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

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

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

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 ☒

As of ~~April 30,~~July 31, 2021, the registrant had ~~93,512,700~~109,307,740 shares of common stock, $0.001 par value per share, outstanding.

	March 31,			December 31,			June 30,			December 31,
	2021			2020			2021			2020
Assets
Current assets:
Cash and cash equivalents	$	47,980		$	69,587		$	76,941		$	69,587
Restricted cash		16,500			16,500			16,500			16,500
Short-term investments		123,186			138,636			53,283			138,636
Accounts receivable, net of chargebacks and other deductions of $17,264 and $12,552, respectively, and provision for credit losses of $9,482 and $9,637, respectively		20,189			23,603
Accounts receivable, net of chargebacks and other deductions of $14,523 and $12,552, respectively, and provision for credit losses of $9,421 and $9,637, respectively								22,218			23,603
Inventories		26,324			28,846			29,765			28,846
Prepaid expenses and other current assets		16,968			14,789			14,384			14,789
Total current assets		251,147			291,961			213,091			291,961
Property and equipment, net		41,778			34,388			45,685			34,388
Goodwill		38,840			38,891			69,216			38,891
Intangible assets, net		9,482			10,218			72,779			10,218
Operating lease right-of-use assets, net		7,462			7,921			7,019			7,921
Other assets		947			950			1,167			950
Total assets	$	349,656		$	384,329		$	408,957		$	384,329
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	15,858		$	18,673		$	19,467		$	18,673
Accrued expenses		28,714			38,273			35,612			38,273
Current portion of operating lease liabilities		3,161			3,185			3,119			3,185
Current portion of long-term debt and finance lease obligations		1,970			2,010			4,725			2,010
Total current liabilities		49,703			62,141			62,923			62,141
Long-term liabilities:
Long-term operating lease liabilities		5,832			6,355			5,317			6,355
Long-term debt and finance lease obligations		147,265			146,577			145,271			146,577
Deferred tax liabilities		58			56			1,833			56
Contingent consideration								20,237			—
Other long-term liabilities		3,674			3,852			3,496			3,852
Total liabilities		206,532			218,981			239,077			218,981
Commitments and contingencies (See Note 15)
Commitments and contingencies (See Note 17)
Stockholders' equity:
Common stock, par value $0.001 per share, 250,000,000 shares authorized at March 31, 2021 and December 31, 2020; 95,185,620 and 95,066,195 shares issued at March 31, 2021 and December 31, 2020, respectively; 93,512,700 and 93,393,275 shares outstanding at March 31, 2021 and December 31, 2020, respectively		95			95
Common stock, par value $0.001 per share, 250,000,000 shares authorized at June 30, 2021 and December 31, 2020; 110,980,660 and 95,066,195 shares issued at June 30, 2021 and December 31, 2020, respectively; 109,307,740 and 93,393,275 shares outstanding at June 30, 2021 and December 31, 2020, respectively								111			95
Additional paid-in capital		904,950			901,864			966,666			901,864
Accumulated other comprehensive loss		(841	)		(1,134	)		(1,123	)		(1,134	)
Accumulated deficit		(738,694	)		(713,644	)		(772,968	)		(713,644	)
Less: treasury stock, at cost; 1,672,920 shares at March 31, 2021 and December 31, 2020		(7,406	)		(7,406	)
Less: treasury stock, at cost; 1,672,920 shares at June 30, 2021 and December 31, 2020								(7,485	)		(7,406	)
Total Athenex, Inc. stockholders' equity		158,104			179,775			185,201			179,775
Non-controlling interests		(14,980	)		(14,427	)		(15,321	)		(14,427	)
Total stockholders' equity		143,124			165,348			169,880			165,348
Total liabilities and stockholders' equity	$	349,656		$	384,329		$	408,957		$	384,329

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Revenue:
Product sales, net	$	20,360		$	18,547		$	21,385		$	40,167		$	41,745		$	58,714
License and other revenue		20,665			28,388			538			5			21,203			28,393
Total revenue		41,025			46,935			21,923			40,172			62,948			87,107
Cost of sales		16,405			19,572			19,663			33,006			36,068			52,578
Gross Profit		24,620			27,363			2,260			7,166			26,880			34,529
Operating expenses:
Research and development expenses		23,070			17,192			21,127			22,015			44,197			39,207
Selling, general, and administrative expenses		22,120			25,748			21,231			17,486			43,351			43,234
Total operating expenses		45,190			42,940			42,358			39,501			87,548			82,441
Operating loss		(20,570	)		(15,577	)		(40,098	)		(32,335	)		(60,668	)		(47,912	)
Interest income		29			413			132			185			161			598
Interest expense		4,908			1,673			5,684			1,565			10,592			3,238
Loss before income tax expense		(25,449	)		(16,837	)
Income tax expense		154			2,881
Loss on extinguishment of debt								—			7,230			—			7,230
Loss before income tax (benefit) expense								(45,650	)		(40,945	)		(71,099	)		(57,782	)
Income tax (benefit) expense								(11,035	)		106			(10,881	)		2,987
Net loss		(25,603	)		(19,718	)		(34,615	)		(41,051	)		(60,218	)		(60,769	)
Less: net loss attributable to non-controlling interests		(553	)		(289	)		(341	)		(600	)		(894	)		(889	)
Net loss attributable to Athenex, Inc.	$	(25,050	)	$	(19,429	)	$	(34,274	)	$	(40,451	)	$	(59,324	)	$	(59,880	)
Unrealized gain (loss) on investment, net of income taxes		16			(68	)
Unrealized (loss) gain on investment, net of income taxes								(19	)		117			(3	)		49
Foreign currency translation adjustment, net of income taxes		277			(438	)		(263	)		(43	)		14			(481	)
Comprehensive loss	$	(24,757	)	$	(19,935	)	$	(34,556	)	$	(40,377	)	$	(59,313	)	$	(60,312	)
Net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (See Note 12)	$	(0.27	)	$	(0.24	)
Weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (See Note 12)		93,429,935			81,539,548
Net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (See Note 14)							$	(0.33	)	$	(0.50	)	$	(0.60	)	$	(0.73	)
Weighted-average shares used in computing net loss per share attributable to Athenex, Inc. common stockholders, basic and diluted (See Note 14)								103,370,268			81,564,441			98,427,561			81,551,995

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Common Stock					Additional					Accumulated other			Treasury Stock						Total Athenex, Inc.			Non-			Total			Common Stock					Additional					Accumulated other			Treasury Stock						Total Athenex, Inc.			Non-			Total
	Shares			Amount		paid-in capital		Accumulated deficit			comprehensive loss			Shares			Amount			stockholders' equity			controlling interests			stockholders' equity			Shares			Amount		paid-in capital		Accumulated deficit			comprehensive loss			Shares			Amount			stockholders' equity			controlling interests			stockholders' equity
Balance at January 1, 2020		83,231,063		$	83	$	763,648	$	(567,465	)	$	(635	)		(1,672,920	)	$	(7,406	)	$	188,225		$	(12,370	)	$	175,855			83,231,063		$	83	$	763,648	$	(567,465	)	$	(635	)		(1,672,920	)	$	(7,406	)	$	188,225		$	(12,370	)	$	175,855
Stock-based compensation cost		—			—		1,864		—			—			—			—			1,864			—			1,864			—			—		1,864		—			—			—			—			1,864			—			1,864
Restricted stock expense		(3,000	)		—		397		—			—			—			—			397			—			397			(3,000	)		—		397		—			—			—			—			397			—			397
Stock options exercised		70,200			—		344		—			—			—			—			344			—			344			70,200			—		344		—			—			—			—			344			—			344
Net loss		—			—		—		(19,429	)		—			—			—			(19,429	)		(289	)		(19,718	)		—			—		—		(19,429	)		—			—			—			(19,429	)		(289	)		(19,718	)
Other comprehensive loss, net of tax																														—			—		—		—			(506	)		—			—			(506	)		—			(506	)
Balance at March 31, 2020 (unaudited)																														83,298,263			83		766,253		(586,894	)		(1,141	)		(1,672,920	)		(7,406	)		170,895			(12,659	)		158,236
Sale of common stock and issuance of stock in connection with acquisition																														51,691			—		269		—			—			—			—			269			—			269
Stock-based compensation cost																														—			—		2,640		—			—			—			—			2,640			—			2,640
Restricted stock expense																														—			—		413		—			—			—			—			413			—			413
Stock options exercised																														12,500			—		125		—			—			—			—			125			—			125
Issuance of warrants, net																														—			—		5,342		—			—			—			—			5,342			—			5,342
Non-controlling interests																														—			—		—		—			—			—			—			—			198			198
Net loss																														—			—		—		(40,451	)		—			—			—			(40,451	)		(600	)		(41,051	)
Other comprehensive income, net of tax		—			—		—		—			(506	)		—			—			(506	)		—			(506	)		—			—		—		—			74			—			—			74			—			74
Balance at March 31, 2020 (unaudited)		83,298,263		$	83	$	766,253	$	(586,894	)	$	(1,141	)		(1,672,920	)	$	(7,406	)	$	170,895		$	(12,659	)	$	158,236
Balance at June 30, 2020 (unaudited)																													$	83,362,454		$	83	$	775,042	$	(627,345	)	$	(1,067	)		(1,672,920	)	$	(7,406	)	$	139,307		$	(13,061	)	$	126,246

	Common Stock				Additional					Accumulated other			Treasury Stock						Total Athenex, Inc.			Non-			Total			Common Stock				Additional					Accumulated other			Treasury Stock						Total Athenex, Inc.			Non-			Total
	Shares		Amount		paid-in capital		Accumulated deficit			comprehensive loss			Shares			Amount			stockholders' equity			controlling interests			stockholders' equity			Shares		Amount		paid-in capital		Accumulated deficit			comprehensive loss			Shares			Amount			stockholders' equity			controlling interests			stockholders' equity
Balance at January 1, 2021		95,066,195	$	95	$	901,864	$	(713,644	)	$	(1,134	)		(1,672,920	)	$	(7,406	)	$	179,775		$	(14,427	)	$	165,348			95,066,195	$	95	$	901,864	$	(713,644	)	$	(1,134	)		(1,672,920	)	$	(7,406	)	$	179,775		$	(14,427	)	$	165,348
Stock-based compensation cost		—		—		2,205		—			—			—			—			2,205			—			2,205			—		—		2,205		—			—			—			—			2,205			—			2,205
Restricted stock expense		—		—		29		—			—			—			—			29			—			29			—		—		29		—			—			—			—			29			—			29
Stock options exercised		119,425		—		852		—			—			—			—			852			—			852			119,425		—		852		—			—			—			—			852			—			852
Net loss		—		—		—		(25,050	)		—			—			—			(25,050	)		(553	)		(25,603	)		—		—		—		(25,050	)		—			—			—			(25,050	)		(553	)		(25,603	)
Other comprehensive income, net of tax																													—		—		—		—			293			—			—			293			—			293
Balance at March 31, 2021 (unaudited)																													95,185,620		95		904,950		(738,694	)		(841	)		(1,672,920	)		(7,406	)		158,104			(14,980	)		143,124
Sale of common stock																													33,373		—		133		—			—			—			—			133			—			133
Issuance of common stock in connection with acquisition of Kuur and settlement of transaction incentive liability assumed																													15,601,667		16		58,412		—			—			—			—			58,428			—			58,428
Stock-based compensation cost																													—		—		2,387		—			—			—			—			2,387			—			2,387
Restricted stock expense																													—		—		57		—			—			—			—			57			—			57
Stock options exercised																													160,000		—		727		—			—			—			—			727			—			727
Treasury stock repurchase																													—		—		—		—			—			—			(79	)		(79	)		—			(79	)
Net loss																													—		—		—		(34,274	)		—			—			—			(34,274	)		(341	)		(34,615	)
Other comprehensive loss, net of tax		—		—		—		—			293			—			—			293			—			293			—		—		—		—			(282	)		—			—			(282	)		—			(282	)
Balance at March 31, 2021 (unaudited)		95,185,620	$	95	$	904,950	$	(738,694	)	$	(841	)	$	(1,672,920	)	$	(7,406	)	$	158,104		$	(14,980	)	$	143,124
Balance at June 30, 2021 (unaudited)																													110,980,660	$	111	$	966,666	$	(772,968	)	$	(1,123	)		(1,672,920	)	$	(7,485	)	$	185,201		$	(15,321	)	$	169,880

The accompanying notes are an integral part of these condensed consolidated financial statements.

