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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from         to      
Commission File Number: 001-39452
INHIBRX, INC.
(Exact name of registrant as specified in its charter)  
Delaware82-4257312
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
11025 N. Torrey Pines Road, Suite 200
La Jolla, California
92037
(Address of principal executive offices)(Zip Code)
(858) 795-4220
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, par value $0.0001INBXThe Nasdaq Global Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.                               Yes  ☒    No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).                                           Yes  ☒    No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated FilerAccelerated filer
Non-accelerated filerSmaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act.       ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).      Yes      No ☒
As of October 31, 2022, the registrant had 43,551,422 shares of common stock outstanding.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q, or this Quarterly Report, of Inhibrx, Inc., or Inhibrx, or the Company, (also referred to as “we,” “us,” and “our”) contains forward-looking statements that involve risks and uncertainties. Except as otherwise indicated by the context, references in this Quarterly Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “possible,” “potential,” “predict,” “project,” “design,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:
the initiation, timing, progress and results of our research and development programs as well as our preclinical studies and clinical trials;
our ability to advance therapeutic candidates into, and successfully complete, clinical trials;
our interpretation of initial, interim or preliminary data from our clinical trials, including interpretations regarding disease control and disease response;
the timing or likelihood of regulatory filings and approvals, including whether INBRX-101, or any other product candidate, receives approval from the FDA, or similar regulatory authority, for an accelerated approval process;
the commercialization of our therapeutic candidates, if approved;
the pricing, coverage and reimbursement of our therapeutic candidates, if approved;
our ability to utilize our technology platform to generate and advance additional therapeutic candidates;
the implementation of our business model and strategic plans for our business and therapeutic candidates;
our ability to successfully manufacture our therapeutic candidates for clinical trials and commercial use, if approved;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
the scope of protection we are able to establish and maintain for intellectual property rights covering our therapeutic candidates;
our ability to enter into strategic partnerships and the potential benefits of such partnerships;
our estimates regarding expenses, capital requirements and needs for additional financing;
our ability to raise funds needed to satisfy our capital requirements, which may depend on financial, economic and market conditions and other factors, over which we may have no or limited control;
our financial performance;
our expectations regarding the impact of the COVID-19 pandemic on our business;
our and our third party partners’ and service providers’ ability to continue operations and advance our therapeutic candidates through clinical trials and the ability of our third party manufacturers to provide the required raw materials, antibodies and other biologics for our preclinical research and clinical trials in light of the COVID-19 pandemic, current market conditions and geopolitical events such as the ongoing conflict in Ukraine;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals; and
developments relating to our competitors and our industry.
These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the section titled “Risk Factors” elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based
1


upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to new information, actual results or to changes in our expectations, except as required by law.
You should read this Quarterly Report and the documents that we file with the Securities and Exchange Commission, or the SEC, with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
This Quarterly Report includes trademarks, tradenames and service marks that are the property of other organizations. Solely for convenience, trademarks and tradenames referred to in this Quarterly Report appear without the ® and ™ symbols, but those references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights, or that the applicable owner will not assert its rights, to these trademarks and tradenames.
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TABLE OF CONTENTS
Page

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Part I — Financial Information
Item 1. Financial Statements.
Inhibrx, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share data and par value)
(Unaudited)
SEPTEMBER 30,DECEMBER 31,
20222021
Assets
Current assets:
Cash and cash equivalents$146,073 $131,301 
Accounts receivable243 373 
Receivables from related parties72 505 
Prepaid expenses and other current assets7,366 6,933 
Total current assets153,754 139,112 
Property and equipment, net2,799 3,153 
Right-of-use asset5,135 6,338 
Other non-current assets3,164 1,847 
Total assets$164,852 $150,450 
Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable$8,569 $9,125 
Accrued expenses14,605 9,621 
Current portion of deferred revenue440 2,034 
Current portion of lease liability1,812 1,674 
Total current liabilities25,426 22,454 
Long-term debt, including final payment fee170,819 70,470 
Non-current portion of lease liability3,657 5,033 
Non-current portion of deferred revenue 110 
Total liabilities199,902 98,067 
Commitments and contingencies (Note 8)
Stockholders’ equity (deficit)
Preferred stock, $0.0001 par value; 15,000,000 shares authorized as of September 30, 2022 and December 31, 2021; no shares issued or outstanding as of September 30, 2022 and December 31, 2021.
  
Common stock, $0.0001 par value; 120,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 39,087,173 and 38,991,307 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively.
4 4 
Additional paid-in-capital296,404 279,526 
Accumulated deficit(331,458)(227,147)
Total stockholders’ equity (deficit)(35,050)52,383 
Total liabilities and stockholders’ equity (deficit)$164,852 $150,450 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
(Unaudited)
THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
2022202120222021
Revenue:
License fee revenue$278 $2,508 $1,904 $4,289 
Grant revenue 24 14 86 
Total revenue278 2,532 1,918 4,375 
Operating expenses:
Research and development24,934 18,485 79,735 52,825 
General and administrative5,347 2,848 15,800 8,710 
Total operating expenses30,281 21,333 95,535 61,535 
Loss from operations(30,003)(18,801)(93,617)(57,160)
Other income (expense):
Interest expense, net(5,340)(1,778)(10,762)(3,437)
Other income (expense), net18 (1)72 20 
Total other expense(5,322)(1,779)(10,690)(3,417)
Loss before income tax expense(35,325)(20,580)(104,307)(60,577)
Provision for income taxes  4 2 
Net loss(35,325)(20,580)(104,311)(60,579)
Net loss per share, basic and diluted$(0.90)$(0.54)$(2.67)$(1.60)
Weighted-average shares of common stock outstanding, basic and diluted39,071 37,893 39,043 37,818 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Condensed Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands)
(Unaudited)
Common Stock
(Shares)
Common Stock
(Amount)
Additional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity (Deficit)
Balance as of December 31, 202138,991 $4 $279,526 $(227,147)$52,383 
Stock-based compensation expense— — 5,108 — 5,108 
Issuance of shares upon exercise of stock options35 — 401 — 401 
Issuance of warrants— — 712 — 712 
Net loss— — — (31,254)(31,254)
Balance as of March 31, 202239,026 $4 $285,747 $(258,401)$27,350 
Stock-based compensation expense— — 5,296 — 5,296 
Issuance of shares upon exercise of stock options15 — 164 — 164 
Net loss— — — (37,732)(37,732)
Balance as of June 30, 202239,041 $4 $291,207 $(296,133)$(4,922)
Stock-based compensation expense— — 4,691 — 4,691 
Issuance of shares upon exercise of stock options45 — 506 — 506 
Net loss— — — (35,325)(35,325)
Balance as of September 30, 202239,086 $4 $296,404 $(331,458)$(35,050)
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Common Stock
(Shares)
Common Stock
(Amount)
Additional Paid-In CapitalAccumulated DeficitTotal Stockholders’ Equity
Balance as of December 31, 202037,712 $4 $220,848 $(145,379)$75,473 
Stock-based compensation expense— — 3,421 — 3,421 
Issuance of shares upon exercise of stock options93 — 988 — 988 
Net loss— — — (19,289)(19,289)
Balance as of March 31, 202137,805 $4 $225,257 $(164,668)$60,593 
Stock-based compensation expense— — 3,951 — 3,951 
Issuance of shares upon exercise of stock options44 — 485 — 485 
Net loss— — — (20,710)(20,710)
Balance as of June 30, 202137,849 $4 $229,693 $(185,378)$44,319 
Stock-based compensation expense— — 3,493 — 3,493 
Issuance of shares upon exercise of stock options84 — 968 — 968 
Net loss— — — (20,580)(20,580)
Balance as of September 30, 202137,933 $4 $234,154 $(205,958)$28,200 

The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
NINE MONTHS ENDED
SEPTEMBER 30,
20222021
Cash flows from operating activities
Net loss$(104,311)$(60,579)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization923 888 
Accretion of debt discount and non-cash interest expense2,190 833 
Stock-based compensation expense15,095 10,865 
Non-cash lease expense1,203 1,108 
(Gain) loss on disposal of fixed assets18 (9)
Changes in operating assets and liabilities:
Accounts receivable130 (38)
Receivables from related parties433 150 
Prepaid expenses and other current assets(383)(2,586)
Other non-current assets(1,317) 
Accounts payable(724)(1,232)
Accrued expenses and other current liabilities4,984 (5,053)
Operating lease liability(1,238)(1,111)
Deferred revenue, current portion(1,594)(312)
Deferred revenue, non-current portion(110)(627)
Net cash used in operating activities(84,701)(57,703)
Cash flows from investing activities
Purchase of fixed assets(419)(597)
Proceeds from the sale of property and equipment 55 
Net cash used in investing activities(419)(542)
Cash flows from financing activities
Proceeds from the issuance of debt98,871 39,992 
Payment of fees associated with debt(50) 
Proceeds from the exercise of stock options1,071 2,441 
Deferred offering costs paid (148)
Net cash provided by financing activities 99,892 42,285 
Net increase (decrease) in cash and cash equivalents14,772 (15,960)
Cash and cash equivalents at beginning of period131,301 128,664 
Cash and cash equivalents at end of period $146,073 $112,704 
Supplemental disclosure of cash flow information
Cash paid for interest$7,834 $2,001 
Cash paid for income taxes$4 $2 
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Supplemental schedule of non-cash investing and financing activities
Fair value of warrants issued to lender in conjunction with February 2022 Amendment$712 $ 
Payable for purchase of fixed assets$261 $78 
Deferred offering costs included in accounts payable and accrued expenses$ $198 
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Inhibrx, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
Inhibrx, Inc., or the Company, or Inhibrx, is a clinical-stage biopharmaceutical company focused on developing a broad pipeline of novel biologic therapeutic candidates. The Company combines a deep understanding of target biology with innovative protein engineering, proprietary discovery technologies, and an integrative approach to research and development to design highly differentiated therapeutic candidates. The Company’s current pipeline is focused on oncology and orphan diseases.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, related to an interim report on the Form 10-Q.
