 31, 

    

2024

2023

Accrued licensing, milestone and royalty payments

$

2,459

$

3,452

Accrued clinical costs

 

794

 

597

Accrued compensation and board fees

 

2,165

 

3,858

Accrued manufacturing costs

1,948

2,531

Accrued sales reserves

1,910

2,309

Other

 

713

 

419

Total

$

9,989

$

13,166

NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS

The Company has entered into three license agreements and certain other agreements with Memorial Sloan Kettering Cancer Center (“MSK”). The license agreements include the MSK License Agreement, dated August 20, 2015, between the Company and MSK (the “MSK License”), and the CD33 License Agreement, dated November 13, 2017, between the Company and MSK (the “CD33 License”). Through the Settlement and Assumption and Assignment of the MSK License and Y-mAbs Sublicense Agreement, dated December 2, 2019, among MabVax Therapeutics Holdings, Inc. and MabVax Therapeutics, Inc., (together “MabVax”), the Company and MSK (the “SAAA”), the Company has established a direct license with MSK relating to the GD2-GD3 Vaccine, which was originally sublicensed by the Company in 2018 from MabVax.

In addition, the Company entered into a license agreement, dated April 15, 2020, with MSK and Massachusetts Institute of Technology (“MIT”) (the “SADA License Agreement”). These license agreements with MSK and MIT grant the Company certain patent rights and intellectual property rights, and in consideration thereof, the Company agreed to make certain payments and issue shares of the Company’s common stock to MSK and MIT. Certain payments are contingent milestone and royalty payments, as disclosed in the table below. Amounts disclosed in NOTE 8—ACCRUED LIABILITIES for accrued licensing, milestone and royalty payments are inclusive of obligations under the MSK License Agreement, CD33 License Agreement, MabVax License Agreement and SADA License Agreement, collectively.

The Company’s material license agreements are detailed in NOTE 9— LICENSE AGREEMENTS AND COMMITMENTS to the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

MSK License Agreement

The MSK License Agreement relates to intellectual property for DANYELZA and requires the Company to pay to MSK mid to high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by the Company and the Company’s affiliates and sublicensees. The Company is required to pay annual minimum royalties of $80,000 over the royalty term, which amounts are non-refundable but are creditable against royalty payments otherwise due thereunder. The Company is also obligated to pay to MSK certain clinical, regulatory and sales-based milestone payments under the MSK License, which payments become due at the earlier of completion of the related milestone activity or the date indicated in the MSK License.

SADA License Agreement

Pursuant to the SADA License Agreement, the Company was granted an exclusive worldwide, sublicensable license to MSK’s and MIT’s rights to certain patent and intellectual property to develop, make, and commercialize

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licensed products and to perform services for all therapeutic and diagnostic uses in the field of cancer diagnostics and cancer treatments using the SADA PRIT Technology.

The SADA License Agreement requires the Company to pay MSK and MIT mid to high single-digit royalties based on annual net sales of licensed products or the performance of licensed services by the Company and its affiliates and sublicensees. The Company is obligated to pay non-refundable annual minimum royalties of $40,000, increasing to $60,000 once a patent has been issued, over the royalty term, commencing on the tenth anniversary of the license agreement, which are creditable against royalty payments otherwise due under the SADA License Agreement. Pursuant to the SADA License Agreement, the Company is also obligated to pay MSK and MIT certain clinical, regulatory and sales-based milestone payments, which become due at the earlier of completion of the related milestone activity or the date indicated in the SADA License Agreement. The Company may terminate the SADA License Agreement with prior written notice.

The Company did not recognize any expense related to milestones under the SADA License Agreement during the three months ended March 31, 2024 and 2023, respectively. The Company recognized an expense of $4,125,000 related to clinical milestones under the SADA License Agreement during the year ended December 31, 2023, as the Company determined certain time-based clinical milestones within the agreement are probable based on the availability of necessary data and the assessment of clinical progress during the year ended December 31, 2023. The Company had $4,125,000 in accrued liabilities as of March 31, 2024 and December 31, 2023. The Company made a payment of $605,000 in the year ended December 31, 2023 related to achievement of the milestone for dosing the first patient in the Phase 1 trial of GD2-SADA in April 2023. The Company did not make any payments under SADA License Agreement in the three months ended March 31, 2024.

