Y-mAbs(YMAB) - 2023 Q3 - Quarterly Report

PART I — FINANCIAL INFORMATION Item 1. Consolidated Financial Statements This section presents the company's unaudited consolidated financial statements, including balance sheets, statements of net loss and comprehensive loss, statements of changes in stockholders' equity, statements of cash flows, and detailed notes explaining the financial figures and accounting policies Consolidated Balance Sheets Consolidated Balance Sheet Highlights (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Cash and cash equivalents | $86,571 | $105,762 | | Total current assets | $114,860 | $130,447 | | Total assets | $128,884 | $141,456 | | Total liabilities | $28,734 | $32,235 | | Total stockholders' equity | $100,150 | $109,221 | | Accumulated deficit | $(456,482) | $(436,043) | - Total assets decreased by $12,572,000 from December 31, 2022, to September 30, 2023, primarily due to a reduction in cash and cash equivalents[20] Consolidated Statements of Net Loss and Comprehensive Loss Consolidated Statements of Net Loss and Comprehensive Loss (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Product revenue, net | $19,954 | $12,537 | $60,956 | $32,820 | | Total revenues | $20,454 | $12,537 | $61,456 | $33,820 | | Total operating costs and expenses | $28,203 | $38,554 | $83,929 | $127,478 | | Loss from operations | $(7,749) | $(26,017) | $(22,473) | $(93,658) | | Net loss | $(7,747) | $(27,526) | $(20,439) | $(96,725) | | Comprehensive loss | $(6,941) | $(25,928) | $(19,921) | $(93,394) | | Net loss per share (basic & diluted) | $(0.18) | $(0.63) | $(0.47) | $(2.21) | - Net loss significantly decreased by 72% for the three months ended September 30, 2023, and by 79% for the nine months ended September 30, 2023, compared to the prior year periods[22] Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Changes in Stockholders' Equity (in thousands) | Metric | Dec 31, 2022 | Sep 30, 2023 | | :-------------------- | :----------- | :----------- | | Common Stock Amount | $4 | $4 | | Additional Paid-in Capital | $543,929 | $554,779 | | Accumulated Other Comprehensive Income | $1,331 | $1,849 | | Accumulated Deficit | $(436,043) | $(456,482) | | Total Stockholders' Equity | $109,221 | $100,150 | - Total stockholders' equity decreased by $9,071,000 from December 31, 2022, to September 30, 2023, primarily due to the accumulated deficit[24][25] Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(19,196) | $(67,260) | | Net cash provided by investing activities | — | — | | Net cash provided by financing activities | — | $84 | | Net decrease in cash and cash equivalents | $(19,191) | $(67,038) | | Cash and cash equivalents at end of period | $86,571 | $114,526 | - Net cash used in operating activities decreased significantly by 71% for the nine months ended September 30, 2023, compared to the same period in 2022[28] Notes to Consolidated Financial Statements NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS - Y-mAbs Therapeutics, Inc. is a commercial-stage biopharmaceutical company focused on the development and commercialization of novel, antibody-based therapeutic products for the treatment of cancer[31] NOTE 2—BASIS OF PRESENTATION - The Company has incurred losses in almost all quarters since inception, with an accumulated deficit of $456,482,000 as of September 30, 2023[33][35] - As of September 30, 2023, the Company had cash and cash equivalents of $86,571,000 and expects this to be sufficient to fund operating expenses and capital expenditure requirements through at least the next 12 months[36] - The Company may raise additional capital through equity securities, debt, or licensing/collaboration agreements to fund future operations[37] NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Cash and Cash Equivalents - Cash equivalents are highly liquid instruments with original maturities of three months or less, held in highly rated securities including a treasury money market fund[42] Accounts Receivable, Net - Accounts receivable are from DANYELZA sales, recorded net of allowances for chargebacks, doubtful accounts, rebates, returns, and discounts[43] Concentration of Credit Risk - As of September 30, 2023, 69% of accounts receivable were from three national specialty distributors in the U.S., with the rest from international distribution partners[44] Inventories - Inventories are valued at the lower of cost or net realizable value on a first-in, first-out basis, including materials, manufacturing, packaging, freight, and labor costs[46] - Inventory write-downs totaled $375,000 and $831,000 for the three and nine months ended September 30, 2023, respectively, and $1,200,000 for both periods in 2022[48] Fair Value Measurements Fair Value Measurements of Cash Equivalents (in thousands) | Metric | Sep 30, 2023 (Level 2) | Dec 31, 2022 (Level 2) | | :----------------------------------- | :--------------------- | :--------------------- | | Cash equivalents: Money market funds | $82,964 | $86,965 | Operating Lease Right-of-Use