FORM10-Q
| ☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
June 30, 2022
| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||
| British Columbia, Canada | ||||||
(State or other jurisdiction of | (I.R.S. Employer
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V5T 1G4
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||
| Common Shares, no par value per share | ZYME | New York Stock Exchange | ||||||
| Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||
| Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||
| Emerging growth company | ☐ | |||||||||||||||
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Consequently, forward-looking statements should be regarded solely as our current plans, estimates and beliefs. You should not place undue reliance on forward-looking statements. We cannot guarantee future results, events, levels of activity, performance or achievements. We do not undertake and specifically decline any obligation to update, republish or revise forward-looking statements to reflect future events or circumstances or to reflect the occurrences of unanticipated events, except as required by law.
Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.
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| March 31, 2018 | December 31, 2017 | |||||||
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Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 30,981 | $ | 35,946 | ||||
Short-term investments (note 4) | 39,050 | 51,851 | ||||||
SR&ED receivables | 1,926 | 2,092 | ||||||
Accounts receivables | 49 | 238 | ||||||
Prepaid expenses and other current assets | 2,415 | 2,208 | ||||||
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Total current assets | 74,421 | 92,335 | ||||||
Acquiredin-process research and development (note 5) | 18,396 | 18,396 | ||||||
Goodwill (note 5) | 12,016 | 12,016 | ||||||
Long-term prepaid assets | 1,182 | 1,215 | ||||||
Property and equipment, net | 6,949 | 7,178 | ||||||
Intangible assets, net | 528 | 748 | ||||||
Deferred tax assets | 46 | 67 | ||||||
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Total assets | $ | 113,538 | $ | 131,955 | ||||
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Liabilities and shareholders’ equity | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued liabilities (note 6) | $ | 7,057 | $ | 9,053 | ||||
Warrant liabilities (note 7b) | 2,690 | 1,348 | ||||||
Fair value of liability classified options | 8,233 | 3,945 | ||||||
Other current liabilities (note 6) | 205 | 315 | ||||||
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Total current liabilities | 18,185 | 14,661 | ||||||
Other long term liabilities (note 6) | 825 | 866 | ||||||
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Total liabilities | 19,010 | 15,527 | ||||||
Shareholders’ equity: | ||||||||
Common shares, no par value; unlimited authorized shares at March 31, 2018 and December 31, 2017, respectively; 25,464,460 and 25,444,006 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively (note 8a) | 223,147 | 222,991 | ||||||
Additionalpaid-in capital | 7,960 | 8,812 | ||||||
Accumulated other comprehensive loss | (6,659 | ) | (6,659 | ) | ||||
Accumulated deficit | (129,920 | ) | (108,716 | ) | ||||
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Total shareholders’ equity | 94,528 | 116,428 | ||||||
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Total liabilities and shareholders’ equity | $ | 113,538 | $ | 131,955 | ||||
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Research collaboration and licensing agreements (note 9) | ||||||||
Commitments and contingencies (note 10) | ||||||||
Subsequent events (note 12) | ||||||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| (unaudited) | |||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 198,649 | $ | 201,867 | |||||||
| Short-term investments (note 5) | 43,184 | 50,741 | |||||||||
| Accounts receivable | 4,196 | 15,614 | |||||||||
| Prepaid expenses and other current assets | 17,037 | 19,998 | |||||||||
| Total current assets | 263,066 | 288,220 | |||||||||
| Deferred financing fees | 1,290 | 1,214 | |||||||||
| Long-term investments (note 5) | 886 | 886 | |||||||||
| Long-term prepaid assets | 16,078 | 12,490 | |||||||||
| Deferred tax asset | 2,613 | 3,070 | |||||||||
| Property and equipment, net | 26,157 | 22,783 | |||||||||
| Operating lease right-of-use assets | 23,321 | 26,987 | |||||||||
| Intangible assets, net | 5,913 | 3,838 | |||||||||
| Acquired in-process research and development (note 6) | 17,628 | 17,628 | |||||||||
| Goodwill (note 6) | 12,016 | 12,016 | |||||||||
| Total assets | $ | 368,968 | $ | 389,132 | |||||||
| Liabilities and shareholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued liabilities (note 7) | $ | 76,685 | $ | 62,767 | |||||||
| Fair value of liability classified stock options | 679 | 7,754 | |||||||||
| Current portion of operating lease liability (note 11) | 2,725 | 1,310 | |||||||||
| Other current liabilities | — | 22 | |||||||||
| Total current liabilities | 80,089 | 71,853 | |||||||||
| Long-term portion of operating lease liability (note 11) | 29,170 | 30,923 | |||||||||
| Deferred revenue (note 9) | 32,941 | 32,941 | |||||||||
| Other long-term liabilities (note 7) | 2,900 | 2,748 | |||||||||
| Deferred tax liability | 1,586 | 1,573 | |||||||||
| Total liabilities | 146,686 | 140,038 | |||||||||
| Shareholders’ equity: | |||||||||||
| Common shares, no par value; unlimited authorized shares at June 30, 2022 and December 31, 2021, respectively; 57,772,461 and 46,633,935 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively (note 8) | 826,497 | 741,147 | |||||||||
| Additional paid-in capital | 222,792 | 197,710 | |||||||||
| Accumulated other comprehensive loss | (6,659) | (6,659) | |||||||||
| Accumulated deficit | (820,348) | (683,104) | |||||||||
| Total shareholders’ equity | 222,282 | 249,094 | |||||||||
| Total liabilities and shareholders’ equity | $ | 368,968 | $ | 389,132 | |||||||
| Research collaboration and licensing agreements (note 9) | |||||||||||
| Commitments and contingencies (note 13) | 0 | 0 | |||||||||
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Revenue | ||||||||
Research and developmental collaborations (note 9) | $ | 40 | $ | 230 | ||||
Operating expenses: | ||||||||
Research and development | 13,085 | 9,058 | ||||||
Government grants and credits | — | (218 | ) | |||||
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| 13,085 | 8,840 | |||||||
General and administrative | 7,066 | 6,259 | ||||||
Impairment on acquired IPR&D (note 5) | — | 1,536 | ||||||
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Total operating expenses | 20,151 | 16,635 | ||||||
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Loss from operations | (20,111 | ) | (16,405 | ) | ||||
Other (expense) income | ||||||||
Interest and other expense | (8 | ) | (227 | ) | ||||
Change in fair value of warrant liabilities (note 7b) | (1,342 | ) | 555 | |||||
Accretion on long-term debt | — | (88 | ) | |||||
Interest and other income | 258 | 50 | ||||||
Foreign exchange (loss) gain | (66 | ) | 189 | |||||
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Total other (expense) income, net | (1,158 | ) | 479 | |||||
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Loss before income taxes | (21,269 | ) | (15,926 | ) | ||||
Income tax recovery (expense) | 65 | — | ||||||
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Net loss and comprehensive loss | $ | (21,204 | ) | $ | (15,926 | ) | ||
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Net loss per common share (note 2): | ||||||||
Basic | (0.83 | ) | (1.21 | ) | ||||
Diluted | (0.83 | ) | (1.25 | ) | ||||
Weighted-average common shares outstanding (note 2): | ||||||||
Basic | 25,459,150 | 13,183,928 | ||||||
Diluted | 25,459,150 | 13,329,751 | ||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Revenue | |||||||||||||||||||||||
| Research and development collaborations (note 9) | $ | 5,442 | $ | 1,771 | $ | 7,358 | $ | 2,415 | |||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 56,022 | 50,711 | 118,532 | 94,994 | |||||||||||||||||||
| General and administrative | 15,243 | 19,945 | 27,335 | 21,241 | |||||||||||||||||||
| Total operating expenses | 71,265 | 70,656 | 145,867 | 116,235 | |||||||||||||||||||
| Loss from operations | (65,823) | (68,885) | (138,509) | (113,820) | |||||||||||||||||||
| Other income: | |||||||||||||||||||||||
| Interest income | 436 | 588 | 738 | 1,329 | |||||||||||||||||||
| Other income, net (note 10) | 759 | 341 | 444 | 470 | |||||||||||||||||||
| Total other income, net | 1,195 | 929 | 1,182 | 1,799 | |||||||||||||||||||
| Loss before income taxes | (64,628) | (67,956) | (137,327) | (112,021) | |||||||||||||||||||
| Income tax recovery (expense) | 9 | 434 | 83 | (91) | |||||||||||||||||||
| Net loss and comprehensive loss | $ | (64,619) | $ | (67,522) | $ | (137,244) | $ | (112,112) | |||||||||||||||
| Net loss per common share (note 4): | |||||||||||||||||||||||
| Basic | $ | (0.97) | $ | (1.31) | $ | (2.15) | $ | (2.18) | |||||||||||||||
| Diluted | $ | (0.97) | $ | (1.31) | $ | (2.15) | $ | (2.42) | |||||||||||||||
| Weighted-average common shares outstanding (note 4): | |||||||||||||||||||||||
| Basic | 66,353,279 | 51,422,066 | 63,874,097 | 51,395,015 | |||||||||||||||||||
| Diluted | 66,354,784 | 51,422,066 | 63,880,076 | 52,068,506 | |||||||||||||||||||
Common shares | Accumulated deficit | Accumulated other comprehensive income (loss) | Additional paid-in capital | Total shareholders’ equity | ||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||
Balance at December 31, 2017 | 25,444,006 | $ | 222,991 | $ | (108,716 | ) | $ | (6,659 | ) | $ | 8,812 | $ | 116,428 | |||||||||||
Issuance of common shares on exercise of options (note 8e) | 7,207 | 56 | — | — | (22 | ) | 34 | |||||||||||||||||
Issuance of common shares through employee share purchase plan (note 8f) | 13,247 | 100 | — | — | — | 100 | ||||||||||||||||||
Share-based compensation | — | — | — | — | (830 | ) | (830 | ) | ||||||||||||||||
Net loss | — | — | (21,204 | ) | — | — | (21,204 | ) | ||||||||||||||||
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Balance at March 31, 2018 | 25,464,460 | $ | 223,147 | $ | (129,920 | ) | $ | (6,659 | ) | $ | 7,960 | $ | 94,528 | |||||||||||
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| Common shares | Accumulated deficit | Accumulated other comprehensive loss | Additional paid-in capital | Total shareholders’ equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at January 1, 2022 | 46,633,935 | $ | 741,147 | $ | (683,104) | $ | (6,659) | $ | 197,710 | $ | 249,094 | ||||||||||||||||||||||||
| Issuance of common shares on exercise of options | 2,112 | 20 | — | — | (8) | 12 | |||||||||||||||||||||||||||||
| Issuance of common shares through employee stock purchase plan | 61,801 | 1,361 | — | — | — | 1,361 | |||||||||||||||||||||||||||||
Issuance of common shares upon vesting of restricted stock units (“RSUs”) | 37,398 | 1,382 | — | — | (1,382) | — | |||||||||||||||||||||||||||||
| Stock-based compensation (recovery) | — | — | — | — | (2,932) | (2,932) | |||||||||||||||||||||||||||||
| Issuance of common shares and pre-funded warrants in connection with public offering, net of offering costs (notes 8a and 8d) | 11,035,000 | 82,549 | — | — | 24,985 | 107,534 | |||||||||||||||||||||||||||||
| Net loss | — | — | (72,625) | — | — | (72,625) | |||||||||||||||||||||||||||||
| Balance at March 31, 2022 | 57,770,246 | $ | 826,459 | $ | (755,729) | $ | (6,659) | $ | 218,373 | $ | 282,444 | ||||||||||||||||||||||||
| Issuance of common shares on exercise of options | 1,257 | 11 | — | — | (4) | 7 | |||||||||||||||||||||||||||||
| Issuance of common shares upon vesting of RSUs | 958 | 27 | — | — | (27) | — | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 4,450 | 4,450 | |||||||||||||||||||||||||||||
| Net loss | — | — | (64,619) | — | — | (64,619) | |||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 57,772,461 | $ | 826,497 | $ | (820,348) | $ | (6,659) | $ | 222,792 | $ | 222,282 | ||||||||||||||||||||||||
| Common shares | Accumulated deficit | Accumulated other comprehensive loss | Additional paid-in capital | Total shareholders’ equity | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at January 1, 2021 | 46,035,389 | $ | 724,219 | $ | (471,261) | $ | (6,659) | $ | 163,623 | $ | 409,922 | ||||||||||||||||||||||||
| Issuance of common shares on exercise of options | 78,736 | 2,624 | — | — | (662) | 1,962 | |||||||||||||||||||||||||||||
| Issuance of common shares through employee stock purchase plan | 26,807 | 1,321 | — | — | — | 1,321 | |||||||||||||||||||||||||||||
| Issuance of common shares upon vesting of restricted stock units RSUs | 23,956 | 843 | — | — | (843) | — | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 8,530 | 8,530 | |||||||||||||||||||||||||||||
| Net loss | — | — | (44,590) | — | — | (44,590) | |||||||||||||||||||||||||||||
| Balance at March 31, 2021 | 46,164,888 | $ | 729,007 | $ | (515,851) | $ | (6,659) | $ | 170,648 | $ | 377,145 | ||||||||||||||||||||||||
| Issuance of common shares on exercise of options | 67,583 | $ | 1,218 | $ | — | $ | — | $ | (455) | $ | 763 | ||||||||||||||||||||||||
| Issuance of common shares upon vesting of RSUs | 2,266 | 86 | — | — | (86) | — | |||||||||||||||||||||||||||||
| Stock-based compensation expense | — | — | — | — | 11,086 | 11,086 | |||||||||||||||||||||||||||||
| Net loss | — | — | (67,522) | — | (67,522) | ||||||||||||||||||||||||||||||
| Balance at June 30, 2021 | 46,234,737 | $ | 730,311 | $ | (583,373) | $ | (6,659) | $ | 181,193 | $ | 321,472 | ||||||||||||||||||||||||
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Cash flows from operating activities: | ||||||||
Loss for the period | $ | (21,204 | ) | $ | (15,926 | ) | ||
Items not involving cash: | ||||||||
Depreciation of property and equipment | 443 | 318 | ||||||
Amortization of intangible assets | 276 | 270 | ||||||
Accretion on long-term debt | — | 88 | ||||||
Share-based compensation | 3,543 | 2,976 | ||||||
Deferred income tax expense (recovery) | 22 | — | ||||||
Impairment on acquired IPR&D | — | 1,536 | ||||||
Change in fair value of warrant liabilities (note 7b) | 1,342 | (555 | ) | |||||
Unrealized foreign exchange loss / (gain) | 80 | (154 | ) | |||||
Changes innon-cash operating working capital: | ||||||||
Accounts receivables | 189 | 2,179 | ||||||
SR&ED and IRAP receivables | 165 | (98 | ) | |||||
Prepaid expenses and other current assets | (173 | ) | (1,076 | ) | ||||
Accounts payable and accrued liabilities | (2,145 | ) | (2,255 | ) | ||||
Income taxes payable | (109 | ) | — | |||||
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Net cash used in operating activities | (17,571 | ) | (12,697 | ) | ||||
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Cash flows from financing activities: | ||||||||
Issuance of common shares on exercise of options (note 8e) | 34 | 450 | ||||||
Issuance of common shares through employee share purchase plan | 100 | — | ||||||
Deferred financing fees | — | (463 | ) | |||||
Capital lease payments | (3 | ) | (2 | ) | ||||
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Net cash from financing activities | 131 | (15 | ) | |||||
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Cash flows from investing activities: | ||||||||
Short-term investments | 12,700 | 7,505 | ||||||
Acquisition of property and equipment | (109 | ) | (913 | ) | ||||
Acquisition of intangible assets | (56 | ) | (3 | ) | ||||
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Net cash from investing activities | 12,535 | 6,589 | ||||||
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Effect of exchange rate changes on cash and cash equivalents | (60 | ) | 132 | |||||
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Net change in cash and cash equivalents | (4,965 | ) | (5,991 | ) | ||||
Cash and cash equivalents, beginning of period | 35,946 | 16,437 | ||||||
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Cash and cash equivalents, end of period | $ | 30,981 | $ | 10,446 | ||||
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Supplemental disclosure ofnon-cash investing and finance items: | ||||||||
Deferred financing fees in accounts payable and accrued liabilities | — | 1,082 | ||||||
Acquisition of property and equipment in accounts payable and accrued liabilities | 104 | 424 | ||||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net loss | $ | (137,244) | $ | (112,112) | |||||||
| Items not involving cash: | |||||||||||
| Depreciation of property and equipment | 3,683 | 1,945 | |||||||||
| Amortization of intangible assets | 320 | 2,180 | |||||||||
| Stock-based compensation (recovery) expense | (5,282) | 6,400 | |||||||||
| Amortization of operating lease right-of-use assets | 3,500 | 1,255 | |||||||||
| Deferred income tax expense (recovery) | 470 | (405) | |||||||||
| Change in fair value of contingent consideration liability | (250) | 31 | |||||||||
| Change in fair value of investments in equity instruments | — | (167) | |||||||||
| Unrealized foreign exchange (gain) loss | (434) | 921 | |||||||||
| Changes in non-cash operating working capital: | |||||||||||
| Accounts receivable | 11,476 | 6,133 | |||||||||
| Prepaid expenses and other current assets | (127) | (10,000) | |||||||||
| Accounts payable and accrued liabilities | 13,550 | 10,339 | |||||||||
| Operating lease liabilities | 102 | 2,325 | |||||||||
| Net cash used in operating activities | (110,236) | (91,155) | |||||||||
| Cash flows from financing activities: | |||||||||||
| Proceeds from public offering, net of issuance costs (notes 8a, 8d) | 107,534 | — | |||||||||
| Issuance of common shares on exercise of stock options (note 8f) | 19 | 2,084 | |||||||||
| Issuance of common shares through employee stock purchase plan | 863 | 829 | |||||||||
| Deferred financing fees | (76) | (128) | |||||||||
| Finance lease payments | (9) | (8) | |||||||||
| Net cash provided by financing activities | 108,331 | 2,777 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Net redemptions of short-term investments | 7,094 | 106,573 | |||||||||
| Acquisition of property and equipment | (6,821) | (2,447) | |||||||||
| Acquisition of intangible assets | (1,629) | (40) | |||||||||
| Net cash (used in) provided by investing activities | (1,356) | 104,086 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 43 | (585) | |||||||||
| Net change in cash and cash equivalents | (3,218) | 15,123 | |||||||||
| Cash and cash equivalents, beginning of period | 201,867 | 242,036 | |||||||||
| Cash and cash equivalents, end of period | $ | 198,649 | $ | 257,159 | |||||||
| Supplemental disclosure of non-cash investing and financing items: | |||||||||||
| Leased assets obtained in exchange for operating lease liabilities | $ | 72 | $ | 21,279 | |||||||
| Acquisition of property and equipment in accounts payable and accrued liabilities | 1,003 | 1,281 | |||||||||
Share Consolidation
On April 13, 2017, the Company effected a 1 for 2.3866 share consolidation (reverse share split) of the Company’s issued and outstanding common shares and redeemable convertible preferred shares. Accordingly, (i) every 2.3866 common shares were combined into one common share, (ii) every 2.3866 redeemable convertible preferred shares were combined into one redeemable convertible preferred share, (iii) the number of common shares into which each outstanding option and warrant to purchase common shares and the number of preferred shares into which each outstanding warrant to purchase preferred shares is exercisable were proportionately decreased on a 1 for 2.3866 basis, and (iv) the exercise price for each such outstanding option and warrant to purchase common shares or preferred shares were proportionately increased on a 1 for 2.3866 basis. All of the share numbers, share prices, and exercise prices in these financial statements have been adjusted, on a retroactive basis, to reflect this 1 for 2.3866 reverse share split.