The unaudited interim condensed financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed financial statements are not necessarily indicative of the results that may be expected for any future periods.
Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2021, which are included in the Company’s Annual Report on Form 10-K filed with the SEC.
Liquidity
As of September 30, 2022, the Company had an accumulated deficit of $331.5 million and cash and cash equivalents of $146.1 million. From its inception and through September 30, 2022, the Company has devoted substantially all of its efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of its therapeutic candidates, organizing and staffing the Company, establishing its intellectual property portfolio and raising capital to support and expand these activities.
The Company believes that its existing cash and cash equivalents will be sufficient to fund the Company’s operations for at least 12 months from the date these condensed consolidated financial statements are issued. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, strategic transactions, and other similar arrangements.
As discussed in Note 4, the Company entered into the Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent, under which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent, or the ATM Offering. During the year ended December 31, 2021, the Company sold 921,042 shares pursuant to the Sales Agreement for net proceeds of $40.2 million, after deducting commissions. During the nine months ended September 30, 2022, the Company did not issue any shares under the Sales Agreement.
As discussed in Note 3, the Company received $40.0 million in gross proceeds upon entering into the February 2022 Amendment to the 2020 Loan Agreement, as amended (both as defined below). Pursuant to the Amended 2020 Loan Agreement (as defined below), three additional tranches became available upon the occurrence of contingent events, for additional gross proceeds of up to $90.0 million. In June 2022, two of these tranches were drawn for additional gross proceeds of $60.0 million.
If the Company does raise additional capital through public or private equity or convertible debt offerings, the ownership interests of its existing stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If the Company raises capital through
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additional debt financings, it may be subject to covenants limiting or restricting its ability to take specific actions, such as incurring additional debt or making certain capital expenditures. To the extent that the Company raises additional capital through strategic licensing, collaboration or other similar agreement, it may have to relinquish valuable rights to its therapeutic candidates, future revenue streams or research programs at an earlier stage of development or on less favorable terms than it would otherwise choose, or to grant licenses on terms that may not be favorable to the Company. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure adequate additional funding, it will need to reevaluate its operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of its development programs, or relinquish rights to its technology on less favorable terms than it would otherwise choose. These actions could materially impact its business, financial condition, results of operations and prospects.
The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities, or may affect the timing of and amounts it can raise by undertaking such activities.
Impact of COVID-19 Pandemic
In response to the global COVID-19 pandemic, the Company continues to take the necessary precautions to ensure the safety of its employees and to minimize interruptions to its operations. The full impact of the COVID-19 outbreak continues to evolve as of the date of these financial statements. While the pandemic has not yet had a material effect on the Company’s financial results, the degree to which COVID-19, including new variants of the virus, may impact the Company’s financial condition, liquidity and future results of operations is uncertain. Management is actively monitoring the risks to public health and the impact of overall global business activity on its financial condition, liquidity, operations, suppliers, industry, and workforce.
The U.S. federal government enacted the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, which, among a number of varied provisions, aimed to ease tax burdens on companies during the COVID pandemic, permitted employers to defer the payment of the employer share of social security taxes due for the period beginning March 27, 2020 and ending December 31, 2020. Of the amounts deferred, 50% was required to be paid by December 31, 2021 and the remaining 50% is required to be paid by December 31, 2022. The Company began deferring payment of the employer share of social security taxes in April 2020 and deferred a total of $0.4 million of such taxes during the period. The Company paid $0.3 million of deferred taxes during December 2021. As of September 30, 2022, the Company has a remaining deferred payment of $0.1 million of such taxes, which are classified as accrued expenses in the Company’s condensed consolidated balance sheets.
Use of Estimates
The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The Company’s most significant estimates relate to whether revenue recognition criteria have been met, accounting for development work and preclinical studies and clinical trials, determining the assumptions used in measuring stock-based compensation, and valuation allowances for the Company’s deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The Company’s actual results may differ from these estimates under different assumptions or conditions.
Concentrations of Credit Risk
The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial condition of the depository institutions in which those deposits are held.
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Fair Value Measurements
The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. These tiers include:
Level 1 - Quoted prices in active markets for identical assets or liabilities.
Level 2 - Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.
As of September 30, 2022 and December 31, 2021, the Company had no financial instruments measured at fair value on a recurring basis.
Deferred Offering Costs
The Company capitalizes costs that are directly associated with equity financings until such financings are consummated, at which time such costs are recorded against the gross proceeds of the offering. Legal, accounting, and filing fees related directly to the Company’s Sales Agreement are capitalized as deferred offering costs. Deferred offering costs associated with the Sales Agreement are reclassified to additional paid-in capital when the Company completes offerings under the Company’s Shelf Registration on Form S-3ASR. In November 2021, the Company completed an ATM Offering under the Sales Agreement and offset $1.7 million of offering costs against the proceeds.
Financial Instruments with Characteristics of Both Liabilities and Equity
The Company accounts for issued warrants either as a liability or equity in accordance with ASC 480-10, Accounting for Certain Financial Instruments with Characteristics of both Liabilities and Equity, or ASC 480-10, and ASC 815-40, Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, or ASC 815-40. Under ASC 480-10, warrants are considered a liability if they are mandatorily redeemable and they require settlement in cash, other assets, or a variable number of shares. If warrants do not meet liability classification under ASC 480-10, the Company considers the requirements of ASC 815-40 to determine whether the warrants should be classified as a liability or as equity. Under ASC 815-40, contracts that may require settlement for cash are liabilities, regardless of the probability of the occurrence of the triggering event. Liability-classified warrants are measured at fair value on the issuance date and at the end of each reporting period. Any change in the fair value of the warrants after the issuance date is recorded in other expense, net in the condensed consolidated statements of operations as a gain or loss. If warrants do not require liability classification under ASC 815-40, in order to conclude warrants should be classified as equity, the Company assesses whether the warrants are indexed to its common stock and whether the warrants are classified as equity under ASC 815-40 or under another applicable GAAP standard. Equity-classified warrants are accounted for at fair value on the issuance date with no changes in fair value recognized after the issuance date. The Company’s outstanding warrants do not meet the requirements for liability classification under ASC-480-10 or ASC-815-40. Therefore, the warrants were treated as equity at the time of issuance.
Revenue Recognition
The Company has generated revenue from its license and collaboration agreements with partners, as well as from grants from government agencies and private not-for-profit organizations. Payments received from customers are included in deferred revenue, allocated between current and non-current on the condensed consolidated balance
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sheet until all revenue recognition criteria are met. In accordance with ASC Topic 606, Revenue from Contracts with Customers, or ASC Topic 606, the Company recognizes revenue when, or as, the promised goods or services are transferred to customers in an amount that reflects the consideration to which it expects to be entitled in exchange for those services. To determine revenue recognition for arrangements the Company concludes are within the scope of ASC Topic 606, the Company performs the following five steps: (1) identify the contract(s) with a customer; (2) identify the performance obligation(s) in the contract; (3) determine the transaction price; (4) allocate the transaction price to the performance obligation(s) in the contract; and (5) recognize revenue when (or as) the performance obligation(s) are satisfied. At contract inception, the Company assesses the goods or services promised within each contract, assesses whether each promised good or service is distinct and identifies those that are performance obligations. The Company recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when, or as, the performance obligation is satisfied.
