10-Q 1 ymab-20220331x10q.htm 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 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 001-38650

Y-mAbs Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware

    

47-4619612

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

230 Park Avenue

Suite 3350

New York, NY 10169

(Address of principal executive offices)

(Zip Code)

(646)-885-8505

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class:

    

Trading Symbol

    

Name of each exchange on which registered:

Common Stock, $0.0001 par value

YMAB

NASDAQ Global Select 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, 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 filer 

    

Accelerated filer 

Non-accelerated filer 

Smaller 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 13(a) of the Exchange Act.  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No  .

There were 43,718,165 shares of Common Stock ($0.0001 par value) outstanding as of May 4, 2022.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our business strategy, future operations and results thereof, future financial position, future revenue, projected costs, prospects, current and prospective products, product approvals, research and development costs, current and prospective collaborations, timing and likelihood of success, plans and objectives of management, expected market growth and future results of current and anticipated products, are forward-looking statements. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “contemplate,” “intend,” “may,” “might,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in Part II, Item 1A, "Risk Factors" in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. 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 future events and trends discussed in this Quarterly Report on Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we undertake no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

Unless expressly indicated or the context requires otherwise, the terms "”Y-mAbs,” "company," "we," "us," and "our" in this document refer to Y-mAbs Therapeutics, Inc., a Delaware corporation, and, where appropriate, its subsidiaries.

We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, licensing agreements, collaborations, joint ventures or investments that we may make.

SUMMARY OF RISK FACTORS

Our business is subject to a number of risks, including risks that may prevent us from achieving our business objectives or may adversely affect our business, financial condition, results of operations, cash flows, and prospects.

These risks are discussed more fully below and include, but are not limited to, risks related to:

our ability to successfully launch and commercialize DANYELZA® (naxitamab-gqgk), referred to as DANYELZA, for the treatment of relapsed/refractory high-risk neuroblastoma in bone and/or bone marrow, in the United States and in any other jurisdictions where we may receive marketing approval in the future;

1

the implementation of our business model and our plans to obtain regulatory approval and develop and commercialize our lead product candidate, omburtamab, and other product candidates, including the potential clinical efficacy, safety and other benefits thereof;
the rate and degree of market acceptance and clinical utility for DANYELZA or any current or future product candidate for which we may receive marketing approval;
the potential approval of our Biological License Application, or BLA, for omburtamab, and whether we will be successful in obtaining a priority review voucher for omburtamab and the commercial value to be realized from any such, Priority Review Voucher, or PRV;
our ability and plans in continuing to build out our commercial infrastructure and successfully launching, marketing, and selling DANYELZA, omburtamab and any current or future product candidate for which we may receive marketing approval, including our plans with respect to the focus and activities of our sales force, the nature of our marketing, market access and patient support activities of DANYELZA and related assumptions;
the pricing, coverage and reimbursement of, and the extent to which patient assistance programs are utilized for DANYELZA, omburtamab or any current or future product candidate for which we may receive marketing approval;
our ongoing and future clinical trials for DANYELZA and our lead product candidate omburtamab and other product candidates, whether conducted by us or by any of our collaborators, including the timing of initiation of these trials, the pace of enrollment, the completion of enrollment, the availability of data from these trials, the expected dates of BLA submission and approval by the United States Food and Drug Administration, or FDA, and equivalent foreign regulatory authorities and of the anticipated results;
our ability to manage our business, operations and clinical development plans and timelines could be adversely affected by the effects of health epidemics, including the COVID-19 pandemic, on the manufacturing, clinical trial and other business activities performed by us or by third parties with whom we conduct business, including our contract manufacturers, or CMOs, contract research organizations, or CROs, shippers and others;
our ability to attract, integrate, manage and retain qualified personnel or key employees;
the timing of and our ability to obtain and maintain regulatory, marketing and reimbursement approvals for our product candidates;
our commercialization, marketing and manufacturing capabilities and strategy;
our intellectual property position and strategy and the scope of protection we are able to establish and maintain for the intellectual property rights covering our product candidates and technology;
our ability to identify and develop additional product candidates and technologies with significant commercial potential;
our plans and ability to enter into collaborations or strategic partnerships for the development and commercialization of our product candidates and future operations, and the potential benefits of any such collaboration or partnership;
our ability to continue to maintain and leverage our relationship with Memorial Sloan Kettering Cancer Center, or MSK, including our exclusive rights to the 2015 MSK License Agreement (as amended), or MSK License, the 2020 SADA Technology License Agreement, or SADA License Agreement, and current and future technology and our relationship with MSK as a user of DANYELZA and any future products;
our expectations related to the use of our cash and cash equivalents, how long that cash is expected to last;
the need for, timing and amount of any future financing transaction and the impact of our current stock price on our ability to raise additional capital on favorable terms;
our financial performance, including our estimates regarding revenues, expenses, cash flow, capital expenditure requirements;
developments relating to our competitors and our industry;
adverse effects on our business, financial condition and results of operations from the global COVID-19 pandemic, including the pace of enrollment in our clinical trials, the effects of the pandemic on the well-being of our personnel;
the effects of the recent global conflict resulting from the invasion of Ukraine by Russia, the suspension of our clinical trial activities in Russia;

2

our dependence on, and difficulty to find a suitable replacement for, a small number of third party CMOs that we currently use for the complex and difficult manufacture of our product candidates;
the impact of government laws and regulations, and our ability to comply with healthcare laws and regulations in the United States and any foreign countries, including, without limitation, those applying to the marketing and sale of pharmaceutical products; and
other risks and uncertainties described in the section herein entitled “Risk Factors”.

3

TABLE OF CONTENTS

Page

PART I — FINANCIAL INFORMATION

Item 1.

Consolidated Financial Statements:

5

Consolidated Balance Sheets (unaudited) as of March 31, 2022 and December 31, 2021

5

Consolidated Statements of Net Income/(Loss) and Comprehensive Income/(Loss) (unaudited) for the three months ended March 31, 2022 and 2021

6

Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the three months ended March 31, 2022 and 2021

7

Consolidated Statements of Cash Flows (unaudited) for the three months ended March 31, 2022 and 2021

8

Notes to Consolidated Financial Statements (unaudited)

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

24

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

39

Item 4.

Controls and Procedures

40

PART II — OTHER INFORMATION

Item 1.

Legal Proceedings

40

Item 1A.

Risk Factors

40

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

106

Item 3.

Defaults Upon Senior Securities

107

Item 4.

Mine Safety Disclosures

107

Item 5.

Other Information

107

Item 6.

Exhibits

108

You should read this Quarterly Report and the documents we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from the plans, intentions, and expectations disclosed in the forward-looking statements we may make.

4

PART I – FINANCIAL INFORMATION

Item 1.  Financial Statements.