Initial Public Offering
On April 27, 2017, the Company’s registration statement on FormF-1 (FileNo. 333-217100) relating to its initial public offering (“IPO”) of its common stock was declared effective by the Securities and Exchange Commission and a final base PREP prospectus was filed with the securities commissions or similar securities regulatory authorities in each of the provinces and territories of Canada. A supplemented PREP prospectus containing pricing information and other important information relating to the common shares was also filed with the securities commissions or similar securities regulatory authorities in each of the provinces and territories of Canada. The Company’s common shares began trading on the New York Stock Exchange (“NYSE”) and Toronto Stock Exchange (“TSX”) on April 28, 2017. The public offering price of the shares sold in the IPO was $13.00 per share. The IPO closed on May 3, 2017, pursuant to which the Company sold 4,894,467 shares of common stock including the sale of 394,467 shares of common stock to the underwriters upon their partial exercise of their over-allotment option to purchase additional shares on May 31, 2017. The Company received net proceeds of approximately $54.2 million, after underwriting discounts, commissions and offering expenses. Immediately prior to the consummation of the IPO, all outstanding shares of redeemable convertible preferred stock were converted into 7,098,194 common shares (note 8c) and the Redeemable Convertible Class A Preferred Shares Warrants were converted into common share warrants to purchase up to 398,076 common shares of the Company at an exercise price of $8.67 per share (note 7a).
2021.
2021.
Financial instruments
Fair value
condition, including revenues, expenses, clinical trials, research and development costs and employee-related amounts, will depend on future developments that are evolving and highly uncertain, such as the duration and severity of outbreaks, including potential future waves or cycles, and the effectiveness of actions taken to contain and treat COVID-19. The Company measures certain financial instruments and other items at fair value.
To determine the fair value, the Company uses the fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use to value an asset or liability and are developed based on market data obtained from independent sources. Unobservable inputs are inputs based on assumptions about the factors market participants would use to value an asset or liability. The three levels of inputs that may be used to measure fair value are as follows:
Assets and liabilities are classified based on the lowest level of input that is significant to the fair value measurements. Changes in the observability of valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy.
The Company’s financial instruments consist of cash and cash equivalents, short-term investments, amounts receivable, accounts payable and accrued liabilities, warrants, capital lease obligations, liability classified options and other long-term liabilities.
The carrying values of cash and cash equivalents, short-term investments, amounts receivable and accounts payable and accrued liabilities approximate their fair values due to the immediate or short-term maturity of these financial instruments. Based on the borrowing rates available to the Company for debt with similar terms and consideration of default and credit risk using Level 2 inputs, the carrying value of the Company’s capital lease obligations as of March 31, 2018 approximates its fair value. As quoted prices for the warrants and liability classified stock options are not readily available, the Company has used a Black-Scholes pricing model to estimate fair value. These are level 3 inputs as defined above. Other long-term liabilities for contingent consideration related to business acquisitions are recorded at fair value on the acquisition date and adjusted quarterly to fair value. Changes in the fair value of contingent consideration liabilities can result from changes in anticipated milestone payments and changes in assumed discount periods and rates. These inputs are unobservable in the market and therefore categorized as level 3 inputs as defined above.
The following tables present information about the Company’s liabilities that are measured at fair value on a recurring basis, and indicates the fair value hierarchy of the valuation techniques used to determine such fair value:
| March 31, 2018 | Level 1 | Level 2 | Level 3 | |||||||||||||
Liabilities | ||||||||||||||||
Liability classified stock options | $ | 8,233 | $ | — | $ | — | $ | 8,233 | ||||||||
Warrant liabilities | 2,690 | — | — | 2,690 | ||||||||||||
Liability for contingent consideration (note 10) | 470 | — | — | 470 | ||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 11,393 | $ | — | $ | — | 11,393 | |||||||||
|
|
|
|
|
|
|
| |||||||||
| December 31, 2017 | Level 1 | Level 2 | Level 3 | |||||||||||||
Liabilities | ||||||||||||||||
Liability classified stock options | $ | 3,945 | $ | — | $ | — | $ | 3,945 | ||||||||
Warrant liabilities | 1,348 | — | — | 1,348 | ||||||||||||
Liability for contingent consideration (note 10) | 470 | 470 | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Total | $ | 5,763 | $ | — | $ | — | $ | 5,763 | ||||||||
|
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|
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| |||||||||
The following table presents the changes in fair value of the Company’s warrant liabilities:
| Liability at beginning of the period | Increase (decrease) in fair value of warrants | Liability at end of the period | ||||||||||
Three months ended March 31, 2018. | $ | 1,348 | $ | 1,342 | $ | 2,690 | ||||||
The following table presents the changes in fair value of the liability classified stock options:
| Liability at beginning of the period | Increase (decrease) in fair value of liability classified stock options | Unrealized foreign currency loss (gain) | Liability at end of the period | |||||||||||||
Liabilities | ||||||||||||||||
Liability classified stock options | $ | 3,945 | $ | 4,367 | $ | (79 | ) | $ | 8,233 | |||||||
Net loss per share
The Company follows thetwo-class method when computing net loss per common share as the Company issued redeemable convertible Class A preferred shares in January 2016 that meet the definition of participating securities. Thetwo-class method determines net loss per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. Thetwo-class method requires income available to common shareholders for the year to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed. The Company’s redeemable convertible Class A preferred shares werenon-cumulative, contractually entitle the holders of such shares to participate in dividends, but do not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss or a net loss attributable to common shareholders resulting from preferred share dividends, net losses are not allocated to participating securities. The Company reported a net loss attributable to common shareholders for all periods presented. The redeemable convertible Class A preferred shares were converted into common share in conjunction with the Company’s IPO.
Basic net loss per share attributable to common shareholders is computed by dividing the net loss attributable to common shareholders by the weighted average number of common shares outstanding for the year. Diluted net loss per share attributable to common shareholders is computed by adjusting net loss attributable to common shareholders to reallocate undistributed earnings based onconsidered the potential impact of dilutive securities, including outstanding redeemable convertible Class A preferred shares, stock optionsCOVID-19 when making certain estimates and warrants. Diluted net loss per share attributablejudgments relating to common shareholders is computed by dividing the diluted net loss attributablepreparation of these interim condensed consolidated financial statements. While there was no material impact to common shareholders by the weighted-average numberCompany’s interim
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Numerator: | ||||||||
Net loss used to compute net loss per common share: | ||||||||
Basic | $ | (21,204 | ) | $ | (15,926 | ) | ||
Adjustment for change in fair value of ASC 815 liability classified stock options and warrant liabilities | — | (710 | ) | |||||
|
|
|
| |||||
Diluted | $ | (21,204 | ) | $ | (16,636 | ) | ||
Denominator: | ||||||||
Weighted-average common shares outstanding: | ||||||||
Basic | 25,459,150 | 13,183,928 | ||||||
Adjustment for dilutive effect of stock options and warrants | — | 145,823 | ||||||
|
|
|
| |||||
Diluted | 25,459,150 | 13,329,751 | ||||||
Net loss per common share — basic | $ | (0.83 | ) | $ | (1.21 | ) | ||
Net loss per common share — diluted | $ | (0.83 | ) | $ | (1.25 | ) | ||
3. Recent Accounting Pronouncements
Initial adoption of new accounting pronouncements
In May 2014, the Financial Accounting Standards Board, or FASB, issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606)”. The standard,COVID-19, as subsequently amended, is intended to clarify the principles for recognizing revenue for U.S. GAAP by creating a new Topic 606, “Revenue from Contracts with Customers” and it supersedes the revenue recognition requirementswell as other factors, could result in ASC 605, “Revenue Recognition”, and supersedes some cost guidance included in Subtopic605-35, “Revenue Recognition — Construction-Type and Production-Type Contracts”. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements subject to the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within each contract and identifies performance obligations that are distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to each performance obligation when (or as) the performance obligation is satisfied. For a complete discussion of accounting for license, collaboration and other revenues, see note 9, “Research, Collaboration and Licensing Agreements”.
The Company adopted the new standard effective January 1, 2018, as required, using the modified retrospective approach. The adoption of ASU2014-09 did not have a material impact onto the Company’s consolidated financial position, results of operations, equity or cash flows as of the adoption date or for the three months ended March 31, 2018. The Company has included the disclosures required by ASU2014-09.
statements in future reporting periods.
In February 2016, the FASB issued ASU2016-02, “Leases (Topic 842)”, which amends lease accounting requiring the recognition of lease assets and lease liabilities by lessees for those leases classified as operating leases under previous U.S. GAAP. The new guidance retains a distinction between finance leases and operating leases, with cash payments from operating leases classified within operating activities in the statement of cash flows. It also requires lessees to recognize all leases, including operating leases, with a term greater than 12 months on the balance sheet, for the obligations created by those leases and an offsetting right of use asset. The accounting for lessors will remain largely unchanged from the existing accounting standards. ASU2016-02 will be effective for fiscal years and interim periods within those years, beginning after December 15, 2018. The Company is currently evaluating the new guidance to determine the impact it will have on its consolidated financial statements.
In January 2017, the FASB issued ASU2017-04, “Intangibles — Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” ASU2017-04 simplifies the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test, which required an entity to determine the fair value of its assets and liabilities at the impairment testing date. ASU2017-04 is effective for public companies’ annual periods, including interim periods within those fiscal years, beginning after December 15, 2019. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial statements.
In May 2017, the FASB issued ASU2017-09, “Compensation — Stock Compensation (Topic 718): Scope of Modification Accounting. ASU2017-09 provides clarification on when modification accounting should be used
for changes to the terms or conditions of a share-based payment award. This ASU does not change the accounting for modifications but clarifies that modification accounting guidance should only be applied if there is a change to the value, vesting conditions, or award classification and would not be required if the changes are considerednon-substantive. The new guidance is effective for fiscal years beginning after December 15, 2018. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.
In July 2017, the FASB issued ASU2017-11, “Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity (Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily RedeemableNon-controlling Interests with a Scope Exception”. The ASU was issued to address the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of liabilities and equity. The ASU, among other things, eliminates the need to consider the effects of down round features when analyzing convertible debt, warrants and other financing instruments. As a result, a freestanding equity-linked financial instrument (or embedded conversion option) no longer would be accounted for as a derivative liability at fair value as a result of the existence of a down round feature. The amendments are effective for fiscal years beginning after December 15, 2018, and should be applied retrospectively. Early adoption is permitted, including adoption in an interim period. The Company is currently assessing the impact that adopting this new accounting standard will have on its consolidated financial statements.
In August 2017, the FASB issued ASU2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities”, the objective of which is to improve the financial reporting accounting principles. For public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any period after issuance. For cash flow and net investment hedges existing at the date of adoption, an entity should apply a cumulative-effect adjustment related to eliminating the separate measurement of ineffectiveness to accumulated other comprehensive income with a corresponding adjustment to the opening balance of retained earnings as of the beginning of the fiscal year that an entity adopts the amendments in this update. The amended presentation and disclosure guidance is required only prospectively. The Company is currently assessing the impact the adoption of the standard will have on its consolidated financial statements.
In February 2018, the FASB issued ASU2018-02, Income Statement — Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income (ASU2018-02), which allows companies to reclassify stranded tax effects resulting from the Act, from accumulated other comprehensive income to retained earnings. The guidance is effective in the first quarter of fiscal year, 2020, and earlier adoption is permitted. The adoption of this standard is not expected to have a significant effect on the Company’s consolidated financial statements.
The Company has reviewed other recent accounting pronouncements and concluded that they are either not applicable to the business, or that no material effect is expected on the consolidated financial statements as a result of future adoption.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||
| Net loss attributable to common shareholders: | |||||||||||||||||||||||
| Basic | $ | (64,619) | $ | (67,522) | $ | (137,244) | $ | (112,112) | |||||||||||||||
| Adjustment for change in fair value of liability classified stock options | (2) | — | (199) | (13,732) | |||||||||||||||||||
| Diluted | $ | (64,621) | $ | (67,522) | $ | (137,443) | $ | (125,844) | |||||||||||||||
| Denominator: | |||||||||||||||||||||||
| Weighted-average common shares outstanding: | |||||||||||||||||||||||
| Basic | 66,353,279 | 51,422,066 | 63,874,097 | 51,395,015 | |||||||||||||||||||
| Adjustment for dilutive effect of liability classified stock options | 1,505 | — | 5,979 | 673,491 | |||||||||||||||||||
| Diluted | 66,354,784 | 51,422,066 | 63,880,076 | 52,068,506 | |||||||||||||||||||
| Net loss per common share – basic | $ | (0.97) | $ | (1.31) | $ | (2.15) | $ | (2.18) | |||||||||||||||
| Net loss per common share – diluted | $ | (0.97) | $ | (1.31) | $ | (2.15) | $ | (2.42) | |||||||||||||||
5. Acquisitionare accounted for as available for sale financial instruments with changes in fair value recorded through net income.
Description of the Transaction
On March 18, 2016, the Company completed the acquisition of all remaining issued and outstanding shares of Kairos, for $24,778 (C$32,257). This consideration was comprised of $23,043 (C$30,000) in common shares of
the Company, and $1,733 (C$2,257) in cash, pursuant to a net working capital adjustment determined at closing. Prior to this acquisition the Company had a 19.99% equity interest in Kairos. The Company recognized6. IPR&D and Goodwill as part of the purchase price allocation.
Impairment Evaluation for Intangible Assets
All development assets (“IPR&D&D”) acquired in the 2016 Kairos Therapeutics Inc. (“Kairos”) business combination isare classified as indefinite-lived intangible assets and isare not currently being amortized. IPR&D becomes definite-lived upon the completion of the associated research and development efforts, and will be amortized from that time over an estimated useful life based on respective patent terms. The Company evaluates the recoverable amount of intangible assets on an annual basis and performs an annual evaluation of goodwill as of December 31 each year, unless there is an event or change in the business that could indicate impairment, in which case earlier testing is performed.
For the year ended December 31, 2016, the Company recorded an impairment charge of $768 for the discontinuance of theCo-Development program with Oxford BioTherapeutics (“OBTCo-Development”). The corresponding deferred tax liability and deferred tax asset balances of $198 were also reversed which resulted in deferred tax liability and offsetting deferred tax asset of $5,127 related to IPR&D as of December 31, 2016. Furthermore, for the three months ended March 31, 2017, the Company recorded an impairment charge of $1,536 related to the faircarrying value of IPR&D, recognized in relation to the Research Collaboration Agreement with OBT (“OBT Technology Swap Agreement”) as the Company chose not to advance the associated researchnet of impairment was $17,628 at both June 30, 2022 and development projects within the research term which expired on February 11, 2017.
December 31, 2021. The Company concluded that there were no further impairment indicators related to IPR&D for the three months ended March 31, 2018. The following table summarizes the carrying valueas of IPR&D, net of impairment:
| March 31, 2018 | December 31, 2017 | |||||||
Acquired IPR&D | $ | 20,700 | $ | 20,700 | ||||
Less: Impairment | (2,304 | ) | (2,304 | ) | ||||
|
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|
| |||||
| $ | 18,396 | $ | 18,396 | |||||
|
|
|
| |||||
June 30, 2022.
6. The Company concluded that there were no impairment indicators related to goodwill as of June 30, 2022.
| March 31, 2018 | December 31, 2017 | |||||||
Trade payables | $ | 959 | $ | 1,664 | ||||
Accrued research expenses | 4,374 | 4,708 | ||||||
Employee compensation and vacation accruals | 954 | 1,981 | ||||||
Accrued legal and professional fees | 670 | 308 | ||||||
Payable to CDRD Ventures Inc. (“CVI”) for Kairos SR&ED receivable | — | 165 | ||||||
Other | 100 | 227 | ||||||
|
|
|
| |||||
Total | $ | 7,057 | $ | 9,053 | ||||
|
|
|
| |||||
| June 30, 2022 | December 31, 2021 | ||||||||||
| Trade payables | $ | 5,889 | $ | 5,174 | |||||||
| Accrued research and development expenses | 56,983 | 50,963 | |||||||||
| Employee compensation and vacation accruals | 8,292 | 3,346 | |||||||||
| Accrued legal and professional fees | 2,167 | 1,064 | |||||||||
| Other | 3,354 | 2,220 | |||||||||
| Total | $ | 76,685 | $ | 62,767 | |||||||
Other current liabilities consisted of the following:
| March 31, 2018 | December 31, 2017 | |||||||
Current income tax liability | $ | 51 | $ | 158 | ||||
Current portion of lease inducements | 138 | 147 | ||||||
Current portion of capital lease liability | 16 | 10 | ||||||
|
|
|
| |||||
Total | $ | 205 | $ | 315 | ||||
|
|
|
| |||||
| March 31, 2018 | December 31, 2017 | |||||||
Liability for contingent consideration (note 10) | $ | 470 | $ | 470 | ||||
Lease inducements | 304 | 344 | ||||||
Capital lease liability | 51 | 52 | ||||||
|
|
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| |||||
Total | $ | 825 | $ | 866 | ||||
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|
| |||||
7. Warrant liabilities and long-term debt
| June 30, 2022 | December 31, 2021 | ||||||||||
| Liability for contingent consideration (note 12) | $ | 1,248 | $ | 1,498 | |||||||
| Liability from in-licensing agreements | 850 | 1,150 | |||||||||
| Finance lease liability (note 11) | 113 | 100 | |||||||||
| Other | 689 | — | |||||||||
| Total | $ | 2,900 | $ | 2,748 | |||||||
Description of transaction:
On June 2, 2016, pursuant to the terms of the Perceptive Debt, the Company also issued Warrant Certificates which entitled Perceptive Credit Opportunities Fund, L.P.right to purchase up to 295,009 Redeemable Convertible Class A Preferred Shares of the Company at an exercise price of $11.69 per share, with an expiry term of five years (the “Perceptive Warrants”). These warrants were classified as liabilities and were recorded at their estimated fair value as they contained a down-round provision and because the shares underlying the warrants could have obligated the Company to transfer assets to the holders at a future date under certain circumstances, such as a deemed liquidation event. Changes in fair value are recorded in the consolidated statements of loss and comprehensive loss.
The warrants were initially recorded at their fair value at issuance of $3,266 and the residual balance of the original principal, $4,234, has been recorded as long-term debt. The long-term debt was being accreted to its face value of $7,500 over the four-year term of the Perceptive Debt. On August 3, 2016, the Warrant Certificates were assigned to Perceptive Credit Holdings, LP, an affiliate of Perceptive.