Collaborative Research, Development, and License Agreements
The Company enters into collaborative agreements with partners that typically include one or more of the following: (1) license fees; (2) nonrefundable up-front fees; (3) payments for reimbursement of research costs; (4) payments associated with achieving specific development, regulatory, or commercial milestones; and (5) royalties based on specified percentages of net product sales, if any. At the initiation of an agreement, the Company analyzes whether each unit of account results in a contract with a customer under ASC Topic 606 or in an arrangement with a collaborator subject to guidance under ASC Topic 808, Collaborative Arrangements. The Company’s licensing arrangements are typically for functional intellectual property as it exists at a point in time, being the time that the license agreement is executed. The Company typically does not have an ongoing performance obligation to support or maintain the licensed intellectual property.
The Company considers a variety of factors in determining the appropriate estimates and assumptions under these arrangements, such as whether the elements are distinct performance obligations, whether there are observable stand-alone prices, and whether any licenses are functional or symbolic. The Company evaluates each performance obligation to determine if it can be satisfied and recognized as revenue at a point in time or over time. Typically, license fees, non-refundable upfront fees, and funding of research activities are considered fixed, while milestone payments are identified as variable consideration which must be evaluated to determine if it is constrained and, therefore, excluded from the transaction price. The Company estimates the amount of variable consideration using the most likely amount, as milestone payments typically only have two possible outcomes. The Company recognizes revenue for sales-based royalty promised in exchange for the license of intellectual property only when the subsequent sale occurs. In the case of an agreement which provides the partner with an option to license a therapeutic or therapeutic candidate in the future, the Company evaluates whether this option represents a material right at the inception of the agreement. If determined to be a material right, the Company will consider the option a separate performance obligation. The Company has historically concluded that the option to grant a license in the future is not a material right as it is contingent upon future events which may not occur. When an option is exercised, the Company will identify any separate performance obligations.
The Company may allocate transaction price using a number of methods including estimating standalone selling price of performance obligations and using the residual approach when the standalone selling price of the license is highly variable or uncertain, and observable standalone selling prices exist for the other goods or services promised in the contract.
Research and Development and Clinical Trial Accruals
Research and development costs are expensed as incurred and include the cost of compensation and related expenses, as well as expenses for third parties who conduct research and development on the Company’s behalf, pursuant to development and consulting agreements in place. The Company’s preclinical studies and clinical trials are performed internally, by third party contract research organizations, or CROs, and/or clinical investigators. The Company also engages with contract development and manufacturing organizations, or CDMOs, for clinical supplies and manufacturing scale-up activities related to its therapeutic candidates. Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon its assessment of the status of each clinical trial and the work completed, and upon information obtained from the CROs and CDMOs. The Company’s estimates are dependent upon the timeliness and accuracy of
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data provided by the CROs and CDMOs regarding the status and cost of the studies. Costs incurred related to the Company’s purchases of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred. Costs incurred related to the licensing of products that have not yet received marketing approval to be marketed, or that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred.
Income Taxes
Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized.
Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding during the same period. Diluted net loss per share is computed by dividing net loss by the weighted average number of common and common equivalent shares outstanding during the same period. The Company excludes common stock equivalents from the calculation of diluted net loss per share when the effect is anti-dilutive.
For purposes of the diluted net loss per share calculation, warrants for purchase of common stock and stock options are considered to be potentially dilutive securities. Accordingly, for the nine months ended September 30, 2022 and September 30, 2021, there is no difference in the number of shares used to calculate basic and diluted shares outstanding.
Potentially dilutive securities not included in the calculation of diluted net loss per share, because to do so would be anti-dilutive, are as follows (in thousands):
AS OF SEPTEMBER 30,
20222021
Outstanding stock options5,269 3,983 
Warrants to purchase common stock47 7 
5,316 3,990 
Segment Information
The Company operates under one segment which develops biologic therapeutic candidates. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies. The Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its condensed consolidated financial condition or results of operations upon adoption.
Adoption of New Accounting Pronouncements
In May 2021, the FASB issued ASU 2021-04, Earnings Per Share (Topic 260), Debt-Modifications and Extinguishments (Subtopic 470-50), Compensation-Stock Compensation (Topic 718), and Derivatives and Hedging-Contracts in Entity’s Own Equity (Subtopic 815-40): Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options, which intends to clarify and reduce diversity in an issuer’s accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The Company adopted ASU 2021-04 on
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January 1, 2022, which did not result in a material impact on its condensed consolidated financial statements and related disclosures.
2. OTHER FINANCIAL INFORMATION
Prepaid Expense and Other Current Assets
Prepaid expense and other current assets were comprised of the following (in thousands):
AS OFAS OF
SEPTEMBER 30, 2022DECEMBER 31, 2021
Outside research and development services$6,539 $6,343 
Other827 590 
Prepaid expense and other current assets$7,366 $6,933 
Property and Equipment, Net
Property and equipment, net were comprised of the following (in thousands):
AS OFAS OF
SEPTEMBER 30, 2022DECEMBER 31, 2021
Machinery and equipment$6,976 $6,286 
Leasehold improvements441 441 
Computer software53 42 
Furniture and fixtures524 514 
Construction in process65 281 
Total property and equipment8,059 7,564 
Less: accumulated depreciation and amortization(5,260)(4,411)
Property and equipment, net$2,799 $3,153 
Depreciation and amortization expense totaled $0.3 million for each of the three months ended September 30, 2022 and September 30, 2021 and $0.9 million for each of the nine months ended September 30, 2022 and September 30, 2021, and consisted of the following (in thousands):
THREE MONTHS ENDED SEPTEMBER 30,NINE MONTHS ENDED SEPTEMBER 30,
2022202120222021
Research and development$251 $250 $757 $746 
General and administrative58 49 166 142 
Total depreciation and amortization expense$309 $299 $923 $888 
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Accrued Expenses
Accrued expenses were comprised of the following (in thousands):
AS OFAS OF
SEPTEMBER 30, 2022DECEMBER 31, 2021
Clinical trials(1)
$3,950 $4,496 
Clinical drug substance and product manufacturing(2)
3,697 1,564 
Other outside research and development1,418 1,329 
Compensation-related2,712 1,322 
Professional fees1,011 261 
Other1,817 649 
Accrued expenses$14,605 $9,621 
(1) Relates primarily to the Company’s usage of third-party CROs for management of clinical trials. See Note 1 for further discussion of the components of research and development.
(2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See Note 1 for further discussion of the components of research and development.
3. DEBT
2020 Loan Agreement
On July 15, 2020, the Company entered into a loan and security agreement, or the 2020 Loan Agreement, with Oxford Finance LLC, or Oxford, pursuant to which it received $10.0 million in gross proceeds, or Term A. The 2020 Loan Agreement was subsequently amended in November 2020, or the November 2020 Amendment, upon which a second tranche in an aggregate principal amount of $20.0 million was funded, or Term B, and in June 2021, or the June 2021 Amendment, upon which a third tranche in an aggregate principal amount of $40.0 million was funded, or Term C. In February 2022, the Company entered into an additional amendment, or the February 2022 Amendment, to the 2020 Loan Agreement, collectively, the Amended 2020 Loan Agreement, upon which the Company received gross proceeds of $40.0 million, or Term D, net of $1.1 million of legal and amendment fees.
The February 2022 Amendment also provided for an increase in the interest rate and for three future tranches of debt to be funded upon the achievement of certain milestones. In June 2022, the Company received additional gross proceeds of $30.0 million, or Term E, following the initiation of part 4 of the Phase 1 clinical trial of INBRX-105, as well as an additional $30.0 million in gross proceeds, or Term F, following the receipt of positive topline data from the Phase 1 clinical trial of INBRX-101. One additional tranche with an aggregate principal amount of $30.0 million, or Term G, remains available to the Company, which will be funded subject to the initiation of a registrational clinical trial of INBRX-101 on or before June 30, 2023.
The Company determined the November 2020, June 2021, and February 2022 Amendments should be treated as modifications of the original 2020 Loan Agreement since the terms and resulting cash flows were not substantially changed upon each of the amendments.