Assets and Operating Lease Liabilities - Operating lease right-of-use assets and liabilities are recognized at lease commencement based on the present value of lease payments over the lease term, using the estimated incremental borrowing rate[54] Use of Estimates - Significant estimates and assumptions reflected in financial statements include net product revenues, accruals for R&D expenses, milestone and royalty payments, and valuation of stock options[57] Revenue Recognition - The company applies a five-step model to recognize revenue from product and license arrangements, allocating transaction price to distinct performance obligations based on relative standalone selling price[58][60][61] Product revenue, net - Revenue from DANYELZA sales is recognized when the customer obtains control of the product, net of estimated rebates, chargebacks, and discounts[62][63] - Estimates for deductions are based on contracts, government-mandated discounts, payor mix, and other factors, and are reviewed quarterly[63] License revenue - License agreements include regulatory-based and sales-based milestone payments, in addition to royalties, recognized when the milestone is achieved or related sales occur[67] - The company has license agreements with SciClone (Greater China), Takeda Israel (Israel, West Bank, Gaza Strip), Swixx BioPharma AG (Eastern European territories), and Adium Pharma S.A. (Latin America)[68][69][70][71] Segment Information - The Company operates in one operating segment, focused on the discovery, development, distribution, and commercialization of novel antibody-based therapeutic products for cancer[74] Recently Issued Accounting Pronouncements - The Company adopted ASU 2022-04, ASU 2022-02, ASU 2022-01, and ASU 2021-08 effective January 1, 2023, with no material impact on its consolidated financial statements or disclosures[75] NOTE 4—PRODUCT REVENUE, NET Product Revenue, Net (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Product revenue, net | $19,954 | $12,537 | $60,956 | $32,820 | | US product revenue | $16,072 | $12,420 | $48,756 | $30,872 | | Other countries product revenue | $3,882 | $117 | $12,200 | $1,948 | | WEP product revenue | $3,048 | — | $5,579 | — | | SciClone product revenue (9 months) | N/A | N/A | $3,535 | N/A | | Royalty revenue from distribution partners | $427 | $58 | $3,814 | $1,412 | - The increase in product revenue was primarily driven by an increase in new US patients and incremental benefit from expanding into international markets, including $3.0 million from WEP in Q3 2023 and $3.5 million from SciClone in 9M 2023[77][78][79] - A change in estimate related to assessed Medicaid claims data experience resulted in a benefit of $1,586,000 for the quarter ended September 30, 2023[84] NOTE 5—NET LOSS PER SHARE Net Loss Per Share (in thousands, except per share amounts) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Net loss | $(7,747) | $(27,526) | $(20,439) | $(96,725) | | Weighted-average shares outstanding | 43,621 | 43,718 | 43,652 | 43,715 | | Basic and diluted net loss per share | $(0.18) | $(0.63) | $(0.47) | $(2.21) | - Potentially dilutive securities (stock options and unvested restricted stock units) totaling 9,015,719 shares as of September 30, 2023, were excluded from diluted EPS calculation due to their antidilutive effect[86] NOTE 6—INVENTORIES Inventories (in thousands) | Inventory Type | Sep 30, 2023 | Dec 31, 2022 | | :----------------------- | :----------- | :----------- | | Work In Progress | $13,745 | $11,317 | | Finished Goods | $2,219 | $666 | | Total Inventories | $15,964 | $11,983 | | Current Inventories | $7,113 | $6,702 | | Noncurrent Inventories | $8,851 | $5,281 | - $8,851,000 of work in progress inventories were classified as noncurrent assets as of September 30, 2023, based on the expectation of utilization after one year[87] - Inventory write-offs were $375,000 and $831,000 for the three and nine months ended September 30, 2023, respectively, and $1,200,000 for both periods in 2022[88] NOTE 7—INTANGIBLE ASSETS, NET Intangible Assets, Net (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------- | :----------- | :----------- | | Intangible assets, net | $2,720 | $2,986 | | Accumulated amortization | $580 | $314 | - Intangible assets are amortized on a straight-line basis over a 10-year useful life, with annual amortization expense expected to be $355,000 each year from 2023 to 2027[91] NOTE 8—ACCRUED LIABILITIES Accrued Liabilities (in thousands) | Accrued Liability Type | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------- | :----------- | :----------- | | Accrued licensing, milestone and royalty payments | $2,137 | $4,002 | | Accrued clinical costs | $1,049 | $932 | | Accrued compensation and board fees | $2,805 | $2,445 | | Accrued manufacturing costs | $3,086 | $2,977 | | Accrued sales reserves | $3,482 | $2,474 | | Other | $745 | $411 | | Total | $13,304 | $13,241 | NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS MSK License Agreement - The MSK License relates to