	Three Months Ended March 31,						Six Months Ended June 30,
	2021			2020			2021			2020
Cash flows from operating activities:
Net loss	$	(25,603	)	$	(19,718	)	$	(60,218	)	$	(60,769	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		1,274			1,086			2,467			2,121
Stock-based compensation expense		2,234			2,261			4,678			5,314
Amortization of debt discount		779			256			1,533			553
Change in fair value of contingent consideration								398			—
Write off of deferred debt issuance costs								648			—
Loss on disposal of assets and impairment charges		—			173			—			173
Loss on extinguishment of debt								—			7,230
Deferred income taxes		2			48			(10,940	)		51
Changes in operating assets and liabilities:
Changes in operating assets and liabilities, net of effect of acquisition:
Receivables, net		3,414			(34,728	)		1,385			(21,931	)
Prepaid expenses and other assets		(2,176	)		3,748			(327	)		1,044
Inventories		2,523			(3,101	)		(918	)		1,487
Accounts payable and accrued expenses		(12,323	)		4,430			(7,796	)		(5,341	)
Net cash used in operating activities		(29,876	)		(45,545	)		(69,090	)		(70,068	)
Cash flows from investing activities:
Purchase of property and equipment		(7,341	)		(1,736	)		(10,459	)		(4,566	)
Payments for licenses		(1,088	)		(64	)		(1,588	)		(83	)
Cash acquired from Kuur acquisition								1,425			—
Purchases of short-term investments		(55,784	)		(23,571	)		(67,600	)		(23,571	)
Sales and maturities of short-term investments		71,250			14,920			152,950			46,345
Net cash provided by (used in) investing activities		7,037			(10,451	)
Net cash provided by investing activities								74,728			18,125
Cash flows from financing activities:
Proceeds from sale of stock								133			269
Proceeds from issuance of debt		—			435			783			95,164
Proceeds from issuance of warrants								—			5,836
Costs incurred related to the issuance of debt and warrants								—			(6,125	)
Repurchase of treasury stock								(79	)		—
Proceeds from exercise of stock options		852			344			1,579			469
Investment from non-controlling interest								—			198
Repayment of finance lease obligations and long-term debt		(98	)		(47	)		(967	)		(54,238	)
Net cash provided by financing activities		754			732			1,449			41,573
Net decrease in cash, cash equivalents, and restricted cash		(22,085	)		(55,264	)
Net increase (decrease) in cash, cash equivalents, and restricted cash								7,087			(10,370	)
Cash, cash equivalents, and restricted cash, beginning of period		86,087			127,674			86,087			127,674
Effect of exchange rate changes on cash, cash equivalents, and restricted cash		478			(427	)		267			(403	)
Cash, cash equivalents, and restricted cash, end of period (See Note 3)	$	64,480		$	71,983		$	93,441		$	116,901
Supplemental cash flow disclosures
Interest paid	$	7,708		$	1,390		$	7,715		$	3,081
Non-cash investing and financing activities:
Accrued purchases of property and equipment	$	1,215		$	1,009		$	2,708		$	436
Accrued purchases of licenses	$	1,800		$	500		$	1,600		$	500
Stock issued in connection with the acquisition of Kuur							$	52,786		$	—
Fair value of acquisition-related contingent consideration							$	19,839		$	—
Equipment purchased with capital lease obligation							$	—		$	564
Accrued cost of debt issuance							$	—		$	287
ROU assets derecognized from modification of operating lease obligations	$	—		$	(468	)	$	—		$	(468	)
ROU assets recognized in exchange for operating lease obligations	$	—		$	353		$	—		$	353

The accompanying notes are an integral part of these condensed consolidated financial statements.

Athenex, Inc. and subsidiaries (the “Company” or “Athenex”), originally under the name Kinex Pharmaceuticals LLC (“Kinex”), formed in November 2003, commenced operations on February 5, 2004, and operated as a limited liability company until it was incorporated in the State of Delaware under the name Kinex Pharmaceuticals, Inc. on December 31, 2012. The Company changed its name to Athenex, Inc. on August 26, 2015.

Athenex is a biopharmaceutical company dedicated to becoming a leader in the discovery, development, and commercialization of next generation drugs for the treatment of cancer. The Company’s mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. The Company has assembled a strong and experienced leadership team and has established operations across the pharmaceutical value chain to execute our goal of becoming a leader in bringing innovative cancer treatments to the market and improving health outcomes.

The Company is organized around three operating segments: (1) its Oncology Innovation Platform, dedicated to the research and development of our proprietary drugs; (2) its Commercial Platform, focused on the sales and marketing of our specialty drugs and the market development of our proprietary drugs; and (3) its Global Supply Chain Platform, dedicated to providing a stable and efficient supply of APIs for our clinical and commercial efforts. The Company’s current clinical pipeline in the Oncology Innovation Platform is derived from four different ~~proprietary~~ technologies: (1) Orascovery, based on a P-glycoprotein (“P-gp”) pump inhibitor, (2) Src Kinase Inhibition, (3) Cell Therapy, and (4) Arginine Deprivation ~~Therapy~~.Therapy.

The Company is primarily engaged in conducting research and development activities through corporate collaborators, in-licensing and out-licensing pharmaceutical compounds and technology, conducting preclinical and clinical testing, identifying and evaluating additional drug candidates for potential in-licensing or acquisition, and raising capital to support development and commercialization activities. The Company also conducts commercial sales of specialty products through its wholly owned subsidiary, Athenex Pharmaceutical Division (“APD”), and 503B products through its wholly owned subsidiary, Athenex Pharma Solutions (“APS”).

The Company has incurred operating losses since its inception and, as a result, as of ~~March 31,~~June 30, 2021 and December 31, 2020 had an accumulated deficit of ~~$738.7~~$773.0 million and $713.6 million, respectively. As of ~~March 31,~~June 30, 2021, the Company had cash and cash equivalents of ~~$48.0~~$76.9 million, restricted cash of $16.5 million, and short-term investments of ~~$123.2~~ $53.3million.

The Company believes that the existing cash and cash equivalents, restricted cash, and short-term investments will enable us to meet our current operational liquidity needs and fund operations ~~into~~through the ~~second half~~fourth quarter of 2022. The Company has based these estimates on assumptions that may prove to be wrong, and it could spend the available financial resources much faster than expected and need to raise additional funds sooner than anticipated.Operations have been funded primarily through the sale of common stock, senior secured loans, and to a lesser extent, from convertible bond financing, revenue, and grant funding. The Company will require significant additional funds to conduct clinical trials and to fund its commercialization and manufacturing operations. There can be no assurance that this funding will be available for our use when needed, or at all. If adequate funds are not available, the Company may be required to delay, modify, or terminate its research and development programs or reduce its planned commercialization efforts. Further, if the Company is unable to obtain additional financing, the Company will need to reevaluate future operating plans. Although the Company plans to raise additional funds, these plans are subject to market conditions which are outside of its control and therefore cannot be deemed to be probable.

In February 2021, the Company received a Complete Response Letter (“CRL”) from the U.S. Food and Drug Administration (“FDA”) regarding the Company’s New Drug Application (“NDA”) for oral paclitaxel and encequidar (“Oral Paclitaxel”) for the treatment of metastatic breast cancer. The FDA issues a CRL to indicate that the review cycle for an application is complete and that the application is not ready for approval in its present form. In the CRL, the FDA indicated its concern of safety risk to patients in terms of an increase in neutropenia-related sequelae on the Oral Paclitaxel arm compared with the IV paclitaxel arm in the Phase III study. The FDA also expressed concerns regarding the uncertainty over the results of the primary endpoint of objective response rate (ORR) at week 19 conducted by blinded independent central review (“BICR”). The FDA stated that the BICR reconciliation and re-read process may have introduced unmeasured bias and influence on the BICR. The FDA recommended that Athenex conduct a new adequate and well-conducted clinical trial in a patient population with metastatic breast cancer representative of the population in the U.S. The FDA determined that ~~additional~~adequate risk mitigation strategies to improve toxicity, which may involve dose optimization as well as, or in addition to, exclusion of patients deemed to be at higher risk of toxicity, ~~are~~would be required ~~to support potential approval of the NDA.~~ ~~We are working to consider the appropriate next steps~~ in ~~the development~~any new clinical trial of Oral Paclitaxel. ~~We have been preparing for and plan to request~~During the second quarter of 2021, the Company held a Type A meeting with the FDA. At the meeting, the Company provided additional analyses,

~~with~~including overall survival (OS) data on patient subgroups, to provide a more comprehensive summary of the risk/benefit assessment. The Company also proposed to collect additional OS data that could inform the design of a new clinical study. The Company is evaluating the optimal design for a new clinical study, which it intends to present to the FDA ~~and plan to engage~~ in ~~a dialogue on~~ the ~~design and scope~~fourth quarter of ~~a clinical trial to address the FDA’s requirements and align on the next steps required to obtain approval.~~2021. The Company’s ability to potentially commercialize Oral Paclitaxel for the treatment of metastatic breast cancer, and the timing of such potential commercialization, is dependent on ~~the discussion~~coming to an agreement with the ~~agency,~~FDA on the path forward for the program, the requirements and progress of a potential new clinical study, the Company’s resubmission of its NDA, ultimate FDA approval, and potentially additional capital.

The Company is subject to a number of risks similar to other biopharmaceutical companies, including, but not limited to, the lack of available capital; possible failure of preclinical testing or clinical ~~trials,~~trials; inability to obtain regulatory approval of product candidates; competitors developing new technological innovations; unsuccessful commercialization strategy and launch plans for its proprietary drug candidates; risks inherent in litigation, including purported class actions; market acceptance of the Company’s products; and protection of proprietary technology. If the Company or its partners do not successfully commercialize any of the Company’s product candidates, it will be unable to generate sufficient ~~product~~ revenue and might not, if ever, achieve profitability and positive cash flow.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles in the United States of America (“GAAP”) for interim financial information (Accounting Standards Codification (“ASC”) 270, Interim Reporting) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these financial statements do not include all of the information necessary for a full presentation of financial position, results of operations, and cash flows in conformity with GAAP. In the opinion of management, the condensed consolidated financial statements reflect all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation of the results of the Company for the periods presented. These condensed consolidated financial statements reflect the accounts and operations of Athenex, Inc. and those of its subsidiaries in which Athenex, Inc. has a controlling financial interest. Intercompany transactions and balances have been fully eliminated in consolidation.

Results of the Company’s operations for the three and six months ended ~~March 31,~~June 30, 2021 are not necessarily indicative of the results expected for the year ending December 31, 2021, or for any other future annual or interim period. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission (“SEC”) on March 1, 2021.

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amount of revenue and expenses during the reporting period. Such management estimates include those relating to assumptions used in clinical research accruals, chargebacks, measurement of acquired assets and assumed liabilities in business combinations, provision for credit losses, inventory reserves, deferred income taxes, the estimated useful life and recoverability of long-lived assets, and the valuation of stock-based awards and other items as appropriate. Actual results could differ from those estimates.

The Company estimates and records a provision for its expected credit losses related to its financial instruments, including its trade receivables and contract assets recorded under Financial Accounting Standards Board (“FASB”) ASC 606, Revenue from Contracts with Customers (“Topic 606”). The Company considers historical collection rates, current financial status of its customers, macroeconomic factors, and other industry-specific factors when evaluating for current expected credit losses. Forward-looking information is also considered in the evaluation of current expected credit losses. However, because of the short time to the expected receipt of accounts receivable and contract assets, the Company believes that the carrying value, net of excepted losses, approximates fair value and therefore, relies more on historical and current analysis of such financial instruments.

The Company accounts for acquired businesses using the acquisition method of accounting, which requires that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date. Identifiable amortizing intangible assets are recorded on the consolidated balance sheet at fair value and amortized over their estimated useful lives. Acquisition-related costs are expensed as incurred. Any excess of the consideration transferred over the estimated fair values of the net assets acquired is recorded as goodwill.

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents, restricted cash, and short-term investments. The Company deposits its cash equivalents in interest-bearing money market accounts and certificates of deposit, invests in highly liquid U.S. treasury notes, commercial paper, and corporate bonds. The Company deposits its cash with multiple financial institutions. Cash balances exceed federally insured limits. The primary focus of the Company’s investment strategy is to preserve capital and meet liquidity requirements. The Company’s investment policy addresses the level of credit exposure by limiting the concentration in any one corporate issuer and establishing a minimum allowable credit

rating. The Company also has significant assets and liabilities held in its overseas manufacturing facility, and research and development facility in China, and therefore is subject to foreign currency fluctuation and regulatory uncertainties.

