On May 23, 2023, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Ascent Merger Sub Corp., a Delaware corporation and wholly-owned subsidiary of the Company (“Merger Sub”), and Apexigen, a Delaware corporation and a clinical-stage biopharmaceutical company focused on discovering and developing innovative antibody therapeutics for oncology.

On August 23, 2023 (the “Closing Date”), the Company completed the acquisition of Apexigen contemplated by the Merger Agreement, pursuant to which, Merger Sub merged with and into Apexigen, with Apexigen surviving as a wholly owned subsidiary of the Company (the “Merger”). The Company issued 4,344,435 shares of its common stock to Apexigen stockholders. The Merger expanded the Company's pipeline with the addition of sotigalimab (now PYX-107), a CD40 agonist with demonstrated anti-cancer activity in patients who previously progressed on PD-(L)1 inhibitors, and enhanced the Company’s ADC capabilities with an addition of the commercially and clinically validated APXiMAB platform to generate novel antibodies that can be optimized for targeted payload delivery.

Under the Merger Agreement, each share of Apexigen common stock outstanding as of the Closing Date was automatically converted into the right to receive 0.1725 shares of the Company’s common stock (“Exchange Ratio”). Additionally, each outstanding stock option, restricted stock unit (“RSU”) and warrant issued by Apexigen was assumed and converted into stock options, RSUs and warrants to acquire the Company’s common stock, on substantially similar terms and conditions as were applicable under such Apexigen equity plans (collectively, the “Replacement Awards”) and warrant agreements. The number of stock options, RSUs and warrants and their respective exercise prices were adjusted by the Exchange Ratio.

The Company accounted for the Merger as a business combination using the acquisition method in accordance with ASC 805. Under the acquisition method of accounting, the Company was identified as the acquirer, with Apexigen as the acquiree, and August 23, 2023 was determined as the acquisition date. Accordingly, the assets acquired and liabilities assumed are recorded at their estimated fair value on the date of acquisition. Apexigen’s results of operations have been included in the consolidated statements of operations and comprehensive loss since the date of acquisition and were not material to the Company’s results of operations for the year ended December 31, 2023.

The consideration transferred for Apexigen includes the shares issued by the Company to former Apexigen stockholders, the fair value of replacement awards (both stock options and RSUs) of the Company granted to Apexigen grantholders attributable to pre-combination service and the fair value of Apexigen warrants converted to the Company’s warrants.

The following table summarizes the acquisition date fair value of the consideration transferred for Apexigen (in thousands, except share and per-share information):


Fair value of Pyxis Oncology common stock issued to Apexigen stockholders (i)	$	9,970
Fair value of replacement options and RSUs attributable to pre-combination service (ii)		144
Fair value of replacement warrants (iii)		618
Provisional purchase price	$	10,732

The following table summarizes the preliminary acquisition date fair value of the assets acquired and liabilities assumed (in thousands):


	Amount
Assets acquired:
Cash and cash equivalents	$	6,660
Prepaid expenses and other current assets		519
Intangible assets, net		24,458
Total identifiable assets	$	31,637

Liabilities assumed:
Accounts payable		(4,548	)
Accrued liabilities		(7,531	)
Deferred tax liability, net		(2,164	)
Deferred revenue		(6,662	)
Total identifiable liabilities		(20,905	)

Net assets acquired	$	10,732

The assets acquired and liabilities assumed were measured based on management’s estimates of the fair value as of the acquisition date. Intangible assets, net includes both IPR&D and definite-lived intangible assets acquired as part of the Merger. IPR&D represents Apexigen's research and development assets, which were in-process, but not yet completed, and which the Company has the opportunity to advance. The definite-lived intangible assets represent royalty rights under certain Apexigen out-licensing agreements that were assumed by the Company upon the Merger Agreement.

The fair value of the intangible assets, including both royalty rights and IPR&D acquired, was determined using the income approach. Under this method, an intangible asset's fair value is equal to the present value of the incremental after-tax cash flows attributable to the intangible asset. The fair value measurements were primarily based on significant inputs not observable in the market and thus represent a Level 3 measurement. The estimates the Company uses are consistent with the plans and estimates that it uses to manage its business. Significant assumptions utilized in the Company’s income approach model include the discount rate, timing of clinical studies and regulatory approvals, the probability of success of its research and development programs, timing of commercialization of these programs, forecasted sales, selling, general and administrative expenses, capital expenditures, as well as anticipated growth rates.

Deferred tax liabilities, net of $2.2 million relates to the IPR&D acquired as part of the Merger.

The fair value estimates for the intangible assets are considered provisional and subject to adjustment during the measurement period, not to exceed one year after the date of acquisition, as additional information becomes available and as additional analyses are performed.

The Company incurred transaction related costs of $1.7 million for the year ended December 31, 2023. All transaction related costs were recognized in general and administrative expenses on the consolidated statements of operations and comprehensive loss. No issuance costs were incurred relating to the issuance of shares to Apexigen stockholders.

On a pro forma basis to give effect to the Merger as if it occurred on January 1, 2022, net loss for the years ended December 31, 2023 and 2022, respectively, would have been as follows:


	Year Ended December 31,
	2023			2022
Net loss	$	(97,791	)	$	(153,207	)

The supplemental pro forma net loss includes a pro forma adjustment related to amortization expense for the acquired royalty rights as if the Merger occurred on January 1, 2022.