Pyxis Oncology(PYXS) - 2023 Q3 - Quarterly Report

Summary Risk Factors Summary Risk Factors The company is a clinical-stage biopharmaceutical company with a limited operating history, significant accumulated losses, and a heavy dependence on its early-stage product candidates - The company is a clinical-stage biopharmaceutical firm with a limited operating history, has incurred significant losses since inception, and may never achieve profitability[11] - Substantial additional capital is required, and an inability to raise funds could force delays or elimination of R&D programs[11] - The business is heavily dependent on the success of early-stage product candidates PYX-201, PYX-106, and PYX-107, and failure would materially and adversely affect the business[11] - Product candidates may fail in development or suffer delays due to lengthy, expensive, and uncertain clinical testing and regulatory approval processes[11] - The company relies on third parties for manufacturing product candidates, and any failure could delay clinical trials, regulatory approval, or commercialization[11] - An inability to obtain and maintain patent protection or adequate protection for proprietary know-how could hinder competitive effectiveness[11] - The company is subject to stringent data privacy and security obligations, and failure to comply could lead to investigations, litigation, and business disruption[12] PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements and detailed notes explaining the company's business, accounting policies, and financial instruments Condensed Consolidated Balance Sheets Total assets decreased to $186.7 million at September 30, 2023, driven by a reduction in cash, partially offset by new marketable securities and intangible assets Condensed Consolidated Balance Sheets (in thousands) | Metric | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $14,715 | $179,293 | | Marketable debt securities, short-term | $118,252 | — | | Total current assets | $139,094 | $186,612 | | Intangible assets, net | $22,294 | — | | Total assets | $186,692 | $211,379 | | Total current liabilities | $28,332 | $31,634 | | Total liabilities | $48,746 | $50,555 | | Total stockholders' equity | $137,946 | $160,824 | | Accumulated deficit | $(270,628) | $(212,435) | Condensed Consolidated Statements of Operations and Comprehensive Loss For the nine months ended September 30, 2023, the net loss improved to $58.2 million from $84.6 million in the prior year, due to lower R&D expenses and higher other income Condensed Consolidated Statements of Operations 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 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $14,687 | $19,034 | $37,979 | $56,275 | | General and administrative | $10,667 | $9,359 | $26,450 | $29,233 | | Total operating expenses | $25,354 | $28,393 | $64,429 | $85,508 | | Loss from operations | $(25,354) | $(28,393) | $(64,429) | $(85,508) | | Interest and investment income | $1,707 | $719 | $5,036 | $892 | | Sublease income | $598 | — | $1,200 | — | | Total other income, net | $2,305 | $719 | $6,236 | $892 | | Net loss | $(23,049) | $(27,674) | $(58,193) | $(84,616) | | Net loss per common share - basic and diluted | $(0.56) | $(0.85) | $(1.52) | $(2.61) | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased to $137.9 million at September 30, 2023, primarily due to the net loss, partially offset by increases from acquisitions and stock issuances Condensed Consolidated Statements of Stockholders' Equity (in thousands, except share amounts) | Metric | Dec 31, 2022 | Sep 30, 2023 | | :--- | :--- | :--- | | Common Stock (shares) | 34,958,730 | 44,294,092 | | Common Stock (amount) | $34 | $44 | | Additional paid-in capital | $373,225 | $408,635 | | Accumulated other comprehensive loss | — | $(105) | | Accumulated deficit | $(212,435) | $(270,628) | | Total stockholders' equity | $160,824 | $137,946 | - The acquisition of Apexigen, Inc contributed $10.7 million to total stockholders' equity[22] - Issuance of common stock to Pfizer Inc added $5.0 million[22] - Shares issued under the ATM program, net of commission, generated $6.1 million[22] - Stock-based compensation increased additional paid-in capital by $13.7 million for the nine months ended September 30, 2023[22] Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2023, cash decreased by $164.6 million, driven by cash used in investing and operating activities Condensed 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 | $(55,455) | $(71,948) | | Net cash used in investing activities | $(115,077) | $(4,541) | | Net cash provided by financing activities | $5,954 | $183 | | Net decrease in cash, cash equivalents, and restricted cash | $(164,578) | $(76,306) | | Cash, cash equivalents and restricted cash at end of period | $16,187 | $200,010 | - Cash used in investing activities significantly increased in 2023 due to purchases of marketable debt securities ($186.6 million), partially offset by redemptions ($71.6 million) and cash acquired from Apexigen ($6.7 million)[25] - Financing activities provided $6.0 million in 2023, primarily from the ATM program, compared to $0.2 million in 2022[25] Notes to Condensed Consolidated Financial Statements The notes detail accounting policies, financial instruments, and significant transactions, including the Apexigen acquisition, licensing agreements, and a subsequent reorganization 1. Description of Business Pyxis Oncology, Inc is a clinical-stage biopharmaceutical company focused on developing next-generation