The Company had a restricted cash balance of $16.5 million as of ~~March 31,~~June 30, 2021 and December 31, 2020 held in a controlled bank account in connection with the Company’s senior secured loan agreement and related security agreements (the “Senior Credit Agreement”) with Oaktree Fund Administration, LLC, as administrative agent, and the lenders party thereto (collectively, “Oaktree”). The Senior Credit Agreement requires the Company to maintain, in a debt service reserve account, a minimum cash balance equal to twelve months of interest on the outstanding loans under the Senior Credit Agreement.

	March 31, 2021		December 31, 2020		June 30, 2021		December 31, 2020
Raw materials and purchased parts	$	3,054	$	6,498	$	2,944	$	6,498
Work in progress		1,728		776		2,500		776
Finished goods		21,542		21,572		24,321		21,572
Total inventories	$	26,324	$	28,846	$	29,765	$	28,846

On May 4, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Kuur Therapeutics, Inc., a Delaware corporation (“Kuur”) whereby it acquired 100% of the outstanding shares of Kuur. Under the terms of the Merger Agreement, the Company’s wholly owned subsidiary, Athenex Pharmaceuticals LLC, a Delaware limited liability company, merged with and into Kuur, with Kuur surviving as a wholly owned subsidiary of the Company. Kuur is a leading developer of off-the-shelf CAR-NKT cell immunotherapies for the treatment of solid and hematological malignancies. The Company believes the acquisition strategically combines its TCR program with the groundbreaking NKT cell platform to provide a solution that may address some of the known limitations associated with the first generation of cell therapy treatments focused on autologous CAR-T.

Pursuant to the Merger Agreement, an upfront fee of $70.0 million was paid to Kuur shareholders and its former employees and directors, comprised primarily of equity in the Company’s common stock. Additionally, Kuur shareholders and its former employees and directors are eligible to receive up to $115.0 million of milestone payments, which may be paid, at the Company’s sole discretion, in either cash or additional common stock of the Company (or a combination of both).

The Company identified the Merger as a business combination pursuant to ASC 805 and used the acquisition method of accounting to account for the transaction. The purchase price, after adjusted for closing conditions, consisted of 14,228,066 shares of the Company’s common stock issued at $3.71 per share with a fair value of $52.8 million, plus the fair value of the future milestone payments amounting to $19.8 million, recorded as contingent consideration. The Company recorded the fair value of this contingent consideration as a liability based on the probabilities of Kuur achieving the milestones and the present value of such payments. These inputs are not observable in in the market and therefore are considered Level 3 inputs.

The Company estimated fair values on May 4, 2021 for the preliminary allocation of consideration to the net tangible and intangible assets acquired and liabilities assumed in connection with the Merger. During the measurement period, the Company will continue to obtain information to assist in finalizing the fair value of assets acquired and liabilities assumed, which may differ materially from these preliminary estimates. If any measurement period adjustments are material, those adjustments, including any related impacts to net income, will be applied in the reporting period in which the adjustments are determined. The Company is in the process of conducting a valuation of the assets acquired and liabilities assumed, most notably, the in-process research & development and contingent consideration, and the final allocation will be made when completed, including the result of any identified goodwill. Accordingly, the provisional measurements noted below are preliminary and subject to modification in the future. To estimate the preliminary fair value of the identifiable intangible assets acquired, the Company used projected discounted cash flow method, which requires assumptions of projected revenues and expenses and an estimated discount rate, among other inputs, each of which is not observable in the market and thus are considered Level 3 inputs. The Company assumed $8.9 million of transaction incentive liability to Kuur’s key employees and independent company directors, of which $3.3 million was paid in cash and $5.6 million was paid in 1,373,601 shares of the Company’s common stock at $4.11 per share. The following table summarizes the purchase price and the initial estimates of the fair values of assets and liabilities acquired at the date of acquisition (in thousands):

Goodwill in the amount of $30.3 million was recorded for the excess of the purchase price over the fair value of the assets acquired and liabilities assumed. The goodwill recorded in connection with this acquisition is not deductible for income tax purposes. A deferred tax liability in the amount of $12.7 million was recorded related to the future taxable income as a result of the book to tax basis difference arising from the IPR&D.

The fair value of the acquired IPR&D relates to two products, including (a) an allogenic product in which NKT cells are engineered with a CAR targeting CD19, and (b) an allogenic product in which NKT cells are engineered with a CAR targeting GPC3. These IPR&D projects were valued using an income approach, specifically a projected discounted cash flow method, adjusted for the probability of technical success (PTS). The projected discounted cash flow models used to estimate the Company’s IPR&D reflect significant assumptions regarding the estimates a market participant would make in order to evaluate a drug development asset including the following:

This acquisition was made to benefit the Company’s R&D efforts, providing synergies with other assets in the Company’s pipeline and therefore, is included in the Oncology Innovation Platform. The operating results of Kuur have been included within the Company’s Oncology Innovation Platform operating segment from the date of acquisition. Kuur added revenue of $0 for the three months ended June 30, 2021 and contributed a net loss of $0.6 million for the three months ended June 30, 2021.

Acquisition-related costs, including legal, regulatory, and consulting costs, amounted to $3.5 million, and are included within selling, general, and administrative expenses in the Company’s consolidated statement of operations and comprehensive loss.

The following table presents supplemental unaudited pro forma information for the acquisition as if it had occurred on January 1, 2020. The unaudited pro forma financial results for the three and six months ended June 30, 2021 include the following adjustments: (1) removal of direct acquisition-related costs which would not have been incurred had the businesses been owned on the beginning of the prior reporting period, (2) the deferred tax effect if the intangible assets and purchase accounting were recorded as of the beginning of the prior reporting period, and (3) the removal of the change in fair value of Kuur convertible debt which was converted prior to the consummation of the acquisition. The pro forma results do not include any anticipated synergies or other expected benefits of the acquisitions. The unaudited pro forma financial information is for informational purposes only and is not necessarily indicative of either future results of operations of the combined entity or results that might have been achieved had the acquisitions been consummated as of the beginning of the prior reporting period. The following table presents the unaudited pro forma consolidated financial information for the three and six months ended June 30, 2021 (in thousands):

The Company’s identifiable intangible assets, net, consist of the following (in thousands):

	March 31, 2021										June 30, 2021
	Cost/Fair Value			Accumulated Amortization		Impairments		Net			Cost/Fair Value			Accumulated Amortization		Impairments		Net
Amortizable intangible assets:
Licenses	$	12,641		$	5,745	$	—	$	6,896		$	12,979		$	6,195	$	—	$	6,784
Polymed customer list		1,593			1,482		—		111			1,593			1,576		—		17
Polymed technology		3,712			1,754		—		1,958			3,712			1,804		—		1,908
Indefinite-lived intangible assets:
CDE in-process research and development (IPR&D)		728			—		—		728			728			—		—		728
Kuur IPR&D												63,500			—		—		63,500
Effect of currency translation adjustment		(211	)		—		—		(211	)		(158	)		—		—		(158	)
Total intangible assets, net	$	18,463		$	8,981	$	—	$	9,482		$	82,354		$	9,575	$	—	$	72,779

In connection with the acquisition of Kuur, the Company identified three drug candidate projects and two were classified as in-process research and development (“IPR&D”) and recorded at their fair value on the acquisition date. Included in the IPR&D is the historical know-how, cell treatment protocols, and procedures expected to be needed to complete the related phase of testing. The fair value of IPR&D was determined for each project, or unit of account, using unobservable, level 3 inputs (see Footnote 5 Business Combination). IPR&D intangible assets are not amortized, but rather are reviewed for impairment on an annual basis or more frequently if indicators of impairment are present, until the project is completed, abandoned, or transferred to a third party.

As of ~~March 31,~~June 30, 2021, licenses at cost include an Orascovery license of $0.4 million, licenses purchased from Gland Pharma Limited (“Gland”) of $4.4 million, a license purchased from MAIA Pharmaceuticals, Inc. (“MAIA”) for $4.0 million, licenses purchased from Ingenus Pharmaceuticals, LLC (“Ingenus”) for $3.0 million, and licenses of other specialty products of $0.8 million. The Orascovery license with Hanmi Pharmaceuticals Co. Ltd. (“Hanmi”) was purchased directly from Hanmi and is being amortized on a straight-line basis over a period of 12.75 years, the remaining life of the license agreement at the time of purchase. The licenses purchased from Gland are being amortized on a straight-line basis over a period of 5 years, the remaining life of the license agreement at the time of purchase. The license purchased from MAIA is being amortized over a period of 7 years, the remaining life of the license agreement at the time of purchase. Of the $3.0 million licenses purchased from Ingenus, a $2.0 million license is being amortized over a period of 5 years, the estimated useful life of the license agreement and a $1.0 million license purchased from Ingenus is being amortized over a period of 3 years, the remaining life of the license agreement at the time of purchase.

The remaining intangible assets were acquired in connection with the acquisitions of Polymed Therapeutics, Inc. (“Polymed”) and Comprehensive Drug Enterprises (“CDE”). Intangible assets are amortized using an economic consumption model over their useful lives. The Polymed customer list and technology are amortized on a straight-line basis over 6 and 12 years, respectively. The CDE ~~in-process research and development, (“~~IPR~~&D”),~~&D will not be amortized until the related projects are completed. IPR&D is tested annually for impairment, unless conditions exist causing an earlier impairment test (e.g., abandonment of project). The Company recorded 0 ~~impairments~~impairment of IPR&D during the ~~three~~six months ended ~~March 31,~~June 30, 2021. The weighted-average useful life for all intangible assets was ~~7.1~~6.5 years as of ~~March 31,~~June 30, 2021.

The Company recorded $~~0.6~~0.5 million of amortization expense for each of the three-month periods ended June 30, 2021and 2020, and $1.1 million and ~~$0.5~~$0.9 million of amortization expense for the ~~three-month~~six-month periods ended ~~March 31,~~June 30, 2021 and 2020, respectively.

The Company’s goodwill balance is the result of current and prior period acquisitions and is allocated to the Global Supply Chain Platform reporting unit and the Oncology Innovation Platform reporting unit. Changes in goodwill balances reported within the unaudited condensed consolidated balance sheet as of ~~March 31,~~June 30, 2021 are due to acquisition of Kuur on May 4, 2021, contributing goodwill of $30.3million, and the effect of foreign currency on goodwill from acquisitions of subsidiaries that have a functional currency other than USD.

During the first quarter of 2021, due to the significant decrease in its market capitalization, the Company evaluated the impact on each of its reporting units to assess whether there was a triggering event requiring it to perform a goodwill impairment test (ASC350-20-35). The Company determined a triggering event occurred and, as such, performed an interim goodwill quantitative impairment test for its reporting units. It also considered certain qualitative factors, such as the Company’s performance, business forecasts, and expansion plans. It reviewed key assumptions, including revisions of projected cash flows and future revenue for reporting units against the results of the annual quantitative impairment test performed during the last quarter of 2020. Using both the income approach and the market approach for its Global Supply Chain Platform and Oncology Innovation Platform, with the discount rate selected considering and capturing the related risk associated with the forecast, the Company compared the fair value of the 2 reporting units to carrying value. Based on the results, the fair value of each of our reporting units exceeded their carrying value and the goodwill was not impaired. However, there can be no assurances that goodwill will not be impaired in future periods. Estimating the fair value of goodwill requires the use of estimates and significant judgments that are based on a number of factors. These estimates and judgments may not be within the control of the Company and accordingly it is reasonably possible that the judgments and estimates could change in future periods.

Financial instruments consist of cash and cash equivalents, restricted cash, short-term investments, an available-for-sale equity investment, accounts receivable, accounts payable, accrued liabilities, contingent consideration, and debt. Short-term investments, ~~and~~ the equity investment, and contingent consideration are stated at fair value. Cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued liabilities, and debt, are stated at their carrying value, which approximates fair value due to the short time to the expected receipt or payment date of such amounts.

ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to

unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under the ASC 820 are described as follows:

Level 1—Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 3—Inputs to the valuation methodology are unobservable, supported by little or no market activity, and are significant to the fair value measurement.

Transfers between levels, if any, are recorded as of the beginning of the reporting period in which the transfer occurs. There were 0 transfers between Levels 1, 2 or 3 for any of the periods presented.