Immediately prior to the consummation of the IPO, in conjunction with the conversion of the Company’s Redeemable Convertible Class A Preferred Shares into common shares (note 8c), the Redeemable Convertible Class A Preferred Share Warrants were converted on a1.349367-for-1 basis into common share warrants to purchase up to 398,0764,166,690 common shares of the Company, at an exercise price of $8.67$0.0001 per share. These common
share warrants were classified as liabilities as they containedIn connection with a down-round provision and because of the understanding that in compliance with applicable securities laws, the warrants required the issuance of registered securities upon exercise and did not sufficiently preclude an implied right to net cash settlement.
b. Warrant liabilities
Warrant liabilities from Perceptive warrants (note 7a) were $2,690 and $1,348 as of March 31, 2018 and December 31, 2017, respectively. The Company recorded a $1,342 increase in fair value of warrant liabilities during the three months ended March 31, 2018, related to the Perceptive Warrants. The estimated fair value of the Perceptive Warrants was determined using the Black-Scholes option pricing model with the following assumptions:
| March 31, | ||||||||
| 2018 | 2017 | |||||||
Expected term | 3.18 years | 4.18 years | ||||||
Dividend yield | 0 | % | 0 | % | ||||
Expected volatility | 67.70 | % | 67.33 | % | ||||
Risk-free interest rate | 2.39 | % | 1.72 | % | ||||
8. Redeemable Convertible Class A Preferred Shares, and Shareholders’ Equity
The number of shares and per share amounts are presented in actual amounts.
On May 2, 2017, the Company’s new Articles of Incorporation were issued under whichpublic offering completed on January 27, 2020, the Company has an unlimited number of voting Common Shares and Preferred Shares without par value.
Under the Company’s former Articles of Incorporation dated December 21, 2015, the Company had 6,413,265 authorized Redeemable Convertible Class A Preferred Shares.
The rights and preferences of the Redeemable Convertible Class A Preferred Shares were as follows:
The Class A preferred shares accrued dividends at 8% per annumnon-cumulative, payable only as, when and if, declared by the Board of Directors of the Company (the “Board”). In addition, holders of the Class A preferred shares would have been entitled to receive, when and as declared by the Board, dividends in an amount equal to any dividend per common share declared by the Board on the common shares multiplied by the number of common shares that would be issued in exchange for the Class A preferred shares upon conversion.
Optional conversion: Each Class A preferred share was convertible at any time at the option of the holders into common shares, which is determined by dividing the Class A original issue price of $11.69 per share by the Class A conversion price in effect at the time of the conversion.
Mandatory conversion: Upon either a) the closing of the sale of common shares to the public1,075,271 Pre-Funded Warrants at a price of at least 1.4 times the Class A original issue price of $11.69$46.4999 per share in a firm-commitment underwritten public offering resulting in at least $50 million of gross proceeds, or b) the date and time, or the occurrence of an event, specified by vote or written consent of thePre-Funded Warrant which granted holders of at least a majority ofwarrants the then outstanding Class A Preferred Share, all outstanding Class A preferred shares would have been automatically converted intoright to purchase up to 1,075,271 common shares at the effective conversion rate. However, in the event the common share public issuance price is less than 1.5 times the Class A original issue price of $11.69 per share, then immediately prior to, and contingent upon such conversion,
the Class A conversion price would be automatically adjusted to equal the lesser of (a) the quotient obtained by dividing the per share price in such public offering by 1.5 and (b) the Class A conversion price in effect as of immediately prior to such public offering.
Upon the liquidation, dissolution, reorganization orwinding-up of the Company, at an exercise price of $0.0001 per share.
under both cases plusholders at any dividends declared but unpaid
The preferences over common shareholders would have ceased to exist upon conversion of preferred shares into common shares.
No Pre-Funded Warrants have been exercised to date.
The Company assessed the issued Class A preferred shares for any beneficial conversion features or embedded derivatives, including the conversion option, that would require bifurcationpurchase from the applicable seriesCompany one one-thousandth of preferred shares and receive separate accounting treatment. On the datea share of Series A Participating Preferred Share, of the issuanceCompany, at an exercise price of preferred shares,$74.00, subject to adjustment. The complete terms of the fair valueRights are set forth in a Preferred Shares Rights Agreement (the “Rights Plan”), dated as of June 9, 2022, between the Company and Computershare Trust Company, N.A., as rights agent.
PriorRights may be to the IPO,render more difficult or discourage a merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination involving the Company classified its preferred shares outsidethat is not approved by the board of permanent equity asdirectors. However, neither the redemptionRights Plan nor the Rights should interfere with any merger, amalgamation, arrangement, take-over bid, tender or exchange offer or other business combination approved by the board of such shares wasdirectors. The issuance of Rights does not solely under the control of the Company.
Immediately prior to the consummation of the IPO, all outstanding Redeemable Convertible Class A Preferred Shares were converted into 7,098,194 common shares on a1-for-1.349367 basis and no Redeemable Convertible Class A Preferred Shares were outstanding as of December 31, 2017.
The IPO was completed at $13.00affect reported earnings per share issued which resulted in an adjustment to the conversion price and a beneficial conversion feature related to the Class A preferred shares as the fair value of the common shares at the commitment date exceeded the effective conversion price at the IPO date. This beneficial conversion feature of $520 was recorded as an increase to additionalpaid-in capital and the resulting deemed dividend was reflected as an increase in accumulated deficit.
The rights and preferences of the unissued Preferred Shares are as follows:
Holders of Preferred Shares will be entitled to preference with respect to payment of dividends over the Common Shares and any other shares ranking junior to the Preferred Shares with respect to payment of dividends.
In the event of the liquidation, dissolution orwinding-up of the Company, whether voluntary or involuntary, or any other distribution of the assets of the Company among its shareholders for the purpose of winding up its affairs, the holders of the Preferred Shares will be entitled to preference over the Common Shares and any other shares ranking junior to the Preferred Shares with respect to the repayment of capital paid up on and the payment of unpaid dividends accrued on the Preferred Shares.
The Preferred Shares may also be given such other preferences over the Common Shares and any other shares ranking junior to the Preferred Shares as may be fixed by directors’ resolution as to the respective series authorized to be issued.
As of March 31, 2018 and December 31, 2017, no preferred shares were issued or outstanding, respectively.
f.Stock-Based Compensation
Plan
For options issued to employees, the shares available for issuance under the Original Plan vest over 4 years. Shares available for issuance under the Original Plan issued to directors, vest over 3 years, and shares available for issuance under the Original Plan issued to consultants and members of the Scientific Advisory Board vest immediately upon issuance.
Upon the effectiveness of the Company’s New Plan described
and Equity Compensation Plan
Plan that did not require shareholder approval.
Company’s common shares for issuance pursuant to equity awards granted thereunder. As of June 30, 2022, 250,000 common shares were available for future award grants under this plan.
| Number of RSUs | Weighted- average grant date fair value ($) | ||||||||||
| Outstanding, December 31, 2021 | 354,269 | 25.85 | |||||||||
| Granted | 10,400 | 7.55 | |||||||||
| Vested and settled | (38,356) | 27.00 | |||||||||
| Forfeited | (138,630) | 36.73 | |||||||||
| Outstanding, June 30, 2022 | 187,683 | 21.76 | |||||||||
common sharesa share on the TSX, (orgrant date reported by the stock exchange wherewith the majority ofgreatest trading volume and value ofor, if such day is not a trading day, the common shares has occurredclosing sale price reported for the fiveimmediately preceding trading days prior to the relevant date) for the five trading days ending on the last trading day before the day on which the option is granted.day. The Company may convert a market price denominated in Canadian currencydollars into United States currencydollars and vice versa and such converted amount shall be the market price.
period, provided
| Number of Options | Weighted- Average Exercise Price (C$) | Weighted- Average Exercise Price ($) | Weighted- Average Contractual Term (years) | Aggregate intrinsic value (C$) | Aggregate intrinsic value ($) | |||||||||||||||||||
Outstanding, December 31, 2017 | 2,263,712 | 14.24 | 11.35 | 7.53 | 1,455 | 1,160 | ||||||||||||||||||
Granted | 234,025 | 15.59 | 12.32 | |||||||||||||||||||||
Expired | (2,033 | ) | 14.44 | 11.42 | ||||||||||||||||||||
Exercised | (7,207 | ) | 5.22 | 4.77 | ||||||||||||||||||||
Forfeited | (4,495 | ) | 11.46 | 9.06 | ||||||||||||||||||||
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Outstanding, March 31, 2018 | 2,484,002 | 14.39 | 11.16 | 7.63 | 7,038 | 5,459 | ||||||||||||||||||
| Number of Options | Weighted- Average Exercise Price (C$) | Weighted- Average Exercise Price ($) | Weighted- Average Contractual Term (years) | Aggregate intrinsic value (C$) | Aggregate intrinsic value ($) | ||||||||||||||||||||||||||||||
| Outstanding, December 31, 2021 | 2,488,655 | 26.15 | 20.70 | 6.24 | 7,919 | 6,224 | |||||||||||||||||||||||||||||
| Granted | 838,035 | 8.78 | 6.88 | ||||||||||||||||||||||||||||||||
| Exercised | (3,369) | 7.30 | 5.78 | ||||||||||||||||||||||||||||||||
| Forfeited | (852,789) | 27.48 | 21.60 | ||||||||||||||||||||||||||||||||
| Outstanding, June 30, 2022 | 2,470,532 | 19.83 | 15.40 | 6.65 | — | — | |||||||||||||||||||||||||||||
| Number of Options | Weighted- Average Exercise Price ($) | Weighted- Average Contractual Term (years) | Aggregate intrinsic value ($) | |||||||||||||
Outstanding, December 31, 2017 | 636,595 | 9.70 | 9.46 | 15 | ||||||||||||
Granted | 565,500 | 11.84 | ||||||||||||||
Expired | — | — | ||||||||||||||
Exercised | — | — | ||||||||||||||
Forfeited | — | — | ||||||||||||||
|
|
|
|
|
|
|
| |||||||||
Outstanding, March 31, 2018 | 1,202,095 | 10.71 | 9.57 | 1,596 | ||||||||||||
The
| Number of Options | Weighted- Average Exercise Price ($) | Weighted- Average Contractual Term (years) | Aggregate intrinsic value ($) | ||||||||||||||||||||
| Outstanding, December 31, 2021 | 4,916,914 | 26.59 | 7.93 | 5,555 | |||||||||||||||||||
| Granted | 2,484,248 | 8.59 | |||||||||||||||||||||
| Exercised | — | — | |||||||||||||||||||||
| Forfeited | (1,857,939) | 27.64 | |||||||||||||||||||||
| Outstanding, June 30, 2022 | 5,543,223 | 18.18 | 8.58 | — | |||||||||||||||||||
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Research and development | $ | 1,192 | $ | 844 | ||||
General and administrative and other | 2,351 | 2,132 | ||||||
|
|
|
| |||||
Total | $ | 3,543 | $ | 2,976 | ||||
|
|
|
| |||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Research and development expense: | |||||||||||||||||||||||
| Stock-based compensation expense (recovery) for equity classified instruments | $ | 1,971 | $ | 5,790 | $ | (776) | $ | 10,126 | |||||||||||||||
| Change in fair value of liability classified instruments | (300) | 245 | (774) | (2,268) | |||||||||||||||||||
| $ | 1,671 | $ | 6,035 | $ | (1,550) | $ | 7,858 | ||||||||||||||||
| General and administrative expense: | |||||||||||||||||||||||
| Stock-based compensation expense (recovery) for equity classified instruments | $ | 1,281 | $ | 5,296 | $ | (951) | $ | 9,488 | |||||||||||||||
| Change in fair value of liability classified instruments | (163) | 1,545 | (3,039) | (11,406) | |||||||||||||||||||
| $ | 1,118 | $ | 6,841 | $ | (3,990) | $ | (1,918) | ||||||||||||||||
| Finance expense (income): | |||||||||||||||||||||||
| Change in fair value of liability classified instruments | (2) | 8 | (32) | (58) | |||||||||||||||||||
| $ | (2) | $ | 8 | $ | (32) | $ | (58) | ||||||||||||||||
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Dividend yield | 0% | 0% | ||||||
Expected volatility | 66.2% | 66.5% | ||||||
Risk-free interest rate | 2.14% | 1.55% | ||||||
Expected average life of options | 5.91 years | 5.90 years | ||||||
The estimated fair value of stock options granted in U.S. dollars under the New Plan was determined using the Black-Scholes option pricing model with the following weighted-average assumptions:
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Dividend yield | 0% | 0% | ||||||
Expected volatility | 66.2% | 65.9% | ||||||
Risk-free interest rate | 2.60% | 1.84% | ||||||
Expected average life of options | 5.91 years | 5.89 years | ||||||
| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
| Dividend yield | 0 | % | 0 | % | |||||||
| Expected volatility | 77.3 | % | 80.9 | % | |||||||
| Risk-free interest rate | 1.89 | % | 0.98 | % | |||||||
| Expected average life of options | 5.94 years | 6.05 years | |||||||||
| March 31, 2018 | March 31, 2017 | |||||||
Dividend yield | 0% | 0% | ||||||
Expected volatility | 66.5% | 66.5% | ||||||
Risk-free interest rate | 1.55% | 1.55% | ||||||
Expected average option term | 5.89 years | 5.89 years | ||||||
Number of liability classified stock options outstanding | 1,474,630 | 1,554,687 | ||||||
| June 30, 2022 | June 30, 2021 | ||||||||||
| Dividend yield | 0 | % | 0 | % | |||||||
| Expected volatility | 73.3 | % | 75.9 | % | |||||||
| Risk-free interest rate | 3.09 | % | 0.59 | % | |||||||
| Expected average option term | 2.01 years | 2.53 years | |||||||||
| Number of liability classified stock options outstanding | 811,069 | 1,011,965 | |||||||||
Eligible employees will be able to contribute up to 15% of their gross base earnings for purchases under the ESPP through regular payroll deductions. Purchase of shares under the ESPP are limited for each employee at $25 worth of the Company’s common shares (determined on the grant date of the purchase right) for each year such purchase right is outstanding.
The ESPP is implemented through a series of offerings under which eligible employees are granted rights to purchase the Company’s common shares at the end of specified purchase periods.
Common shares purchased
The number of common shares reserved for issuance under the ESPP will not exceed 272,350are limited for each employee at NaN thousand dollar worth of the Company’s common shares plus the number of common shares that are automatically added on January 1st of each year, commencing on (and including) January 1, 2018 and ending on (and including) January 1, 2027, in an amount equal to(determined using the lesser of (i) 1%the market price of a common share on the first day of the total number of common shares issued and outstanding on December 31st of the preceding calendar year,applicable purchase period and (ii) 419,000the market price of a common shares.
share on the purchase date) for each year such purchase right is outstanding.
$739 (December 31, 2021: $1,243).
The Company has entered into a number of collaboration and licensing agreements which are under the scope of ASC 606, under which it licensed its therapeutic platforms to its strategic partners. The terms of these arrangements typically include one or more of the following types of payments to the Company:
In determining the appropriate amount of revenue to be recognized as it fulfills its obligations under each of its agreements, the Company performs the following steps: (i) identification of the promised deliverables in the contract; (ii) determination of whether the promised deliverables are performance obligations including whether they are distinct; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations based on the stand-alone selling prices; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price for each performance obligation identified in the contract, which may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.
Licenses of intellectual property including platform technology access: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues fromnon-refundable,up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses where licenses are not distinct from other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue fromnon-refundable,up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.
Milestone payments: At the inception of each arrangement that includes research, development or regulatory milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Companyre-evaluates the probability of achievement of such development milestones and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulativecatch-up basis, which would affect license, collaboration and other revenues and earnings in the period of adjustment. The process of successfully achieving the criteria for the milestone payments is highly uncertain. Consequently, there is a significant risk that the Company may not earn all of the milestone payments from each of its strategic partners.
Research and development milestones in the Company’s collaboration agreements may include some, but not necessarily all, of the following types of events:
Regulatory milestone payments may include the following types of events:
Royalties and commercial milestones: For arrangements that include sales-based royalties, including commercial milestone payments based onpre-specified level of sales, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). Achievement of these royalties and commercial milestones may solely depend upon performance of the licensee. Since inception to date, the Company has not recognized any royalty revenue or commercial milestone from any of itsout-licensing arrangements.
Research support payments: Payments by the licensees in exchange for research activities performed by the Company on behalf of the licensee are recognized upon performance of such activities at rates consistent with prevailing market rates.
If the expectation at contract inception is such that the period between payment by the licensee and the completion of related performance obligations will be one year or less, the Company assumes that the contract does not have a significant financing component.
Strategic Partnership Revenue
The following table presents summarized revenue recognized from the Company’s strategic partnerships.
| Three Months Ended March 31, | ||||||||
| 2018 | 2017 | |||||||
Merck: | ||||||||
Research support payments | $ | — | $ | 1 | ||||
Lilly: | ||||||||
Research support payments | — | 15 | ||||||
Daiichi: | ||||||||
Research support payments | — | 214 | ||||||
Other: | ||||||||
Research support payments | 40 | — | ||||||
|
|
|
| |||||
| $ | 40 | $ | 230 | |||||
|
|
|
| |||||
As at January 1, 2018partnerships is summarized as follows:
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Atreca, Inc. (“Atreca”) | |||||||||||||||||||||||
| Research license fee relating to licensing agreement | $ | 5,000 | $ | — | $ | 5,000 | $ | — | |||||||||||||||
| Research support and other payments | 442 | 1,771 | 2,358 | 2,415 | |||||||||||||||||||
| $ | 5,442 | $ | 1,771 | $ | 7,358 | $ | 2,415 | ||||||||||||||||
Research$3,000, which is presented within accounts receivable (December 31, 2021: nil) and License Agreementcontract liabilities were $32,941 (December 31, 2021: $32,941). Contract liabilities include deferred revenue relating to an upfront payment received in 2018 under the licensing and collaboration agreement with Merck Sharp & Dohme Research Ltd. (“Merck”)
BeiGene. During the three and six months ended June 30, 2022, the Company did not recognize any revenue from performance obligations satisfied in relation to the deferred revenue (three and six months ended June 30, 2021: nil). Amounts not expected to be recognized as revenue in the next twelve months from June 30, 2022 have been classified as long-term deferred revenue.
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2022 | 2021 | 2022 | 2021 | ||||||||||||||||||||
| Foreign exchange gain, net | $ | 723 | $ | 435 | $ | 361 | $ | 372 | |||||||||||||||
| Other | 36 | (94) | 83 | 98 | |||||||||||||||||||
| $ | 759 | $ | 341 | $ | 444 | $ | 470 | ||||||||||||||||
On December 3, 2014, the Company and Merck jointly amended the agreement, including amending certain terms and exclusivities contained therein. Under the terms of the amended agreement, the Company receives funding for certain internal and external research costs incurred in the project. Additionally, the amendment removed a $2.0 million research milestone from the total milestones the Company would be eligible to receive over the life of the agreement. The new research funding terms were priced at market rate, and the Company concluded that the original agreement was not materially modified. Accordingly, the amendments did not impact the determination of units of accounting or the allocation of the arrangement consideration.