therapeutics for difficult-to-treat cancers - The company is a clinical-stage biopharmaceutical firm focused on defeating difficult-to-treat cancers[27] - Therapeutic candidates include antibody-drug conjugates (ADCs) and immuno-oncology (IO) programs targeting solid tumors[27] - The company operates as one segment, managed on a consolidated basis by the CEO[28] 2. Basis of Presentation and Summary of Significant Accounting Policies The financial statements are prepared per U.S. GAAP, reflecting significant losses and an accumulated deficit of $270.6 million, with existing capital expected to fund operations into early 2026 - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP for interim reporting[29] - The company has an accumulated deficit of $270.6 million as of September 30, 2023, with net losses of $58.2 million (9M 2023) and $84.6 million (9M 2022)[31] - Existing cash, cash equivalents, and short-term investments of $133.0 million are expected to fund operations into early 2026 following a corporate reorganization[33][131] - The adoption of new accounting standards for credit losses and business combinations on January 1, 2023, did not materially affect the financial statements[53][54] - Investments are classified as available-for-sale marketable debt securities, recorded at fair value[39] 3. Acquisition of Apexigen Pyxis Oncology acquired Apexigen, Inc for a provisional purchase price of $10.7 million, expanding its pipeline with sotigalimab (PYX-107) and the APXiMAB platform - The acquisition of Apexigen, Inc was completed on August 23, 2023, for a provisional purchase price of $10.7 million[58][62] - Consideration included 4,344,435 shares of common stock issued to Apexigen stockholders, plus replacement options, RSUs, and warrants[58][61][62] - The acquisition expanded the pipeline with sotigalimab (PYX-107), a CD40 agonist, and enhanced ADC capabilities with the APXiMAB platform[58] - Acquired intangible assets (in-process R&D) were valued at $22.3 million[64][65] - The company incurred $1.3 million in transaction-related costs, recognized in general and administrative expenses[67] 4. Fair Value Measurements The company's financial instruments subject to recurring fair value measurements consist primarily of Level 1 assets valued using quoted market prices Fair Value of Financial Instruments (in thousands) | Asset Category | September 30, 2023 (Level 1) | December 31, 2022 (Level 1) | | :--- | :--- | :--- | | Cash equivalents (Money market funds) | $10,086 | $177,279 | | Marketable debt securities (U.S. Treasury securities) | $118,252 | — | | Restricted cash (Money market funds) | — | $1,472 | | Total | $128,338 | $178,751 | - Money market funds and U.S. Treasury securities are classified as Level 1, valued using quoted prices in active markets[70] 5. Marketable Debt Securities As of September 30, 2023, the company held $118.3 million in U.S. Treasury securities classified as available-for-sale, with unrealized losses of $0.1 million Marketable Debt Securities (in thousands) as of September 30, 2023 | Security Type | Amortized Cost | Unrealized Gains | Unrealized Losses | Aggregate Fair Value | | :--- | :--- | :--- | :--- | :--- | | U.S. Treasury securities | $118,357 | $8 | $(113) | $118,252 | - All marketable debt securities are classified as available-for-sale, with remaining contractual terms of less than 12 months[71][72] Interest and Investment Income (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 | | :--- | :--- | :--- | :--- | :--- | | Interest income | $227 | $719 | $1,689 | $892 | | Accretion of discount, net | $1,480 | — | $3,347 | — | | Total interest and investment income | $1,707 | $719 | $5,036 | $892 | 6. Joint Venture The company's share of losses from its Voxall Therapeutics joint venture was $0.1 million for the three and nine months ended September 30, 2023 - The company formed Voxall Therapeutics, LLC, a joint venture with Alloy Therapeutics, Inc, in March 2021[74] - The investment in Voxall is accounted for under the equity method[75] - The company's share of Voxall losses was $0.1 million for both the three and nine months ended September 30, 2023[75] 7. Licensing Agreements The company holds key licensing agreements with Pfizer, LegoChem, and Biosion for its product candidates, involving potential future milestone and royalty payments - A license agreement with the University of Chicago provides global rights to develop and commercialize products covered by licensed patents/know-how[76] - The Pfizer License Agreement grants exclusive worldwide rights to develop and commercialize ADC product candidates like PYX-201 and PYX-203[78][79] - The LegoChem License Agreement provides worldwide (ex-Korea) rights for LCB67, a DLK-1 targeting ADC[81] - The Biosion License Agreement grants exclusive worldwide (ex-Greater China) rights for PYX-106, a Siglec-15 targeting antibody, with a $10.0 million upfront fee paid in March 2022[83][84] - All agreements include potential future contingent payments, but no such amounts were required as of September 30, 2023[77][80][82][85] 8. Deferred Revenue Due to a dispute with Novartis over royalty obligations for Beovu®, the company has fully constrained royalty revenue and recorded $7.2 million received as deferred revenue - The company assumed Apexigen's out-licensing agreements, including Novartis' Beovu® product royalties, following the acquisition[86][87] - Novartis has disputed its royalty obligation for Beovu® sales, leading to full constraint of sales-based royalty