Y-mAbs(YMAB) - 2022 Q1 - Quarterly Report

PART I — FINANCIAL INFORMATION This section covers the unaudited consolidated financial statements, management's analysis, market risk, and internal controls for the reporting period Item 1. Consolidated Financial Statements This section presents Y-mAbs Therapeutics' unaudited consolidated financial statements and detailed notes for Q1 2022 and 2021 Consolidated Balance Sheets Consolidated Balance Sheets | ASSETS (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------- | :------------- | :---------------- | | Cash and cash equivalents | $156,724 | $181,564 | | Accounts receivable, net | $9,324 | $7,712 | | Inventories | $5,588 | $5,512 | | Other current assets | $6,103 | $7,473 | | Total current assets | $177,739 | $202,261 | | Property and equipment, net | $1,697 | $1,847 | | Operating lease right-of-use assets | $3,155 | $3,842 | | Intangible assets, net | $1,618 | $1,663 | | Other assets | $6,838 | $3,170 | | TOTAL ASSETS | $191,047 | $212,783 | | | | | | LIABILITIES AND STOCKHOLDERS' EQUITY (in thousands) | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :---------------- | | Accounts payable | $14,661 | $13,552 | | Accrued liabilities | $12,930 | $12,540 | | Operating lease liabilities, current portion | $1,451 | $1,783 | | Total current liabilities | $29,042 | $27,875 | | Accrued milestone and royalty payments | $2,100 | $2,100 | | Operating lease liabilities, long-term portion | $1,598 | $1,851 | | Other liabilities | $835 | $851 | | TOTAL LIABILITIES | $33,575 | $32,677 | | STOCKHOLDERS' EQUITY | | | | Common stock | $4 | $4 | | Additional paid in capital | $524,329 | $519,206 | | Accumulated other comprehensive income | $1,682 | $1,371 | | Accumulated deficit | $(368,543) | $(340,475) | | TOTAL STOCKHOLDERS' EQUITY | $157,472 | $180,106 | | TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $191,047 | $212,783 | Consolidated Statements of Net Income/(Loss) and Comprehensive Income/(Loss) Consolidated Statements of Net Income/(Loss) and Comprehensive Income/(Loss) | (in thousands, except share and per share data) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :---------------------------------------------- | :-------------------------------- | :-------------------------------- | | Product revenue, net | $10,486 | $5,383 | | Total revenues | $10,486 | $5,383 | | Cost of goods sold | $1,831 | $93 | | Research and development | $22,912 | $21,579 | | Selling, general, and administrative | $13,438 | $11,970 | | Total operating costs and expenses | $38,181 | $33,642 | | Loss from operations | $(27,695) | $(28,259) | | Gain from sale of priority review voucher, net | $— | $62,010 | | Interest and other loss | $(373) | $(338) | | NET INCOME / (LOSS) | $(28,068) | $33,413 | | Foreign currency translation | $311 | $435 | | COMPREHENSIVE INCOME / (LOSS) | $(27,757) | $33,848 | | Net income / (loss) per share, basic | $(0.64) | $0.80 | | Weighted average common shares outstanding, basic | 43,709,238 | 41,870,759 | | Net income / (loss) per share, diluted | $(0.64) | $0.75 | | Weighted average common shares outstanding, diluted | 43,709,238 | 44,383,791 | Consolidated Statements of Changes in Stockholders' Equity Consolidated Statements of Changes in Stockholders' Equity | (in thousands, except share data) | Common Stock Shares | Common Stock Amount | Additional Paid-in Capital | Accumulated Other Comprehensive Income / (Loss) | Accumulated Deficit | Stockholders' Equity | | :-------------------------------- | :------------------ | :------------------ | :------------------------- | :---------------------------------------------- | :------------------ | :------------------- | | Balance December 31, 2021 | 43,694,716 | $4 | $519,206 | $1,371 | $(340,475) | $180,106 | | Exercise of stock options | 16,000 | $— | $32 | $— | $— | $32 | | Stock-based compensation expense | 7,449 | $— | $5,091 | $— | $— | $5,091 | | Foreign currency translation | — | $— | $— | $311 | $— | $311 | | Net loss | — | $— | $— | $— | $(28,068) | $(28,068) | | Balance March 31, 2022 | 43,718,165 | $4 | $524,329 | $1,682 | $(368,543) | $157,472 | Consolidated Statements of Cash Flows Consolidated Statements of Cash Flows | (in thousands) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :------------- | :-------------------------------- | :-------------------------------- | | Net cash used in operating activities | $(24,925) | $(31,861) | | Net cash provided by investing activities | $— | $61,610 | | Net cash provided by financing activities | $32 | $107,835 | | Effect of exchange rates on cash and cash equivalents | $53 | $53 | | Net increase / (decrease) in cash and cash equivalents | $(24,840) | $137,637 | | Cash and cash equivalents at the beginning of period | $181,564 | $114,634 | | Cash and cash equivalents at the end of period | $156,724 | $252,271 | Notes to Consolidated Financial Statements NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS - Y-mAbs Therapeutics, Inc. is a commercial-stage biopharmaceutical company focused on developing and commercializing novel, antibody-based therapeutic products for cancer treatment, leveraging proprietary antibody platforms[36] - The Company was incorporated on April 30, 2015, in Delaware and is headquartered in New York[37] NOTE 2—BASIS OF PRESENTATION - The Company has