Upon the execution of the agreement, the Company received aone-time,non-refundable upfront payment of $1.25 million. Over the life of the agreement, the Company is eligible to receive payments up to $190.75 million, comprised of the $1.25 million upfront payment, $3.5 million for research phase successes, up to $6.0 million for completion ofIND-enabling studies, up to $66.0 million for development milestones and up to $114.0 million for commercial milestones.2 five-year extension options. In addition, the Company is eligible to receive tiered royalty payments on sales of products. Merck will have exclusive worldwide commercialization rights to products derived from the agreement. The events and conditions resultingleases office space in payments for research, development and commercial milestones solely depend on Merck’s performance.
The Company assessed this arrangementSeattle, Washington with lease terms expiring in accordance with ASC 606 and concluded that the contract counterparty, Merck, is a customer. The Company identified the following promised goods and services at the inception of the Merck agreement: (1) the research license, (2) the commercial license, (3) the transfer of the Company’s platform technology (Azymetric) (4) research services and technical assistance in connection with the transfer of platform technology to Merck, and (5) research activities to be performed on behalf of Merck. The Company concluded that the licenses and platform technologies together are distinct. Accordingly, the deliverables (1) through (4) were considered as a single performance obligation and the upfront payment of $1.25 million has been allocated to this performance obligation. The upfront payment was recorded as deferred revenue and recognized into revenue on a straight-line basis from October 1, 2011 through June 30, 2012, the period over which the Company performed the procedures for transferring the Company’sknow-how and technology and related technical assistance during the transfer process. The research activities to be performed on behalf of Merck after the transfer of the technology are also determined to have stand-alone value as Merck or another third party could provide these services without the Company’s assistance. The revenue from this deliverable is recognized upon performance of such activities at rates consistent with prevailing market rates.
In order to evaluate the appropriate transaction price, the Company determined that theup-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company estimated the best estimate of selling price of the licenses and technology platform based on comparable license and collaboration arrangements. The best estimate of selling price for the other deliverables was estimated using internal estimates of cost to perform the specific services plus a normal profit margin for providing the services.
At execution, the transaction price included only the $1.25 millionup-front consideration received.May 2027. None of the research and development milestones hasoptional extension periods have been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluationdetermination of the constraint,right-of-use assets or the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Merck and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The consideration otherwise allocable to delivered units is limited to the amount that is not contingent on the delivery of additional items or fulfillment of other performance conditions. Consequently, the arrangement consideration related to the research activities to be performed on behalf of Merck after the transfer of the technology was excluded from the allocation arrangement consideration because the consideration and performance are contingent upon Merck requesting performance of the services and these services are priced at an estimated fair value.
The agreement contains customary termination rightslease liabilities for Merck and the Company including the right for Merck to terminate the agreement in its sole discretion with advance notice to the Company. The agreement will terminate on the later of: (a) the expiry of the last patent covering a Merck licensed product excluding methods of
making the product; or (b) the expiry of the royalty payment obligations by Merck. During the research term, the agreement will terminate if the antibodies do not achieve all the research milestones or if Merck elects to not further develop the antibodies after the research term.
The Company received and recordednon-refundable milestone payments from Merck in the amounts of $2.0 million and $1.5 million on September 20, 2012 and April 22, 2013, respectively. These milestone payments were received upon the achievement of certain development activities during the course of the research program and were recorded as revenue upon achievement of the milestoneoperating leases as the Company had no remaining performance obligations under the arrangement. No additional milestone payments or royalties have been received to date.
During the three months ended March 31, 2018,did not consider it reasonably certain that the Company recorded $nil (2017: $1) in research support payments from Merck, under the terms of the amended agreement and on September 19, 2017, the Company disclosed that Merck had provided formal notification of their plans to advance a bispecific drug candidate into preclinical development.
Licensing and Collaboration Agreement with Eli Lilly and Company (“Lilly”)
On December 17, 2013, the Company entered into a Licensing and Collaboration Agreement with Lilly to develop novel bispecific antibody therapeutics using the Company’s proprietary Azymetric platform. The Company will apply its Azymetric platform in combination with Lilly’s proprietary targets to create novel bispecific antibodies which Lilly will have the right to develop and commercialize worldwide.
Upon the execution of the agreement, the Company received aone-time,non-refundable upfront payment of $1.0 million. Over the life of the agreement, the Company will receive funding for internal and external research costs incurred on behalf of Lilly on the project, and is eligible to receive potential milestone payments for each product, comprised of $1.0 million for research phase success, $2.0 million for IND submission, $8.0 million for development milestones and up to $40.0 million for commercial milestones. In addition, the Company is eligible to receive tiered royalty payments on the sale of products. Lilly will have exclusive worldwide commercialization rights to products derived from the collaboration. The Company determined that other than the research milestone, the events and conditions resulting in payments for development and commercial milestones solely depend on Lilly’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Lilly, is a customer. The Company identified the following promised goods and services at the inception of the Lilly agreement: (1) the research license, (2) the commercial license, (3) the transfer of the Company’s platform technology (Azymetric), (4) the research services and technical assistance to be provided by the Company in connection with the transfer of intellectual property to Lilly, and (5) research activities to be performed on behalf of Lilly. The Company concluded that the licenses and platform technology together are distinct. Accordingly, the deliverables (1) through (4) were considered as a single performance obligation and the upfront payment of $1.0 million has been allocated to this performance obligation. The payment was recorded as deferred revenue and recognized into revenue on a straight-line basis from December 31, 2013 to June 30, 2014, the period over which the Company performed the procedures for transferring the Company’sknow-how and technology and related technical assistance during the transfer process. The research activities to be performed on behalf of Lilly after the transfer of the technology are also determined to be distinct as Lilly or another third party could provide these services without the Company’s assistance. The revenue from this deliverable is recognized upon performance ofwould exercise any such activities at rates consistent with prevailing market rates.
In order to evaluate the appropriate transaction price, the Company determined that theup-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company estimated the best estimate of selling price of the licenses and technology platform based on comparable license and collaboration arrangements. The best estimate of selling price for the other deliverables
was estimated using internal estimates of cost to perform the specific services plus a normal profit margin for providing the services.
At execution, the transaction price included only the $1.0 millionup-front consideration received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Lilly and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The consideration otherwise allocable to delivered units is limited to the amount that is not contingent on the delivery of additional items or fulfillment of other performance conditions. Consequently, the arrangement consideration related to the research activities to be performed on behalf of Lilly after the transfer of the technology was excluded from the allocation arrangement consideration because the consideration and performance are contingent upon Lilly requesting performance of the services and these services are priced at an estimated fair value.
The agreement contains customary termination rights for Lilly and the Company including the right for Lilly to terminate the agreement in its sole discretion with advance notice to us. The agreement will terminate on aproduct-by-product andcountry-by-country basis upon the later of the product being no longer covered by certain patents related to the Lilly licensed product, or 10 years after the first commercial sale of the Lilly licensed product in such a country.
On December 11, 2015, the Company recordednon-refundable substantive research milestone revenue from Lilly in the amount of $1.0 million upon the achievement of certain research activities during the course of the research program.
During the three months ended March 31, 2018, the Company recorded $nil (2017: $15) in research support revenue from Lilly.
Licensing and Collaboration Agreement with Lilly
On October 22, 2014, the Company entered into a second Licensing and Collaboration Agreement with Lilly to develop novel bispecific antibody therapeutics using the Company’s proprietary Azymetric platform. This agreement did not alter or amend the initial agreement entered into on December 17, 2013. Under the terms of this agreement, the Company will apply its Azymetric platform in combination with Lilly’s proprietary targets to create novel bispecific antibodies which Lilly will develop and commercialize. In 2017 Lilly nominated a bispecific antibody from this agreement for preclinical development and discontinued the development of two other bispecific antibodies due to strategic portfolio realignment in those particular disease areas. Each of the two agreements with Lilly were negotiated independently and the deliverables covered by the respective contracts are unrelated to one another as they cover different product candidates. Accordingly, the second Licensing and Collaboration Agreement with Lilly has been accounted for as a new arrangement.
The Company is eligible to receive potential milestone payments totaling up to $125.0 million, comprised of up to $2.0 million for research success milestone, up to $8.0 million for IND submission milestones, up to $20.0 million for development milestones and up to $95.0 million for commercial milestones. In addition, the Company is eligible to receive tiered royalty payments on the sale of products. Lilly will have exclusive worldwide commercialization rights to products derived from the collaboration. No license, research, development and commercial milestones or royalty payments have been received to date. The Company
determined that other than the research milestone, the events and conditions resulting in payments for development and commercial milestones solely depend on Lilly’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Lilly, is a customer. At execution, there was noup-front fee received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Lilly and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The agreement contains customary termination rights for Lilly and the Company with advance notice to the Company, in addition to (i) both Lilly and the Company have certain rights to terminate on a program by program basis due to scientific failure, (ii) Lilly can terminate the agreement on a target pair by target pair basis in its sole discretion after the payment of the initial license fee for such a target pair, (iii) Lilly can terminate the agreement or specific target pairs due to an incurable material breach by the Company, and under specific conditions, Lilly shall have certain rights to continue the research, development and commercialization of products with their license payment, milestone and royalty obligations reduced by 50% and (iv) Lilly shall have the right to terminate the agreement or specific target pairs in the event of the Company undergoing a change of control, while retaining certain rights. If the affected research programs have not completed specific research stages, Lilly’s obligations to the license payments, milestones and royalties shall be reduced in a tiered fashion ranging from25-75%.
On December 1, 2016, the Company recorded anon-refundable fee of $2.0 million which was received upon achievement of a critical success criteria point milestone under the research plan.
No other research, development or commercial milestone payments or royalties have been received to date.
Licensing and Collaboration Agreement with Celgene Corporation & Celgene Alpine Investment Co. LLC (“Celgene”)
On December 23, 2014, the Company entered into an agreement with Celgene to develop novel bispecific antibody therapeutics using the Company’s proprietary Azymetric platform. The Company will apply its Azymetric platform in combination with Celgene’s proprietary targets to create novel bispecific antibodies for which Celgene has an option to develop and commercialize a certain number of products (“Commercial License Option”).
Upon the execution of the Agreement, the Company received aone-time,non-refundable payment of $8.0 million. Over the life of the agreement, the Company is eligible to receive potential milestone payments totaling up to $164.0 million per each therapeutic candidate, comprised of a payment of $7.5 million upon Celgene exercising a Commercial License Option, up to $101.5 million for development milestones and up to $55.0 million for commercial milestones. In addition, the Company is eligible to receive tiered royalties calculated upon the global net sales of the resulting products. Celgene will have exclusive worldwide commercialization rights to products derived from the agreement if Celgene elects to exercise a Commercial License Option for each product. The Company determined that, the events and conditions resulting in payments for research, development and commercial milestones solely depend on Celgene’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Celgene, is a customer. The Company identified the following promised goods and services at the
inception of the Celgene agreement: (1) thenon-exclusive research license, (2) the transfer of the Company’s platform technology (Azymetric) and relevantknow-how, and (3) technical assistance if required by Celgene in connection with the transfer of technology. The Company concluded that the license and platform technology together are distinct. Accordingly, all the deliverables are considered a single performance obligation and the upfront payment of $8.0 million has been allocated to this performance obligation. The upfront payment was recognized as revenue ratably over thesix-month period ended June 30, 2015, the period during which the Company transferred its technicalknow-how and technology to Celgene.
In order to evaluate the appropriate transaction price, the Company determined that theup-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company estimated the best estimate of selling price of the licenses and technology platform based on comparable license and collaboration arrangements.
At execution, the transaction price included only the $8.0 millionup-front consideration received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Celgene and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. The Company concluded that, at the inception of the agreement, Celgene’s option to obtain a Commercial License did not represent a deliverable because it is a substantive option and does not contain a significant or incremental discount.
The agreement contains customary termination rights for Celgene and the Company including the right of Celgene to terminate the agreement in its entirety or on aproduct-by-product basis in its sole discretion with advance notice to the Company. The agreement will terminate on aproduct-by-product andcountry-by-country basis upon the later of the expiration of the last-expiring patent related to the Celgene licensed product, or 10 years after the first commercial sale of the Celgene licensed product in such a country. If Celgene does not exercise its option for the commercial license, the agreement will terminate on aproduct-by-product basis for which the option was not exercised.
No development or commercial milestone payments or royalties have been received to date.
Collaboration and License Agreement with GlaxoSmithKline Intellectual Property Development Ltd. (“GSK”)
On December 1, 2015, the Company entered into a Collaboration and License Agreement with GSK for the research, development, and commercialization of novelFc-engineered monoclonal and bispecific antibody therapeutics, which have been optimized for specific therapeutic effects. The Company and GSK will collaborate to further develop the Company’s Effector Function Enhancement and Control Technology (EFECT) platform through the design, engineering, and testing of novel engineered Fc domains tailored to induce specific antibody-mediated immune responses.
At the conclusion of the research collaboration, both GSK and the Company will have the right to develop and commercialize monoclonal and bispecific antibody candidates that incorporate the Company’s optimized immune-modulating Fc domains.
Under the terms of the agreement, GSK will have the right to develop a minimum of four products across multiple disease areas, and the Company will be eligible to receive research, development, and commercial milestones of up to $110.0 million for each product. In addition, the Company is eligible to receive tiered sales
royalties. Under the terms of the agreement, each party is liable for their own internal and external research costs incurred in the project. Furthermore, the Company will have the right to develop up to four products with the intellectual property arising from the collaboration without any royalty or milestone payment to GSK. The Company determined that, the events and conditions resulting in payments for research, development and commercial milestones solely depend on GSK’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, GSK, is a customer. At execution, there was noup-front fee received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to GSK and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The agreement contains customary termination rights for GSK and the Company including the right for GSK to terminate the agreement in its sole discretion with advance notice to us, after the research period has advanced beyond a specified stage, and allowing the parties to terminate the agreement by mutual agreement during the research period. If GSK elects not to advance any product into research and development, the agreement will terminate at the end of the research period. If GSK elects to advance one or more products incorporating intellectual property generated under the research period for further research and development, the agreement will terminate on aproduct-by-product andcountry-by-country basis upon the latter of the product being no longer covered by a patent related to the GSK licensed product, or 10 years after the first commercial sale of the GSK licensed product in such a country.
No development or commercial milestone payments or royalties have been received to date.
Platform Technology Transfer and License Agreement with GSK
On April 21, 2016, the Company entered into a Platform Technology Transfer and License Agreement with GSK for the research, development, and commercialization of novel bispecific antibodies enabled using the Company’s Azymetric platform. Each of the two agreements with GSK were negotiated independently and the deliverables covered by the respective contracts utilize different therapeutic platforms and are unrelated to one another. Accordingly, the Platform Technology and License Agreement with GSK has been accounted for as a new arrangement.
Upon execution of the agreement, the Company received a technology access fee of $6.0 million on May 3, 2016. The Company is also eligible to receive up to $30.0 million in research milestone payments; up to $152.0 million in development milestone payments; and up to $720.0 million in commercial sales milestone payments. In addition, the Company is entitled to receive tiered royalties on potential sales. The Company determined that, the events and conditions resulting in payments for research, development and commercial milestones solely depend on GSK’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, GSK, is a customer. The Company identified the following promised goods and services at the inception of the GSK agreement: (1) thenon-exclusive research license, (2) commercial license (3) transfer of the Company’s platform technology (Azymetric) and relevantknow-how, (4) technical assistance if required by GSK in connection with the transfer of technology, and (5) the obligation to provide future technology improvement and updates, when and if available. The Company concluded that the licenses and platform technologies together are distinct. Accordingly, deliverables (1) through (4) were considered as a single
performance obligation and the technology access fee of $6.0 million has been allocated to this performance obligation and has been recognized as revenue upon completion of the transfer of the Company’s technology and technicalknow-how to GSK.
In order to evaluate the appropriate transaction price, the Company determined that theup-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company estimated the best estimate of selling price of the licenses and technology platform based on comparable license and collaboration arrangements. The Company concluded that the best estimate of selling price for the obligation to deliver future technology improvements and updates was a nominal amount, as the Company has no intention of performing and has made no commitment to perform or provide additional update work on the applicable technology platform. Accordingly, no arrangement consideration was allocated to this deliverable.
At execution, the transaction price included only the $6.0 millionup-front consideration received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to GSK and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The agreement contains customary termination rights for GSK and the Company including the right for GSK to terminate the agreement in its sole discretion with advance notice to the Company. Termination provisions allow for GSK to terminate the agreement or specific antibody sequence pairs due to an incurable material breach by the Company, and under specific conditions, GSK shall have certain rights to continue the research, development, and commercialization of products with their license payment, milestone, and royalty obligations reduced by 50%.
No research, development or commercial milestone payments or royalties have been received to date.
Collaboration and Cross License Agreement with Daiichi Sankyo, Co., Ltd. (“Daiichi Sankyo”)
On September 26, 2016, the Company entered into a Collaboration and Cross License Agreement with Daiichi Sankyo for the research, development, and commercialization of novel bispecific antibodies enabled using the Company’s Azymetric and EFECT platforms. Additionally, the Company will license immuno-oncology antibodies from Daiichi Sankyo, with the right to research, develop and commercialize multiple products globally in exchange for royalties on product sales. Under the agreement, Daiichi Sankyo will have the option to develop and commercialize a single bispecific immuno-oncology therapeutic.
Upon execution of the agreement, the Company received a technology access fee of $2.0 million. The Company is also eligible to receive up to $66.9 million in research and development milestone payments and commercial license option; and up to $80.0 million in commercial sales milestone payments. In addition, the Company is eligible to receive tiered royalties on potential product sales. The Company determined that other than a research milestone for $1.0 million, the events and conditions resulting in payments for research, development and commercial milestones solely depend on Daiichi Sankyo’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Daiichi Sankyo, is a customer. The Company identified the following promised goods and services at the inception of the Daiichi Sankyo agreement: (1) the research license, (2) the transfer of the Company’s
platform technologies (Azymetric and EFECT) and relevantknow-how, and (3) research activities to be performed on behalf of Daiichi Sankyo. The Company concluded that the licenses and platform technologies together are distinct. Accordingly, the deliverables (1) and (2) were considered as a single performance obligation and the technology access fee of $2.0 million was allocated to this performance obligation and was recognized as revenue upon delivery of the licenses and transfer of the relevant technology. The research activities to be performed on behalf of Daiichi Sankyo after the transfer of the technology are also determined to be distinct as Daiichi Sankyo or another third party could provide these services without the Company’s assistance. The revenue to be received from Daiichi Sankyo from delivery of these services is recognized upon performance of such activities at rates consistent with prevailing market rates. The Company concluded that, at the inception of the agreement, Daiichi Sankyo’s option to obtain a Commercial License did not represent a deliverable because it is a substantive option and did not contain a significant or incremental discount.