Y-MABS THERAPEUTICS, INC.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share data)

    

March 31, 

    

December 31, 

2022

2021

ASSETS

 

  

 

  

CURRENT ASSETS

 

  

 

  

Cash and cash equivalents

$

156,724

$

181,564

Accounts receivable, net

9,324

7,712

Inventories

5,588

5,512

Other current assets

 

6,103

 

7,473

Total current assets

 

177,739

 

202,261

Property and equipment, net

 

1,697

 

1,847

Operating lease right-of-use assets

3,155

3,842

Intangible assets, net

1,618

1,663

Other assets

 

6,838

 

3,170

TOTAL ASSETS

$

191,047

$

212,783

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

  

 

  

LIABILITIES

 

  

 

  

Accounts payable

$

14,661

$

13,552

Accrued liabilities

 

12,930

 

12,540

Operating lease liabilities, current portion

1,451

1,783

Total current liabilities

 

29,042

27,875

Accrued milestone and royalty payments

 

2,100

 

2,100

Operating lease liabilities, long-term portion

1,598

1,851

Other liabilities

835

851

TOTAL LIABILITIES

33,575

32,677

Commitments and contingencies (Note 9)

 

  

 

  

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, $0.0001 par value, 5,500,000 shares authorized and none issued at March 31, 2022 and December 31, 2021

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized at March 31, 2022 and December 31, 2021; 43,718,165 and 43,694,716 shares issued at March 31, 2022 and December 31, 2021, respectively

 

4

 

4

Additional paid in capital

 

524,329

 

519,206

Accumulated other comprehensive income

 

1,682

 

1,371

Accumulated deficit

 

(368,543)

 

(340,475)

TOTAL STOCKHOLDERS’ EQUITY

 

157,472

 

180,106

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

$

191,047

$

212,783

The accompanying notes are an integral part of the consolidated financial statements

5

Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Net Income/(Loss) and Comprehensive Income/(Loss)

(unaudited)

(In thousands, except share and per share data)

    

Three months ended March 31, 

    

2022

2021

REVENUES

Product revenue, net

$

10,486

$

5,383

Total revenues

10,486

5,383

OPERATING COSTS AND EXPENSES

 

  

 

 

Cost of goods sold

1,831

93

Research and development

22,912

21,579

Selling, general, and administrative

 

13,438

 

11,970

Total operating costs and expenses

 

38,181

 

33,642

Loss from operations

 

(27,695)

 

(28,259)

OTHER INCOME / (LOSS), NET

 

  

 

  

Gain from sale of priority review voucher, net

62,010

Interest and other loss

 

(373)

 

(338)

NET INCOME / (LOSS)

$

(28,068)

$

33,413

Other comprehensive income / (loss)

 

  

 

  

Foreign currency translation

 

311

 

435

COMPREHENSIVE INCOME / (LOSS)

$

(27,757)

$

33,848

Net income / (loss) per share attributable to common stockholders, basic

$

(0.64)

$

0.80

Weighted average common shares outstanding, basic

 

43,709,238

 

41,870,759

Net income / (loss) per share attributable to common stockholders, diluted

$

(0.64)

$

0.75

Weighted average common shares outstanding, diluted

 

43,709,238

 

44,383,791

The accompanying notes are an integral part of the consolidated financial statements

6

Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

(In thousands, except share data)

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Income / (Loss)

    

Deficit

    

Equity

Balance December 31, 2020

40,688,447

$

4

$

391,558

$

(526)

$

(285,200)

$

105,836

Issuance of common stock to investors, net of issuance costs

2,804,878

107,725

107,725

Exercise of stock options

46,000

110

110

Stock-based compensation expense

9,094

4,698

4,698

Foreign currency translation

435

435

Net loss

33,413

33,413

Balance March 31, 2021

43,548,419

$

4

$

504,091

$

(91)

$

(251,787)

$

252,217

Accumulated

Other

Common Stock

Additional

Comprehensive

Accumulated

Stockholders’

    

Shares

    

Amount

    

Paid-in Capital

    

Income / (Loss)

    

Deficit

    

Equity

Balance December 31, 2021

 

43,694,716

$

4

$

519,206

$

1,371

$

(340,475)

$

180,106

Exercise of stock options

16,000

32

32

Stock-based compensation expense

 

7,449

 

 

5,091

 

 

 

5,091

Foreign currency translation

 

 

 

 

311

 

 

311

Net loss

 

 

 

 

 

(28,068)

 

(28,068)

Balance March 31, 2022

43,718,165

$

4

$

524,329

$

1,682

$

(368,543)

$

157,472

The accompanying notes are an integral part of the consolidated financial statements

7

Y-MABS THERAPEUTICS, INC.

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

Three months ended March 31, 

2022

2021

CASH FLOWS FROM OPERATING ACTIVITIES

 

  

 

  

 

Net loss

$

(28,068)

$

33,413

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

  

Gain from sale of priority review voucher, net

(62,010)

Depreciation and amortization

 

195

 

130

Stock-based compensation

 

5,091

 

4,698

Foreign currency transactions

 

311

 

435

Changes in assets and liabilities:

 

 

Accounts receivable, net

(1,612)

(5,997)

Inventories

(76)

(1,005)

Other current assets

 

1,370

 

2,993

Other assets

 

(3,668)

 

(1,543)

Accounts payable

 

1,109

 

(2,829)

Accrued liabilities and other

 

423

 

(146)

NET CASH USED IN OPERATING ACTIVITIES

 

(24,925)

 

(31,861)

CASH FLOWS FROM INVESTING ACTIVITIES

 

  

 

  

Purchase of property and equipment

 

 

(400)

Net proceeds from sale of priority review voucher

62,010

NET CASH PROVIDED BY INVESTING ACTIVITIES

 

 

61,610

CASH FLOWS FROM FINANCING ACTIVITIES

 

  

 

  

Proceeds from issuance of common stock, net of issuance costs

107,725

Proceeds from exercised stock options

32

110

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

32

 

107,835

Effect of exchange rates on cash and cash equivalents

 

53

 

53

NET INCREASE / (DECREASE) IN CASH AND CASH EQUIVALENTS

 

(24,840)

 

137,637

Cash and cash equivalents at the beginning of period

 

181,564

 

114,634

Cash and cash equivalents at the end of period

$

156,724

$

252,271

SUPPLEMENTAL DISCLOSURE OF NON-CASH ACTIVITIES

 

  

 

  

Property and equipment purchases in accounts payable

$

$

60

Intangible assets acquisition in accrued milestones and royalty payments

$

1,500

$

The accompanying notes are an integral part of the consolidated financial statements

8

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS

Y mAbs Therapeutics, Inc. (“we,” “us,” “our,” the “Company,” or “Y-mAbs”) is a commercial stage biopharmaceutical company focused on the development and commercialization of novel, antibody based therapeutic products for the treatment of cancer. We are leveraging our proprietary antibody platforms and deep expertise in the field of antibodies to develop a broad portfolio of innovative medicines.