incurred net loss since inception, except for the quarter ended March 31, 2021, and faces risks including drug candidate development uncertainty, regulatory FDA approval, market acceptance, and the need for additional financing[38] - DANYELZA (naxitamab-gqgk) received U.S. FDA approval in November 2020, but other drug candidates require significant R&D, clinical testing, and regulatory FDA approval[39] - As of March 31, 2022, the Company had an accumulated deficit of $368.5 million, funded primarily by common stock sales and net proceeds from DANYELZA sales and its Priority Review Voucher (PRV)[40] - Cash and cash equivalents were $156.7 million as of March 31, 2022, and $181.6 million as of December 31, 2021, expected to fund operations for at least the next 12 months[42][44] NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - The Company considers highly liquid instruments with original maturities of three months or less as cash equivalents, held in highly rated securities including a Treasury money market fund[48] - Trade accounts receivable are from DANYELZA sales, recorded net of allowances for chargebacks, rebates, returns, and discounts, with 94% of receivables from three national specialty distributors as of March 31, 2022[49][51] - Inventory is valued at the lower of cost or net realizable value (FIFO basis), including materials, manufacturing, packaging, freight, labor, and overhead. Capitalization of DANYELZA inventory began upon FDA approval[52][53] NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES | Fair Value Measurements (in thousands) | Level 1 | Level 2 | Level 3 | Total | | :------------------------------------- | :------ | :--------- | :------ | :--------- | | At March 31, 2022: | | | | | | Money market funds | $— | $141,739 | $— | $141,739 | | Total | $— | $141,739 | $— | $141,739 | | At December 31, 2021: | | | | | | Money market funds | $— | $166,729 | $— | $166,729 | | Total | $— | $166,729 | $— | $166,729 | - Operating lease right-of-use assets and liabilities are recognized at lease commencement based on the present value of lease payments, using the estimated incremental borrowing rate[58] - Revenue from DANYELZA sales is recognized when the customer obtains control, generally upon receipt at the end-user hospital, and is net of estimated rebates, chargebacks, and discounts[64][65] - The Company operates in one segment: discovery, development, distribution, and commercialization of antibody-based therapeutic products for cancer[67] NOTE 4—PRODUCT REVENUE NOTE 4—PRODUCT REVENUE | Product Revenue (in thousands) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :----------------------------- | :-------------------------------- | :-------------------------------- | | Product revenue, net | $10,486 | $5,383 | - Product revenue is net of allowances for rebates, chargebacks, discounts, and distribution-related fees. As of March 31, 2022, accounts receivable allowances were $668,000 and accrued liabilities were $2,921,000[71] NOTE 4—PRODUCT REVENUE | Allowances and Discounts (in thousands) | Balance, December 31, 2021 | Current provisions | Payments/credits | Balance, March 31, 2022 | | :-------------------------------------- | :------------------------- | :----------------- | :--------------- | :---------------------- | | Contractual Allowances and Discounts | $13 | $24 | $(14) | $23 | | Government Rebates | $3,027 | $1,085 | $(546) | $3,566 | | Returns | $61 | $126 | $(187) | $— | | Total | $3,101 | $1,235 | $(747) | $3,589 | - For Q1 2022, McKesson, AmerisourceBergen, and Cardinal Health accounted for 60%, 25%, and 11% of gross product revenue, respectively. For Q1 2021, McKesson and Cardinal Health accounted for 80% and 16%, respectively[73] NOTE 5—NET LOSS PER SHARE NOTE 5—NET LOSS PER SHARE | (in thousands, except per share amounts) | Three months ended March 31, 2022 | Three months ended March 31, 2021 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income /(loss) | $(28,068) | $33,413 | | Weighted-average shares (denominator), basic | 43,709 | 41,871 | | Basic net income / (loss) per share | $(0.64) | $0.80 | | Weighted-average shares (denominator), diluted | 43,709 | 44,384 | | Diluted net income / (loss) per share | $(0.64) | $0.75 | - Potentially dilutive securities (stock options and RSUs) excluded from diluted EPS due to antidilutive effect totaled 6,686,168 shares as of March 31, 2022, and 1,177,600 shares as of March 31, 2021[74] NOTE 6—INVENTORIES NOTE 6—INVENTORIES | Inventories (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------- | :------------- | :---------------- | | Work In Progress | $8,747 | $4,741 | | Finished Goods | $541 | $771 | | Total inventories | $9,288 | $5,512 | NOTE 6—INVENTORIES | Inventory Classification (in thousands) | March 31, 2022 | December 31, 2021 | | :------------------------------------ | :------------- | :---------------- | | CURRENT ASSETS - Inventories | $5,588 | $5,512 | | NONCURRENT ASSETS - Other assets | $3,700 | $— | | Total Inventories | $9,288 | $5,512 | - The Company classified $3.7 million of work in progress inventory as noncurrent assets, expecting its utilization beyond one year from the balance sheet date[75] NOTE 7—INTANGIBLE ASSETS - Intangible assets totaled $1.618 million as of March 31, 2022, related to capitalized milestone payments for