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

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

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Summary of Significant License Agreements and Related Commitments

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

    

Maximum

    

Maximum

    

Maximum

Clinical

Regulatory

Sales-based

Agreements

Milestones

Milestones

Milestones

MSK

$ 2,450

$ 9,000

$ 20,000

CD33

550

500

7,500

MabVax

200

1,200

SADA

4,730

18,125

23,750

The below table represents all obligations pertaining to the significant license agreements that have been paid, expensed, or accrued for during the three months ended March 31, 2024 and 2023, and as of March 31, 2024 and December 31, 2023 (in thousands):

    

Cash paid

    

Cash paid

    

Expense

    

Expense

Accrued

    

Accrued

    

Accrued

    

Accrued

    

three

three

three

three

liabilities

    

liabilities

    

liabilities

    

liabilities

    

months

months

months

months

current

non-current

current

non-current

ended

ended

ended

ended

as of

as of

as of

as of

March 31, 

March 31, 

March 31, 

March 31, 

March 31, 

March 31, 

December 31, 

December 31, 

Agreements

2024

2023

2024

2023

2024

2024

2023

2023

MSK

$

2,377

$

3,245

$

1,348

$

1,223

$

1,459

$

1,950

$

2,452

$

1,950

CD33

300

300

SADA

1,000

3,125

1,000

3,125

Minimum royalties and certain clinical, regulatory and sales milestones that become due based upon the passage of time under the MSK License Agreement, CD33 License Agreement, the MabVax Agreement, and the SADA License Agreement are excluded from the above table as the Company does not consider such obligations to be probable as of March 31, 2024 and December 31, 2023.

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

Lease Agreements

In February 2019, the Company entered into a lease agreement in connection with the Company’s 4,548 square feet laboratory in New Jersey. In December 2019, the Company expanded the space with an additional 235 square feet. The original term of the lease was three years from the date the Company occupied the premises, with an option to extend for an additional two years which was to expire in January 2024, which the Company exercised and had included in the determination of the related lease liability. In July 2023, the Company entered into a lease amendment to extend the term to February 2025. Fixed rent payable under the lease is approximately $177,000 per annum and is payable in equal monthly installments of approximately $15,000 per month.

In January 2018, the Company entered into a lease agreement in connection with the Company’s corporate headquarters in New York. The term of the lease was six years from the date the Company began to occupy the premises and the lease was to expire in April 2024. In August 2023, the Company entered into a lease amendment to extend the

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term to April 2025. Fixed rent payable under the lease is approximately $408,000 per annum and is payable in equal monthly installments of approximately $34,000.

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

Total operating lease costs were $246,000 and $340,000 for the three months ended March 31, 2024 and 2023, respectively.

During the three months ended March 31, 2024, the expenses were recorded as $168,000 in research and development expense and $78,000 in selling, general, and administrative expense. During the three months ended March 31, 2023, the expenses were recorded as $283,000 in research and development expense and $57,000 in selling, general, and administrative expense. Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2024 and 2023 was $251,000 and $259,000, respectively, and was included in net cash used in operating activities in the Company’s Consolidated Statements of Cash Flows.

Maturities of operating lease liabilities as of March 31, 2024 and December 31, 2023 were as follows (in thousands):

    

March 31, 2024

December 31, 2023

Remainder of 2024

$

730

$

Years ending December 31,

2024

996

2025

525

526

Total lease payments

1,255

1,522

Less: Imputed interest

(74)

(103)

Total operating lease liabilities as of period end

$

1,181

$

1,419

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company estimates the incremental borrowing rate based on the information available at the lease commencement date. As of March 31, 2024, the weighted average remaining lease term was 1.37 years and the weighted average discount rate used to determine the operating lease liability was 8.3%. As of December 31, 2023, the weighted average remaining lease term is 1.61 years and the weighted average discount rate used to determine the operating lease liability was 8.3%.