revenue[87] Deferred Revenue (in thousands) | Metric | September 30, 2023 | | :--- | :--- | | Deferred revenue | $7,189 | 9. Common Stock Warrants Following the Apexigen acquisition, the company replaced approximately 5.8 million Apexigen warrants with 1.0 million Pyxis Oncology warrants valued at $0.6 million - The company replaced 5,815,613 Apexigen warrants with 1,003,191 Pyxis Oncology warrants due to the Merger Agreement[89] - The acquisition date fair value of the Replacement Warrants was $0.6 million, determined using the Black-Scholes option-pricing model[89] Outstanding Warrants as of September 30, 2023 | Exercise Price | Number of Warrants | Expiration | | :--- | :--- | :--- | | $8.12 per share | 344,259 | July 30, 2028 | | $10.14 per share | 17,212 | Callable by Company | | $66.67 per share | 641,720 | July 29, 2027 | 10. Stockholders' Equity As of September 30, 2023, the company had 44.3 million shares outstanding and an ATM program under which it sold 1.0 million shares for $6.3 million gross proceeds in 2023 - As of November 6, 2023, 44,323,046 shares of common stock were outstanding[4] - The company filed a shelf registration statement for up to $250.0 million and an ATM offering program for up to $125.0 million[92] - The company sold 1,001,208 shares of common stock under the ATM program for gross proceeds of $6.3 million during the nine months ended September 30, 2023[94] Reserved Shares of Common Stock for Issuance | Category | September 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Stock options outstanding | 6,022,413 | 5,720,415 | | Unvested restricted stock awards and units | 3,822,944 | 3,015,387 | | Common stock warrants | 1,003,191 | — | | Total reserved shares | 12,781,480 | 10,967,643 | 11. Stock-Based Compensation A stock option repricing in March 2023 resulted in $1.1 million of incremental compensation expense, with total stock-based compensation for the nine months ended September 30, 2023, at $13.7 million - The company operates under multiple equity incentive plans for employees and non-employees[97][98][99][100][101][102] - A stock option repricing on March 24, 2023, reduced the exercise price of certain options to $2.21 per share, resulting in $1.1 million of incremental stock-based compensation[103][104] - The company issued 712,181 Replacement Options and 34,500 Replacement RSU Awards to Apexigen grantholders[106] Stock-Based Compensation Expense (in thousands) | Expense Category | 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 options (Total) | $2,443 | $3,157 | $8,613 | $9,324 | | Restricted stock awards | $2,700 | $1,300 | $5,100 | $2,500 | - Unrecognized stock-based compensation expense totaled $22.5 million as of September 30, 2023[109][116] 12. Operating Leases The company paid $1.7 million for operating lease liabilities and generated $1.2 million in sublease income for the nine months ended September 30, 2023 - Cash paid for operating lease liabilities was $1.7 million for the nine months ended September 30, 2023[117] - The company entered into a sublease agreement for office and laboratory space in Boston, commencing March 2023[118] Sublease Income (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 | | :--- | :--- | :--- | :--- | :--- | | Sublease income | $598 | — | $1,200 | — | Lease Cost Components (in thousands) | Lease Cost Type | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | :--- | :--- | | Operating lease cost | $678 | $660 | $1,997 | $1,392 | | Variable lease cost | $230 | $12 | $518 | $116 | | Short-term lease cost | — | $482 | $488 | $1,058 | | Total lease cost | $908 | $1,154 | $3,003 | $2,566 | - The weighted-average remaining lease term is 9.10 years, and the weighted-average discount rate is 9.40% as of September 30, 2023[120] 13. Income Taxes The company's effective tax rate was 0% for the reported periods, with a full valuation allowance maintained for its deferred tax assets - The effective tax rate was 0% for the three and nine months ended September 30, 2023 and 2022[121] - The company maintains a full valuation allowance for its U.S. federal and state deferred tax assets[122] 14. Net Loss per Common Share Basic and diluted net loss per common share improved to $(1.52) for the nine months ended September 30, 2023, from $(2.61) in the prior year Net Loss per Common Share (in thousands, except share and 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 | $(23,049) | $(27,674) | $(58,193) | $(84,616) | | Weighted-average common shares outstanding | 41,331,806 | 32,561,228 | 38,379,401 | 32,444,072 | | Net loss per share, basic and diluted | $(0.56) | $(0.85) | $(1.52) | $(2.61) | - Potentially dilutive securities were excluded from the diluted EPS calculation due to their anti-dilutive effect[124] 15. Related Parties The company has related party relationships with the University of Chicago, Pfizer Inc, and Alloy Therapeutics/Voxall Therapeutics, with no related expenses incurred during the reported periods - The company has a license agreement with the University of Chicago, where it was founded[125] - Pfizer Inc is considered a principal owner, holding over 10% of the company, and has a license agreement[126] - The company formed a joint venture, Voxall Therapeutics, LLC, with Alloy Therapeutics, LLC[127] - No expenses related to these related party agreements were incurred during the three and nine months ended September 30, 2023 and 2022[125][126][127] 16. Commitments and Contingencies The company is not involved in any material legal proceedings but