DANYELZA, net of $182,000 accumulated amortization[76] - Annual amortization expense for intangible assets is expected to be $180,000 each year from 2022 to 2026, based on a 10-year useful life[77] NOTE 8—ACCRUED LIABILITIES NOTE 8—ACCRUED LIABILITIES | Accrued Short-Term Liabilities (in thousands) | March 31, 2022 | December 31, 2021 | | :-------------------------------------------- | :------------- | :---------------- | | Accrued licensing, milestone and royalty payments | $3,768 | $3,090 | | Accrued clinical costs | $1,533 | $915 | | Accrued compensation and board fees | $2,119 | $1,877 | | Accrued manufacturing costs | $1,153 | $2,622 | | Accrued sales reserves | $2,921 | $2,615 | | Other | $1,436 | $1,421 | | Total | $12,930 | $12,540 | NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS - The Company has license agreements with Memorial Sloan Kettering Cancer Center (MSK) and Massachusetts Institute of Technology (MIT), including the MSK License, CD33 License Agreement, and SADA Technology License Agreement, granting patent and intellectual property rights[79] NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS | License Agreements (in thousands) | Cash paid (Q1 2022) | Cash paid (Q1 2021) | Expense (Q1 2022) | Expense (Q1 2021) | Accrued liabilities Current (Mar 31, 2022) | Accrued liabilities Non-current (Mar 31, 2022) | Accrued liabilities Current (Dec 31, 2021) | Accrued liabilities Non-current (Dec 31, 2021) | | :-------------------------------- | :------------------ | :------------------ | :---------------- | :---------------- | :------------------------------------------- | :--------------------------------------------- | :------------------------------------------- | :--------------------------------------------- | | MSK | $— | $450 | $677 | $— | $2,163 | $1,650 | $1,486 | $1,650 | | CD33 | — | 100 | — | — | — | 450 | — | 450 | | MabVax | — | — | — | — | — | — | — | — | | SADA | — | — | — | — | 1,605 | — | 1,605 | — | NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS | Maximum Milestones (in thousands) | Clinical Milestones | Regulatory Milestones | 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 | - The Company incurred $697,000 and $948,000 in R&D expenses for Q1 2022 and Q1 2021, respectively, under various support agreements with MSK, including sponsored research and data services[84][85] - Total operating lease costs were $704,000 for Q1 2022 and $646,000 for Q1 2021, primarily for manufacturing space, laboratory, and office facilities in New Jersey, New York, and Denmark[90] NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS | Operating Lease Liabilities (in thousands) | March 31, 2022 | December 31, 2021 | | :--------------------------------------- | :------------- | :---------------- | | Remainder of 2022 | $1,341 | $1,953 | | 2023 | $1,016 | $1,025 | | 2024 | $540 | $550 | | 2025 | $436 | $445 | | Total lease payments | $3,333 | $3,973 | | Less: Imputed interest | $(284) | $(339) | | Total operating lease liabilities | $3,049 | $3,634 | - The Company is a nominal defendant in a lawsuit regarding alleged short swing profits by Mr. Thomas Gad, but believes the claim is without merit and has not recorded any loss or gain contingencies[93] NOTE 10—STOCKHOLDERS' EQUITY - As of March 31, 2022, the Company had 105,500,000 authorized shares (100,000,000 common, 5,500,000 preferred)[94] - 43,718,165 shares of common stock were issued as of March 31, 2022. No preferred stock has been issued[95][96] - In April 2020, 213,996 shares were issued to non-employee researchers for SADA technology development, vesting over three years. Loans totaling $2.61 million were provided to cover associated tax payments[97][98] - On February 22, 2021, the Company completed a public offering of 2,804,878 common shares at $41.00/share, generating net proceeds of approximately $107.7 million[99] NOTE 11—SHARE-BASED COMPENSATION - The 2015 Equity Incentive Plan reserved 4,500,000 shares, with no further grants after the 2018 Plan became effective[101] - The 2018 Equity Incentive Plan reserved 5,500,000 shares (inclusive of 2015 Plan awards), with an annual increase equal to 4% of outstanding common stock[102] - Stock-based compensation for stock options was $5.017 million for Q1 2022 and $4.629 million for Q1 2021, allocated to R&D and SG&A expenses[103] NOTE 11—SHARE-BASED COMPENSATION | Stock Options | Options | Weighted average exercise price | Aggregate intrinsic value (in thousands) | Weighted average remaining contractual life (years) | | :------------ | :---------- | :------------------------------ | :--------------------------------------- | :-------------------------------------------------- | | Outstanding and expected to vest at December 31, 2021 | 6,687,128 | $22.43 | $26,412 | 7.21 | | Exercised | (16,000) | $2.00 | | | | Forfeited | (22,167) | $28.67 | | | | Outstanding and expected to vest at March 31, 2022 | 6,648,961 | $22.46 | $15,726 | 6.96 | | Exercisable at March 31, 2022 | 4,083,593 | $17.23 | $15,720 | 5.78 | - Unrecognized compensation for employee stock options was $44.592 million as of March 31, 2022, expected to vest over 2.79 years[106] - Stock-based compensation for restricted stock units (RSUs) was $74,000 for Q1 2022 and $69,000 for Q1 2021[107] NOTE 11—SHARE-BASED COMPENSATION | Restricted Stock Units | Restricted Stock Units | Weighted average grant price | Weighted average remaining vesting life (years) | | :--------------------- | :--------------------- | :--------------------------- | :---------------------------------------------- | | Outstanding and expected to vest at December 31, 2021 | 28,907 | $28.04 | 1.82 | | Granted | 16,283 | $9.31 | | | Vested | (7,450) | $21.05 | | | Forfeited | (534) | $28.89 | | | Outstanding and expected to vest at March 31, 2022 | 37,206 | $20.74 | 2.38 | - Unrecognized compensation for employee RSUs was $650,000 as of March 31, 2022, expected to vest over 2.38 years[110] NOTE 12—RELATED PARTY TRANSACTIONS - The Company expensed $1.374 million in Q1 2022 and $948,000 in Q1 2021 for milestones and R&D costs under agreements with MSK[111] - Liabilities due to MSK totaled $6.455 million as of March 31, 2022, including $335,000 in accounts payable and $6.120 million in accrued liabilities[111] NOTE 13—INCOME TAXES - No current or deferred income taxes were provided for net loss of $28.068 million in Q1 2022 and net income of $33.413 million in Q1 2021[112] - Unrecognized tax benefits were $0 as of March 31, 2022, down from $304,000 at December 31, 2021. The Company maintains a full valuation allowance on its U.S. and foreign deferred tax assets[113][114] NOTE 14—OTHER BENEFITS - The Company offers a 401(k) savings plan for U.S. employees but made no matching contributions in Q1 2022 or Q1 2021[115] - The Danish subsidiary has a retirement program for employees but made no contributions in Q1 2022 or Q1 2021[116] NOTE 15—GAIN FROM SALE OF PRIORITY REVIEW VOUCHER - In Q1 2021, the Company recognized a net gain of $62.010 million from the sale of its DANYELZA Priority Review Voucher (PRV) to United Therapeutics Corporation for $105 million, retaining 60% of net proceeds[118] - No corresponding gain was recognized in Q1 2022[119] NOTE 16—SUBSEQUENT EVENT - Effective April 22, 2022, Dr. Claus Møller stepped down as CEO and Board member. Thomas Gad assumed the role of Interim CEO[120] - This executive change is expected to result in a total charge of $10.714 million in 2022, including $1.428 million in cash compensation and a $9.286 million non-cash share-based compensation expense[120] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, operational results, liquidity, critical accounting policies, and external impacts Overview - Y-mAbs is a commercial-stage biopharmaceutical company developing antibody-based cancer therapies, leveraging proprietary platforms[122] - DANYELZA® (naxitamab-gqgk) was FDA-approved in November 2020 for relapsed/refractory high-risk neuroblastoma (NB) in bone or bone marrow and launched in February 2021[123] - DANYELZA is being investigated in three Phase 2 clinical studies for first-line NB, third-line NB, and relapsed osteosarcoma. The GD2-GD3 Vaccine is in a Phase 2 trial for Stage 4 high-risk NB[124][125] - The BLA for omburtamab for CNS leptomeningeal metastases from NB was resubmitted in March 2022 after a Refusal to File letter in October 2020[126] - The company is advancing SADA technology (Liquid Radiation™) for GD2-SADA (IND filed Dec 2021) and Y-BiClone platform for T cell engaging bispecific antibodies, including a CD33 BsAb (IND filed, clinical trials expected mid-2022)[128][129] - The company had an accumulated deficit of $368.5 million as of March 31, 2022, with a net loss of $28.1 million for Q1 2022, compared to a net income of $33.4 million for Q1 2021 (due to PRV sale)[135] - The company has various license agreements with MSK and MIT, including the MSK License, SADA License Agreement, and others, involving milestone payments, royalties, and funding for research and clinical trials[136][137][141] - The COVID-19 pandemic has caused slower initiation and fluctuating recruitment rates in clinical trials, marginally delaying clinical development activities, but the aggregate impact has not been significant[146] Components of Our Results of Operations - Product revenue consists solely of sales from DANYELZA[148] - Cost of goods sold includes direct and indirect manufacturing and distribution costs for DANYELZA, such as materials, third-party manufacturing, packaging, freight, labor, and third-party royalties[149] - Research and development expenses are expensed as incurred and include costs for sponsored research, clinical trials, outsourced manufacturing, personnel, regulatory activities, and facility-related costs[150] - Selling, general, and administrative expenses primarily cover employee-related costs (salaries, benefits, stock-based compensation) for executive, commercial, finance, and administrative functions, along with facility costs, legal fees, and consulting services[157] - Other income/(loss), net, includes the gain from the sale of the DANYELZA Priority Review Voucher (PRV) in 2021[159] Critical Accounting Policies and Significant Judgments and Estimates - The preparation of financial statements requires management to make significant estimates and assumptions, particularly for net product revenues, R&D expenses, milestone/royalty accruals, and stock option valuation[162][163] - Revenue recognition for DANYELZA sales is based on customer control (receipt at hospital), with estimates for rebates, chargebacks, and discounts based on contracts and payor mix[166][168] - R&D