As of September 30, 2022, the Company had $170.0 million in gross principal outstanding in term loans under the Amended 2020 Loan Agreement. The outstanding term loans will mature on January 1, 2027, or the Amended Maturity Date, and bear interest at a floating per annum rate equal to the greater of (1) 8.30% or (2) the sum of (i) the 30 day U.S. Dollar LIBOR rate reported in The Wall Street Journal on the last business day of the month that immediately precedes the month in which the interest will accrue, plus (ii) 8.19%. The repayment schedule provides for interest-only payments through February 1, 2025. The interest-only period is followed by 23 months of equal payments of principal and interest beginning on March 1, 2025. The interest-only period may be extended by an additional 12 months in the event the Company raises at least $100.0 million in upfront licensing or partnership proceeds by February 2025, which would then be followed by 11 months of principal repayments. Upon the Amended Maturity Date, a final payment of 9.0% of the original principal amount will be due to Oxford. This final payment of $15.3 million is being accreted over the life of the Amended 2020 Loan Agreement using the effective interest method. The Company has the option to prepay the outstanding balance of the term loans in full prior to the
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Amended Maturity Date, subject to a prepayment fee ranging from 1.0% to 3.0%, depending upon the timing of the prepayment.
The Company’s outstanding debt balance under the Amended 2020 Loan Agreement consisted of the following as of September 30, 2022 and December 31, 2021 (in thousands).
AS OFAS OF
SEPTEMBER 30, 2022DECEMBER 31, 2021
Term A$10,900 $10,900 
Term B21,800 21,800 
Term C43,600 43,600 
Term D43,600  
Term E32,700  
Term F32,700  
Less: debt discount(14,481)(5,830)
Long-term debt, including debt discount and final payment fee$170,819 $70,470 
As of September 30, 2022, and unless extended in accordance with the terms described above, the Company’s interest-only period will continue through January 2025, with principal payments beginning in February 2025. Future principal payments and final fee payments will be made as follows (in thousands):
AS OF
SEPTEMBER 30, 2022
2025$73,913 
202688,696 
202722,691 
Total future minimum payments185,300 
Less: unamortized debt discount(14,481)
Total debt$170,819 
The Company’s obligations under the Amended 2020 Loan Agreement are secured by a first priority security interest of substantially all of the Company’s assets with a positive lien on intellectual property. The Amended 2020 Loan Agreement includes customary events of default, including instances of a material adverse change in the Company’s operations, that may require prepayment of the outstanding term loans. Additionally, the Amended 2020 Loan Agreement requires a minimum cash balance of $20.0 million to be maintained in a collateral account. As of September 30, 2022, the Company is in compliance with all covenants under the Amended 2020 Loan Agreement and has not received any notification or indication from Oxford of an intent to declare the loan due prior to maturity.
Concurrently with the February 2022 Amendment, the Company issued 40,000 warrants to Oxford to purchase shares of the Company’s common stock at an exercise price of $45.00. Upon issuance, the warrants were classified as equity and recorded at their fair value of $0.7 million. See Note 4 for further discussion of these warrants.
Interest Expense
Interest expense is calculated using the effective interest method and is inclusive of non-cash amortization of the debt discount and accretion of the final payment. Interest expense was approximately $5.5 million and $1.8 million for the three months ended September 30, 2022 and September 30, 2021 and $11.1 million and $3.6 million for the nine months ended September 30, 2022 and September 30, 2021, respectively, all of which was related to the Amended 2020 Loan Agreement in each period.
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4. STOCKHOLDERS’ EQUITY
Common Stock
In September 2021, the Company entered into the Sales Agreement with the Sales Agent, under which it may, from time to time, sell shares of its common stock having an aggregate offering price of up to $200.0 million through the Sales Agent, or the ATM Offering. Pursuant to the Sales Agreement, the Company will pay the Sales Agent a commission for its services in acting as an agent in the sale of common stock in an amount equal to 3% of the gross sales price per share sold. During the year ended December 31, 2021, the Company sold 921,042 shares pursuant to the Sales Agreement for net proceeds of $40.2 million, after deducting commissions. During the nine months ended September 30, 2022, the Company did not issue any shares under the Sales Agreement.
Common Stock Warrants
The Company has 7,354 warrants outstanding at an exercise price of $17.00 per share, which are exercisable for shares of common stock through their expiration date of July 15, 2030. As of September 30, 2022, the warrants are equity-classified and reflected in additional paid-in-capital at a fair value of $0.1 million.
Upon the February 2022 Amendment, the Company issued 40,000 warrants, which are exercisable for shares of common stock of the Company at $45.00 per share. The warrants are exercisable through their expiration date of February 18, 2032. The warrants are equity-classified and reflected in additional paid-in-capital at a fair value of $0.7 million. The fair value of the warrants was determined using the Black-Scholes model on the date of issuance.
No subsequent remeasurement is required for equity-classified warrants.
5. EQUITY COMPENSATION PLAN
Stock Incentive Plan
The Company’s share-based compensation plan, the Amended and Restated 2017 Employee, Director and Consultant Equity Incentive Plan, or the 2017 Plan, provides for the issuance of incentive stock options, restricted and unrestricted stock awards, and other stock-based awards. As of September 30, 2022, an aggregate of 6.1 million shares of common stock were reserved for issuance under the 2017 Plan, of which 0.3 million were available.
Stock Option Activity
The Company recognizes compensation costs related to stock-based awards, including stock options, based on the estimated fair value of the awards on the date of grant. The Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant. The options are subject to four-year vesting with a one-year cliff and have a contractual term of 10 years.
A summary of the Company’s stock option activity under its 2017 Plan for the nine months ended September 30, 2022 is as follows (in thousands, except for per share data and years):
Number of SharesWeighted Average Exercise PriceWeighted Average Remaining Contractual Term
(In Years)
Aggregate Intrinsic Value
Outstanding as of December 31, 2021
4,064 $22.19 
Granted1,682 $24.32 
Exercised(96)$11.17 
Forfeited(381)$30.73 
Outstanding as of September 30, 2022
5,269 $22.45 7.9$13,157 
Vested and exercisable as of September 30, 2022
2,247 $18.26 6.5$9,894 
The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2022 and September 30, 2021 was $1.4 million and $3.4 million, respectively. Aggregate intrinsic value of stock options
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exercised and outstanding is calculated using the fair value of common stock on the date of exercise and as of September 30, 2022, respectively.
Stock-Based Compensation Expense
The weighted-average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option pricing model, as well as the resulting weighted-average fair value for the nine months ended September 30, 2022 and September 30, 2021 were as follows:
 NINE MONTHS ENDED SEPTEMBER 30,
20222021
Risk-free interest rate2.45 %0.67 %
Expected volatility85.23 %93.55 %
Expected dividend yield % %
Expected term (in years)6.086.08
Weighted average fair value$17.15 $24.01 
Stock-based compensation expense for stock options consisted of the following (in thousands):
 THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
2022202120222021
Research and development$3,545 $2,696 $10,764 $8,679 
General and administrative1,146 797 4,331 2,186 
Total stock-based compensation expense$4,691 $3,493 $15,095 $10,865 
As of September 30, 2022, the Company had $52.2 million of total unrecognized stock-based compensation expense related to its stock options, which is expected to be recognized over a weighted-average period of 2.8 years.
6. LICENSE AND GRANT REVENUES
The following table summarizes the total revenue recorded in the Company’s condensed consolidated statements of operations (in thousands):
THREE MONTHS ENDED
SEPTEMBER 30,
NINE MONTHS ENDED
SEPTEMBER 30,
2022202120222021
License fee revenue 
Phylaxis BioScience, LLC$14 $460 $1,101 $1,838 
2seventy bio, Inc. 2,000 200 2,100 
Chiesi Farmaceutici S.p.A.264 48 603 351 
Total license fee revenue278 2,508 1,904 4,289 
 
Grant revenue 24 14 86 
Total revenue$278 $2,532 $1,918 $4,375 
License and Collaboration Agreements
Phylaxis
In July 2020, the Company entered into a joint venture with an entity affiliated with ArrowMark Partners, Phylaxis BioScience, LLC, or Phylaxis. In connection with the joint venture, the Company entered into the following agreements: Contribution Agreement, License Agreement, Limited Liability Company Agreement, and Master Services Agreement, or collectively the Phylaxis Agreements, pursuant to which the Company licensed certain intellectual property and know-how to Phylaxis and agreed to provide services to develop certain compounds. Upon closing, the Company received a $2.5 million nonrefundable, upfront payment from Phylaxis under the Master
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Services Agreement, or MSA. The Company has also received an additional $2.5 million, which was payable within 180 days from closing under the MSA, in two payments of $1.25 million each, received in October 2020 and January 2021. Upon closing, the Company received a 10% equity interest in Phylaxis as consideration for the contribution of the license of the Company’s intellectual property and know-how and is entitled to receive an additional 5% based on the achievement of certain milestones. Under the License Agreement, the Company is also entitled to specified development and commercialization milestone payments of up to an aggregate of $225.0 million and $175.0 million, respectively. The Company is also entitled to share in a percentage of the profits of Phylaxis under the Limited Liability Company Agreement.