The Company is headquartered in New York and was incorporated on April 30, 2015 under the laws of the State of Delaware.

NOTE 2—BASIS OF PRESENTATION

Except for the quarter ended March 31, 2021, the Company has incurred losses since inception. Operations of the Company are subject to certain risks and uncertainties, including, among others, uncertainty of drug candidate development; technological uncertainty; uncertainty regarding patents and proprietary rights; uncertainty in obtaining the U.S. Food and Drug Administration (“FDA”) approval in the United States and regulatory approval in other jurisdictions; marketing or sales capability or experience; uncertainty in getting adequate payer coverage and reimbursement; dependence on key personnel; compliance with government regulations and the need to obtain additional financing. The Company’s drug candidates currently under development will require significant additional research and development efforts, including extensive pre-clinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel infrastructure and extensive compliance reporting capabilities.

The Company’s drug candidates are in various stages of development. DANYELZA (naxitamab-gqgk) was approved by the U.S. FDA in November 2020, but there can be no assurance that the Company’s other research and development efforts will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate significant revenue from product sales. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies.

The Company’s financial statements have been prepared on the basis of continuity of operations, realization of assets and the satisfaction of liabilities in the ordinary course of business. The Company has experienced negative cash flows from operations since inception, and had an accumulated deficit of $368,543,000 as of March 31, 2022 and $340,475,000 as of December 31, 2021. Through March 31, 2022, the Company has funded its operations primarily through proceeds from sales of shares of its common stock, including its initial public offering in September 2018 and its subsequent public offerings in November 2019 and February 2021, as well as additional funding from the proceeds from the sales of DANYELZA and from proceeds from the sale of the DANYELZA PRV.

On February 22, 2021, the Company announced the closing of its public offering of 2,804,878 shares of its common stock, at a public offering price of $41.00 per share, which includes the exercise in full of the underwriters' option to purchase 365,853 additional shares of common stock. The aggregate gross proceeds to the Company, before deducting underwriting discounts and commissions and offering expenses payable by the Company, were approximately $115,000,000.

As of March 31, 2022, the Company had cash and cash equivalents of $156,724,000, and as of December 31, 2021 the Company had cash and cash equivalents of $181,564,000. As of the issuance date of the financial statements for the first quarter ended March 31, 2022, the Company expects that its cash and cash equivalents at March 31, 2022

9

will be sufficient to fund its operating expenses and capital expenditure requirements through at least the next 12 months, irrespective of whether any additional product approvals are obtained.

The Company may raise additional capital to fund future operations through the sale of its equity securities, incurring debt, entering into licensing or collaboration agreements with partners, grants or other sources of financing. Sufficient funds may not be available to the Company on attractive terms or at all when needed from equity or debt financing. If FDA approval for omburtamab does not occur or is significantly delayed, and the Company is unable to obtain additional financing from these or other sources when needed, it will likely be necessary to take other actions to enhance its liquidity position which may include significantly reducing the current rate of spending through delaying, scaling back current operations, or suspending certain research and development programs and other operational programs.

The accompanying unaudited consolidated financial statements reflect the accounts of the Company and its wholly-owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information, Accounting Standards Codification (“ASC”) Topic 270-10 and with the instructions to Form 10-Q. Accordingly, these financial statements do not include all of the information and notes required by GAAP for complete financial statements. The unaudited interim financial statements include all adjustments (consisting only of normal recurring nature) necessary in the judgment of management for a fair statement of the results for the periods presented. All intercompany balances and transactions have been eliminated. The Company has evaluated subsequent events through the date of this filing. Operating results for the three-month period ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ended December 31, 2022, any other interim periods, or any future year or period. The December 31, 2021 consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by GAAP. You should read these unaudited interim consolidated financial statements in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

NOTE 3—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Our significant accounting policies are detailed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Cash and Cash Equivalents

The Company considers all highly liquid instruments with original maturities of three months or less from date of purchase to be cash equivalents. All cash and cash equivalents are held in highly rated securities including a Treasury money market fund which is unrestricted as to withdrawal or use. To date, the Company has not experienced any losses on its cash and cash equivalents. The carrying amount of cash and cash equivalents approximates its fair value due to its short-term and liquid nature. We maintain cash balances in excess of insured limits. The Company monitors the financial performance, credit ratings and liquidity of the money market fund to timely assess and respond to any changes in the asset values of the fund. We do not anticipate any losses with respect to such cash balances.

Trade Accounts Receivables

The Company’s trade accounts receivable balance consists of amounts due from sales of our approved product, DANYELZA. Receivables from product sales are recorded net of allowances which generally include chargebacks, doubtful accounts, rebates, returns, and discounts. The allowance is based primarily on assessment of specific identifiable customer account considered at risk or uncollectible, as well as an analysis of current receivables aging and expected future write-offs. The Company has not historically experienced any significant credit losses. All customer accounts are actively managed, and no losses are currently expected.

The Company has not experienced any write-offs related to our customers and has not recognized any allowance for doubtful accounts nor reversed any allowances in the three months ended March 31, 2022.

10

Concentration of Credit Risk

The Company product sales are made through arrangements primarily with three national speciality distributors in the United States of America. As of March 31, 2022, the receivables balances from such distributors totaled 94% of our outstanding accounts receivable. The Company has contractual payment terms with each of its customers and the Company monitors their financial performance, historical payment terms and credit worthiness to timely assess and respond to any changes in their credit profile.

Inventory

The Company values its inventories at the lower of cost or net realizable value on a first-in, first-out basis. The Company’s inventory cost includes amounts related to materials, third-party contract manufacturing, third-party packaging services, freight, labor costs for personnel involved in the manufacturing process, and indirect overhead costs. Raw and intermediate materials that may be utilized for both commercial and clinical programs are identical and given the alternative future use such amounts are initially classified as inventory. Amounts in inventory associated with clinical development programs are charged to research and development expense when the product enters the research and development process and can no longer be used for commercial purposes and, therefore, does not have an alternative future use.

The Company capitalizes inventory costs related to products to be sold in the ordinary course of business. The Company makes a determination of capitalizing inventory costs for a product based on, among other factors, status of regulatory approval, information regarding safety, efficacy and expectations relating to commercial sales and recoverability of costs. For DANYELZA, the Company commenced capitalization of inventory at the receipt of FDA approval. Prior to FDA approval, the Company expensed such costs as part of research and development expenses.

The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment occurs. Such impairment charges, should they occur, are recorded within cost of goods sold. The determination of whether inventory costs will be realizable requires estimates by management. No material inventory write-downs occurred in the three months ended March 31, 2022.