costs are expensed as incurred, with accruals for estimated ongoing costs based on study progress and contracted terms. Milestone and royalty payments are recorded when probable and estimable[169] - Stock options are measured at fair value on the grant date using the Black-Scholes model, with volatility estimated from peer companies and the Company's historical data, and expense recognized over the vesting period[174][175][176] Results of Operations Results of Operations | (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change Amount | Change Percentage | | :------------- | :-------------------------------- | :-------------------------------- | :------------ | :---------------- | | Product revenue, net | $10,486 | $5,383 | $5,103 | 95% | | Total revenues | $10,486 | $5,383 | $5,103 | 95% | | Cost of goods sold | $1,831 | $93 | $1,738 | 1,869% | | Research and development | $22,912 | $21,579 | $1,333 | 6% | | Selling, general, and administrative | $13,438 | $11,970 | $1,468 | 12% | | Total operating costs and expenses | $38,181 | $33,642 | $4,539 | 13% | | Loss from operations | $(27,695) | $(28,259) | $564 | (2)% | | Gain from sale of priority review voucher | $— | $62,010 | $(62,010) | (100)% | | Interest and other loss | $(373) | $(338) | $(35) | 10% | | Net income / (loss) | $(28,068) | $33,413 | $(61,481) | (184)% | - Net product revenue increased by 95% to $10.5 million in Q1 2022 from $5.4 million in Q1 2021, driven by DANYELZA sales[180] - Cost of goods sold significantly increased to $1.8 million in Q1 2022 from $93,000 in Q1 2021, as all inventory sold in Q1 2022 was produced after FDA approval, unlike Q1 2021 which included previously expensed inventory[181] - Research and development expenses rose by 6% to $22.9 million in Q1 2022, primarily due to increased employee-related costs and clinical trials (omburtamab), partially offset by reduced outsourced manufacturing[184] - Selling, general, and administrative expenses increased by 12% to $13.4 million in Q1 2022, mainly due to growth in the commercialization team's employee-related costs, commercial expenses, and travel[185] - Net income/(loss) shifted from a $33.4 million net income in Q1 2021 (due to a $62.0 million PRV sale) to a $28.1 million net loss in Q1 2022, as no PRV sales occurred in the latter period[186] Liquidity and Capital Resources - The Company has incurred significant net operating losses since inception, except for Q1 2021, and expects continued net loss[188] - Operations have been financed primarily through common stock sales ($378.8 million by 2019, $115.0 million in 2021), DANYELZA sales, and the DANYELZA PRV sale[188] - Cash and cash equivalents were $156.7 million as of March 31, 2022, down from $181.6 million at December 31, 2021[188] Liquidity and Capital Resources | Cash Flows (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change Amount | Change Percentage | | :------------------------ | :-------------------------------- | :-------------------------------- | :------------ | :---------------- | | Net cash used in operating activities | $(24,925) | $(31,861) | $6,936 | (22)% | | Net cash provided by investing activities | $— | $61,610 | $(61,610) | (100)% | | Net cash provided by financing activities | $32 | $107,835 | $(107,803) | (100)% | | Effect of exchange rates on cash and cash equivalents | $53 | $53 | $— | —% | | Net increase / (decrease) in cash and cash equivalents | $(24,840) | $137,637 | $(162,477) | (118)% | - Net cash used in operating activities decreased by $7.0 million to $24.9 million in Q1 2022, primarily due to decreased cash used for working capital ($6.1 million) and a smaller net loss (excluding non-cash adjustments)[193] - Net cash provided by investing activities was $0 in Q1 2022, compared to $61.6 million in Q1 2021, which was primarily from the sale of the DANYELZA PRV[194] - Net cash provided by financing activities was $32,000 in Q1 2022 (from stock options), significantly down from $107.8 million in Q1 2021 (driven by a public offering)[195] - The Company expects current cash and cash equivalents ($156.7 million) to fund operations through mid-2024, but anticipates needing substantial additional funding for DANYELZA commercialization, omburtamab development, and other pipeline programs[196][199] Off-Balance Sheet Arrangements - The Company did not have any off-balance sheet arrangements during the periods presented[205] Contractual Obligations and Commitments - The Company has material outstanding contractual commitments and potential milestone payments under various license agreements with MSK and MIT, as detailed in Note 9[206][208][209][210] - Contracts with CROs, CMOs, and other third parties are generally cancelable and do not include minimum purchase commitments, with payments limited to services provided or expenses incurred up to cancellation[207] - Under the MSK License and CD33 License, obligations include milestone payments (clinical, regulatory, sales-based) and mid-to-high single-digit royalties. Total potential milestones are $2.45 million clinical, $9 million regulatory, and $20 million sales-based for MSK License, and $550,000 clinical, $500,000 regulatory, and $7.5 million sales-based for CD33 License[209] - The SADA License Agreement requires mid-to-high single-digit royalties and potential