has future contingent payment obligations for milestones and royalties under its licensing agreements - The company is not a party to any material legal proceedings and is unaware of any pending or threatened legal proceedings[128][224] - The company enters into cancellable agreements for clinical trials, preclinical research, testing, manufacturing, and other services[129] - The company has future contingent payment obligations under license agreements for milestones and royalties, totaling up to $900 million plus tiered royalties[194][195][196] - These contingent payments are not included in contractual obligations due to their dependence on future events[193] 17. Subsequent Event On November 7, 2023, the company announced a corporate reorganization, including a 40% workforce reduction, to extend its cash runway into early 2026 - A corporate reorganization was announced on November 7, 2023, to refocus on PYX-201 and PYX-106 clinical trials[130] - Initiatives include a ~40% workforce reduction and pausing funding for certain early-stage research programs[130] - The estimated cost of the reorganization is $1.4 million, primarily for severance payments, to be recognized in Q4 2023[130] - The company expects existing cash, cash equivalents, and investments to fund operations into early 2026 as a result of the reorganization[131] - The company is seeking additional non-dilutive funding through monetization of acquired royalty streams and partnerships[131] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on financial condition and results of operations, including recent developments, pipeline updates, and analysis of expenses and liquidity Overview Pyxis Oncology is a clinical-stage company developing a multi-modality portfolio of next-generation therapeutics, including ADCs and IO product candidates, to treat difficult cancers - The company is a clinical-stage oncology firm developing multi-modality therapeutics (ADCs, IO, mAbs) for difficult-to-treat cancers[136] - The company has in-licensed two ADC programs from Pfizer and one IO program from Biosion[138] - INDs for PYX-201 and PYX-106 were cleared by the FDA in December 2022, transitioning the company to the clinical stage[138] - The company retains full worldwide development and commercialization rights to all product candidates, except PYX-106 in Greater China[138] Recent Developments The company announced a corporate reorganization to extend its cash runway into early 2026 and completed the acquisition of Apexigen, adding sotigalimab (PYX-107) to its pipeline - A corporate reorganization was announced on November 7, 2023, to refocus on PYX-201 and PYX-106 clinical trials[139] - The reorganization includes a ~40% workforce reduction and pausing early-stage research programs, with an estimated cost of $1.4 million in Q4 2023[139] - The company expects existing cash to fund operations into early 2026 due to the reorganization[140] - The acquisition of Apexigen, Inc was completed on August 23, 2023, for a $10.7 million provisional purchase price[141] - The acquisition added sotigalimab (PYX-107), a CD40 agonist, to the pipeline and enhanced ADC capabilities with the APXiMAB platform[142][143] - The company acquired Apexigen's royalty stream, including $7.2 million in deferred revenue from Novartis' Beovu® product, which is currently constrained due to a dispute[144] Pipeline The pipeline includes lead candidates PYX-201 (ADC) and PYX-106 (IO) in Phase 1 trials, and the recently acquired PYX-107 (CD40 agonist) from Phase II trials - PYX-201, a lead ADC candidate, is in a Phase 1 clinical trial for relapsed/refractory solid tumors[146][149] - PYX-201 received Orphan Drug Designation for pancreatic cancer in May 2023[149] - PYX-201 dose escalation is progressing, with preliminary data expected in H1 2024[150][151] - PYX-106, a lead IO candidate, is in a Phase 1 clinical trial for relapsed/refractory solid tumors[152][153] - The PYX-106 trial is repositioned to focus on specific tumor types like NSCLC, with preliminary data expected in H2 2024[154][155] - PYX-107 (sotigalimab), a CD40 agonist acquired from Apexigen, demonstrated anti-cancer activity in Phase II trials, with future development to be assessed after PYX-201 data[142] Components of Our Results of Operations Results are driven by R&D and G&A expenses, which are expected to increase with clinical development, and other income from interest and subleases - Operating expenses are categorized into Research and Development (R&D) and General and Administrative (G&A)[159][161] - R&D expenses include program-specific costs and unallocated costs like personnel and facilities[159] - R&D expenses are expensed as incurred and are expected to increase substantially with ongoing clinical development[159][160] - G&A expenses primarily cover personnel, stock-based compensation, professional fees, and administrative functions[161] - Other income, net, consists mainly of interest and investment income, and sublease income[162] Results of Operations This section details financial performance, highlighting a decrease in net loss driven by reduced operating expenses, particularly in R&D, and increased other income Comparison of the Three Months Ended September 30, 2023 and 2022 For Q3 2023, the net loss decreased by $4.6 million to $23.0 million, driven by a $4.3 million decrease in R&D expenses and a $1.6 million increase in other income Net Loss (in thousands) | Metric | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Net loss | $(23,049) | $(27,674) | $4,625 | Operating Expenses (in thousands) | Expense Category | 3 Months Ended Sep 30, 2023 | 3 Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $14,687 | $19,034 | $(4,347) | | General and administrative | $10,667 | $9,359 | $1,308 | | Total operating expenses | $25,354 | $28,393 | $(3,039) | - R&D expenses decreased by $4.3 million, mainly due to lower costs for the PYX-201 program and other paused preclinical programs[164][165][166][167] - G&A expenses increased by $1.3 million, primarily due to higher personnel-related expenses[168] - Other income, net, increased by $1.6 million, driven by higher interest rates, accretion of discounts, and sublease income[169] Comparison of the Nine Months Ended September 30, 2023 and 2022 For the nine months ended September 30, 2023, the net loss decreased by $26.4 million to $58.2 million, due to a $21.1 million reduction in operating expenses and a $5.3 million increase in other income Net Loss (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Net loss | $(58,193) | $(84,616) | $26,423 | Operating Expenses (in thousands) | Expense Category | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | Change | | :--- | :--- | :--- | :--- | | Research and development | $37,979 | $56,275 | $(18,296) | | General and administrative | $26,450 | $29,233 | $(2,783) | | Total operating expenses | $64,429 | $85,508 | $(21,079) | - R&D expenses decreased by $18.3 million, primarily due to lower costs for the PYX-201 and PYX-106 programs and other paused preclinical programs[171][172][173][174][175] - G&A expenses decreased by $2.8 million, mainly due to a reduction in professional and consultant fees[176] - Other income, net, increased by $5.3 million, driven by higher interest rates, accretion of discounts, and sublease income[177] Liquidity and Capital Resources As of September 30, 2023, the company had $133.0 million in cash and investments, which is expected to fund operations into early 2026 - Cash, cash equivalents, and short-term investments totaled $133.0 million as of September 30, 2023[178] - The accumulated deficit was $270.6 million as of September 30, 2023[178] - Existing capital is expected to fund operating expenses and capital requirements into early 2026, following the corporate reorganization[189] - Future funding requirements are highly uncertain and depend on factors like clinical trial costs, manufacturing, and regulatory approvals[180][182] - The company plans to finance future operations through equity offerings, debt financings, collaborations, or licensing arrangements[180] Cash Flow Summary (in thousands) | Metric | 9 Months Ended Sep 30, 2023 | 9 Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(55,455) | $(71,948) | | Net cash used in investing activities | $(115,077) | $(4,541) | | Net cash provided by financing activities | $5,954 | $183 | | Net decrease in cash, cash equivalents and restricted cash | $(164,578) | $(76,306) | - Operating cash outflow decreased due to a lower net loss and non-cash charges[184] - Investing cash outflow significantly increased due to $186.7 million in marketable debt securities purchases[186] - Financing cash inflow was primarily from the ATM program ($6.0 million) in 2023[188] Contractual Obligations and Commitments The company has lease obligations of $28.6 million and significant contingent payment obligations under licensing agreements for milestones and royalties - Lease obligations for office and laboratory space total $28.6 million (net of sublease payments) through December 31, 2032[192] - Contingent payment obligations under the Pfizer A&R License Agreement include up to $665 million for milestones for the first four licensed ADCs, plus tiered royalties[194] - The University License Agreement includes potential milestones up to $7.7 million, plus running royalties[195] - The Biosion License Agreement includes potential milestones up to $222.5 million, plus tiered royalties[196] - These contingent payments are not included in contractual obligations due to their dependence on future events[193] - Contracts with CDMOs, CROs, and other third parties are generally cancellable[197] Off-Balance Sheet Arrangements Pyxis Oncology did not have any off-balance sheet arrangements during the reported periods - There were no off-balance sheet arrangements as defined by SEC rules and regulations[198] Critical Accounting Policies and Significant Judgments and Estimates The preparation of financial statements requires management to make estimates, particularly regarding investments, business combinations, intangible assets, and revenue recognition - Financial statements require management estimates and assumptions for assets, liabilities, expenses, and disclosures[200] - Investments are classified as available-for-sale marketable debt securities, recorded at fair value[202] - Business combinations are accounted for using the acquisition method, recognizing identifiable assets and liabilities at fair value[205] - Indefinite-lived intangible assets (IPR&D) are acquired in business combinations and evaluated for impairment annually[210][211] - Warrants are classified as equity or liability based on specific terms and accounting guidance[212] - Revenue is recognized when the customer obtains control of promised goods/services[214][215] Recently Issued Accounting Pronouncements Recent accounting pronouncements are not expected to have a material impact on the company's financial statements and related disclosures - Recent accounting pronouncements are not expected