Fair Value Measurements

Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (i.e. an exit price). The accounting guidance includes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The three levels of the fair value hierarchy are as follows:

• Level 1 — Unadjusted quoted prices for identical assets or liabilities in active markets;

• Level 2 — Inputs other than quoted prices in active markets for identical assets and liabilities that are observable either directly or indirectly for substantially the full term of the asset or liability; and

• Level 3 — Unobservable inputs for the asset or liability, which include management's own assumption about the assumptions market participants would use in pricing the asset or liability, including assumptions about risk.

Cash equivalents held in money market funds are valued using other significant observable inputs, which represent a Level 2 measurement within the fair value hierarchy. The Company has no other cash equivalents.

11

The following tables present the Company’s fair value hierarchy for its cash equivalents, which are measured at fair value on a recurring basis (in thousands):

Fair Value Measurements at March 31, 2022 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

141,739

$

$

141,739

Total

$

$

141,739

$

$

141,739

Fair Value Measurements at December 31, 2021 Using:

    

Level 1

    

Level 2

    

Level 3

    

Total

Cash equivalents:

Money market funds

$

$

166,729

$

$

166,729

Total

$

$

166,729

$

$

166,729

During the quarter ended March 31, 2022, there were no transfers between Level 1, Level 2, and Level 3.

Operating Leases

The Company determines if an arrangement includes a lease at inception. Operating lease right-of-use assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease right-of-use assets and liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. In determining the net present value of lease payments, the Company uses its estimated incremental borrowing rate based on information available at the lease commencement date. Because most of the Company’s leases do not provide an implicit rate of return, an incremental borrowing rate is used based on the information available at the commencement date in determining the present value of lease payments on an individual lease basis. The Company’s incremental borrowing rate for a lease is the estimated rate of interest it would have to pay on a collateralized basis to borrow an amount equal to the lease payments under similar terms.

The Company’s leases may include options to extend or terminate the lease which are included in the lease term when it is reasonably certain that it will exercise any such options. None of the Company’s leases contain any residual value guarantees. Lease expense is recognized on a straight-line basis over the expected lease term. Related variable lease costs incurred are not material to the Company.

The Company currently elects the short-term lease recognition exemption for all leases that qualify. This means, for those leases that qualify, we will not recognize right-of-use assets or liabilities, and this includes not recognizing right-of-use assets or liabilities for existing short-term leases of those assets in transition. We also elect the practical expedient to not separate lease and non-lease components for all of our leases. The Company has made an accounting policy election to account for each separate lease component of a contract and its associated non-lease components as a single lease component. See the Lease Agreements section in NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS for the related disclosures.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, net product revenues, the accrual for research and development expenses, the accrual of milestone and royalty payments, and the valuation of stock options. 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. Actual results could differ from those estimates.

12

The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations and financial condition, including expenses, manufacturing, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international markets.

Revenue Recognition - Product revenue

We recognize revenue from sales of DANYELZA at a point in time when our customer is deemed to have obtained control of the product, which generally occurs upon receipt at the end-user hospital.

The amount of revenue we recognize from sales of DANYELZA varies due to rebates, chargebacks and discounts provided under governmental and other programs, distribution related fees and other sales-related deductions. In order to determine those deductions, we estimate, utilizing the expected value method, the amount of revenue that we will ultimately be entitled to. This estimate is based upon contracts with customers and government agencies, statutorily-defined discounts applicable to government-funded programs, estimated payor mix, and other relevant factors. Calculating these amounts involves estimates and judgments, and we review these estimates quarterly. If actual results vary from our original estimates, we will adjust these estimates quarterly, which would affect net product revenue and earnings in the period such variances occur.

Rebates and chargebacks

We contract with United States governmental agencies to ensure that DANYELZA will be eligible for coverage under the various programs administered by the agencies. We estimate the rebates and chargebacks to be provided and deduct these estimated amounts from our gross product revenues. These reserves are recorded in the same period the revenue is recognized, resulting in a reduction of product revenue and the establishment of accrued liabilities for the rebates and a reduction of accounts receivable for the chargebacks. We develop estimates for rebates and chargebacks based upon (i) the Company’s contracts with these agencies, (ii) the government-mandated discounts applicable to government-funded programs, and (iii) information obtained from hospitals and third party consultants regarding the payor mix. Our liability for these rebates and chargebacks mainly consists of claims for which invoices have not yet been received and paid. We do not maintain material levels of inventory in the wholesale or retail channel.

Discounts and distribution-related fees

We provide invoice discounts on DANYELZA sales to our distributors for prompt payment and fees for distribution services and invoice discounts reduce the original accounts receivable balances. The payment terms for sales to distributors generally include a 2% discount for prompt payment or fees for distribution services which are based on contractual rates agreed with the respective distributors. Based on historical data and experiences with the distributors, we expect our distributors to earn these discounts and fees and deduct the full amount of these discounts and fees from our gross product revenue at the time such revenues are recognized.

Returns

We offer our customers limited product return rights for damaged, defective, or expiring products. We estimate returns on sales of DANYELZA mainly based on information provided to the Company from the hospitals and distributors. The return reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and an establishment of an accrued liability.

13

Segment Information

The Company is engaged solely in the discovery, development, distribution and commercialization of novel antibody-based therapeutic products for the treatment of cancer. Accordingly, the Company has determined that it operates in one operating segment.

Recently Issued Accounting Pronouncements – Adopted

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, and are adopted by the Company as of the specific effective date. The Company adopted ASU 2020-10, ASU 2021-04 and ASU 2020-06 effective January 1, 2022, and the adoption of these new standards did not have a material impact on the Company’s consolidated financial statements or disclosures.

The Company has evaluated accounting pronouncements recently issued but not yet adopted and believes that these pronouncements do not apply to the Company’s operations and therefore will not have a material impact on the Company’s consolidated financial statements or disclosures.

NOTE 4—PRODUCT REVENUE

The Company’s product revenues were generated from sales of DANYELZA and totaled $10,486,000 for three months ended March 31, 2022 and $5,383,000 for the three months ended March 31, 2021.

Revenue from product sales is recorded net of applicable provisions for rebates, chargebacks, discounts, distribution-related fees and other sales-related deductions. Accruals for chargebacks and discounts are recorded as a direct reduction to accounts receivable. Accruals for rebates, distribution-related fees and other sales-related deductions are recorded within accrued liabilities. As of March 31, 2022, the company had recorded accounts receivable allowances of approximately $668,000 and accrued liabilities of $2,921,000 related to product sales during the three months ended March 31, 2022. As of December 31, 2021, the company had recorded accounts receivable allowances of approximately $486,000 and accrued liabilities of $2,615,000 related to product sales.