The following tables represent the fair value hierarchy for those assets and liabilities that the Company measures at fair value on a recurring basis (in thousands):

	Fair Value Measurements at March 31, 2021 Using:								Fair Value Measurements at June 30, 2021 Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Financial assets included within cash and cash equivalents
Money market funds	$	5,497	$	5,497	$	—	$	—	$	19,711	$	19,711	$	—	$	—
Short-term investments - certificates of deposit		1,000		—		1,000		—
Short-term investments - commercial paper		22,548		—		22,548		—		28,238		—		28,238		—
Financial assets included within short-term investments
Short-term investments - certificates of deposit		22,769		—		22,769		—		22,773		—		22,773		—
Short-term investments - U.S. government bonds		15,000		—		15,000		—
Short-term investments - commercial paper		85,185		—		85,185		—		30,299		—		30,299		—
Available-for-sale investment		232		232		—		—		211		211		—		—
Total assets	$	152,231	$	5,729	$	146,502	$	—	$	101,232	$	19,922	$	81,310	$	—
Liabilities:
Contingent consideration - Kuur									$	20,237	$	—	$	—	$	20,237
Total liabilities									$	20,237	$	—	$	—	$	20,237

	Fair Value Measurements at December 31, 2020 Using:
	Total		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Financial assets included within cash and cash equivalents
Money market funds	$	5,615	$	5,615	$	—	$	—
Short-term investments - certificates of deposit		4,070		—		4,070		—
Short-term investments - U.S. government bonds		5,000		—		5,000		—
Short-term investments - commercial paper		34,860		—		34,860		—
Financial assets included within short-term investments
Short-term investments - certificates of deposit		20,696		—		20,696		—
Short-term investments - U.S. government bonds		14,998		—		14,998		—
Short-term investments - commercial paper		102,715		—		102,715		—
Available-for-sale investment		227		227		—		—
Total assets	$	188,181	$	5,842	$	182,339	$	—

The Company classifies its money market funds within Level 1 because it uses quoted market prices to determine their fair value. The Company classifies its commercial paper, corporate notes, certificates of deposit, and U.S. government bonds within Level 2 because it uses quoted prices for similar assets or liabilities in active markets and each has a specified term and all Level 2 inputs are observable for substantially the full term of each instrument.

The Company owns 68,000 shares of PharmaEssentia, a company publicly traded on the Taiwan OTC Exchange. As of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company’s investment in PharmaEssentia was valued at the reported closing price on such dates. This investment is classified as a Level 1 investment and is recorded as an available-for-sale investment within short-term investments on the Company’s condensed consolidated balance sheet.

The Company accounted for the acquisition of Kuur as business combinations under the acquisition method of accounting. All assets and liabilities were measured at fair value as of the acquisition date. As a result of the purchases, the Company became liable for contingent consideration payable to certain previous owners of Kuur. This contingent consideration is measured at fair value using unobservable level 3 inputs, including (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the regulatory events on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases (decreases) in any of those inputs could result in a lower or higher fair value measurement, and such changes in fair value measurement could have an impact on future earnings. The total undiscounted amount of the milestone payments underlying this liability is $115.0 million. These payments are contingent on the achievement of various regulatory milestones which are expected to occur between 2022 and 2027, and may be paid, at the Company’s sole discretion, in either cash or common stock (or a combination of both). The milestone payments have been adjusted based on a probability of occurrence of 28.3%, and the discount rates used to calculate the present value of future payments were based on risk-free rates plus risk-adjusted spreads based on the Company’s estimated incremental borrowing rate and was between 13.78% and 15.05% for the initial valuation of the contingent consideration. The acquisition of Kuur is described in Note 5—Business Combination and the fair value of the contingent consideration is discussed further in Note 11 – Contingent Consideration.

	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Accrued selling fees, rebates, and royalties					$	6,627	$	9,046
Accrued wages and benefits	$	7,798	$	6,720		6,447		6,720
Accrued selling fees, rebates, and royalties		4,388		9,046
Accrued interest						4,171		3,583
Accrued inventory purchases						3,805		3,714
Accrued construction costs						3,608		4,104
Accrued operating expenses		3,804		3,222		3,425		3,222
Accrued construction costs		3,421		4,104
Accrued inventory purchases		2,397		3,714
Accrued clinical expenses		2,073		2,949		2,293		2,949
Accrued R&D licensing fees						2,266		366
Accrued tax withholdings		1,863		1,948		1,546		1,948
Deferred revenue						1,082		1,147
Accrued costs for product launch		1,415		1,474		342		1,474
Deferred revenue		1,289		1,147
Accrued R&D licensing fees		266		366
Accrued interest		—		3,583
Total accrued expenses	$	28,714	$	38,273	$	35,612	$	38,273

The accrued construction costs relate to the building of the manufacturing facility in Dunkirk, NY. This amount, plus an additional $0.4 million paid by the Company is expected to be funded by New York State. Therefore, ~~$3.8~~$4.0 million is recorded within prepaid expenses and other current assets on the Company’s condensed consolidated balance sheet as of ~~March 31,~~June 30, 2021.

The Company did 0t record a provision for U.S. federal income taxes for the ~~three~~six months ended ~~March 31,~~June 30, 2021 because it expects to generate a loss for the year ending December 31, 2021 and the Company’s net deferred tax assets continue to be fully offset by a valuation allowance. ~~Tax expense~~Income tax benefit to date is primarily the result of the taxable temporary difference due to the deferred tax ~~withheld in Taiwan, in~~liability recognized for the ~~amount of $0.1~~ ~~million, on milestone payments~~indefinite lived intangible assets acquired in connection with ~~an out-license agreement.~~the acquisition of Kuur’s IPR&D. This taxable temporary difference is considered a source of taxable income to support the realization of deferred tax assets from the acquirer which resulted in a reversal of the Company’s valuation allowance.

9.Under the provisions of Section 382 of the Internal Revenue Code (“IRC”), net operating loss and credit carryforwards and other tax attributes may be subject to limitation if there has been a significant change in ownership of the Company, as defined by the IRC. During the six months ended June 30, 2021, the Company experienced such a change in ownership of its common stock. Currently, the limitations imposed by Sections 382 are not expected to impair the Company’s ability to fully realize its NOLs; however, the annual usage of NOLs incurred prior to the change in ownership is limited. In addition, if the Company earns net taxable income in the future, its ability to use the pre-change net operating loss carryforwards to offset U.S. federal taxable income may be subject to limitations, which could potentially result in increased future tax liability to the Company.

The Company’s debt as of ~~March 31,~~June 30, 2021 and December 31, 2020, consists of the following (in thousands):

	March 31,		December 31,		June 30,		December 31,
	2021		2020		2021		2020
Current portion of mortgage	$	729	$	731	$	740	$	731
Current portion of bank loan		761		764		772		764
Current portion of senior secured loan		70		70
Current portion of senior secured loan and financing fees						2,848		70
Current portion of finance lease obligations		410		445		365		445
Current portion of operating lease obligations		3,161		3,185		3,119		3,185
Long-term portion of finance lease obligations		474		537		424		537
Long-term portion of operating lease obligations		5,832		6,355		5,317		6,355
Chongqing Maliu credit agreement		7,614		7,641		7,728		7,641
Senior secured loan, net of debt discount and financing fees of $10,822 and $11,601 respectively		139,178		138,399
Senior secured loan, net of debt discount and financing fees of $10,033 and $11,601 respectively						137,119		138,399
Total	$	158,229	$	158,127	$	158,432	$	158,127

On June 19, 2020 (“Closing Date”), the Company entered into the Senior Credit Agreement with Oaktree to borrow up to $225.0 million in 5 tranches, with a maturity date of June 19, 2026. Three tranches (“Tranche A”, “Tranche B”, and “Tranche D”) of the term loans with an aggregate principal amount of $150.0 million were drawn by the Company in 2020. One tranche (“Tranche C”) of $25.0 million will be available to the Company from 90 days after the Closing Date through June 20, 2022, subject to the Company’s satisfaction of a certain regulatory milestone; and the last tranche of $50.0 million (“Tranche E”) will be available to the Company from 90 days after the Closing Date through June 19, 2023, also subject to the Company’s satisfaction of a certain commercial milestone. The loan bears interest at a fixed annual rate of 11.0%. The Company allocated the proceeds of the drawn tranches between liability and equity components and the fair value of such equity components, along with the direct costs related to the issuance of the debt were recorded as an offset to long-term debt on the consolidated balance sheets. The debt discount and financing fees are amortized on a straight-line basis, which approximates the effective interest method, over the remaining maturity of the Senior Credit Agreement. The effective interest rate of Tranches A, B and D, including the amortization of debt discount and financing fees amounts to 13.3% annually. The Company is required to make quarterly interest-only payments until June 19, 2022, after which the Company is required to make quarterly amortizing payments, with the remaining balance of the principal plus accrued and unpaid interest due at maturity. Beginning on September 17, 2020, the Company was required to pay a commitment fee on any undrawn commitments equal to 0.6% per annum, payable on each subsequent funding date or the commitment termination date. Prepayments of the loan, in whole or in part, will be subject to early prepayment fee which declines each year until the fourth anniversary date of the Closing Date, after which no prepayment fee is required. Upon the final payment, the Company must also pay an exit fee calculated based on a percentage of the aggregate principal amount of all tranches advanced to the Company, and as of ~~March 31,~~June 30, 2021 and December 31, 2020, the Company has reflected a long-term exit fee liability of $3.0 million within long-term debt and finance lease obligations on the consolidated balance sheet.

The Senior Credit Agreement contains certain representations and warranties, affirmative covenants, negative covenants and conditions that were customarily required for similar financings. The Company is subject to certain financial covenants under the Senior Credit Agreement, including (1) a minimum liquidity amount in cash or permitted cash equivalent investments of $20.0 million from the closing date until the date on which the aggregate principal amount of loans outstanding is greater than or equal to $150.0 million (the “First Step-Up Date”), $25.0 million from the First Step-Up Date until the date on which the aggregate principal amount of loans outstanding balance is equal to $225.0 million (the “Second Step-Up Date”), and $30.0 million from the Second Step-up Date until the maturity date; (2) minimum revenue no less than 50% of target revenue beginning with the fiscal quarter ended on December 31, 2020 and with respect to each such subsequent fiscal quarter prior to the revenue covenant termination date; (3) leverage ratio covenant not to exceed 4.50 to 1.00 as of the last day of any fiscal quarter beginning with the first fiscal quarter following the revenue covenant termination date. At ~~March 31,~~June 30, 2021, the Company was in compliance with all applicable debt covenants.

On August 4, 2020, the Company entered into a Revenue Interest Financing Agreement with Sagard, pursuant to which Sagard agreed to pay the Company $50.0 million to provide funding for the Company’s development and commercialization of Oral Paclitaxel upon receipt of marketing authorization for Oral Paclitaxel by the U.S. FDA for the treatment of metastatic breast cancer. In the event the Company is unable to do so before December 31, 2021, Sagard will have a termination right. ~~In exchange~~The Company believes that there is significant uncertainty that it will be able to obtain marketing authorization for ~~the Product Payment, the Company agreed to make payments to Sagard equal to 5.0% of its world-wide net sales of~~ Oral Paclitaxel ~~subject to a hard cap equal to~~by the ~~lesser of 170% of the Product Payment~~U.S. FDA and ~~the Put/Call Price as discussed below and further set forth in~~draw funds from the Revenue Interest Financing, ~~Agreement. The Company is required to make certain additional payments to Sagard~~due to the ~~extent Sagard has not received Payments equaling at least $20.0 million by September 30, 2024 and at least $50.0 million by August 4, 2026, in the amount~~receipt of the ~~applicable shortfall,~~CRL and ~~subject to the Hard Cap, if Sagard has not received Payments equaling at least $85.0 million by the tenth anniversary~~timing of the ~~date~~Type A meeting with the ~~Product Payment is funded, in an amount such that Sagard will have obtained a 6.0% internal rate of return on~~FDA. Therefore, the ~~Product Payment.~~

~~The Company’s obligations under~~Company has written off its deferred debt issuance costs related to the Revenue Interest Financing ~~Agreement are secured, subject to customary permitted liens~~for $0.6 million and ~~other agreed upon exceptions~~has included such expense within interest expense on its condensed consolidated statement of operations and ~~subject to an intercreditor agreement with Oaktree as administrative agent~~comprehensive loss for the lenders under our Senior Credit Agreement, by a perfected security interest in (i) accounts receivable arising from net sales of Oral Paclitaxel and (ii) intellectual property that is claiming or covering Oral Paclitaxel itself or any method of using, making or manufacturing Oral Paclitaxel.three months ended June 30, 2021.