clinical, regulatory, and sales-based milestones totaling $4.73 million, $18.125 million, and $23.75 million respectively, plus up to $60 million for sublicensee sales[210] - The Company is also responsible for potential downstream payment obligations to MSK related to the GD2-GD3 Vaccine, including development milestones and royalties[212] Recent Accounting Pronouncements - Refer to Note 3 for a discussion of recent accounting pronouncements[214] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, including interest rate and foreign currency exchange risks Interest Rate Risk - The Company's exposure to interest rate risk is considered immaterial due to its cash and cash equivalents being primarily held in highly rated, short-term Treasury money market funds[215] - An immediate 100 basis point change in interest rates would not significantly affect the fair market value of cash balances[215] Foreign Currency Exchange Risk - The primary foreign currency exposure is to the Danish Kroner (DKK) due to its Danish subsidiary[217] - Cash and cash equivalents denominated in DKK were $0.6 million as of March 31, 2022, and $0.9 million as of December 31, 2021. A 10% change in DKK exchange rate would not materially affect these balances[217] Item 4. Controls and Procedures This section details the evaluation of disclosure controls and procedures and reports on changes in internal control Evaluation of Disclosure Controls and Procedures - Management, with the Interim CEO and CFO, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2022[218] - Controls and procedures provide reasonable, not absolute, assurance, acknowledging inherent limitations in all control systems[219] Changes in Internal Control over Financial Reporting - There were no material changes in internal control over financial reporting during Q1 2022[220] PART II — OTHER INFORMATION This section includes legal proceedings, risk factors, equity sales, and other required disclosures Item 1. Legal Proceedings This section discloses legal proceedings, including a lawsuit against a Board Member for alleged short swing profits - The Company is a nominal defendant in a lawsuit against Board Member Thomas Gad for alleged short swing profits, but believes the claim is without merit and has not recorded any loss or gain contingencies[221] Item 1A. Risk Factors This section details significant risks and uncertainties impacting the company's business, financial condition, and future growth Risks Related to Our Financial Condition and Need for Additional Capital - The Company has a limited operating history, incurred significant net loss since inception ($368.5 million accumulated deficit as of March 31, 2022), and expects to continue incurring net loss, with DANYELZA being its only FDA-approved product[225][226][228] - Profitability depends on successful commercialization of DANYELZA and other product candidates, obtaining regulatory FDA approval, market acceptance, and managing manufacturing and intellectual property[228] - Payment obligations to MSK and MIT for license agreements, including milestones and royalties, could be significant and may require additional funding, potentially through debt or equity, leading to dilution[233][237][239] - The Company will need substantial additional funding for R&D, commercialization, and operating as a public company. Failure to obtain funding could delay or eliminate programs and terminate license agreements[240][242][244] - Raising additional capital may dilute stockholders, impose restrictive covenants through debt financing, or require relinquishing valuable rights to products or technologies[245][246] - Focusing resources on specific products or indications (e.g., DANYELZA, omburtamab) may cause the Company to miss other potentially more profitable opportunities[247][248] Risks related to product development and commercialization - DANYELZA and product candidates are novel cancer treatments facing significant development and commercialization challenges, with revenue highly dependent on successful commercialization and regulatory FDA approval[250][251] - The success of product candidates depends on timely completion of clinical trials, satisfactory safety/efficacy profiles, regulatory/reimbursement FDA approval, manufacturing capacity, and market acceptance[252] - Safety or efficacy problems with DANYELZA or omburtamab could harm development plans for other similar technology-based candidates[256] - The COVID-19 pandemic has and could continue to adversely affect operations, including clinical trial delays, patient enrollment issues, manufacturing disruptions, and impacts on sales and regulatory processes[257][258][262] - Russia's invasion of Ukraine led to the termination of clinical trials and regulatory activities for DANYELZA in Russia, negatively impacting commercialization plans and potentially global financial markets[267] - The Company has limited experience as a commercial company; successful marketing and sales of DANYELZA and future products depend on establishing and expanding sales/marketing capabilities or successful third-party collaborations[268][270][276] - Commercial success relies on market acceptance by physicians, patients, and payors, influenced by efficacy, safety, competitive advantages, pricing, and ease of administration[271][273] - Market