An analysis of the change in reserves for discounts and allowances is summarized as follows:

    

Contractual

 

    

    

Allowances and

Discounts

Government Rebates

 

Returns

Total

(in thousands)

Balance, December 31, 2021

$

13

$

3,027

$

61

$

3,101

Current provisions relating to sales in current year

24

1,085

126

1,235

Payments/credits relating to sales in current year

(14)

(546)

(187)

(747)

Balance, March 31, 2022

$

23

$

3,566

$

$

3,589

Substantially all of the Company’s product sales were in the United States. The Company had product sales to certain customers that accounted for more than 10% of total gross product revenue for the three months ended March 31, 2022 and March 31, 2021. Mckesson, AmerisourceBergen, and Cardinal Health accounted for 60%, 25%, and 11%, respectively, of our gross product revenue for the three months ended March 31, 2022. Mckesson and Cardinal Health accounted for 80% and 16%, respectively, of our gross product revenue for the three months ended March 31, 2021.

14

NOTE 5—NET LOSS PER SHARE

Basic net loss per share (“EPS”) is calculated by dividing net income or loss attributable to common stockholders by the weighted average common stock outstanding. Diluted EPS is calculated by adjusting weighted average common shares outstanding for the dilutive effect of common stock options and restricted stock units. In periods in which a net loss is recorded, no effect is given to potentially dilutive securities, since the effect would be antidilutive. Securities that could potentially dilute basic EPS in the future were not included in the computation of diluted EPS because to do so would have been antidilutive. The calculations of basic and diluted net loss per share are as follows (in thousands, except per share amounts):

Three months ended March 31, 

    

2022

2021

Net income /(loss) (numerator)

$

(28,068)

$

33,413

Weighted-average shares (denominator), basic

 

43,709

 

41,871

Basic net income / (loss) per share

$

(0.64)

$

0.80

Weighted-average shares (denominator), diluted

43,709

44,384

Diluted net income / (loss) per share

$

(0.64)

$

0.75

Potentially dilutive securities excluded from the computation of diluted earnings per share relate to stock options and unvested restricted share units (“RSUs”) outstanding totaled 6,686,168 shares as of March 31, 2022 and 1,177,600 shares as of March 31, 2021.

NOTE 6—INVENTORIES

Inventories consist of the following (in thousands):

    

March 31, 2022

December 31, 2021

Work In Progress

8,747

4,741

Finished Goods

541

771

Total inventories

$

9,288

$

5,512

Inventories are classified on the Consolidated Balance Sheets in each respective period (in thousands):

    

March 31, 2022

December 31, 2021

CURRENT ASSETS

Inventories

$

5,588

$

5,512

Total recorded in Current Assets

5,588

5,512

NONCURRENT ASSETS

Other assets

3,700

Total recorded in Noncurrent Assets

3,700

Total Inventories

$

9,288

$

5,512

The Company has classified $3,700,000 of work in progress inventory as noncurrent assets based on our current demand schedule and expectation that such inventory will be utilized in excess of one year from the balance sheet date.

15

d NOTE 7—INTANGIBLE ASSETS

The company’s intangible assets as of March 31, 2022 totaled $1,618,000 and related to capitalized milestone payments made following FDA approval and commercialization of DANYELZA. The intangible asset net book value as of March 31, 2022 is net of $182,000 of accumulated amortization.

The company’s intangible assets as of December 31, 2021 totaled $1,663,000. The intangible asset net book value as of December 31, 2021 is net of $137,000 of accumulated amortization.

Intangible assets are amortized on a straight-line basis based on a 10 year useful of the assets. Annual amortization expense is expected to $180,000 each year for the five-year period from 2022 to 2026.

NOTE 8—ACCRUED LIABILITIES

Accrued short-term liabilities at March 31, 2022 and December 31, 2021 are as follows (in thousands):

March 31, 

    

December 31, 

    

2022

2021

Accrued licensing, milestone and royalty payments

$

3,768

$

3,090

Accrued clinical costs

 

1,533

 

915

Accrued compensation and board fees

 

2,119

 

1,877

Accrued manufacturing costs

1,153

2,622

Accrued sales reserves

2,921

2,615

Other

 

1,436

 

1,421

Total

$

12,930

$

12,540

NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS

As of March 31, 2022, the Company has entered into two license agreements and certain other agreements with Memorial Sloan Kettering Cancer Center (“MSK”). The license agreements, as previously disclosed in our annual report on Form 10-K, are the MSK License and the CD33 License Agreement. In addition, the Company entered into the SADA Technology License Agreement, or the SADA License Agreement, with MSK and Massachusetts Institute of Technology (“MIT”) in 2020. Through a 2019 Settlement and Assumption and Assignment of the MSK License and Y-mAbs Sublicense Agreement (“SAAA”) with MabVax, Inc. (“MabVax”) and MSK, the Company has established a direct license with MSK relating to the GD2-GD3 Vaccine, which was originally sublicensed by the Company in 2018 from MabVax. These license agreements with MSK and MIT grant the Company certain patent rights and intellectual property rights, and in consideration thereof, the Company agreed to make certain payments and issue shares of the Company’s common stock to MSK and MIT.

Certain of the payments are contingent milestone and royalty payments, as disclosed in the table below. Amounts disclosed for accrued milestone and royalty payments are inclusive of obligations under the MSK License, CD33 License Agreement, MabVax License Agreement, and SADA License Agreement, collectively. We have the

16

following significant license agreements and related commitments which include all obligations that have been paid or are accrued as of and for the period ending March 31, 2022 (in thousands):

    

    

    

    

    

Accrued

    

Accrued

    

Accrued

    

Accrued

Cash paid

    

Cash paid

    

Expense

    

Expense

    

liabilities

    

liabilities

    

liabilities

    

liabilities

Three months

Three months

Three months

Three months

Current

Non-current

Current

Non-current

ended

ended

ended

ended

as of

as of

as of

as of

March

March

March

March

March

March

December

December

Agreements

2022

2021

2022

2021

2022

2022

2021

2021

MSK

$ -

$ 450

$ 677

$ -

$ 2,163

$ 1,650

$ 1,486

$ 1,650

CD33

100

450

450

MabVax

SADA

1,605

1,605

Minimum royalties and certain clinical and regulatory milestones that become due based upon the passage of time under the CD33 License Agreement, the SADA Agreement and the MabVax Agreement are excluded from the above table as the Company does not consider such obligations to be probable.