intellectual property for DANYELZA and requires mid to high single-digit royalties on annual net sales and annual minimum royalties of $80,000[98] - The Company is obligated to pay MSK certain clinical, regulatory, and sales-based milestone payments, totaling $2.5 million, $9.0 million, and $20.0 million respectively[98][108] SADA License Agreement - The SADA License Agreement grants an exclusive worldwide license to MSK's and MIT's SADA Technology, requiring mid to high single-digit royalties and annual minimum royalties starting at $40,000[99][100] - The Company is obligated to pay MSK and MIT clinical, regulatory, and sales-based milestone payments totaling $4.7 million, $18.1 million, and $23.8 million respectively under the SADA License Agreement[100][108] - An expense of $4,125,000 related to clinical milestones under the SADA License Agreement was recognized during the three and nine months ended September 30, 2023[101] Summary of Significant License Agreements and Related Commitments Summary of Significant License Agreements and Related Commitments (in thousands) | Agreement | Cash Paid (9M 2023) | Expense (3M 2023) | Expense (9M 2023) | Accrued Liabilities Current (Sep 30, 2023) | Accrued Liabilities Non-current (Sep 30, 2023) | | :-------- | :------------------ | :---------------- | :---------------- | :----------------------------------------- | :--------------------------------------------- | | MSK | $6,027 | $1,142 | $3,844 | $1,137 | $1,950 | | CD33 | — | — | — | — | $300 | | MabVax | $10 | $10 | $10 | — | — | | SADA | $605 | $4,125 | $4,125 | $1,000 | $3,125 | Maximum Clinical, Regulatory, or Sales-based Milestones (in thousands) | Agreement | Maximum Clinical Milestones | Maximum Regulatory Milestones | Maximum Sales-based Milestones | | :-------- | :-------------------------- | :---------------------------- | :----------------------------- | | MSK | $2,450 | $9,000 | $20,000 | | CD33 | $550 | $500 | $7,500 | | MabVax | $200 | $1,200 | — | | SADA | $4,730 | $18,125 | $23,750 | Lease Agreements - The Company extended lease agreements for its New Jersey laboratory (to February 2025) and New York corporate headquarters (to April 2025)[109][110] Operating Lease Costs (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total operating lease costs | $229 | $721 | $789 | $2,127 | Operating Lease Liabilities (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------------------- | :----------- | :----------- | | Total lease payments | $1,752 | $1,906 | | Total operating lease liabilities | $1,623 | $1,767 | | Weighted average remaining lease term | 1.85 years | 2.36 years | | Weighted average discount rate | 8.3% | 8.3% | Former Chief Executive Officer Contractual Severance Related Benefits - The departure of the former CEO in April 2022 resulted in $1,589,000 in cash compensation and a $9,286,000 non-cash share-based compensation charge in the nine months ended September 30, 2022[118] Legal Matters Donoghue vs. Y-mAbs Therapeutics, Inc., and Gad - A lawsuit filed by a stockholder alleges short swing profits by Mr. Thomas Gad; the action is currently stayed through November 30, 2023[119][272] In re Y-mAbs Therapeutics, Inc. Securities Litigation - A class-action lawsuit alleges material misrepresentations regarding the FDA's BLA consideration for omburtamab; defendants filed a motion to dismiss[120][273] Hazelton vs. Y-mAbs Therapeutics Inc., and Gad, et al. - A purported stockholder derivative action alleges excessive compensation to current and former board members for fiscal years 2020 and 2021; defendants filed a motion to dismiss[121][274] NOTE 10—STOCKHOLDERS' EQUITY Authorized Stock - The Company had authorized 100,000,000 shares of common stock and 5,500,000 shares of preferred stock, both with $0.0001 par value, as of September 30, 2023[122] Common Stock - As of September 30, 2023, 43,621,618 shares of common stock were issued, each entitled to one vote and potential dividends, subject to preferred stock rights[123] Preferred Stock - No preferred stock has been issued as of September 30, 2023, or December 31, 2022[124] Stock Grant Agreements with Non-Employees - Two non-employee researchers repaid loans related to tax payments for stock grants in 2022 and 2023, leading to the company recording and subsequently canceling treasury shares ($963,000 in 2022, $480,000 in 2023)[127] NOTE 11—STOCK-BASED COMPENSATION 2015 Equity Incentive Plan - The 2015 Plan reserved 4,500,000 shares of common stock for various equity awards, generally vesting over a four-year period[128] 2018 Equity Incentive Plan - The 2018 Plan initially reserved 5,500,000 shares of common stock, with annual increases, for various equity awards, generally vesting between one and four years[129][131] Stock Options Stock-Based Compensation for Stock Options (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock-based compensation | $2,229 | $3,257 | $10,793 | $21,822 | - 1,821,000 stock options were granted in the nine months ended September 30, 2023, including 1,105,500 