During the second quarter of 2019, the Company entered into a credit agreement which amended the existing partnership agreement with Chongqing Maliu Riverside Development and Investment Co., LTD (“CQ”), for a Renminbi ¥50.0 million (USD $7.7 million at December 31, 2020) line of credit to be used for the construction of the new API plant in China. The Company is required to repay the principal amount with accrued interest within three years after the plant receives the cGMP certification, with 20% of the total loan with accrued interest is due within the first twelve months following receiving the certification, 30% of the total loan with accrued interest due within twenty-four months, and the remaining balance with accrued interest due within thirty-six months. Interest accrues at the three-year loan interest rate by the People’s Bank of China for the same period on the date of the deposit of the full loan amount, which is expected to approximate 4.75% annually. If the Company fails to obtain the cGMP certification within three years upon the acceptance of the plant, it shall return all renovation costs with the accrued interest to CQ in a single transaction within the first ten business days. As of ~~March 31,~~June 30, 2021, the balance due to CQ was ~~$7.6~~$7.7 million.

On May 15, 2020, the Company entered into a credit agreement with China Merchants Bank, enabling the Company to draw up to a Renminbi ¥5.0 million (USD $0.8 million at ~~March 31,~~June 30, 2021) during the period through May 14, 2021. The Company drew the entire available credit in July ~~2020.~~2020 and repaid the credit agreement in full on May 14, 2021. On May 28, 2021, the Company entered into a credit agreement on the same terms as that which was repaid, and withdrew the full Renminbi ¥5.0 million (USD $0.8 million at June 30, 2021) on that date. This loan has a maturity date of May ~~14, 2021~~28, 2022 and bears interest at a fixed rate of 4.35% annually. The Company is required to pay the outstanding principal and all accrued interest at maturity.

The mortgage payments, assumed in connection with the acquisition of CDE, extend through December 31, 2021.

The Company has operating leases for office and manufacturing facilities in several locations in the U.S., Asia, and Latin America and has three finance leases for manufacturing equipment used in its facilities near Buffalo, NY. The components of lease expense are as follows (in thousands):

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Operating lease cost		746	$	755		747	$	768		1,494	$	1,523
Finance lease cost:
Amortization of assets		75		34		75		64		149		81
Interest on lease liabilities		24		6		22		20		46		26
Total net lease cost	$	845	$	795	$	844	$	852	$	1,689	$	1,630

The Company has elected to exclude short-term leases from its operating lease right-of-use (“ROU”) assets and lease liabilities. Lease costs for short-term leases were not material to the financial statements for the three months ended ~~March 31,~~June 30, 2021 and 2020. Variable lease costs for the three months ended ~~March 31,~~June 30, 2021 were not material to the financial statements.

Supplemental balance sheet information related to leases is as follows (in thousands, except lease term and discount rate):

	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
Finance leases:
Property and equipment, at cost	$	1,535		$	1,535		$	1,535		$	1,535
Accumulated amortization, net		(422	)		(347	)		(497	)		(347	)
Property and equipment, net	$	1,113		$	1,188		$	1,038		$	1,188

Current obligations of finance leases	$	410		$	445		$	365		$	445
Long-term portion of finance leases		474			537			424			537
Total finance lease obligations	$	884		$	982		$	789		$	982

Weighted average remaining lease term (in years):
Operating leases		3.96			4.23			3.81			4.23
Finance leases		3.06			3.40			2.84			3.40

Weighted average discount rate:
Operating leases		12.8	%		12.8	%		12.8	%		12.8	%
Finance leases		10.8	%		10.4	%		10.8	%		10.4	%

Supplemental cash flow information related to leases is as follows (in thousands):

	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020			Six Months Ended June 30, 2021			Six Months Ended June 30, 2020
Cash paid for amount included in the measurements of lease liabilities:
Operating cash flows from operating leases	$	(979	)	$	(820	)	$	(1,696	)	$	(1,617	)
Operating cash flows from finance leases		(24	)		(6	)		(22	)		(26	)
Financing cash flows from finance leases		(98	)		(47	)		(192	)		(118	)

ROU assets derecognized from modification of operating lease obligations		—			(468	)		—			(468	)
ROU assets recognized in exchange for operating lease obligations	$	—		$	353		$	—		$	353

Year ending December 31:	Operating Leases			Finance Leases			Operating Leases			Finance Leases
2021 (remaining nine months)	$	2,577		$	351
2021 (remaining six months)							$	1,716		$	234
2022		2,918			275			2,929			275
2023		2,096			248			2,096			248
2024		2,002			157			2,002			177
2025		1,472			—			1,472			—
Thereafter		478			—			478			—
Total lease payments		11,543			1,031			10,693			934
Less: Imputed interest		(2,550	)		(147	)		(2,257	)		(145	)
Total lease obligations		8,993			884			8,436			789
Less: Current obligations		(3,161	)		(410	)		(3,119	)		(365	)
Long-term lease obligations	$	5,832		$	474		$	5,317		$	424

Pursuant to the public-private partnership agreements with the State of New York, the Company will rent the manufacturing facilities in Dunkirk, NY. The facility is in the final stage of completion. However, no lease term had commenced as of ~~March 31,~~June 30, 2021, as it was not yet operational and the Company could not direct the use of the facility. No lease costs were incurred related to the manufacturing facility during the three-month period ended ~~March 31,~~June 30, 2021.

On January 5, 2021, Chongqing Sintaho Pharmaceuticals Co., Ltd. (“CQ Sintaho”), a subsidiary of the Company in China, entered into a lease agreement with Chongqing International Biological City Development & Investment Co., Ltd (“CQ D&I”). Under the lease agreement, the provisions of which are consistent with those agreed upon in the 2015 Agreement, CQ Sintaho leased the newly constructed API facility, or Sintaho API Facility, of 34,517 square meters rent-free, for the first 10-year term, with an option to extend the lease for an additional 10-year term, during which, if CQ Sintaho is profitable, it will pay a monthly rent of 5 RMB per square meter of space occupied. The Company determined the lease ~~had~~ commenced asin the first quarter of ~~March 31,~~ 2021, as it was operational and CQ Sintaho could direct the use of the facility. The Company also evaluated the probability of exercising the renewal and purchase options, and determined that it is not reasonably certain whether it will exercise those options. Therefore, the lease term is comprised only of the rent-free period and the recognition of the right-of-use asset and liability did not have a significant effect on the Company’s consolidated financial statements.

The Company exercises judgment in determining the discount rate used to measure the lease liabilities. When rates are not implicit within an operating lease, the Company uses its incremental borrowing rate as its discount rate, which is based on yield trends in the biotechnology and healthcare industry and debt instruments held by the Company with stated interest rates. The Company re-assesses its incremental borrowing rate when new leases arise, or existing leases are modified.

The fair value measurements of contingent consideration liabilities are determined using unobservable Level 3 inputs. These inputs include (a) the estimated amount and timing of projected cash flows; (b) the probability of the achievement of the factors on which the contingency is based; and (c) the risk-adjusted discount rate used to present value the probability-weighted cash flows. Significant increases (decreases) in any of those inputs could result in a lower or higher fair value measurement. The Company expects that these milestones will be achieved at varying times between 2022 and 2027.

The following table represents a reconciliation of the contingent consideration liability related to the acquisition of Kuur measured on a recurring basis using level 3 inputs as of June 30, 2021 (in thousands):

The increase of the contingent consideration was due to the time value of money from the initial measurement date (Kuur acquisition date) to June 30, 2021, as well as updated probabilities of future cash flows related to R&D milestones. The adjustment to the contingent consideration liability is included within selling, general, and administrative expenses in the Company’s condensed consolidated statements of operations and comprehensive loss.

During the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, the Company entered into transactions with individuals and companies that have financial interests in the Company. Related party transactions included the following:

In June 2019, the Company entered into an agreement whereby Avalon would hold a 90% ownership interest and the Company would hold a 10% ownership interest of the newly formed entity under the name Nuwagen Limited (“Nuwagen”), incorporated under the laws of Hong Kong. Nuwagen is principally engaged in the development and commercialization of herbal medicine products for metabolic, endocrine, and other related indications. The Company contributed nonmonetary assets in exchange for the 10% ownership interest. In July 2020, the transaction closed. The activities of Nuwagen were not material to the financial statements for the three or six months ended ~~March 31,~~June 30, 2021.

In September 2020, Axis Therapeutics Limited (“Axis”), a majority-owned subsidiary of the Company, entered into a collaboration agreement with PharmaEssentia, pursuant to which Axis granted to PharmaEssensia an exclusive, non-transferrable and revocable sublicense of TCR-engineered ~~T Cell~~T-Cell therapy for the development of the technology in Taiwan. Axis received license fee of $1.0 million, net of $0.3 million withholding tax, in the fourth quarter of 2020. This amount was recorded as deferred revenue as of ~~March 31,~~June 30, 2021.

The Company has four equity compensation plans, adopted in 2017, 2013, 2007 and 2004 (the “Plans”) which, taken together, authorize the grant of up to 16,000,000 shares of common stock to employees, directors, and consultants. On May 23, 2019, the board of directors approved the amendment and restatement of the 2017 Omnibus Incentive Plan (the “2017 Plan”, which increases the number of shares available for issuance under the 2017 Plan by up to 3,500,000 shares, which was approved by the Company’s stockholders at the Company’s 2020 annual meeting of stockholders. On April 26, 2021, the board of directors approved an amendment to the 2017 Plan, which increases the number of shares available for issuance under the 2017 Plan by 5,000,000 shares, ~~subject to the approval of~~which was approved by the Company’s stockholders at the Company’s 2021 annual meeting of stockholders. The Company also has an employee stock purchase plan, the 2017 Employee Stock Purchase Plan (the “ESPP”), adopted on June 14, 2017, which authorizes the issuance of up to 1,000,000 shares of common stock for future issuances to eligible employees.

The total fair value of stock options vested and recorded as compensation expense during the three months ended ~~March 31,~~June 30, 2021 and 2020, and six months ended June 30, 2021 and 2020 was ~~$2.2~~$2.3 million, ~~and $1.9~~$2.5 million, $4.5 million, and $4.4 million, respectively. As of ~~March 31,~~June 30, 2021, ~~$16.5~~$14.2 million of unrecognized cost related to non-vested stock options was expected to be recognized over a weighted-average period of approximately ~~1.8~~1.7 years. The total intrinsic value of options exercised was approximately $0.2million and $0.8 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively.

The following table summarizes the status of the Company’s stock option activity granted under the Plans to employees, directors, and consultants (aggregate intrinsic value in thousands):

	Stock Options			Weighted- Average Exercise price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value		Stock Options			Weighted- Average Exercise price		Weighted- Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at December 31, 2020		12,496,888		$	9.26		5.42	$	22,463		12,496,888		$	9.26		5.42	$	22,463
Granted		20,000			11.90		—		—		28,500			9.75		—		—
Exercised		(119,425	)		7.10		—		—		(279,425	)		5.64		—		—
Forfeited and expired		(32,830	)		12.92		—		—		(219,365	)		8.33		—		—
Outstanding at March 31, 2021		12,364,633		$	9.28		5.20	$	—
Vested and exercisable at March 31, 2021		9,504,028		$	8.21		4.28	$	—
Outstanding at June 30, 2021											12,026,598		$	9.39		5.07	$	—
Vested and exercisable at June 30, 2021											9,426,192		$	8.40		4.21	$	—

The Company determines the fair value of stock-based awards on the grant date using the Black-Scholes option pricing model, which is impacted by assumptions regarding several highly subjective variables. The following table summarizes the weighted-average assumptions used as inputs to the Black-Scholes model during the periods indicated:

	Three Months Ended March 31,						Six Months Ended June 30,
	2021			2020			2021			2020
Weighted average grant date fair value	$	7.40		$	7.32		$	6.18		$	7.60
Expected dividend yield		0	%		0	%		0	%		0	%
Expected stock price volatility		68	%		67	%		68	%		66	%
Risk-free interest rate		1.37	%		0.75	%		1.45	%		1.34	%
Expected life of options (in years)		6.3			5.0			6.3			6.2

The Company granted 48,000 restricted stock units during the three months ended June 30, 2021. NaN restricted stock awards were granted during the three or six months ended ~~March 31, 2021 and~~June 30, 2020. Stock-based compensation related to the restricted stock awards

amounted to ~~less than~~ $0.1million and $0.4 million for the three months ended ~~March 31,~~June 30, 2021 and 2020, respectively, and $0.1 million and $0.8 million for the six months ended June 30, 2021 and 2020, respectively.As of ~~March 31,~~June 30, 2021, ~~$0.3~~ $0.5million of unrecognized cost related to non-vested restricted stock awards were expected to be recognized over a weighted-average period of approximately ~~1.4 years.~~0.7 years.