The below table represents the maximum clinical, regulatory or sales-based milestones as reflected within the agreements, certain of which have been paid in prior periods or are accrued as presented in the table above (in thousands):

    

Maximum

    

Maximum

    

Maximum

    

Agreements

Clinical Milestones

Regulatory Milestones

Sales-based milestones

MSK

$ 2,450

$ 9,000

$ 20,000

CD33

550

500

7,500

MabVax

200

1,200

SADA

4,730

18,125

23,750

Research and development is inherently uncertain and as described above, should such research and development fail, the MSK License, the CD 33 License, and the SADA License are cancelable at the Company’s option. The Company will also consider the development risk and each party’s termination rights under the agreements when considering whether any clinical or regulatory based milestone payments, certain of which also contain time-based payment requirements, are deemed probable. The Company records milestones in the period in which the contingent liability is probable and the amount is reasonably estimable.

The Company did not have an expense related to milestones under the SADA License Agreement in the first quarters of 2022 and 2021 and had $1,605,000 in accrued liabilities as of March 31, 2022 and 2021. This includes clinical-based milestones of $605,000 coming due within 36 months of the effective date of the agreement as this continues to represent the time period we expect will be required to gather necessary clinical data to determine which patent rights to further pursue, if any, under the SADA License Agreement. The Company does not consider any other milestones under the SADA License Agreement to be probable as of March 31, 2022 and December 31, 2021.

Other agreements

We have also entered into various other support agreements with MSK including a sponsored research agreement to provide research services related to the intellectual property licensed under the MSK License Agreement; a master data services agreement, for services provided by approximately five full time employees at MSK, who are engaged in transferring clinical data, databases, regulatory files and other know how included in the MSK License Agreement to the Company; a master clinical trial agreement pursuant to which we committed to fund certain clinical trials at MSK; two separate core facility service agreements pursuant to which we committed to obtaining certain laboratory services from MSK; and in October 2020 we entered into a SADA sponsored research agreement pursuant to which we agreed to pay MSK to provide research services over a period of three years related to the intellectual property licensed under the SADA License Agreement.

17

For three months ended March 31, 2022 and 2021, we incurred research and development expenses of $697,000 and $948,000, respectively, under these agreements.

Lease Agreements

In July 2019, the Company entered a development, manufacturing and supply agreement with SpectronRx in South Bend, Indiana, to secure access to clinical and commercial scale radiolabeling capacity for omburtamab. Under the terms of the agreement, SpectronRx has agreed to establish a manufacturing unit designated for the Company within its existing facilities, at which both clinical and commercial supply of radiolabeled omburtamab can be produced. Since the Company possesses the right to substantially all the economic benefits and directs the use of the production area, the Company accounts for the payments related to the access to the manufacturing space under ASC 842 as an operating lease. The term of the lease is two years from the commencement date of August 31, 2020. Upon the lease commencement date, we recorded $3,617,000 as right-of-use asset and $2,680,000 as lease liability with the difference of $937,000 resulting from certain prepayments and other costs incurred. The Company pays equal monthly installments of approximately $117,000 per month in additional access fees through September 2022 resulting in total payments of $583,000 remaining under the agreement. There are no renewal options in this agreement.

In February 2019, the Company entered into a lease agreement in connection with its 4,548 square feet laboratory in New Jersey. In December 2019, we expanded the space with an additional 235 square feet. The term of the lease is three years from the date the Company occupied the premises, with an option to extend for an additional two years which the Company expects to exercise and has included in the determination of the related lease liability. This lease will expire in the fourth quarter of 2023. Fixed rent payable under the lease is approximately $144,000 per annum and is payable in equal monthly installments of approximately $12,000.

January 2018, the Company entered into a lease agreement in connection with its corporate headquarters in New York. The term of the lease is five years from the date the Company begins to occupy the premises. Fixed rent payable under the lease is approximately $384,000 per annum and is payable in equal monthly installments of approximately $32,000, which are recognized on a straight line basis.

The Company entered a three-year lease agreement for the lease of certain office space in Denmark in February 2018, as amended in November 2018 and February 2019. Additionally, on September 26, 2021, the Company entered into a lease agreement in Denmark to expand the size of its current office space to a total of 29,288 square feet. The lease is payable in monthly installments of approximately $41,000, which are recognized on a straight line basis. The new lease is expected to last for 48 months and commenced on November 1, 2021 when we were provided access to the leased space.

Total operating lease costs were $704,000 and $646,000 for the three months ended March 31, 2022 and 2021, respectively. During the three months ended March 31, 2022, the expenses were recorded as $638,000 in research and development expense and $66,000 in selling, general, and administrative expense. During the three months ended March 31, 2021, the expenses were recorded as $587,000 in research and development expense and $59,000 in selling, general, and administrative expense.

Cash paid for amounts included in the measurement of lease liabilities for the three months ended March 31, 2022 and 2021 was $607,000 and $544,000, respectively, and was included in net cash used in operating activities in the Company’s Consolidated Statements of Cash Flows.

18

Maturities of operating lease liabilities at March 31, 2022 were as follows (in thousands):

Operating Leases

    

at March 31, 2022

Remainder of 2022

$

1,341

Years ending December 31,

2023

1,016

2024

540

2025

436

Total lease payments

3,333

Less: Imputed interest

(284)

Total operating lease liabilities at March 31, 2022

$

3,049

Maturities of operating lease liabilities at December 31, 2021 were as follows (in thousands):

Operating Leases

Years ending December 31,

    

at December 31, 2021

2022

$

1,953

2023

1,025

2024

550

2025

445

Total lease payments

3,973

Less: Imputed interest

(339)

Total operating lease liabilities at December 31, 2021

$

3,634

Operating lease liabilities are based on the net present value of the remaining lease payments over the remaining lease term. In determining the present value of lease payments, the Company uses its estimate of its incremental borrowing rate based on the information available at the lease commencement date. As of March 31, 2022, the weighted average remaining lease term is 2.54 years and the weighted average discount rate used to determine the operating lease liability was 6.5%. As of March 31, 2021, the weighted average remaining lease term is 1.97 years and the weighted average discount rate used to determine the operating lease liability was 7.6%.

Legal Matters

The Company has been named a nominal defendant in a lawsuit instigated by a stockholder against our Board Member and President, Interim Chief Executive Officer and Head of Business Development and Strategy, Mr. Thomas Gad, seeking to compel Mr. Gad to disgorge alleged short swing profits stemming from a certain transaction involving the Company’s common stock undertaken by Mr. Gad on March 10, 2021. The Company is of the opinion that the claim is without merit and intends to maintain this position in the proceedings. In addition, the Company had been informed by Mr. Gad that he also believes the claim is without merit, that he has strong defenses against such claim and that he intends to vigorously defend the action. The Company has assessed the proceedings and does not believe that it is probable that a gain or a liability will be realized by the Company. As a result, the Company did not record any loss or gain contingencies for this matter.

19

NOTE 10—STOCKHOLDERS’ EQUITY

Authorized Stock

As of March 31, 2022 and December 31, 2021, the Company has authorized a total of 105,500,000 shares, 100,000,000 of which are common stock, par value $0.0001 per share, and 5,500,000 of which are preferred stock, par value $0.0001 per share.