under the Company's retention program[135] - As of September 30, 2023, unrecognized compensation expense related to employee stock options was $16,052,000, expected to vest over 2.59 years[139] Restricted Stock Unit Activity Stock-Based Compensation for Restricted Stock Units (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Stock-based compensation | $181 | $84 | $537 | $242 | - 380,636 restricted stock units were granted in the nine months ended September 30, 2023, under the Company's retention program[143] - As of September 30, 2023, unrecognized compensation related to employee restricted stock units was $1,379,000, expected to vest over 2.22 years[143] NOTE 12—INCOME TAXES Income Tax Provision (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Pre-tax net losses | $(7,560) | $(27,526) | $(20,073) | $(96,725) | | Current income tax provision | $187 | — | $366 | — | - The Company maintains a full valuation allowance on its U.S. and foreign deferred tax assets due to historical and forecasted losses[147] NOTE 13—OTHER BENEFITS - The Company offers a 401(k) savings plan for U.S. employees and a retirement program for Danish employees[148][151] - No matching contributions were made to the 401(k) plan or the Danish retirement program during the three and nine months ended September 30, 2023 and 2022[150][151] NOTE 14 —RESTRUCTURING CHARGE - In January 2023, the Company announced a strategic restructuring plan, reducing its workforce by approximately 35% to prioritize DANYELZA commercialization and SADA technology development[152][161] - Restructuring expenses totaled $4,482,000 for the nine months ended September 30, 2023, primarily for severance benefits ($2,776,000) and accelerated stock-based compensation ($1,706,000)[152] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial condition, results of operations, and cash flows, discussing key drivers, recent developments, known trends, critical accounting policies, and future funding requirements Overview - Y-mAbs Therapeutics is a commercial-stage biopharmaceutical company focused on novel, antibody-based therapeutic products for cancer[154] - DANYELZA (naxitamab-gqgk) received accelerated FDA approval in November 2020 for relapsed or refractory high-risk neuroblastoma[155] - The company is developing the SADA-BiDE Pre-targeted Radioimmunotherapy Platform (Liquid Radiation™), with GD2-SADA in Phase 1 clinical trials and CD38-SADA IND cleared for 2024 dosing[158][159][160] - A strategic restructuring in January 2023, including a 35% workforce reduction and deprioritization of omburtamab, is expected to extend cash resources into 2027[161][162] Recent Developments and Other Developments New Chief Executive Officer and Executive Officer Transition - Michael Rossi started as the new President and Chief Executive Officer on November 6, 2023; the former President, Interim Chief Executive Officer, and Head of Business Development and Strategy transitioned to Chief Business Officer[169] Omburtamab BLA and Advisory Committee Meeting - The FDA issued a Complete Response Letter (CRL) for omburtamab's BLA in December 2022, following an ODAC vote (16-0) that the company had not provided sufficient evidence for overall survival improvement[170] - The omburtamab program has been deprioritized as part of the strategic restructuring, and an 18-month extension of the BLA was requested in October 2023[161][170] DANYELZA Regulatory Developments - DANYELZA received marketing authorization in Brazil (May 2023) and Mexico (September 2023)[171] - $0.5 million in regulatory-based license revenue was recognized from Adium for DANYELZA's marketing authorization in Mexico[171] - SciClone launched commercial sales of DANYELZA in China, generating $3.5 million in product revenue and related royalties from an initial inventory stocking order[172] Known Trends, Geopolitical Events and Uncertainties - The Russia-Ukraine conflict led to the termination of DANYELZA clinical trials and suspension of regulatory activities in Russia, negatively impacting commercialization plans[173][325] - The Israel-Hamas war poses a risk to Takeda Israel's ability to sell products and collect receivables in the region, potentially impacting royalty income[177][325] - Inflation, rising interest rates, and recession risk may adversely affect operating results and the ability to obtain financing[178] - Financial institution liquidity risks, exemplified by recent bank failures, could impact access to cash and the ability to raise capital[179] Components of Our Results of Operations Product Revenue, Net - Product revenue consists of sales of DANYELZA and royalty revenue generated from its sales[180] License Revenue - License revenue consists of payments received for the licensing rights to DANYELZA and omburtamab[181] Operating Costs and Expenses Cost of goods sold - Cost of goods sold includes direct and indirect costs related to manufacturing and distribution of DANYELZA, third-party royalties, and inventory write-offs[183] Licensing royalties - Licensing