The ESPP is available to eligible employees (as defined in the plan document). Under the ESPP, shares of the Company’s common stock may be purchased at a discount (15%) of the lesser of the closing price of the Company’s common stock on the first trading or the last trading day of the offering period. The current offering period extends from ~~December~~June 1, ~~2020~~2021 to ~~May 31,~~November 30, 2021. The Company expects to offer six-month offering periods after the current period. The ESPP reserved 1,000,000 shares of common stock for issuance under the ESPP. Stock-based compensation related to the ESPP amounted to less than $0.1million and $0.1 million for each of the three months ended ~~March 31,~~June 30, 2021 and ~~2020.~~2020, respectively, and $0.1 million for each of the six months ended June 30, 2021 and 2020, respectively.

The components of stock-based compensation and the amounts recorded within cost of sales, research and development expenses and selling, general, and administrative expenses in the Company’s consolidated statements of operations and comprehensive loss consisted of the following for the three and six months ended ~~March 31,~~June 30, 2021 and 2020 (in thousands):

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Stock options	$	2,205	$	1,864	$	2,341	$	2,501	$	4,500	$	4,365
Restricted stock expense		29		397		57		413		86		810
Employee stock purchase plan		46		70		46		139		92		139
Total stock-based compensation expense	$	2,280	$	2,331	$	2,444	$	3,053	$	4,678	$	5,314
Cost of sales	$	56	$	54	$	59	$	55	$	115	$	109
Research and development expenses		601		946		671		1,012		1,272		1,958
Selling, general, and administrative expenses		1,623		1,331		1,714		1,986		3,291		3,247
Total stock-based compensation expense	$	2,280	$	2,331	$	2,444	$	3,053	$	4,678	$	5,314

Basic net loss per share is calculated by dividing net loss attributable to Athenex, Inc. common stockholders by the weighted-average number of common shares issued, outstanding, and vested during the period. Diluted net loss per share is computed by dividing net loss attributable to common stockholders by the weighted-average number of common stock and common stock equivalents for the period using the treasury-stock method. For the purposes of this calculation, warrants to purchase common stock and stock options are considered common stock equivalents but are only included in the calculation of diluted net loss per share when their effect is dilutive.

The following outstanding shares of common stock equivalents were excluded from the calculation of diluted net loss per share attributable to common stockholders for the periods presented because including them would have been antidilutive:

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Stock options and other common stock equivalents		13,899,191		11,347,475		13,568,672		11,700,399		13,560,708		11,709,928
Unvested restricted shares		22,500		105,000		52,566		79,000		37,616		105,000
Total potential dilutive shares		13,921,691		11,452,475		13,621,238		11,779,399		13,598,324		11,814,928

The Company has 3 operating segments, which are organized based mainly on the nature of the business activities performed and regulatory environments in which they operate. The Company also considers the types of products from which the reportable segments derive their revenue (only applicable to 2 reportable segments). Each operating segment has a segment manager who is held accountable for operations and has discrete financial information that is regularly reviewed by the Company’s chief operating decision-maker. Consequently, the Company has concluded each operating segment to be a reportable segment. The Company’s operating segments are as follows:

Oncology Innovation Platform— This operating segment performs research and development on certain of the Company’s proprietary drugs, from the preclinical development of its chemical compounds, to the execution and analysis of its several clinical trials. It focuses specifically on cell therapy programs, Orascovery and Src Kinase Inhibition research platforms, ~~cell therapy programs~~ and arginine deprivation therapy.

Global Supply Chain Platform— This operating segment includes APS and Polymed and the construction of the manufacturing facilities in Chongqing, China, and Dunkirk, NY. APS is a manufacturing company that supplies sterile injectable drugs to hospital pharmacies across the U.S. APS manufactures products under Section 503B of the Compounding Quality Act within the Federal Food, Drug & Cosmetic Act (“FDCA”). Additionally, APS provides products for the development and manufacturing of the Company’s proprietary drug candidates as well as providing the Company with a cGMP analytical services function. Polymed is primarily in the business of marketing and selling API in North America, Europe, and Asia from its locations in Texas and China. Polymed also develops new compounds and processing techniques and is in the final phase of completion of the new API manufacturing facility in Chongqing, China.

Commercial Platform— This operating segment includes APD, which focuses on the manufacturing, distribution, and sales of specialty pharmaceuticals and Athenex Oncology, which focus on the manufacturing, distribution, and sales of specialty pharmaceuticals and the pre-launch commercial activities for the Company’s proprietary drugs, respectively. This segment provides services and products to external customers based mainly in the U.S.

The Company’s Oncology Innovation Platform segment operates and holds long-lived assets located in the U.S., Taiwan, Hong Kong, mainland China, the United Kingdom, and Latin America. The Global Supply Chain Platform segment operates and holds long-lived assets located in the U.S. and China. The Commercial Platform segment operates and holds long-lived assets located in the U.S. For geographic segment reporting, product sales have been attributed to countries based on the location of the customer.

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Total revenue:
Oncology Innovation Platform	$	20,665		$	28,387		$	306		$	5		$	20,971		$	28,393
Global Supply Chain Platform		8,207			3,714			6,112			4,982			14,319			8,696
Commercial Platform		13,259			15,542			15,791			36,214			29,050			51,755
Total revenue for reportable segments		42,131			47,643			22,209			41,201			64,340			88,844
Intersegment revenue		(1,106	)		(708	)		(286	)		(1,029	)		(1,392	)		(1,737	)
Total consolidated revenue	$	41,025		$	46,935		$	21,923		$	40,172		$	62,948		$	87,107

Intersegment revenue eliminated in the above table reflects $0.3 million and $0.8 million in sales from the Global Supply Chain Platform to the Oncology Innovation Platform for the three and six months ended June 30, 2021, respectively, and $1.0 million and $1.7 million for the three and six months ended June 30, 2020, respectively. Intersegment revenue eliminated in the above table also reflects $0.6 million in sales from the Global Supply Chain Platform to the Commercial Platform ~~and $0.5 million in sales from~~for the ~~Global Supply Chain Platform to the Oncology Innovation Platform (in thousands).~~six months ended June 30, 2021.

	Three Months Ended March 31,				Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Total revenue by product group:
License fees	$	20,500	$	28,381	$	296	$	—	$	20,953	$	28,381
Commercial product sales		18,061		17,502		19,970		38,881		38,033		56,383
API sales		1,868		1,022		986		1,229		2,854		2,251
Contract manufacturing revenue		430		23		427		57		857		80
Other revenue		166		7		244		5		251		12
Total consolidated revenue	$	41,025	$	46,935	$	21,923	$	40,172	$	62,948	$	87,107

Intersegment revenue is recognized by the selling segment when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. Upon consolidation, all intersegment revenue and related cost of sales are eliminated from the selling segment’s ledger (in thousands).

	Three Months Ended March 31,				Three Months Ended June 30,						Six Months Ended June 30,
	2021		2020		2021			2020			2021			2020
Total depreciation and amortization:
Net loss attributable to Athenex, Inc.:
Oncology Innovation Platform	$	207	$	175	$	(20,122	)	$	(35,024	)	$	(25,563	)	$	(35,982	)
Global Supply Chain Platform		523		496		(3,944	)		(5,745	)		(7,626	)		(11,731	)
Commercial Platform		544		415		(10,208	)		318			(26,135	)		(12,167	)
Total consolidated depreciation and amortization	$	1,274	$	1,086
Total consolidated net loss attributable to Athenex, Inc.					$	(34,274	)	$	(40,451	)	$	(59,324	)	$	(59,880	)

	March 31,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Total assets:
Total depreciation and amortization:
Oncology Innovation Platform	$	199,741	$	234,153	$	224	$	188	$	438	$	363
Global Supply Chain Platform		101,621		99,087		508		426		1,023		922
Commercial Platform		48,294		51,089		461		421		1,006		836
Total consolidated assets	$	349,656	$	384,329
Total consolidated depreciation and amortization					$	1,193	$	1,035	$	2,467	$	2,121

	March 31,		December 31,		Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		2021		2020
Total property and equipment, net:
Total revenue:
United States	$	20,902	$	15,511	$	20,679	$	26,001	$	59,323	$	43,522
China		20,876		18,877		652		125		858		28,638
Total consolidated property and equipment, net	$	41,778	$	34,388
South Korea						445		1,060		1,112		1,693
India						—		—		906		—
United Kingdom						—		12,933		—		12,933
Other foreign countries						147		53		749		321
Total consolidated revenue					$	21,923	$	40,172	$	62,948	$	87,107

Customer revenue and accounts receivable concentration amounted to the following for the identified periods. These customers relate to the Commercial Platform segment and the Global Supply Chain Platform segment.

	Three Months Ended March 31,						Three Months Ended June 30,						Six Months Ended June 30,
	2021			2020			2021			2020			2021			2020
Percentage of total revenue by customer:
Customer A		49	%		0	%		22	%		14	%		15	%		6	%
Customer B		11	%		9	%		21	%		15	%		13	%		7	%
Customer C		9	%		11	%		19	%		9	%		12	%		4	%
Customer D		9	%		7	%		0	%		0	%		32	%		0	%
Customer E		0	%		60	%		0	%		32	%		0	%		15	%
Customer F								0	%		0	%		0	%		32	%

The Company records revenue in accordance with ASC, Topic 606 “Revenue from Contracts with Customers.” Under Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which it expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that the Company determines are within the scope of Topic 606, the entity performs the following five steps: (i) identifies the contract(s) with a customer; (ii) identifies the performance obligations in the contract; (iii) determines the transaction price; (iv) allocates the transaction price to the performance obligations in the contract; and (v) recognizes revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. Below is a description of principal activities – separated by reportable segments – from which the Company generates its revenue.

The Company out-licenses certain of its IP to other pharmaceutical companies in specific territories that allow the customer to use, develop, commercialize, or otherwise exploit the licensed IP. In accordance with Topic 606, the Company analyzes the contracts to identify its performance obligations within the contract. Most of the Company’s out-license arrangements contain multiple performance obligations and variable pricing. After the performance obligations are identified, the Company determines the transaction price, which generally includes upfront fees, milestone payments related to the achievement of developmental, regulatory, or commercial goals, and royalty payments on net sales of licensed products. The Company considers whether the transaction price is fixed or variable, and whether such consideration is subject to return. Variable consideration is only included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. If any portion of the transaction price is constrained, it is excluded from the transaction price until the constraint no longer exists. The Company then allocates the transaction price to the performance obligation to which the consideration is related. Where a portion of the transaction price is received and allocated to continuing performance obligations under the terms of the arrangement, it is recorded as deferred revenue and recognized as revenue when (or as) the underlying performance obligation is satisfied.

The Company’s contracts may contain one or multiple promises, including the license of IP and development services. The licensed IP is capable of being distinct from the other performance obligations identified in the contract and is distinct within the context of the contract, as upon transfer of the IP, the customer is able to use and benefit from it, and the customer could obtain the development services from other parties. The Company also considers the economic and regulatory characteristics of the licensed IP and other promises in the contract to determine if it is a distinct performance obligation. The Company considers if the IP is modified or enhanced by other performance obligations through the life of the agreement and whether the customer is contractually or practically required to use updated IP. The IP licensed by the Company has been determined to be functional IP. The IP is not modified during the license period and therefore, the Company recognizes revenues from any portion of the transaction price allocated to the licensed IP when the license is transferred to the customer and they can benefit from the right to use the IP. For the ~~three-month~~three and six month period ended ~~March 31,~~June 30, 2021, the Company recognized license revenue of ~~$20.5~~$0.2 million and $20.8 million, respectively, of which $20.0 million was recognized upon the achievement of the first commercial milestone pursuant to the 2017 Almirall out-license

arrangement upon the launch of Klisyri^®(tirbanibulin) in the U.S., and $0.5 million was recognized for an upfront fee upon transferring IP to the customer upon execution of the second amendment to the 2011 PharmaEssentia license agreement. ~~Under~~For the six-month period ended June 30, 2020, the Company recognized revenue of $28.3 million, net of $1.7 million value added tax (“VAT”) collected on behalf of the counterparty, upon transferring certain IP to the customer. NaN license revenue was recognized for the three-month period ended June 30, 2020. During the fourth quarter of 2020 and under the collaboration agreement between Axis Therapeutics and PharmaEssentia, the Company received $1.0 million, net of ~~$0.3~~$0.3 million withholding tax, of upfront fees allocated to its performance obligation to deliver functional IP to the Customer. As of ~~March 31,~~June 30, 2021, the Company had not satisfied this performance obligation by delivering the license with the data necessary for the customer to benefit from the right to use the IP and, therefore, the amount was recorded as deferred revenue.