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Legal Matters

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

The Company has been named a nominal defendant in a lawsuit filed in the U.S. District Court, Southern District of New York, on August 25, 2021, by one of the Company’s stockholders, Deborah Donoghue (Case No. 1:21-cv-07182). The suit names the Company’s Chief Business Officer, and Vice Chairman of the Company’s board of directors, Mr. Thomas Gad as an additional defendant, and it seeks to compel Mr. Gad to disgorge alleged short swing profits stemming from a certain transaction involving the Company’s common stock undertaken by Mr. Gad on March 10, 2021 together with appropriate interest and costs of the lawsuit. On December 17, 2021, Mr. Gad filed a Motion to Dismiss the lawsuit. On August 8, 2022, the Court denied Mr. Gad’s Motion to Dismiss the lawsuit. The parties have completed documentary discovery and depositions. On February 1, 2024, both the Plaintiff and Mr. Gad filed their respective motions for summary judgment. The Company is of the opinion that the claim is without merit and intends to maintain this position in the proceedings. In addition, the Company has been informed by Mr. Gad that he also believes the claim is without merit, that he has strong defenses against such claim and that he intends to vigorously defend the action. The Company has assessed the proceedings and does not believe that it is probable that a gain or a liability will be realized by the Company. As a result, the Company did not record any loss or gain contingencies for this matter.

In re Y-mAbs Therapeutics, Inc. Securities Litigation

On January 18, 2023, a putative class-action lawsuit was filed against the Company and certain of the Company’s current and former officers for alleged violations of the U.S. federal securities laws in the United States District Court, Southern District of New York (Case No.: 1:23-cv-00431). The amended complaint filed on May 23, 2023, asserts claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended, on behalf of a proposed class consisting of those who acquired the Company’s common stock between October 6, 2020 and October 28, 2022. The amended complaint alleges that there were material misrepresentations and/or omissions regarding the FDA’s consideration of the Company’s BLA for omburtamab for the treatment of pediatric patients with CNS/leptomeningeal metastasis from neuroblastoma firstly submitted in 2020 and resubmitted in 2022. The amended complaint seeks unspecified damages, and costs and expenses, including attorneys’ fees. On September 29, 2023, the defendants’ motion to dismiss the amended complaint was fully briefed. On February 5, 2024, the Court granted in part and denied in part the defendants’ motion to dismiss. The Court dismissed the plaintiff’s claims relating to three of four categories of challenged statements and dismissed in part plaintiff’s claims relating to the fourth category of challenged statements. The Court also dismissed one of the individual defendants from the case. The Company believes that the remaining claims are without merit and intends to vigorously defend against these claims. The Company has not established a liability for this claim as of March 31, 2024 as the Company does not consider a loss on the claim to be probable.

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

The Company has been named a nominal defendant in a lawsuit filed in the Court of Chancery of the State of Delaware, on February 8, 2023, by a purported stockholder, Jeffrey Hazelton (Case No. 2023-0147-LWW). The amended complaint filed on May 12, 2023, purports to bring claims on behalf of the Company against current and former members of the Company’s board of directors for allegedly awarding themselves excessive compensation for fiscal years 2020 and 2021. The amended complaint seeks, among other things, recovery of alleged excessive compensation, an order directing the Company to undertake certain corporate governance reforms, and an award of costs and expenses, including attorneys’ fees. Defendants’ motion to dismiss the amended complaint was fully briefed as of September 8, 2023. On April 3, 2024, the parties informed the Court that they had agreed to resolve the matter on mootness grounds and hoped to reach agreement on formal documentation. The Company has not established a liability for this claim as of March 31, 2024 as the Company does not consider a loss on the claim to be estimable.

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NOTE 10—STOCKHOLDERS’ EQUITY

Authorized Stock

As of March 31, 2024 and December 31, 2023, the Company has authorized a total of 105,500,000 shares, 100,000,000 of which are common stock, par value $0.0001 per share, and 5,500,000 of which are preferred stock, par value $0.0001 per share.

Common Stock

Each share of common stock is entitled to one vote. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to preferential dividend rights of the preferred stock, none of which have been issued. The Company had issued 43,852,638 shares and 43,672,112 shares of common stock as of March 31, 2024 and December 31, 2023.

Preferred Stock

Preferred stock may be issued from time to time in one or more series with such designations, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions as approved by the Company’s Board of Directors. No preferred stock has been issued as of March 31, 2024 or December 31, 2023.

NOTE 11—STOCK-BASED COMPENSATION

2015 Equity Incentive Plan

The Company’s board of directors and stockholders approved and adopted the Amended and Restated 2015 Equity Incentive Plan (the “2015 Plan”), which provided for the grant of incentive stock options, within the meaning of Section 422 of the Code (the Internal Revenue Code), to the Company’s employees and any parent and subsidiary corporations’ employees, and for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units to the Company’s employees, directors and consultants and the Company’s subsidiary corporations’ employees and consultants. A total of 4,500,000 shares of the Company’s common stock were reserved for issuance pursuant to the 2015 Plan. Options granted under the 2015 Plan vest according to the schedule specified in the grant agreements, which is generally a four-year period and generally become immediately exercisable upon the occurrence of a change in control, as defined. Upon the 2018 Equity Incentive Plan (the “2018 Plan”) becoming effective in September 2018, no further grants are allowed under the 2015 Plan.