Common Stock

Each share of common stock is entitled to one vote. Common stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to preferential dividend rights of the preferred stock, none of which have been issued. The Company had issued 43,718,165 shares of its common stock as of March 31, 2022 and 43,694,716 shares of its common stock as of December 31, 2021.

Preferred Stock

Preferred stock may be issued from time to time in one or more series with such designations, preferences and relative participating, optional or other special rights and qualifications, limitations or restrictions as approved by the Company’s Board of Directors. No preferred stock has been issued as of March 31, 2022 or December 31, 2021.

Stock grant agreements with non-employees

In April 2020, in connection with the SADA License Agreement, we entered into certain stock grant agreements pursuant to which we agreed to issue a total of 213,996 shares to two non-employee researchers who were involved in the development of the SADA technology licensed from MSK and MIT in consideration for their prior service. All 213,996 shares were issued in April 2020 into escrow with 40% of the shares immediately vesting at the time of issuance and the remaining 60% of the shares subject to vesting ratably over the next three years on the anniversary date of the agreement. In accordance with the terms of the agreement, the non-employee researchers vested in an additional 20% of the awards in 2021 and the remaining 40% vesting ratably over the years of 2022 and 2023 on the anniversary date of the agreement. The shares are subject to forfeiture to the extent the SADA License Agreement is terminated prior to the vesting of the shares. There is no cash settlement feature, and no future service is required for the non-employee researchers to vest and receive the shares. While the shares vest over time, there is no performance condition for the shares. In April 2020, we recorded an expense within research and development totaling $7,376,000 related to the shares which represents the fair value of the shares on the grant date.

In July 2020, pursuant to the stock grant agreements, we also loaned the two researchers a total of $2,610,000 related to their individual tax payments due in conjunction with the stock grants. Each of the loans are evidenced by a three year Secured Promissory Note. The outstanding principal amounts of the loans, together with all accrued interest thereon at the rate of 1% per annum, is due and payable on the maturity date of the loans. The loans are secured by Pledge and Security Agreements, pursuant to which the researchers have pledged the shares as security for repayment of the loans with interest rates. The loans are classified as held to maturity securities, recorded at amortized cost and included in other assets in the Company’s Consolidated Balance Sheet.

Issuance of common stock

On February 22, 2021, we completed a third public offering of our common stock pursuant to which we issued and sold 2,804,878 shares of our common stock at a price to the public of $41.00 per share which included the exercise in full of the underwriters’ option to purchase additional shares. We received aggregate gross proceeds from our secondary public offering of $115,000,000, or aggregate net proceeds of approximately $107,725,000 after deducting underwriting discounts and commissions and offering expenses.

20

NOTE 11—SHARE-BASED COMPENSATION

2015 Equity Incentive Plan

Our board of directors and stockholders have approved and adopted the 2015 Plan, which provided for the grant of incentive stock options, within the meaning of Section 422 of the Code (the Internal Revenue Code), to our employees and any parent and subsidiary corporations’ employees, and for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants. A total of 4,500,000 shares of our common stock were reserved for issuance pursuant to the 2015 Plan. Options granted under the 2015 Plan vest according to the schedule specified in the grant agreements, which is generally a four-year period and generally become immediately exercisable upon the occurrence of a change in control, as defined. Upon the 2018 Equity Incentive Plan (the “2018 Plan’) becoming effective in September 2018, no further grants are allowed under the 2015 Plan.

2018 Equity Incentive Plan

Our board of directors and stockholders approved and adopted the 2018 Plan, which became effective upon the Company’s initial public offering in September 2018 and which provides for the grant of incentive stock options, within the meaning of Section 422 of the Code (the Internal Revenue Code), to our employees and any parent and subsidiary corporations’ employees, and for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock and restricted stock units to our employees, directors and consultants and our parent and subsidiary corporations’ employees and consultants. A total of 5,500,000 shares of our common stock, inclusive of the awards previously granted under the 2015 Equity Incentive Plan, are reserved for issuance pursuant to the 2018 Plan. In addition, the number of shares available for issuance under the 2018 Plan will also include an annual increase on the first day of each fiscal year beginning in 2019, equal to 4% of the outstanding shares of common stock as of the last day of our immediately preceding fiscal year. The exercise price of options granted under the plans must at least be equal to the fair market value of our common stock on the date of grant. The term of an incentive stock option may not exceed 10 years, except that with respect to any participant who owns more than 10% of the voting power of all classes of our outstanding stock, the term must not exceed five years and the exercise price must equal at least 110% of the fair market value on the grant date. The administrator will determine the methods of payment of the exercise price of an option, which may include cash, shares or other property acceptable to the administrator, as well as other types of consideration permitted by applicable law. Options granted under the 2018 Plan vest according to the schedule specified in the grant agreements, which is generally a four-year period and generally become immediately exercisable upon the occurrence of a change in control, as defined.

Stock Option Valuation

During the three-month periods ended March 31, 2022 and 2021, there were no new stock options granted. During the three month periods ended in March 31, 2022 and 2021, stock-based compensation for stock option grants were $5,017,000 and $4,629,000, respectively, for options granted to employees and directors. During the three months ended March 31, 2022, the expenses were recorded as $1,779,000 in research and development expense and $3,238,000 in selling, general, and administrative expense. During the three months ended March 31, 2021, the expenses were recorded as $1,692,000 in research and development expense and $2,937,000 in selling, general, and administrative expense.

21

The following table summarizes common stock options issued and outstanding:

    

    

    

    

Weighted

Weighted

Aggregate

average

average

intrinsic

remaining

exercise

value

contractual

Options

price

(in thousands)

life (years)

Outstanding and expected to vest at December 31, 2021

 

6,687,128

$

22.43

$

26,412

7.21

Exercised

(16,000)

2.00

Forfeited

(22,167)

28.67

Outstanding and expected to vest at March 31, 2022

 

6,648,961

$

22.46

$

15,726

6.96

Exercisable at March 31, 2022

 

4,083,593

$

17.23

$

15,720

5.78

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The Company’s public trading commenced in September 2018, and, as a result, there is only limited available historical volatility experience. Therefore, we estimate our expected share price volatility based on a combination of the historical volatility of a group of publicly traded peer companies and the historical volatility of the Y-mAbs share price, and we expect to continue to do so until such time as we have adequate historical data regarding the volatility of our own traded share price. The expected term of our stock options has been determined utilizing the “simplified” method for awards as we have limited historical data to support the expected term assumption. The risk free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. The expected dividend yield is based on the fact that we have never paid cash dividends on shares of our common stock and do not expect to pay any cash dividends in the foreseeable future. There were no significant changes to the inputs included in the Black-Scholes option pricing model during the period ended March 31, 2022.