In order to determine the fair value of the equity interest in Phylaxis, the Company engaged a third-party valuation specialist. The valuation report utilized a market approach to establish the total equity value of Phylaxis using inputs not observable in the market, including the discount rate. The fair value of the equity interest was $0.5 million, which has been accounted for under the equity method. The fair value of the equity interest upon the execution of the agreements has been included in the transaction price, along with the $5.0 million of payments due pursuant to the MSA.
The Company identified the transfer of the exclusive licenses for, and performance of, development services to modify the first and second compounds as one performance obligation and allocated the transaction price evenly between the two compounds. Revenue related to the performance obligation will be recognized over time as services are performed, based on the Company’s progress to satisfy the performance obligation. During the third quarter of 2022, the Company fulfilled this performance obligation in full and recognized all remaining deferred revenue under this contract.
During the three months ended September 30, 2022 and September 30, 2021, the Company recognized $14,000 and $0.5 million of revenue related to this performance obligation, respectively. During the nine months ended September 30, 2022 and September 30, 2021, the Company recognized $1.1 million and $1.8 million of revenue related to this performance obligation, respectively. As of September 30, 2022, there was no deferred revenue remaining related to the Phylaxis Agreements. As of December 31, 2021, there was $1.1 million of deferred revenue related to the Phylaxis Agreements, all of which was classified as current.
2seventy bio, Inc.
2018 License Agreement
On December 20, 2018, the Company entered into a License Agreement with bluebird bio, Inc., or bluebird, whereby the Company granted bluebird the exclusive, worldwide rights to develop, manufacture, and commercialize certain cell therapy products containing binders. In November 2021, bluebird assigned the agreement, which we refer to as the 2018 2seventy Agreement, to its affiliate, 2seventy bio, Inc., or 2seventy, in connection with an internal restructuring and subsequent spin-out of 2seventy. Under the 2018 2seventy Agreement, the Company is entitled to receive specified development milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single-digits. Due to the uncertainty in the achievement of the developmental milestones, the variable consideration associated with the future milestone payments has been fully constrained (excluded) from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. These estimates will be re-assessed at each reporting period.
In July 2021, a milestone event under the 2018 2seventy Agreement was achieved and the Company recognized $2.0 million of revenue at that point in time. The Company received the associated $2.0 million payment in August 2021. During each of the three and nine months ended September 30, 2021, the Company recognized a total of $2.0 million in revenue related to this agreement. During the three and nine months ended September 30, 2022, the Company recognized no revenue related to this agreement.
2020 License Agreement
In June 2020, the Company entered into an Option and License Agreement with bluebird pursuant to which the Company granted to bluebird exclusive worldwide rights to develop binders and cell therapy products containing single domain antibodies, or sdAbs, directed to specified targets, consisting of two initial programs and up to an additional 8 programs. The Company retains all rights to the specific sdAbs outside of the cell therapy field. This
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agreement, or the 2020 2seventy Agreement, was assigned to bluebird’s affiliate, 2seventy, in November 2021 in connection with bluebird’s internal restructuring and subsequent spin-out of 2seventy.
In June 2020, the Company received a non-refundable upfront option fee of $0.2 million in connection with each of the two initial programs, or $0.4 million in aggregate, and is entitled to an upfront option fee for each additional program, on a program-by-program basis. In June 2022, 2seventy selected a third program and paid a non-refundable upfront option fee of $0.2 million in exchange for a development license. Under each of the three programs, the Company has granted an option in which 2seventy may acquire an exclusive license with respect to all binders and cell therapy products developed under this agreement, which entitles the Company to additional fees upon exercise of the option. In connection with each program for which 2seventy exercises its option, 2seventy will be required to pay the Company a one-time, non-refundable, non-creditable fee in the low-single-digit millions. The Company is also entitled to receive certain developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single-digits. Due to the uncertainty in the achievement of the developmental milestones and future sales, the variable consideration associated with the future milestone payments has been fully constrained (excluded) from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. These estimates will be re-assessed at each reporting period.
As of the effective date of the 2020 2seventy Agreement, the Company identified one performance obligation, which was the transfer of the exclusive development license to bluebird for the two initial programs. The Company determined that the option granted for an exclusive license in the future was not a material right. For the eight programs not identified upon execution of the contract, the Company evaluated the customer option for additional purchases and determined that those options for additional programs did not constitute material rights nor variable consideration. As additional programs are identified, the Company re-assesses its performance obligations and transaction price accordingly.
In May 2021, pursuant to the option extension terms in the 2020 2seventy Agreement, bluebird requested to extend the option term for one of the initial programs by an additional six months in exchange for an option extension fee of $0.1 million. The Company recognized the $0.1 million of revenue related to this extension in May 2021, the point in time in which the extension was granted.
In October 2021, pursuant to the option exercise terms in the 2020 2seventy Agreement, the Company received a $2.1 million option exercise fee for one of the initial programs and transferred an exclusive license for the program and recognized the $2.1 million of revenue related to this option exercise at the point in time in which the exclusive license was transferred.
In June 2022, pursuant to the terms regarding the addition of new programs in the 2020 2seventy Agreement, the Company received a $0.2 million upfront option fee related to the selection of a third program and transferred the related know-how and development license. The Company recognized the $0.2 million of revenue at the point in time in which the program was added and the program term began.
During the nine months ended September 30, 2022 and September 30, 2021, the Company recognized $0.2 million and $0.1 million of revenue related to this agreement, respectively. During the three months ended September 30, 2022 and September 30, 2021, the Company recognized no revenue related to this agreement in either period.
Chiesi
In May 2019, the Company entered into an Option Agreement, as amended by the First Amendment to Option Agreement, dated August 19, 2019, or the Chiesi Option Agreement, with Chiesi Farmaceutici S.p.A., or Chiesi, pursuant to which the Company granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Additionally, the Chiesi Option Agreement provides Chiesi with a right of negotiation for INBRX-101 development and commercialization rights in the United States and Canada in the event that the Company engages in discussions with any third parties for such rights during the term of the Chiesi Option Agreement or, as applicable, the term of a definitive exclusive license agreement between Chiesi and the Company. Under the terms of the Chiesi Option Agreement, the Company received a one-time, non-refundable option initiation payment of $10.0 million in August 2019. If Chiesi chooses to exercise its
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option under the Chiesi Option Agreement, then Chiesi must pay the Company a one-time, non-refundable fee of $12.5 million upon the effective date of the definitive agreement granting Chiesi the exclusive license. If the option is exercised, under the license agreement, the Company may be entitled to receive specified milestone payments of up to $122.5 million, as well as royalties on future product sales.
The Company has identified one performance obligation as of the effective date of the Chiesi Option Agreement, which is to perform research and development services for Chiesi during the option period, which will continue (unless the Chiesi Option Agreement is terminated earlier by Chiesi or the Company) until 60 days following the last to occur of (i) the Company’s delivery to Chiesi of the trial phase data for the first Phase I Clinical Trial, (ii) the Company’s delivery to Chiesi of the finalized minutes from the definitive U.S. Food and Drug Administration, or FDA, scientific advice meeting conducted following completion of such Phase I Clinical Trial, and (iii) the Company’s delivery to Chiesi of the finalized minutes from the definitive parallel European Medicines Agency health technology assessment scientific advice meeting conducted following completion of such Phase I Clinical Trial. The Company has determined that the option to grant a license in the future is not a material right.
The $10.0 million upfront payment has been allocated to the single performance obligation. Revenue is recognized over time as services are performed during the option period, based on the Company’s effort to satisfy the performance obligation relative to the total expense estimated to be incurred during the option period. During the three months ended September 30, 2022, the Company recognized $0.3 million in revenue related to this agreement. During the three months ended September 30, 2021, the Company recognized no revenue related to this agreement. During the nine months ended September 30, 2022 and September 30, 2021, the Company recognized $0.6 million and $0.4 million in revenue related to this agreement, respectively. As of September 30, 2022, the Company has $0.4 million of deferred revenue related to this agreement, all of which is classified as current deferred revenue. As of December 31, 2021, the Company had $0.9 million and $0.1 million of current and non-current deferred revenue related to this agreement, respectively.
7. RELATED PARTY TRANSACTIONS
From time to time, the Company will enter into an agreement with a related party in the ordinary course of its business. These agreements are ratified by the Company’s Board of Directors or a committee thereof pursuant to policy.