In order to evaluate the appropriate transaction price, the Company determined that theup-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company estimated the best estimate of selling price of the licenses and technology platform based on comparable license and collaboration arrangements. The best estimate of selling price for the other deliverables was estimated using internal estimates of cost to perform the specific services plus a normal profit margin for providing the services.
At execution, the transaction price included only the $2.0 millionup-front consideration received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Daiichi Sankyo and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The consideration otherwise allocable to delivered units is limited to the amount that is not contingent on the delivery of additional items or fulfillment of other performance conditions. Consequently, the arrangement consideration related to the research activities to be performed on behalf of Daiichi Sankyo after the transfer of the technology was excluded from the allocation arrangement consideration because the consideration and performance are contingent upon Daiichi Sankyo requesting performance of the services and these services are priced at an estimated fair value.
The agreement contains customary termination rights for Daiichi Sankyo and the Company including the right for Daiichi Sankyo to terminate the rights to the Company’s therapeutic platforms in its sole discretion with advance notice to the Company and for the Company to terminate the Company’s rights to Daiichi Sankyo’s antibodies with advance notice to Daiichi Sankyo. The agreement shall terminate, with respect to Daiichi Sankyo’s license, if Daiichi Sankyo fails to exercise its option or, on aproduct-by-product basis, until expiration of Daiichi Sankyo’s royalty obligations.
On June 26, 2017, the Company recordednon-refundable milestone revenue from Daiichi Sankyo in the amount of $1.0 million upon the achievement of a research milestone.
During the three months ended March 31, 2018, the Company recorded $nil in research support revenue from Daiichi Sankyo (2017: $214).
Collaboration and License Agreement with Janssen Biotech, Inc. (“Janssen”)
On November 13, 2017, the Company entered into a Collaboration and License Agreement with Janssen to research, develop and commercialize up to six bispecific antibodies generated through the use of the Azymetric
and EFECT platforms. Under the terms of the agreement, we granted Janssen a worldwide, royalty-bearing, antibody sequence pair-specific exclusive license to research, develop and commercialize certain products. Janssen also has the option to develop two additional bispecific antibodies under this agreement subject to a future option payment. Under the agreement, Janssen will be solely responsible for the research, development, manufacturing and commercialization of the products.
Upon execution of the agreement, the Company received anon-refundable upfront fee of $50.0 million. The Company is also eligible to receive up to $282.0 million in development milestone payments and up to $1,119.0 million in commercial milestone payments. In addition, Company is eligible to receive tiered royalties in themid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks platform patent coverage on products, or (ii) for 10 years, beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage on products, royalty rates may be potentially reduced. Janssen has the right, prior to the first dosing of a patient in a Phase 3 clinical trial for a product, to buy down the royalty relating to such product by one percentage point with a payment of $10.0 million. The Company determined that, the events and conditions resulting in payments for research, development and commercial milestones solely depend on Janssen’s performance.
The Company assessed this arrangement in accordance with ASC 606 and concluded that the contract counterparty, Janssen, is a customer. The Company identified the following promised goods and services at the inception of the Janssen agreement: (1) the research and commercial license, (2) the transfer of the Company’s platform technologies (Azymetric and EFECT) and relevantknow-how. The Company concluded that the licenses and platform technologies together are distinct. Accordingly, the deliverables (1) and (2) were considered as a single performance obligation and the upfront fee of $50.0 million was allocated to this performance obligation and was recognized as revenue upon delivery of the licenses and transfer of the relevant technology.
In order to evaluate the appropriate transaction price, the Company determined that theup-front amount constituted the entirety of the consideration to be included in the transaction price and to be allocated to the performance obligations based on the Company’s best estimate of their relative stand-alone selling prices. The Company estimated the best estimate of selling price of the licenses and technology platform based on comparable license and collaboration arrangements.
At execution, the transaction price included only the $50.0 millionup-front consideration received. None of the research and development milestones has been included in the transaction price, as all milestone amounts were fully constrained. As part of its evaluation of the constraint, the Company considered numerous factors, including that receipt of the milestones is outside the control of the Company and contingent upon success in future clinical trials and the licensee’s efforts. Any consideration related to sales-based milestones (including royalties) will be recognized when the related sales occur as they were determined to relate predominantly to the license granted to Janssen and therefore have also been excluded from the transaction price. The Company willre-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.
The agreement contains customary termination rights for Janssen and the Company including the right for Janssen to terminate the agreement in its sole discretion with advance notice to the Company. The agreement will terminate, on aproduct-by-product basis on the expiry of the royalty term for the product. Furthermore, if Janssen does not designate an antibody sequence pair during the research program term, the agreement will also terminate.
10. Commitments and Contingencies
Lease Commitments
The Company leases office premises in Vancouver, British Columbia and Seattle, Washington that expire in August 2021 and February 2022, respectively. The Company has also entered into a lease for laboratory space in Vancouver, British Columbia that will expire in August 2021. The leases contain rent escalation clauses.options. The Company also leases office equipment under capital lease agreements. Future minimum
| June 30, 2022 | December 31, 2021 | ||||||||||
| Operating lease liabilities: | |||||||||||
| Current portion | $ | 2,725 | $ | 1,310 | |||||||
| Long-term portion | 29,170 | 30,923 | |||||||||
| Total operating lease liabilities | 31,895 | $ | 32,233 | ||||||||
| Finance lease liabilities: | |||||||||||
| Current portion included in other current liabilities | — | 22 | |||||||||
| Long-term portion included in other long-term liabilities | 113 | 100 | |||||||||
| Total finance lease liabilities | 113 | 122 | |||||||||
| Total lease liabilities | $ | 32,008 | $ | 32,355 | |||||||
| Operating leases | |||||
| Within 1 year | $ | 3,942 | |||
| 1 to 2 years | 5,079 | ||||
| 2 to 3 years | 5,197 | ||||
| 3 to 4 years | 5,244 | ||||
| 4 to 5 years | 4,586 | ||||
| Thereafter | 13,807 | ||||
| Total operating lease payments | 37,855 | ||||
| Less: | |||||
| Imputed interest | (5,960) | ||||
| Operating lease liabilities | $ | 31,895 | |||
| Payments due by period | ||||||||||||||||||||||||
| Less Than 1 Year | 1 to 2 Years | 2 to 3 Years | 3 to 4 Years | 4 to 5 Years | Total | |||||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||||||
Capital lease obligations | $ | 24 | $ | 19 | $ | 23 | $ | 11 | $ | 2 | $ | 79 | ||||||||||||
Operating lease obligations | 1,937 | 1,948 | 1,958 | 1,082 | — | 6,925 | ||||||||||||||||||
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Total contractual obligations | $ | 1,961 | $ | 1,967 | $ | 1,981 | $ | 1,093 | $ | 2 | $ | 7,004 | ||||||||||||
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| June 30, 2022 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Commercial paper | $ | 61,567 | $ | — | $ | 61,567 | $ | — | |||||||||||||||
| Investments: | |||||||||||||||||||||||
| GICs | 43,184 | — | 43,184 | — | |||||||||||||||||||
| Total | $ | 104,751 | $ | — | $ | 104,751 | $ | — | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Liability for contingent consideration (note 13) | 1,248 | — | — | 1,248 | |||||||||||||||||||
| Total | $ | 1,248 | $ | — | $ | — | $ | 1,248 | |||||||||||||||
| December 31, 2021 | Level 1 | Level 2 | Level 3 | ||||||||||||||||||||
| Assets | |||||||||||||||||||||||
| Cash equivalents: | |||||||||||||||||||||||
| Commercial paper | $ | 61,387 | $ | — | $ | 61,387 | $ | — | |||||||||||||||
| Investments: | |||||||||||||||||||||||
| GICs | 50,741 | — | 50,741 | — | |||||||||||||||||||
| Total | $ | 112,128 | $ | — | $ | 112,128 | $ | — | |||||||||||||||
| Liabilities | |||||||||||||||||||||||
| Liability for contingent consideration (note 13) | 1,498 | — | — | 1,498 | |||||||||||||||||||
| Total | $ | 1,498 | $ | — | $ | — | $ | 1,498 | |||||||||||||||
| Liability at the beginning of the period | Increase (decrease) in fair value of liability for contingent consideration | Amounts paid or transferred to payables | Liability at end of the period | ||||||||||||||||||||
| Three months ended June 30, 2022 | $ | 1,248 | $ | — | $ | — | $ | 1,248 | |||||||||||||||
| Six months ended June 30, 2022 | $ | 1,498 | $ | — | $ | (250) | $ | 1,248 | |||||||||||||||
and Contingencies
In August 2016,presented in the Company entered into a license agreement with Innovative Targeting Solutions Inc., or ITS, to use ITS’ protein engineering technology for the development and commercialization of antibody and protein therapeutics. Pursuant to the agreement, the Company agreed to pay an aggregate of $12.0 million in annual licensing fees to ITS over a five-year period. Licensing fees paid to ITS are recorded in intangible assets and amortized over a twelve-month period. The Company may also be required to make payments to ITS upon the achievement of certain development and commercial milestones, as well as royalty payments on net sales.
interim condensed consolidated financial statements.
Contingencies
11. Related Party Transactions
Lilly was considered
12. Subsequent Events
On April 22, 2018, Celgene exercised its right to increase the number of potential products it can develop and commercialize from eight to ten and extended the research program term by 24 months until April 2020, for which the Company is entitled to receive an expansion fee of $4.0 million and is eligible to receive up to $164.0 million per additional product in development and commercial milestones plus royalties on worldwide sales in accordance with the terms of the licensing and collaboration agreement.
subsidiaries. populations.20172021 included in our Annual Report on Form10-K filed with the U.S. Securities and Exchange Commission (the “SEC”) on March 14, 2018February 24, 2022 and with the securities commissions in all provinces and territories of Canada on March 14, 2018.February 24, 2022. This Quarterly Report on Form10-Q, including the following sections, contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. As a result of many factors, including without limitation those set forth under “Risk Factors” under Item 1A of Part II below, and elsewhere in this Quarterly Report on Form10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. We caution the reader not to place undue reliance on these forward-looking statements, which reflect management’s analysis only as of the date of this Quarterly Report on Form10-Q. We undertake no obligation to update forward-looking statements which reflect events or circumstances occurring after the date of this Quarterly Report on Form10-Q. 10-Q, except as required by law. Throughout this discussion, unless the context specifies or implies otherwise, the terms “Zymeworks,” “we,” “us,” and “our” refer to Zymeworks Inc. and its subsidiary.an innovative,a clinical-stage biopharmaceutical company dedicated to the discovery, development and commercialization of next-generation multifunctional biotherapeutics. Our suite of complementary therapeutic platforms and our fully integrated drug development engine provide the flexibility and compatibility to precisely engineer and develop highly differentiated product candidates. These capabilities have resulted in multiple wholly owned product candidates with the potential to drive superiorpositive outcomes in large underserved and unaddressed patient populations, as further described below.Initial Public OfferingOn May 3, 2017, we successfully closed our initial public offering (the “IPO”) pursuant to which we sold 4,894,467 common shares (including the sale of 394,467 common shares to the underwriters upon their partial exercise of their over-allotment option to purchase additional common shares on May 31, 2017). The public offering price of the common shares sold in the IPO was $13.00 per share. We received net proceeds of approximately $54.2 million, after underwriting discounts, commissions and estimated offering expenses. The common shares are listed for trading on the New York Stock Exchange and the Toronto Stock Exchange under the symbol “ZYME”.Description of Business and ProductsZW25,zanidatamab, is a novel bispecific antibody whichthat targets two distinct domains of the human epidermal growth factor receptor 2 or HER2.(“HER2”). Zanidatamab’s unique binding properties result in multiple mechanisms of action that may enable it to address unmet need in patient populations with HER2-expressing cancers. In our adaptive Phase 1 clinical trial, ZW25 hastrials, zanidatamab monotherapy and zanidatamab in combination with chemotherapy have been well tolerated with promising single agent anti-tumorantitumor activity in patients with treatment-naive and heavily pretreated HER2-expressing cancers, including individuals whose disease had progressed on multiple prior treatment regimens that included HER2-targeted agents. Based on these data, a number of global multicenter clinical trials have progressed afterbeen initiated to evaluate zanidatamab in specific indications and lines of therapy. These include pivotal clinical trials in (i) previously treated HER2 gene amplified biliary tract cancer (“BTC”) and (ii) first-line locally advanced or metastatic HER2-positive gastroesophageal adenocarcinomas (“GEA”) in combination with chemotherapy with or without BeiGene, Ltd.’s (“BeiGene”) tislelizumab, as well as proof of concept trials in (iii) first-line locally advanced or metastatic HER2-positive colorectal cancer (“CRC”), GEA, or BTC in combination with standard of care including multiple HER2-targeted regimens. Its unique design may enable ZW25 to address patient populationschemotherapy, (iv) first-line locally advanced or metastatic HER2-positive GEA in combination with all levels of HER2 expression, including thosetislelizumab and chemotherapy, (v) first-line locally advanced or metastatic HER2-positive breast cancer in combination with low to intermediatedocetaxel, (vi) previously-treated locally advanced or metastatic HER2-positive, hormone receptor-positive breast cancer in combination with Pfizer’s Ibrance (palbociclib) and fulvestrant, and (vii) previously-treated locally advanced or metastatic HER2-expressing tumors, who are otherwise limited to chemotherapy or hormone therapy. cancers (including HER2-positive and HER2-low breast cancer) in combination with ALX Oncology Inc.’s (“ALX Oncology”) evorpacept (ALX148).ZW49, capitalizes onzanidatamab zovodotin (ZW49), combines the unique design and antibody framework of ZW25 and is a bispecificzanidatamab with our ZymeLink antibody-drug conjugate or ADC, armed with(“ADC”) platform, comprised of our proprietary ZymeLink-cytotoxic payload.cytotoxin (cancer cell-killing compound) and cleavable linker. We designed ZW49zanidatamab zovodotin to be abest-in-class HER2-targeting ADC withto further address unmet need across a wide therapeutic window, for which we expectrange of HER2-expressing cancers. A Phase 1 clinical trial to file an Investigational New Drug, or IND, application in 2018. establish safety and antitumor activity of zanidatamab zovodotin is currently ongoing. In addition to our wholly owned pipeline, two of our therapeutic platforms have been further leveraged through
multiple revenue-generating strategic partnerships with the following global pharmaceutical companies: Merck Sharp & Dohme Research Ltd., Eli Lilly and Company, Celgene Corporation and Celgene Alpine Investment Co. LLC, GlaxoSmithKline Intellectual Property Development Limited, Daiichi Sankyo Co., Ltd., and Janssen Biotech, Inc. or “Merck”, “Lilly”, “Celgene”, “GSK”, “Daiichi Sankyo” and “Janssen”, respectively.
Our proprietary capabilities and technologies include fourseveral modular, complementary therapeutic platforms that can be easily used in combination with each other and with existing approaches. This ability to layer technologies without compromising manufacturability enables us to engineer next-generation biotherapeutics with synergistic activity, which we believe will result in superiorimproved patient outcomes. Our core platforms include include:
Through March 31, 2018,months from the date this Quarterly Report on Form 10-Q is filed with the SEC.
non-dilutive funding as well as access to proprietary therapeutic assets, which increase our ability to rapidly advance our product candidates while maintaining worldwide commercial rights to our wholly-ownedown therapeutic pipeline. OurUnder our strategic partnerships includeand collaboration agreements, we have received over $240.0 million to date in the following:
In August 2011, we entered into a researchform of non-refundable upfront payments and license agreement with Merck, which was amended and restated in December 2014, to develop and commercialize three bispecific antibodies generated through the use of the Azymetric and EFECT platforms. Under the terms of the agreement, we granted Merck a worldwide, royalty-bearing antibody sequence pair exclusive license to research, develop and commercialize certain licensed products. We are eligible to receive up to $190.75 million, including an upfront payment ($1.25 million received in 2011), research milestone payments totaling $3.5 million ($2.0 million and $1.5 million received in 2012 and 2013, respectively), payments for completion ofIND-enabling studies of up to $6.0 million, development milestone payments of up to $66.0 million and commercial milestone payments of up to $114.0 million.payments. In addition, we are eligible to receive tiered royalties in the low tomid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks patent coverage on products, or (ii) for five years, beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage on products, royalty rates will be reduced.
Under the agreement, we are sharing certain research and development responsibilities with Merck to generate bispecific antibodies with the Azymetric and EFECT platforms. Merck provides funding for a portion ofunder our internal and external research costs in support of the collaboration. After the conclusion of the research program, Merck will be solely responsible for the further research, development, manufacturing and commercialization of the products.
In December 2013, we entered into a licensingactive strategic partnerships and collaboration agreement with Lilly to research, develop and commercialize one bispecific antibody, with an option for a second antibody, generated through the use of the Azymetric platform. Under the terms of the agreement, we granted Lilly a worldwide, royalty-bearing antibody target pair-specific exclusive license to research, develop and commercialize certain licensed products. We are eligible to receive up to $103.0 million, including an upfront payment ($1.0 million received in 2013) and per product potential milestone payments, comprised of research milestone payments totaling $1.0 million ($1.0 million received in 2015), IND submission milestone payments of $2.0 million, development milestone payments of $8.0 million and commercial milestone payments of $40 million. In addition, we are eligible to receive tiered royalties in the low tomid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks platform patent coverage on products, or (ii) for 10 years, beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage on products, royalty rates may be potentially reduced. In 2017, Lilly nominated a bispecific candidate from this agreement for preclinical development.
Under the agreement, we are sharing certain research and development responsibilities with Lilly to generate bispecific antibodies with the Azymetric platform. Lilly provides funding for a portion of our internal and external research costs in support of the collaboration. After the conclusion of the research program, Lilly will be solely responsible for the further research, development, manufacturing, and commercialization of the products.
In October 2014, we entered into a second licensing and collaboration agreement with Lilly to research, develop and commercialize three bispecific antibodies generated through the use of the Azymetric platform. This agreement did not alter or amend the initial agreement entered in 2013. Under the terms of the agreement, we granted Lilly a worldwide, royalty-bearing antibody target-pair exclusive (for two bispecific antibodies) and an antibody sequence pair-specific (for one bispecific antibody) license to
research, develop and commercialize certain licensed products. In 2017, Lilly nominated a bispecific candidate from this agreement for preclinical development and discontinued the development of two other bispecific antibodies due to strategic portfolio realignment in those particular disease areas. We are currently eligible to receive up to $125.0 million, comprised of research milestone payments of up to $2.0 million ($2.0 million earned in 2016), IND submission milestone payments of up to $8.0 million, development milestone payments of up to $20.0 million and commercial milestone payments of up to $95.0 million. In addition, we are eligible to receive tiered royalties in the low tomid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks platform patent coverage on products, or (ii) for 10 years, beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage on products, royalty rates may be potentially reduced. In conjunction with this collaboration agreement, Lilly purchased approximately $24.0 million of our common shares.
Under the agreement, we are sharing certain research and development responsibilities with Lilly to generate bispecific antibodies with the Azymetric platform. We are responsible for our internal and external research costs in support of this collaboration. After the conclusion of the research program, Lilly will be solely responsible for the further research, development, manufacturing and commercialization of the products.
In December 2014, we entered into a collaboration agreement with Celgene to research, develop and commercialize up to eight bispecific antibodies generated through the use of the Azymetric platform. Under the terms of the agreement, we granted Celgene a right to exercise options to worldwide, royalty-bearing, antibody sequence pair-specific exclusive licenses to research, develop and commercialize certain licensed products. We received an upfront payment of $8.0 million, which was accounted for as upfront collaboration consideration received in 2014. In April 2018, Celgene exercised its right to increase the number of programs under this collaboration from eight to ten and extended the research program term by 24 months until April 2020, for which are entitled to receive $4.0 million in accordance with the terms of the collaboration agreement. As a result, Celgene has the right to exercise options on up to ten programs and if Celgene opts in on a program,agreements, we are eligible to receive up to $164.0 million per product candidate (up to $1.64$2.9 billion for all ten programs), comprised of a commercial license option payment of $7.5 million,in preclinical and development milestone payments of up to $101.5 million and $6.1 billion in commercial milestone payments, of up to $55.0 million. No development or commercial milestone payments or royalties have been received to date.
In addition, we are eligible to receiveas well as tiered royalties inon potential future product sales. It is possible, however, that our strategic partners’ programs will not advance as currently contemplated, which would negatively affect the low tomid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks platform patent coverage on products, or (ii) for 10 years, beginning from the first commercial sale, whichever period is longer. Celgene also has the right, prior to the first dosingamount of a patient in a Phase 3 clinical trial for a product, to buy down the royalty to a flatlow-single digit rate with a payment of $10.0 million per percentage point. In addition to this collaboration agreement, the parties also entered into an equity subscription agreement under which Celgene paid $8.6 million for common shares.
Under the agreement, we are collaborating with Celgene to generate and develop a number of bispecific antibodies during the research program term. After the conclusion of the research program in April 2020, Celgene will be solely responsible for the further research, development, manufacturing and commercialization of the products.
In December 2015, we entered into a collaboration and license agreement with GSK to research, develop and commercialize up to 10 newFc-engineered monoclonal and bispecific antibodies
generated through the use of the EFECT and Azymetric platforms. Under the terms of the agreement, we granted GSK a worldwide, royalty-bearing antibody target-exclusive license to new intellectual property generated to the EFECT platform under this collaboration and anon-exclusive license to the Azymetric platform to research, develop and commercialize future licensed products. We are eligible to receive up to $1.1 billion, including research, development and commercial milestone payments and royalties on potential future product sales we may receive. Importantly, these partnerships include predominantly non-target-exclusive licenses for any of up to $110.0 million for each product. In addition,our therapeutic platforms, so we are eligible to receive tiered royalties inmaintain thelow-single digits on net sales of products, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks patent coverage on products or certain joint patent coverage on products, or (ii) for 10 years beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage or certain joint patent coverage on products, royalty rates will be reduced. No development or commercial milestone payments or royalties have been received to date. We retained the right ability to develop uptherapeutics directed to four products, freemany high-value targets utilizing our platforms.
Under theour existing collaboration and license agreement, we are sharing certain researchagreements, please refer to “Item 1. Business - Strategic Partnerships and development responsibilities with GSK to generate newFc-engineered antibodies. Each party will bear its own costs for the responsibilities assigned to it during the research period. After the conclusion of the research period, each party will be solely responsible for the further research, development, manufacturing and commercialization of its own respective products. The research period will terminate when the “research collaboration plan” (as defined in the collaboration and license agreement) is complete or on December 1, 2018, whichever is earlier. During the term of the agreement and solely based on the outcome of the research collaboration, we have granted GSK exclusive rights to develop and commercialize monospecific antibodies against targets nominated by GSK. If GSK develops bispecific antibodies using its own platform approaches, we have granted GSK exclusive rights to develop and commercialize such antibodies comprising of specific antibody sequence pairs.
In April 2016, we entered into a licensing agreement with GSK to research, develop and commercialize up to six bispecific antibodies generated through the use of the Azymetric platform. This may include bispecific antibodies incorporating new engineered Fc regions generated under the 2015 GSK agreement outlined in the preceding section. Under the terms of this agreement, we granted GSK a worldwide, royalty-bearing antibody sequence pair-specific exclusive license to research, develop and commercialize licensed products. We are eligible to receive up to $908.0 million, including an upfront payment as a technology access fee ($6.0 million received in 2016), research milestone payments of up to $30.0 million, development milestone payments of up to $152.0 million and commercial milestone payments of up to $720.0 million. In addition, we are eligible to receive tiered royalties in the low tomid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks patent coverage on products, or (ii) for 10 years beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage on products, royalty rates may be potentially reduced. No research, development or commercial milestone payments or royalties have been received to date. GSK has the right, prior to the first dosing of a patient in a Phase 3 clinical trial for a product, to buy down the royalty payable on such product by only 1% with a payment of $10.0 million.
Under the agreement, GSK will bear all responsibility and all costs associated with research, development and commercialization of products generated using the Azymetric platform.
In September 2016, we entered into a collaboration and cross-license agreement with Daiichi Sankyo to research, develop and commercialize one bispecific antibody generated through the use of the Azymetric and EFECT platforms. Under the terms of the agreement, we granted Daiichi Sankyo a worldwide, royalty-bearing antibody sequence pair-specific exclusive license to research, develop and
commercialize certain licensed products. We are eligible to receive up to $149.9 million, including an upfront payment as a technology access fee of $2.0 million (received in 2016), research ($1.0 million received in 2017) and development milestone payments and a commercial option payment totaling up to $67.9 million and commercial milestone payments of up to $80.0 million. In addition, we are eligible to receive tiered royalties ranging from the low single digits up to 10% on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks platform patent coverage on products, or (ii) for 10 years beginning from the first commercial sale, whichever period is longer. No research, development or commercial milestone payments or royalties have been received to date. We also gainednon-exclusive rights to develop and commercialize up to three products using Daiichi Sankyo’s proprietary immune-oncology antibodies, with royalties in the low single digits to be paid to Daiichi Sankyo on sales of such products.
Under the agreement, we are sharing certain research and development responsibilities with Daiichi Sankyo to generate bispecific antibodies with the Azymetric platform. Daiichi Sankyo is responsible for our internal and external research costs in support of this collaboration during the research program term. After the research program term, Daiichi Sankyo will be solely responsible for the further research, development, manufacturing and commercialization of the products. Under thenon-exclusive immuno-oncology antibody license to Zymeworks, we are solely responsible for all research, development and commercialization of the resulting products.
In November 2017, we entered into a collaboration agreement with Janssen to research, develop and commercialize up to six bispecific antibodies generated through the use of the Azymetric and EFECT platforms. Under the terms of the agreement, we granted Janssen a worldwide, royalty-bearing, antibody sequence pair-specific exclusive license to research, develop and commercialize certain products. We are eligible to receive up to $1.45 billion, including an upfront payment of $50.0 million (received in 2017), development milestone payments of up to $282.0 million and commercial milestone payments of up to $1.12 billion. In addition, we are eligible to receive tiered royalties in themid-single digits on product sales, with the royalty term being, on aproduct-by-product andcountry-by-country basis, either (i) for as long as there is Zymeworks platform patent coverage on products, or (ii) for 10 years, beginning from the first commercial sale, whichever period is longer. If there is no Zymeworks patent coverage on products, royalty rates may be potentially reduced. No development or commercial milestone payments or royalties have been received to date. Janssen has the right, prior to the first dosing of a patient in a Phase 3 clinical trial for a product, to buy down the royalty relating to such product by only 1% with a payment of $10.0 million. Janssen also has the option to develop two additional bispecific antibodies under this agreement subject to a future option payment.
Under the agreement, Janssen will be solely responsible for the research, development, manufacturing and commercialization of the products.
Critical Accounting Policies and Significant Judgments and Estimates
Our critical accounting policies are those policies that require the most significant judgments and estimates in the preparationCollaborations” of our interim condensed consolidated financial statements. A summary of our critical accounting policies is presented in note 2 of our annual consolidated financial statementsAnnual Report on Form 10-K for the year ended December 31, 2017.
Our management’s discussion and analysis of financial conditions and results of operations is based on our interim condensed consolidated financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of the financial statements in accordance with U.S. GAAP requires us to make estimates and judgments in certain circumstances that affect the reported amounts of assets, liabilities, revenue and expenses and related disclosure of contingent assets and liabilities. In preparing these consolidated financial statements,
management has made its best estimates and judgments of certain amounts included in the financial statements, giving due consideration to materiality. On an ongoing basis, the we evaluate our estimates, including those related to revenue recognition, SR&ED Program and Industrial Research Assistance Program (“IRAP”), share-based compensation, warrants, accrual of expenses, preclinical study accruals, valuation allowance for deferred taxes, other contingencies and valuation of assets acquired in a business combination. Management bases its estimates on historical experience or on various other assumptions that it believes to be reasonable under the circumstances. Actual results could differ from these estimates.
There have been no significant changes in our critical accounting policies and estimates during the three months ended March 31, 2018 as compared to the critical accounting policies and estimates described in our most recent annual consolidated financial statements, except the adoption of ASU2014-09, “Revenue from Contracts with Customers (Topic 606)” effective on January 1, 2018, as required.
Recent Accounting Pronouncements
In May 2014, the FASB issued ASU2014-09, “Revenue from Contracts with Customers (Topic 606)”. We adopted the new standard effective January 1, 2018, as required, using the modified retrospective approach. The adoption of ASU2014-09 did not have a material impact on our consolidated financial position, results of operations, equity or cash flows as of the adoption date or for the three months ended March 31, 2018. We have included the disclosures required by ASU2014-09.
A summary of recent accounting pronouncements is presented in note 3 of our interim condensed consolidated financial statements for the quarter ended March 31, 2018 within this Quarterly Report on Form10-Q.
the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of clinical trials and preclinical studies, uncertainties in clinical trial enrollment rates and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.
Our research and development expenses may increase in the future as we continue to develop our platforms and product candidates.
activities.
Research2021
| Three Months Ended June 30, | Increase/ (Decrease) | Six Months Ended June 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||
| Revenue from research and collaborations | $ | 5.4 | $ | 1.8 | $ | 3.6 | 200 | % | $ | 7.4 | $ | 2.4 | $ | 5.0 | 208 | % | |||||||||||||||||||||||||||||||
The following represents a comparison of our research and developmentcollaboration agreements.
| Three Months Ended March 31, | Increase/ (Decrease) | |||||||||||||||
| 2018 | 2017 | |||||||||||||||
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Revenue from research and collaborations | $ | 0.04 | $ | 0.23 | $ | (0.19 | ) | (83)% | ||||||||
The decrease in collaboration revenue for the three months ended March 31, 2018June 30, 2022 compared to the same period in 2017 is primarily due to a $0.2 million decrease in research support payments from Daiichi Sankyo as research and development activities under the agreement with Daiichi Sankyo shifted to our partner.
Research and Development Expense
The following represents a comparison of our research and development expense2021. Revenue for the three months ended March 31, 2018June 30, 2022 included a $5.0 million research license fee from our Atreca licensing agreement and 2017:
| Three Months Ended March 31, | Increase/ (Decrease) | |||||||||||||||
| 2018 | 2017 | |||||||||||||||
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ZW25 | $ | 5.8 | $ | 2.2 | $ | 3.6 | 164% | |||||||||
ZW49 | 1.3 | 0.4 | 0.9 | 225% | ||||||||||||
Therapeutic platforms | 1.7 | 2.1 | (0.4 | ) | (19)% | |||||||||||
Other research activities | 4.3 | 4.4 | (0.1 | ) | (2)% | |||||||||||
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Total research and development expense | $ | 13.1 | $ | 9.1 | $ | 4.0 | 44% | |||||||||
During$0.4 million from our partners for research support and other payments. Revenue for the threesame period in 2021 included $1.8 million from our partners for research support and other payments.
| Three Months Ended June 30, | Increase/ (Decrease) | Six Months Ended June 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||
| Third-party research and development program expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
Clinical development programs(1): | |||||||||||||||||||||||||||||||||||||||||||||||
| Zanidatamab | $ | 36.1 | $ | 20.9 | $ | 15.2 | 73 | % | $ | 74.8 | $ | 37.4 | $ | 37.4 | 100 | % | |||||||||||||||||||||||||||||||
| Zanidatamab zovodotin | (0.7) | 2.4 | (3.1) | (129) | % | 0.9 | 6.8 | (5.9) | (87) | % | |||||||||||||||||||||||||||||||||||||
| Preclinical and other research programs | 1.6 | 2.8 | (1.2) | (43) | % | 2.1 | 6.2 | (4.1) | (66) | % | |||||||||||||||||||||||||||||||||||||
| 37.0 | 26.1 | 10.9 | 42 | % | 77.8 | 50.4 | 27.4 | 54 | % | ||||||||||||||||||||||||||||||||||||||
| Unallocated departmental research and development expenses: | |||||||||||||||||||||||||||||||||||||||||||||||
| Salaries and benefits | 12.8 | 13.7 | (0.9) | (7) | % | 31.1 | 26.8 | 4.3 | 16 | % | |||||||||||||||||||||||||||||||||||||
| Stock-based compensation (recovery) expense | 1.7 | 6.0 | (4.3) | (72) | % | (1.6) | 7.8 | (9.4) | (121) | % | |||||||||||||||||||||||||||||||||||||
| Other unallocated expenses | 4.5 | 4.9 | (0.4) | (8) | % | 11.2 | 10.0 | 1.2 | 12 | % | |||||||||||||||||||||||||||||||||||||
| Research and development expense | $ | 56.0 | $ | 50.7 | $ | 5.3 | 10 | % | $ | 118.5 | $ | 95.0 | $ | 23.5 | 25 | % | |||||||||||||||||||||||||||||||
| Three Months Ended June 30, | Increase/ (Decrease) | Six Months Ended June 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
| (dollars in millions) | 2022 | 2021 | 2022 | 2021 | |||||||||||||||||||||||||||||||||||||||||||
| Salaries and benefits | $ | 5.2 | $ | 6.2 | $ | (1.0) | (16) | % | $ | 13.1 | $ | 12.6 | $ | 0.5 | 4 | % | |||||||||||||||||||||||||||||||
| Stock-based compensation expense (recovery) | 1.1 | 6.8 | (5.7) | 84 | % | (4.0) | (1.9) | (2.1) | (111) | % | |||||||||||||||||||||||||||||||||||||
| Professional fees, consulting and business insurance | 6.1 | 4.3 | 1.8 | 42 | % | 9.8 | 7.4 | 2.4 | 32 | % | |||||||||||||||||||||||||||||||||||||
| Other general and administrative expenses | 2.8 | 2.6 | 0.2 | 8 | % | 8.4 | 3.1 | 5.3 | 171 | % | |||||||||||||||||||||||||||||||||||||
| General and administrative expense | $ | 15.2 | $ | 19.9 | $ | (4.7) | (24) | % | $ | 27.3 | $ | 21.2 | $ | 6.1 | 29 | % | |||||||||||||||||||||||||||||||
General and Administrative Expense
The following represents a comparison of ourJune 30, 2022, general and administrative expense for the threeincluded non-cash stock-based compensation recovery of $4.0 million comprised of a $1.0 million recovery from equity classified awards (six months ended March 31, 2018June 30, 2021 – $9.5 million expense) and 2017:
| Three Months Ended March 31, | Increase/ (Decrease) | |||||||||||||||
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General and administrative expense | $ | 7.1 | $ | 6.3 | $ | 0.8 | 13% | |||||||||
Generala $3.0 million recovery related to the non-cash mark-to-market revaluation of certain historical liability classified awards (six months ended June 30, 2021 – recovery of $11.4 million). Excluding stock-based compensation, general and administrative expense increased forby $8.2 million or 35% in the threesix months ended March 31, 2018 by $0.8 million,June 30, 2022 compared to the same period in 2017,2021. This increase was primarily due to anseverance and other expenses incurred due to the Company's Restructuring program in 2022 and increase in compensation costs and professional fees. The compensation costs increase was the result of new hiresfees as well as an increasea non-recurring sales tax refund recognized in stock-based compensation expense.
2021, which partially offset expenses in the same period in 2021.
| Three Months Ended March 31, | Increase/ (Decrease) | |||||||||||||||
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Other (expense) income, net | $ | (1.2 | ) | $ | 0.5 | $ | (1.7 | ) | (340)% | |||||||
| Three Months Ended June 30, | Increase/ (Decrease) | Six Months Ended June 30, | Increase/ (Decrease) | ||||||||||||||||||||||||||||||||||||||||||||
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| Other income, net | $ | 1.2 | $ | 0.9 | $ | 0.3 | 32 | % | $ | 1.2 | $ | 1.8 | $ | (0.6) | (33) | % | |||||||||||||||||||||||||||||||
Until the completion of
We closedmilestone payments, and research support payments generated from our IPO on May 3, 2017,strategic collaborations and licensing agreements.
In addition,
In addition to our existing cash and cash equivalents, we expect to continue to receive additional reimbursements from our existing and future research collaborations for research and development services rendered and additional milestone payments. However, our ability to receive future milestone payments is dependent upon the successful completion of specified research and development activities by Zymeworks and its collaborators and therefore is uncertain at this time.
Three Months March 31 | ||||||||
| 2018 | 2017 | |||||||
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Net cash provided by (used in): | ||||||||
Operating activities | $ | (17.6 | ) | $ | (12.7 | ) | ||
Investing activities | 12.6 | 6.6 | ||||||
Financing activities | 0.1 | — | ||||||
Effect of exchange rate changes on cash and cash equivalents | (0.1 | ) | 0.1 | |||||
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| Six Months Ended June 30, | |||||||||||
| 2022 | 2021 | ||||||||||
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| Net cash (used in) provided by: | |||||||||||
| Operating activities | $ | (110.2) | $ | (91.2) | |||||||
| Investing activities | (1.3) | 104.1 | |||||||||
| Financing activities | 108.3 | 2.8 | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | — | (0.6) | |||||||||
| Net change in cash and cash equivalents | $ | (3.2) | $ | 15.1 | |||||||
During the three months ended March 31, 2017, cash used in operating activities was $12.7 million, which consisted of a net loss of $15.9 million. The net loss was adjusted bynon-cash charges of $4.5 millionprimarily due to higher clinical trial expenses for zanidatamab and a net decrease of $1.3 million in our net operating assets. Thenon-cash charges primarily consisted of $3.0 million in stock-based compensation, $0.6 million in depreciationincreased drug manufacturing expenses as well as severance and amortization and $1.5 million in impairment charges, which were partiallyother expenses incurred due to the Company's Restructuring program, partly offset by a $0.6 million gain from valuation of warrant liabilities. The change in our net operating assetslower clinical trial expense for zanidatamab zovodotin and liabilities was primarily attributable to a decrease in our accounts payable and accrued liabilities of $2.3 million anddeprioritized research projects as well as increase in prepaid assets of $1.1 million, which was partially offset by decreaseproceeds from collaborations in SR&ED and accounts receivable of $2.1 million.