opportunities for DANYELZA and product candidates may be limited to specific patient populations (e.g., relapsed/refractory), potentially hindering profitability without broader indications[289][291][292] - Difficulties in patient enrollment for clinical trials due to population size, eligibility criteria, competition, or patient/physician reluctance could delay development and regulatory FDA approval[293][296][297] - DANYELZA and product candidates may cause serious adverse events (SAEs) or undesirable side effects, potentially halting clinical development, delaying/withdrawing FDA approval, limiting commercial potential, or requiring restrictive labeling (e.g., DANYELZA's boxed warning for infusion reactions and neurotoxicity)[298][299][303][304][305] - Pre-clinical and early clinical trial results may not predict later success, and interim data are subject to change. Adverse safety issues or clinical holds in one trial could affect others[307][308][309][311] Risks related to our dependence on third parties - The Company has relied heavily on third parties (e.g., MSK) to sponsor most clinical trials for DANYELZA and omburtamab, limiting control over design and conduct[328] - Assuming control over clinical and regulatory development will incur substantial expenses and may face delays, and past trial data may not be sufficient for FDA acceptance[329][330][331] - Reliance on third-party CROs for clinical trials carries risks of non-compliance with GCPs, missed deadlines, compromised data quality, and potential need to repeat trials[333][334] - The Company relies on third-party CMOs for DANYELZA commercial supply and product candidate manufacturing, facing risks of insufficient quantities, quality issues, non-compliance with cGMP, and limited manufacturers[336][338][339][340][341][344] - FDA and EMA inspections of manufacturing facilities (e.g., EMD/Merck, Patheon/Thermo Fisher) are critical for FDA approval, and delays or non-compliance could significantly impact the FDA approval process for omburtamab[345][348] - Dependence on outside scientists and third-party research institutions for R&D and early clinical testing means limited control, potential conflicts of interest, and risks to IND filings and clinical trial timing[349][350][353] - Termination of agreements with MSK could suspend R&D and commercialization, requiring additional resources or new collaborations[354] - Manufacturing biologics is complex, highly regulated, and costly, with risks of product loss, contamination, equipment failure, and supply disruptions, especially for sole-source vendors[355][356][357][358] - Strategic collaborations for DANYELZA and omburtamab (e.g., SciClone, Takeda, Swixx, Adium) carry risks of collaborators not dedicating sufficient resources, abandoning projects, or competing, potentially delaying development and commercialization[360][361] - Failure to establish additional collaborations could force the Company to curtail development, delay commercialization, or increase expenditures, requiring more capital[365] - Market acceptance and sales depend on adequate coverage and reimbursement from third-party payors, which is uncertain for new cancer treatments and could be inadequate for profitability[366][369] Risks related to government regulation; market approval and other legal compliance matters - The FDA issued a Refusal to File letter for omburtamab's BLA in October 2020, requiring further detail in CMC and Clinical Modules. The BLA was resubmitted in March 2022, but FDA approval is not assured and could be delayed[370][371][372][373][375] - FDA inspections of manufacturing facilities are required for FDA approval, and any delays (e.g., due to COVID-19 travel restrictions) or non-compliance could prevent or delay BLA FDA approval for omburtamab[376][377] - The EMA also requires manufacturing facility inspections for omburtamab's MAA, with similar risks of delays or non-compliance impacting FDA approval in Europe[379] - The regulatory FDA approval process is lengthy, expensive, and unpredictable, requiring extensive pre-clinical and clinical data, manufacturing information, and facility inspections. FDA approval for DANYELZA in the US does not guarantee foreign approvals[380][381][383][386][399] - The FDA may require two Phase 3 studies for regular FDA approval, or accelerated FDA approval based on surrogate endpoints with post-marketing studies. The FDA may disagree with the Company's strategy or require additional trials[382] - Clinical trials can be delayed or terminated due to various factors, including patient enrollment difficulties, regulatory FDA approval, funding, site issues, safety concerns, and manufacturing challenges[387][388][390] - Failure to obtain regulatory FDA approval for product candidates would significantly harm the business, results of operations, and prospects[392][393][395][396][408] - Breakthrough Therapy Designation (BTD) for omburtamab (granted in 2017) does not guarantee faster development or FDA approval, and the FDA may revoke it or not grant it for other candidates[409][410][411] - The Company's product candidates may not obtain or maintain Orphan Drug Designation (ODD) or Rare Pediatric Disease Designation (RPDD), losing associated financial incentives and market exclusivity[412][413][415][416][417][418] - Post-approval, DANYELZA