to have a material impact on the financial statements[55][216] Jumpstart Our Business Startups Act As an "emerging growth company," Pyxis Oncology is eligible for reduced disclosure requirements but has elected to adopt new accounting standards on the regular timeline - The company is an "emerging growth company" and "smaller reporting company" under the JOBS Act[217][218] - The company elects to take advantage of reduced reporting requirements available to emerging growth companies[462] - The company has irrevocably elected not to use the extended transition period for new or revised financial accounting standards[4][217] Item 3. Quantitative and Qualitative Disclosures About Market Risk As a "smaller reporting company," Pyxis Oncology is not required to provide quantitative and qualitative disclosures about market risk - As a "smaller reporting company," the company is not required to provide quantitative and qualitative disclosures about market risk[219] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting - Disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of September 30, 2023[220] - There were no material changes in internal control over financial reporting during the period[221] - Management acknowledges inherent limitations in the effectiveness of control systems, which can only provide reasonable, not absolute, assurance[222] PART II. OTHER INFORMATION Item 1. Legal Proceedings Pyxis Oncology is not currently a party to any material legal proceedings and is unaware of any pending or threatened legal actions - The company is not currently a party to any material legal proceedings[224] - The company is unaware of any pending or threatened legal proceedings that could have an adverse effect on its business, operating results, or financial condition[128][224] Item 1A. Risk Factors The company's business involves a high degree of risk related to its financial position, product development, regulatory approvals, and dependence on third parties - The business involves a high degree of risk, requiring careful consideration of all described risks and uncertainties[225] - Risks include financial position, merger integration, product development, regulatory hurdles, operational management, third-party reliance, and intellectual property[225] - The occurrence of any risk could materially and adversely affect the business, financial condition, or results of operations, potentially causing a stock price decline[225] Risks Related to Our Financial Position and Need for Additional Capital The company has a limited operating history, significant accumulated losses, and requires substantial additional capital to fund operations, which are projected to last into early 2026 - The company is a clinical-stage biopharmaceutical firm with a limited operating history and significant operating losses, with a $270.7 million accumulated deficit as of Sep 30, 2023[227] - The company expects to incur significant expenses and operating losses for the foreseeable future and may never achieve profitability[227][228][230] - Substantial additional capital is required to finance operations, obtain regulatory approval, and commercialize product candidates[232] - Existing cash and investments of $133.0 million are estimated to fund operations into early 2026, but this estimate is based on assumptions that may prove wrong[233] - Future funding may involve equity offerings (dilution), debt financings (restrictive covenants), or collaborations (relinquishing rights)[180][236] - Adverse developments in the financial services industry could impair access to funding and liquidity[239][240] - An inability to complete or successfully integrate future strategic acquisitions could adversely affect the business and financial condition[241] Risks Relating to the Merger The company may fail to realize the expected benefits from the Apexigen merger due to integration challenges, which could adversely affect financial results and stock price - The company may fail to realize anticipated benefits and synergies from the Apexigen Merger, adversely affecting its stock price[244] - Integration challenges include combining technologies, managing supplier bases, coordinating R&D teams, and integrating administrative functions[246] - The acquisition may result in significant cash expenses, non-cash accounting charges, or unexpected liabilities[247] - Expanded operations post-Merger pose substantial management challenges, potentially hindering the realization of economies of scale and synergies[248] Risks Related to the Discovery and Development of our Product Candidates The company's success depends on early-stage candidates facing a high risk of failure in the lengthy, expensive, and uncertain clinical testing and regulatory approval process - The company is heavily dependent on the success of PYX-201, PYX-106, and PYX-107, which are in early clinical stages and face a high risk of failure[250][251] - Preclinical testing and clinical trials are lengthy, expensive, and have uncertain outcomes; product candidates may fail to demonstrate adequate safety, purity, and potency[255][260][268] - PYX-107's early clinical trial results may not predict later success, and serious adverse events (SAEs) have been reported in studies with sotigalimab (PYX-107)[252][253] - Delays in clinical trials can arise from various factors, including regulatory disagreements, insufficient supply, slow patient enrollment, or undesirable side effects[256][268][292][293] - Undesirable side effects or safety issues