LAV Summit Limited
LAV Summit Limited, or LAV SL, a limited company, is a principal shareholder which owned more than 5% of the Company’s outstanding equity interest during the year ended December 31, 2021. Due to this equity ownership, LAV SL was considered a related party. LAV SL’s General Partner, Lilly Asia Ventures, or LAV, through one of its funds, holds a significant equity ownership position in Chinese biotechnology company, Elpiscience Biopharmaceuticals, Inc., or Elpiscience, and the Venture Partner of LAV is the CEO, Founder, and Director at Elpiscience. Accordingly, the Company identified Elpiscience as a related party and all agreements entered into between the Company and Elpiscience through December 31, 2021 are deemed related party agreements. As of December 31, 2021, LAV SL no longer holds more than 5% of the Company’s outstanding equity interest. Accordingly, any future contracts entered into with LAV SL affiliates will not be considered related party transactions.
Elpiscience
In April 2018, the Company entered into a license agreement, or the OX40 License Agreement, with Elpiscience, whereby the Company granted Elpiscience an exclusive license to the Company’s multivalent protein therapeutic directed to the biological target OX40, or INBRX-106. Under this agreement, the Company is entitled to reimbursement for certain CMC and toxicology expenses incurred. The Company received $0.2 million in reimbursements under this agreement during the first quarter of 2022, and has received $5.3 million to date as of September 30, 2022. During the three months ended September 30, 2022, the Company derecognized $32,000 as contra-expenses, which are recorded as receivables from affiliates as of September 30, 2022. No further reimbursements remain under this contract following the receipt of this balance.
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In July 2020, the Company entered into an additional cost sharing agreement with Elpiscience related to the OX40 License Agreement. Under this agreement, the Company is entitled to reimbursement for certain formulation development costs. The Company received $0.3 million and $0.2 million in reimbursements under this agreement in the first quarter of 2022 and 2021, respectively, and has received $0.5 million of reimbursements to date as of September 30, 2022. Reimbursements under this contract are recognized as contra-expense as incurred.
8. COMMITMENTS AND CONTINGENCIES
Operating Leases
In September 2017, the Company entered into a seven-year lease agreement for approximately 34,000 square feet as its sole location in La Jolla, California. The lease expires in June 2025 with an option to extend the lease an additional five years. The lease contained an initial base rent of approximately $0.1 million per month with 2% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which to be determined annually.
In May 2019, the Company executed an amendment to its lease agreement to expand its facilities by approximately 9,000 square feet and began occupying this space in January 2020. The amended lease terminates coterminously with the initial lease agreement and contains an initial base rent of approximately $30,000 per month with 2% annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which is to be determined annually.
The right-of-use asset and operating lease liability as of September 30, 2022 and December 31, 2021 are as follows (in thousands):
AS OFAS OF
SEPTEMBER 30, 2022DECEMBER 31, 2021
Right-of-use asset$5,135 $6,338 
Operating lease liability
Current$1,812 $1,674 
Non-current3,657 $5,033 
Total operating lease liability$5,469 $6,707 
During the three and nine months ended September 30, 2022, the Company recognized operating lease expense of $0.9 million and $2.5 million, respectively. During the three and nine months ended September 30, 2021, the Company recognized operating lease expense of $0.8 million and $2.3 million, respectively. During the three months ended September 30, 2022 and September 30, 2021, the Company paid $0.5 million for amounts included in the measurement of the lease liability in each period. During the nine months ended September 30, 2022 and September 30, 2021, the Company paid $1.6 million for amounts included in the measurement of the lease liability in each period.
As of September 30, 2022 and December 31, 2021, the Company’s operating lease had a remaining term of 2.8 and 3.5 years, respectively. The Company discounts its lease payments using its incremental borrowing rate as of the commencement of the lease. The Company has determined a weighted-average discount rate of 8.2% as of September 30, 2022 and December 31, 2021.
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Future minimum rental commitments for the Company’s operating leases reconciled to the lease liability are as follows (in thousands):
AS OF
SEPTEMBER 30, 2022
2022$544 
20232,203 
20242,247 
20251,137 
Thereafter 
Total future minimum lease payments$6,131 
Less: imputed interest(662)
Present value of operating lease liability5,469 
Less: current portion of operating lease liability(1,812)
Non-current portion of operating lease liability$3,657 
Litigation
The Company is not party to any material legal proceedings. From time to time, it may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained.
9. SUBSEQUENT EVENTS
For the unaudited interim condensed consolidated financial statements as of September 30, 2022, the Company evaluated subsequent events to assess the need for potential recognition or disclosure in these financial statements. Based upon this evaluation, it was determined that no additional subsequent events required recognition or disclosure in these condensed consolidated financial statements, other than disclosures related to those outlined below.
On October 3, 2022, the Company entered into an amendment to the Amended 2020 Loan Agreement, or the October 2022 Amendment. The October 2022 Amendment amended the milestone terms of the last remaining tranche, Term G, under the Amended 2020 Loan Agreement to provide for the funding of $30.0 million upon the announcement of the regulatory path for INBRX-101 rather than upon the initiation of a potential registration-enabling clinical trial of INBRX-101. On October 4, 2022, the Company met this milestone and on October 24, 2022, drew the final tranche for additional gross proceeds of $30.0 million.
In October 2022, the Company sold 4,332,354 shares of its common stock pursuant to its Sales Agreement for net proceeds of $127.4 million after deducting commissions.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report, and our audited financial statements and notes thereto as of and for the year ended December 31, 2021 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on February 28, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report contain forward-looking statements that involve risk and uncertainties, including those described in the section titled “Special Note Regarding Forward-Looking Statements.” As a result of many factors, including those factors set forth in the section of this Quarterly Report titled “Risk Factors,” our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company with a pipeline of novel biologic therapeutic candidates, developed using our protein engineering expertise and proprietary single domain antibody, or sdAb, platform. Our sdAb platform allows us to pursue validated targets with clinical promise where other antibody and biologic based approaches have failed. Highly modular, our sdAbs can be combined with precise valencies and multiple specificities, creating therapeutic candidates designed to be capable of enhanced cell signaling, conditional activation or combined synergistic functions.
We have multiple programs in various stages of development from discovery to preclinical to clinical. We currently have four programs in ongoing clinical trials. Three of these programs are for the treatment of various cancers, and one for the treatment of Alpha-1 Antitrypsin Deficiency, or AATD, as shown below:
inhibrx-20220930_g1.jpg
INBRX-101INBRX-109INBRX-106INBRX-105
AAT-Fc fusion proteinTetravalent DR5 agonistHexavalent OX40 agonistPD-L1x4-1BB tetravalent conditional agonist
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ProgramTherapeutic AreaTarget(s)/FormatSTAGE OF DEVELOPMENT
PreclinicalPhase 1Phase 2Phase 3
INBRX-101*Orphan/RespiratoryNeutrophil Elastase
AAT-Fusion Protein
INBRX-109**OncologyDR5
Tetravalent Agonist
INBRX-106***OncologyOX40
Hexavalent Agonist
INBRX-105***OncologyPD-L1 x 4-1BB
Tetravalent Conditional Agonist
__________________
*    Commercialization and development rights outside of the United States and Canada, subject to an option agreement with Chiesi Farmaceutici S.p.A., or Chiesi
**    Third party partnership with Chinese biotechnology company, Transcenta Holding, Ltd. (formerly Hangzhou Just Biotherapeutics Co., Ltd.), or Transcenta, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.
***    Third party partnership with Chinese biotechnology company, Elpiscience Biopharmaceuticals, Inc, or Elpiscience, currently in place for development and commercialization in China, Hong Kong, Macau and/or Taiwan.

INBRX-101 is an optimized, recombinant alpha-1 antitrypsin, or AAT, augmentation therapy candidate for AATD. In March 2022, the U.S. Food and Drug Administration, or FDA, granted orphan-drug designation for INBRX-101 for the treatment of AATD. In May 2022, we announced topline results from the INBRX-101 Phase 1 clinical trial. At our end-of-Phase 1 meeting, the FDA requested additional data on the correlation between functional AAT levels and the clinical benefit in AATD to further support serum AAT levels as a surrogate endpoint that is reasonably likely to predict clinical benefit, a prerequisite for the FDA’s Accelerated Approval Program. We believe the data revealed the potential to achieve normal AAT levels with monthly dosing and showed the treatment was well tolerated with no drug-related severe or serious adverse events at doses up to and including 120 mg/kg in single and multi-dose administered intravenously. We plan to initiate, during the first quarter of 2023, a potential registration-enabling clinical trial using functional AAT as a surrogate endpoint, with the intent to submit for regulatory approval under the FDA’s Accelerated Approval Program.