Other performance obligations included in most of the Company’s out-licensing agreements include performing development services to reach clinical and regulatory milestone events. The Company satisfies these performance obligations at a point-in-time, because the customer does not simultaneously receive and consume the benefits as the development occurs, the development does not create or enhance an asset controlled by the customer, and the development does not create an asset with no alternative use. The Company considers milestone payments to be variable consideration measured using the most likely amount method, as the entitlement to the consideration is contingent on the occurrence or nonoccurrence of future events. The Company allocates each variable milestone payment to the associated milestone performance obligation, as the variable payment relates directly to the Company’s efforts to satisfy the performance obligation and such allocation depicts the amount of consideration to which the Company expects to be entitled for satisfying the corresponding performance obligation. The Company re-evaluates the probability of achievement of such performance obligations and any related constraint and adjusts its estimate of the transaction price as appropriate. To date, no amounts have been constrained in the initial or subsequent assessments of the transaction price. The Company did 0t recognize revenue from other performance obligations included in the Company’s out-licensing agreements during the three ~~month~~and six-month periods ended ~~March 31,~~June 30, 2021 and 2020.

Certain out-license agreements include performance obligations to manufacture and provide drug product in the future for commercial sale when the licensed product is approved. For the commercial, sales-based royalties, the consideration is predominantly related to the licensed IP and is contingent on the customer’s subsequent sales to another commercial customer. Consequently, the sales- or usage-based royalty exception would apply. Revenue will be recognized for the commercial, sales-based milestones as the underlying sales occur. The Company recorded $0.2 million of royalty revenue related to sales of Tirbanibulin during the three and six months ended June 30, 2021. NaN royalty revenue was recorded during the six months ended June 30, 2020.

The Company exercises significant judgment when identifying distinct performance obligations within its out-license arrangements, determining the transaction price, which often includes both fixed and variable considerations, and allocating the transaction price to the proper performance obligation. The Company did not use any other significant judgments related to out-licensing revenue during the ~~three-month~~three and six-month periods ended ~~March 31,~~June 30, 2021 and 2020.

The Company’s Global Supply Chain Platform manufactures API for use internally in its research and development activities as well as its clinical studies, and for sale to pharmaceutical customers globally. The Company generates additional revenue on this platform, by providing small to mid-scale cGMP manufacturing of clinical and commercial products for pharmaceutical and biotech companies and selling pharmaceutical products under 503B regulations set forth by the U.S. FDA.

Revenue earned by the Global Supply Platform is recognized when the Company has satisfied its performance obligation, which is the shipment or the delivery of drug products. The underlying contracts for these sales are generally purchase orders and the Company recognizes revenue at a point-in-time. Any remaining performance obligations related to product sales are the result of customer deposits and are reflected in the deferred revenue contract liability balance.

The Company’s Commercial Platform generates revenue by distributing specialty products through independent pharmaceutical wholesalers. The wholesalers then sell to an end-user, normally a hospital, alternative healthcare facility, or an independent pharmacy, at a lower price previously established by the end-user and the Company. Upon the sale by the wholesaler to the end-user, the wholesaler will chargeback the difference, if any, between the original list price and price at which the product was sold to the end-user. The Company also offers cash discounts, which approximate 2.3% of the gross sales price, as an incentive for prompt customer payment, and, consistent with industry practice, the Company’s return policy permits customers to return products within a window of time before and after the expiration of product dating. Further, the Company offers contractual allowances, generally in the form of rebates or administrative fees, to certain wholesale customers, group purchasing organizations (“GPOs”), and end-user customers, consistent with pharmaceutical industry practices. Revenues are recorded net of provisions for variable consideration, including discounts, rebates, GPO allowances, price adjustments, returns, chargebacks, promotional programs and other sales allowances. Accruals for these provisions are presented in the consolidated financial statements as reductions in determining net sales and as a contra asset in accounts receivable, net (if settled via credit) and other current liabilities (if paid in cash). As of ~~March 31,~~June 30, 2021, and December 31, 2020, the Company’s total provision for chargebacks and other deductions included as a reduction of accounts

receivable totaled ~~$17.3~~$14.5 million and $12.6 million, respectively. The Company’s total provision for chargebacks and other revenue deductions was ~~$25.6~~$26.9 million, and ~~$24.9~~$20.2 million for the three months ended ~~March 31,~~June 30, 2021, and 2020, respectively, and $52.5 million and $45.1 million for the six months ended June 30, 2021 and 2020, respectively.

The Company exercises significant judgment in its estimates of the variable transaction price at the time of the sale and recognizes revenue when the performance obligation is satisfied. Factors that determine the final net transaction price include chargebacks, fees for service, cash discounts, rebates, returns, warranties, and other factors. The Company estimates all of these variables based on historical data obtained from previous sales finalized with the end-user customer on a product-by-product basis. At the time of sale, revenue is recorded net of each of these deductions. Through the normal course of business, the wholesaler will sell the product to the end-user, determining the actual chargeback, return products, and take advantage of cash discounts, charge fees for services, and claim warranties on products. The final transaction price per product is compared to the initial estimated net sale price and reviewed for accuracy. The final prices and other factors are immediately included in the Company’s historical data from which it will estimate the transaction price for future sales. The underlying contracts for these sales are generally purchase orders including a single performance obligation, generally the shipment or delivery of products and the Company recognizes this revenue at a point-in-time.

The following represents the Company’s revenue for its reportable segment by country, based on the locations of the customer.

	For the Three Months Ended March 31, 2021								For the Three Months Ended June 30, 2021
	(In Thousands)								(In Thousands)
	Oncology Innovation Platform		Global Supply Chain Platform		Commercial Platform		Consolidated Total		Oncology Innovation Platform		Global Supply Chain Platform		Commercial Platform		Consolidated Total
United States	$	20,157	$	5,229	$	13,259	$	38,645	$	288	$	4,600	$	15,791	$	20,679
China		8		197		—		205		9		643		—		652
South Korea										—		445		—	$	445
Other foreign countries		500		1,675		—		2,175		9		138		—		147
Total revenue	$	20,665	$	7,101	$	13,259	$	41,025	$	306	$	5,826	$	15,791	$	21,923

	For the Three Months Ended March 31, 2020								For the Three Months Ended June 30, 2020
	(In Thousands)								(In Thousands)
	Oncology Innovation Platform		Global Supply Chain Platform		Commercial Platform		Consolidated Total		Oncology Innovation Platform		Global Supply Chain Platform		Commercial Platform		Consolidated Total
United States									$	—	$	2,720	$	23,281	$	26,001
United Kingdom										—		—		12,933		12,933
South Korea										—		1,060		—		1,060
China	$	28,308	$	205	$	—	$	28,513		5		120		—		125
United States		—		1,980		15,542		17,522
Other foreign countries		79		821		—		900		—		53		—		53
Total revenue	$	28,387	$	3,006	$	15,542	$	46,935	$	5	$	3,953	$	36,214	$	40,172

The Company also disaggregates its revenue by product group which can be found in Note 1315 – Business Segment, Geographic, and Concentration Risk Information.

The following table provides information about receivables and contract liabilities from contracts with customers. The Company has not recorded any contract assets from contracts with customers.

	March 31, 2021			December 31, 2020			June 30, 2021			December 31, 2020
	(In Thousands)						(In Thousands)
Accounts receivable, gross	$	46,935		$	45,792		$	46,162		$	45,792
Chargebacks and other deductions		(17,264	)		(12,552	)		(14,523	)		(12,552	)
Provision for credit losses		(9,482	)		(9,637	)		(9,421	)		(9,637	)
Accounts receivable, net	$	20,189		$	23,603		$	22,218		$	23,603
Deferred revenue		1,289			1,147			1,082			1,147
Total contract liabilities	$	1,289		$	1,147		$	1,082		$	1,147

The following tables illustrate accounts receivable and contract asset balances by reportable segments.

	March 31, 2021												June 30, 2021
	(In Thousands)												(In Thousands)
	Oncology Innovation Platform			Global Supply Chain Platform			Commercial Platform			Consolidated Total			Oncology Innovation Platform			Global Supply Chain Platform			Commercial Platform			Consolidated Total
Accounts receivable, gross	$	9,167		$	3,589		$	34,179		$	46,935		$	9,170		$	2,771		$	34,221		$	46,162
Chargebacks and other deductions		—			—			(17,264	)		(17,264	)		—			—			(14,523	)		(14,523	)
Provision for credit losses		(8,919	)		(138	)		(425	)		(9,482	)		(8,919	)		(178	)		(324	)		(9,421	)
Accounts receivable, net		248			3,451			16,490			20,189			251			2,593			19,374			22,218

As of ~~March 31,~~June 30, 2021 and December 31, 2020, the deferred revenue balances relate to customer deposits made by customers of the Oncology Innovation Platform and Global Supply Chain Platform and are included within accrued expenses on the condensed consolidated balance sheets.

There were no other material changes to contract balances during the three and six months ended ~~March 31,~~June 30, 2021.

Future minimum payments under the non-cancelable operating leases consists of the following as of ~~March 31,~~June 30, 2021 (in thousands):

Year ending December 31:	Minimum payments		Minimum payments
2021 (remaining nine months)	$	2,577
2021 (remaining six months)			$	1,716
2022		2,918		2,929
2023		2,096		2,096
2024		2,002		2,002
2025		1,472		1,472
Thereafter		478		478
	$	11,543	$	10,693

Following our receipt of the CRL in February 2021 and the subsequent decline of the market price of the Company’s common stock, 2 purported securities class action lawsuits were filed in the U.S. District Court for the Western District of New York on March 3, 2021 and March 22, 2021, respectively, against the Company and certain members of its management team seeking to recover damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The complaints generally allege that between August 7, 2019 and February 26, 2021 (the purported class period), the Company and the individual defendants made materially false and misleading statements regarding the Company's business in connection with the Company’s development of Oral Paclitaxel for the treatment of metastatic breast cancer and the likelihood of FDA approval, and that the plaintiffs suffered losses when the Company’s stock price dropped after its announcement on February 26, 2021 regarding receipt of the CRL. The complaints seek class certification, damages, fees, costs, and expenses. Motions to appoint a lead plaintiff and consolidate the two cases were fully briefed as of May 17, 2021, and are now pending before the court. The defendants expect that the court will issue an order consolidating these two lawsuits ~~will be consolidated~~ and appointing a lead plaintiff ~~appointed~~ in the coming months. Additional similar lawsuits might be filed. The Company and the individual defendants believe that the claims in these lawsuits are without merit, and the Company has 0tnot recorded a liability related to this shareholder class action lawsuit as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims but there can be no0 assurances as to the outcome.

On ~~May 4,~~June 3, 2021, a shareholder derivative lawsuit was filed in the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Kuur Therapeutics, Inc., a Delaware corporation (“Kuur”). Kuur is a leading developer of off-the-shelf CAR-NKT cell immunotherapiesUnited States District Court for the ~~treatment~~District of solid and hematological malignancies. Pursuant to the terms of the Merger Agreement, the Company will pay $70.0 million upfront to Kuur shareholders and its former employees and directors, comprised primarily of equity in the Company’s common stock. Additionally, Kuur shareholders and its former employees and directors are eligible to receive up to $115.0 million of milestone payments, which may be paid, at the Company’s sole discretion, in either cash or additional common stockDelaware by Timothy J. Wonnell, allegedly on behalf of the Company, ~~(or a combination~~that piggy-backs on the securities class actions referenced above. The complaint names Johnson Lau, Rudolf Kwan, Timothy Cook, and members of ~~both).~~the Board as defendants, and generally alleges that they caused or failed to prevent the securities law violations asserted in the securities class actions. The Company ~~believes~~and the ~~acquisition strategically combines its TCR program with~~individual defendants believe the groundbreaking NKT cell platform to provide a solution that may address some of the known limitations associated with the first generation of cell therapy treatments focused on autologous CAR-T. Due to the recency of the Merger Agreement,claims are without merit, and the Company has not ~~yet completed its assessment~~recorded a liability related to this lawsuit as the risk of ~~the fair value of the assets acquired, the liabilities assumed~~loss is remote. The Company and the ~~contingent considerations.~~ individual defendants intend to vigorously defend against these claims but there can be 0 assurances as to the outcome.