could halt clinical development, delay regulatory approval, or limit commercial potential[295] - The company faces intense competition from other biopharmaceutical companies developing cancer treatments[300][301][303][304] - Failures or setbacks involving the FACT Platform or APXiMAB Platform could detrimentally impact the research pipeline[275] - The company may expend resources on less profitable candidates, failing to capitalize on more successful opportunities[282] - Market opportunities for product candidates may be smaller than believed, adversely affecting revenue[283][284] - The market may not be receptive to novel therapeutic modalities like the FACT Platform, making commercialization difficult[285][287] Risks Related to Regulatory Licensure or Approval and Other Legal Compliance Matters Obtaining regulatory licensure is a lengthy, unpredictable, and expensive process with no guarantee of success, and approved products face ongoing regulatory obligations and review - Regulatory licensure and approval processes are lengthy, time-consuming, and inherently unpredictable; failure to obtain approval would substantially harm the business[310][311] - Even if approved, products are subject to ongoing regulatory obligations, which may result in significant additional expense or penalties for non-compliance[316][317][318][319] - Breakthrough Therapy or Fast Track designations do not guarantee faster development, review, or approval[325][327] - Orphan Drug Designation, if obtained, may not guarantee market exclusivity or be maintained[329][330][331][332] - Accelerated approval, if granted, requires confirmatory post-marketing trials; failure to verify clinical benefit could lead to withdrawal of approval[334][338] - Biosimilar competition or lack of appropriate data/market exclusivity in foreign markets could adversely affect sales[347] - Failure to obtain regulatory clearances for companion diagnostic tests could delay or prevent approval of product candidates[348][349] - Relationships with healthcare professionals are subject to fraud and abuse laws; non-compliance could lead to substantial penalties[350][351] - Commercial success depends on third-party payor coverage and adequate reimbursement; failure to obtain these could limit market access and revenue[353][354][355][356] - Enacted and future healthcare legislation like the Inflation Reduction Act may increase costs and affect pricing[358] - Failures to comply with data protection, privacy, and security laws could adversely affect business, operations, and financial condition[362][363][365][368][369][370] - Failure to comply with environmental, health, and safety laws could result in fines, penalties, or costly clean-up[372] - The company is subject to U.S. and foreign export/import controls, sanctions, and anti-corruption laws; violations can lead to serious consequences[374] Risks Related to Employee Matters, Managing Our Growth and Other Risks Related to Our Business Success depends on retaining key personnel, managing growth, and establishing a sales infrastructure, while also mitigating risks from cybersecurity threats and potential operational disruptions - Success depends on attracting and retaining qualified senior management and key scientific personnel amid intense competition for talent[375][376] - The company may experience difficulties managing growth and expanding operations, especially integrating products and technology from the Apexigen Merger[377] - The company lacks marketing, sales, or distribution infrastructure; establishing one or outsourcing carries substantial risks[378] - Internal computer systems are vulnerable to cybersecurity attacks and data breaches, which could result in significant costs, liabilities, and operational disruption[380][381][382][385] - The company may be adversely affected by natural disasters, potentially disrupting operations and incurring substantial expenses not fully covered by insurance[387] - Conducting business internationally exposes the company to economic, political, and regulatory risks[388] - Disruptions at government agencies like the FDA could hinder timely review and approval of products[390][391][392] Risks Related to Our Dependence on Third Parties The company relies heavily on third parties for manufacturing and clinical trials, and any failure by these partners could delay or impair development and commercialization - Failure to comply with obligations under license agreements could result in damages or loss of necessary intellectual property rights[395] - The company relies on third-party contract manufacturers for product supplies; any failure or disruption could limit supply, quality, or timely availability[400] - Manufacturing processes are subject to FDA and foreign regulatory review (cGMP); non-compliance by manufacturers could lead to sanctions or delays[401][402][404][405] - Dependence on third-party CDMOs for manufacturing entails risks like breach of agreement and misappropriation of proprietary information[403] - A portion of manufacturing takes place in China, exposing the company to supply disruption and increased costs due to geopolitical or economic changes[409] - CDMOs may be unable to successfully scale-up manufacturing, delaying development and commercialization[410] - Reliance on sole suppliers for raw and intermediate materials could lead to supply interruptions[411] - The company relies on third-party CROs to conduct clinical trials; their unsatisfactory performance could delay or prevent marketing