Our most advanced therapeutic candidate, INBRX-109, is a tetravalent death receptor 5, or DR5, agonist currently being evaluated in patients diagnosed with difficult-to-treat cancers, such as chondrosarcoma, mesothelioma, colorectal cancer, Ewing sarcoma and pancreatic adenocarcinoma. We have ongoing Phase 1 cohorts with INBRX-109 in combination with standard chemotherapies in several indications. In June 2021, we initiated a potentially registration-enabling Phase 2 trial for the treatment of unresectable or metastatic conventional chondrosarcoma for which the FDA and European Medicine Agency, or EMA, granted orphan-drug designation in November 2021 and August 2022, respectively. We plan to announce data from the isocitrate dehydrogenase, or IDH, mutant population cohort at the annual Connective Tissue Oncology Society’s conference in November 2022.
INBRX-106 is a hexavalent OX40 agonist, currently being investigated as a single agent and in combination with Keytruda, a PD-1 blocking checkpoint inhibitor, in patients with locally advanced or metastatic solid tumors. In January 2022, we announced initial Phase 1 dose escalation results for INBRX-106 in combination with Keytruda, which was observed to be well tolerated with predominantly mild or moderate immune-related toxicities noted.
INBRX-105 is a conditional 4-1BB agonist that is currently being investigated as a single agent and in combination with Keytruda in patients with locally advanced or metastatic solid tumors. In June 2022, we announced Phase 1 dose escalation results for INBRX-105 in combination with Keytruda. These results showed INBRX-105 was reasonably well-tolerated and we observed durable responses in checkpoint-naïve and relapsed refractory patients.
We anticipate additional data releases from INBRX-105 and INBRX-106 during the second or third quarter of 2023.
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Liquidity, Capital Resources and Financial Condition
Sources of Liquidity
Sources of capital raised to fund our operations have been comprised of the sale of equity securities, payments received from commercial partners for licensing rights to our therapeutic candidates under development and grants, borrowings under loan and security agreements, and proceeds from the sale and issuance of convertible promissory notes.
The sale of equity securities includes proceeds under our initial public offering, or IPO, from which our aggregate net proceeds from the offering were $125.9 million, net of underwriting discounts, commissions and offering costs, as well as proceeds under our Open Market Sale Agreement, or the Sales Agreement, with Jefferies LLC, or the Sales Agent. Under the Sales Agreement, which we entered into in September 2021, we may, from time to time, sell shares of common stock through the Sales Agent with an aggregate offering price of up to $200.0 million. Sales of our common stock made pursuant to the Sales Agreement, if any, will be made under our $400.0 million Shelf Registration on Form S-3ASR, which became automatically effective upon filing on September 3, 2021. During the year ended December 31, 2021, we sold 921,042 shares pursuant to the Sales Agreement for net proceeds of $40.2 million, after deducting commissions. During the nine months ended September 30, 2022, we did not issue any shares under the Sales Agreement. In October 2022, we sold 4,332,354 shares pursuant to the Sales Agreement for net proceeds of $127.4 million.
Our borrowings under the loan and security agreement, or the Amended 2020 Loan Agreement, with Oxford Finance LLC, or Oxford, include $200.0 million in gross proceeds received in seven tranches between July 2020 and October 2022. As of September 30, 2022, we had $170.0 million in gross proceeds received to date under the Amended 2020 Loan Agreement.
Future Funding Requirements
Since our inception, we have devoted substantially all of our efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of our therapeutic candidates, hiring to support our research and development activities and financial reporting capabilities, establishing our intellectual property portfolio, and raising capital to support and expand these activities. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. Our net losses may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities.
Our net loss for the nine months ended September 30, 2022 and September 30, 2021 was $104.3 million and $60.6 million, respectively. As of September 30, 2022, we had an accumulated deficit of $331.5 million and cash and cash equivalents of $146.1 million. Based upon our current operating plans, we believe that our existing cash and cash equivalents will be sufficient to fund our operations for at least the next 12 months from the date these condensed consolidated financial statements are issued. Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect.
The process of conducting preclinical studies and testing product candidates in clinical trials is costly, and the timing of progress and expenses in these studies and trials is uncertain. We expect to continue to incur net losses for the foreseeable future, and we expect our research and development expenses to increase as we continue our development of, and seek marketing approvals for, our therapeutic candidates (especially as we move more candidates from preclinical to clinical development as well as study candidates in later stages of clinical development), and begin to commercialize any approved products, if ever. If we elect to proceed with the commercialization of any of our product candidates, we would incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. We also expect our general and administrative expenses and losses to increase as we hire additional personnel and incur increased accounting, audit, legal, regulatory, and compliance costs, and as we incur increased costs from investor and public relations expenses associated with operating as a public company.
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Until such time, if ever, we can generate substantial product revenue, we expect to finance our cash needs through equity offerings, debt financings or other capital sources, including strategic licensing and collaborations, disposition transactions, strategic transactions, or other similar arrangements and transactions, and from time to time, we engage in discussions with potential acquirers regarding the disposition of one or more of our product candidates. However, there can be no assurance as to the availability or terms upon which such finances or capital might be available in the future. If we are unable to secure adequate additional funding, we will need to reevaluate our operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of our development programs, or relinquish rights to our intellectual property on less favorable terms than we would otherwise choose. These actions could materially impact our business, results of operations, financial condition, and prospects.
Our future liquidity and capital funding requirements will depend on numerous factors, including:
the outcome, costs and timing of preclinical studies and clinical trials for our current or future therapeutic candidates;
whether and when we are able to obtain marketing approval to market any of our therapeutic candidates and the outcome of meetings with applicable regulatory agencies, including the FDA;
our ability to successfully commercialize any therapeutic candidates that receive marketing approval;
the emergence and effect of competing or complementary therapeutics or therapeutic candidates;
our ability to maintain, expand and defend the scope of our intellectual property portfolio, including the amount and timing of any payments we may be required to make, or that we may receive, in connection with the licensing, filing, prosecution, defense and enforcement of any patents or other intellectual property rights;
our ability to retain our current employees and the need and ability to hire additional management and scientific and medical personnel;
the terms and timing of any strategic licensing, collaboration or other similar agreement that we have established or may establish;
our ability to repay, refinance or restructure our indebtedness when payment is due, including in the event such indebtedness is accelerated;
the valuation of our capital stock; and
the continuing or future effects of the COVID-19 pandemic and geopolitical events such as the ongoing conflict in Ukraine on capital and financial markets.
We do not own or operate manufacturing facilities for the production of any of our therapeutic candidates, nor do we have plans to develop our own manufacturing operations in the foreseeable future. We currently rely on a limited number of third-party contract manufacturers for all of our required raw materials, antibodies, and other biologics for our preclinical research, clinical trials, and if and when applicable, commercial product, and employ internal resources to manage our manufacturing relationships with these third parties.
Commitments
Our material cash requirements from known contractual and other obligations primarily relate to our lease obligations, debt, and services provided by our third party contract research organizations, or CROs, and contract development and manufacturing organizations, or CDMOs.
We have two leases for our laboratory and office space, which expire in 2025, with an option to extend the leases for an additional five years. As of September 30, 2022, we have future minimum rental obligations under these leases of $6.1 million, of which $2.2 million and $3.9 million are current and non-current, respectively. For more information regarding these lease agreements, refer to Note 8 to the condensed consolidated financial statements.
Under the Amended 2020 Loan Agreement, we are required to make interest-only payments through February 2025, with all principal payments and final fee payments beginning in March 2025 and continuing through the maturity date, or January 2027, unless extended by a financing event as defined in the Amended 2020 Loan Agreement. In October 2022, the interest-only period was extended by an additional 12 months upon the raise of at least $100.0 million in upfront licensing or partnership proceeds, which would then be followed by 11 months of principal repayments.
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As of September 30, 2022, we had an obligation of $234.6 million of long-term debt, including interest and final fee payments, of which $14.7 million and $219.9 million are current and non-current, respectively. For more information regarding the Amended 2020 Loan Agreement, refer to Note 3 and Note 9 to the condensed consolidated financial statements.
We enter into contracts in the normal course of business with CROs related to our ongoing preclinical studies and clinical trials with CDMOs for clinical supplies and manufacturing scale-up activities. These contracts are generally cancellable, with notice, at our option. We have recorded accrued expenses of approximately $9.1 million in our condensed consolidated balance sheets for expenditures incurred by CROs and CDMOs as of September 30, 2022.
While these contracts are generally cancellable, some may contain specific activities that involve one or more non-cancellable commitments, including minimum purchase commitments, binding annual forecasts, and capital equipment investments. Additionally, depending on the timing and reasoning of the exit, certain termination penalties may apply and can range from the cost of work performed to date up to twelve months of future committed manufacturing costs. As of September 30, 2022, the non-cancellable portion of these contracts total in aggregate, excluding amounts recorded in accounts payable and accrued expenses as of this date, approximately $2.3 million.