As of March 31, 2022, we had $44,592,000 of unrecognized compensation related to employee stock options that are expected to vest over a period of 2.79 years. As of March 31, 2021, we had $47,610,000 of unrecognized compensation related to employee stock options that are expected to vest over a period of 2.92 years.

Restricted Stock Unit Activity

During the three months ended March 31, 2022 and March 31, 2021, stock-based compensation for restricted stock unit grants was $74,000 and $69,000, respectively. During the three months ended March 31, 2022, the expenses were recorded as $68,000 in research and development expense and $6,000 in selling, general, and administrative expense. During the three months ended March 31, 2021, the expenses were recorded as $63,000 in research and development expense and $6,000 in selling, general, and administrative expense.

The following table summarizes restricted stock units issued and outstanding:

    

    

    

Weighted

    

Weighted

average

average

remaining

grant

vesting

Restricted Stock Units

price

life (years)

Outstanding and expected to vest at December 31, 2021

28,907

$

28.04

 

1.82

Granted

16,283

9.31

 

  

Vested

(7,450)

21.05

 

Forfeited

(534)

28.89

Outstanding and expected to vest at March 31, 2022

37,206

$

20.74

 

2.38

22

As of March 31, 2022, we had $650,000 of unrecognized compensation related to employee restricted stock units that are expected to vest over a period of 2.38 years. As of March 31, 2021, we had $523,000 of unrecognized compensation related to employee restricted stock units that are expected to vest over a period of 1.96 years.

NOTE 12—RELATED PARTY TRANSACTIONS

Under the MSK License Agreement, SADA License Agreement, the CD33 License Agreement, MabVax Agreement, and various other supporting agreements with MSK, we have expensed costs in the total amount of $1,374,000 and $948,000 in the three months ended March 31, 2022 and 2021, respectively, for milestones, and research and development costs, under these agreements with MSK. Please refer to NOTE 9—LICENSE AGREEMENTS AND COMMITMENTS for additional details on our agreements with MSK. As of March 31, 2022, our consolidated balance sheet includes liabilities due to MSK totaling $6,455,000, $335,000 recorded within accounts payable and $6,120,000 recorded within accrued liabilities. As of December 31, 2021, our consolidated balance sheet includes liabilities due to MSK totaling $6,191,000, $748,000 recorded within accounts accounts payable, $5,443,000 recorded within accrued liabilities.

NOTE 13—INCOME TAXES

The Company provided no current and deferred income taxes on net loss of $28,068,000 and net income of $33,413,000 for the three-month periods ended March 31, 2022 and 2021, respectively.

The Company recognizes income tax benefits for tax positions determined more likely than not to be sustained upon examination, based on the technical merits of the positions. Unrecognized tax benefits were $0 and $304,000 at March 31, 2022 and December 31, 2021, respectively. As of March 31, 2022 and December 31, 2021, the Company does not have any interest or penalties accrued related to the total amount of unrecognized tax benefits. The Company’s tax returns for the years 2020, 2019, 2018, and 2017 are open for tax examination by U.S. federal and state and Danish tax authorities. During 2022, the review of the Company’s transfer pricing policies by the Danish Tax Authorities for tax years 2016 through 2020 was completed resulting in no material impacts to our income tax accounts.

The Company maintains a full valuation allowance on its U.S. and foreign deferred tax assets. The assessment regarding whether a valuation allowance is required considers both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. In making this assessment, significant weight is given to evidence that can be objectively verified. In its evaluation, the Company considered its cumulative losses historically and in recent years and its forecasted losses in the near term as significant negative evidence. Based upon review of available positive and negative evidence, the Company determined that the negative evidence outweighed the positive evidence and a full valuation allowance on its U.S. and foreign deferred tax assets will be maintained. The Company will continue to assess the realizability of its deferred tax assets and will adjust the valuation allowance as needed.

NOTE 14—OTHER BENEFITS

The Company has adopted a defined contribution 401(k) savings plan (the “401(k) plan”) covering all U.S. employees. Participants may elect to defer a percentage of their pretax or after-tax compensation to the 401(k) plan, subject to defined limitations. The plan allows for a discretionary match by the Company. The Company made no matching contributions to the plan during the three months ended March 31, 2022 and 2021.

The Company has established a retirement program for employees of our Danish subsidiary pursuant to which all such employees can contribute an amount at their election from their base compensation and may receive contributions from our Danish subsidiary. The Danish subsidiary made no contributions during the three months ended March 31, 2022 and 2021. In addition, health insurance benefits for our Danish employees are fully paid for by such employees. Our Danish subsidiary does not incur any costs for these health insurance benefits.

23

NOTE 15GAIN FROM SALE OF PRIORITY REVIEW VOUCHER

On December 28, 2020, the Company announced that it entered into a definitive agreement to sell its DANYELZA Priority Review Voucher, or PRV, to United Therapeutics Corporation for $105,000,000. The PRV was granted in conjunction with the approval by FDA of DANYELZA, for the treatment of refractory/relapsed high-risk neuroblastoma. Under the terms of the Company’s license agreement with MSK, Y-mAbs retained 60% of the net proceeds received from the sale, and the remaining 40% was paid to MSK. The transaction closed on January 21, 2021 once the substantive closing conditions included within the agreement were resolved. The Company recognized a net gain of $62,010,000 during the quarter ended March 31, 2021 related to the sale.

The Company did not recognize a corresponding gain during the quarter ended March 31, 2022.

NOTE 16SUBSEQUENT EVENT

On April 27, 2022, the Company announced certain executive management changes. Effective April 22, 2022, Dr. Claus Møller stepped down from his positions as Chief Executive Officer and as a member of the Company’s Board of Directors. There were no disagreements with the Company expressed by Dr. Møller on any matters relating the Company’s operations, policies or practices. Dr. Møller’s employment agreement provides for cash compensation of $1,428,000, which includes salary and certain benefits continuation. Also, under terms of the equity award agreement, Dr. Møller’s outstanding stock option awards will continue to vest as scheduled and become exercisable when vested. This will result in a non-cash share-based compensation expense charge of $9,286,000 that the Company anticipates will be recognized in 2022 as there is no longer a service condition related to such awards. Therefore, the Company expects a total charge of $10,714,000 related to executive management change to be recorded during 2022.

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 with our accompanying financial statements and related notes thereto included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the U.S. Securities and Exchange Commission, or SEC. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this Quarterly Report on Form 10-Q, 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. For convenience of presentation some of the numbers have been rounded in the text below.

Overview

We are a commercial-stage biopharmaceutical company focused on the development and commercialization of novel, antibody-based therapeutic products for the treatment of cancer. We are leveraging our proprietary antibody platf