and other FDA-approved drugs are subject to extensive ongoing regulation, including post-marketing studies (e.g., Study 201 for DANYELZA), safety reporting, cGMP compliance, and promotional restrictions[419][422] - Failure to comply with post-approval requirements or changes in regulatory policies could lead to withdrawn FDA approval, marketing limitations, and substantial penalties[423][424][425][426][427][429] - Healthcare reform measures (e.g., ACA) and government price controls could increase costs, reduce demand, and negatively impact pricing and reimbursement for DANYELZA and future products[430][431][432][435][436][437][438][439][440][442][443] - Relationships with healthcare providers are subject to anti-kickback, fraud and abuse, and other healthcare laws (e.g., Anti-Kickback Statute, False Claims Act, HIPAA, Sunshine Act, GDPR), risking penalties and reputational harm[444][445][447][448][452] - Radioimmunotherapy product candidates have very limited shelf lives, making them susceptible to damage and loss during transportation and distribution, which could adversely affect business and financial results[462][463][464] - Non-compliance with environmental, health, and safety laws (e.g., handling hazardous materials, radioactive elements) could lead to fines, penalties, and increased costs, impairing R&D and production[465][466][467] - International operations (US, Denmark, CMOs in Europe) are subject to diverse laws and regulations, including FCPA and anti-corruption laws, requiring costly compliance programs and risking penalties for non-compliance[468][469][470][472][473][474] Risks related to our intellectual property - Protecting intellectual property (patents, trademarks, trade secrets) is difficult and costly. Patent applications may not result in issued patents, or patents may not be broad enough to prevent competition[475][476] - Dependence on in-licensed technology from MSK and MIT means limited control over patent prosecution and enforcement, and potential loss of licenses if obligations are not met[477][478][483] - Uncertainty in patent issuance, scope, validity, and enforceability, coupled with changes in patent laws (e.g., America Invents Act), increases costs and risks of inadequate protection or infringement claims[484][486][487] - Patents may not cover all threats, competitors may circumvent them, and patent terms may expire before or shortly after commercialization, limiting competitive advantage[488][489] - Reliance on trade secrets is risky due to potential unintentional or willful disclosure by employees or independent development by competitors[494] - Litigation related to patents or other intellectual property is costly, time-consuming, and unpredictable, potentially leading to substantial damages, injunctions, or loss of rights[496][497][498][499][500][504][508][509][512] - Protecting intellectual property globally is expensive and challenging, as foreign legal systems may not offer the same level of protection as the U.S[513][514] - Failure to comply with procedural requirements for patent agencies can lead to abandonment or lapse of patent rights[515] - Failure to secure trademark registrations or FDA approval for proprietary names could hinder brand recognition and competitive positioning[516][517][519][520] Risks related to employee matters and managing growth - The Company heavily depends on executive officers and consultants. Loss of senior management (e.g., CEO stepping down in April 2022) or key personnel could materially harm the business[521][527] - Recruiting and retaining qualified scientific, clinical, manufacturing, and sales/marketing personnel is critical, especially in competitive regions like New York City[522] - Equity grants to employees may not always be sufficient to retain talent against more lucrative offers[523] - Expected significant growth in employees and operations (sales, marketing, clinical, regulatory, R&D) may be difficult to manage due to limited financial resources and management experience, potentially disrupting operations[528] Risks related to our common stock - Executive officers, directors, and principal stockholders collectively own approximately 33.38% of common stock, allowing them significant influence over stockholder approval matters[529] - Provisions in corporate charter documents and Delaware law (Section 203 DGCL) could discourage or delay acquisitions and make it difficult for stockholders to replace management or board members[530][533] - An active trading market for common stock may not be sustained, potentially making it difficult for stockholders to sell shares[534] - As of December 31, 2020, the Company became a large accelerated filer, subjecting it to increased disclosure and compliance requirements (e.g., Section 404(b) SOX, executive compensation disclosures), increasing costs and management time[535][537][539] - The ability to use net operating loss carryforwards and other tax attributes may be limited by ownership changes under Section 382 of the Code[540] - The Company does not anticipate paying cash dividends, making capital appreciation the sole source of gain for stockholders[541] - Future sales of common stock by existing stockholders (including those with registration rights or under Rule 144) could dilute existing stockholders and depress the mar