royalties are third-party royalty expenses related to third-party licensing revenues[184] Research and development - Research and development expenses are expensed as incurred and include costs for clinical trials, outsourced manufacturing, license payments, personnel, and regulatory activities[185] - The successful development and regulatory approval of product candidates is highly uncertain, with costs and timing varying significantly due to numerous factors[185][186][189] - Research and development expenses decreased as a result of the January 2023 strategic restructuring, which deprioritized the omburtamab program and other pipeline programs[190] Selling, general, and administrative - Selling, general, and administrative expenses primarily consist of employee-related expenses, facility costs, legal fees, and fees for accounting, tax, and consulting services[191] - SG&A expenses decreased in the nine months ended September 30, 2023, due to the January 2023 restructuring[192] Other Income / (Loss), Net - Other income / (loss), net, primarily consists of interest income earned on money market funds and foreign currency transaction gains and losses, which can vary quarter-to-quarter[193] Critical Accounting Policies and Significant Judgments and Estimates Use of Estimates - Significant estimates and assumptions include net product revenues, accruals for research and development expenses, milestone and royalty payments, valuation of stock options, and asset impairments[196] Product Revenue, Net - Revenue from DANYELZA sales is recognized when the customer obtains control of the product, net of rebates, chargebacks, and discounts[199][201] - The vast majority of product sales were in the United States, with additional sales in China, Europe, Latin America, and Israel through sublicenses and distribution agreements[200] License Revenue - License revenue recognition follows a five-step model, allocating the transaction price to distinct performance obligations based on relative standalone selling price[202][203] Research and Development - Research and development costs are charged to operations when incurred, including compensation, license costs, payments to CMOs and CROs, and consumables[204][205] - Milestone and royalty payments are recorded when the achievement of the milestone or payment is probable and the amount is reasonably estimable[206] Fair Value Measurements - 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, with cash equivalents carried at fair value and primarily classified as Level 2[207][208][211] Stock-Based Compensation - Stock options granted to employees, directors, and consultants are measured at fair value on the grant date and recognized as compensation expense over the vesting period[209] Fair Value of Stock Options - The fair value of each stock option grant is estimated using the Black-Scholes option pricing model, considering expected volatility, expected term, risk-free interest rate, and expected dividend yield[210][212][216] Results of Operations Results of Operations (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :-------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Total revenues | $20,454 | $12,537 | $7,917 | 63% | | Total operating costs and expenses | $28,203 | $38,554 | $(10,351) | (27)% | | Loss from operations | $(7,749) | $(26,017) | $18,268 | (70)% | | Net loss | $(7,747) | $(27,526) | $19,779 | (72)% | Comparison of the Three Months Ended September 30, 2023 and 2022 Revenues Revenues (in thousands) | Revenue Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :--------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Product revenue, net | $19,954 | $12,537 | $7,417 | 59% | | License revenue | $500 | — | $500 | 100% | - Product revenue, net, increased by $7.5 million (59%) primarily due to new US patients and international market expansion, including $3.1 million from WEP[215][217] - License revenue of $0.5 million was recognized from DANYELZA's marketing authorization in Mexico[219] Cost of Goods Sold Cost of Goods Sold (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Cost of goods sold | $2,595 | $2,475 | $120 | 5% | - The increase was driven by increased product revenue and a $0.4 million inventory charge in 2023, partially offset by a $1.2 million charge in 2022[220] - Gross margin decreased due to increased revenues from geographic areas outside of the United States, which were at a lower gross margin[220] License Royalties License Royalties (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | License royalties | $50 | — | $50 | 100% | - License royalty expenses of $50,000 were incurred in Q3 2023, related to DANYELZA's Mexico marketing authorization[221] Research and Development Research and Development Expenses (in thousands) | R&D Expense Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change | Percentage | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | :--------- | | Research and development | $15,358 | $22,453 | $(7,095) | (32)% | | Outsourced manufacturing | $2,809 | $8,459 | $(5,650) | (67)% | | Milestones and license acquisition costs | $4,125 | — | $4,125 | 100% | | Personnel costs | $2,745 | $4,214 | $(1,469) | (35)% | - The $7.1 million decrease was primarily due to reduced spending on deprioritized programs, including $5.7 million in outsourced manufacturing and $2.0 million in personnel-related costs[223][225][226] - This decrease was partially offset by a $4.1 million increase in milestones and license acquisition costs related to the SADA License Agreement[223][224] Selling, General, and Administrative Selling, General, and Administrative Expenses (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :--------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Selling, general, and administrative | $10,200 | $13,626 | $(3,426) | (25)% | - The $3.4 million decrease was primarily attributable to a $1.9 million decrease in commercial expense, mainly due to costs incurred in 2022 for the preparation of a potential omburtamab launch[227] Interest and Other Income / (Loss) Interest and Other Income / (Loss) (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Interest and other income/(loss) | $189 | $(1,509) | $1,698 | (113)% | - The $1.7 million favorable change was primarily due to a $0.8 million decrease in foreign currency transaction losses and a $0.5 million increase from money market fund investment income[228] Provision for Income Taxes Provision for Income Taxes (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Provision for income taxes | $187 | — | $187 | — | - A $0.2 million provision for income taxes was recorded in Q3 2023, primarily driven by certain U.S. state jurisdictions[229] Comparison of the Nine Months Ended September 30, 2023 and 2022 Results of Operations (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :-------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Total revenues | $61,456 | $33,820 | $27,636 | 82% | | Total operating costs and expenses | $83,929 | $127,478 | $(43,549) | (34)% | | Loss from operations | $(22,473) | $(93,658) | $71,185 | (76)% | | Net loss | $(20,439) | $(96,725) | $76,286 | (79)% | Revenues Revenues (in thousands) | Revenue Type | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :--------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Product revenue, net | $60,956 | $32,820 | $28,136 | 86% | | License revenue | $500 | $1,000 | $(500) | (50)% | - Product revenue, net, increased by $28.2 million (86%) primarily due to new US patients and international market expansion, including $3.5 million from SciClone and $5.6 million from WEP[232] - License revenue decreased to $0.5 million in 2023 (from $1.0 million in 2022) due to the timing of milestone achievements[233] Cost of Goods Sold Cost of Goods Sold (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Cost of goods sold | $9,327 | $5,447 | $3,880 | 71% | - The increase was primarily driven by increased product revenue and a $0.8 million inventory charge in 2023, partially offset by a $1.2 million charge in 2022[235] - Gross margin decreased due to increased revenues from lower-margin international geographic areas[235] License Royalties License Royalties (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | License royalties | $50 | $100 | $(50) | (50)% | - License royalty expenses of $0.1 million in 2023 related to DANYELZA's Mexico marketing authorization, compared to $0.1 million in 2022 for the FDA BLA Dossier[236] Research and Development Research and Development Expenses (in thousands) | R&D Expense Category | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | Percentage | | :-------------------------- | :-------------------------- | :-------------------------- | :----- | :--------- | | Research and development | $40,831 | $71,785 | $(30,954) | (43)% | | Outsourced manufacturing | $9,529 | $27,433 | $(17,904) | (65)% | | Milestones and license acquisition costs | $4,125 | — | $4,125 | 100% | | Personnel costs | $10,903 | $14,207 | $(3,304) | (23)% | - The $31.0 million decrease was primarily due to reduced spending on deprioritized programs, including $17.9 million in outsourced manufacturing and $4.1 million in personnel-related costs[238][239][241] - This decrease was partially offset by a $4.1 million increase in milestones and license acquisition costs related to the SADA License Agreement[238] Selling, General, and Administrative Selling, General, and Administrative Expenses (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :--------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Selling, general, and administrative | $33,721 | $50,146 | $(16,425) | (33)% | - The $16.4 million decrease was primarily attributable to a $10.9 million charge for severance and share-based compensation expense for the former CEO in 2022[242] - Also, a $2.9 million decrease in commercial expense, primarily due to costs incurred in 2022 for the preparation of a potential omburtamab launch[242] Interest and Other Income / (Loss) Interest and Other Income / (Loss) (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :--------------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Interest and other income/(loss) | $2,400 | $(3,067) | $5,467 | (178)% | - The $5.5 million favorable increase was primarily due to a $2.6 million decrease in foreign currency transaction losses and a $2.3 million increase from money market fund investment income[243] Provision for Income Taxes Provision for Income Taxes (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :-------------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Provision for income taxes | $366 | — | $366 | 100% | - A $0.4 million provision for income taxes was recorded in 9M 2023, primarily driven by certain U.S. state jurisdictions[244] Liquidity and Capital Resources Overview - Cash and cash equivalents were $86.6 million as of September 30, 2023[245] - The January 2023 restructuring and anticipated DANYELZA revenues are expected to support operations into 2027[245] - The Company expects to continue incurring net operating losses and may require additional funding through public/private equity, debt, or strategic collaborations[167][168][245] Cash Flows Cash Flows (in thousands) | Cash Flow Category | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Amount Change | Percentage Change | | :----------------------- | :-------------------------- | :-------------------------- | :------------ | :---------------- | | Net cash used in operating activities | $(19,196) | $(67,260) | $48,064 | (71)% | | Net cash provided by investing activities | — | — | — | NA | | Net cash provided by financing activities | — | $84 | $(84) | (100)% | | Net decrease in cash and cash equivalents | $(19,191) | $(67,038) | $47,847 | (71)% | Net Cash Used in Operating Activities - Net cash used in operating activities decreased by $48.1 million to $19.2 million for the nine months ended September 30, 2023[251] - This decrease was primarily due to a $61.5 million improvement in net loss (net of non-cash adjustments), partially offset by a $13.4 million increase in cash used for working capital[251] Net Cash Provided by Investing Activities - The Company did not generate or use cash for investing activities during the nine months ended September 30, 2023, or 2022[252] Net Cash Provided by Financing Activities - The Company had no cash flows from financing activities in the nine months ended September 30, 2023, compared to $84,000 provided by exercised stock options in the same period of 2022[253] Funding Requirements - The Company expects its $86.6 million cash and cash equivalents (as of September 30, 2023), combined with anticipated DANYELZA revenues, to support operations into 2027[257] - Substantial additional funding will be required for pipeline development, marketing approval, and commercialization of product candidates[254][300] - Global economic conditions, including inflation, international conflicts, and banking instability, could adversely impact the ability to raise additional capital on acceptable terms[256][302] - Failure to obtain additional funding could force delays, reductions, or termination of research and development programs or commercialization efforts, or lead to unfavorable licensing terms[256][302] Contractual Obligations and Commitments - Material contractual commitments include license agreements with MSK, CD33, and SADA, involving various milestone and royalty payment obligations[263][265] - Research and development agreements are cancelable at the Company's option if such research and development fails[265] - Failure to meet certain conditions under license agreements could cause the related licenses to be canceled and result in termination of the respective arrangement[265] Recent Accounting Pronouncements - Refer to NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES for a discussion of recent accounting pronouncements, which had no material impact on the Company's consolidated financial statements[266] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the registrant is not required to provide quantitative and qualitative disclosures about market risk - As a 'smaller reporting company,' the registrant is not required to provide quantitative and qualitative disclosures about market risk[268] Item 4. Controls and Procedures Management, with CEO and CFO participation, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2023. There were no material changes in internal control over financial reporting during the quarter - Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of September 30, 2023[269] - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2023[271] PART II — OTHER INFORMATION Item 1. Legal Proceedings The company is a nominal defendant in three ongoing lawsuits: Donoghue vs. Y-mAbs Therapeutics, Inc., and Gad (short swing profits), In re Y-mAbs Therapeutics, Inc. Securities Litigation (securities fraud), and Hazelton vs. Y-mAbs Therapeutics Inc., and Gad, et al. (excessive compensation). The company believes these claims are without merit and has not established