License and Collaboration Agreements
Celgene Agreement
On July 1, 2013, we entered into a license agreement with Celgene Corporation, a Bristol Myers Squibb Company, or Celgene, as amended on November 23, 2018, or the Celgene Agreement, pursuant to which we granted Celgene an exclusive, global license for the development, manufacture and commercialization of our proprietary CD47 binding domain, or the Celgene Licensed Intellectual Property. Per the terms of the Celgene Agreement, Celgene is operationally and financially responsible for the development, manufacturing and commercialization activities of Celgene Licensed Intellectual Property and any additional related antibodies covered by the Celgene Agreement.
As payment for the license granted in the Celgene Agreement, we may be eligible to receive development and regulatory milestones of an aggregate of $934.1 million, assuming the achievement of all potential milestones in the Celgene Agreement, as well as percentage tiered royalties based on future worldwide sales, with rates ranging between the high single-digits and low teens, subject to potential reduction when and if comparable third party products attain certain levels of competitive market share (on a country-by-country basis) and, subject to certain limitations, payments to third parties for third-party intellectual property rights. We are obligated to pay 2% of future amounts received under the Celgene Agreement to advisors who assisted us with the negotiations and other matters in connection with the Celgene Agreement.
2seventy bio Agreements
On December 20, 2018, we entered into an exclusive license agreement with bluebird bio, Inc., or bluebird, to research, develop and commercialize CAR T-cell therapies using our proprietary sdAb platform. In November 2021, bluebird assigned this license agreement, or the 2018 2seventy Agreement, to its affiliate 2seventy bio, Inc., or 2seventy, in connection with an internal restructuring and subsequent spin-out of 2seventy. Under the terms of this license agreement, we provided 2seventy the exclusive worldwide rights to develop, manufacture and commercialize certain cell therapy products containing sdAbs directed to various cancer targets. In January 2019, we received a $7.0 million payment and pursuant to the license agreement, we are entitled to receive developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single digits. In August 2021, we received a $2.0 million milestone payment under this agreement.
On June 9, 2020, we entered into an additional license agreement with bluebird, or the 2020 2seventy Agreement, which was also assigned to 2seventy in November 2021 in connection with bluebird’s internal restructuring and subsequent spin-out of 2seventy. In June 2020, we received a non-refundable upfront option fee of $0.2 million in connection with each of the two initial programs, or $0.4 million in aggregate, and we are entitled to an upfront option fee for each additional program. In June 2022, 2seventy selected a third program and paid an additional $0.2 million as a non-refundable upfront option fee in exchange for a development license. We also granted options in which 2seventy may acquire an exclusive license with respect to all binders and cell therapy products developed under the 2020 2seventy Agreement, which entitles us to additional fees upon exercise of an option for each
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program. We are also entitled to receive certain developmental milestone payments of up to an aggregate of $51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single-digits.
In May 2021, pursuant to the option extension terms in the 2020 2seventy Agreement, bluebird requested to extend the option term for one of the initial programs by an additional six months in exchange for an option extension fee of $0.1 million. In August 2021, pursuant to the option exercise terms in the agreement, bluebird exercised its option to exclusively license one of the initial programs in exchange for an option exercise fee of $2.1 million, the payment of which was received in October 2021.
Chiesi
In May 2019, we entered into an option agreement with Chiesi, or the Chiesi Option Agreement. Under this agreement, we granted to Chiesi an exclusive option to obtain an exclusive license to develop and commercialize INBRX-101 outside of the United States and Canada. Additionally, the Chiesi Option Agreement provides Chiesi with a right of negotiation for INBRX-101 development and commercialization rights in the United States and Canada in the event we engage in discussions with any third parties for such rights during the term of the Chiesi Option Agreement or, as applicable, the term of a definitive exclusive license agreement between Chiesi and the Company. Under the terms of the Chiesi Option Agreement, we received a one-time, non-refundable option initiation payment of $10.0 million in August 2019. Pursuant to the Chiesi Option Agreement, we are performing research and development services for Chiesi during the option period, which will continue (unless the Chiesi Option Agreement is terminated earlier by the Chiesi or the Company) until 60 days following the last to occur of (i) the Company’s delivery to Chiesi of the trial phase data for the first Phase I Clinical Trial, (ii) the Company’s delivery to Chiesi of the finalized minutes from the definitive FDA scientific advice meeting conducted following completion of such Phase I Clinical Trial, and (iii) the Company’s delivery to Chiesi of the finalized minutes from the definitive parallel EMA health technology assessment scientific advice meeting conducted following completion of such Phase I Clinical Trial.
If Chiesi chooses to exercise its option under the Chiesi Option Agreement, we will receive a one-time, non-refundable fee of $12.5 million upon the effective date of the definitive agreement granting Chiesi the exclusive license. If the option is exercised, under the license agreement, we may be entitled to receive specified milestone payments of up to $122.5 million, as well as royalties on future product sales.
Other Collaboration Agreements
In addition to these contracts, we have entered into strategic collaborations with other third parties, including Phylaxis BioScience, LLC, or Phylaxis, Transcenta, and Elpiscience. For more information regarding these agreements, refer to Note 6 to the condensed consolidated financial statements.
Components of Results of Operations
Revenue
To date, all of our revenue has been derived from licenses with collaboration partners and grant awards. We have not generated any revenue from the commercial sale of approved therapeutic products, and we expect our revenue for the next several years will be derived primarily from payments under our current and any future grant awards and agreements with our collaboration partners.
Operating Expenses
Research and Development
To date, our research and development expenses have related primarily to research activities, including our discovery efforts, and preclinical and clinical development and the manufacturing of our therapeutic candidates. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received. We do not track our internal research and development expenses on a program-by-program basis as they primarily relate to personnel, early research and consumable costs, which are deployed across multiple projects under development.
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Research and development expenses consist primarily of:
External expenses, consisting of:
expenses incurred in connection with the preclinical development of our programs;
clinical trials of our therapeutic candidates, including under agreements with third parties, such as consultants and CROs;
expenses associated with manufacturing our contract development and manufacturing therapeutic candidates including under agreements with CDMOs;
expenses associated with regulatory requirements, including fees and other expenses related to our Scientific Advisory Board, or SAB; and
other external expenses, such as laboratory services related to our discovery and development programs and other shared services, and
Internal expenses, consisting of:
salaries, benefits and other related costs, including stock-based compensation, for personnel engaged in research and development functions;
facilities, depreciation and other expenses, which include direct and allocated expenses for depreciation and amortization, rent and maintenance of facilities; and
other internal expenses, such as laboratory supplies and other shared research and development costs.
We expect that research and development expense will continue to increase over the next several years as we continue development of our therapeutic candidates currently in clinical stage development, support our preclinical programs, and continue to discover new therapeutic candidates, as well as increase our headcount. In particular, clinical development of our therapeutic candidates, as opposed to preclinical development, generally has higher development costs, primarily due to the increased size and duration of later-stage clinical trials. Moreover, the costs associated with our CDMOs to manufacture our therapeutic candidates and future commercial products is also much more costly as compared to early stage preclinical development. We cannot determine with certainty the timing of initiation, the duration or the completion costs of current or future preclinical studies and clinical trials of our therapeutic candidates due to the inherently unpredictable nature of preclinical and clinical development. Preclinical and clinical development timelines, the probability of success and development costs can differ materially from expectations. We anticipate that we will make determinations as to which therapeutic candidates to pursue and how much funding to direct to each therapeutic candidate on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each therapeutic candidate’s commercial potential. We will need substantial additional capital in the future to support these efforts. In addition, we cannot forecast which therapeutic candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our clinical development costs may vary significantly based on factors such as:
per patient trial costs;
the number of trials required for approval;
the number of sites included in the trials;
the countries in which the trials are conducted;
the length of time required to enroll eligible patients;
the number of patients that participate in the trials;
the number of doses that patients receive;
the drop-out or discontinuation rates of patients;
potential additional safety monitoring requested by regulatory agencies;
the duration of patient participation in the trials and follow-up;
the cost and timing of manufacturing of our therapeutic candidates;
the phase and development of our therapeutic candidates;
the efficacy and safety profile of our therapeutic candidates; and
uncertainties related to the COVID-19 pandemic.
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General and Administrative
G&A expenses consist primarily of:
salaries, benefits and other related costs, including stock-based compensation, for personnel engaged in G&A functions;
expenses incurred in connection with accounting and audit services, legal services, and investor relations, as well as consulting expenses under agreements with third parties, such as consultants and contractors;
expenses incurred in connection with commercial and business development activity; and