2018 Equity Incentive Plan

The Company’s board of directors and stockholders approved and adopted the 2018 Equity Incentive Plan (the “2018 Plan”) in connection with the Company’s initial public offering in September 2018. However, options outstanding under the 2015 Plan continue to be governed by the 2015 Plan. The 2018 Plan provides for the grant of incentive stock options, within the meaning of Section 422 of the Code (the Internal Revenue Code), to the Company’s employees and any parent and subsidiary corporations’ employees, and for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units, including performance-based restricted stock units (“PRSUs”), to the Company’s employees, directors and consultants and the Company’s parent and subsidiary corporations’ employees and consultants. A total of 5,500,000 shares of the Company’s common stock, inclusive of the awards previously granted under the 2015 Equity Incentive Plan were initially reserved for issuance pursuant to the 2018 Plan. In addition, the number of shares available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year beginning in 2019 through 2029, equal to 4% of the outstanding shares of common stock as of the last day of the Company’s immediately preceding fiscal year or by a lesser amount determined by the board of

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directors. As of March 31, 2024, the Company had 3,106,029 shares available for grant under the 2018 Equity Incentive Plan.

The exercise price of options granted under the plans must at least be equal to the fair market value of the Company’s common stock on the date of grant. The term of an incentive stock option may not exceed 10 years, except that with respect to any participant who owns more than 10% of the voting power of all classes of the Company’s outstanding stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the administrator, as well as other types of consideration permitted by applicable law. Options granted under the 2018 Plan vest according to the schedule specified in the grant agreements, which is generally between one and four years and generally become immediately exercisable upon the occurrence of a change in control, as defined in the Plan Agreement.

Stock-Based Compensation Expense

During the three months ended March 31, 2024 and 2023, the Company recognized the following stock-based compensation expense (in thousands):

Three months ended March 31, 

2024

2023

Stock-based compensation by type of award

Restricted stock units (excluding PRSUs)

$

421

$

187

PRSUs

 

53

 

Stock options

3,372

5,117

Total stock-based compensation expense

$

3,846

$

5,304

 

 

Stock-based compensation by type of expense

Research and development expenses

$

1,872

$

2,306

Selling, general and administrative expenses

1,974

2,998

Total stock-based compensation expense

$

3,846

$

5,304

The expense for the three months ended March 31, 2023 was inclusive of an acceleration of stock-based compensation of $1,706,000, as described further in NOTE 14— RESTRUCTURING CHARGE. There is no financial impact from the restructuring in the three months ended March 31, 2024.

Unrecognized Stock-Based Compensation Expense

The following table sets forth the Company’s unrecognized stock-based compensation expense as of March 31, 2024, by type of award and the weighted-average period over which the Company expects to recognize the expense (in thousands):

March 31, 2024

Unrecognized

Weighted average

compensation expense

recognition period (years)

Type of award

Restricted stock units (excluding PRSUs)

$

4,872

2.4

PRSUs

 

605

1.9

Stock options

23,991

3.0

Total unrecognized stock-based compensation expense

$

29,468

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Restricted Stock Unit (Excluding PRSU) Activity

The following table summarizes restricted stock units issued and outstanding:

    

    

    

Weighted

Weighted

average

average

remaining

grant

vesting

Restricted Stock Units

price

life (years)

Outstanding and expected to vest as of December 31, 2023

351,407

$

5.06

 

1.99

Granted

400,277

10.96

 

  

Vested

(108,976)

4.82

 

Forfeited

(39,934)

7.35

Outstanding and expected to vest as of March 31, 2024

602,774

$

8.87

 

2.41

During the three months ended March 31, 2024, 4,660 shares of RSUs were granted to a new non-executive director, which will vest equal quarterly installments until the third anniversary of the date of grant, provided that the recipient remains as non-executive director through vesting date. The remaining 395,617 shares of RSUs granted in the three months ended March 31, 2024 will vest annually over the next 3 years, provided in each case that the recipient remains an employee of the Company through each vesting date.

Performance-based Restricted Stock Unit (PRSUs) Activity

The following table summarizes restricted stock units issued and outstanding: