UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended March 31, 2022

☐TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934

From the transition period from to .

Commission File Number 001-35798

Humanigen, Inc.

(Exact name of registrant as specified in its charter)

Delaware		77-0557236
	~~FORM 10-Q~~

~~(Mark One)~~
	☒	~~QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934~~
~~For the quarterly period ended September 30, 2021~~
OR
	☐	~~TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT OF 1934~~
~~From the transition period from __________ to __________~~
~~Commission File Number 001-35798~~


	~~Humanigen, Inc.~~
	~~(Exact name of registrant as specified in its charter)~~

~~Delaware~~		~~77-0557236~~
(State or other jurisdiction of ~~incorporation)~~		(IRS Employer
incorporation)		Identification No.)
~~533 Airport Boulevard, Suite 400 Burlingame, CA 94010~~
~~(Address of principal executive offices)~~ ~~(Zip Code)~~
~~Registrant’s telephone number, including area code:~~ ~~(650) 243-3100~~

830 Morris Turnpike, 4th Floor

Short Hills, NJ 07078

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (973) 200-3100

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

Title of each class	Trading Symbol(s)	Name of each exchange on with registered
Common Stock	HGEN	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

Large accelerated filer ☐ ☒	Accelerated filer ☐

Non-accelerated filer ☒ ☐	Smaller reporting company ☒	☐

	Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of ~~November 9, 2021,~~May 2, 2022, there were ~~63,818,233~~70,633,705 shares of common stock of the issuer outstanding.

Unless the context indicates otherwise, the terms “Humanigen,” “we,” “us” and “our” refer to Humanigen, Inc., and its consolidated subsidiaries. This report also may include trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this report are the property of their respective owners.

TABLE OF CONTENTS

HUMANIGEN, INC.

FORM 10-Q

	~~Page~~
			Page

PART I.FINANCIAL INFORMATION			3 4

	Item 1.	Financial Statements (unaudited)	3 4

		Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3 4

		Condensed Consolidated Statements of Operations for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021~~and 2020~~	4 5

		Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and~~ ~~2020~~	5 6

		Condensed Consolidated Statements of Stockholders’ Equity (Deficit) for the Three ~~and Nine~~ Months Ended~~September 30, 2021~~ March 31, 2022 and ~~2020~~2021	6 7

		Notes to Condensed Consolidated Financial Statements	7 8


	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1816

	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2824

	Item 4.	Controls and Procedures	2824

PART II. OTHER INFORMATION			3025

	Item 1.	Legal Proceedings	3025

	Item 1A.	Risk Factors	3025

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	5925

	Item 3.	Defaults Upon Senior Securities	5926

	Item 4.	Mine Safety Disclosures	5926

	Item 5.	Other Information	5926

	Item 6.	Exhibits	6027

SIGNATURES			6128

Table of Contents

~~Table of Contents~~

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements

~~Item 1.Financial Statements~~

Humanigen, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share data)

(Unaudited)

	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	68,948		$	70,016
Prepaid expenses and other current assets		2,287			955
Total current assets		71,235			70,971

Other assets		90			90
Total assets	$	71,325		$	71,061

Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	47,873		$	44,698
Accrued expenses		19,181			19,882
Deferred revenue		4,127			4,145
Total current liabilities		71,181			68,725
Non-current liabilities:
Deferred revenue		-			1,018
Long-term debt		25,193			25,006
Total liabilities		96,374			94,749

Stockholders’ deficit:
Common stock, $0.001 par value: 225,000,000 shares authorized at
March 31, 2022 and December 31, 2021; 69,954,377 and 64,027,629 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively		70			64
Additional paid-in capital		607,238			587,327
Accumulated deficit		(632,357	)		(611,079	)
Total stockholders’ deficit		(25,049	)		(23,688	)
Total liabilities and stockholders’ deficit	$	71,325		$	71,061

September 30, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
76,500
$
67,737
Prepaid expenses and other current assets
1,347
475
Total current assets
77,847
68,212

Other assets
90
90
   Total assets
$
77,937
$
68,302

Liabilities and stockholders’ equity (deficit)
Current liabilities:
Accounts payable
$
45,962
$
15,366
Accrued expenses
18,602
3,175
Deferred revenue
4,145
1,874
Total current liabilities
68,709
20,415
Non-current liabilities:
Deferred revenue
2,054
2,342
Long-term debt
24,818
0-
   Total liabilities
95,581
22,757

Stockholders’ equity (deficit):
Common stock, $0.001 par value: 225,000,000 shares authorized at September 30, 2021 and December 31, 2020; 60,017,333 and 51,626,508 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively
60
52
Additional paid-in capital
559,835
419,923
Accumulated deficit
(577,539
)
(374,430
)
Total stockholders’ equity (deficit)
(17,644
)
45,545
   Total liabilities and stockholders’ equity (deficit)
$
77,937
$
68,302

See accompanying notes.

Table of Contents

~~Table of Contents~~

Humanigen, Inc.

Condensed Consolidated Statements of Operations

(in thousands, except share and per share data)

(Unaudited)

Three Months Ended September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
Revenue:
  License revenue
$
1,036
$
0-
$
2,558
$
0-
Total revenue
1,036
0-
2,558
0-

Operating expenses:
  Research and development
60,811
22,416
183,757
44,218
  General and administrative
6,204
8,331
19,228
11,685
Total operating expenses
67,015
30,747
202,985
55,903

Loss from operations
(65,979
)
(30,747
)
(200,427
)
(55,903
)

Other expense:
  Interest expense
(751
)
(3
)
(1,516
)
(1,336
)
  Other expense, net
(9
)
(1
)
(1,166
)
(1
)
Net loss
$
(66,739
)
$
(30,751
)
$
(203,109
)
$
(57,240
)

Basic and diluted net loss per common share
$
(1.12
)
$
(0.71
)
$
(3.56
)
$
(1.79
)

Weighted average common shares outstanding used to calculate basic and diluted net loss per common share
59,486,626
43,490,071
56,997,039
32,041,790

	Three Months Ended March 31,
	2022			2021
Revenue:
License revenue	$	1,036		$	486
Total revenue		1,036			486

Operating expenses:
Research and development		17,220			59,934
General and administrative		4,345			4,948
Total operating expenses		21,565			64,882

Loss from operations		(20,529	)		(64,396	)

Other expense:
Interest expense		(734	)		(19	)
Other expense, net		(15	)		(1,152	)
Net loss	$	(21,278	)	$	(65,567	)

Basic and diluted net loss per common share	$	(0.32	)	$	(1.25	)

Weighted average common shares outstanding used to
calculate basic and diluted net loss per common share		65,590,724			52,655,756

See accompanying notes.

Table of Contents

~~Table of Contents~~

Humanigen, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Three Months Ended March 31,
	2022			2021
Operating activities:
Net loss	$	(21,278	)	$	(65,567	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock based compensation expense		1,543			510
Non-cash interest expense related to debt financing		187			-
Changes in operating assets and liabilities:
Other receivable		-			(5,010	)
Prepaid expenses and other assets		(1,332	)		(381	)
Accounts payable		3,175			28,046
Accrued expenses		(701	)		2,523
Deferred revenue		(1,036	)		4,055
Net cash used in operating activities		(19,442	)		(35,824	)

Financing activities:
Net proceeds from issuance of common stock		18,374			36,106
Proceeds from exercise of stock options		-			429
Net proceeds from issuance of long-term debt		-			24,444
Net cash provided by financing activities		18,374			60,979

Net increase (decrease) in cash and cash equivalents		(1,068	)		25,155
Cash and cash equivalents, beginning of period		70,016			67,737
Cash and cash equivalents, end of period	$	68,948		$	92,892

Supplemental cash flow disclosure:
Cash paid for interest	$	550		$	4

Nine Months Ended September 30,
2021
2020
Operating activities:
Net loss
$
(203,109
)
$
(57,240
)
Adjustments to reconcile net loss to net cash used in operating activities:
  Stock based compensation expense
3,815
1,634
  Non-cash interest expense related to debt financing
374
706
  Issuance of common stock for payment of compensation
0-
78
  Issuance of common stock in exchange for services
0-
212
  Changes in operating assets and liabilities:
Prepaid expenses and other assets
(872
)
(309
)
Accounts payable
30,596
3,697
Accrued expenses
15,427
5,065
Deferred revenue
1,983
0-
Net cash used in operating activities
(151,786
)
(46,157
)

Investing activities:
  Purchase of intangible assets
0-
(20
)
Net cash used in investing activities
0-
(20
)

Financing activities:
  Net proceeds from issuance of common stock
134,140
139,760
  Proceeds from exercise of stock options
1,965
572
  Net proceeds from issuance of long-term debt
24,444
10
  Net proceeds from issuance of convertible notes
0-
467
  Net proceeds from issuance of PPP loan
0-
83
  Net proceeds from issuance of bridge notes
0-
350
  Payments on PPP loan
0-
(83
)
  Payments on bridge notes
0-
(2,400
)
  Payments on convertible notes
0-
(518
)
  Payments on notes payable to vendors
0-
(776
)
Net cash provided by financing activities
160,549
137,465

Net increase in cash and cash equivalents
8,763
91,288
Cash and cash equivalents, beginning of period
67,737
143
Cash and cash equivalents, end of period
$
76,500
$
91,431

Supplemental cash flow disclosure:
Cash paid for interest
$
961
$
671
Supplemental disclosure of non-cash investing and financing activities:
  Issuance of stock options in lieu of cash compensation
$
0-
$
180
  Issuance of warrants for services
$
0-
$
2,066
  Conversion of notes payable and related accrued interest and fees to common stock
$
0-
$
4,316

See accompanying notes.

Table of Contents

~~Table of Contents~~

Humanigen, Inc.

Condensed Consolidated Statements of Stockholders’ Equity (Deficit)

(in thousands, except share data)

~~(Unaudited)~~

Three and Nine Months Ended September 30, 2021
Total
Additional
Stockholders’
Common Stock
Paid-In
Accumulated
Equity
Shares
Amount
Capital
Deficit
(Deficit)
Balances at January 1, 2021
51,626,508
$
52
$
419,923
$
(374,430
)
$
45,545
Issuance of common stock, net of expenses
1,796,858
2
36,104
-
36,106
Issuance of common stock upon option exercise
233,323
-
429
-
429
Stock-based compensation expense
-
-
510
-
510
Net loss
-
-
-
(65,567
)
(65,567
)
Balances at March 31, 2021
53,656,689
54
456,966
(439,997
)
17,023
Issuance of common stock, net of expenses
5,427,017
5
94,167
-
94,172
Issuance of common stock upon option exercise
319,153
-
1,432
-
1,432
Stock-based compensation expense
-
-
1,871
-
1,871
Net loss
-
-
-
(70,803
)
(70,803
)
Balances at June 30, 2021
59,402,859
59
554,436
(510,800
)
43,695
Issuance of common stock, net of expenses
600,933
1
3,861
-
3,862
Issuance of common stock upon option exercise
13,541
-
104
-
104
Stock-based compensation expense
-
-
1,434
-
1,434
Net loss
-
-
-
(66,739
)
(66,739
)
Balances at September 30, 2021
60,017,333
$
60
$
559,835
$
(577,539
)
$
(17,644
)

(Unaudited)

	Three Months Ended March 31, 2022
										Total
					Additional					Stockholders’
	Common Stock				Paid-In		Accumulated			Equity
	Shares		Amount		Capital		Deficit			(Deficit)
Balances at January 1, 2022		64,027,629	$	64	$	587,327	$	(611,079	)	$	(23,688	)
Issuance of common stock, net of expenses		5,926,748		6		18,368		-			18,374
Stock-based compensation expense		-		-		1,543		-			1,543
Net loss		-		-		-		(21,278	)		(21,278	)
Balances at March 31, 2022		69,954,377	$	70	$	607,238	$	(632,357	)	$	(25,049	)

Three and Nine Months Ended September 30, 2020
Total
Common Stock
Additional
Paid-In
Accumulated
Stockholders’ Equity
Shares
Amount
Capital
Deficit
(Deficit)
Balances at January 1, 2020
22,806,890
$
22
$
270,555
$
(284,895
)
$
(14,318
)
Issuance of common stock, net of expenses
40,000
-
65
-
65
Issuance of common stock in exchange for services
5,868
-
13
-
13
Issuance of stock options for payment of compensation
-
-
133
-
133
Issuance of common stock for payment of compensation
9,599
-
19
-
19
Issuance of warrant for services
-
-
1
-
1
Stock-based compensation expense
-
-
265
-
265
Net loss
-
-
-
(2,467
)
(2,467
)
Balances at March 31, 2020
22,862,357
22
271,051
(287,362
)
(16,289
)
Issuance of common stock, net of expenses
16,505,744
17
66,987
-
67,004
Issuance of common stock for conversion of debt
2,397,916
3
4,313
-
4,316
Issuance of common stock in exchange for services
15,463
-
57
-
57
Issuance of stock options for payment of compensation
-
-
32
-
32
Issuance of common stock for payment of compensation
4,915
-
29
-
29
Issuance of warrant for services
-
-
117
-
117
Issuance of common stock upon option exercise
188,521
-
-
-
0-
Stock-based compensation expense
-
-
357
-
357
Net loss
-
-
-
(24,022
)
(24,022
)
Balances at June 30, 2020
41,974,916
42
342,943
(311,384
)
31,601
Issuance of common stock, net of expenses
9,200,000
10
72,681
-
72,691
Issuance of common stock in exchange for services
13,733
-
142
-
142
Issuance of stock options for payment of compensation
-
-
15
-
15
Issuance of common stock for payment of compensation
2,803
-
30
-
30
Issuance of warrant for services
-
-
1,948
-
1,948
Issuance of common stock upon option exercise
202,147
-
572
-
572
Issuance of common stock upon warrant exercise
222,909
-
10
-
10
Stock-based compensation expense
-
-
1,012
-
1,012
Net loss
-
-
-
(30,751
)
(30,751
)
Balances at September 30, 2020
51,616,508
$
52
$
419,353
$
(342,135
)
$
77,270

	Three Months Ended March 31, 2021

					Additional					Total
	Common Stock				Paid-In		Accumulated			Stockholders’
	Shares		Amount		Capital		Deficit			Equity
Balances at January 1, 2021		51,626,508	$	52	$	419,923	$	(374,430	)	$	45,545
Issuance of common stock, net of expenses		1,796,858		2		36,104		-			36,106
Issuance of common stock upon option exercise		233,323		-		429		-			429
Stock-based compensation expense		-		-		510		-			510
Net loss		-		-		-		(65,567	)		(65,567	)
Balances at March 31, 2021		53,656,689	$	54	$	456,966	$	(439,997	)	$	17,023

See accompanying notes.

Table of Contents

~~Table of Contents~~

Humanigen, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Nature of Operations

Description of the Business

Humanigen, Inc. (the “Company”) was incorporated on March 15, 2000 in California, reincorporated as a Delaware corporation in September 2001 as KaloBios Pharmaceuticals, Inc., and in August 2017, the Company changed its name to Humanigen, Inc.

The Company is a clinical stage biopharmaceutical company, developing its portfolio of proprietary Humaneered^®anti-inflammatory immunology and immuno-oncology monoclonal antibodies. The Company is focusing its efforts on the development of its lead product candidate, lenzilumab, its proprietary Humaneered® anti-human granulocyte-macrophage colony-stimulating factor (“GM-CSF”) monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated to neutralize GM-CSF, a cytokine that the Company believes is of critical importance in the hyperinflammatory cascade, sometimes referred to as cytokine release syndrome (“CRS”) or cytokine storm, associated with COVID-19, chimeric antigen receptor T-cell (“CAR-T”) therapy and acute Graft versus Host Disease (“aGvHD”) associated with bone marrow transplants. The Company believes the results from its Phase 3 study in COVID-19, its Phase 1b study in CAR-T, and four other clinical trials, support the mechanism of action of lenzilumab.

On May 5, 2021, data from the Company’s Phase 3, multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab as a potential therapeutic for hospitalized, hypoxic patients with COVID-19 pneumonia was published on MedRxiv, a non-peer reviewed journal. The Company refers to this study as the “LIVE-AIR” study. Data from LIVE-AIR support the previously reported primary endpoint that demonstrated lenzilumab improved the likelihood of survival without ventilation, (“SWOV”), sometimes referred to as “ventilator-free survival”, by 54% in the modified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.32, p=0.0403). SWOV also improved on a relative basis by 92% in subjects who received both corticosteroids and remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 3.04-fold in subjects with baseline C-reactive protein (“CRP”) levels <150 mg/L and age <85 years (3.04; 1.68–5.51, nominal p=0.0003). Survival was improved by 2.22-fold in subjects with baseline CRP<150 mg/L and age <85 years (nominal p=0.0337). Subjects in the LIVE-AIR study with baseline CRP<150 mg/L and age <85 years, 75% of all patients with an evaluable CRP at baseline, demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab.

The Company submitted an application for Emergency Use Authorization (“EUA”) of lenzilumab to the U.S. Food and Drug Administration (“FDA”) at the end of May 2021. On September 8, 2021, FDA declined the Company’s EUA request. FDA committed to working with the Company in the development of lenzilumab and invited the Company to submit additional data as it becomes available. The Company requested and has been granted a Type B meeting with FDA. Included in the briefing materials for the meeting request were day 60 data as well as detailed CRP analysis from the Company’s LIVE-AIR Phase 3 study.

The Company has submitted to the Medicines and Healthcare Products Regulatory Agency (“MHRA”), the pharmaceuticals and biologics regulatory agency in the United Kingdom (“UK”), all the required modules as well as a risk management plan and pediatric investigation plan for a Conditional Marketing Authorization (“CMA”) for the use of lenzilumab in hospitalized COVID-19 patients. The Company has also initiated the process for submission to the European Medicines Agency (“EMA”) of a Marketing Authorization Application (“MAA”) for the use of lenzilumab in the European Union and the EMA has appointed a rapporteur and co-rapporteur as part of the process related to this submission.

Lenzilumab was selected to be part of the ongoing Accelerating COVID-19 Therapeutic Interventions and Vaccines (“ACTIV”)-5 and Big Effect Trial, in the “B” arm of the trial (“BET-B”), referred to as the ACTIV-5/BET-B trial, which is sponsored and funded by the National Institutes of Health (“NIH”). ACTIV-5/BET-B currently has over 53 active U.S. sites and two Korean sites enrolling and has recently expanded to a potential of 70 sites. The study is evaluating lenzilumab in combination with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients with a 1:1 randomization. In July 2021, NIH advanced the ACTIV-5/BET-B study to a Phase 2/3 study and amended the protocol in a manner that aligns with the design of the LIVE-AIR study. The amended ACTIV-5/BET-B study protocol now includes target enrollment of up to 400 patients with a baseline CRP<150 mg/L, or up to 550 patients overall. Humanigen is providing lenzilumab and assisting the NIH to achieve the completion of the study.

The Company intends to submit a Biologics License Application (“BLA”) to FDA for lenzilumab in the treatment of hospitalized COVID-19 patients. Since BLAs typically require more than one study, the Company plans to include the results of the expanded ACTIV-5/BET-B study as a basis for a BLA-confirmatory study for lenzilumab and believes data from ACTIV-5/BET-B, along with LIVE-AIR, should provide the sufficient size and statistical power typically required for a BLA to be submitted to FDA.

~~Table of Contents~~

Lenzilumab also has been studied in a multi-center Phase 1b trial as a sequenced therapy with Yescarta® (axicabtagene ciloleucel) to prevent CRS and neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) (NCT04314843), for which the Company announced positive results. The Company intends to initiate a randomized, placebo-controlled, open-label, potentially registrational, Phase 3 study to evaluate the efficacy and safety of lenzilumab combined with commercially available CD19 CAR-T therapies in non-Hodgkin lymphoma in 2022 and has scheduled a meeting with FDA in December 2021 to discuss the study protocol. The Company currently plans to enroll approximately 250 patients in the study.

The Company also expects that a Phase 2/3, potentially registrational, trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for acute GvHD (the “Risk Adapted Therapy in Acute GvHD” or the “RATinG” study) is expected to begin enrollment in the first half of 2022. The study will be conducted by the IMPACT Partnership, a collection of 22 stem cell transplant centers located in the UK. The Company will provide lenzilumab for the study including the cost of import, labeling and distribution of the study drug, and support certain laboratory tests related to the study, but the majority of the study costs will be borne by the IMPACT Partnership.

In addition, the Company is in partnership with the South Australian Health & Medical Research Institute (“SAHMRI”) and the University of Adelaide to conduct a Phase 2 trial studying the efficacy of lenzilumab in combination with azacitadine in patients with chronic myelomonocytic leukemia (“CMML”). The study (“PREcision Approach to Chronic Myelomonocytic Leukemia” or “PREACH-M”) has begun enrollment at five sites in Australia and the first patient has been dosed. The Company will provide lenzilumab for this study and the majority of the study costs will be borne by the partner and funded by a grant from the Medical Research Futures Fund, a research fund set up by the Australian Government.

The Company’s proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. ~~The Company~~Humanigen has developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied its Humaneered technology to optimize them. ~~Lenzilumab~~The Company’s lead product candidate, lenzilumab, or LENZ^®, and ~~the Company’s~~its other two product candidates, ifabotuzumab (“iFab”) and HGEN005, are Humaneered monoclonal antibodies. The Company’s Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their ~~target but low immunogenicity.~~target. In addition, the Company believes its Humaneered antibodies offer further important advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related reactions.

The Company is focusing its efforts on the development of its lead product candidate, lenzilumab. Lenzilumab is a monoclonal antibody that has been demonstrated to neutralize granulocyte-macrophage colony-stimulating factor (“GM-CSF”), a cytokine believed to be of critical importance in the hyperinflammatory cascade, sometimes referred to as cytokine release syndrome (“CRS”) or cytokine storm, which is associated with COVID-19, chimeric antigen receptor T-cell (“CAR-T”) therapy, acute Graft versus Host Disease (“aGvHD”) associated with bone marrow transplants, as well as several other conditions. The Company’s development programs in COVID-19, CAR-T and aGvHD are complementary in that all are focused on preventing or reducing cytokine storm in those disease states.

The Company has completed a Phase 3 registrational trial with lenzilumab in newly hospitalized COVID-19 patients (known as “LIVE-AIR”) and announced positive topline data in March 2021. Following completion of the LIVE-AIR study, the Company commenced a series of efforts to attain authorization to commercialize lenzilumab for use in hospitalized COVID-19 patients in the United States and the United Kingdom. The Company’s regulatory initiatives have not yet resulted in commercial authorization.

The next anticipated step in the Company’s development program for lenzilumab in COVID-19 is the release of results from the Accelerating COVID-19 Therapeutic Interventions and Vaccines-5 (“ACTIV-5”) and Big Effect Trial, in the “B” arm of the trial (“BET-B”), referred to as the ACTIV-5/BET-B trial, which is sponsored and funded by the National Institutes of Health (“NIH”). This study is evaluating lenzilumab in combination with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients, as more fully described below.

A sub-analysis of the LIVE-AIR study suggested that patients with a baseline C-reactive protein level (“CRP”) below 150 mg/L (the “CRP subgroup”) appeared to derive the greatest benefit from lenzilumab; therefore, the ACTIV-5/BET-B study protocol was modified by NIH to include baseline CRP below 150 mg/L as the primary analysis population. The ACTIV-5/BET-B study is fully enrolled with over 400 patients that met this criterion. Topline results from ACTIV-5/BET-B are expected to be released in the second quarter of 2022. If confirmatory of the findings of the CRP subgroup from the Company’s LIVE-AIR study, the Company plans to include the results from ACTIV-5/BET-B in an amendment to its Emergency Use Authorization (“EUA”) submission to the U.S. Food and Drug Administration (“FDA”), and to include these results in a responsive submission to Medicines and Healthcare products Regulatory Agency (“MHRA”) of the United Kingdom along with certain performance process qualification (“PPQ”) data around drug product batches, in the second quarter of 2022. In addition, as a result of feedback received from representatives of European Medicines Agency (“EMA”), if the ACTIV-5/BET-B data are confirmatory of the results of the findings of the CRP subgroup from the LIVE-AIR study, the Company intends to submit a Conditional Marketing Authorization (“CMA”) for lenzilumab with an Accelerated Approval request to EMA later in 2022.

See Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Item 27 of ~~this Quarterly~~the Company’s 2021 Annual Report on Form ~~10-Q~~10-K for additional information regarding the business.

Liquidity and Going Concern

The Condensed Consolidated Financial Statements for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. However, the Company has incurred net losses since its inception, and has negative operating cash ~~flows.~~flows and its total liabilities exceed total assets. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. ~~The financial statements do not include any adjustments that might be necessary if~~

Table of Contents

As of March 31, 2022, the Company ~~is unable to continue as a going concern.~~

had cash and cash equivalents of $68.9 million. The Company continues to advance its efforts in support of the development of lenzilumab as a therapy for hospitalized COVID-19 ~~patients. As of September 30, 2021,~~patients, as well as in the ~~Company had cash~~CAR-T, aGvHD and ~~cash equivalents of $76.5 million.~~chronic myelomonocytic leukemia (“CMML”) settings. On September 8, 2021, FDA declined to ~~approve~~authorize the ~~Company’s~~ EUA the Company had submitted for ~~lenzilumab.~~lenzilumab in COVID-19 patients. As more fully described under “Item 1. Business��Manufacturing and Raw Materials.” in ~~our~~the Company’s 2021 Annual Report on Form 10-K, ~~for the year ended December 31, 2020 under “Item 1. Business—Manufacturing and Raw Materials.”,~~ the Company ~~has~~had entered into agreements with several contract manufacturing organizations (“CMOs”) to provide manufacturing, fill/finish and packaging services for lenzilumab. While the Company remains committed to its ongoing efforts seeking marketing authorization for lenzilumab to treat hospitalized COVID-19 patients in the U.S., UK and other territories, since September 9, 2021, the Company ~~has~~ amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce its future spending on lenzilumab production until and if authorization is received in the U.S., UK, or European Union (“EU”)~~, or U.S.~~ (See Note 6 below). These ~~changes~~actions reduced the Company’s manufacturing costs beginning in the fourth quarter of 2021 and will ~~significantly~~ limit future production of lenzilumab but, because most of the Company’s manufacturing agreements required payment of upfront fees upon execution and payments against performance of the services to be provided, often over a lengthy performance period, the changes will not have an immediate impact on the Company’s spending as the cancellations generally only impact production efforts that were not expected to commence until 2022.lenzilumab.

~~Table of Contents~~

Considering the Company’s current cash resources and its current and expected levels of operating expenses for the next twelve months, which includes combined accounts payable and accrued expenses recorded in the Company’s condensed consolidated balance sheets as of March 31, 2022 of $67.1 million, and its non-manufacturing commitments of $1.3 million and manufacturing commitments of $42.6 million during the remaining nine months of 2022, $11.8 million for 2023, and $4.6 million thereafter (see Note 6 below), management expects to need additional capital to fund the Company’s planned ~~operations for the next twelve months.~~operations. Management may seek to raise such additional capital through public or private equity offerings, including under the Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), grant financing and support from governmental agencies, convertible ~~debt, borrowings under its Loan and Security Agreement with Hercules Capital~~ and other debt financings, collaborations, strategic alliances and marketing, supply, distribution, or licensing arrangements. Subsequent to ~~September 30, 2021~~March 31, 2022 and through the date of this filing, as disclosed in Note 11 below, the Company issued and sold ~~3,818,300~~679,328 shares of common stock pursuant to the Sales Agreement and received net proceeds of approximately ~~$24.5~~$2.0 million, after deducting fees and expenses. While management believes its plans to raise additional funds will alleviate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern, these plans are not entirely within the Company’s control and cannot be assessed as being probable of occurring. The Company expects that the results of the ACTIV-5/BET-B trial will be important to potential investors. The Company’s ability to raise capital on favorable terms in the near future is linked to the success of that trial, which cannot be assured. Additional funds may not be available when the Company needs them on terms that are acceptable to the Company, or at all. If adequate funds are not available, the Company may be required to delay or reduce the scope of or eliminate one or more of its research or development programs, its commercialization efforts or its manufacturing commitments and capacity. In addition, if the Company raises additional funds through collaborations, strategic alliances or marketing, supply, distribution, or licensing arrangements with third parties, the Company may have to relinquish ~~valuable~~ rights to its technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to the Company.

~~Reclassifications~~

Certain prior year amounts in the Condensed Consolidated Financial Statements have been reclassified to conform to the current year's presentation. Such reclassifications had no effect on prior years’ Net loss or Stockholders’ equity (deficit).

Basis of Presentation

The accompanying interim unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and on a basis consistent with the annual consolidated financial statements and include all adjustments necessary for the presentation of the Company’s condensed consolidated financial position, results of operations and cash flows for the periods presented.

The Condensed Consolidated Financial Statements include the accounts of the Company and its ~~wholly owned~~wholly-owned subsidiaries. These financial statements have been prepared on a basis that assumes that the Company will continue as a going concern, which contemplates the realization of assets and the satisfaction of liabilities and commitments in the normal course of business. The December 31, ~~2020~~2021 Condensed Consolidated Balance Sheet was derived from the audited financial statements but does not include all disclosures required by U.S. GAAP. These interim financial results are not necessarily indicative of the results to be expected for the year ending December 31, ~~2021,~~2022, or for any other future annual or interim period. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto included in the Company’s ~~2020~~2021 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts and disclosures reported in the Condensed Consolidated Financial Statements and accompanying notes. Actual results could differ materially from those estimates. The Company believes judgment is involved in accounting for the determination of revenue recognition, fair value-based measurement of stock-based compensation ~~accruals~~ and ~~warrants.~~accruals. The Company evaluates its estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements.

2. Summary of Significant Accounting Policies

The Company’s significant accounting policies are detailed in its Annual Report on Form 10-K for the year ended December 31, ~~2020.~~2021. There have been no significant changes to the Company’s significant accounting policies during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022, from those previously disclosed in its ~~2020~~2021 Annual Report on Form 10-K.

~~Recent Accounting Pronouncements~~

In December 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2019-12, Simplifying the Accounting for Income Taxes. ASU No. 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. ASU 2019-12 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted No. ASU 2019-12 on January 1, 2021, which did not have any impact to the Company’s Condensed Consolidated Financial Statements.

In August 2020, the FASB issued ASU No. 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity”, as part of its overall simplification initiative to reduce costs and complexity of applying accounting standards while maintaining or improving the usefulness of the information provided to users of financial statements. Among other changes, the new guidance removes from U.S. GAAP, separation models for convertible debt that require the convertible debt to be separated into a debt and equity component, unless the conversion feature is required to be bifurcated and accounted for as a derivative or the debt is issued at a substantial premium. As a result, after adopting the guidance, entities will no longer separately present such embedded conversion features in equity and will instead account for the convertible debt wholly as debt. The new guidance also requires use of the “if-converted” method when calculating the dilutive impact of convertible debt on earnings per share, which is consistent with the Company’s current accounting treatment under the current guidance. The guidance is effective for the Company’s financial statements issued for fiscal years beginning after December 15, 2023, and interim periods within those fiscal years, with early adoption permitted, but only at the beginning of the fiscal year. The Company early adopted the new guidance on January 1, 2021, using the modified retrospective approach. The adoption did not have any impact to the Company’s Condensed Consolidated Financial Statements.

Table of Contents

~~Table of Contents~~

3. Potentially Dilutive Securities

The Company’s potentially dilutive securities, which include stock options and warrants and shares of common stock issuable upon conversion of convertible debt, have been excluded from the computation of diluted net loss per common share as the effect of including those securities would be to reduce the net loss per common share and be antidilutive. Therefore, the denominator used to calculate both basic and diluted net loss per common share is the same in each period presented.

The following outstanding potentially dilutive securities have been excluded from the computations of diluted net loss per common share:

As of September 30,
2021
2020
Options to purchase common stock
4,144,864
3,528,642
Warrants to purchase common stock
31,238
76,238
Convertible debt
510,986
0-
4,687,088
3,604,880

	As of March 31,
	2022		2021
Options to purchase common stock		4,712,659		4,224,111
Warrants to purchase common stock		31,238		51,238
Convertible debt		510,986		510,986
		5,254,883		4,786,335

4. License Revenue

On November 3, 2020, the Company entered into a License Agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”). Pursuant to the South Korea Agreement, among other things, the Company granted the Licensee a license under certain patents and other intellectual property to develop and commercialize lenzilumab for treatment of COVID-19 pneumonia, in South Korea and the Philippines (the “Territory”), subject to certain reservations and limitations. The Licensee will be responsible for gaining regulatory approval for, and subsequent commercialization of, lenzilumab in the Territory.

As consideration for the license, the Licensee has agreed to pay the Company (i) an up-front license fee of $6.0 million, ~~(or $4.5 million net of withholding taxes and other fees and royalties),~~ payable promptly following the execution of the License Agreement, which was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on achievement by the Company of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021, and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that the Company will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

~~The Company assessed~~

Since the ~~South Korea Agreement in accordance with Accounting Standards Codification (“ASC”) 606 –~~ ~~Revenue from Contracts with Customers~~ provision of the license and ~~ASC 808 –~~ ~~Collaborative Arrangements~~ ~~and determined that its performance obligations under~~ the ~~South Korea agreement include (i) the exclusive, royalty-bearing, sublicensable license to lenzilumab, (ii) the manufacturing supply services to be provided by the Company, (iii)~~ cooperation and assistance to be provided by the Company to the Licensee with regulatory authorities in the Territory and ~~(iv) its~~the Company’s obligation to serve on a joint steering committee ~~(Items (iii) and (iv) above collectively, the “Research and Development Services” or the~~(the “Services”). The Company concluded that in the initial period leading up to regulatory approval in the Territory (the “Initial Period”), the license was not distinct since it was of no benefit to Licensee without the aforementioned Services and that, as such, the license and the Services should be bundled as a single performance obligation.

The Company has concluded that the nature of its promise is to stand ready to provide Research and Development Services as needed during the Performance Period (as defined below). The Company has further concluded that for all of the increments of time during the Performance Period its promise of standing ready to provide the Services is substantially the same. While the specific tasks performed during each increment of time will vary, the nature of the overall promise to provide the Services remains the same throughout the Performance Period.

~~Table of Contents~~

~~Since the provision of the license and the Services~~ are considered a single performance obligation, the $6.0 million upfront payment (or $4.5 million net of withholding taxes and other fees and royalties) and the first milestone payment of $6.0 million (or $4.5 million net of withholding taxes and other fees and ~~royalties) which was met in the first quarter of 2021 and received in the second quarter of 2021,~~royalties, are being recognized as revenue ratably over the performance period through March 2023 (the “Performance Period”), the expected period over which the Company conservatively expects the Services to be performed with approval in the Territory expected by the end of March 2023. Therefore, ~~in the three and nine months ended September 30, 2021,~~ the Company recognized license revenue totaling approximately $1.0 million and ~~$2.6~~$0.5 million in the three months ended March 31, 2022 and 2021, respectively.

Licensee’s purchases of lenzilumab for development purposes or for commercial requirements, represent options under the agreement and revenues will therefore be recognized when control of the product is transferred to Licensee.

Contract Liabilities

A contract liability of $4.1 million was recorded on the Condensed Consolidated Balance Sheets as deferred revenue as of March 31, 2022 related to the South Korea agreement. There were no contract asset or deferred contract acquisition costs as of March 31, 2022 associated with the South Korea agreement.

Table of Contents

The following table presents changes in the Company’s contract liability for the three months ended March 31, 2022 (in thousands):

Balance at January 1, 2022	$	5,163
Deductions for performance obligations satisfied:
In current period		(1,036	)
Balance at March 31, 2022	$	4,127

5. Long-Term Debt

Secured Term Loan Facility

On March 10, 2021, the Company executed a Loan and Security Agreement with Hercules ~~Capital~~ as agent for its affiliates serving as lenders thereunder (the “Term Loan”). The Term Loan provides a loan in the aggregate principal amount of up to $80 million, in three tranches. On March 29, 2021, the Company drew the initial $25.0 million tranche under the Term Loan. After giving effect to payment of fees and expenses associated with the draw, the Company received net proceeds of approximately $24.4 million. The Company is no longer entitled to draw the second tranche, which was to be in the amount of up to $35.0 ~~million or $25.0~~ million, as it did not receive EUA for lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia by September 15, 2021. The Company may become entitled to draw another $20.0 million under the Term Loan through June 15, 2022, at the discretion of Hercules if the Company requests additional funding in support of the Company’s strategic initiatives, although there can be no assurances that Hercules would agree to provide such additional funding.

The Company will be required to repay amounts borrowed by March 1, 2025, subject to a one-year extension option that it may exercise if it has received FDA approval of a BLA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia, and the FDA-authorized label for lenzilumab is generally consistent with that sought in the Company’s BLA filing, and the Company has paid Hercules certain fees and expenses associated with the extension.

Amounts drawn bear interest at a floating rate equal to the greater of either (i) 8.75% plus the prime rate as reported in The Wall Street Journal minus 3.25%, or (ii) 8.75% (such greater amount, the “Base Interest Rate”). Subject to there not having occurred any default or event of default under the loan agreement, the Base Interest Rate will be reduced by 25 basis points upon the occurrence of each of the first three of the four following events to occur:

•

if the Company achieves the protocol-specified primary efficacy endpoint for the pivotal Phase 3 study of lenzilumab for COVID-19, (clinicaltrials.gov identifier NCT04351152), and receives EUA for the use of lenzilumab for the treatment of hospitalized patients with COVID-19 pneumonia;

•

if the Company achieves product revenue from lenzilumab that is invoiced and/or recognized as revenue (as determined in accordance with GAAP) solely from the sale of lenzilumab (“Net Lenzilumab Product Revenue”) of at least $100.0 million;

•

~~if the Company achieves Net Lenzilumab Product Revenue of at least $250.0 million; and~~

•

~~if the Company achieves Net Lenzilumab Product Revenue of at least $350.0 million.~~

No principal payments will be due during an interest-only period, commencing on the initial borrowing date and continuing to April 1, 2023, subject to extension to April 1, 2024, and potentially October 1, 2024, under certain conditions. Following the interest-only period, the outstanding balance of the loan will be required to be repaid monthly, continuing through the maturity date.

The Company ~~may prepay~~will be required to repay amounts ~~drawn under the agreement in full prior to the maturity date then in effect,~~borrowed by March 1, 2025, subject to ~~payment~~a one-year extension option that it may exercise if it has received FDA approval of ~~prepayment charges equal to:~~

•

~~2.0%~~a Biologics License Application (“BLA”) for the use of lenzilumab for the ~~amounts borrowed, if~~treatment of hospitalized patients with COVID-19 pneumonia, and the ~~prepayment occurs on or prior to March 29, 2022;~~

•

~~1.5% of the amounts borrowed, if the prepayment occurs after March 29, 2022 and before March 29, 2023; and~~

•

~~1.0% of the amounts borrowed, if the prepayment occurs after March 29, 2023 and before March 29, 2024.~~

In addition, on the earliest to occur of (i) the maturity date, (ii) the date the Company prepays the outstanding principal amount of the Term Loan, or (iii) the date the outstanding principal amount of the Term Loan otherwise becomes due, the Company will owe Hercules an end of term (“EOT”) charge equal to 6.75% of the aggregate amount of the Term Loan funded by Hercules.

~~As a condition to obtaining the Term Loan, the Company granted Hercules a security interest~~FDA-authorized label for lenzilumab is generally consistent with that sought in substantially all of its assets and personal property not otherwise subject to existing or permitted liens. In addition, the Term Loan contains customary representations and warranties and events of default for a term loan facility of this size and type. Under the Term Loan, the Company also agreed to comply with certain customary affirmative and negative covenants that become effective upon the initial draw of the first tranche, including covenants to:

~~Table of Contents~~

•

~~maintain $10.0 million unrestricted cash;~~

•

~~comply with certain requirements to provide Hercules with financial information and other rights to inspect~~ the Company’s ~~books~~BLA filing, and ~~records and the collateral for the Term Loan;~~

•

refrain from incurring debt that is not expressly subordinated to the Term Loan; “Rule 144A-style” convertible notes in aggregate principal amount up to $250.0 million; and other permitted indebtedness;

•

~~refrain from granting (or permitting to exist) liens on the Company’s assets and properties, other than certain permitted liens, including in respect of its patents and other intellectual property;~~

•

~~refrain from making certain investments, other than permitted acquisitions and certain other permitted investments;~~

•

~~refrain from repurchasing the Company’s stock or paying dividends, subject to limited exceptions;~~

•

~~refrain from transferring any material portion of its assets; and~~

•

~~refrain from entering into any merger or consolidation in which the Company is not the surviving entity.~~

~~All of these covenants will not apply upon repayment of any borrowings under the Term Loan.~~

~~Certain of the baskets for permitted investments and other exceptions to the covenants described above have increased because~~ the Company has ~~raised more than $100.0 million in unrestricted net cash proceeds from one or more bona fide equity financings prior to March 31, 2022. (See Notes 7~~paid Hercules certain fees and ~~11 below for information relating to~~expenses associated with the Company’s equity financings in 2021 in this regard.) Further, the covenants in the Term Loan will not prohibit the Company from pursuing its strategy of entering into out-bound license agreements for lenzilumab that may be exclusive as to specific geographic regions outside the U.S., nor will the covenants prohibit the Company from entering into co-development or co-promotion or commercialization agreements relating to lenzilumab, so long as such agreements generally are negotiated on arm’s length and commercially reasonable terms.extension.

While the Term Loan is outstanding, the lenders will have the right to convert a portion of the principal amount outstanding under the Term Loan (ranging from $5.0 million to $10.0 million in the aggregate) into shares of the Company’s common stock at a conversion price equal to $19.57 per share, subject to customary anti-dilution adjustments.

The following table summarizes the outstanding future payments of principal and interest associated with the Company’s Term Loan as of ~~September 30, 2021~~March 31, 2022 (in thousands):

2021
$
552
2022
2,218
2023
10,800
2024
13,671
2025
5,153
Total payments
32,394
Less amount representing interest
(5,706
)
Notes payable, gross
26,688
Less: Unamortized portion of EOT charge
(1,406
)
Less: Unamortized discount on notes payable
(177
)
Less: Unamortized debt issuance costs
(287
)
Long-term debt
24,818
Less current portion
0-
Long-term debt, net of current portion
$
24,818

2022	$	1,716
2023		10,842
2024		13,705
2025		5,163
Total payments		31,426
Less amount representing interest		(4,738	)
Notes payable, gross		26,688
Less: Unamortized portion of EOT charge		(1,123	)
Less: Unamortized discount on notes payable		(141	)
Less: Unamortized debt issuance costs		(231	)
Long-term debt		25,193
Less current portion		-
Long-term debt, net of current portion	$	25,193

Interest expense related to the Term Loan, ~~for~~recorded during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022, was approximately $0.7 million ~~and $1.5 million, respectively,~~ and the effective interest rate was ~~9.0%~~9.25%.

Table of Contents

~~Table of Contents~~

6. Commitments and Contingencies

Eversana Agreement

On January 10, 2021, the Company announced that it had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide the Company multiple services from its integrated commercial platform in preparation for the potential commercialization of lenzilumab.

Under the Eversana Agreement, Eversana will provide the Company with services in connection with the potential launch of lenzilumab. Eversana services during 2021 ~~have~~ comprised marketing, market access, consulting, field solutions, field operations, health economics and medical affairs. Additional services may be negotiated by the parties and set forth in statements of work delivered in accordance with the Eversana Agreement.

The Company agreed to pay Eversana fees and reimburse it for expenses in performing the services as established in applicable statements of work. Eversana agreed to defer a portion of its fees for certain work performed which fees would only be payable upon the Company’s receipt of an EUA from FDA for lenzilumab for newly hospitalized and hypoxic COVID-19 patients.On

On September 21, 2021, the Company notified Eversana that due to the ~~declination letter received from FDA on September 8, 2021,~~EUA status in the U.S., it was terminating the initial statement of work related to commercialization support of lenzilumab for the treatment of COVID-19 in the United States. Eversana is disputing the termination notice and has requested payment of approximately $4.0 million it has asserted the Company owes for services rendered from April 1, 2021 to September 30, 2021. The ~~parties are~~Company has disputed this assertion and is working to resolve ~~a dispute over the amount of fees the Company is obligated to pay Eversana as a result of FDA’s decision to decline to grant EUA for lenzilumab.~~this dispute.

The Eversana Agreement provides for a one-year term and will renew for subsequent one-year terms unless either party provides a notice of non-renewal. After the first year, the Company may terminate the Eversana Agreement upon advance written notice to Eversana. The Eversana Agreement contains customary provisions allowing either party to terminate the Eversana Agreement as a result of certain changes in law and material breaches and certain insolvency events by or relating to the other party.

The Eversana Agreement imposes customary mutual obligations on the parties to protect and not disclose the confidential information and intellectual property of the other, and contains insurance, non-solicitation, indemnification and limitation of liability provisions customary for service contracts of this type.

Manufacturing Agreements

The Company has entered into agreements with several CMOs to manufacture bulk drug substance (“BDS”) and to provide fill/~~finish/~~finish services or drug product (“DP”) for lenzilumab for a potential launch of lenzilumab in anticipation of an EUA or ~~CMA in 2021.~~CMA. The Company has also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. Since September 9, 2021, the Company has amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce its future spending on lenzilumab production until and if authorization is received in the U.S., UK, ~~EU,~~ or ~~U.S.~~EU. These ~~changes~~actions reduced the Company’s manufacturing costs beginning in the fourth quarter of 2021 and will ~~significantly~~ limit future production of lenzilumab but because most of the Company’s manufacturing agreements required payment of upfront fees upon execution and payments against performance of the services to be provided, often over a lengthy performance period, the changes will not have an immediate impact on the Company’s spending as the cancellations generally only impact production efforts that were not expected to commence until 2022.lenzilumab. In addition, certain of the Company’s CMOs have been unsuccessful in their efforts to manufacture some batches of lenzilumab to the Company’s specifications for various reasons. The Company is working with one of these CMOs to determine if batches of ~~BDS~~lenzilumab manufactured by them will be usable in the future or, if not, whether other financial recompense will be offered to the Company. Another CMO was unsuccessful in its attempts to produce BDS and has filed for arbitration of amounts owed. Mediation efforts were unsuccessful as the CMO insisted on large cash payments despite its inability to produce any BDS. The Company is contemplating litigation in an effort to recover previous monies provided to this CMO as prepayment for services and materials and to recover a significant amount of raw materials and components currently held by this CMO that have been paid for by the Company. As of ~~September 30, 2021,~~March 31, 2022, the Company estimates that its commitments remaining to be incurred under these agreements are approximately ~~$50.5~~$42.6 million for the ~~fourth quarter~~remaining nine months of ~~2021, $55.9~~2022, $11.8 million for ~~2022~~2023, and ~~$4.3~~$4.6 million thereafter. Certain of these commitments and amounts accrued at ~~quarter-end~~year-end are in dispute and the Company intends to defer these payments, negotiate lower amounts or seek ~~legal recourse~~other courses of action for the amounts in question.

7. Stockholders’ Equity

~~Reverse Stock Split~~

Effective September 11, 2020 (the “Effective Date”), the Company amended its charter to effect a reverse stock split at a ratio of 1-for-5 (the “Split Ratio”). No fractional shares were issued in connection with the reverse stock split. Stockholders of record otherwise entitled to receive fractional shares of common stock received cash (without interest or deduction) in lieu of such fractional share interests.

~~Table of Contents~~

The reverse stock split reduced the total number of shares of the Company’s common stock outstanding as of the Effective Date from approximately 210.9 million shares to approximately 42.2 million shares. The par value per share and other terms of the Company’s common stock were not affected by the reverse stock split, and the number of authorized shares of the Company’s common stock remains at 225,000,000.

The reverse stock split resulted in a proportionate adjustment in the number of shares reserved for issuance under the 2020 Equity Plan, such that a total of 7,000,000 shares of the Company’s common stock were reserved for issuance under the 2020 Equity Plan following the Effective Date. In addition, proportionate adjustments were made to the number of shares covered by, and the exercise price applicable to, each outstanding stock option award under the 2012 Equity Plan and outstanding warrants issued by the Company, in each case to give effect to the Split Ratio and the reverse stock split.

The reverse stock split was accounted for retroactively and is reflected in our common stock, stock option and warrant activity as of and during the period ended December 31, 2020, and the periods ended September 30, 2021 and 2020. Unless stated otherwise, all share data in this Quarterly Report on Form 10-Q have been adjusted, as appropriate, to reflect the reverse stock split.

Controlled Equity Offering

On December 31, 2020, the Company entered into ~~the~~a Sales Agreement with Cantor, under which the Company could issue and sell, from time-to-time, shares of the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as the sales agent. During the ~~nine~~three months ended ~~September 30,~~March 31, 2021, the Company issued and sold ~~2,397,791~~1,796,858 shares of its common stock ~~pursuant to~~under the Sales Agreement ~~and received~~for net proceeds of ~~approximately $40.0 million, after deducting fees~~$36.1 million. During the three months ended March 31, 2022, the Company issued and ~~expenses.~~sold 5,926,748 shares of its common stock under the Sales Agreement for net proceeds of $18.4 million. As of ~~September 30, 2021,~~March 31, 2022, the Company had the ability to offer and sell shares of common stock having an aggregate offering price of up to ~~$58.7~~$13.3 million under the prospectus supplement dated August 13, 2021 to the Company’s prospectus dated September 14, 2020 filed in respect of the Sales Agreement. See Note 11 below for additional information related to the Sales Agreement.

Table of Contents

2021 Underwritten Public Offering

On March 30, 2021, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the ~~several`~~several underwriters, ~~(the “Underwriters”),~~ in connection with the public offering of 5,000,000 shares of ~~the Company’s~~our common stock. ~~Pursuant to the Underwriting Agreement, the Company~~In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial ~~sale of 5,000,000 shares~~offering closed on April 5, 2021. On May 3, 2021, ~~the Company~~we closed on the sale of an additional 427,017 shares of ~~its~~our common stock related to the exercise of the underwriters’ 30-day option. The aggregate gross proceeds from the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and offering costs, were approximately $94.2 million.

8. Stock-Based Compensation

A summary of stock option activity for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 under all the Company’s options plans is as follows:

Options
Weighted
Average Exercise
Price
Outstanding at January 1, 2021
3,732,149
$
5.57
Granted
1,049,355
$
15.66
Exercised
(582,936
)
$
3.98
Cancelled (forfeited)
(53,600
)
$
7.71
Cancelled (expired)
(104
)
$
162.09
Outstanding at September 30, 2021
4,144,864
$
8.32

	Options			Weighted Average Exercise Price
Outstanding at January 1, 2022		4,429,906		$	7.89
Granted		350,078		$	2.99
Exercised		-		$	-
Cancelled (forfeited)		(67,325	)	$	15.09
Cancelled (expired)		-		$	-
Outstanding at March 31, 2022		4,712,659		$	7.42

The weighted average fair value of options granted during the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was ~~$12.87~~$2.41 per share.

~~Table of Contents~~

The Company valued the options granted using the Black-Scholes options pricing model and the following weighted-average assumption terms for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

		~~Nine~~Three Months Ended
		~~September 30, 2021~~
~~Exercise price~~			~~$5.93 - $20.68~~ March 31, 2022
~~Market value~~ Exercise price			~~$5.93 - $20.68~~ 2.99
~~Expected term~~ Market value			~~5 - 6 years~~ 2.99
Expected ~~volatility~~ term			~~105% - 109%~~ 6 years
Expected volatility	104%
Risk-free interest rate			~~0.98% - 1.09%~~ 1.59%
Expected dividend yield	- %		~~0-%~~

The Company recorded stock-based compensation expense in the Condensed Consolidated Statements of Operations as follows (in thousands):

	Three Months Ended March 31,
	2022		2021
General and administrative	$	1,294	$	364
Research and development		249		146
Total stock-based compensation	$	1,543	$	510

Three Months Ended September 30,
Nine Months Ended
September 30,
2021
2020
2021
2020
General and administrative
$
1,077
$
909
$
2,848
$
1,415
Research and development
357
103
967
219
Total stock-based compensation
$
1,434
$
1,012
$
3,815
$
1,634

At ~~September 30, 2021,~~March 31, 2022, the Company had ~~$12.5~~$11.2 million of total unrecognized stock-based compensation expense, net of estimated forfeitures, related to outstanding stock options that will be recognized over a weighted-average period of ~~2.2~~1.8 years. As of March 31, 2022, there were 4,714,407 shares available for grant under the Company’s 2020 Equity Incentive Plan.

Table of Contents

9. License and Collaboration Agreements

Kite Agreement

On May 30, 2019, the Company entered into a ~~clinical~~ collaboration agreement (the “Kite Agreement”) with Kite ~~providing in part for conduct of~~Pharmaceuticals, Inc. (“Kite”), pursuant to which the Company and Kite are conducting a multi-center Phase 1b1b/2 study of lenzilumab with Kite’s Yescarta in patients with relapsed or refractory B-cell lymphoma, including ~~DLBCL.~~diffuse large B-cell lymphoma (“DLBCL”). On April 19, 2021, the Company announced positive preliminary data from this study. As a result of this positive preliminary data and the conclusion of the Phase 1b portion of the study, the Company elected to terminate the clinical collaboration agreement with Kite. Enrollment in the Phase 1b portion of the study is closed and the study itself shall be closed ~~by the fourth quarter of 2021.~~in 2022. The effective date of termination of the clinical collaboration with Kite ~~shall be~~was December 31, 2021. Until the Phase 1b portion of the study is terminated and the last subject transitioned onto the Kite long term follow up protocol, Humanigen and Kite will cooperate to ensure the orderly wind down of study activities. The Company is preparing to initiate a Company-sponsored, registrational Phase 3 study with Yescarta and Tecartus, commercially available CD19 CAR-T therapies, in non-Hodgkin lymphoma in ~~2022 and has scheduled a meeting~~2022. The Company met with FDA in December 2021 to discuss the study protocol. Modifications to the protocol have been submitted to FDA. The Company currently plans to enroll ~~approximately 250~~more than 160 patients in the study.

~~Mayo Agreement~~

On June 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Mayo Agreement”) with the Mayo Foundation for Medical Education and Research (“Mayo”) for certain technologies used to create CAR-T cells lacking GM-CSF expression through various gene-editing tools including CRISPR-Cas9 (“GM-CSF^KO CAR-T”). The license covers various patent applications and know-how developed by Mayo in collaboration with the Company. These licensed technologies complement and broaden the Company’s position in the GM-CSF neutralization space and expand the Company’s discovery platform aimed at improving CAR-T to include gene-edited CAR-T cells.

Pursuant to the Mayo Agreement, the Company paid $0.2 million to Mayo in June 2020, which payment was accrued as Research and development expense in June 2019. The Mayo Agreement also requires the payment of milestones and royalties upon the achievement of certain regulatory and commercialization milestones.

~~Zurich Agreement~~

On July 19, 2019, the Company entered into an exclusive worldwide license agreement (the “Zurich Agreement”) with the University of Zurich (“UZH”) for technology used to prevent or treat GvHD through GM-CSF neutralization. The Zurich Agreement covers various patent applications filed by UZH which complement and broaden the Company’s position in the application of GM-CSF and expands the Company’s development platform to include improving allogeneic Hematopoietic Stem Cell Transplantation (“HSCT”).

~~The Zurich Agreement also requires the payment of annual maintenance fees and milestones and royalties upon the achievement of certain regulatory and commercialization milestones.~~

~~Table of Contents~~

Clinical Trial Agreement with the National Institute of Allergy and Infectious Diseases

On July 24, 2020, the Company entered into a clinical trial agreement (the “ACTIV-5 Clinical Trial Agreement”) with the National Institute of Allergy and Infectious Diseases (“NIAID”), part of NIH, which is part of the U.S. Government Department of Health and Human Services, as represented by the Division of Microbiology and Infectious Diseases. Pursuant to the ACTIV-5 Clinical Trial Agreement, lenzilumab is being evaluated in the NIAID-sponsored ACTIV-5/BET-B in hospitalized patients with COVID-19. The ACTIV-5/BET-B study protocol was modified to focus on patients with a baseline CRP below 150 mg/L (the CRP subgroup) as the primary analysis population. The ACTIV-5/BET-B study is fully enrolled with over 400 patients that met this criterion and the Company anticipates top-line data in the second quarter of 2022. See Note 1 above for further information regarding ACTIV-5/BET-B.

Pursuant to the ACTIV-5 Clinical Trial Agreement, NIAID ~~will serve~~serves as sponsor and ~~will be~~is responsible for funding, supervising and overseeing ACTIV-5/BET-B. The Company ~~will be~~has been responsible for providing lenzilumab to NIAID without charge and in quantities to ensure a sufficient supply of lenzilumab. The ACTIV-5 Clinical Trial Agreement imposes additional obligations on the Company that are reasonable and customary for clinical trial agreements of this nature, including in respect of compliance with data privacy laws and potential indemnification obligations. ~~The Company will have access to data from ACTIV-5/BET-B once concluded.~~

10. Litigation

~~CRADA~~

Avid Arbitration

On ~~November 5, 2020, the Company and the Department of Defense~~December 17, 2021, Avid Bioservices, Inc. (“~~DoD”~~Avid”) ~~Joint Program Executive Office~~filed a Demand for ~~Chemical, Biological, Radiological and Nuclear Defense (“JPEO-CBRND” or “JPEO”) entered into a Cooperative Research and Development Agreement (“CRADA”)~~Arbitration claiming more than $20.5 million in collaboration with the Biomedical Advanced Research and Development Authority (“BARDA”), part of the Office of the Assistant Secretary for Preparedness and Response (“ASPR”) at the U.S. Department of Health and Human Services (“HHS”), in support of Operation Warp Speed (“OWS”), to assist in the development of lenzilumab, in connection with a potential EUA for COVID-19.

On January 22, 2021, the Company announced an expansion of the CRADA that it had previously entered into with JPEO on November 5, 2020, was subsequently co-signed by BARDA and is set to expire on January 21, 2022. This providesdamages against the Company with ~~access~~the American Arbitration Association entitled, Avid Bioservices, Inc. v. Humanigen, Inc. (AAA Case No. 01-21-0018-0523). The Demand contains three claims for: (1) Breach of Contract concerning the Process Development and Manufacturing Master Services Agreement; (2) Anticipatory Breach of Contract concerning the Capacity Expansion and Contribution/Commitment letter; and (3) Trade Libel and Commercial Disparagement. Avid claims that the Company canceled the contract after Avid was unable to ~~manufacturing capacity reserved by BARDA~~successfully produce any full batches of lenzilumab BDS, but that the Company still owes the full amount due under the contract for ~~fill-finish product to accelerate~~all batches under the ~~drug product manufacturing of lenzilumab.~~

~~Pursuant to the CRADA,~~contract. Avid blamed its failed attempts on a subcontractor. To date, the Company has ~~been provided access~~paid Avid $10.6 million, despite Avid not being able to ~~a full-scale, integrated team of OWS manufacturing,~~produce any full BDS batches.

On January 6, 2022, the Company filed an Answer to Avid’s Demand, denying the allegations and ~~regulatory subject matter experts, leading decision makers and statistical support in its efforts to apply for EUA for lenzilumab as a potential treatment for COVID-19.~~asserting affirmative defenses.

~~10. Litigation~~

Savant Litigation

The Company ~~is currently~~was previously involved in litigation ~~with~~against Savant Neglected Diseases, LLC (“Savant”) ~~in an action captioned~~ ~~Humanigen, Inc. v. Savant Neglected Diseases, LLC, C.A. No. N17C-07-068-PRW [CCLD]~~. In this litigation, the Company filed a complaint against Savant in the Superior Court of the State of Delaware, New Castle County (the “Superior Court”). The Company asserted breach of contract, declaratory judgment and fraudulent inducement claims against Savant arising under the Agreement for the Manufacture, Development and Commercialization of Benznidazole for Human Use (the “MDC Agreement”).

~~Subsequently, Savant filed a complaint against~~March 2022, the Company and ~~Madison Joint Venture LLC (“Madison”) in~~Savant reached a confidential settlement. Accordingly, the Delaware Court of Chancery (the “Chancery Action”) seeking to “recover as damages amounts owed to it under the MDC Agreement, and to reclaim Savant’s intellectual property,” among other things. This actionlitigation involving Savant was ~~subsequently consolidated with the Superior Court action.~~dismissed on March 31, 2022.

On July 9, 2021, the Court issued a memorandum opinion resolving various summary judgment motions. In the opinion, the Court granted the Company’s motion for summary judgment on certain of Savant’s claims. Accordingly, Savant’s claims are now limited to breach of contract and fraudulent transfer claims. Savant’s summary judgment motion was denied in its entirety leaving Humanigen’s fraud and contract claims against Savant for trial.

~~The action is not currently set for trial, but the Company is prepared to defend itself vigorously and pursue all remedies available against Savant for breach of contract and fraud.~~

Private Placement Litigation

On June 15, 2020, a complaint was filed against the Company and Dr. Durrant in the Commercial Division of the Supreme Court of the State of New York. The case caption is Alliance Texas Holdings, LLC et al. v. Humanigen, Inc. et al., Index No. 652490/2020 (“Alliance Texas Holdings Case”). Dr. Durrant has been dismissed as an individual defendant in the case. The plaintiffs in the Alliance Texas Holdings Case comprise a group of prospective investors introduced to Humanigen by Noble Capital Markets, Inc. (“Noble”), which had been engaged by the Company as a non-exclusive placement agent in connection with a private placement of its common stock (the “Private Placement”). The plaintiffs had indicated interest in purchasing shares of common stock in the Private Placement but, due to the strength of demand for shares from other prospective investors, the plaintiffs were not allocated any investment amount. The plaintiffs allege that the Company breached a contractual obligation to deliver shares of common stock to the plaintiffs. The plaintiffs seek to recover for losses due to the Company’s alleged failure to deliver shares to them and seek equitable relief in the form of specific performance.

Table of Contents

~~Table of Contents~~

~~The Company believes that the claims made in the Alliance Texas Holdings Case are without merit, and it is prepared to defend itself vigorously.~~

On April 19, 2021, the Company and Noble entered into a confidential settlement agreement in respect of a separate lawsuit brought by Noble related to the Private Placement (the “Noble Case”) captioned Noble Capital Markets, Inc. v. Humanigen, Inc., Case No. 9:20-CV-81131-WPD, pursuant to which the Noble Case was dismissed with prejudice.

On February 24, 2022, the Company entered into a confidential settlement agreement and release with respect to the claims raised in the Alliance Texas Holding Case, pursuant to which the Alliance Texas Holding Case has been discontinued with prejudice, except as to two Plaintiffs whose claims comprised less than 10% of the total alleged investments, as to whom the case has been discontinued without prejudice.

11. Subsequent ~~Event~~Events

On April 14, 2022, the Company filed a prospectus in respect of the Sales Agreement which provides the Company with the ability to offer and sell shares of common stock having an aggregate offering price of up to $75.0 million.

Subsequent to ~~September 30, 2021~~March 31, 2022 and through the date of this filing, the Company issued and sold ~~3,818,300~~679,328 shares of common stock ~~pursuant to~~under the Sales Agreement ~~and received~~for net proceeds of ~~approximately $24.5 million, after deducting fees and expenses.~~$2.0 million. As of the date of this filing, the Company ~~had~~has the ability to offer and sell ~~additional~~ shares of common stock having an aggregate offering price of up to ~~$33.5~~$86.3 million under the prospectus supplement dated August 13, 2021 toand the ~~Company’s~~ prospectus dated ~~September~~April 14, ~~2020 filed in respect of the Sales Agreement.~~2022.

1715

Table of Contents

Item 2.

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

You should read the following discussion and analysis together with our financial statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2020.~~2021. This Quarterly Report on Form 10-Q contains statements that discuss future events or expectations, projections of results of operations or financial condition, trends in our business, business prospects and strategies and other “forward-looking” information. In some cases, you can identify “forward-looking statements” by words like “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “intends,” “potential” or “continue” or the negative of those words and other comparable words. These statements may relate to, among other things, our expectations regarding the scope, progress, timing, expansion, and costs of researching, developing and commercializing our product candidates; our expectations relating to regulatory pathways to ~~and potential timelines for,~~ emergency use or other conditional marketing authorizations ~~other regulatory approvals,~~ and the opportunity to benefit from various regulatory incentives; expectations for our financial results, revenue, operating expenses and other financial measures in future periods; and the adequacy of our sources of liquidity to satisfy our working capital needs, capital expenditures, and other liquidity requirements. Among the factors that could cause actual results to differ materially are the factors discussed under “Risk Factors” in “Part I, Item 1A - Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, and the additional or modified risk factors disclosed in this Quarterly Report on Form 10-Q and ~~our subsequent current and periodic reports.~~ each subsequently filed Quarterly Report on Form 10-Q. Some additional factors that could cause actual results to differ include:

·●

the timing of the initiation, enrollment and completion and results of ongoing or planned clinical trials;

·●

the evolution of scientific discovery around the coronavirus, COVID-19 and the lung and other organ and systems dysfunction resulting in some patients may indicate that cytokine release syndrome (“CRS”) or cytokine storm is caused by or results from something other than elevated granulocyte-macrophage colony-stimulating factor (“GM-CSF”) levels;

·●

our ability to attain an EUA for lenzilumab in COVID-19 patients in the U.S.; and, if attained, the duration of the emergency conditions underlying such EUA;

·●

our ability to attain any conditional marketing authorization (“CMA”) for lenzilumab in COVID-19 patients in the United Kingdom, (“UK”), European Union (“EU”) or other markets outside the U.S.;

·●

our ability to attain the additional financing we need to continue as a going concern with the ability to pursue our development initiatives, manufacturing requirements and commercialize our product candidates on favorable terms or at all;

·●

our ability to timely source adequate supply of bulk drug substance and ~~bulk~~ drug product for our development and if approved, ~~commercial products~~finished goods from third-party manufacturers on which we depend;

·●

our ability to resolve disputes with certain CMOs regarding our obligations to make payments to them despite their failure to produce lenzilumab within contractual specifications, and our ability to reach a satisfactory resolution of our dispute with Eversana regarding our potential payments under our contract with ~~it;~~Eversana;

·●

if a marketing authorization or approval were to be granted for lenzilumab, our ability to accurately forecast and predict future revenues in the U.S. and outside the U.S. coupled with our ability to produce sufficient quantities on a timely basis to meet demand;

·●

our ability to research, develop and commercialize our product candidates, including our ability to do so ~~before~~after our competitors ~~develop~~have developed and ~~commercialize~~commercialized competing products or alternative therapies orand vaccines that ~~may~~ reduce hospitalizations due to COVID-19 and thus the demand for ~~our product candidates;~~lenzilumab;

·●

our ability to initiate a study of lenzilumab with commercially available chimeric antigen receptor T-cell (“CAR-T”) therapies in non-Hodgkin lymphoma;

·●

the ability of partners to initiate and conduct the RATinG and PREACH-M studies of lenzilumab in patients at risk of acute Graft versus Host Disease (“aGvHD”) and chronic myelomonocytic leukemia (“CMML”), respectively, as currently contemplated;

·●

our ability to execute our strategy and business plan focused on developing our proprietary monoclonal antibody portfolio and our GM-CSF knockout gene-editing CAR-T platform;

·●

our ability to enter into partnerships with potential collaborators with development, regulatory and commercialization expertise to enable us to pursue the other initiatives in our development pipeline;

~~Table of Contents~~

·●

the potential, if any, for future development of any of our present or future products;

·●

increasing levels of market acceptance of CAR-T therapies and stem cell transplants and the development of a market for lenzilumab in these therapies;

·●

our ability to identify and develop additional uses for our products;

·●

our ability to maintain licenses with third parties;

·●

our ability to attain market exclusivity and/or to obtain, maintain, protect and enforce our intellectual property and to operate our business without infringing, misappropriating or otherwise violating, the intellectual property rights of others;

·●

the outcome of pending, threatened or future ~~litigation;~~litigation or arbitration;

·●

acquisitions or in-licensing or out-licensing transactions that we may pursue may fail to perform as expected;

·●

our ability to obtain and maintain regulatory approval of our product candidates, and any related restrictions;

Table of Contents

·●

limitations and/or warnings in the label of an approved product candidate, or one that is granted an EUA or CMA, outside the U.S.;

·●

changes in the regulatory landscape that may prevent us from pursuing or realizing any of the expected benefits from the various regulatory incentives, or the imposition of regulations that affect our products; and

·●

the accuracy of our estimates regarding expenses, future revenues, capital requirements and needs for additional financing.

These are only some of the factors that may affect the forward-looking statements contained in this Form 10-Q. For a discussion identifying additional important factors that could cause actual results to vary materially from those anticipated in the forward-looking statements, see “Risk Factors” in Item 1A of Part II ~~below.~~below and in Part I, Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021. You should review these risk factors, together, for a more complete understanding of the risks associated with an investment in our securities. However, we operate in a competitive and rapidly changing environment and new risks and uncertainties emerge, are identified or become apparent from time-to-time. It is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Form 10-Q. You should be aware that the forward-looking statements contained in this Form 10-Q are based on our current views and assumptions. We undertake no obligation to revise or update any forward-looking statements made in this Form 10-Q to reflect events or circumstances after the date hereof or to reflect new information or the occurrence of unanticipated events, except as required by law.

Overview

~~Humanigen, Inc. is~~We are a clinical stage biopharmaceutical company, developing ~~its~~our portfolio of proprietary Humaneered^® anti-inflammatory immunology and immuno-oncology monoclonal antibodies. We are focusing our efforts on the development of our lead product candidate, lenzilumab, our proprietary Humaneered® anti-human GM-CSF monoclonal antibody. Lenzilumab is a monoclonal antibody that has been demonstrated to neutralize GM-CSF, a cytokine that we believe is of critical importance in the hyperinflammatory cascade, sometimes referred to as CRS or cytokine storm, associated with COVID-19, CAR-T therapy and aGvHD associated with bone marrow transplants. We believe the results from our Phase 3 study in COVID-19, our Phase 1b study in CAR-T, and four other clinical trials support the mechanism of action of lenzilumab.

We believe that we have built a strong intellectual property position in the area of GM-CSF neutralization through multiple approaches and mechanisms, as they pertain to COVID-19, CAR-T, aGvHD and multiple other oncology/transplantation, inflammation, fibrosis and autoimmune conditions which may be driven by GM-CSF.

On May 5, 2021, data from a Phase 3, multi-center, double-blind, placebo-controlled potential registrational trial of lenzilumab as a potential therapeutic for hospitalized, hypoxic patients with COVID-19 pneumonia was published on MedRxiv, a non-peer reviewed journal. We refer to this study as the “LIVE-AIR” study. Data from LIVE-AIR support the previously reported primary endpoint that demonstrated lenzilumab improved the likelihood of survival without ventilation (“SWOV”), sometimes referred to as “ventilator-free survival”, by 54% in the modified intent-to-treat (“mITT”) population (Hazard Ratio, (“HR”): 1.54; 95%CI: 1.02-2.32, p=0.0403). SWOV also improved on a relative basis by 92% in subjects who received both corticosteroids and remdesivir (1.92; 1.20-3.07, nominal p=0.0067); by 3.04-fold in subjects with baseline C-reactive protein (“CRP”) levels <150 mg/L and age <85 years (3.04; 1.68–5.51, nominal p=0.0003). Survival was improved by 2.22-fold in subjects with baseline CRP<150 mg/L and age <85 years (nominal p=0.0337). Subjects in the LIVE-AIR study with baseline CRP<150 mg/L and age <85 years, 75% of all patients with an evaluable CRP at baseline, demonstrated an improvement in survival and appeared to derive the greatest benefit from lenzilumab. An additional analysis of minority groups that are at greater risk of poor outcomes with COVID-19 demonstrated a nearly 9-fold relative improvement in SWOV in Black and African-American Subjects with CRP < 150 mg/L at baseline (HR: 8.90; 95%CI: 1.08-73.09, p=0.0418).

~~Table of Contents~~

We ~~submitted an application for EUA of lenzilumab to FDA at the end of May 2021.~~ On September 8, 2021, FDA declined our EUA request. FDA committed to working with us in the development of lenzilumab and invited us to submit additional data as it becomes available. We requested and have been granted a Type B meeting with FDA. Included in the briefing materials for the meeting request were day 60 data as well as detailed CRP analysis from the LIVE-AIR study.

We have been in discussion with the Medicines and Healthcare Products Regulatory Agency (“MHRA”), the pharmaceuticals and biologics regulatory agency in the UK, for the use of lenzilumab in hospitalized COVID-19 patients and have submitted all the required modules as well as a risk management plan and pediatric investigation plan for the lenzilumab CMA to the MHRA. We have also initiated the process for submission of a Marketing Authorization Application (“MAA”) to the European Medicines Agency (“EMA”) for the use of lenzilumab in the European Union and the EMA has appointed a rapporteur and co-rapporteur as part of the process related to this submission.

~~Lenzilumab was selected to be part of the~~ ~~ongoing ACTIV-5/BET-B trial,~~ which is sponsored and funded by the National Institutes of Health (“NIH”). ACTIV-5/BET-B currently has over 53 active U.S. sites and two Korean sites enrolling and has recently expanded to a potential of 70 sites. The study is evaluating lenzilumab in combination with remdesivir, compared to placebo and remdesivir, in hospitalized COVID-19 patients with 1:1 randomization. In July 2021, NIH advanced the ACTIV-5/BET-B study to a Phase 2/3 study and amended the protocol in a manner that aligns with the design of the LIVE-AIR study. The amended ACTIV-5/BET-B study protocol now includes target enrollment of up to 400 patients with a baseline CRP<150 mg/L, or up to 550 patients overall. We are providing lenzilumab and assisting NIH to achieve the completion of the study.

We intend to submit a Biologics License Application (“BLA”) to FDA for lenzilumab in the treatment of hospitalized COVID-19 patients. Since BLAs typically require more than one study, we plan to include the results of the expanded ACTIV-5/BET-B study as a basis for a BLA-confirmatory study for lenzilumab and believe data from ACTIV-5/BET-B, along with LIVE-AIR, should provide the sufficient size and statistical power typically required for a BLA to be submitted to FDA.

~~Lenzilumab has also been studied in a multi-center Phase 1b trial as a sequenced therapy with Yescarta~~^® (axicabtagene ciloleucel) to prevent CRS and neurotoxicity in patients with relapsed or refractory diffuse large B-cell lymphoma (“DLBCL”) (NCT04314843), for which we recently announced positive results. We intend to initiate a randomized, placebo-controlled, open-label, potentially registrational, Phase 3 study to evaluate the efficacy and safety of lenzilumab combined with commercially available CD19 CAR-T therapies in non-Hodgkin lymphoma in 2022 and have scheduled a meeting with FDA in December 2021 to discuss the study protocol. We currently plan to enroll approximately 250 patients in the study.

We also plan to commence a Phase 2/3 potentially registrational trial for lenzilumab to treat patients who have undergone allogeneic hematopoietic stem cell therapy (“HSCT”) who are at high and intermediate risk for aGvHD (the “RATinG” study). The study will be conducted by the IMPACT Partnership, a collection of 22 stem cell transplant centers located in the United Kingdom and is expected to begin enrollment in the first half of 2022. We will provide lenzilumab for the study including the cost of import, labeling and distribution of the study drug, and support certain laboratory tests related to the study, but the majority of the study costs will be borne by the IMPACT Partnership.

In addition, we are in partnership with SAHMRI and the University of Adelaide to conduct a Phase 2 Trial studying the efficacy of lenzilumab in combination with azacitadine in patients with CMML. This study, PREACH-M, has begun enrollment at five sites in Australia and the first patient has been dosed. We will provide lenzilumab for this study and the majority of the study costs will be borne by the partner and funded by a grant from the Medical Research Futures Fund, a research fund set up by the Australian Government.

Our proprietary, patented Humaneered technology platform is a method for converting existing antibodies (typically murine) into engineered, high-affinity human antibodies designed for therapeutic use, particularly with acute and chronic conditions. We have developed or in-licensed targets or research antibodies, typically from academic institutions, and then applied our Humaneered technology to optimize them. ~~Lenzilumab~~Our lead product candidate, lenzilumab, and our other two product candidates, ifabotuzumab (“iFab”) and HGEN005, are Humaneered monoclonal antibodies. Our Humaneered antibodies are closer to human antibodies than chimeric or conventionally humanized antibodies and have a high affinity for their ~~target but low immunogenicity.~~target. In addition, we believe our Humaneered antibodies offer further important advantages, such as high potency, a slow off-rate and a lower likelihood to induce an inappropriate immune response or infusion related ~~reactions.~~

reaction.

~~Table of Contents~~

~~Our Pipeline~~

~~In addition to~~We are focusing our ~~ongoing work with lenzilumab described above,~~efforts on the development of our ~~pipeline also includes two other monoclonal antibodies, ifabotuzumab and HGEN005.~~

~~Ifabotuzumab~~

~~Ifabotuzumab,~~lead product candidate, lenzilumab. Lenzilumab is a ~~Humaneered~~ monoclonal antibody ~~formerly~~that has been demonstrated to neutralize human granulocyte-macrophage colony-stimulating factor (“GM-CSF”), a cytokine that we believe is of critical importance in the hyperinflammatory cascade, sometimes referred to as ~~KB004, is a non-fucosylated IgG1κ antibody targeting the EphA3 receptor. EphA3 is a tumor-restricted~~cytokine release syndrome (“CRS”) or cytokine storm, associated with COVID-19, chimeric antigen ~~expressed in the tumor vasculature~~receptor T-cell (“CAR-T”) therapy and ~~tumor stroma of various solid tumors including breast, colon, lung, prostate, melanoma, and glioblastoma multiforme~~acute Graft versus Host Disease (“~~GBM”~~aGvHD”), a highly aggressive type of cancer that begins within the brain. We believe that ifabotuzumab, as part of an antibody drug conjugate (“ADC”), has the potential for treating solid tumors, hematologic malignancies and serious pulmonary conditions. associated with bone marrow transplants.

On April 10, 2021, we presented top-line results from the Phase 1 safety and bioimaging trial of ifabotuzumab in patients with GBM at the American Association for Cancer Research 2021 Annual Meeting. The Phase 1 study primarily sought to determine the safety and recommended Phase 2 dose of ifabotuzumab in patients with GBM, the most frequent and lethal primary brain neoplasm, with 5-year survival rates of 10%. It is estimated there are more than 18,000 deaths from brain cancer annually in the U.S. The results of the study show in all patients for both doses, that ifabotuzumab demonstrates highly sensitive, specific, and reproducible targeting of the tumor and tumor microenvironment. There were no dose-limiting toxicities observed and all adverse events were readily manageable. Additional studies are being planned to evaluate ifabotuzumab as an antibody-drug conjugate (“ADC”) in patients with solid tumors, such as lung, colon, breast, prostate, melanoma and pancreatic cancer. These studies include the Olivia Newton-John Cancer Research Institute which plans to conduct a Phase 1b dose-escalation and imaging study in non-CNS solid tumors that is scheduled to begin in early 2022.Our Pipeline

~~HGEN005~~

HGEN005 is a Humaneered monoclonal antibody which targets EMR1, and in which the antibody carbohydrate chains lack fucose, thereby enhancing the targeted cell-killing activity of the antibody. A major limitation of current eosinophil-targeted therapies is incomplete depletion of tissue eosinophils and/or lack of cell selectivity. In preclinical work, HGEN005’s anti-EMR1 activity resulted in dramatically enhanced NK killing of eosinophils from normal and eosinophilic donors and also induced a rapid and sustained depletion of eosinophils in a non-human primate model without any clinically significant adverse events. In 2020, we engaged with NIH to discuss expanding the initial work they have conducted utilizing HGEN005. The development of HGEN005 is on hold while we focus on lenzilumab and ifabotuzmab.

~~Except for the potential of lenzilumab for COVID-19 under an EUA or CMA outside the U.S., our~~Our product candidates are in the clinical stage of development and ~~will~~ require substantial time, resources, research and development, and regulatory approval prior to commercialization. ~~Furthermore, it may be years before any of our products are approved for use, if at all.~~ Our current pipeline is depicted below:

2117

Table of Contents

~~Other Recent Developments~~

In October 2021, we announced that we had entered into an arrangement with Clinigen Group plc (“Clinigen”) a global pharmaceutical Services and Products company, to implement a Managed Access Program for lenzilumab (“LenzMAP™”). LenzMAP will enable access to lenzilumab on a case-by-case basis for hospitalized patients with COVID-19 where the treating physician deems there to be no suitable alternatives and where regulations allow. LenzMAP will be available in the following 16 European countries: Austria, Bulgaria, Croatia, Cyprus, Denmark, Estonia, France, Greece, Ireland, Lithuania, Luxembourg, Netherlands, Portugal, Spain, Sweden, and Switzerland.

Table of Contents

In October 2021, we announced that a manuscript describing our budget impact model for the treatment of patients hospitalized with COVID-19 is available on MedRxiv. These results highlight the value of selecting the right treatment for the right hospitalized patients during this time of unprecedented pressure on health systems.

In October 2021, our research partners presented Phase 1 results from a study of ifabotuzumab in GBM at the Annual Congress of the European Association of Nuclear Medicine (EANM’21) and announced plans to initiate a follow-on Phase 1b study in non-CNS solid tumors (such as breast, colorectal, lung, and pancreatic cancer) in early 2022.

~~In October 2021, the European Commission selected lenzilumab as one of the 10 most promising treatments for COVID-19.~~

~~In October 2021, we announced the first patient was dosed with lenzilumab in the PREACH-M clinical trial.~~

Critical Accounting Policies and Use of Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our Condensed Consolidated Financial Statements, which have been prepared in accordance with accounting principles generally accepted in the U.S., or GAAP. The preparation of our financial statements in conformity with GAAP requires our management to make estimates and assumptions that affect the amounts and disclosures reported in the financial statements and accompanying notes. Actual results could differ materially from those estimates. Our management believes judgment is involved in determining revenue recognition, the fair value-based measurement of stock-based compensation, and accruals. Our management evaluates estimates and assumptions as facts and circumstances dictate. As future events and their effects cannot be determined with precision, actual results could differ from these estimates and assumptions, and those differences could be material to the Condensed Consolidated Financial Statements. If our assumptions change, we may need to revise our estimates, or take other corrective actions, either of which may also have a material adverse effect on our statements of operations, liquidity and financial condition.

~~Table of Contents~~

There were no significant and material changes in our critical accounting policies and use of estimates during the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Use of Estimates” in our ~~2020~~2021 Annual Report on Form 10-K, filed with the SEC on March ~~10, 2021.~~1, 2022.

Results of Operations

At ~~September 30, 2021,~~March 31, 2022, we had an accumulated deficit of ~~$577.5~~$632.4 million, primarily as a result of research and development and general and administrative expenses. Since inception, we have recognized a nominal amount of revenue from payments for license or collaboration fees. While we may in the future generate additional revenue from a variety of sources, including license fees, milestone payments, and research and development payments in connection with strategic partnerships, our product candidates may never be successfully developed or commercialized and we may therefore never realize revenue from any product ~~sales, particularly because most of our product candidates are at an early stage of development.~~sales. Accordingly, we expect to continue to incur substantial losses from operations for the foreseeable future, and there can be no assurance that we will ever generate significant revenue or profits.

Comparison of Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~

The following table summarizes the results of our operations for the periods indicated (amounts in thousands, except percentages):

Three Months Ended September 30, Increase/ (Decrease) Nine Months Ended September 30, Increase/ (Decrease)
(in thousands) 2021 2020 Amount % 2021 2020 Amount %
Revenue:
License revenue $ 1,036 $ - $ 1,036 100 $ 2,558 $ - $ 2,558 100
Total revenue 1,036 - 1,036 2,558 - 2,558

Operating expenses:
Research and development 60,811 22,416 38,395 171 183,757 44,218 139,539 316
General and administrative 6,204 8,331 (2,127 ) (26 ) 19,228 11,685 7,543 65
Total operating expenses 67,015 30,747 36,268 118 202,985 55,903 147,082 263

Loss from operations (65,979 ) (30,747 ) 35,232 115 (200,427 ) (55,903 ) 144,524 259

Other expense:
Interest expense (751 ) (3 ) 748 24,933 (1,516 ) (1,336 ) 180 13
Other income (expense), net (9 ) (1 ) 8 800 (1,166 ) (1 ) 1,165 116,500
Net loss $ (66,739 ) $ (30,751 ) $ 35,988 117 $ (203,109 ) $ (57,240 ) $ 145,869 255

	Three Months Ended March 31,						Increase/ (Decrease)
(in thousands)	2022			2021			Amount			%
Revenue:
License revenue	$	1,036		$	486		$	550			113
Total revenue		1,036			486			550

Operating expenses:
Research and development		17,220			59,934			(42,714	)		(71	)
General and administrative		4,345			4,948			(603	)		(12	)
Total operating expenses		21,565			64,882			(43,317	)		(67	)

Loss from operations		(20,529	)		(64,396	)		(43,867	)		(68	)

Other expense:
Interest expense		(734	)		(19	)		715			3,763
Other income (expense), net		(15	)		(1,152	)		(1,137	)		(99	)
Net loss	$	(21,278	)	$	(65,567	)	$	(44,289	)		(68	)

Revenue

Revenue in the three months ended March 31, 2022 and 2021, represents license revenue under the license agreement (the “South Korea Agreement”) with KPM Tech Co., Ltd. (“KPM”) and its affiliate, Telcon RF Pharmaceutical, Inc. (together with KPM, the “Licensee”). described in more detail in Note 4 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. License revenue was $1.0 million for the three months ended March 31, 2022, as compared to $0.5 million for the three months ended March 31, 2021.

Table of Contents

Research and Development Expenses

Conducting research and development is central to our business model. We expense both internal and external research and development costs as incurred. We track external research and development costs incurred by project for each of our clinical programs. Our external research and development costs consist primarily of:

·●

expenses incurred under agreements with contract research organizations, investigative sites, and consultants that conduct our clinical trials and our pre-clinical activities;

·●

the cost of acquiring and manufacturing clinical trial, pre-commercial and other materials, the cost to transfer the manufacturing process for bulk drug substance and fill/finish production, development of and periodic performance of a variety of tests and assays for stability, release, comparability and product characterization, costs associated with quality management, the preparation of documents and information necessary to file with regulatory authorities; and

·●

other costs associated with development activities, including additional studies.

Other research and development costs consist primarily of internal research and development costs such as salaries and related fringe benefit costs for our employees, stock-based compensation charges, and travel costs not allocated to one of our clinical programs. Internal research and development costs generally benefit multiple projects and are not separately tracked per project.

The following table shows our total research and development expenses for the three months ended March 31, 2022 and 2021:

	Three Months Ended March 31,
(in thousands)	2022		2021
External Costs
Lenzilumab	$	16,448	$	59,332
Ifabotuzumab		158		25
Internal costs		614		577
Total research and development	$	17,220	$	59,934

Research and development expenses ~~increased~~decreased by ~~$38.4~~$42.7 million from ~~$22.4~~$59.9 million for the three months ended ~~September 30, 2020~~March 31, 2021 to ~~$60.8~~$17.2 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The ~~increase~~decrease is primarily due to ~~an increase of $44.9~~a $35.7 million ~~in lenzilumab manufacturing costs, partially offset by a~~ decrease ~~of $7.5 million in clinical trial expenses related to the COVID-19 trial, which began in May 2020.~~

~~Table of Contents~~

Research and development expenses increased by $139.6 million from $44.2 million for the nine months ended September 30, 2020 to $183.8 million for the nine months ended September 30, 2021. The increase is primarily due to an increase of $134.6 million in lenzilumab manufacturing costs and ~~$5.1~~a $4.3 million decrease in ~~consulting and professional services in support of lenzilumab manufacturing~~clinical trial expenses as the LIVE-AIR study has been completed and the ~~COVID-19~~first patient has not yet been dosed in the CAR-T trial.

We expect our research and development costs will continue ~~to increase throughout 2021 as compared to 2020 as a result of our ongoing manufacturing obligations for the production of lenzilumab for commercial use; however, we expect these costs~~ to decrease in 2022 as compared to 2021. ~~On September 8, 2021, FDA declined~~We have sought to ~~approve~~mitigate our ~~EUA~~financial commitments while continuing to position lenzilumab for ~~lenzilumab. Accordingly, we have amended,~~a future authorization or approval in the U.S., UK and EU. Our mitigation efforts included the amendment or in some cases ~~canceled,~~cancelation of certain of our agreements with CMOs for future manufacturing ~~agreements,~~work, some of which were contingent on EUA, in an effort to reduce our future ~~spending~~spending. We incurred cancellation fees for several of these modifications. We also have disputed several invoices for cancellation fees and for production batches for lenzilumab that had been submitted by CMOs that failed to produce lenzilumab within our stated release specifications, but our mitigation efforts may not be successful to recoup any such loss of lenzilumab bulk drug substance (“BDS”) or drug product (“DP”). See Notes 6 and 10 to the Condensed Consolidated Financial Statements included in this Quarterly Report on ~~lenzilumab production until and if authorization is received in the UK, EU, or U.S.~~Form 10-Q for more information on these disputes. In the event of authorization by FDA, MHRA, ~~EMA,~~ or ~~FDA,~~EMA, we anticipate that the demand for commercial product could exceed the ~~in process~~in-process and planned production of lenzilumab through 2022. We intend to seek additional manufacturing capacity if authorization is obtained. ~~Production beyond 2022 would require us to secure capacity at our CMOs and acquire the necessary supplies and components.~~ We expect to use a portion of the revenues generated from commercial sale of lenzilumab following receipt of a regulatory authorization to support our efforts to expand production capacity in 2023 and beyond.

~~The following table shows our total research and development expenses for the three and nine months ended September 30, 2021 and 2020:~~

Three Months Ended September 30, Nine Months Ended September 30,
(in thousands) 2021 2020 2021 2020
External Costs
Lenzilumab $ 59,950 $ 21,979 $ 181,089 $ 43,331
Ifabotuzumab 25 29 75 79
Internal costs 836 408 2,593 808
Total research and development $ 60,811 $ 22,416 $ 183,757 $ 44,218

General and Administrative Expenses

General and administrative expenses consist principally of personnel-related costs (including stock-based compensation), professional fees for legal and patent expenses, insurance, consulting, audit, ~~and tax services, public, governmental and~~ investor relations costs, and other general operating expenses not otherwise included in research and development.

General and administrative expenses decreased by ~~$2.1~~$0.6 million from ~~$8.3~~$4.9 million for the three months ended ~~September 30, 2020,~~March 31, 2021 to ~~$6.2~~$4.3 million for the three months ended ~~September 30, 2021.~~March 31, 2022. The decrease for the three months ended ~~September 30, 2021,~~March 31, 2022, is primarily due to ~~a decrease~~decreases of ~~$3.2~~$1.2 million in ~~public~~consulting expenses and investor relations expense, which amount included the issuance of warrants with a fair value of $1.9 million to certain third-party consultants for the three months ended September 30, 2020, a decrease of $0.7 million in personnel-related expenses primarily due to higher bonus costs for our Chief Executive Officer in the quarter ended September 30, 2020, a decrease of $0.4 million in ~~legal fees primarily due to~~investor and public relations expenses ~~incurred in connection with preparation to uplist on Nasdaq and other corporate actions taken in the three months ended September 30, 2020, which decreases were~~ partially offset by a ~~$1.9~~$0.9 million increase in consulting and other professional services fees and other net increases in general and administrative expenses of $0.3 million related to increased operating activities to support the submission of marketing authorizations for COVID-19 and preparations for potential commercialization of lenzilumab.

General and administrative expenses increased by $7.5 million from $11.7 million for the nine months ended September 30, 2020, to $19.2 million for the nine months ended September 30, 2021. The increase for the nine months ended September 30, 2021, is primarily due to increases in consulting and other professional services fees of $6.6 million, personnel-related expenses of $2.0 million, including non-cash stock-based compensation expense of $1.4 million, attributable to new hires since the first quarter of 2020, and an increase of $0.6 million in business insurance and other net increases in general and administrative expenses of $0.4 million, all in support of our increased operating activities to support the trial for COVID-19 and prepare for potential commercialization of lenzilumab, partially offset by a decrease in public and investor relations expenses of $2.1 million.expense. We expect our overall general and administrative costs to continue to decrease in the near-term ~~as we reduce our expenses in response to FDA’s declination letter~~ until ~~and if~~such time as authorization is received in the U.S., UK, ~~EU,~~ or ~~U.S.~~EU.

2420

Table of Contents

Interest Expense

Interest expense increased $0.8 million to $0.8 million for the three months ended September 30, 2021 and increased $0.2 million from $1.3 million for the nine months ended September 30, 2020 to $1.5 million for the nine months ended September 30, 2021. Interest expense for ~~the three and nine months ended September 30, 2021~~both periods primarily related to the Loan and Security Agreement with Hercules Capital as agent for its affiliates serving as lenders thereunder (the “Term Loan”). OnInterest expense increased $0.7 million from $19 thousand for the three months ended March ~~29,~~31, 2021, as we ~~borrowed~~drew the initial $25.0 million under the Term ~~Loan.~~Loan on March 29, 2021. After giving effect to payment of fees and expenses associated with the draw, we received net proceeds of approximately $24.4 million. See Note 5 to the Condensed Consolidated Financial Statements ~~included in Item 1~~ of this Quarterly Report on Form 10-Q for additional information on the Term Loan. Interest expense for the three and nine months ended September 30, 2020 primarily related to our previously outstanding debt. In June 2020, we paid off substantially all of our debt with proceeds from the private placement of our common stock.

Other ~~Income (Expense), net~~Expense

Other expense ~~was nominal~~decreased by $1.1 million for the three months ended ~~September 30, 2021 and 2020, and increased by $1.2 million for the nine months ended September 30, 2021 as compared to the nine months ended September 30, 2020,~~March 31, 2022, primarily due to litigation ~~costs.~~settlement costs incurred in the prior year period.

Liquidity and Capital Resources

Since our inception, we have financed our operations primarily through proceeds from the public offerings of our common stock, private placements of our common and preferred stock, debt financings, interest income earned on cash, and cash equivalents, and marketable securities, and borrowings against lines of credit, and ~~more recently,~~ with the proceeds under the South Korea Agreement. ~~Specifically, under the South Korea Agreement,~~At March 31, 2022, we ~~received a $6.0~~had cash and cash equivalents of $68.9 million upfront payment (or $4.5 million, net of withholding taxes and other fees and royalties) in the fourth quarter of 2020 and the first milestone payment of $6.0 million (or $4.5 million, net of withholding taxes and other fees and royalties) which was met in. In the first quarter of ~~2021 and received in the second quarter of 2021. In the second quarter of 2021,~~2022, we sold an aggregate of ~~5,427,017~~5,926,748 shares of our common stock ~~in connection with an underwritten public offering, raising net proceeds of approximately $94.2 million after deducting underwriting discounts and offering costs. In~~under the ~~nine months ended September 30, 2021, we sold an aggregate of 2,397,791 shares of our common stock in connection with our~~ Controlled Equity Offering^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), raising net proceeds of approximately ~~$40.0 million after deducting underwriting discounts and offering costs. At September 30, 2021, we had cash and cash equivalents of $76.5~~$18.4 million. Subsequent to September 30, 2021 and through the date of this filing, as disclosed in Note 11 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q, the Company issued and sold 3,818,300 shares of common stock pursuant to the Sales Agreement and received net proceeds of approximately $24.5 million, after deducting fees and expenses.

Primary Sources of and Uses of Cash

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:

	Three Months Ended March 31,
(In thousands)	2022			2021
Net cash (used in) provided by:
Operating activities	$	(19,442	)	$	(35,824	)
Financing activities		18,374			60,979
Net increase (decrease) in cash and cash equivalents	$	(1,068	)	$	25,155

Nine Months Ended September 30,
(In thousands) 2021 2020
Net cash (used in) provided by:
   Operating activities $ (151,786 ) $ (46,157 )
   Investing activities - (20 )
   Financing activities 160,549 137,465
Net increase in cash and cash equivalents $ 8,763 $ 91,288

Net cash used in operating activities was ~~$151.8~~$19.4 million and ~~$46.2~~$35.8 million for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ respectively. Cash used in operating activities of ~~$151.8~~$19.4 million for the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, primarily related to our net loss of ~~$203.1~~$21.3 million, adjusted for non-cash items, such as ~~$3.8~~$1.5 million in stock-based compensation, and a net increase in operating assets and liabilities of ~~$47.1 million and other non-cash items of $0.4~~$0.1 million.

Cash used in operating activities of ~~$46.2~~$35.8 million for the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021, primarily related to our net loss of ~~$57.2~~$65.6 million, adjusted for non-cash items, such as ~~$1.6~~$0.5 million in stock-based compensation, and a net increase in operating assets and liabilities of ~~$8.5 million and other non-cash items of $0.9~~$29.2 million.

Net cash used in investing activities was $0 and $20 thousand for the nine months ended September 30, 2021 and 2020, respectively. Cash used in investing activities for the nine months ended September 30, 2020 consisted of the purchase of website domain names for future use.

~~Table of Contents~~

Net cash provided by financing activities was ~~$160.5~~$18.4 million for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 and consists ~~primarily~~ of ~~net proceeds of approximately $94.2 million related to the sale of 5,427,017 shares of our common stock in connection with an underwritten public offering, $40.0~~$18.4 million received from the issuance of common stock in connection with the ~~Controlled Equity Offering~~^SMSales Agreement ~~(the “Sales Agreement”)~~with Cantor.

Net cash provided by financing activities was $61.0 million for the three months ended March 31, 2021 and consists primarily of $36.1 million received from the issuance of common stock in connection with the Sales Agreement with Cantor, ~~Fitzgerald & Co. (“Cantor”),~~ $24.4 million in net proceeds received from the Term Loan, and ~~$1.9~~$0.4 million received from the exercise of stock options.

Net cash provided by financing activities was $137.5 million for the nine months ended September 30, 2020 and consisted primarily of $67.0 million received from the issuance of common stock in the June 2020 private placement with certain accredited investors, $72.7 million received from the issuance of common stock in the September 2020 underwritten public offering, $0.5 million received from the March 2020 issuance of two convertible redeemable promissory notes, $0.6 million received from the exercise of stock options, $0.3 million received from the April 2020 issuance of two short-term, secured bridge notes, and $0.1 million received from the issuance of common stock under an equity line of credit, offset by $0.5 million for the payoff of the March 2020 convertible redeemable promissory notes, $2.4 million for the payoff of the outstanding short-term, secured bridge notes issued in June 2019, November 2019, and April 2020, and $0.8 million for the payoff of certain outstanding notes payable to vendors.

Recent Financings

Controlled Equity Offering

On December 31, 2020, wethe Company entered into the Sales Agreement with Cantor, under which wethe Company could issue and sell shares of ~~our~~the Company’s common stock, having an aggregate gross sales price of up to $100 million through Cantor, as sales agent. ~~During~~For the ~~period from January 1, 2021 through September 30, 2021,~~first three months of 2022, we issued and sold ~~2,397,791~~5,926,748 shares of our common stock under the Sales Agreement, raising net proceeds of ~~$40.0~~$18.4 million, and for the first three months of 2021, we issued and sold 1,796,858 shares of our common stock under the Sales Agreement, raising net proceeds of $36.1 million. ~~See Note 11~~

Table of Contents

Subsequent to March 31, 2022 and through the ~~Condensed Consolidated Financial Statements included in Item 1~~date of this ~~Quarterly Report on Form 10-Q for additional information related to~~filing, the Company issued and sold 679,328 shares of common stock under the Sales ~~Agreement.~~Agreement for net proceeds of $2.0 million. As of the date of this filing, the Company has the ability to offer and sell shares of common stock having an aggregate offering price of up to $86.3 million under the prospectus supplement dated August 13, 2021 and prospectus dated April 14, 2022.

2021 Underwritten Public Offering

On March 30, 2021, we entered into an underwriting agreement ~~(the “Underwriting Agreement”)~~ with Jefferies LLC, Credit Suisse Securities (USA) LLC and Cantor, as representatives of the several underwriters, in connection with the public offering of 5,000,000 shares of our common stock. In addition, we granted the underwriters a 30-day option to purchase an additional 750,000 shares of our common stock. The initial offering closed on April 5, 2021. On May 3, 2021, we closed on the sale of an additional 427,017 shares of our common stock related to the exercise of the underwriters’ 30-day option. The aggregate gross proceeds from the sale of the 5,427,017 shares in the offering, inclusive of the additional shares purchased by the underwriters, were approximately $100.4 million. The net proceeds from this offering, after deducting underwriting discounts and offering costs, were approximately $94.2 million.

Term Loan with Hercules

On March 10, 2021, we entered into the Term Loan with Hercules which provided us with the ability to draw an initial amount of $25.0 million, which we drew on March 29, 2021. We may become entitled to draw another $20.0 million under the Term Loan through June 15, 2022, at the discretion of Hercules if we request additional funding in support of our strategic initiatives, although there can be no assurances that Hercules would agree to provide such additional funding. See Note 5 to the Condensed Consolidated Financial Statements ~~included~~ in ~~Item 1 of~~ this Quarterly Report on Form 10-Q for additional information on the Term Loan.

Liquidity and ~~Going Concern~~Manufacturing Commitments

We continue to advance our efforts in support of the development of lenzilumab as a therapy for hospitalized COVID-19 patients. As of ~~September 30, 2021,~~March 31, 2022, we had cash and cash equivalents of ~~$76.5~~$68.9 million. On September 8, 2021, FDA declined to ~~approve~~authorize our EUA for lenzilumab. As more fully described in our 2021 Annual Report on Form 10-K ~~for the year ended December 31, 2020~~filed on March 1, 2022 under “Item 1. Business—Manufacturing and Raw ~~Materials.”~~Materials”, we have entered into agreements with several CMOs to provide manufacturing, fill/finish and packaging services for lenzilumab. While we remain committed to our ongoing efforts seeking ~~marketing~~ authorization or approval for commercial use of lenzilumab to treat hospitalized COVID-19 patients in the U.S., UK, EU and other territories, we have amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce our future spending on lenzilumab production until and if authorization is received in the U.S., UK, or EU ~~or U.S.~~ (See ~~Note~~Notes 6 and 10 to the Condensed Consolidated Financial Statements included in ~~Item 1 of~~ this Quarterly Report on Form 10-Q). ~~These changes~~The actions reduced our manufacturing costs beginning in the fourth quarter of 2021 and will ~~significantly~~ limit future production of lenzilumab ~~but~~ because ~~most of our manufacturing~~we have not yet entered into any reservation agreements ~~required payment of upfront fees upon execution~~for production in 2023 and payments against performance of the services to be provided, often over a lengthy performance period, the changes will not have an immediate impact on our spending as the cancellations generally only impact production efforts that were not expected to commence until 2022.

beyond.

~~Table of Contents~~

Considering our current cash resources and our current and expected levels of operating expenses for the next twelve months, which includes our combined accounts payable and accrued expenses as of March 31, 2022 of $67.1 million, and our manufacturing commitments of $42.6 million for the remaining nine months of 2022, $11.8 million for 2023, and $4.6 million thereafter related to our manufacturing agreements, as further described below (see “–Contracts”), we expect to need additional capital to fund our planned operations and capital requirements. Certain of these commitments and amounts accrued at March 31, 2022 are in dispute and we intend to defer these payments, negotiate lower amounts or seek other courses of action, which may include legal recourse for the ~~next twelve months.~~amounts in question. If marketing authorization or approval for lenzilumab were granted, we would expect to be able to satisfy certain of the cash requirements associated with our future manufacturing commitments from revenues from the commercial sale of lenzilumab. We may seek to raise ~~such~~ additional capital through public or private equity offerings, including under the Sales Agreement with Cantor, grant financing and support from governmental agencies, convertible ~~debt, borrowings under our Term Loan with Hercules~~ and other debt financings, collaborations, strategic alliances and marketing, supply, distribution, or licensing arrangements. Subsequent to ~~September 30, 2021~~March 31, 2022 and through the date of this filing, as disclosed in Note 11 to the Condensed Consolidated Financial Statements included in ~~Item 1 of~~ this Quarterly Report on Form 10-Q, we issued and sold ~~3,818,300~~679,328 shares of common stock pursuant to the Sales Agreement and ~~received~~raised net proceeds of approximately ~~$24.5~~$2.0 million, after deducting fees and expenses.

Other significant contractual cash requirements as of March 31, 2022 include payments for principal and interest on the Term Loan. Our current and long-term obligations related to the Term Loan are outlined in Note 5 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.

While we believe ~~these~~our plans to raise additional funds will alleviate the conditions that raise substantial doubt about our ability to continue as a going concern, these plans are not entirely within our control and cannot be assessed as being probable of ~~occurring.~~occurring at this time. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs, our commercialization efforts or our manufacturing commitments and capacity. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, supply, distribution, or licensing arrangements with third parties, we may have to relinquish ~~valuable~~ rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

Table of Contents

We expect that the results of the ACTIV-5/BET-B trial will be important to potential investors in evaluating an investment in our company. Our ability to raise capital on favorable terms in the near future is linked to the success of that trial, which we cannot assure. Unfavorable results likely would have a material and adverse impact on our stock price and ability to obtain future financing.

If we are unsuccessful in our efforts to raise additional capital, based on our current and expected levels of operating expenses our current capital will not be sufficient to fund our operations for the next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern.

~~Capital Commitments and Capital Resources~~

On September 8, 2021, FDA declined to approve our application for EUA for the use of lenzilumab for the treatment of COVID-19. On October 1, 2021, we announced that we had submitted all the required modules as well as a risk management plan and pediatric investigation plan for the lenzilumab CMA in hospitalized COVID-19 patients to the UK’s MHRA, which had previously accepted the application for expedited COVID-19 rolling review. We have also begun the submission process for an MAA in the European Union.Contracts

To support our development efforts for lenzilumab and potential commercialization upon approval under an EUA, CMA or MAA, we have entered into agreements with several organizations for contract manufacturing services, as more fully described in our Annual Report on Form 10-K for the year ended December 31, 2020 under “Item 1. Business—Manufacturing and Raw Materials.”

While we remain committed to completing regulatory processes underway seeking marketing authorization for lenzilumab to treat hospitalized COVID-19 patients in the UK and other territories, subsequent to FDA’s decision to decline to approve our application for EUA for the use of lenzilumab we amended, and in some cases terminated, certain of our manufacturing agreements, some of which were contingent on EUA, in an effort to reduce our future spending on lenzilumab production until and if authorization is received in the UK, EU, or U.S. These changes will significantly limit future production of lenzilumab but because most of our manufacturing agreements required payment of upfront fees upon execution and payments against performance of the services to be provided, often over a lengthy performance period, the changes will not have an immediate impact on our spending as the cancellations generally only impact production efforts that were not expected to commence until 2022. As of September 30, 2021, we estimate that our commitments remaining to be incurred under these agreements will amount to approximately $50.5 million during the fourth quarter of 2021, $55.9 million during 2022 and $4.3 million thereafter. Certain of these commitments and amounts accrued at quarter-end are in dispute and we intend to defer these payments, negotiate lower amounts or seek legal recourse for the amounts in question. Given our existing capital resources and the competitive environment, it is not possible for us to predict when we will be in a position to execute any additional manufacturing agreements, or to estimate the aggregate amount of potential future payments under such new agreements or the timing in which they may be made. If marketing authorization or approval for lenzilumab were granted, we would expect to be able to satisfy certain of the cash requirements associated with our future manufacturing commitments from revenues from the commercial sale of lenzilumab, supplemented as necessary with proceeds from the sale of our equity securities; the incurrence of debt; upfront and milestone payments from licensees; and government funding or financial support, if offered.

~~See “Contracts” below for additional information.~~

~~Contracts~~

Eversana Agreement

On January 10, 2021, we announced that we had entered into a master services agreement (the “Eversana Agreement”) with Eversana Life Science Services, LLC (“Eversana”) pursuant to which Eversana will provide us with services in connection with the potential launch of lenzilumab.

~~Table of Contents~~

We will pay Eversana fees and reimburse it for expenses in performing the services as established in applicable statements of work. Eversana agreed to defer its fees for certain work performed which fees would only be payable upon our receipt of an EUA from FDA for lenzilumab for hospitalized and hypoxic COVID-19 patients. On September 21, 2021, we notified Eversana that due to the ~~declination letter received from FDA on September 8, 2021,~~EUA status in the U.S., we were terminating the initial statement of work related to commercialization support of lenzilumab for the treatment of COVID-19 in the United States. Eversana is disputing the termination notice and has requested payment of approximately $4.0 million it has asserted we owe for services rendered from April 1, 2021 to September 30, 2021. We have disputed this assertion and are working to resolve ~~a dispute over the amount of fees we are obligated to pay Eversana as a result of FDA’s decision to decline to grant EUA for lenzilumab.~~this dispute.

Manufacturing Agreements

We have entered into agreements with several CMOs to manufacture bulk drug substance (“BDS”) and fill/finish/drug product (“DP”) for our lenzilumab clinical trial activities in COVID-19 as well as to manufacture BDS and DP for a potential launch of lenzilumab in anticipation of an EUA or ~~CMA in 2021.~~CMA. We have also entered into agreements for packaging of the drug. These agreements represent large commitments, including upfront amounts prior to commencement of manufacturing and progress payments through the course of the manufacturing process and include payments for technology transfer. Since September 9, 2021, we have amended, and in some cases canceled, certain of these agreements, some of which were contingent on EUA, in an effort to reduce our future spending on lenzilumab production until and if authorization is received in the UK, EU, or U.S. As of September 30, 2021, we estimate that our commitments remaining to be incurred under these agreements will amount to approximately $50.5 million during the fourth quarter of 2021, $55.9 million during 2022 and $4.3 million thereafter. Certain of these commitments and amounts accrued at quarter-end are in dispute and we intend to defer these payments, negotiate lower amounts or seek legal recourse for the amounts in question. In addition, certain of our CMOs have been unsuccessful in their efforts to manufacture some batches of lenzilumab to our specifications for various reasons. We are working with one of these CMOs to determine if batches of BDS manufactured by them will be usable in the future or, if not, whether other financial recompense will be offered to us. ~~For example,~~As of April 30, 2022, we believe approximately 83,900 lenzilumab treatments would be available for sale under an EUA. Of these, approximately 26,000 are expected to be available for immediate sale in the U.S. or UK upon authorization. Another 41,000 treatments are in production ~~of bulk drug substance~~ at one of our ~~CMO’s~~CMOs for which material has not yet been ~~halted as batches made~~released, and which may require reprocessing prior to ~~date do~~release. At this time, it is not ~~meet certain release criteria. We are currently working with this CMO~~possible to ~~resolve the production issues. If successful, manufacturing may continue; however, we do not expect any bulk drug substance production from this CMO in 2021. We intend~~predict if these 41,000 treatments would be released and available for sale if authorization or approval for lenzilumab were to ~~seek replacement batches for bulk drug substance that this CMO failed to produce.~~be attained.

Please see “our Form 10-K for the year ended December 31, 2021,Part I, Item ~~1A.~~1A - Risk Factors—“Risks Related to Our Efforts to Develop Lenzilumab for COVID-19— Manufacturing efforts relating to our lenzilumab program in COVID-19 have been extremely costly and ~~Lenzilumab—Manufacturing problems at~~inefficient in producing treatments for use in our ~~third-party manufacturers,~~clinical development program or potential sale.”

License Agreements

We are obligated to make future payments to third parties under in-license agreements, including ~~their ability~~sublicense fees, royalties, and payments that become due and payable on the achievement of certain development and commercialization milestones.

We record upfront and milestone payments made to ~~manufacture~~third parties under licensing arrangements as an expense. Upfront payments are recorded when incurred and milestone payments are recorded when the specific milestone has been achieved.

Outlicensing Agreements

The South Korea Agreement

On November 3, 2020, we entered into a License Agreement (the “South Korea Agreement”) with KPM and Telcon (together, the “Licensee”). Pursuant to the South Korea Agreement, among other things, we granted the Licensee a license under certain patents and other intellectual property to develop and commercialize our lead product candidate, lenzilumab ~~within specifications, or their ability~~(the “Product”), for treatment of COVID-19 pneumonia, in South Korea and the Philippines (the “Territory”), subject to ~~produce due to lack of components or raw materials, or their requirements to displace our reserved manufacturing slots to comply with government orders, could cause inventory shortages~~certain reservations and ~~delay or impair our ability to obtain an EUA or BLA or other~~limitations. The Licensee will be responsible for gaining regulatory approval ~~or delay shipments~~for, and subsequent commercialization of, lenzilumab ~~for commercial use, which may adversely affect our results of operations.”~~in those territories.

~~Off-Balance Sheet Arrangements~~

Table of Contents

~~We currently~~As consideration for the license, the Licensee has agreed to pay us (i) an up-front license fee of $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties), payable promptly following the execution of the License Agreement, which was received in the fourth quarter of 2020, (ii) up to an aggregate of $14.0 million in two payments based on our achievement of two specified milestones in the U.S., of which the first milestone was met in the first quarter of 2021 and $6.0 million (or $4.5 million net of withholding taxes and other fees and royalties) was received in the second quarter of 2021,and (iii) subsequent to the receipt by the Licensee of the requisite regulatory approvals, double-digit royalties on the net sales of lenzilumab in South Korea and the Philippines. The Licensee has agreed to certain development and commercial performance obligations. It is expected that we will supply lenzilumab to the Licensee for a minimum of 7.5 years at a cost-plus basis from an existing or future manufacturer. The Licensee has agreed to certain minimum purchases of lenzilumab on an annual basis.

Indemnification

In the normal course of business, we enter into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. Our exposure under these agreements is unknown because it involves claims that may be made against us in the future but have ~~no off-balance sheet arrangements, such~~not yet been made. To date, we have not paid any claims or been required to defend any action related to our indemnification obligations. However, we may record charges in the future as ~~structured finance, special purpose entities or variable interest entities.~~a result of these indemnification obligations.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments, including cash equivalents, are in the form, or may be in the form of, money market funds or marketable securities and are or may be invested in U.S. Treasury and U.S. government agency obligations. Due to the short-term maturities and low risk profiles of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our investments.

We are ~~a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and are~~ not ~~required~~materially exposed to ~~provide the information specified under this item.~~market risk related to changes in foreign currency exchange rates.

Item 4.

Controls and Procedures

We maintain disclosure controls and procedures (as defined in Exchange Act Rule 13a–15(e) and 15d-15(e)) that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

~~Table of Contents~~

Evaluation of disclosure controls and procedures. As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on the foregoing, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in internal control over financial reporting. There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

2924

Table of Contents

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings.

Please see Note 10 to the Condensed Consolidated Financial Statements included in Item 1 of this Quarterly Report on Form 10-Q for a summary of legal proceedings and developments during the ~~three and nine months~~quarter ended ~~September 30, 2021.~~March 31, 2022.

Item 1A.

Risk Factors.

~~Risk Factor Summary~~

~~The following summary highlights the material risks that may affect our business, operating results, financial condition and prospects, as more fully described in the pages that follow this summary.~~

We face risks related to the development, manufacturing and distribution of lenzilumab as a treatment for COVID-19, which has not been granted authorized or approved for use by any regulatory agency. We cannot provide any assurance that lenzilumab will receive any such approval or authorization.

We need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates or continue as a going concern.

EUA and/or FDA approval has been granted for vaccines and some of our competitors have received EUA and/or FDA approval for therapeutics for COVID-19. As a result, our commercial opportunity may be reduced or eliminated, if, and to the extent that, such products directly compete for the same segment of patients that lenzilumab targets or indirectly compete for the same patients by preventing hospitalization.

Manufacturing problems at our third-party manufacturers or their requirements to displace our reserved manufacturing slots to comply with government orders could cause inventory shortages and delay or impair our ability to obtain a regulatory authorization or approval or delay shipments of lenzilumab for commercial use, which may adversely affect our results of operations and for which we may not be able to obtain adequate compensation or mitigate our payment obligations.

We may not be able to obtain materials or supplies necessary to conduct clinical trials or, following requisite regulatory authorizations or approvals, to manufacture and sell our products, which could limit our ability to generate revenues.

~~If an authorization or approval is granted for lenzilumab, we may be unable to accurately predict demand for lenzilumab or to produce sufficient quantities on a timely basis to meet demand.~~

There can be no assurance that lenzilumab, even if approved or authorized, would ever become profitable, due to government or healthcare provider or payer interest and public perception regarding vaccines and treatments for COVID-19 related complications. Competing products that are subsequently developed also may diminish demand for lenzilumab or impair its profitability.

The regulatory pathway for lenzilumab is highly dynamic and continues to evolve and may result in unexpected or unforeseen challenges. It may also be affected by the duration and the impact of the COVID-19 pandemic.

We currently have no internal sales and marketing capabilities and will rely on third parties to market and sell lenzilumab if we attain authorization or approval for its commercialization, and any product candidates we may successfully develop. We or they may not be able to effectively market and sell any such product candidates.

We have experienced and may in the future experience significant volatility in the market price of our common stock following announcements and releases regarding our ongoing development of lenzilumab as a potential COVID-19 therapy.

~~We have a history of operating losses and we may never become profitable.~~

The adoption of CAR-T therapies as the potential standard of care for treatment of certain cancers is uncertain, and dependent on the efforts of a limited number of market entrants, and if not adopted as anticipated, the market for lenzilumab or next-generation gene-edited CAR-T therapies may be limited or not develop.

Our business could target benefits from various regulatory incentives, such as EUA, orphan drug exclusivity, breakthrough therapy designation, fast track designation, and priority review, but we may not ultimately qualify for or benefit from these incentives.

We may experience delays in commencing or conducting our planned or contemplated clinical trials, several of which are being led by third parties whose actions we cannot control, in receiving data from third parties or in the continuation or completion of clinical testing, which could result in increased costs to us, delay our ability to generate product candidate revenue or, ultimately, render us unable to complete the development and commercialization of our product candidates.

~~Table of Contents~~

If we fail to attract and retain key management and clinical development personnel, or if the attention of such personnel is diverted, we may be unable to successfully manage our business and develop or commercialize our product candidates.

If our competitors develop similar or comparable treatments for the target indications of our product candidates that are approved more quickly, marketed more successfully or are demonstrated to be safer or more effective than our product candidates, or if FDA approves generic or biosimilar competitors to our products post-approval, our commercial opportunity will be reduced or eliminated.

~~We may encounter difficulties in managing our growth and expanding our operations successfully, including internationally if lenzilumab is authorized or approved in any foreign country or market.~~

Even if we are able to obtain regulatory approval for our product candidates, we will continue to be subject to ongoing and extensive regulatory requirements, and our failure to comply with these requirements could substantially harm our business.

~~Currently pending, threatened or future litigation or governmental proceedings or inquiries could result in material adverse consequences, including judgments or settlements.~~

~~We may not be able to protect our intellectual property rights in the U.S. and throughout the world.~~

~~Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.~~

In addition to the other information set forth in this Quarterly Report on Form 10-Q and other filings we have made and will make in the future with the SEC, you should carefully consider the following risk factors and uncertainties, which could materially affectFDA declined our business, financial condition or results of operations in future periods. Additional risks not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or results of operations in future periods.

~~Risks Related to Our Business and Industry~~

~~Risks Related to COVID-19 and Lenzilumab~~

~~We face risks related to the development, manufacturing and distribution of~~initial request for emergency use authorization for lenzilumab as a ~~treatment~~therapy for hospitalized patients with COVID-19. MHRA raised certain questions in its review of our application for marketing authorization to which we are drafting responses. We are continuing to pursue an authorization or approval for lenzilumab’s use in hospitalized patients with COVID-19 ~~which has~~in the U.S., UK and EU, but may not ~~been granted an EUA or approved by FDA. We cannot provide any assurance that lenzilumab will receive an EUA or be approved by FDA.~~obtain one.

We completed a Phase 3 potentially registrational trial with lenzilumab in newly hospitalized COVID-19 patients and announced positive topline data from the study known as “LIVE-AIR” in March 2021. On September 8, 2021, FDA informed us that it had declined to ~~approve our~~issue an EUA for ~~lenzilumab. It is possible~~lenzilumab in this indication. FDA has advised us that ~~FDA and other regulatory authorities may not grant a future~~they will review an amended EUA ~~or subsequently approve lenzilumab~~submission with further data. MHRA raised certain questions in its review of our application for the treatment of COVID-19, or that any such EUA or approval, if granted, may have significant limitations on its use. Widespread uptake of a safe, effective, scalable and affordable vaccine may have a negative impact on the demandmarketing authorization to which we are drafting responses. A further step in our development program for lenzilumab ~~over~~in COVID-19 is the ~~long term, even if an EUA or approval were issued, although substantial numbers~~release of patients may continue to be hospitalized until there is widespread vaccination/herd immunity, notwithstanding the impact of current and future variants. It is possible that further safety and efficacy dataresults from the Accelerating COVID-19 Therapeutic Interventions and ~~Vaccines~~Vaccines-5 (“~~ACTIV”~~ACTIV-5”)-5 and Big Effect Trial, in the “B” arm of the trial (“BET-B”), referred to as the ACTIV-5/BET-B trial, which is sponsored and funded by the National Institutes of Health (“NIH”),. A subgroup analysis of the LIVE-AIR study suggested that patients under the age of 85 and with a baseline CRP below 150 mg/L (the “CRP subgroup”) appeared to derive the greatest benefit from lenzilumab. As a result, NIH amended the ACTIV-5/BET-B study protocol to include baseline CRP below 150 mg/L as the primary analysis population and submitted the amendment to FDA. The ACTIV-5/BET-B study has completed enrollment. Analysis of data by the NIH can begin once the database lock has occurred. The NIH controls the data analysis and we may be unable to influence the timeline for completion. It is possible, but not assured, that the results from the ACTIV-5/BET-B trial may support the preparation of an amended submission for an EUA, as well as our response to MHRA. If the results from ACTIV-5/BET-B are not positive, we may consider utilizing data from other on-going COVID-19 studies, conduct a further and new clinical trial, seek a partner to develop lenzilumab in this indication or abandon this development program altogether. Unfavorable results likely would have a material and adverse impact on our stock price and ability to obtain future financing needed to continue as a going concern.

Even if ACTIV-5/BET-B results confirm our findings from the CRP subgroup from the LIVE-AIR study and we prepare an amended EUA submission and respond to MHRA, the regulatory agencies may not ~~provide support for a new EUA request.~~

find the results compelling. Furthermore, even if the results are deemed compelling, we may be required to obtain and submit additional information related to the Chemistry Manufacturing and Control (“CMC”) aspects of lenzilumab production before we attain EUA, CMA or any other authorization or approval. We are in the process of obtaining additional CMC information but there is no assurance that we will generate sufficient information to satisfy regulatory requirements.

More broadly, in the context of EUA, CMA or any other request for a conditional marketing authorization or approval, there is no requirement that FDA or any regulatory body reach a favorable conclusion about our submissions. A myriad of factors, including the regulator’s assessment of the urgency of the need for a therapeutic such as lenzilumab; the efficacy of lenzilumab as the pandemic evolves; and other factors such as the development of more efficacious therapies, may influence a regulator’s decision on any submissions we may make.

Furthermore, if an EUA ~~were~~is granted to permit lenzilumab to be commercialized for use in the treatment of COVID-19, the authorization iswould only remain in effect while ~~it is determined that~~ a “Public Health Emergency” is ~~still~~ underway and might be expressly conditioned or limited by FDA. An EUA, ~~does not take~~if granted, could also be terminated if, in the ~~place of~~future, there are changes in available data that bear on the ~~formal BLA submission, review and approval process.~~risk-benefit analysis, or if alternative approved products become available.

We intend to submit a BLA to FDA for the use of lenzilumab in hospitalized COVID-19 patients. Since BLAs typically require more than one study, we are currently evaluating the extent to which the results of the expanded ACTIV-5/BET-B study may serve as a basis for a BLA-confirmatory study for lenzilumab. There can be no assurance that the ACTIV-5/BET-B data will be sufficient for a BLA or that FDA will not require additional information, including additional clinical trials, in order to grant a BLA. ~~Furthermore, there~~Accordingly, it is no assurance of favorable results from the ongoing ACTIV-5/BET-B clinical trial, or that this trial will enroll enough patients to satisfy FDA or be completed in anticipated timelines or at all. It is also possible that FDA and other regulatory authorities may not authorize or approve lenzilumab for the treatment of COVID-19, or that any ~~marketing approvals,~~such authorization or approval, if granted, may have significant limitations on its use. Further, we may make a strategic decision to discontinue development of lenzilumab in this indication if other parties are successful in developing a more effective treatment for COVID-19. As a result, weuse or subsequently be rescinded or terminated. We may never successfully produce or commercialize lenzilumab for use in COVID-19 patients or realize a return on our significant investment in the development, supply, and commercialization of lenzilumab for this purpose.

We cannot assure that lenzilumab will receive a marketing authorization from Medicines and Healthcare Products Regulatory Agency (“MHRA”) or European Medicines Agency (“ EMA”) or any other regulatory agency.

~~Table of Contents~~

We have focused increasing efforts to pursue a marketing authorization for lenzilumab in the United Kingdom and European Union. We cannot provide any assurances that we will be able to attain any conditional marketing authorization (“CMA”) for lenzilumab in COVID-19 patients in the United Kingdom, (“UK”), European Union (“EU”) or other markets outside the U.S. Our inability to attain a marketing authorization or approval outside the U.S. would prevent us from generating significant revenues from commercial sales of lenzilumab until such time as we might be successful in receiving authorization or approval from FDA or another regulatory agency. Our inability to commercialize lenzilumab for use in COVID-19 patients would prevent us from realizing a return on our significant investment in the development, supply, and commercialization of lenzilumab for this purpose.

We will need to obtain additional financing to fund our operations and, if we are unable to obtain such financing, we may be unable to complete the development and commercialization of our product candidates, or continue to operate as a going concern.

We will need to obtain additional financing to fund our future operations, including for clinical development, manufacturing, distribution and commercialization of lenzilumab for patients with COVID-19 and other indications including CAR-T, GvHD and CMML and our other product candidates. We may also need to obtain additional financing to conduct additional trials for the approval of our product candidates if requested by regulatory authorities in the U.S. and other countries, and to complete the development of any additional product candidates we own or might acquire. Moreover, our fixed expenses such as salaries, committed payments to our contract manufacturers, and other contractual commitments, are substantial and are expected to increase in the future. Our need to raise funds will depend on a number of factors, including our ability to establish additional relationships for the manufacture of lenzilumab and our ability to commence commercialization and begin generating revenues from product sales if lenzilumab were to be authorized or approved by a regulatory agency.

Until we can generate a sufficient amount of revenue, we may finance future cash needs through public or private equity offerings, license agreements, grant financing and support from governmental agencies, convertible debt, other debt financings, collaborations, strategic alliances and marketing, supply, distribution or licensing arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. If adequate funds are not available, we may be required to delay or reduce the scope of or eliminate one or more of our research or development programs, our commercialization efforts or our manufacturing commitments and capacity. We may seek to access the public or private capital markets whenever conditions are favorable, even if we do not have an immediate need for additional capital at that time. In addition, if we raise additional funds through collaborations, strategic alliances or marketing, supply, distribution, or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

If we are unsuccessful in efforts to raise additional capital, based on our current levels of operating expenses, our current capital is not expected to be sufficient to fund our operations for the next twelve months. These conditions raise substantial doubt about our ability to continue as a going concern.

The condensed consolidated financial statements for the three and nine months ended September 30, 2021 were prepared on the basis of a going concern, which contemplates that we will be able to realize our assets and discharge liabilities in the normal course of business. The financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

In addition, the presence of the explanatory paragraph about our ability to continue as a going concern in our financial statements, could also make it more difficult to raise the capital necessary to address our current needs.

The fluid and unpredictable nature of the COVID-19 pandemic, which began in late 2019 and has spread worldwide, may affect our ability to conduct the clinical trials with NIH, Mayo Clinic, the IMPACT Partnership, SAHMRI and the University of Adelaide and the Olivia Newton-John Cancer Research Centre, delay the initiation of planned and future clinical trials, disrupt regulatory activities, or have other adverse effects on our business and operations. In addition, this pandemic has caused substantial volatility in the financial markets and may adversely impact economies worldwide, both of which could result in adverse effects on our business and operations.

In December 2019, an outbreak of the respiratory illness COVID-19 caused by a strain of novel coronavirus, SARS-Cov-2, was first reported in China. The COVID-19 outbreak has spread worldwide, causing many governments to implement measures to slow the spread of the outbreak through quarantines, strict travel restrictions, heightened border scrutiny, and other measures. COVID-19 infections are widespread and as of October 31, 2021, in the U.S., there have been reported over 45 million cases, over 3.2 million hospitalizations and over 740 thousand deaths. Several vaccines have been developed which show efficacy rates ranging from less than 50% in certain populations to more than 90%; however, the rollout of inoculations and the emergence of numerous COVID-19 variants lead us to believe the need for therapeutics to treat COVID-19 currently exists and will continue to exist. The outbreak and government measures taken in response have had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. The future progression of the outbreak and its effects on our business and operations are uncertain.

~~Table of Contents~~

We and our third-party CRO clinical sites and contract manufacturing organizations (“CMOs”) may experience disruptions in supply of product candidates and/or procuring items that are essential for our research, development and manufacturing activities, including raw materials and components used in the manufacturing of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies, in each case, for which there may be shortages because of ongoing efforts to address the outbreak. These delays have impacted our overall manufacturing supply chain operations to date, and while we continue to explore back up or alternative sources of supply, any future disruption in the supply chain from the COVID-19 outbreak, or any continued outbreak, could have a material adverse impact on our clinical trial plans and business operations.

Additionally, we will seek to enroll patients in several planned studies. Patients in our clinical trials are at sites located in many areas affected by COVID-19 and, as a result, our trials may be impacted. In addition, even if sites are actively recruiting, we may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the outbreak. Prolonged delays or closure to enrollment in our trials or patient discontinuations could have a material adverse impact on our clinical trial plans and timelines.

In addition, our ability to collect all data requested of patients enrolled in our clinical trials during this pandemic is being impacted to varying degrees by COVID-19. Clinical trial data collection generally continues for each of our clinical trials, but at a slower pace, and in some instances, we encounter disruption of collection of complete study data. This could have a material adverse impact on our data analysis.

The response to the COVID-19 pandemic may redirect resources with respect to regulatory and intellectual property matters in a way that would adversely impact our ability to progress regulatory approvals and protect our intellectual property. In addition, we may face impediments to regulatory meetings and approvals due to measures intended to limit in-person interactions.

Any negative impact that the COVID-19 pandemic has on the ability of our suppliers to provide materials for our product candidates, or on recruiting or retaining patients in our clinical trials, or our ability to collect patient data, could cause delays to clinical trial activities including enrollment, completion and collection of the final results from the ACTIV-5/BET-B trial, which could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our financial results. Furthermore, any negative impact that the outbreak has on the ability of our CROs to deliver data sets and execute on experimentation could cause substantial delays for our discovery activities and materially impact our ability to fuel our pipeline with new product candidates.

The COVID-19 pandemic has caused significant volatility in the financial markets, and may continue to cause such disruptions, which could impact our ability to raise additional funds through public offerings and may also impact the volatility of our stock price and trading in our stock. Moreover, the pandemic has significantly impacted economies worldwide, which could result in adverse effects on our business and operations. We cannot be certain what the overall impact of the COVID-19 pandemic will be on our business. It has the potential to adversely affect our business, financial condition, results of operations, and prospects.

EUA and/or FDA approval has been granted for vaccines and some of our competitors have received EUA and/or FDA approval for therapeutics for COVID-19. As a result, our commercial opportunity may be reduced or eliminated, if such products directly compete for the same segment of patients that lenzilumab targets or indirectly compete for the same patients by preventing hospitalization.

We may not be successful in attaining any authorization or approval for lenzilumab in hospitalized COVID-19 patients before competitors receive authorization or approval of competitive therapeutics, which may reduce the commercial opportunity for lenzilumab. In addition, vaccines which have been granted EUA and/or FDA approval to prevent COVID-19 may indirectly compete for the same patients by preventing hospitalization.

On October 22, 2020, FDA approved remdesivir for use in adult and certain pediatric patients for the treatment of COVID-19 requiring hospitalization. Remdesivir appears to improve Time to Recovery (“TTR”) but not survival. Baricitinib has also been authorized for use without remdesivir for the treatment of COVID-19. Baricitinib may not be used with corticosteroids. Tocilizumab has been authorized for use with corticosteroids for the treatment of COVID-19. Several neutralizing antibodies have been approved to prevent progression in the early stages of infection. Three vaccines and boosters have been authorized by FDA with efficacy rates ranging from less than 50% in certain populations to more than 90%. There are numerous other companies working on therapies to treat COVID-19 in the out-patient and the in-patient settings and/or vaccines to prevent COVID-19, including oral antiviral compounds. For example, in October 2021 Merck & Co. Inc. and Ridgeback Biotherapeutics LP submitted for EUA for molnupiravir, an investigational oral antiviral medicine, for the treatment of COVID-19 in adults in the out-patient setting.

~~Table of Contents~~

If additional competing therapies are approved, such approval could have a material adverse impact on our ability to attain regulatory approvals needed to commercialize lenzilumab as a therapy for COVID-19. In addition, there are numerous clinical trial programs in progress for COVID-19 therapies which are all competing for largely the same patient population for enrollment. This problem is exacerbated by changing rates of infection and spread, which make it challenging to ensure there are sufficient centers and patients to be enrolled in additional studies. Results from clinical testing may raise new questions and require us to redesign proposed clinical trials. Many of our competitors and potential competitors have substantially greater scientific, research, and product development capabilities, as well as greater financial, marketing, sales and human resources capabilities than we do. In addition, many specialized biotechnology firms have formed collaborations with large, established companies to support the research, development and commercialization of products that may be competitive with ours.

Manufacturing problems at our third-party manufacturers, including their ability to manufacture lenzilumab within specifications or their ability to produce due to lack of components or raw materials, or their requirements to displace our reserved manufacturing slots to comply with government orders, could cause inventory shortages and delay or impair our ability to obtain an EUA or BLA or other regulatory approval or delay shipments of lenzilumab for commercial use, which may adversely affect our results of operations.

We believe that our ability to obtain an EUA and, ultimately, a BLA to permit lenzilumab to be used commercially for patients with COVID-19 depends at least in part on our ability to demonstrate to FDA that we will be able to scale the manufacturing to produce a sufficient quantity of dosages to address the potential demand for the product. We have contracted and expect to continue to contract with third-party manufacturers to produce lenzilumab. We depend on these third parties to perform the manufacturing of lenzilumab effectively, timely, and in compliance with Good Manufacturing Practices (“GMP”), which are extensive regulations governing manufacturing processes, stability testing, record-keeping and quality standards as defined by FDA. Similar regulations are in effect in other jurisdictions.

Our complete reliance on third-party manufacturers to produce lenzilumab subjects us to additional risks, including the possible breach of the manufacturing agreement by the third party, the possible cancellation, delay or modification of contracted manufacturing slots by the third party, or the termination or nonrenewal of the agreement by the third party at a time that is costly or inconvenient for us. While we remain committed to our ongoing efforts seeking marketing authorization for lenzilumab to treat hospitalized COVID-19 patients in the U.S., UK and other territories, we have amended, and in some cases canceled, certain of our agreements with these third-party manufacturers, some of which were contingent on EUA, in an effort to reduce our future spending on lenzilumab production. These changes will significantly limit future production of lenzilumab.

In addition, in an effort to increase the availability of needed medical products, vaccinations or related therapies in response to the COVID-19 pandemic, governments have required and may continue require our third-party manufacturers or our suppliers to allocate manufacturing capacity (for example pursuant to the U.S Defense Production Act, “DPA”) in a way that adversely affects our ability to obtain regulatory approval for and to commercialize lenzilumab. During the latter half of 2020, and continuing into 2021, it has become more challenging and expensive to obtain these slots due to increased demand for production at our CMOs, many of which also manufacture vaccines and other therapeutics. Even after being reserved and paid for, the manufacturing slots for which we contract are subject to risk of displacement as mandated from Rated Orders issued under the DPA. This displacement risk has caused us to expend significant efforts to manage our supply chain and add additional CMOs. Despite those efforts, we have experienced and expect to continue to experience shortages of raw materials and critical components we necessary for our manufacturing processes. Accordingly, the inability to manage our manufacturing capacity could delay our ability to gain approval and ultimately generate revenues from sales of lenzilumab.

Our third-party manufacturers are independent entities subject to their own unique operational and financial risks that are out of our control. If we or any of these third-party manufacturers fail to perform as required, this could cause delays in our clinical trials and applications for regulatory approval. Further, we may have to pay the costs of manufacturing any batch that fails to pass quality inspection or meet regulatory approval. Production at one of our CMOs has been halted as batches made to date do not meet certain release criteria. We are seeking redress for this situation but may not be successful in recouping our costs incurred to-date or in obtaining another appropriate remedy. In addition, our third-party manufacturers may only be able to produce some of our products at one or a limited number of facilities and, therefore, we have limited manufacturing capacity for certain products, and we may not be able to locate additional or replacement facilities on a reasonable basis or at all. Our sales of such products could also be adversely impacted by our reliance on such limited number of facilities. To the extent these risks materialize and affect their performance obligations to us, our financial results may be adversely affected.

In addition, the process of manufacturing biologics is extremely susceptible to product loss due to contamination, equipment failure or improper installation or operation of equipment, or vendor or operator error. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral, foreign substances or other contaminations are discovered in our products or in the manufacturing facilities in which our products are made, such manufacturing facilities may need to be closed for an extended period of time to investigate and remedy the contamination. Lenzilumab produced in these facilities may be quarantined or recalled and not available for clinical or commercial use. We have encountered and may continue to encounter these difficulties, as a result of which we have less lenzilumab available for potential sale if we were able to attain an authorization or approval, which could have an adverse effect on our business.

~~Table of Contents~~

We need access to certain supplies and products to conduct our clinical trials and, if an EUA or BLA or other approval were to be received, to manufacture and sell our products. If we are unable to purchase sufficient quantities of these materials or find suitable alternative materials in a timely manner, our development efforts for our product candidates may be delayed or our ability to manufacture our products could be limited, which could limit our ability to generate revenues.

Suppliers of key components and materials must be named in the EUA, BLA or other marketing authorization application filed with the regulatory authority for any product candidate for which we are seeking marketing approval, and significant delays can occur if the qualification of a new supplier is required. Even after a manufacturer is qualified by the regulatory authority, the manufacturer must continue to expend time, money and effort in the area of production and quality control to ensure full compliance with GMP. Manufacturers are subject to regular periodic inspections by regulatory authorities following initial approval. If, as a result of these inspections, a regulatory authority determines that the equipment, facilities, laboratories or processes do not comply with applicable regulations and conditions of product approval, the regulatory authority may suspend the manufacturing operations. If the manufacturing operations of any of the single suppliers for our products are suspended, we may be unable to generate sufficient quantities of commercial or clinical supplies of product to meet market demand, which could in turn decrease our revenues and harm our business. In addition, if deliveries of materials from our suppliers were interrupted for any reason, we may be unable to supply our product candidates in development for clinical trials or ship them to customers, if authorized or approved for commercial use. In addition, some of our products and the materials that we utilize in our operations are manufactured at only one facility or from a single vendor, which we may not be able to replace in a timely manner and on commercially reasonable terms, or at all. Problems with any of the single suppliers we depend on, including in the event of a natural disaster, power or equipment failure or other difficulty, may negatively impact our development and commercialization efforts.

A significant portion of the raw materials and intermediates used to manufacture our product candidates are supplied by third-party manufacturers and corporate partners outside of the U.S. As a result, any political or economic factors in a specific country or region, including any changes in or interpretations of trade regulations, compliance requirements or tax legislation, that would limit or prevent third parties outside of the U.S. from supplying these materials could adversely affect our ability to conduct our pending or contemplated clinical trials.

If we were to encounter any of these difficulties, our ability to conduct clinical trials on product candidates and to manufacture and sell any products that may be authorized or approved for commercial use could be impaired, which could have an adverse effect on our business.

Interim, top-line, ad-hoc, retrospective, exploratory or preliminary data from our clinical trials that we announce or publish from time-to-time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

From time-to-time, we may publicly disclose preliminary, “top-line” or other data from clinical trials, which is based on a preliminary analysis of then-available data, and the results and related findings and conclusions are subject to change following a full analysis of all data related to the particular trial. We may also seek to publish additional ad-hoc, retrospective or exploratory data, including results from patients with CRP levels <150 mg/L. We also make assumptions, estimations, calculations and conclusions as part of our analyses of data, and we may not have received or had the opportunity to fully and carefully evaluate all data. As a result, such results that we report may differ from future results of the same trials, or different conclusions or considerations may qualify such results once additional data have been received and fully evaluated. Such data also remain subject to audit and verification procedures that may result in the final data being materially different from the preliminary data we previously published. As a result, interim, top-line, or preliminary data should be viewed with caution until the final data are available. Such data from clinical trials are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Adverse differences between such data and final data could significantly harm our business prospects. Further, disclosure of interim, top-line or preliminary data by us or by our competitors could result in volatility in the price of shares of our common stock.

In addition, others, including regulatory agencies, may not accept or agree with our assumptions, estimates, calculations, conclusions or analyses or may interpret or weigh the importance of data differently, which could impact the value of the particular program, the approvability or commercialization of the particular product candidate or product, and our business in general. In addition, the information we choose to publicly disclose or to publish via a preprint publication regarding a particular study or clinical trial is based on what is typically extensive information, and you or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular drug, product candidate, or our business. If the top-line data that we report differ from actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for and commercialize our current or any our future product candidate, our business, operating results, prospects or financial condition may be harmed.

~~Table of Contents~~

~~If an authorization or approval were granted for lenzilumab, we may be unable to accurately predict demand for lenzilumab or to produce sufficient quantities on a timely basis to meet demand.~~

If lenzilumab is authorized for commercial use, we may be unsuccessful in estimating user demand and may not be effective in matching inventory levels and locations to actual end user demand, in particular if the COVID-19 pandemic, including emerging variants, is effectively contained or the risk of patients being hospitalized as a result of coronavirus infection is significantly diminished. In addition, adverse changes in economic conditions, increased competition, including through approved vaccines or other therapeutics, or other factors may cause hospitals or other users or distributors of lenzilumab to reduce inventories of our products, which would reduce their orders for lenzilumab, even if end user demand has not changed. As a result, even if lenzilumab receives an EUA or BLA approval for use in COVID-19 patients, our revenues may be difficult to predict and vulnerable to extreme fluctuations.

There can be no assurance that lenzilumab, even if approved, would ever become profitable, due to government or healthcare provider or payer interest and public perception regarding vaccines and treatments for COVID-19 related complications.

As a result of the emergency situations in many countries, there is a heightened risk that a COVID-19 therapy or other treatments for COVID-19 symptoms may be subject to adverse governmental actions in certain countries, including intellectual property expropriation, compulsory licenses, strict price controls or other actions. Additionally, we may need, or we may be required by governmental or non-governmental authorities, to set aside specific quantities of doses of lenzilumab for designated purposes or geographic areas. We may face challenges related to the allocation of supply of lenzilumab, particularly with respect to geographic distribution. Thus, even if lenzilumab is approved, such governmental actions may limit our ability to recoup our current and future expenses incurred to develop and commercialize lenzilumab.

Furthermore, public sentiment regarding commercialization of a COVID-19 therapy or other treatment may limit or negate our ability to generate revenues from sales of lenzilumab. If authorized or approved, we may face significant public attention and scrutiny over any future business models and pricing decisions with respect to lenzilumab. If we are unable to successfully manage these risks, we could face significant reputational harm, which could negatively affect the price of our common stock.

Even if regulatory authorization or approval were received for lenzilumab, the later discovery of previously unknown problems associated with the use of lenzilumab may result in restrictions, including withdrawal of the product from the market, and lead to significant liabilities and reputational damage.

Because the path to marketing approval of any treatment or vaccine for COVID-19 is unclear, lenzilumab may be used and in circulation in the U.S. or another country prior to our receipt of marketing approval. Unexpected safety issues, including any that we have not yet observed in our Phase 3 clinical trial for lenzilumab, could lead to patient harm and significant reputational damage to us and our platforms going forward and other issues, including delays in our other programs, the need for re-design of our clinical trial and the need for significant additional financial resources.

We also may be restricted or prohibited from marketing or manufacturing lenzilumab, even after obtaining product approval, if previously unknown problems with lenzilumab or its manufacture are subsequently discovered. We cannot provide assurance that newly discovered or developed safety issues will not arise following regulatory approval. With the use of any drug product or treatment by a wide patient population, serious adverse events may occur from time-to-time that did not arise in the clinical trials of the product or that initially appeared to be unrelated to the vaccine itself and only with the collection of subsequent information were found to be causally related to the product. Any such safety issues could cause us to suspend or cease marketing of our approved products, possibly subject us to substantial liabilities, and adversely affect our ability to generate revenue and our financial condition.

We currently have no internal sales and marketing capabilities and will rely on third parties to market and sell lenzilumab if we attain an EUA or other regulatory approval for its commercialization, and any product candidates we may successfully develop. We or they may not be able to effectively market and sell any such product candidates.

While we have entered into several agreements with commercial partners who will provide sales and marketing support as well as logistic and distribution services, we currently do not have the internal sales and marketing infrastructure in place that would be necessary to sell and market products. As is the case with many, if not most, small companies seeking to commercialize their products and who have not yet partnered with a larger biotech or pharmaceutical company, we have entered into arrangements to outsource those services to third parties.

If we or any of our partners fail to hire, train, retain and manage qualified sales personnel, market our product successfully or on a cost-effective basis, our ability to generate revenue will be limited and we will need to identify and retain an alternative third-party, or develop our own sales and marketing capability. The establishment of an in-house sales and marketing operation can be expensive and time consuming and could delay any product candidate launch.

~~Table of Contents~~

We may experience significant volatility in the market price of our common stock following announcements and releases regarding our ongoing development of lenzilumab as a potential COVID-19 therapy.

Biopharmaceutical companies that are developing potential therapeutics and vaccines to combat COVID-19, including our company, have experienced significant volatility in the price of their securities upon publication of preclinical and clinical data as well as news about their development programs. Since our initial announcement of our plans to develop lenzilumab as a therapy for COVID-19 patients, our common stock has experienced wide variations in daily trading volume and price movements. The volatility in the price per share is further exacerbated by the large percentage of retail shareholders. We expect that over the coming months we may make public disclosures of additional data, and clinical and regulatory updates with respect to lenzilumab and our commercialization efforts for lenzilumab. We cannot predict public reaction or the impact on the market price of our common stock once further announcements regarding lenzilumab or developments from our on-going clinical trial are announced. Given the attention being paid to the COVID-19 pandemic and the public scrutiny of COVID-19 development announcements and data releases to date, we expect that any public announcements we make in the coming months regarding the ongoing development and commercialization of lenzilumab will attract significant attention and scrutiny and that, as a result, the price of our common stock may be particularly volatile during this time.

~~Other Risks Related to Our Business and Industry~~

~~We have a history of operating losses, we expect to continue to incur losses, and we may never become profitable.~~

We have incurred net losses in nearly every year since our inception. For the nine months ended September 30, 2021, we incurred a net loss of $203.1 million, and we have an accumulated deficit of $577.5 million as of September 30, 2021. Since inception, we have recognized a nominal amount of revenue from payments for license or collaboration fees, $2.6 million of which was recognized in the first nine months of 2021. We expect to make substantial expenditures and incur additional operating losses in the future to further develop and commercialize our product candidates. Our accumulated deficit is expected to increase significantly as we continue our development and clinical trial efforts. Our ability to achieve and sustain profitability depends on obtaining regulatory approvals for and successfully commercializing our product candidates, either alone or with third parties. We do not currently have the required approvals to market any of our product candidates and we may never receive them. We may not be profitable even if we or any future development partners succeed in commercializing any of our product candidates. Because of the numerous risks and uncertainties associated with developing and commercializing our product candidates, we are unable to predict the extent of any future losses or when we will become profitable, if at all.

Our business depends on the success of our current product candidates. We cannot be certain that we will be able to obtain regulatory approval for, or successfully commercialize, any of our product candidates.

We have a limited pipeline of product candidates and we do not plan to conduct active research at this time for discovery of new molecules or antibodies. We depend on the successful development and attainment of regulatory authorization or approval of our current product candidates for our future business success. The future clinical, regulatory and commercial success of our product candidates is subject to a number of risks, including the following:

~~we may not be able to enroll adequate numbers of eligible patients in the clinical trials we propose to conduct, whether alone or through collaborations;~~

~~we may not have sufficient financial and other resources to fund our clinical trials or collaborations;~~

~~we may not be able to provide acceptable evidence of safety and efficacy for our product candidates;~~

the results of our clinical trials or collaborations may not meet the level of statistical or clinical significance, or product safety, required to move to the next stage of development or, ultimately, obtain marketing approval from FDA;

~~we may not be able to obtain, maintain and enforce our patents and other intellectual property rights; and~~

~~we may not be able to obtain and maintain commercial manufacturing arrangements with third-party manufacturers or establish commercial-scale manufacturing capabilities.~~

Furthermore, even if we do receive regulatory approval to market any of our product candidates, any such approval may be subject to limitations on the indicated uses for which we may market the product. If any of our product candidates are unsuccessful, that could have a substantial negative impact on our business.

Accordingly, we cannot assure you that our product candidates will be successfully developed or commercialized. If we or any future development partners are unable to develop, or obtain regulatory approval for or, if approved, successfully commercialize one or more of our product candidates, we may not be able to generate sufficient revenue to continue our business.

~~Table of Contents~~

We are seeking to advance the development of lenzilumab to address, among other things, the serious and potentially fatal side effects associated with CAR-T therapies and to improve the efficacy of these treatments. We are also working to create next-generation gene-edited CAR-T therapies using GM-CSF gene knockout technologies. Although four CAR-T therapies have been approved by FDA to date, the use of engineered T cells as a potential cancer treatment is a recent development and may not be broadly accepted by physicians, patients, hospitals, cancer treatment centers, payers and others in the medical community. The degree of market acceptance of any approved product candidates will depend on a number of factors, including:

~~the efficacy and safety as demonstrated in clinical trials;~~

~~the clinical indications for which the product candidate is approved;~~

~~acceptance by physicians, major operators of hospitals and clinics, and patients of the product candidate as a safe and effective treatment;~~

~~the potential and perceived advantages of product candidates over alternative treatments;~~

~~the safety of product candidates seen in a broader patient group, including in use outside the approved indications;~~

~~competitive approaches to tackle similar issues;~~

~~the cost of treatment in relation to alternative treatments;~~

~~the availability of adequate reimbursement and pricing by payers;~~

~~relative convenience and ease of administration;~~

~~the prevalence and severity of adverse events;~~

~~the effectiveness of sales and marketing efforts; and~~

~~the ability to manage any unfavorable publicity relating to the product candidate.~~

If the medical and payer community is not sufficiently persuaded of the safety, efficacy and cost-effectiveness of CAR-T therapy and the potential advantages of using lenzilumab compared to existing and future therapeutics, and there is not significant market acceptance of CAR-T therapy as the standard of care for treatment of certain cancers, the market for lenzilumab or next-generation gene-edited CAR-T therapies may be limited or not develop, and our stock price could be adversely affected.

CAR-T therapies currently in early development purport to incorporate technology that may minimize or eliminate the adverse side-effects and improve on efficacy, that we believe have impaired the uptake of the approved CAR-T therapies. If these developing therapies are proven safer and equally or more efficacious in their proposed indications and approved for use by FDA and other regulatory agencies, the market growth for the currently approved CAR-T therapies may be limited, impairing demand for lenzilumab.

In recent years, several biotechnology companies describing business plans focusing on development of CAR-T therapies have completed or announced they are pursuing initial public offerings (“IPOs”). Several of these companies have described their belief that their therapies will not result in the same level of cytokine release syndrome (“CRS”) or neurotoxicity (“NT”) as has been experienced in use of previously FDA-approved CAR-T therapies. While these products are in early-stage development, the data is limited and these products have not yet been approved for use by FDA, if any such product were also proven equally efficacious and subsequently approved, the market for lenzilumab may not develop or grow as anticipated. Recently, FDA approved Breyanzi™, (liso-cel), a new CAR-T cell therapy for adults with relapsed or refractory Large B-cell Lymphoma. Grade ≥3 cytokine release syndrome and Grade ≥3 neurologic toxicities following Breyanzi treatment occurred in 4% and 12% of patients, respectively. If new CAR-T therapies with lower occurrences of CRS and NT are approved, the market for lenzilumab in conjunction with CAR-T therapy may be diminished. Any such failure of a market for lenzilumab to develop could adversely affect our stock price. In addition, if new CAR-T therapies that offer improved efficacy, either with or without improved safety, are approved, the market for lenzilumab which is used in conjunction with CAR-T therapy may be diminished if such CAR-T therapy is used in preference to existing CAR-T therapy.

We may seek various regulatory incentives, such as EUA, orphan drug exclusivity, breakthrough therapy designation, fast track designation, accelerated approval, priority review and Priority Review Vouchers (“PRVs”), where available, that provide for certain periods of exclusivity, expedited review and/or other benefits, and we may also seek similar designations elsewhere in the world. Often, regulatory agencies have broad discretion in determining whether or not products qualify for such regulatory incentives and benefits. We cannot guarantee that we will be able to receive orphan drug status from FDA or equivalent regulatory designations elsewhere. We also cannot guarantee that we will obtain breakthrough therapy or fast track designation, which may provide certain potential benefits such as more frequent meetings with FDA to discuss the development plan, intensive guidance on an efficient drug development program, and potential eligibility for rolling review or priority review. Legislative developments in the U.S., including proposed legislation that would restrict eligibility for PRVs, may affect our ability to qualify for these programs in the future.

~~Table of Contents~~

Even if we are successful in obtaining beneficial regulatory designations by FDA or other regulatory agency for our product candidates, such designations may not lead to faster development or regulatory review or approval, and does not increase the likelihood that our product candidates will receive marketing approval. We may not be able to obtain or maintain such designations for our product candidates, and our competitors may obtain these designations for their product candidates, which could impact our ability to develop and commercialize our product candidates or compete with such competitors, which would adversely impact our business, financial condition or results of operations.

There is a limited amount of information about us upon which investors can evaluate our product candidates and business prospects, including because we have a limited operating history developing product candidates, and we have not yet successfully commercialized any products, and have a relatively small management team.

Our primary focus is developing our proprietary monoclonal antibody portfolio, which comprises lenzilumab, ifabotuzumab and HGEN005. Our limited operating history developing clinical-stage product candidates may make it more difficult for us to succeed or for investors to be able to evaluate our business and prospects. In addition, as an early-stage clinical development company, we have limited experience in development activities, including conducting clinical trials, or seeking and obtaining regulatory approvals, even though our executives have had relevant experience at other companies. We currently have eleven full-time employees and therefore are heavily dependent on external consultants and expert vendors for scientific, contract manufacturing and regulatory expertise. To execute our business plan, we will need to successfully:

~~execute our product candidate development activities, including successfully completing our clinical trial programs, including those conducted under our collaborations and partnerships;~~

~~obtain required regulatory approvals or authorizations for the development and commercialization of our product candidates;~~

~~manage our costs and expenses related to clinical trials, regulatory approvals, manufacturing and commercialization;~~

~~secure substantial additional funding;~~

~~develop and maintain successful strategic relationships;~~

~~build and maintain a strong intellectual property portfolio;~~

~~build and maintain appropriate clinical, sales, manufacturing, distribution, and marketing capabilities on our own or through third parties; and~~

~~gain market acceptance and favorable reimbursement status for our product candidates.~~

~~If we are unsuccessful in accomplishing these objectives, we may not be able to develop product candidates, raise capital, expand our business, or continue our operations.~~

In addition to our collaboration with the NIH, Mayo Clinic, IMPACT Partnership, SAHMRI and the University of Adelaide, and the Olivia Newton-John Cancer Research Centre, we may, in the future, seek to enter into collaborations with other third parties for the discovery, development and commercialization of our product candidates. If our collaborators cease development efforts under our collaboration agreements, or if any of those agreements are terminated, these collaborations may fail to lead to commercial products, and we may never receive milestone payments or future royalties under these agreements.

We may in the future seek to enter into agreements with other third-party collaborators for research, development and commercialization of other therapeutic technologies or product candidates. Biopharmaceutical companies are our likely future collaborators for any marketing, distribution, development, licensing, or broader collaboration arrangements. If we fail to enter into future collaborations on commercially reasonable terms, or at all, or such collaborations are not successful, we may not be able to execute our strategy to develop our product candidates or therapies that we believe could benefit from the resources of either larger biopharmaceutical companies or those specialized in a particular area of relevance.

With respect to our existing collaboration agreements, we have limited control over the amount and timing of resources that our collaborators dedicate to the development or commercialization of our product candidates. Moreover, our ability to generate revenues from these arrangements will depend on our collaborators’ abilities to successfully perform the functions assigned to them in these arrangements.

~~Collaborations involving our product candidates pose the following risks to us:~~

~~collaborators have significant discretion in determining the efforts and resources that they will apply to these collaborations;~~

collaborators may not pursue development and commercialization of our product candidates or may elect not to continue or renew development or commercialization programs based on preclinical studies or clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors such as an acquisition that diverts resources or creates competing priorities;

~~Table of Contents~~

collaborators may delay clinical trials, provide insufficient funding for a clinical trial program, stop a clinical trial or abandon a product candidate, repeat or conduct new clinical trials or require a new formulation of a product candidate for clinical testing;

collaborators could independently develop, or develop with third parties, products that compete directly or indirectly with our product candidates if the collaborators believe that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

~~collaborators with marketing and distribution rights to one or more products may not commit sufficient resources to the marketing and distribution of such product or products;~~

collaborators may not properly maintain or defend our intellectual property rights or may use our proprietary information in such a way as to invite litigation that could jeopardize or invalidate our intellectual property or proprietary information or expose us to litigation or potential liability;

~~collaborators may infringe the intellectual property rights of third parties, which may expose us to litigation and potential liability;~~

disputes may arise between the collaborators and us that result in the delay or termination of the research, development or commercialization of our product candidates or that result in costly litigation or arbitration that diverts management attention and resources; and

~~collaborations may be terminated and, if terminated, may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.~~

As a result of the foregoing, our current and any future collaboration agreements may not lead to development or commercialization of our product candidates in the most efficient manner or at all. If a collaborator of ours were to be involved in a business combination, the continued pursuit and emphasis on our product development or commercialization program could be delayed, diminished or terminated. Any failure to successfully develop or commercialize our product candidates pursuant to our current or any future collaboration agreements could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Moreover, to the extent that any of our existing or future collaborators were to terminate a collaboration agreement, we may be forced to independently develop these product candidates, including funding preclinical studies or clinical trials, assuming marketing and distribution costs and defending intellectual property rights, or, in certain instances, abandon product candidates altogether, any of which could result in a change to our business plan and have a material adverse effect on our business, financial condition, results of operations and prospects.

We have relied and may in the future rely on third parties to conduct ISTs of our products, which is cost-effective for us but affords the investigators the ability to retain significant control over the design and conduct of the trials, as well as the use of the data generated from their efforts.

We have relied and may in the future rely on third parties to conduct and sponsor clinical trials relating to lenzilumab, our GM-CSF gene knockout platform and our other immunotherapy product candidates, ifabotuzumab and HGEN005. Such ISTs may provide us with valuable clinical data that can inform our future development strategy in a cost-efficient manner, but we do not control the design or conduct of the ISTs, and it is possible that FDA or non-U.S. regulatory authorities will not view these ISTs as providing adequate support for future clinical trials, whether controlled by us or third parties, for any one or more reasons, including elements of the design or execution of the trials or safety concerns or other trial results.

These arrangements provide us limited information rights with respect to the ISTs, including access to and the ability to use and reference the data, including for our own regulatory filings, resulting from the ISTs. However, we would not have control over the timing and reporting of the data from ISTs, nor would we own the data from the ISTs. If we are unable to confirm or replicate the results from the ISTs or if negative results are obtained, we would likely be further delayed or prevented from advancing further clinical development. Further, if investigators or institutions breach their obligations with respect to the clinical development of our product candidates, or if the data proves to be inadequate compared to the first-hand knowledge, we might have gained had the ISTs been sponsored and conducted by us, then our ability to design and conduct any future clinical trials ourselves may be adversely affected.

If the third parties conducting our clinical trials do not conduct the trials in accordance with our agreements with them, our ability to pursue our clinical development programs could be delayed or unsuccessful and we may not be able to obtain regulatory approval for or commercialize our product candidates when expected or at all.

We do not have the ability to conduct all aspects of our preclinical testing or clinical trials ourselves. Therefore, the timing of the initiation and completion of these trials is uncertain and may occur on substantially different timing from our estimates. We also use CROs to conduct our clinical trials and rely on medical institutions, clinical investigators, CROs, and consultants to conduct our trials in accordance with our clinical protocols and regulatory requirements. Our CROs, investigators, and other third parties play a significant role in the conduct of these trials and subsequent collection and analysis of data.

~~Table of Contents~~

There is no guarantee that any CROs, investigators, or other third parties on which we rely for administration and conduct of our clinical trials will devote adequate time and resources to such trials or perform as contractually required. If any of these third parties fails to meet expected deadlines, fails to adhere to our clinical protocols, or otherwise performs in a substandard manner, our clinical trials may be extended, delayed, or terminated. If any of our clinical trial sites terminates for any reason, we may experience the loss of follow-up information on subjects enrolled in our ongoing clinical trials unless we are able to transfer those subjects to another qualified clinical trial site. In addition, principal investigators for our clinical trials may serve as scientific advisors or consultants to us from time-to-time and may receive cash or equity compensation in connection with such services. If these relationships and any related compensation result in perceived or actual conflicts of interest, the integrity of the data generated at the applicable clinical trial site may be jeopardized.

We may experience delays in commencing or conducting our clinical trials, in receiving data from third parties or in the continuation or completion of clinical testing, which could result in increased costs to us, delay our ability to generate product candidate revenue or, ultimately, render us unable to complete the development and commercialization of our product candidates.

We have product candidates in clinical development and preclinical development. As with most small biotech companies, the risk of failure for our product candidates is high. It is impossible to predict when or if any of our product candidates will prove effective or safe in humans or will receive regulatory approval. Before obtaining marketing approval from regulatory authorities for the sale of any product candidate, we must complete preclinical development and then conduct extensive clinical trials to demonstrate the safety and efficacy of our product candidates in humans.

Before we can initiate clinical trials in the U.S. for any new product candidates, we are required to submit the results of preclinical testing to FDA as part of an IND application, along with other information including information about product candidate chemistry, manufacturing, and controls and our proposed clinical trial protocol. For our programs already underway, we are required to report or provide information to appropriate regulatory authorities in order to continue with our testing programs. If we are unable to make timely regulatory submissions for any of our programs, it will delay our plans for our clinical trials. If those third parties do not make the required data available to us, we will likely have to identify and contract with another third party, and/or develop all necessary preclinical and clinical data on our own, which will lead to significant delays and increase development costs of the product candidate. In addition, FDA may require us to conduct additional preclinical testing for any product candidate before it allows us to initiate clinical testing under any IND application, which may lead to additional delays and increase the costs of our preclinical development. Moreover, despite the presence of an active IND application for a product candidate, clinical trials can be delayed for a variety of reasons, including delays in:

~~identifying, recruiting, and enrolling qualified subjects to participate in a clinical trial;~~

~~identifying, recruiting, and training suitable clinical investigators;~~

reaching agreement on acceptable terms with prospective contract research organizations, or CROs, and trial sites, the terms of which can be subject to extensive negotiation, may be subject to modification from time-to-time, and may vary significantly among different CROs and trial sites;

obtaining and maintaining sufficient quantities of a product candidate for use in clinical trials, either as a result of transferring the manufacturing of a product candidate to another site or manufacturer, deferring ordering or production of product in order to conserve resources or mitigate risk, having product in inventory become no longer suitable for use in humans, or other reasons that reduce or delay availability of drug supply;

~~obtaining and maintaining Institutional Review Board (“IRB”) or ethics committee approval to conduct a clinical trial at an existing or prospective site;~~

retaining or replacing participants who have initiated a clinical trial but may withdraw due to adverse events from the therapy, insufficient efficacy, fatigue with the clinical trial process, or personal issues;

~~developing any companion diagnostic necessary to ensure the study enrolls the target population;~~

~~being required by FDA to add more patients or sites or to conduct additional trials; or~~

~~FDA placing a clinical trial on hold.~~

Once a clinical trial has begun, recruitment and enrollment of subjects may be slower than we anticipate. Numerous companies and institutions are conducting clinical studies in similar patient populations which can result in competition for qualified patients. In addition, clinical trials will take longer than we anticipate if we are required, or believe it is necessary, to enroll additional subjects than originally planned. Clinical trials may also be delayed as a result of ambiguous or negative interim results. Further, a clinical trial may be suspended or terminated by us, an IRB, an ethics committee, or a data safety monitoring committee overseeing the clinical trial, any of our clinical trial sites with respect to that site, or FDA or other regulatory authorities, due to several factors, including:

~~failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols;~~

~~inspection of the clinical trial operations or clinical trial site by FDA or other regulatory authorities;~~

~~inability to provide timely supply of drug product due to shortages or other issues with the drug product;~~

~~Table of Contents~~

~~unforeseen safety issues, known safety issues that occur at a greater frequency or severity than we anticipate, or any determination that the clinical trial presents unacceptable health risks; or~~

~~lack of adequate funding to continue the clinical trial or unforeseen significant incremental costs related to the trial.~~

Additionally, if any future development partners do not develop the licensed product candidates in the time and manner that we expect, or at all, the clinical development efforts related to these licensed product candidates could be delayed or terminated. In addition, our ability to enforce our partners’ obligations under any future collaboration efforts may be limited due to time and resource constraints, competing corporate priorities of our future partners, and other factors.

Any delays in the commencement of our clinical trials may delay or preclude our ability to further develop or pursue regulatory approval for our product candidates. Changes in U.S. and foreign regulatory requirements and guidance also may occur, and we may need to amend clinical trial protocols to reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for re-examination, which may affect the costs, timing, and likelihood of a successful completion of a clinical trial.

If we are required to conduct additional clinical trials or other testing of our product candidates beyond those that we currently contemplate, if we are unable to successfully complete clinical trials of our product candidates or other testing, if the results of these trials or tests are not positive or do not meet the standard for acceptability by regulatory authorities or if there are safety concerns, we may:

~~be delayed in obtaining marketing approval for our product candidates;~~

~~not obtain marketing approval or EUA at all;~~

~~obtain approval for indications or patient populations that are not as broad as intended or desired;~~

~~obtain approval with labeling that includes significant use or distribution restrictions or safety warnings;~~

~~be subject to additional post-marketing testing requirements; or~~

~~have the product removed from the market after obtaining marketing approval.~~

Our product development costs will also increase if we experience delays in testing or in obtaining marketing approvals. We do not know whether any of our preclinical studies or clinical trials will begin as planned, will need to be restructured or will be completed on schedule, or at all. We may also determine to change the design or protocol of one or more of our clinical trials, including to add additional arms or patient populations, which could result in increased costs and expenses and/or delays. If we or any future development partners experience delays in the completion of, or if we or any future development partners must terminate, any clinical trial of any product candidate our ability to obtain regulatory approval for that product candidate will be delayed and the commercial prospects, if any, for the product candidate may suffer as a result. Significant preclinical study or clinical trial delays also could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before we do and impair our ability to successfully commercialize our product candidates and may harm our business and results of operations. In addition, many of these factors may also ultimately lead to the denial of regulatory approval of a product candidate.

Our product candidates are subject to extensive regulation, compliance with which is costly and time consuming, may cause unanticipated delays, or may prevent the receipt of the required approvals to commercialize our product candidates.

The clinical development, approval, manufacturing, labeling, storage, record-keeping, advertising, promotion, import, export, marketing, and distribution of our product candidates are subject to extensive regulation by FDA in the U.S. and by comparable authorities in foreign markets. In the U.S., we are not permitted to market our product candidates until we receive regulatory approval or other authorization, such as EUA, from FDA. The process of obtaining regulatory approval is expensive, often takes many years, and can vary substantially based upon the type, complexity, and novelty of the products involved, as well as the target indications. Approval policies or regulations may change, and FDA has substantial discretion in the drug approval process, including the ability to delay, limit, or deny approval of a product candidate for many reasons. Despite the time and expense invested in clinical development of product candidates, regulatory approval is never guaranteed. FDA or other comparable foreign regulatory authorities can delay, limit, or deny approval of a product candidate for many reasons, including:

~~such authorities may disagree with the design or implementation of our or any future development partners’ clinical trials;~~

~~such authorities may not accept clinical data from trials that are conducted at clinical facilities or in countries where the standard of care is potentially different from the U.S.;~~

~~the results of clinical trials may not demonstrate the safety or efficacy required by such authorities for approval;~~

~~we or any future development partners may be unable to demonstrate that a product candidate’s clinical and other benefits outweigh its safety risks;~~

~~such authorities may disagree with our interpretation of data from preclinical studies or clinical;~~

such authorities may find deficiencies in the manufacturing processes or facilities of third-party manufacturers with which we or any future development partners contract for clinical and commercial supplies; or

~~Table of Contents~~

~~the approval policies or regulations of such authorities may significantly change in a manner rendering our or any future development partners’ clinical data insufficient for approval.~~

With respect to foreign markets, approval procedures vary widely among countries and, in addition to the aforementioned risks, can involve additional product testing, administrative review periods, and agreements with pricing authorities. In addition, events raising questions about the safety of certain marketed pharmaceuticals may result in increased caution by FDA and comparable foreign regulatory authorities in reviewing new drugs based on safety, efficacy or other regulatory considerations and may result in significant delays in obtaining regulatory approvals. Any delay in obtaining, or inability to obtain, applicable regulatory approvals may delay or prevent us or any future development partners from commercializing our product candidates.

The results of preclinical studies and early clinical trials are not always predictive of future results. Any product candidate we or any future development partners advance into clinical trials may not have favorable results in later clinical trials, if any, or receive regulatory approval.

Drug development has substantial inherent risk. We or any future development partners will be required to demonstrate through adequate and well-controlled clinical trials that our product candidates are effective, with a favorable benefit-risk profile, for use in their target populations for their intended indications before we can seek regulatory approvals for their commercial sale. Drug development is a long, expensive and uncertain process, and delay or failure can occur at any stage of development, including after commencement of any of our clinical trials. Success in early clinical trials does not mean that later clinical trials will be successful because product candidates in later-stage clinical trials may fail to demonstrate sufficient safety or efficacy despite having progressed through initial clinical testing. Furthermore, our future trials will need to demonstrate sufficient safety and efficacy for approval by regulatory authorities in larger patient populations. Companies frequently suffer significant setbacks in advanced clinical trials, even after earlier clinical trials have shown promising results. In addition, only a small percentage of drugs under development result in the submission of an NDA or BLA to FDA, and even fewer are approved for commercialization.

In addition, serious adverse or undesirable side effects may emerge or be identified during later stages of development that were not observed in earlier stages. If our product candidates, either alone or in combination with other therapeutics, are associated with serious adverse events or undesirable side effects or unacceptable drug-drug interactions in clinical trials or have characteristics that are unexpected in clinical trials or preclinical testing, we may need to abandon their development or limit development to more narrow uses or subpopulations in which the serious adverse events, undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. In pharmaceutical development, many compounds that initially show promise in early-stage or clinical testing are later found to cause side effects that prevent further development of the compound. In addition, if third parties manufacture or use our product candidates without our permission, and generate adverse events or unacceptable side effects, this could also have an adverse impact on our development efforts.

Unacceptable adverse events caused by any of our product candidates that we advance into clinical trials could cause us or regulatory authorities to interrupt, delay, or halt clinical trials and could result in the denial of regulatory approval by FDA or other regulatory authorities for any or all targeted indications and markets. This in turn could prevent us from completing development or commercializing the affected product candidate and generating revenue from its sale. We have not yet successfully completed testing of any of our product candidates for the treatment of the indications for which we intend to seek approval in humans, and we currently do not know the extent of adverse events, if any, that will be observed in individuals who receive any of our product candidates. If any of our product candidates cause unacceptable adverse events in clinical trials, we may not be able to obtain regulatory approval or commercialize such product candidates.

We face risks associated with clinical operations abroad, which may adversely affect our financial condition and results of operations, and we may not be able to receive conditional marketing or other approvals for lenzilumab in COVID-19 patients in markets outside the U.S.

Partners are conducting or planning to conduct clinical trials involving lenzilumab in the UK, Korea and Australia, as well as potentially in other countries in patients with COVID-19 and other indications. In addition, we are working to seek CMA for lenzilumab in hospitalized COVID-19 patients in the European Union and the United Kingdom. We have not received any authorization or approval to sell lenzilumab in any country but would expect to commence commercial operations, through a partner or on our own, only after such authorization or approval were received. As with our development programs in the U.S., our product candidates must be approved for marketing and sale by regulatory authorities in each jurisdiction to which we may apply for approval and, once approved, are subject to extensive regulation by regulatory agencies in other countries. We anticipate that we may file for marketing approval in additional countries and for additional indications and products over the next several years. These and any future marketing applications we file may not be approved by the regulatory authorities on a timely basis, or at all. Even if marketing approval is granted for these products, there may be significant limitations on their use. We cannot state with certainty when or whether any of our product candidates under development will be approved by any foreign regulators or launched; whether we will be able to develop, license or acquire additional product candidates or products; or whether any products, once launched, will be commercially successful.

~~Table of Contents~~

International operations involve risks that are different from those faced in the U.S. and would subject us to complex and frequently changing laws and regulations, including differing labor laws, such as the United Kingdom (“UK”) Modern Slavery Act. In addition, operations abroad are accompanied by certain financial, political, economic and other risks, including those listed below:

Foreign Currency Exchange: Operations internationally may subject us to risks related to foreign currency exchange risks as we make payments, or incur obligations, denominated in foreign currencies. We cannot predict future fluctuations in the foreign currency exchange rates of the U.S. dollar. If the U.S. dollar appreciates significantly against certain currencies and our practices do not sufficiently offset the effects of such appreciation, our results of operations would be adversely affected, and our stock price may decline.

Anti-Bribery: We are subject to the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws that will govern our international operations with respect to payments to government officials. Our international operations would be heavily regulated and require significant interaction with foreign officials. In certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices or may require us to interact with doctors and hospitals, some of which may be state controlled, in a manner that is different than local custom. In addition, despite our efforts, our policies and procedures may not protect us from reckless or criminal acts committed by persons who act on our behalf. Enforcement activities under anti-bribery laws could subject us to administrative and legal proceedings and actions, which could result in civil and criminal sanctions, including monetary penalties and exclusion from health care programs.

~~Other risks inherent in conducting foreign operations include:~~

International operations, including any use of third-party manufacturers, distributors, CROs and collaboration arrangements outside the U.S., expose us to increased risk of theft of our intellectual property and other proprietary technology, particularly in jurisdictions with less robust intellectual property protections than the U.S., as well as restrictive government actions against our intellectual property and other foreign assets such as nationalization, expropriation or the imposition of compulsory licenses.

We may be subject to protective economic policies taken by foreign governments, such as trade protection measures and import and export licensing requirements, which may result in the imposition of trade sanctions or similar restrictions by the U.S. or other governments.

~~Our foreign operations, third-party manufacturers, CROs or strategic partners could be subject to business interruptions for which we or they may be uninsured or inadequately insured.~~

Our operations may also be adversely affected if there is political instability or disruption in any other geographic region where we may have operations, which could impact our ability to do business in those areas.

~~If we were to encounter any of these risks, our foreign operations may be adversely affected, which could have an adverse effect on our overall business and results of operations.~~

We will need to effectively manage our managerial, operational, financial, and other resources in order to successfully pursue our clinical development and commercialization efforts. As a company with a limited number of personnel, we are heavily affected by turnover and highly dependent on the expertise of the members of our senior management. Furthermore, we rely on third party consultants for a variety of services. We cannot predict the impact of the loss of such individuals or the loss of services of any of our other senior management, should they occur, or the difficulty in replacing such individuals. Such losses could delay or prevent the further development and potential commercialization of our product candidates and, if we are not successful in finding suitable replacements, could harm our business.

We compete in an industry characterized by rapidly advancing technologies, intense competition, a changing regulatory and legislative landscape and a strong emphasis on the benefits of intellectual property protection and regulatory exclusivities. Our competitors include pharmaceutical companies, other biotechnology companies, academic institutions, government agencies and other private and public research organizations. We compete with these parties in immunotherapy and oncology treatments and in recruiting highly qualified personnel. Our product candidates, if successfully developed and approved, may compete with established therapies, with new treatments that may be introduced by our competitors, including competitors relying on our biologics approvals under section 351(k) of the Public Health Service Act, or with generic copies of our products approved by FDA under an abbreviated new drug application (“ANDA”), referencing our drug products. We believe that competitors are actively developing competing products to our product candidates. See “Competition” in the “Business” section of our 2020 Annual Report on Form 10-K for a discussion of competition with respect to our current product candidates.

~~Table of Contents~~

Many of our competitors and potential competitors have substantially greater scientific, research, and product development capabilities, as well as greater financial, marketing, sales and human resources capabilities than we do. In addition, many specialized biotechnology firms have formed collaborations with large, established companies to support the research, development and commercialization of products that may be competitive with ours. Accordingly, our competitors may be more successful with respect to their products than we may be in developing, commercializing, and achieving widespread market acceptance for our products. If a competitor obtains approval for an orphan drug that is the same drug or the same biologic as one of our candidates before we do, we will be blocked from obtaining FDA approval for seven years from the date of the competitor’s product, unless we can establish that our product is clinically superior to the previously-approved competitor’s product or we can meet another exception, such as by showing that the competitor has failed to provide an adequate supply of its product to patients after approval. In addition, our competitors’ products may be more effective or more effectively marketed and sold than any treatment we or our development partners may commercialize and may render our product candidates obsolete or non-competitive before we can recover the expenses related to developing and supporting the commercialization of any of our product candidates. Developments by competitors may render our product candidates obsolete or noncompetitive. After one of our product candidates is approved, FDA may also approve a generic version with the same dosage form, safety, strength, route of administration, quality, performance characteristics and intended use as our product. These generic equivalents would be less costly to bring to market and could generally be offered at lower prices, thereby limiting our ability to gain or retain market share.

The acquisition or licensing of pharmaceutical products is also very competitive, and a number of more established companies, which have acknowledged strategies to in-license or acquire products, may have competitive advantages as may other emerging companies taking similar or different approaches to product acquisitions. The more established companies may have a competitive advantage over us due to their size, cash flows, institutional experience and historical corporate reputation.

~~We are subject to a multitude of manufacturing risks, any of which could substantially increase our costs and limit supply of our products.~~

We are wholly dependent on third party contract manufacturers for the timely supply of adequate quantities of our products which meet or exceed requisite quality and production standards for use in clinical and nonclinical studies. Given the extensive risks, scope, complexity, cost, regulatory requirements, and commitment of resources associated with developing the capabilities to manufacture one or more of our products, we have no present plan or intention of developing in-house manufacturing capabilities for nonclinical, clinical or commercial scale production, beyond our current supervision and management of our third-party contract manufacturers. In addition, in order to balance risk and conserve financial and human resources, we have and may continue from time-to-time to defer commitment to production of product, which could result in delays to the continued progress of our clinical and nonclinical testing.

~~In addition to the foregoing, the process of manufacturing our products is complex, highly regulated, and subject to several risks, including but not limited to the following:~~

We, and our contract manufacturers, must comply with FDA’s current Good Manufacturing Practice, (“cGMP”), regulations and guidance. We, and our contract manufacturers, may encounter difficulties in achieving quality control and quality assurance and may experience shortages in qualified personnel. We, and our contract manufacturers, are subject to inspections by FDA and comparable agencies in other jurisdictions to confirm compliance with applicable regulatory requirements. Any failure to follow cGMP or other regulatory requirements or any delay, interruption or other issues that arise in the manufacture, fill-finish, packaging, or storage of our products as a result of a failure of our facilities or the facilities or operations of third parties to comply with regulatory requirements, or a failure to pass any regulatory authority inspection, could significantly impair our ability to develop and commercialize our products, including leading to significant delays in the availability of products for our clinical studies or the termination or hold of a clinical study, or the delay or prevention of a filing or approval of marketing applications for our product candidates. Significant noncompliance could also result in the imposition of sanctions, including injunctions, civil penalties, failure of regulatory authorities to grant marketing approvals for our product candidates, delays, suspension or withdrawal of approvals, license revocation, seizures or recalls of products, operating restrictions, adverse publicity, and criminal prosecutions, any of which could damage our reputation. If we are not able to maintain regulatory compliance, we may not be permitted to market our products and/or may be subject to product recalls, seizures, injunctions, or criminal prosecution. Any adverse developments affecting manufacturing operations for our products may result in shipment delays, inventory shortages, lot failures, product withdrawals or recalls, or other interruptions in the supply of our products. Once our product candidates are approved, we may also have to take inventory write-offs and incur other charges and expenses for products that fail to meet specifications, undertake costly remediation efforts or seek more costly manufacturing alternatives.

The manufacturing facilities in which our products are made could be adversely affected by equipment failures, plant closures, capacity constraints, competing customer priorities or changes in corporate strategy or priorities, process changes or failures, changes in business models or operations, materials or labor shortages, natural disasters, power failures and numerous other factors.

We are wholly dependent upon third party CMOs for the timely supply of adequate quantities of requisite quality product for our nonclinical, clinical and, if approved by regulatory authorities, commercial scale production.

~~Table of Contents~~

If any product candidate that we successfully develop does not achieve broad market acceptance among physicians, patients, healthcare payers and the medical community, the revenue that it generates may be limited.

Even if our product candidates receive regulatory approval, they may not gain market acceptance among physicians, patients, healthcare payers, and the medical community. Coverage and reimbursement of our product candidates by third-party payers, including government payers, generally is also necessary for commercial success. The degree of market acceptance of any approved product candidates will depend on several factors, including:

~~the efficacy and safety as demonstrated in clinical trials;~~

~~the clinical indications for which the product candidate is approved;~~

~~acceptance by physicians, major operators of hospitals and clinics, and patients of the product candidate as a safe and effective treatment;~~

~~the potential and perceived advantages of product candidates over alternative treatments;~~

~~the safety of product candidates seen in a broader patient group, including its use outside the approved indications;~~

~~the cost of treatment in relation to alternative treatments;~~

~~the availability of adequate reimbursement and pricing by payers;~~

~~relative convenience and ease of administration;~~

~~the prevalence and severity of adverse events;~~

~~the effectiveness of our sales and marketing efforts; and~~

~~the ability to manage any unfavorable publicity relating to the product candidate.~~

If any product candidate is approved but does not achieve an adequate level of acceptance by physicians, hospitals, healthcare payers, and patients, we may not generate sufficient revenue from that product candidate and may not become or remain commercially attractive as a standalone indication for that product.

~~Reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.~~

Market acceptance and sales of our product candidates will depend significantly on the availability of adequate insurance coverage and reimbursement from third-party payers for any of our product candidates and may be affected by existing and future health care reform measures. Government authorities and third-party payers, such as private health insurers and health maintenance organizations, decide which drugs they will pay for and establish reimbursement levels. Reimbursement by a third-party payer may depend upon a number of factors including the third-party payer’s determination that use of a product candidate is:

~~a covered benefit under its health plan;~~

~~safe, effective, and medically necessary;~~

~~appropriate for the specific patient;~~

~~cost-effective; and~~

~~neither experimental nor investigational.~~

Obtaining coverage and reimbursement approval for a product candidate from a government or other third-party payer is a time-consuming and costly process that could require us to provide supporting scientific, clinical, and cost effectiveness data for the use of our product candidates to the payer. We may not be able to provide data sufficient to gain acceptance with respect to coverage and reimbursement. We cannot be sure that coverage or adequate reimbursement will be available for any of our product candidates. Also, we cannot be sure that reimbursement amounts will not reduce the demand for, or the price of, our product candidates. If reimbursement is not available or is available only to limited levels or with restrictions, we may not be able to commercialize certain of our product candidates profitably, or at all, even if approved.

In the U.S. and in certain foreign jurisdictions, there have been a number of legislative and regulatory changes to the health care system that could affect our ability to sell our product candidates profitably. In particular, the Medicare Modernization Act of 2003 revised the payment methods for many product candidates under Medicare. This has resulted in lower rates of reimbursement. There have been numerous other federal and state initiatives designed to reduce payment for pharmaceuticals.

As a result of legislative proposals and the trend toward managed health care in the U.S., third-party payers are increasingly attempting to contain health care costs by limiting both coverage and the level of reimbursement of new drugs. They may also refuse to provide coverage of approved product candidates for medical indications other than those for which FDA has granted market approvals. As a result, significant uncertainty exists as to whether and how much third-party payers will reimburse patients for their use of newly approved drugs, which in turn will put pressure on the pricing of drugs. We could be subject to pricing pressures in connection with the sale of our product candidates due to the trend toward managed health care, the increasing influence of health maintenance organizations, and additional legislative proposals as well as country, regional, or local healthcare budget limitations. Similar concerns about the costs of treatment have been raised in Europe and the United Kingdom.

~~Table of Contents~~

~~We face potential product liability exposure and, if successful claims are brought against us, we may incur substantial liability for a product candidate and may have to limit its commercialization.~~

The use of our product candidates in clinical trials and the sale of any product candidates for which we may obtain marketing approval expose us to the risk of product liability claims. Product liability claims may be brought against us or any future development partners by participants enrolled in our clinical trials, patients, health care providers, or others using, administering, or selling our product candidates. If we cannot successfully defend ourselves against any such claims, or have insufficient insurance protection, we would incur substantial liabilities. Regardless of merit or eventual outcome, product liability claims may result in:

~~withdrawal of clinical trial participants;~~

~~termination of clinical trial sites or entire trial programs;~~

~~costs of related litigation;~~

~~substantial monetary awards to trial participants or other claimants;~~

~~decreased demand for our product candidates and loss of revenue;~~

~~impairment of our business reputation;~~

~~diversion of management and scientific resources from our business operations; and~~

~~the inability to commercialize our product candidates.~~

We have obtained limited product liability insurance coverage for our clinical trials domestically and in selected foreign countries where we are conducting clinical trials. As such, our insurance coverage may not reimburse us or may not be sufficient to reimburse us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the future, we may not be able to maintain insurance coverage at a reasonable cost or in sufficient amounts to protect us against losses due to product liability. We intend to expand our insurance coverage for product candidates to include the sale of commercial products if we obtain marketing approval for our product candidates in development; however, we may be unable to obtain commercially reasonable product liability insurance for any product candidates approved for marketing. Large judgments have been awarded in class action lawsuits based on drugs that had unanticipated side effects. A successful product liability claim or series of claims brought against us, particularly if judgments exceed our insurance coverage, could decrease our working capital and adversely affect our business.

~~Our employees and consultants may engage in misconduct or other improper activities, including noncompliance with regulatory standards, which could have a material adverse effect on our business.~~

We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees or consultants could include intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, failure to provide accurate information to FDA or comparable foreign regulatory authorities, failure to comply with manufacturing standards, failure to comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, failure to report financial information or data accurately, violations of anti-bribery laws, or failure to disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Employee or consultant misconduct could also involve the improper use of confidential information obtained in the course of our business, which could result in civil or criminal legal actions, regulatory sanctions, or serious harm to our reputation. We have adopted a Code of Business Conduct and Ethics and other corporate policies, but it is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

~~We may encounter difficulties in managing our growth and expanding our operations successfully~~.

As we seek to advance our product candidates through clinical trials, we will need to expand our development, regulatory, manufacturing, marketing, and sales capabilities, and contract with third parties to provide these capabilities for us. As our operations expand, we expect that we will need to manage additional relationships with various development partners, suppliers, and other third parties. Future growth will impose significant added responsibilities on members of management. Our future financial performance and our ability to commercialize our product candidates and to compete effectively will depend in part on our ability to manage any future growth effectively. To that end, we must be able to manage our development efforts and clinical trials effectively. We may not be able to accomplish these tasks and our failure to accomplish any of them could prevent us from successfully growing our company.

~~Table of Contents~~

We and any future development partners, third-party manufacturers and suppliers use hazardous materials, and any claims relating to improper handling, storage, or disposal of these materials could be time consuming or costly.

We and any future development partners, third-party manufacturers and suppliers may use hazardous materials, including chemicals and biological agents and compounds that could be dangerous to human health and safety or the environment. Our operations and the operations of our development partner, third-party manufacturers and suppliers also produce hazardous waste products. Federal, state, and local laws and regulations govern the use, generation, manufacture, storage, handling, and disposal of these materials and wastes. Compliance with applicable environmental laws and regulations may be expensive and current or future environmental laws and regulations may impair our product development efforts. In addition, we cannot eliminate the risk of accidental injury or contamination from these materials or wastes. We do not carry specific biological or hazardous waste insurance coverage and our property, casualty, and general liability insurance policies specifically exclude coverage for damages and fines arising from biological or hazardous waste exposure or contamination. Accordingly, in the event of contamination or injury we could be held liable for damages or be penalized with fines in an amount exceeding our resources, and our clinical trials or regulatory approvals could be suspended.

Legislative or regulatory healthcare reforms in the U.S. may make it more difficult and costly for us to obtain regulatory approval of our product candidates and to produce, market, and distribute our products after approval is obtained.

From time-to-time, legislation is drafted and introduced in Congress that could significantly change the statutory provisions governing the regulatory approval, manufacture, and marketing of regulated products or the reimbursement thereof. In addition, FDA regulations and guidance are often revised or reinterpreted by FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our current product candidates or any future product candidates. There have been, and likely will continue to be, legislative and regulatory proposals at the federal and state levels directed at broadening the availability of health care and containing or lowering the overall cost of health care. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations, and other payers of healthcare services to contain or reduce costs of health care may adversely affect:

~~the demand for any drug products for which we may obtain regulatory approval;~~

~~our ability to set a price that we believe is fair for our product candidates;~~

~~our ability to gain reimbursement at commercially acceptable levels;~~

~~our ability to generate revenue and achieve or maintain profitability;~~

~~the level of taxes that we are required to pay; and~~

~~the availability of capital.~~

~~In addition, such changes could, among other things, require:~~

~~changes to manufacturing methods;~~

~~additional studies, including clinical studies;~~

~~recall, replacement, or discontinuance of one or more of our products; and~~

~~additional record-keeping.~~

Each of these would likely entail substantial time and cost and could materially harm our business and our financial results. In addition, delays in receipt of or failure to receive regulatory approvals for any future products would harm our business, financial condition, and results of operations.

We and any of our future development partners will be required to report to regulatory authorities if any of our approved products cause or contribute to adverse medical events, and any failure to do so would result in sanctions that would materially harm our business.

If we and any future development partners are successful in commercializing our products, FDA and foreign regulatory authorities would require that we and any future development partners report certain information about adverse medical events if those products may have caused or contributed to those adverse events. The timing of our obligation to report would be triggered by the date we become aware of the adverse event as well as the nature of the event. We and any future development partners may fail to report adverse events we become aware of within the prescribed timeframe. We and any future development partners may also fail to appreciate that we have become aware of a reportable adverse event, especially if it is not reported to us as an adverse event or if it is an adverse event that is unexpected or removed in time from the use of our products. If we and any future development partners fail to comply with our reporting obligations, FDA or a foreign regulatory authority could take action including criminal prosecution, the imposition of civil monetary penalties, seizure of our products, or delay in approval or clearance of future products.

~~Table of Contents~~

~~Our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.~~

With the enactment of the Biologics Price Competition and Innovation Act of 2009, or the BPCIA, as part of the Affordable Care Act, an abbreviated pathway for the approval of biosimilar and interchangeable biological products was created. The abbreviated regulatory pathway establishes legal authority for FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as ‘‘interchangeable’’ based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be approved by FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We believe that any of our product candidates, such as lenzilumab, ifabotuzumab and/or HGEN005, if approved as biological products under a BLA, should qualify for the 12-year period of exclusivity. However, there is a risk that FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. Finally, there is a risk that the 12-year exclusivity period could be reduced which could negatively affect our products.

In addition, foreign regulatory authorities may also provide for exclusivity periods for approved biological products. For example, biological products in Europe may be eligible for a 10-year period of exclusivity. However, biosimilar products have been approved under a sub-pathway of the centralized procedure since 2006. The pathway allows sponsors of a biosimilar product to seek and obtain regulatory approval based in part on the clinical trial data of an originator product to which the biosimilar product has been demonstrated to be ‘‘similar.’’ In many cases, this allows biosimilar products to be brought to market without conducting the full suite of clinical trials typically required of originators. It is unclear whether we and our development partner would face competition to our products in European markets sooner than anticipated.

We may in the future be subject to various U.S. federal and state laws pertaining to health care fraud and abuse, including anti-kickback, self-referral, false claims and fraud laws, and any violations by us of such laws could result in fines or other penalties.

If one or more of our product candidates is approved, we will likely be subject to the various U.S. federal and state laws intended to prevent health care fraud and abuse. The federal anti-kickback statute prohibits the offer, receipt, or payment of remuneration in exchange for or to induce the referral of patients or the use of products or services that would be paid for in whole or part by Medicare, Medicaid, or other federal health care programs. Remuneration has been broadly defined to include anything of value, including cash, improper discounts, and free or reduced-price items and services. Many states have similar laws that apply to their state health care programs as well as private payers. Violations of the anti-kickback laws can result in exclusion from federal health care programs and substantial civil and criminal penalties.

The False Claims Act imposes liability on persons who, among other things, present or cause to be presented false or fraudulent claims for payment by a federal health care program. The False Claims Act has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. The False Claims Act includes a whistleblower provision that allows individuals to bring actions on behalf of the federal government and share a portion of the recovery of successful claims. If our marketing or other arrangements were determined to violate the False Claims Act or anti-kickback or related laws, then our revenue could be adversely affected, which would likely harm our business, financial condition, and results of operations.

State and federal authorities have aggressively targeted medical technology companies for alleged violations of these anti-fraud statutes, based on improper research or consulting contracts with doctors, certain marketing arrangements that rely on volume-based pricing, off-label marketing schemes, and other improper promotional practices. Companies targeted in such prosecutions have paid substantial fines in the hundreds of millions of dollars or more, have been forced to implement extensive corrective action plans or corporate integrity agreements, and have often become subject to consent decrees severely restricting the manner in which they conduct their business. If we become the target of such an investigation or prosecution based on our contractual relationships with providers or institutions, or our marketing and promotional practices, we could face similar sanctions, which would materially harm our business.

Also, the Foreign Corrupt Practices Act and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. We cannot assure you that our internal control policies and procedures will protect us from reckless or negligent acts committed by our employees, future distributors, partners, collaborators, or agents. Violations of these laws, or allegations of such violations, could result in fines, penalties, or prosecution and have a negative impact on our business, results of operations and reputation.

~~Table of Contents~~

If we receive regulatory approval for our product candidates, we will be subject to ongoing FDA obligations and continued regulatory oversight and review, such as continued safety reporting requirements, and we may also be subject to additional FDA post-marketing obligations. If we are not able to maintain regulatory compliance, we may not be permitted to market our product candidates and/or may be subject to product recalls or seizures.

If FDA approves any of our product candidates, the labeling, manufacturing, packaging, storage, distribution, export, adverse event reporting, advertising, promotion and record-keeping for our products will be subject to extensive regulatory requirements. Violations of these regulatory requirements or the subsequent discovery of previously unknown problems with the products, including adverse events of unanticipated severity or frequency, may result in:

~~the issuance of warning or untitled letters;~~

~~requirements to conduct post-marking clinical trials;~~

~~restrictions on the marketing and distribution of the product, including potential withdrawal of the product from the market;~~

~~suspension of ongoing clinical trials;~~

~~the issuance of product recalls, import and export restrictions, seizures, and detentions; and~~

~~the issuance of injunctions, or imposition of other civil and/or criminal penalties.~~

~~Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be subject to certain limitations.~~

We have incurred substantial losses during our history and do not expect to become profitable in the foreseeable future and may never achieve profitability. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire. We may be unable to use these losses to offset income before such unused losses expire. The Tax Cuts and Jobs Act, enacted in 2017, limited the use of net operating loss carryforwards for periods beginning after 2017 to eighty percent of taxable income in the period to which the losses were carried. However, this limitation on the use of the carryforwards was eliminated by the Coronavirus Aid, Relief and Economic Security Act (the “CARES” Act) for tax years beginning before January 1, 2021. In addition, Section 382 of the Internal Revenue Code of 1986, as amended, may limit the utilization of net operating loss carryforwards. Under Section 382, if a corporation undergoes an ‘‘ownership change’’ (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. We have recently and in the past experienced ownership changes that have resulted in limitations on the use of a portion of our net operating loss carryforwards. If we experience further ownership changes our ability to utilize our net operating loss carryforwards could be further limited.

We rely completely on third parties to supply drug substance and manufacture drug product for our clinical trials and preclinical studies and intend to rely on other third parties to produce commercial supplies of product candidates, and our dependence on third parties could adversely impact our business.

We are dependent on third-party suppliers. We regularly evaluate potential alternate sources of supply of raw materials, various components used in production, drug substance and drug product, but there can be no assurance that any such suppliers would be available, acceptable, or successful. The costs of manufacturing our drug candidates are high, and we will require additional capital to ensure that we can maintain an adequate supply to conduct our contemplated development programs.

If our third-party suppliers do not supply sufficient quantities for product candidates to us on a timely basis and in accordance with applicable specifications and other regulatory requirements, there could be a significant interruption of our supplies, which would adversely affect clinical development of the product candidate, including affecting our ability to enroll in and timely progress clinical trials. Furthermore, if any of our contract manufacturers cannot successfully manufacture material that conforms to our specifications and with regulatory requirements, we will not be able to secure and/or maintain regulatory approval, if any, for our product candidates.

We will also rely on our contract manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our anticipated clinical trials. There are a small number of suppliers for certain capital equipment and raw materials used to manufacture our product candidates. We do not have any control over the process or timing of the acquisition of these raw materials by our contract manufacturers. Moreover, we currently do not have agreements in place for the commercial production of these raw materials. Any significant delay in the supply of a product candidate or the raw material components thereof for an ongoing clinical trial could considerably delay completion of that clinical trial, product candidate testing, and potential regulatory approval of that product candidate.

We do not expect to have the resources or capacity to commercially manufacture any of our proposed product candidates, if approved, and will likely continue to be dependent on third-party manufacturers. Our dependence on third parties to manufacture and supply us with clinical trial materials and any approved product candidates may adversely affect our ability to develop and commercialize our product candidates on a timely basis.

~~Table of Contents~~

~~We may not be successful in establishing and maintaining development partnerships and licensing agreements, which could adversely affect our ability to develop and commercialize product candidates.~~

Part of our strategy is to enter into development partnerships and licensing agreements. We face significant competition in seeking appropriate partners and the negotiation process is time consuming and complex. Even if we are successful in securing a development partnership, we may not be able to continue it. Moreover, we may not be successful in our efforts to establish a development partnership or other alternative arrangements for any of our other existing or future product candidates and programs because, among other reasons, our research and development pipeline may be insufficient, our product candidates and programs may be deemed to be at too early a stage of development for collaborative effort and/or third parties may not view our product candidates and programs as having the requisite potential to demonstrate safety and efficacy. Even if we are successful in our efforts to establish new development partnerships, the terms that we agree upon may not be favorable to us and we may not be able to maintain such development partnerships if, for example, development or approval of a product candidate is delayed or sales of an approved product candidate are disappointing. Any delay in entering into new development partnership agreements related to our product candidates could delay the development and commercialization of our product candidates and reduce their competitiveness if they reach the market.

~~Moreover, if we fail to establish and maintain additional development partnerships related to our product candidates:~~

~~the development of our current or future product candidates may be terminated or delayed;~~

~~our cash expenditures related to development of certain of our current or future product candidates would increase significantly and we may need to seek additional financing;~~

~~we may be required to hire additional employees or otherwise develop expertise, such as sales and marketing expertise, for which we have not budgeted; and~~

~~we will bear all of the risk related to the development of any such product candidates.~~

Our or any new partner’s failure to develop, manufacture or effectively commercialize our product would result in a material adverse effect on our business and results of operations and would likely cause our stock price to decline.

~~Currently pending, threatened or future litigation or governmental proceedings or inquiries could result in material adverse consequences, including judgments or settlements.~~

We are, or may from time-to-time become, involved in lawsuits and other legal or governmental proceedings. See Note 10 to the Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q for information regarding currently pending litigation that could have a material impact on us. Many of these matters raise complicated factual and legal issues and are subject to uncertainties and complexities, all of which make the matters costly to address. The timing of the final resolutions to any such lawsuits, inquiries, and other legal proceedings is uncertain.

Additionally, the possible outcomes or resolutions to these matters could include adverse judgments or settlements, either of which could require substantial payments, adversely affecting our consolidated financial condition, results of operations and cash flows. Any judgment against us, the entry into any settlement agreement, or the imposition of any fine could have a material adverse effect on our consolidated financial condition, results of operations and cash flows.

The terms of our loan agreement with Hercules may restrict our current and future operations, particularly our ability to respond to changes in business or to take certain actions, including to pay dividends to our stockholders.

On March 10, 2021, we entered into the Loan and Security Agreement with Hercules Capital, Inc. (the “Term Loan”). As of September 30, 2021, we had approximately $24.8 million of accrued debt under the Term Loan. The Term Loan has a scheduled maturity date of March 1, 2025 and is secured by a first priority security interest in substantially all of our assets. The Term Loan contains, and any future indebtedness we incur will likely contain, a number of restrictive covenants that impose operating restrictions, including restrictions on our ability to engage in acts that may be in our best long-term interests. The Term Loan includes covenants that, among other things, restrict our ability to (i) declare dividends or redeem or repurchase equity interests; (ii) incur additional liens; (iii) make loans and investments; (iv) incur additional indebtedness; (v) engage in mergers, acquisitions, and asset sales; (vi) transact with affiliates; (vii) undergo a change in control; (viii) add or change business locations; and (ix) engage in businesses that are not related to our existing business. The Term Loan also requires that we at all times maintain unrestricted cash of not less than $10.0 million.

A breach of any of these covenants could result in an event of default under the Loan Agreement. Upon the occurrence of such an event of default, Hercules may, at its discretion, accelerate and demand payment of all or any part of the outstanding advances, together with a prepayment charge, end of term charge, and all interest due and payable under the Term Loan. Hercules also may seek to realize on the collateral we have pledged as security for the Term Loan. If our indebtedness is accelerated, we cannot assure you that we will have sufficient assets to repay the indebtedness. The restrictions and covenants in the Term Loan and any future financing agreements may adversely affect our ability to finance future operations or capital needs or to engage in other business activities.

~~Table of Contents~~

~~Future acquisitions of and investments in new businesses could impact our business and financial condition.~~

From time-to-time, we may acquire or invest in businesses or partnerships that we believe could complement our business and drug candidates. The pursuit of such acquisitions or investments may divert the attention of management and cause us to incur various expenses, regardless of whether the acquisition or investment is ultimately completed. In addition, acquisitions and investments may not perform as expected and we may be unable to realize the expected benefits, synergies, or developments that we may initially anticipate. Further, if we are able to successfully identify and acquire additional businesses, we may not be able to successfully integrate the acquired personnel or operations, or effectively manage the combined business following the acquisition, any of which could harm our business and financial condition.

In addition, to the extent we finance any acquisition or investment in cash, it would reduce our cash reserves, and to the extent the purchase price is paid with shares of our common or preferred stock, it could be dilutive to our current stockholders. To the extent we finance any acquisition or investment with the proceeds from the incurrence of debt, this would increase our level of indebtedness and could negatively affect our liquidity, credit rating and restrict our operations. Moreover, we may face contingent liabilities in connection with any acquisitions or investments.

~~Risks Related to Intellectual Property~~

If we fail to adequately protect or enforce our intellectual property rights or secure rights to patents of others, the value of our intellectual property rights would diminish, and our business and competitive position would suffer.

Our success, competitive position and future revenues will depend in part on our ability and the abilities of our licensors and licensees to obtain and maintain patent protection for our products, methods, processes and other technologies, to preserve our trade secrets, to prevent third parties from infringing on our proprietary rights and to operate without infringing the proprietary rights of third parties. We have an active patent protection program that includes filing patent applications on new compounds, formulations, delivery systems and methods of making and using products and prosecuting these patent applications in the U.S. and abroad. As patents issue, we also file continuation applications as appropriate. Although we have taken steps to build what we believe to be a strong patent portfolio, we cannot predict:

~~the degree and range of protection any patents will afford us against competitors, including whether third parties find ways to invalidate or otherwise circumvent our licensed patents;~~

~~if and when patents will issue in the U.S. or any other country;~~

~~whether or not others will obtain patents claiming aspects similar to those covered by our licensed patents and patent applications;~~

~~whether we will need to initiate litigation or administrative proceedings to protect our intellectual property rights, which may be costly whether we win or lose;~~

whether any of our patents will be challenged by our competitors alleging invalidity or unenforceability and, if opposed or litigated, the outcome of any administrative or court action as to patent validity, enforceability or scope;

whether a competitor will develop a similar compound that is outside the scope of protection afforded by a patent or whether the patent scope is inherent in the claims modified due to interpretation of claim scope by a court;

~~whether there were activities previously undertaken by a licensor that could limit the scope, validity or enforceability of licensed patents and intellectual property; or~~

~~whether a competitor will assert infringement of its patents or intellectual property, whether or not meritorious, and what the outcome of any related litigation or challenge may be.~~

Our success also depends upon the skills, knowledge and experience of our scientific and technical personnel, our consultants and advisors as well as our licensors, sublicensees and contractors. To help protect our proprietary know-how and our inventions for which patents may be unobtainable or difficult to obtain, we rely on trade secret protection and confidentiality agreements. To this end, we require all employees, consultants and board members to enter into agreements that prohibit the disclosure of confidential information and, where applicable, require disclosure and assignment to us of the ideas, developments, discoveries and inventions important to our business. These agreements may not provide adequate protection for our trade secrets, know-how or other proprietary information in the event of any unauthorized use or disclosure or the lawful development by others of such information. If any of our trade secrets, know-how or other proprietary information is disclosed, the value of our trade secrets, know-how and other proprietary rights would be significantly impaired, and our business and competitive position would suffer.

~~Due to legal and factual uncertainties regarding the scope and protection afforded by patents and other proprietary rights, we may not have meaningful protection from competition.~~

~~Table of Contents~~

Our long-term success will substantially depend upon our ability to protect our proprietary technologies from infringement, misappropriation, discovery and duplication and avoid infringing the proprietary rights of others. Our patent rights, and the patent rights of biopharmaceutical companies in general, are highly uncertain and include complex legal and factual issues. These uncertainties also mean that any patents that we own or may obtain in the future could be subject to challenge, and even if not challenged, may not provide us with meaningful protection from competition. Patents already issued to us, or our pending applications may become subject to dispute, and any dispute could be resolved against us.

If some or all of our or any licensor’s patents expire or are invalidated or are found to be unenforceable, or if some or all of our patent applications do not result in issued patents or result in patents with narrow, overbroad, or unenforceable claims, or claims that are not supported in regard to written description or enablement by the specification, or if we are prevented from asserting that the claims of an issued patent cover a product of a third party, we may be subject to competition from third parties with products in the same class of products as our product candidates or products with the same active pharmaceutical ingredients as our product candidates, including in those jurisdictions in which we have no patent protection.

Our commercial success will depend in part on obtaining and maintaining patent and trade secret protection for our product candidates, as well as the methods for treating patients in the product indications using these product candidates. We will be able to protect our product candidates and the methods for treating patients in the applicable product indications using these product candidates from unauthorized use by third parties only to the extent that we or our exclusive licensor owns or controls such valid and enforceable patents or trade secrets.

Even if our product candidates and the methods for treating patients for prescribed indications using these product candidates are covered by valid and enforceable patents and have claims with sufficient scope, disclosure and support in the specification, the patents will provide protection only for a limited amount of time. Our and any licensor’s ability to obtain patents can be highly uncertain and involve complex and in some cases unsettled legal issues and factual questions. Furthermore, different countries have different procedures for obtaining patents, and patents issued in different countries provide different degrees of protection against the use of a patented invention by others. Therefore, if the issuance to us or any licensor, in a given country, of a patent covering an invention is not followed by the issuance, in other countries, of patents covering the same invention, or if any judicial interpretation of the validity, enforceability, or scope of the claims in, or the utility, written description or enablement in, a patent issued in one country is not similar to the interpretation given to the corresponding patent issued in another country, our ability to protect our intellectual property in those countries may be limited. Changes in either patent laws or in interpretations of patent laws in the U.S. and other countries may materially diminish the value of our intellectual property or narrow the scope of our patent protection.

We may be subject to competition from third parties with products in the same class of products as our product candidates, or products with the same active pharmaceutical ingredients as our product candidates in those jurisdictions in which we have no patent protection. Even if patents are issued to us or any licensor regarding our product or methods of using them, those patents can be challenged by our competitors who can argue such patents are invalid or unenforceable on a variety of grounds, including lack of utility, lack sufficient written description or enablement, utility, or that the claims of the issued patents should be limited or narrowly construed. Patents also will not protect our product candidates if competitors devise ways of making or using these products without legally infringing our patents. The current U.S. regulatory environment may have the effect of encouraging companies to challenge branded drug patents or to create non-infringing versions of a patented product in order to facilitate the approval of ANDAs for generic substitutes. These same types of incentives encourage competitors to submit NDAs that rely on literature and clinical data not prepared for or by the drug sponsor, providing another less burdensome pathway to approval.

~~If we infringe the rights of third parties, we could be prevented from selling products and be forced to defend against litigation and pay damages.~~

There is a risk that we may be inadvertently infringing the proprietary rights of third parties because numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields that are the focus of our development and manufacturing efforts. Others might have been the first to make the inventions covered by each of our or any licensor’s pending patent applications and issued patents and/or might have been the first to file patent applications for these inventions. In addition, because patent applications take many months to publish and patent applications can take many years to issue, there may be currently pending applications, unknown to us or any licensor, which may later result in issued patents that cover the production, manufacture, synthesis, commercialization, formulation or use of our product candidates. In addition, the production, manufacture, synthesis, commercialization, formulation or use of our product candidates may infringe existing patents of which we are not aware. Defending ourselves against third-party claims, including litigation in particular, would be costly and time consuming and would divert management’s attention from our business, which could lead to delays in our development or commercialization efforts. If third parties are successful in their claims, we might have to pay substantial damages or take other actions that are adverse to our business.

~~Table of Contents~~

~~If our products, methods, processes and other technologies infringe the proprietary rights of other parties, we could incur substantial costs and may have to:~~

~~obtain licenses, which may not be available on commercially reasonable terms, if at all;~~

~~redesign our products or processes to avoid infringement, which may not be possible or could require substantial funds and time;~~

~~stop using the subject matter claimed in patents held by others, which could cause us to lose the use of one or more of our drug candidates;~~

~~pay damages royalties, or other amounts; or~~

~~grant a cross license to our patents to another patent holder.~~

~~We expect that, as our drug candidates move further into clinical trials and commercialization and our public profile is raised, we will be more likely to be subject to such claims.~~

We may fail to comply with any of our obligations under existing agreements pursuant to which we license or have otherwise acquired rights or technology, which could result in the loss of rights or technology that are material to our business.

We are a party to technology licenses and have acquired certain assets and rights that are important to our business and we may enter into additional licenses or acquire additional assets and rights in the future. We currently hold licenses from Ludwig Institute for Cancer Research (“LICR”), BioWa, Inc. (“BioWa”), Lonza Sales AG (“Lonza”) Mayo Foundation (“Mayo”) and the University of Zurich (“UZH”). These licenses impose various commercial, contingent payments, royalty, insurance, indemnification, and other obligations on us. If we fail to comply with these obligations, the licensor may have the right to terminate the license or take back rights or assets, in which event we would lose valuable rights under our collaboration agreements, potential claims and our ability to develop product candidates.

~~We may be subject to claims that our consultants or independent contractors have wrongfully used or disclosed alleged trade secrets of their other clients or former employers to us.~~

As is common in the biotechnology and pharmaceutical industry, we engage the services of consultants to assist us in the development of our product candidates. Many of these consultants were previously employed at or may have previously or may be currently providing consulting services to, other biotechnology or pharmaceutical companies, including our competitors or potential competitors. We may become subject to claims that our company or a consultant inadvertently or otherwise used or disclosed trade secrets or other information proprietary to their former employers or their former or current clients. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to our management team.

~~We may not be able to protect our intellectual property rights throughout the world.~~

Filing, prosecuting and defending patents on product candidates in all countries throughout the world would be prohibitively expensive, and we intend to seek patent protection only in selected countries. Our intellectual property rights in some countries outside the U.S. can be less extensive than those in the U.S. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the U.S. Consequently, we may not be able to prevent third parties from practicing our inventions in all countries outside the U.S., or from selling or importing products made using our inventions in and into the U.S. or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the U.S. These products may compete with our product candidates and our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to biopharmaceuticals, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

~~Risks Related to Our Common Stock~~

A significant portion of our total outstanding shares are eligible to be sold into the market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

~~Table of Contents~~

Sales of a substantial number of shares of our common stock in the public market or the perception in the market that the holders of a large number of shares intend to sell shares, could depress the market price of our common stock and could impair our future ability to obtain capital, especially through an offering of equity securities. In addition, holders of a substantial number of shares of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.

~~We have also entered into a Controlled Equity Offering~~^SM Sales Agreement (the “Sales Agreement”) with Cantor Fitzgerald & Co. (“Cantor”), under which we may issue and sell from time-to-time shares of common stock through Cantor, as sales agent. Through September 30, 2021, we issued and sold 2,397,791 shares of common stock under the Sales Agreement for net proceeds of $40.0 million and an additional 3,818,300 shares of common stock for net proceeds of $24.5 million subsequent to September 30, 2021. Sales of a substantial number of shares under the Sales Agreement, or the perception that those sales may occur, could cause the market price of our common stock to decline.

Further, certain shares of our common stock that are currently outstanding but have not been registered for resale may currently be sold under Rule 144 under the Securities Act or the Securities Act. Sales of a substantial number of these shares in the public market, or the perception that those sales may occur, could cause the market price of our common stock to decline.

Our executive officers, directors and principal stockholders, if they choose to act together, will continue to have the ability to significantly influence all matters submitted to stockholders for approval, and this concentration of ownership may contribute to volatility in our stock price.

We have a relatively small public float due to the ownership percentage of our executive officers and directors, and greater than 5% stockholders. Our directors, executive officers, and the other holders of more than 5% of our common stock together with their affiliates beneficially owned approximately 48% of our common stock as of September 30, 2021.

Some of these persons or entities may have interests that are different from our other stockholders, which could prevent or discourage unsolicited acquisition proposals or offers for our common stock that may be in the best interest of our other stockholders. This may also adversely affect the trading price of our common stock because investors may perceive disadvantages in owning stock in companies with a significant concentration of ownership.

As a result of our small public float, our common stock may be less liquid, experience reduced daily trading volume and have greater stock price volatility than the common stock of companies with broader public ownership. In addition, the trading of a relatively small volume of shares of our common stock may result in significant volatility in our stock price. If and to the extent ownership of our common stock becomes more concentrated, whether due to increased ownership by our directors and executive officers or other principal stockholders, or other factors, our public float would further decrease, which in turn would likely result in increased stock price volatility.

Additionally, because a large amount of our stock is closely held, we may experience low trading volume or large fluctuations in share price and volume due to sales by our principal stockholders. If our existing stockholders, particularly our directors, executive officers and the holders of more than 5% of our common stock, or their affiliates or associates, sell substantial amounts of our common stock in the public market, or are perceived by the public market as intending to sell substantial amounts of our common stock, the trading price of our common stock could decline significantly.

Despite our listing on the Nasdaq Capital Market, there can be no assurance that an active trading market for our common stock will develop or be sustained, and the Nasdaq Capital Market may subsequently delist our common stock if we fail to comply with ongoing listing standards.

On September 18, 2020, our common stock commenced trading on the Nasdaq Capital Market under the symbol “HGEN.” The Nasdaq Capital Market’s rules for listed companies will require us to meet certain financial, public float, bid price and liquidity standards on an ongoing basis in order to continue the listing of our common stock. In addition to specific listing and maintenance standards, the Nasdaq Capital Market has broad discretionary authority over the continued listing of securities, which it could exercise with respect to the listing of our common stock.

As a listed company, we are required to meet the continued listing requirements applicable to all Nasdaq Capital Market companies. If we fail to meet those standards, as applied by Nasdaq in its discretion, our common stock may be subject to delisting. We intend to take all commercially reasonable actions to maintain our Nasdaq listing. If our common stock is delisted in the future, it is not likely that we will be able to list our common stock on another national securities exchange and, as a result, we expect our securities would be quoted on an over-the-counter market; however, if this were to occur, our stockholders could face significant material adverse consequences, including limited availability of market quotations for our common stock and reduced liquidity for the trading of our securities. In addition, in the event of such delisting, we could experience a decreased ability to issue additional securities and obtain additional financing in the future.

~~Table of Contents~~

The National Securities Markets Improvement Act of 1996, which is a federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” Because our common stock is listed on Nasdaq, shares of our common stock qualify as covered securities under the statute. Although the states are preempted from regulating the sale of our securities, the federal statute does allow the states to investigate companies if there is a suspicion of fraud, and, if there is a finding of fraudulent activity, then the states can regulate or bar the sale of covered securities in a particular case. Further, if we were no longer listed on Nasdaq, our securities would not qualify as covered securities under the statute, and we would be subject to regulation in each state in which we offer our securities.

~~Further, there can be no assurance that an active trading market for our common stock will be sustained despite our listing on the Nasdaq Capital Market.~~

Raising additional funds by issuing securities or through licensing or lending arrangements may cause dilution to our existing stockholders, restrict our operations or require us to relinquish proprietary rights.

To the extent that we raise additional capital by issuing equity securities, the share ownership of existing stockholders will be diluted. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance could result in further dilution to our stockholders by causing a reduction in their proportionate ownership and voting power.

Any future debt financing may involve covenants that restrict our operations, including, among other restrictions, limitations on our ability to incur liens or additional debt, pay dividends, redeem our stock, make certain investments, and engage in certain merger, consolidation, or asset sale transactions. In addition, if we raise additional funds through licensing arrangements, it may be necessary to grant potentially valuable rights to our product candidates or grant licenses on terms that are not favorable to us.

Any material weaknesses in our internal control over financing reporting that we may identify in the future could adversely affect investor confidence, impair the value of our common stock and increase our cost of raising capital.

If we were to identify any material weaknesses or significant deficiencies in our internal controls over financial reporting in the future, our operating results might be harmed, we may fail to meet our reporting obligations or fail to prevent or detect material misstatements in our financial statements. Any such failure could, in turn, affect the future ability of our management to certify that internal control over our financial reporting is effective. Inferior internal control over financial reporting could also subject us to the scrutiny of the SEC and other regulatory bodies which could cause investors to lose confidence in our reported financial information and could subject us to civil or criminal penalties or stockholder litigation, which could have an adverse effect on our results of operations and the market price of our common stock.

In addition, if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting, the disclosure of that fact, even if quickly remedied, could reduce the market’s confidence in our financial statements and harm our share price. Furthermore, deficiencies could result in future non-compliance with Section 404 of the Sarbanes-Oxley Act of 2002. Such non-compliance could subject us to a variety of administrative sanctions, including review by the SEC or other regulatory authorities.

We have never paid and do not intend to pay cash dividends and, consequently, the ability to achieve a return on any investment in our common stock will depend on appreciation in the price of our common stock.

We have never paid cash dividends on any of our capital stock, and we currently intend to retain future earnings, if any, to fund the development and growth of our business. Therefore, a holder of our stock is not likely to receive any dividends on our common stock for the foreseeable future. Since we do not intend to pay dividends, the ability to receive a return on an investment in our common stock will depend on any future appreciation in the market value of our common stock. There is no guarantee that our common stock will appreciate or even maintain the price at which it was purchased.

~~Anti-takeover provisions in our charter documents and Delaware law, could discourage, delay, or prevent a change in control of our company and may affect the trading price of our common stock.~~

We are a Delaware corporation, and the anti-takeover provisions of the Delaware General Corporation Law may discourage, delay, or prevent a change in control by prohibiting us from engaging in a business combination with an interested stockholder for a period of three years after the person becomes an interested stockholder, even if a change in control would be beneficial to our existing stockholders.

~~Table of Contents~~

Our Amended and Restated Certificate of Incorporation, as amended (the “Charter”), and our Second Amended and Restated Bylaws (the “Bylaws”) may discourage, delay, or prevent a change in our management or control over us that stockholders may consider favorable. Our Charter and Bylaws:

~~provide that vacancies on our board of directors, including newly created directorships, may be filled only by a majority vote of directors then in office;~~

~~do not provide stockholders with the ability to cumulate their votes; and~~

~~require advance notification of stockholder nominations and proposals.~~

In addition, our Charter permits the Board to issue up to 25 million shares of preferred stock with such powers, rights, terms and conditions as may be designated by the Board upon the issuance of shares of preferred stock at one or more times in the future. Specifically, the Charter permits the Board to approve the future issuance of all or any shares of the preferred stock in one or more series, to determine the number of shares constituting any series and to determine any voting powers, conversion rights, dividend rights, and other designations, preferences, limitations, restrictions and rights relating to such shares without any further authorization by our stockholders. The Board’s power to issue preferred stock could have the effect of delaying, deterring or preventing a transaction or a change in control of our company that might otherwise be in the best interest of our stockholders.

~~General Risk Factors~~

Our internal computer systems, or those of our third-party vendors, collaborators or other contractors or consultants, may fail or suffer security breaches, which could result in a material disruption of our product development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to liability or otherwise adversely affecting our business.

Our internal computer systems and those of our current and any future third-party vendors, collaborators and other contractors or consultants are vulnerable to damage or interruption from computer viruses, computer hackers, malicious code, employee theft or misuse, denial-of-service attacks, sophisticated nation-state and nation-state-supported actors, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we seek to protect our information technology systems from system failure, accident and security breach, if such an event were to occur and cause interruptions in our operations, it could result in a disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other disruptions. For example, the loss of clinical trial data from clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. If we were to experience a significant cybersecurity breach of our information systems or data, the costs associated with the investigation, remediation and potential notification of the breach to counterparties and data subjects could be material. In addition, our remediation efforts may not be successful. If we do not allocate and effectively manage the resources necessary to build and sustain the proper technology and cybersecurity infrastructure, we could suffer significant business disruption, including transaction errors, supply chain or manufacturing interruptions, processing inefficiencies, data loss or the loss of or damage to intellectual property or other proprietary information.

To the extent that any disruption or security breach were to result in a loss of, or damage to, our or our third-party vendors’, collaborators’ or other contractors’ or consultants’ data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability including litigation exposure, penalties and fines, we could become the subject of regulatory action or investigation, our competitive position could be harmed and the further development and commercialization of our product candidates could be delayed. Any of the above could have a material adverse effect on our business, financial condition, results of operations or prospects.

~~Our insurance policies are expensive and protect us only from some business risks, which leaves us exposed to significant uninsured liabilities.~~

We do not carry insurance for all categories of risk that our business may encounter. Some of the policies we currently maintain include general liability, employment practices liability, property, inventory and cargo, auto, workers’ compensation, products liability, and directors’ and officers’ insurance. We do not know, however, if we will be able to maintain existing insurance with adequate levels of coverage. Any significant, uninsured liability may require us to pay substantial amounts, which would adversely affect our working capital and results of operations.

Changes in laws or regulations relating to data privacy and security, or any actual or perceived failure by us to comply with such laws and regulations, or contractual or other obligations relating to data privacy and security, could have a material adverse effect on our reputation, results of operations, financial condition and cash flows.

We are, and may increasingly become, subject to various laws and regulations, as well as contractual obligations, relating to data privacy and security in the jurisdictions in which we operate. The regulatory environment related to data privacy and security is increasingly rigorous, with new and constantly changing requirements applicable to our business, and enforcement practices are likely to remain uncertain for the foreseeable future. These laws and regulations may be interpreted and applied differently over time and from jurisdiction to jurisdiction, and it is possible that they will be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, results of operations or prospects.

~~Table of Contents~~

In the U.S., various federal and state regulators, including governmental agencies like the Consumer Financial Protection Bureau and the Federal Trade Commission, have adopted, or are considering adopting, laws and regulations concerning personal information and data security. In particular, regulations promulgated pursuant to the Health Insurance Portability and accountability Act of 1996 (“HIPAA”) establish privacy and security standards that limit the use and disclosure of protected health information and require the implementation of safeguards to protect the privacy, integrity and availability of protected health information. Determining whether protected health information has been handled in compliance with applicable privacy standards and our contractual obligations can be complex and may be subject to changing interpretation. If we fail to comply with applicable HIPAA privacy and security standards, we could face civil and criminal penalties. In addition, state attorneys general are authorized to bring civil actions seeking either injunctions or damages in response to violations that threaten the privacy of state residents. We cannot be sure how these regulations will be interpreted, enforced or applied to our operations.

Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to personal information than federal, international, or other state laws, and such laws may differ from each other, all of which may complicate compliance efforts. For example, the California Consumer Privacy Act (“CCPA”), which increases privacy rights for California residents and imposes obligations on companies that process their personal information, came into effect on January 1, 2020. Among other things, the CCPA requires covered companies to provide new disclosures to California consumers and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. The CCPA provides for civil penalties for violations, as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the likelihood of, and risks associated with, data breach litigation.

On August 10, 2021, we were notified that the production website used by one of our service providers to prepare for FDA’s decision regarding our EUA request for lenzilumab had been compromised and source code from the website was posted on various internet message boards. Our service provider has taken additional security measures to ensure that drafts and other unapproved materials are no longer visible to the public. Despite additional security measures taken by our service provider, there can be no assurance that their information systems, or any materials prepared in advance by us, or any of our service providers related to potential regulatory decisions would not be compromised, stolen, copied or manipulated. We remind investors that information posted online may be false, misleading or inaccurate. We undertake no obligation to review and/or correct false, misleading, or inaccurate information posted, published or disclosed other than that information made available by us in formal submissions to the SEC.

Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the E.U. General Data Protection Regulation (“GDPR”), which became effective in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data. EU member states are tasked under the GDPR to enact, and have enacted, certain implementing legislation that adds to and/or further interprets the GDPR requirements and potentially extends our obligations and potential liability for failing to meet such obligations. The GDPR, together with national legislation, regulations and guidelines of the EU member states governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater.

All of these evolving compliance and operational requirements impose significant costs, such as costs related to organizational changes, implementing additional protection technologies, training associates and engaging consultants, which are likely to increase over time. In addition, such requirements may require us to modify our data processing practices and policies, distract management or divert resources from other initiatives and projects, all of which could have a material adverse effect on our results of operations, financial condition and cash flows. Any failure or perceived failure by us to comply with any applicable federal, state or similar foreign laws and regulations relating to data privacy and security could result in damage to our reputation and our relationship with our customers, as well as proceedings or litigation by governmental agencies or customers, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations or prospects.

We review and explore strategic alternatives on an on-going basis, but there can be no assurance that we will be successful in identifying or completing any strategic alternative or that any such strategic alternative will yield additional value for our stockholders.

We regularly review strategic alternatives to ensure our current structure optimizes our ability to execute our strategic plan and to maximize stockholder value. The review of strategic alternatives could result in, among other things, a sale, merger, consolidation or business combination, asset divestiture, partnering, licensing or other collaboration agreements, or potential acquisitions or recapitalizations, in one or more transactions, or continuing to operate with our current business plan and strategy. There can be no assurance that the exploration of strategic alternatives will result in the identification or consummation of any transaction.

~~Table of Contents~~

In addition, we may incur substantial expenses associated with identifying and evaluating potential strategic alternatives. The process of exploring strategic alternatives may be time consuming and disruptive to our business operations and if we are unable to effectively manage the process, our business, financial condition and results of operations could be adversely affected. We also cannot assure that any potential transaction or other strategic alternative, if identified, evaluated and consummated, will provide greater value to our stockholders than that reflected in our current stock price. Any potential transaction would be dependent upon a number of factors that may be beyond our control, including, among other factors, market conditions, industry trends, the interest of third parties in our business or product candidates and the availability of financing to potential buyers on reasonable terms.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

None.

Table of Contents

Item 3.

Defaults Upon Senior Securities

None.

Item 4.

Mine Safety Disclosures

Not applicable.

Item 5.

Other Information

None.

5926

Table of Contents

Item 6.

Exhibits.

Incorporated by Reference Filed or
Exhibit No. Exhibit Description Form⁺ Date Number Furnished
Herewith
3.1 Amended and Restated Certificate of Incorporation of the Registrant. 8-K July 6, 2016 3.1
3.1.1 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant. 8-K August 7, 2017 3.1
3.1.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, as amended. 8-K February 28, 2018 3.1
3.1.3 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, as amended 8-K September 11, 2020 3.1
3.2 Second Amended and Restated Bylaws of the Registrant. 8-K August 7, 2017 3.2
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)or 15d-14(a) of the Securities Exchange Act of 1934, as amended. X
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended. X
32.1*** Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350. X
32.2*** Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350. X
Incorporated by Reference Filed or
Exhibit No. Exhibit Description Form⁺ Date Number Furnished
Herewith
3.1 Amended and Restated Certificate of Incorporation of the Registrant. 8-K July 6, 2016 3.1
3.1.1 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant. 8-K August 7, 2017 3.1
3.1.2 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, as amended. 8-K February 28, 2018 3.1
3.1.3 Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, as amended 8-K September 11, 2020 3.1
3.2 Second Amended and Restated Bylaws of the Registrant. 8-K August 7, 2017 3.2
10.1 First amendment to Loan and Security Agreement, dated as of April 23, 2022, by and between the Registrant and Hercules Capital, Inc. X
10.2** Employment Agreement, dated as of April 21, 2021, by and between the Registrant and Dr. Adrian Kilcoyne. 8-K April 12, 2022 10.1
31.1 Certification of Chief Executive Officer pursuant to Rule 13a-14(a)or 15d-14(a) of the Securities Exchange Act of 1934, as amended. X
31.2 Certification of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934, as amended. X
32.1*** Certification of Chief Executive Officer pursuant to 18 U.S.C. §1350. X
32.2*** Certification of Chief Financial Officer pursuant to 18 U.S.C. §1350. X

101.INS XBRL Instance Document

101.SCH XBRL Taxonomy Extension Schema

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF XBRL Taxonomy Extension Definition Linkbase Document

101.LAB XBRL Taxonomy Extension Label Linkbase Document

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

~~101.INS~~ ~~XBRL Instance Document.~~ ~~The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.~~
~~101.SCH~~ ~~XBRL Taxonomy Extension Schema~~
~~101.CAL~~ ~~XBRL Taxonomy Extension Calculation Linkbase Document~~
~~101.DEF~~ ~~XBRL Taxonomy Extension Definition Linkbase Document~~
~~101.LAB~~ ~~XBRL Taxonomy Extension Label Linkbase Document~~
~~101.PRE~~ ~~XBRL Taxonomy Extension Presentation Linkbase Document~~
~~104~~ ~~Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).~~
**Indicates management contract or compensatory plan.
***The certifications attached as Exhibits 32.1 and 32.2 that accompanies this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Registrant under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing.

6027
Table of Contents

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

HUMANIGEN, INC.

Date: ~~November 12, 2021~~ May 5, 2022 By: /s/ Cameron Durrant
Cameron Durrant
Chief Executive Officer
(Principal Executive Officer)

Date: ~~November 12, 2021~~ May 5, 2022 By: /s/ Timothy Morris
Timothy Morris
Chief Operating Officer and Chief Financial Officer
(Principal Accounting and Financial Officer)

6128

iso4217:USD xbrli:shares