Investing Activities
equipment.
from the issuance of common shares in relation to our employee stock purchase plan.
Contractual Obligations See Part II, Item 1A, “Risk Factors - Risks Related to Our Business and Contingent Liabilities
Lease Commitments
We lease office premises in Vancouver, British Columbiathe Development and Seattle, Washington that expire in August 2021Commercialization of Our Product Candidates” and February 2022, respectively. We also lease laboratory space in Vancouver, British Columbia that will expire in August 2021. The leases contain rent escalation clauses. We also lease office equipment under capital lease agreements. Future minimum lease payments under thenon-cancellable operating leases and capital leases at March 31, 2018 are as follows:
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| Less Than 1 Year | 1 to 3 Years | 3 to 5 Years | More Than 5 Years | Total | ||||||||||||||||
| (dollars in thousands) | ||||||||||||||||||||
Capital lease obligations | 24 | 19 | 23 | 13 | 79 | |||||||||||||||
Operating lease obligations | 1,937 | 1,948 | 1,958 | 1,082 | 6,925 | |||||||||||||||
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Total contractual obligations | $ | 1,961 | $ | 1,967 | $ | 1,981 | $ | 1,095 | 7,004 | |||||||||||
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Other Commitments
We have entered into research collaboration agreements with strategic partners in the ordinary course of operations that may include contractual milestone payments related“Risk Factors - Risks Related to the achievement ofpre-specified research,
development, regulatory and commercialization events and indemnification provisions, which are common in such agreements. Pursuant to the agreements, we are obligated to make research and development and regulatory milestone payments upon the occurrence of certain events and royalty payments basedOur Dependence on net sales. The maximum amount of potential future indemnification is unlimited, however, we currently hold commercial and product liability insurance. This insurance limits our liability and may enable us to recover a portion of any future amounts paid. Historically, we have not made any indemnification payments under such agreements and we believe that the fair value of these indemnification obligations is minimal. Accordingly, we have not recognized any liabilities relating to these obligations for any period presented.
In August 2016, we entered into a license agreement with Innovative Targeting Solutions Inc., or ITS, to use ITS’ protein engineering technology for the development and commercialization of antibody and protein therapeutics. Pursuant to the agreement, we agreed to pay an aggregate of $12.0 million in annual licensing fees to ITS over a five-year period. Licensing fees paid have been recorded in intangible assets and are being amortized over a twelve-month period.Third Parties - We may also be requirednot realize the anticipated benefits of our strategic partnerships”.
In connection with our acquisitionability to enter into new arrangements;
Contingencies
From time to time,these securities may include liquidation or other preferences that adversely affect our shareholders’ rights. If we raise additional capital through debt financing, we may be subject to various legal proceedings and claims relatedcovenants limiting or restricting our ability to matters arisingtake specific actions, such as incurring additional debt, making capital
Off-Balance Sheet Arrangements
We have no material undisclosedoff-balance sheet arrangements that have,necessary debt or are reasonably likely to have, a current or future effect on our results of operations or financial condition.
equity financing more difficult, more costly and more dilutive.
JOBS Act Accounting Election
In April 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.
Item 3. Quantitative |
Management believes there have been no material changes to our quantitative and qualitative disclosures about market risks during the three months ended March 31, 2018, compared to those discussed in our Annual Report on Form10-K for the year ended December 31, 2017, filed with the SEC.
Qualitative Disclosure About Market Risk
We
Our operating results and financial position We are reported insubject to foreign currency translation risk when translating these foreign currency denominated net monetary assets to U.S. dollars in ourfor period end financial statements.statement preparation. The fluctuation of the Canadian dollar in relationrelative to the U.S. dollar will consequently have an impact upon ouron the reported balances for net assets, net loss and may also affect the value ofshareholders’ equity in our assets and the amount of shareholders equity.interim condensed consolidated financial statements. A hypothetical 10% increase (decrease) in the value of the Canadian dollar relative to the U.S. dollar would result in a foreign exchange gain (loss) of $0.4$0.6 million being recorded in theour Condensed Consolidated StatementsStatement of Loss and Comprehensive Loss onfor the translationsix months ended June 30, 2022.
The term “disclosure controls and procedures,” as defined in Part 1, Subsection 1.1 ofNI 52-109, means controls and other procedures of an issuer that are designed to provide reasonable assurance that information required to be disclosed by the issuer in its annual filings, interim filings or other reports filed or submitted by it under securities legislation is recorded, processed, summarized and reported within the time periods specified in the securities legislation. Such controls and procedures include controls and procedures designed to ensure that information required to be disclosed by an issuer in its annual filings, interim filings or other reports filed or submitted under securities legislation is accumulated and communicated to the issuer’s management, including its certifying officers, as appropriate, to allow timely decisions regarding required disclosure.
See “Cautionary Note Regarding Forward-Looking Statements.” The risks below are not the only risks facing our company. Risks other risks that we face, can be found below under the heading “Risk Factors” and should be carefully considered, together with other information in this Form 10-Q and our other filings with the SEC, before making an investment decision regarding our common shares.Relatedand uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, results of operations, and/or prospects. Our BusinessRisk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.Developmentprincipal factors that make an investment in our common shares speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and Commercialization of Our Product Candidates preclinical or early clinical development. If we do not obtain regulatory approval of one or more of our product candidates, or experience significant delays in doing so, our business will be materially adversely affected.early stages ofclinical development and we have not submitted an application, or received marketing approval, for any of our product candidates. Furthermore, the fact that our core competencies have been recognized through strategic partnerships does not improve our product candidates’ outlook for regulatory approval. We have limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA. Obtaining regulatory approval of our product candidates will depend on many factors, including, but not limited to, the following:including:successfully completing formulation and process development activities;
Clinical trials are very expensive, time consuming, and difficult to design and implement, and involve uncertain outcomes. Furthermore, the results of previous preclinical studies and clinical trials may not be predictive of future results, and the results of our current and planned clinical trials may not satisfy the requirements of the FDA ornon-U.S. comparable regulatory authorities outside the United States.
A BLA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety, purity and efficacy for each desired indication. The BLA must also include significant information regarding the manufacturing controls for the product. The novel nature of our product candidates may introduce uncertain, complex, expensive and lengthy challenges that could impact regulatory approval. Even if we eventually complete clinical testing and receive approval of any regulatory filing for our product candidates, the FDA or foreign health authorities may approve our product candidates for a more limited indication or a narrower patient population than we originally requested.
basis or at all.
advanced. In some instances, there can be significant variability in safety or efficacy results between different trials of the same product candidate due to numerous factors, including changes in trial protocols, differences in size and type of the patient populations, adherence to the dosing regimen and other trial protocols and the rate of dropout among clinical trial participants. We do not know whether any Phase 2, Phase 3 or other clinical trials we or any of our strategic partners may conduct will demonstrate consistent or adequate efficacy and safety to obtain regulatory approval to market our product candidates.
we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.
favorable safety profile in humans. The results of these and future clinical trials may show that ZW25zanidatamab, zanidatamab zovodotin or our other product candidates cause undesirable or unacceptable side effects, which could interrupt, delay or halt clinical trials, and result in delay of, or failure to obtain, marketing approval from the FDA and other regulatory authorities, or result in marketing approval from the FDA and other regulatory authorities with restrictive label warnings, limited patient populations or potential product liability claims. Even if we believe that our Phase 1 clinical trialtrials and preclinical studies demonstrate the safety and efficacy of our product candidates, only the FDA and other
consist both of small moleculesmall-molecule drug products, as well as biologics that work by using next-generation antibody therapeutic platforms to address specific cancer targets. In addition, severalThese companies are also developing bispecific antibodies. Other companies are developing new treatments for cancer that enhance the Fc regions of antibodies to create more potent antibodies, including Macrogenics,include MacroGenics, Inc., XenCor, Inc.AstraZeneca PLC/Daiichi Sankyo, Roche AG, Seagen and F.Hoffmann-La Roche AG.
others.
Our product candidates, for which
Our abilityexpect to compete may be affected in many cases by insurerswith biosimilar versions of already approved products like trastuzumab or other third-party payors seeking to encourage the use of biosimilar products. Biosimilar products are expected to become available over the coming years. Evenpertuzumab, and even if our product candidates achieve marketing approval, they may be priced atchallenged to achieve a significantprice premium over competitive biosimilar products if any have been approved by then. and will compete for market share with them.
that could significantly shorten the exclusivity period for biologics.
Regulatory authorities in some jurisdictions, including the United States and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act, the FDA may designate a product candidate as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the United States.
Even if we obtain orphan drug exclusivity for ZW25,zanidatamab, or for any other product candidates that receive an Orphan Drug Designation in the future, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Further, in the United States, even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition submitted by a competitor if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care. If we failare unable to maintain our current Orphan Drug Designations formanufacture sufficient supply of our product candidate, ZW25, or for any other product candidates that receive an Orphan Drug Designation into meet the future, or ifneeds of patients, the FDA approves Orphan Drug Designationcan withdraw
the exclusivity period.
Congress is currently considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases and allowing Medicare to negotiate drug pricing for certain drugs. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved.
regulatory authorities. Moreover, eligibility for coverage and reimbursement does not imply that a drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution expenses. Interim reimbursement levels for new drugs, if applicable, may also be insufficient to cover our and any collaborator’s costs and may not be made permanent. Reimbursement rates may vary according to the use of the drug and the clinical setting in which it is used, may be based on reimbursement levels already set for lower cost drugs and may be incorporated into existing payments for other services. Net prices for drugs may be reduced by mandatory discounts or rebates required by government healthcare programs or private payors and by any future relaxation of laws that presentlycurrently restrict imports of drugs from countries where they may be sold at lower prices than in the United States. Our or any collaborator’s inability to promptly obtain coverage and profitable payment rates from both government-funded and private payors for any approved products that we or our strategic partners develop could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize product candidates and our overall financial condition.
We may expend our limited resources to pursue a particular product candidate or indication and fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs, therapeutic platforms and product candidates that we identify for specific indications. As a result, we may forego or delay pursuit of opportunities with other therapeutic platforms or product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. Our spending on current and future research and development programs, therapeutic platforms and product candidates for specific indications may not yield any commercially viable products. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.
A key element of our strategy is
If any of our product candidates are approved for commercial sale, we will be highly dependent upon consumer perceptions of us and the safety and quality of our products. We could be adversely affected if we are subject to negative publicity. We could also be adversely affected if any of our products or any similar products distributed by other companies prove to be, or are asserted to be, harmful to patients. Because of our dependence upon consumer perceptions, any adverse publicity associated with illness or other adverse effects resulting from patients’ use or misuse of our products or any similar products distributed by other companies could have a material adverse impact on our financial condition or results of operations.
Changes
Acquisitions or joint ventures
Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks associated with specific countries.
Foreign
The secure processing, storage, maintenance and transmission of this critical information are vital to our operations and business strategy, and we devote significant resources to protecting such information.
we take measures designed to protect sensitive information from unauthorized access or disclosure, our information technology and infrastructure and thatthose of anyour CROs and our other third-party billing and collections provider weservice providers may utilize may be vulnerable to attacks by hackers or viruses or breached, interrupted or compromised due to employee error, malfeasance inadvertent or intentional actions by our employees, contractors, business partners, and/or other disruptions.third parties, or from cyber-attacks by malicious third parties (including supply chain cyber attacks or the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information). Any such breach, incident, or interruption could compromise systems and networks used in our networksbusiness and lead to the loss, destruction, alteration, prevention of access to, disclosure, or dissemination of, or damage or unauthorized access to, our data (including trade secrets or other confidential information, stored thereintellectual property, proprietary business information, and personal information) or data that is processed or maintained on our behalf, or other assets, which could be accessed by unauthorized parties, publicly disclosed, lost or stolen.result in financial, legal, business and reputational harm to us. Any such access, disclosure or other loss of informationevent could result in legal claims, demands and litigation or governmental investigations or other proceedings, liability under laws that protect the privacy of personal information, such as HIPAA,the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), and regulatory penalties.penalties and other liabilities. Although we have implemented security measures and a formal enterprise security program designed to prevent unauthorized access to patientsensitive data, there is no guarantee that we or our third-party service providers can continue to protect our systems or networks or other systems or networks used in our business from breach. Unauthorizedsecurity breaches, incidents, or compromises. Any loss, destruction, alteration, prevention of access lossto, disclosure, or dissemination of, or damage or unauthorized access to, our data or other data that is processed or maintained on our behalf could also disrupt our operations (including our ability to conduct our analyses, provide test results, bill payors orpay providers, process claims and appeals, conduct research and development activities, collect, process and prepare company financial information, provide information about any future products, and manage the administrative aspects of our business) and damage our reputation, any of which could adversely affect our business.
The U.S. Office
In addition to HIPAA, other applicable data privacy and security obligations, including U.S. state data breach notification laws, may require us to notify relevant stakeholders of any security breaches or incidents that result in the unauthorized disclosure, or dissemination of, personal information. Such disclosures are costly, and the disclosures or the failure to comply with such requirements, could lead to adverse impacts.
Furthermore, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on other third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business.
stated goals of containing healthcare costs, improving quality and expanding access. In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.
Since its enactment,PPACA, there have been executive, judicial and Congressional challenges to certain aspects of the PPACA, including recent tax legislationjudicial challenges in the Fifth Circuit Court and the United States Supreme Court. In June 2021, the United States Supreme Court held that removed the financial penalties for people who do not carry health insurance. There is still uncertainty asTexas and other challengers had no legal standing to whetherchallenge the PPACA, dismissing the case without specifically ruling on the constitutionality of the PPACA. Accordingly, the PPACA remains in effect in its current form. It is unclear how this Supreme Court decision, future litigation, or healthcare measures promulgated by the Biden administration will undergo additional revisions,impact our business, financial condition and we cannot predict the impactresults of operations. Complying with any future modifications,new legislation or changes in healthcare regulation could be time-intensive and it is uncertain how any such proposals, if approved, would affect these provisions.
In addition, otherexpensive, resulting in a material adverse effect on our business.
statute of limitations period for the government to recover overpayments to providers from three to five years. These laws may result in additional reductions in Medicare and other healthcare funding, which could have a material adverse effect on potential customers for our product candidates, if approved, and, accordingly, our future financial operations. Also, there hasWe are unable to predict the future course of federal or state health care legislation or foreign regulations relating to the marketing, pricing and reimbursement of pharmaceutical products.
pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. No legislation or administrative actions have been finalized to implement these principles. Further, Congress is considering legislation that, if passed, could have significant impact on prices of prescription drugs covered by Medicare, including limitations on drug price increases and allowing Medicare to negotiate pricing for certain drugs. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product candidates if approved. Complying with any new legislation and regulatory changes could be time-intensive and expensive, resulting in a material adverse effect on our business.
without limitation, the federal Anti-Kickback StatuteAKS and the federal False Claims Act, that may constrain the business or financial arrangements and relationships through which we conduct clinical research on product candidates and market, sell and distribute any products for which we obtain marketing approval. In addition, we may be subject to transparency laws and patient privacy regulation by the federal government and by the U.S. states and foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign healthcare laws and regulations that may affect our ability to operate include but are not limited to, the following:Anti-Kickback Statute,AKS, which prohibits, among other things, persons from knowingly and willfully soliciting, offering, receiving or providing remuneration (including any kickback, bribe or rebate), directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service for which payment may be made under federal and state healthcare programs such as Medicare and Medicaid;
•HIPAA established the U.S. Health Insurance Portability and Accountability Actfederal offense of 1996, or HIPAA,health care fraud, which among other things, imposes criminal liability for knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or to obtain, by means of false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody
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We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets. We can face criminal liability and other serious consequences for violations whichthat can harm our business.
depress our market value and could impair our ability to raise capital, expand our business, develop other product candidates, or continue our operations. A decline in the value of our company could also cause our shareholders to lose all or part of their investment.
near term.
Although it is difficult to predict our liquidity requirements, based upon our current operating plan, we believe that our existing cash and cash equivalents and short term investments will enable us to fund oursignificantly reduce operating expenses and capital expenditure requirement into 2019. We may also be eligible to receive certain research, development and commercial milestone payments in the future, as described under “Business – Strategic Partnerships and Collaborations.” However, because successful developmentdelay, scale back or eliminate one or more of our product candidatesdevelopment programs or our business operations. In January 2022, we began implementing a Company-wide reduction in workforce to help achieve a more cost-efficient organization, which we believe will enhance our ability to execute on our key priorities. The target of the reduction in workforce was to reduce employee headcount by at least 25% by the end of 2022. As of March 31, 2022, we exceeded the previously announced workforce reduction of 25%, ahead of schedule; however, the full scope, scale and impact of the achievementreduction in workforce is not yet known.
If sufficient funds on acceptable terms are not available when needed, or at all, we could be forced to significantly reduce operating expenses and delay, scale back or eliminate one or more of our development programs or our business operations.
Unstable market and economic conditions may have serious adverse consequences on our business and financial condition.
Global credit and financial markets experienced extreme disruptions at various points over the last decade, characterized by diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, increases in unemployment rates and uncertainty about economic stability. If another such disruption in credit and financial markets and deterioration of confidence in economic conditions occurs, our business may be adversely affected. If the equity and credit markets were to deteriorate significantly in the future, it may make any necessary debt or equity financing more difficult to complete, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and share price and could require us to delay or abandon development or commercialization plans. In addition, there is a risk that one or more of our current strategic partners, service providers, manufacturers and other partners would not survive or be able to meet their commitments to us under such circumstances, which could directly affect our ability to attain our operating goals on schedule and on budget.
We are subject to risks associated with currency fluctuations, and changes in foreign currency exchange rates could impact our results of operations.
Management assesses its functional currency to be the U.S. dollar based on management’s analysis of the primary economic environment in which we operate.
As of March 31, 2018, approximately 7.4% of our cash and cash equivalents was denominated in Canadian dollars. Fluctuations in U.S. dollar and Canadian dollar exchange rates could result in a material increase in reported expenses relative to revenue, and therefore could cause our operating income (expense) to appear to decline materially. Fluctuations in foreign currency exchange rates also impact the reporting of our receivables and payables innon-Canadian currencies. As a result of such foreign currency fluctuations, it could be more difficult to detect underlying trends in our business and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our results of operations to differ from our expectations or the expectations of our investors, the trading price of our common shares could be adversely affected.
From time to time, we may engage in exchange rate hedging activities in an effort to mitigate the impact of exchange rate fluctuations. For example, we maintain a natural currency hedge against fluctuations in the U.S./Canadian foreign exchange rate by matching the amount of U.S. dollar and Canadian dollar investments to the expected amount of future U.S. dollar and Canadian dollar obligations, respectively. Any hedging technique we implement may fail to be effective. If our hedging activities are not effective, changes in currency exchange rates may have a more significant impact on the trading price of our common shares.