liabilities Donoghue vs. Y-mAbs Therapeutics, Inc., and Gad - A lawsuit filed by a stockholder alleges short swing profits by Mr. Thomas Gad; the action is currently stayed through November 30, 2023[119][272] In re Y-mAbs Therapeutics, Inc. Securities Litigation - A class-action lawsuit alleges material misrepresentations regarding the FDA's BLA consideration for omburtamab; defendants filed a motion to dismiss[120][273] Hazelton vs. Y-mAbs Therapeutics Inc., and Gad, et al. - A purported stockholder derivative action alleges excessive compensation to current and former board members for fiscal years 2020 and 2021; defendants filed a motion to dismiss[121][274] Item 1A. Risk Factors This section details numerous risks that could materially and adversely affect the company's business, financial condition, results of operations, and future growth prospects, categorized into financial, product development, third-party dependence, regulatory, intellectual property, employee, common stock, and general risks Risks Related to Our Financial Condition and Need for Additional Capital - The company has a limited operating history and incurred significant losses since inception, with an accumulated deficit of $456.5 million as of September 30, 2023[276][277] - DANYELZA is the only approved product, and revenue from its sales does not fully fund operating expenses; significant losses are expected for the foreseeable future[282] - The January 2023 restructuring and workforce reduction aim to focus resources on DANYELZA and the SADA platform, but may lead to unintended consequences and costs[287][288] - Substantial additional funding will be required for product development and commercialization, which may cause dilution to stockholders or involve restrictive debt covenants[300][303][304] Risks related to product development and commercialization - Drug development is a lengthy, expensive, and uncertain process; clinical trials may fail to demonstrate safety and efficacy, leading to delays or inability to obtain marketing approval[308][309][311] - The SADA Technology is unproven, exposing the company to unforeseen risks, and its safety and efficacy in humans are not guaranteed, potentially leading to longer regulatory review and increased costs[319][323] - DANYELZA and other product candidates may cause serious adverse events or undesirable side effects, which could halt clinical development, delay/withdraw regulatory approval, or limit commercial potential[354][355][357] - The outcome of early clinical trials may not predict later success, and interim data is subject to change, potentially affecting regulatory approval and increasing costs[363][364][365] Risks related to our dependence on third parties - Reliance on third parties (CROs, CMOs, research institutions) for clinical trials and manufacturing poses risks if they fail to meet duties, deadlines, or regulatory requirements[391][396][410] - Manufacturing DANYELZA and SADA-based candidates is complex, with reliance on limited third-party manufacturers and sole-source vendors, risking production difficulties, supply shortages, and compliance issues[396][397][398][418][419] - Existing license agreements with MSK and MIT are crucial, and their termination due to non-compliance could suspend R&D and commercialization efforts[417] - Strategic collaborations for DANYELZA and omburtamab in certain jurisdictions (e.g., Takeda Israel, SciClone) carry risks of collaborators not performing as expected or abandoning projects[423][424][426] Risks related to government regulation; market approval and other legal compliance matters - The FDA regulatory approval process is lengthy, time-consuming, and unpredictable, with no assurance of approval for DANYELZA in additional indications or other product candidates[429][436] - The FDA's CRL for omburtamab highlights challenges in demonstrating effectiveness, especially for rare diseases with small patient populations and reliance on external control comparators[432][433][435] - Compliance with anti-kickback, fraud and abuse, and data privacy laws (HIPAA, GDPR, CCPA) is stringent and evolving, posing risks of regulatory investigations, litigation, fines, and business disruptions[489][493][494][499][505] - Government price controls, healthcare reforms (e.g., Inflation Reduction Act), and limited reimbursement from third-party payors could restrict drug pricing and profitability[485][486][525][530] Risks related to our intellectual property - Protecting intellectual property (patents, trademarks, trade secrets) is difficult and costly, with no guarantee of broad or enforceable protection[547][548][549][566] - Dependence on in-licensed technology from MSK and MIT means limited control over patent prosecution and potential termination if license obligations are not met[550][556] - Litigation related to patent infringement or trade secret misappropriation is costly, time-consuming, and could result in substantial damages, injunctions, or loss of valuable rights[571][579][582](index=582&typ