licenses[412][414] Risks Related to Our Intellectual Property The company's ability to compete depends on obtaining and maintaining broad patent protection, which is an expensive and uncertain process with numerous risks - Success depends on obtaining and maintaining patent protection for product candidates and proprietary know-how[416][417] - Patent applications may fail to issue, or issued patents may be successfully challenged, narrowed, or designed around[419][420][421][424][425] - Patent terms may be inadequate to protect the competitive position due to lengthy development and regulatory review[428] - Intellectual property rights have limitations and may not address all potential threats to the business[429] - The company may face legal proceedings alleging infringement of third-party intellectual property rights, leading to substantial litigation expense or inability to commercialize[430][431][432] - The company may be subject to claims that employees have wrongfully used or disclosed trade secrets of former employers[433][434] - Breach of license agreements could lead to loss of intellectual property rights and inability to develop related product candidates[435][437] - Lawsuits to protect or enforce patents are expensive, time-consuming, and may be unsuccessful[438][439][441] - Changes in U.S. or foreign patent law could diminish the value of patents and impair protection ability[442] - An inability to protect the confidentiality of trade secrets would harm the business and competitive position[444][445][447][448] - Trademarks may be infringed or challenged, requiring rebranding or leading to loss of brand recognition[449][450] Risks Related to Our Common Stock The company's stock price is highly volatile, and future equity issuances will dilute existing shareholders, while principal stockholders exert significant control - Operating results are subject to significant annual and quarterly fluctuations, potentially causing a stock price decline[451] - The stock price is highly volatile, influenced by clinical trial results, regulatory developments, competition, and market conditions[452][457] - Future issuance of equity or convertible debt securities will dilute existing share capital and may adversely affect the trading price[455] - Principal stockholders and management own 35.4% of stock, exerting significant control over corporate actions[458] - Sales of a substantial number of shares in the public market could cause the stock price to fall[459] - As an "emerging growth company," reduced disclosure requirements may make common stock less attractive to investors[461][462][463] - Anti-takeover provisions in charter documents and Delaware law could make an acquisition more difficult[464][465] - The company incurs increased costs and management time for compliance as a public company; failure to maintain effective internal controls could impair financial reporting[467][468][469][470] - The company does not anticipate paying cash dividends; return on investment depends on stock price appreciation[473] - The company may be subject to securities litigation, which is expensive and could divert management's attention[474] - The designated forum for certain actions could limit stockholders' ability to obtain a favorable judicial forum[475] - The ability to use net operating loss carryforwards may be subject to limitations due to ownership changes[476][477] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company's 2021 IPO generated $152.3 million in net proceeds, the planned use of which has been updated to focus on advancing PYX-201 and PYX-106 - The IPO in October 2021 generated $152.3 million in net proceeds from 10.5 million shares at $16.00/share[478] - The planned use of IPO proceeds has changed due to pipeline reprioritization, now focusing on PYX-201 and PYX-106 clinical development and general corporate purposes[479] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities - There were no defaults upon senior securities[480] Item 4. Mine Safety Disclosures This item is not applicable to the company - This item is not applicable[480] Item 5. Other Information On November 7, 2023, the company announced a corporate reorganization to refocus on key clinical trials and extend its cash runway into early 2026 - A corporate reorganization was announced on November 7, 2023, to refocus on PYX-201 and PYX-106 clinical trials[480] - Initiatives include a ~40% workforce reduction and pausing funding for certain early-stage research programs, with an estimated cost of $1.4 million in Q4 2023[480] - The company expects existing cash, cash equivalents, and investments to fund operations into early 2026 as a result of the reorganization[481] - The company is seeking additional non-dilutive funding through monetization of acquired royalty streams and partnerships[481] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including officer certifications and XBRL documents - This section lists exhibits filed with the Quarterly Report on Form 10-Q[483] - Exhibits include certifications of the Principal Executive Officer and Principal Financial Officer[483] - Exhibits include the Inline XBRL Instance Document and Taxonomy Extension Documents[483] SIGNATURES SIGNATURES The report was signed on November 7, 2023, by the President and Chief Executive Officer and the Chief Financial Officer and Chief Operating Officer - The report was signed by Lara Sullivan, M.D., President and CEO, and Pamela Connealy, CFO and COO[488] - The date of signature was November 7, 2023[488]