Risks Related to Our Dependence on Third Parties
partners’ operations or business.Werealizehave the anticipated benefitsability or the development capabilities to perform their obligations as expected, including as a result of the impact of the COVID-19 pandemic on our strategic partnerships.Moreover, our estimates of the potential revenue we are eligible to receive under our strategic partnerships may include potential payments in respect of therapeutic programs for which our partners have discontinued development or may discontinue development in the future. Furthermore, our strategic partners may not keep us informed as to the status of theirin-house research activities and they may fail to exercise options embedded within certain agreements. Any discontinuation of product development by our strategic partners could reduce the amounts receivable under our strategic partnerships below the stated amounts we are eligible to receive under those agreements. If we do not receive the funding we expect under theseour strategic partnership agreements, our development of our therapeutic platforms and product candidates could be delayed and we may need additional resources to develop product candidates and our therapeutic platforms. All of the risks relating to product development, regulatory approval and commercialization described in this Quarterly Report on Form10-Q also apply to the activities of our program strategic partners. For example, in 2017 Lilly nominated a bispecific candidate from their 2014 agreement with us for preclinical development and discontinued the development of two other bispecific antibodies due to strategic portfolio realignment in those particular disease areas. As a result, we have updated our projections and are currently eligible to receive up to $125.0 million under this agreement, comprised of research milestone payments of up to $2.0 million ($2.0 million earned in 2016), IND submission milestone payments of up to $8.0 million, development milestone payments of up to $20.0 million and commercial milestone payments of up to $95.0 million.Additionally, subject to its contractual obligations to us, if one of our strategic partners is involved in a business combination, the partner might deemphasize or terminate the development or commercialization of any product candidate licensed to it by us. If one of our strategic partners terminates its agreement with us, we may find it more difficult to attract new partners.
collaboration and the proposed strategic partner’s evaluation of a number of factors. These factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing products, the existence of uncertainty with respect to our ownership of technology, which can exist if there is a challenge to such ownership without regard to the merits of the challenge, and industry and market conditions generally. The strategic partner may also consider alternative
Reliance
comply
The manufacture of our product candidates is complex. We and our
The manufacture of biopharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. The process of manufacturing our product candidates is extremely susceptible to product loss due to contamination, equipmentin doing so. Such failure or improper installation or operation of equipment, vendor or operator error, contamination and inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processessubstantial delay could result in reduced production yields, product defectsmaterially harm our business.
development timelines.
Ultimately, we are responsible for ensuring that each of our clinical trials is conducted in accordance with the applicable protocol, legal, regulatory and scientific standards, and our reliance on third parties does not relieve us of our regulatory responsibilities.
Risks Related to Our Intellectual Property
if a license to necessary technology is terminated, the licensor may initiate litigation claiming that our processes or products infringe or misappropriate their patent or other intellectual property rights and/or
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These lawsuits would be costly and could affect our results of operations and divert the attention of our management and scientific personnel. Some of our competitors may be able to sustain the cost of such litigation and proceedings more effectively than we can because of their substantially greater resources. There is a risk that a court would decide that we or our strategic partners are infringing thea third party’s patents and would order us or our strategic partners to stop the activities or stop the manufacture, use, or sale of any product covered by the patents. In that event, we or our strategic partners may not have a viable alternative to the technology protected by the patent and may need to halt work on the affected product candidate or cease commercialization of an approved product. In addition, there is a risk that a court willwould order us or our strategic partners to pay third-party damages or some other monetary award, depending upon the jurisdiction. An adverse outcome in any litigation or other proceeding could subject us to significant liabilities to third parties, potentially including treble damages and attorneys’ fees if we are found to have willfully infringed, and we may be required to cease using the technology that is at issue or to license the technology from third parties. We may not be able to obtain any required licenses on commercially acceptable terms or at all. Any of these outcomes could have a material adverse effect on our business.
publications of discoveries in scientific literature lag behind actual discoveries, we cannot be certain that we were the first to make the inventions claimed in our issued patents or pending patent applications, or that we were the first to file for protection of the inventions set forth in our patents or patent applications. As a result, we may not be able to obtain or maintain protection for certain inventions. Therefore, the issuance, validity, enforceability, scope and commercial value of our patents in the United States and in foreignother countries cannot be predicted with certainty and, as a result, any patents that we own or license may
Patent terms may be inadequate to protect our competitive position on our product candidates for an adequate amount of time.
We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security of our premises and physical and electronic security of our information technology systems and cloud storage sources, but such security measures may be breached, including through cyber-hacking or cyberattacks, and we may not have adequate remedies for any breach.
addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.
evidentiary standard in USPTO proceedings compared to the evidentiary standard in United StatesU.S. federal court necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action.
noncompliance with our policies and procedures.
In addition, employees may become subject of allegations of gender discrimination and other misconduct that are not in compliance with our policies and procedures, which, regardless of the ultimate outcome, may result in adverse publicity that could materially harm our brand, reputation and business.
purchasing, leasing, ordering or arranging for the purchase, lease or order of any healthcare item or service reimbursable under Medicare, Medicaid or other federally financed healthcare programs. This statute has been interpreted to apply to arrangements between pharmaceutical manufacturers on the one hand and prescribers, purchasers and formulary managers on the other. Although there are several statutory exemptions and regulatory safe harbors protecting certain common activities from prosecution, the exemptions and safe harbors are drawn narrowly, and practices that involve remuneration intended to induce prescribing, purchasing or recommending may be subject to scrutiny if they do not qualify for an exemption or safe harbor. Most states also have statutes or regulations similar to the federal anti-kickback law and federal false claims laws, which may apply to items such as pharmaceutical products and services reimbursed by private insurers. Administrative, civil and criminal sanctions may be imposed under these federal and state laws.
Over the past few years, a number of pharmaceutical and other healthcare companies have been prosecuted under these laws for a variety of promotional and marketing activities, such as:
The civil monetary penalties statute imposes penalties against any person or entity who, among other things, is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent.
Medicare, Medicaid or the Children’s Health Insurance Program (with certain exceptions) to report annually information related to certain payments or other transfers of value made or distributedin the previous year to covered recipients, including physicians, and teaching hospitals, or to entities or individuals at the request of, or designated on behalf of, the physiciansas defined by law, and teaching hospitals and, effective for data reported in 2022, expanded to report annuallyinclude nurse practitioners, physician assistants, clinical nurse specialists, certified registered nurse anesthetists and anesthesiologist assistants, and certified nurse-midwives, including certain ownership and investment interests held by physicians andor their immediate family members. Failure to comply with the required reporting requirements could subject applicable reporting entities such as manufacturers and others to substantial civil moneymonetary penalties.
We expect to change from foreign private issuer to U.S. domestic issuer status in the future, which may result in additional costs and expenses to us.
We are currently a “foreign private issuer,” as such term is defined in Rule 405 under the U.S. Securities Act
directors or executive officers are U.S. citizens or residents; (ii) a majority of our assets are located in the United States; or (iii) our business is administered principally in the United States. As of December 31, 2017, the majority of our common shares are held in the United States. Moreover, the majority of our directors are U.S. citizens. Accordingly, with the expectation that we may no longer be considered a foreign private issuer as of the next determination date, we have voluntarily chosen to file periodic reports on U.S. domestic issuer forms, beginning with this Quarterly Report on Form10-Q. The next determination date with respect to our foreign private issuer status is June 30, 2018. If, as we expect, we no longer qualify as a foreign private issuer on that determination date, as of January 1, 2019 we will no longer be eligible to use the rules and forms designated for foreign private issuers and we will be considered a U.S. domestic issuer. The regulatory and compliance costs to us under U.S. securities laws as a U.S. domestic issuer may be significantly more than the costs incurred as a foreign private issuer. If we are not a foreign private issuer, we will be required to file periodic and current reports and registration statements on U.S. domestic issuer forms with the SEC, which are generally more detailed and extensive than the forms available to a foreign private issuer. In addition, we will no longer be eligible to rely upon exemptions from corporate governance requirements that are available to foreign private issuers or to benefit from other accomodations for foreign private issuers under the rules of the SEC or NYSE.
Risks Related to Employee Matters and Managing Growth
Recruiting
We will
contract with other organizations to provide these capabilities for us. Future growth would impose significant added responsibilities on members of management, including the need to identify, recruit, maintain, motivate and integrate additional employees. Also, our management may need to divert a disproportionate amount of their attention away from ourday-to-day activities and devote a substantial amount of time to
common shares.
We incur significant costs
As a public company, we incur significant legal, accountingapply these funds effectively could negatively affect our ability to operate and other expenses. In addition,grow our administrative staff are required to perform additional tasks not required for a private company. For example, as a public company, we have adopted additional internal controls and disclosure controls and procedures, retained a transfer agent and adopted an insider trading policy. As a public company, we bearbusiness.
our fundraising efforts. In addition, regulationsthe amount, allocation and standards relating to corporate governance and public disclosure,timing of our actual expenditures will depend upon numerous factors, including the Sarbanes-Oxley Act and the related rules and regulations implemented by the SEC, the applicable Canadian securities regulators, the New York Stock Exchange, or NYSE, and the Toronto Stock Exchange, or TSX, have legal and financial compliance costs and make some compliance activities time consuming. We intend to invest resources to comply with evolving laws, regulations and standards, and such investment will result in increased general and administrative expenses and may divert management’s time and attentionmilestone payments received from our other business activities. If our efforts to comply with new laws, regulationsstrategic partnerships and standards differ fromroyalties received on sale of any future approved product. Accordingly, we will have broad discretion in using these proceeds. Until the activities intended by
regulatory or governing bodies due to ambiguities related to practice, regulatory authorities may initiate legal proceedings against us and our businessnet proceeds are used, they may be harmed. Additionally, as a public company, we maintain our directors’ and officers’ liability insurance coverage, which resultsplaced in higher insurance costs. In the future, itinvestments that do not produce significant income or that may be more expensive or more difficult for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified memberslose value.
Under the corporate governance standards of the NYSE, a majority of our board of directors and each member of our audit committee must be an independent director no later than the first anniversary of the completion of our initial public offering (IPO). The policies of the TSX require our board of directors to consist of at least two independent directors and Canadian securities laws require each member of the audit committee to be independent within the meaning of Canadian securities laws. As of the date of this Quarterly Report on Form10-Q, we meet these requirements but we may in the future encounter difficulty in attracting and retaining qualified persons to serve on our board of directors and the audit committee, and our board of directors and management may be required to divert significant time and attention and resources away from our business to identify qualified directors. If we fail to attract and retain the required number of independent directors, we may be subject to the delisting of our common shares from the NYSE and TSX.
As a foreign private issuer, we are subject to different U.S. securities laws and rules than a U.S. domestic issuer, in particular, certain disclosure requirements, which could limit the information publicly available to our shareholders.
As a foreign private issuer, we are currently not required to comply with all of the periodic disclosure and current reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, that apply to U.S. domestic issuers and, as such, there may be less publicly available information about us than if we were a U.S. domestic issuer. Furthermore, our officers, directors and principal shareholders are currently exempt from the insider reporting and short-swing profit recovery requirements in Section 16 of the Exchange Act. Accordingly, our shareholders may not know on as timely a basis when our officers, directors and principal shareholders purchase or sell their common shares, as the reporting deadlines under the corresponding Canadian insider reporting requirements are longer. As a foreign private issuer, we are also exempt from the requirements of Regulation FD (Fair Disclosure) which, generally, are meant to ensure that select groups of investors are not privy to specific information about an issuer before other investors. As a result of such varied reporting obligations, shareholders should not expect to receive the same information at the same time as information provided by U.S. domestic issuers.
In addition, as a foreign private issuer, we have the option to follow certain Canadian corporate governance practices rather than those of the United States, except to the extent that such laws would be contrary to U.S. securities laws, provided that we disclose the requirements we are not following and describe the Canadian practices we follow instead. As a result, our shareholders may not have the same protections afforded to shareholders of companies that are subject to all domestic U.S. corporate governance requirements. As described elsewhere in this Quarterly Report on Form10-Q, we expect to no longer qualify as a foreign private issuer as of our next determination date of June 30, 2018, such that as of January 1, 2019, we will be considered a U.S. domestic issuer.
We are an emerging growth company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to emerging growth companies could make our common shares less attractive to investors.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or JOBS Act. For as long as we continue to be an emerging growth company, we may choose to take advantage of exemptions from various reporting requirements applicable to other public companies that are not emerging growth
companies, including, but not limited to, not being required to have our independent registered public accounting firm audit our internal control over financial reporting under Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years following the completion of our IPO on May 3, 2017, although, if we have more than $1.07 billion in annual revenue, if the market value of our common shares held bynon-affiliates exceeds $700 million as of June 30 of any year, or we issue more than $1.0 billion ofnon-convertible debt over a three-year period before the end of that five-year period, we would cease to be an emerging growth company as of the following December 31. Investors could find our common shares less attractive if we choose to rely on these exemptions. If some investors find our common shares less attractive as a result of any choices to reduce future disclosure, there may be a less active trading market for our common shares and our share price may be more volatile.
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results or prevent fraud. As a result, shareholders could lose confidence in our financial and other public reporting, which would harm our business and the trading price of our common shares.
Effective internal control over financial reporting is necessary for us to provide reliable financial reports and, together with adequate disclosure controls and procedures, are designed to prevent fraud. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could cause us to fail to meet our reporting obligations.
Pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, and related rules adopted by the SEC and the U.S. Public Company Accounting Oversight Board, or PCAOB, and National Instrument52-109 — Certification of Disclosure in Issuers’ Annual and Interim Filings, or NI52-109, our management is required to disclose changes made in our internal control over financial reporting on a quarterly basis and assess the effectiveness of our disclosure controls and procedures annually. We have elected to take advantage of certain exceptions from reporting requirements that are available to emerging growth companies under the JOBS Act and therefore we are not required to deliver an auditor’s attestation report on the effectiveness of our internal control over financial reporting pursuant to Section 404 until after the date we are no longer an emerging growth company. We could be an emerging growth company for up to five years from our IPO, although circumstances could cause us to lose that status earlier, including if the market value of our shares held bynon-affiliates exceeds $700 million as of any June 30 before that time, in which case we would no longer be an emerging growth company as of the following December 31. An independent assessment of the effectiveness of our internal control could detect problems that our management’s assessment might not. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation. Inferior internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our common shares.
Our management and independent registered public accounting firm did not perform an evaluation of the design and operating effectiveness of our internal control over financial reporting in accordance with the provisions of Section 404 and NI52-109 as of December 31, 2015 and December 31, 2016. Had we and our independent registered public accounting firm performed such an evaluation, control deficiencies may have been identified by management or our independent registered public accounting firm, and those control deficiencies could have also represented one or more material weaknesses. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
As of December 31, 2017, our management did perform an evaluation of the design and operating effectiveness of our internal control over financial reporting based on the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, or 2013 COSO Framework, in
accordance with the provisions of NI52-109. However, no independent assessment of the design and operating effectiveness of our internal controls was performed by our independent registered public accounting firm as of December 31, 2017 pursuant to certain exceptions under the JOBS Act, as described above. Had our independent registered public accounting firm performed such an evaluation, control deficiencies may have been identified by our independent registered public accounting firm and those control deficiencies could have also represented one or more material weaknesses. Undetected material weaknesses in our internal controls could lead to financial statement restatements and require us to incur the expense of remediation.
We are at risk of securities class action litigation.
In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology companies have experienced significant stock price volatility in recent years and our stock price declined following our IPO. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could materially harm our business.
We do not anticipate paying cash dividends for the foreseeable future, and accordingly, shareholders must rely on share appreciation for any return on their investment.
The NYSE or TSX may delist our securities from its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our securities may fail to meet the continued listing requirements to be listed on the NYSE or TSX. If the NYSE or TSX delists our common shares from trading on its exchange, we could face significant material adverse consequences, including:
We are governed by the corporate laws of Canada, which in some cases have a different effect on shareholders than the corporate laws of the United States.
and (ii) under the BCBCA a holder of 5% or more of our common shares can requisition a special meeting of shareholders, whereas such right does not exist under the DGCL. We cannot predict whether investors willInvestors may find our company and our common shares less attractive because we are governed by foreign laws.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.
The trading market for our common shares will depend on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. We cannot assure that analysts will cover us or provide accurate or favorable coverage. If one or more of the analysts who cover us downgrade our stock or change their opinion
U.S. holders of the company’s shares may suffer adverse U.S. federal income tax consequences if we are characterized as a passive foreign investment company.
may mitigate certain possible adverse U.S. federal income tax consequences but may result in an inclusion in gross income without receipt of such income.
Insiders haveaggregate, could exert substantial control over us which could delay or prevent a change in corporate control or result in the entrenchment of management or the board of directors.
shares entitled to votevotes cast on such approval;proposal;
Item 2. Unregistered Sales |
We did not make sales of equity securities during our fiscal quarter ended March 31, 2018 that were not registered under theEquity Securities Act.
On May 3, 2017, we consummated our initial public offering and sold 4,500,000 sharesUse of common stock at an initial offering price of $13.00 per share for aggregate gross proceeds of $58.5 million before deducting underwriting discounts and commissions and offering expenses paid by us. On May 31, 2017 we completed the sale of an additional 394,467 shares of common stock at an initial offering price of $13.00 per share pursuant to the partial exercise by the underwriters of their over-allotment option, for additional gross proceeds of $5.1 million before deducting underwriting discounts and commissions and offering expenses paid by us. The offer and sale of all of the shares in our initial public offering, including shares sold pursuant to the over-allotment option, were registered under the Securities Act pursuant to a registration statement onForm F-1 (File No. 333-217100), which was declared effective by the SEC on April 27, 2017. We received net proceeds from our initial public offering of approximately $54.2 million, after deducting underwriting discounts and commissions of $4.5 million and offering expenses of approximately $4.9 million. Our planned “Use of Proceeds” as described in the final prospectus dated as of April 27, 2017 and filed with the SEC pursuant to Rule 424(b)(4) under the Securities Act on April 28, 2017 included the planned use of approximately $5.0 million to fund clinical development expenses for ZW33. As previously announced on March 14, 2018, we have decided to advance ZW49 in lieu of ZW33. As such, the $5.0 million allocated to ZW33 has been reallocated to ZW49. Other than this reallocation, there has been no material change in the use of proceeds from our planned “Use of Proceeds” as described in the final prospectus noted above.
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| 10.4#, † | ||||||||
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| 32.2 | ||||||||
| The following materials from the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2022, formatted in Inline XBRL | ||||||||
| Cover Page Interactive Data File (formatted as Inline XBRL | ||||||||
| † | Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K, but a copy will be furnished supplementally to the SEC upon request. | |||||||
| * | Certain portions of this exhibit (indicated by “[…***…]”) have been omitted in accordance with Item 601(b)(10) of Regulation S-K because the omitted information is not material and the Company customarily and actually treats such omitted information as private or confidential. | |||||||
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| By: | /s/ | |||||||||||
| Name: | ||||||||||||
| Title: | Chair of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | |||||||||||
| Date: | August 4, 2022 | |||||||||||
| By: | /s/ Christopher Astle | |||||||||||
| Name: | Christopher Astle | |||||||||||
| Title: | Senior Vice President and Chief Financial Officer (Principal | |||||||||||
| Date: | ||||||||||||
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