The Company ~~will account~~suspended production activities at its Taihao active pharmaceutical ingredient (API) facility in Chongqing, China, in May 2019, based on concerns raised by the Department of Emergency Management of Chongqing (DEMC) related to the location of our plant. The Company subsequently resumed producing API at the Taihao facility primarily for ~~this~~its ongoing clinical studies and commercial launches of its proprietary drugs in accordance with ~~ASC 805, Business Combinations,~~local regulatory guidance, while the Company started building out Sintaho, a new API facility in Chongqing. In July 2021, the Company received verbal notice from the DEMC that it will be required to terminate the production activities at its Taihao API facility at the end of 2021. The Company is seeking further dialogue with the DEMC. While a certain extent of its operations is now being conducted at Sintaho, its new API facility in Chongqing, the Company is beginning to explore plans to move remainder of the operations and ~~its evaluation~~production activities to Sintaho, in the ~~effect on its consolidated financial statements during~~event it is unable to reach an agreement with the ~~second quarter~~DEMC for the continued production activities of ~~2021.~~the Taihao API facility.

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

The following discussion contains management’s discussion and analysis of our financial condition and results of operations and should be read together with the unaudited condensed consolidated financial statements and the notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K for the year ended December 31, 2020. Unless the context indicates otherwise, as used in this Quarterly Report, the terms “Athenex,” the “Company,” “we,” “us,” and “our” refer to Athenex, Inc., a Delaware corporation, and its subsidiaries taken as a whole, unless otherwise noted. This discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section entitled “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2020.

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and section 27A of the Securities Act of 1933, as amended (the “Securities Act”). All statements other than statements of historical fact are “forward-looking statements” for purposes of this Quarterly Report. These forward-looking statements may include, but are not limited to, statements regarding our future results of operations and financial position, business strategy, potential market size, potential growth opportunities, the timing and results of clinical trials, the impact of COVID-19 on our business, and potential regulatory approval and commercialization of product candidates. In some cases, forward-looking statements may be identified by terminology such as “believe,” “may,” “will,” “should,” “predict,” “goal,” “strategy,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” “seek” and similar expressions and variations thereof. These words are intended to identify forward-looking statements.

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section included in our Annual Report on Form 10-K for the year ended December 31, 2020 and the additional risk factors described herein. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business. In light of these risks, uncertainties and assumptions, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date hereof to conform these statements to actual results or to changes in our expectations, except as required by law.

We are a biopharmaceutical company dedicated to becoming a leader in the discovery, development and commercialization of next generation drugs for the treatment of cancer. Our mission is to improve the lives of cancer patients by creating more effective, safer and tolerable treatments. We have assembled a strong and experienced leadership team and have established operations across the pharmaceutical value chain to execute our goal of becoming a global leader in bringing innovative cancer treatments to the market and improving health outcomes.

We are organized around three operating segments: (1) our Oncology Innovation Platform, dedicated to the research and development of our proprietary drugs; (2) our Commercial Platform, focused on the sales and marketing of our specialty drugs and the market development of our proprietary drugs; and (3) our Global Supply Chain Platform, dedicated to providing a stable and efficient supply of APIs for our clinical and commercial efforts. Our current clinical pipeline in the Oncology Innovation Platform is derived from four different ~~proprietary~~ technologies: (1) Orascovery, based on a P-glycoprotein (“P-gp”) pump inhibitor, (2) Src Kinase Inhibition, (3) Cell Therapy, and (4) Arginine Deprivation Therapy.

The following table summarizes the development status of our current pipeline of product candidates as of June 30, 2021:

On July 19, 2021, we announced that our partner, Almirall (Almirall, S.A., BME: ALM), had received approval from the European Commission to market Klisyri^® (tirbanibulin) for the topical treatment of actinic keratosis (AK) of the face or scalp in adults. Almirall launched Klisyri in the U.S. in February 2021 after Athenex received approval from the FDA for the commercialization of Klisyri in the United States for the same drug indication usage in December 2020. Almirall will be launching the product in Europe. The launch in the U.S. resulted in a milestone payment of $20.0 million pursuant to the license agreement.

In June 2021, we held a Type A meeting with the FDA after receiving in February 2021 a Complete Response Letter (“CRL”), in which the agency indicated its concern of safety risk to patients in terms of an increase in neutropenia-related sequelae on the Oral Paclitaxel arm compared with the IV paclitaxel arm in the Phase III study, and also its concern of the uncertainty over the results of the primary endpoint of objective response rate (ORR) at week 19 conducted by blinded independent central review (BICR), and recommended that we conduct a new adequate and well-conducted clinical trial in a patient population with metastatic breast cancer representative of the population in the U.S. The agency determined that adequate risk mitigation strategies to improve toxicity, which may involve dose optimization and / or exclusion of patients deemed to be at higher risk of toxicity, would be required in any new clinical trial of Oral Paclitaxel. At the Type A meeting, we provided additional analyses, including overall survival (OS) data on patient subgroups, to provide a more comprehensive summary of the risk/benefit assessment. We also proposed to collect additional OS data that could inform the design of a new clinical study. The FDA was supportive and encouraged the Company to continue development of oral paclitaxel and encequidar for the treatment of metastatic breast cancer. The FDA also agreed that a well-designed and well-conducted trial may adequately address the deficiencies raised in the CRL. We are evaluating the optimal design for a new clinical study which we intend to present to the FDA in the fourth quarter of 2021.

We are also evaluating Oral Paclitaxel in other indications and in combination with other therapies. We completed enrollment in our Phase 2 study of Oral Paclitaxel in the treatment of cutaneous angiosarcoma and intend to discuss a registration pathway with the FDA. Our Phase 1 study of Oral Paclitaxel in combination with pembrolizumab, or Keytruda, in patients with advanced solid malignancies is ongoing. Athenex has an abstract accepted for poster presentation at the European Society of Medical Oncology

(ESMO) Congress 2021, taking place in September 2021, to present dose finding results from this study. We are proceeding into the expansion phase of the Oral Paclitaxel in combination with pembrolizumab study. The I-SPY 2 trial evaluating Oral Paclitaxel in combination with dostarlimab in neoadjuvant breast cancer patients is also ongoing.

In addition to our lead Orascovery product candidate, development of our other Orascovery product candidates is ongoing. We are planning Phase 2 studies for both oral irinotecan and encequidar (“Oral Irinotecan”) and oral docetaxel and encequidar (“Oral Docetaxel”). A Phase 1 study of oral eribulin and encequidar (“Oral Eribulin”) in patients with solid tumors is ongoing.

On May 4, 2021, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Kuur Therapeutics, Inc., a Delaware corporation ~~(“Kuur”~~(formerly known as Cell Medica, “Kuur”). Kuur is a ~~leading developer~~clinical-stage biopharmaceutical company focused on the development of ~~off-the-shelf CAR-NKT~~allogeneic, or “off-the-shelf”, NKT (natural killer T) cell immunotherapies for the treatment of solid and hematological malignancies. Kuur’s immunotherapy platform engineers chimeric antigen receptors (“CARs”) expressed by invariant NKT cells, which combine features of T and NK cells, and is being developed in partnership with Baylor College of Medicine and Texas Children’s Hospital. Allogeneic cell therapy has the potential to be faster and less expensive than patient-specific autologous products, and NKT cells offer several advantages over other cell types for allogeneic immunotherapy applications. NKT cells have the cytotoxic and anti-tumor properties of conventional T cells, but with other biological attributes that are expected to improve their ability to attack hematological and solid tumors. These include amplification of the immune response, innate tissue and solid tumor homing properties, as well as endogenous anti-tumor activity based on the ability to eliminate immune suppressive cells and activate host immune cells within the tumor microenvironment.

Kuur has two principal agreements with Baylor College of Medicine (“Baylor”), an Amended and Restated Exclusive License and Option Agreement dated February 28, 2020 (the “Baylor License Agreement”) and an Amended and Restated Co-Development Agreement dated February 28, 2020 (the “Baylor Co-Development Agreement”), each entered into by Kuur Therapeutics Limited (f/k/a Cell Medica, Ltd.) (“Kuur Ltd”) to amend and restate agreements that have been in place since 2016. In August 2020, Kuur Ltd assigned its obligations under the Baylor License Agreement and the Baylor Co-Development Agreement to Cell Medica, Inc. (“Cell Medica”), a sister company to Kuur Ltd. and direct subsidiary of Kuur. Under the Baylor License Agreement and Baylor Co-Development Agreement, Kuur has an exclusive licensing and co-development agreement around cellular immunotherapy products for the treatment of cancer and pursuant to which the parties to the agreement have been advancing Kuur’s pipeline of three product candidates, KUR-501 and KUR-502 into the clinic, and in advancing KUR-503 into IND-enabling preclinical studies. Per the terms of the Baylor Co-Development Agreement, Baylor is responsible for the development activities, at Kuur’s cost pursuant to an annual budget, determined by and under the supervision of a joint steering committee that is composed of four Baylor appointees and four Kuur appointees. The Baylor Co-Development Agreement is coterminous with the Baylor License Agreement or on breach or at Kuur’s option upon twelve months’ notice with such termination effective no earlier than three years from the date of the agreement.

Under the terms and conditions of the Baylor License Agreement, Baylor has granted Kuur a royalty bearing, worldwide, exclusive license under its technology in the permitted fields of use to research, develop, commercialize, and manufacture the licensed products with options to extend the scope and Kuur will be responsible for the commercialization of the licensed product in their permitted fields of use. Kuur has agreed to pay Baylor payments up to $128.5 million in the event defined development and sales are achieved, as well as tiered royalties at single digit rates based on annual net sales of licensed products and tiered percentages of sublicensing revenue ranging from mid-single digits to royalty rates in the mid-teens.

The Baylor License Agreement will continue until the patent rights under the agreement expire on a country-by-country basis, unless terminated earlier in accordance with the terms of the Baylor License Agreement. The agreement may be terminated on a product-by-product basis or in its entirety upon the mutual agreement of the parties, by Kuur upon requisite notice, on insolvency of a party or by either party for material breach as set forth in the Baylor License Agreement.

KUR-501 is an autologous product in which NKT cells are engineered with a CAR targeting GD2, which is expressed on almost all neuroblastoma tumors, as well as other malignancies. KUR-501 is being tested in the phase 1 GINAKIT2 clinical study in patients with relapsed-refractory (R/R) high risk neuroblastoma. The single-arm study will evaluate six dose levels of KUR-501 with patients receiving pre-dose lymphodepletion chemotherapy consisting of cyclophosphamide and fludarabine. Neuroblastoma is a pediatric cancer and patients with R/R high risk neuroblastoma have a poor prognosis and a significant unmet medical need. The KUR-501 development program is also designed to provide autologous proof-of-concept for CAR-NKT cells in solid tumors using a validated target. The GINAKIT2 study is supported by Kuur Therapeutics and conducted by Kuur’s collaborator, Baylor College of Medicine (“BCM”), and is currently recruiting patients.

KUR-502 is an allogeneic product in which NKT cells are engineered with a CAR targeting CD19. KUR-502 is built on Kuur’s next-generation CAR-NKT platform with novel engineering capabilities that harness and enhance the unique properties of NKT cells. The NKT cells used in Kuur’s CAR-NKT platform have a semi-invariant TCR that does not distinguish between self- and non-self-tissues, making the cells unlikely to induce graft versus host disease (GvHD). As a result, KUR-502 cells are harvested and manufactured from healthy donors. The ANCHOR clinical study is a phase 1, first-in-human, dose escalation evaluation of KUR-502 in adults with R/R CD19 positive malignancies including B cell lymphomas, acute lymphoblastic leukemia (ALL), and chronic lymphocytic leukemia (CLL). The single-arm study will evaluate three dose levels with patients receiving lymphodepletion

chemotherapy consisting of cyclophosphamide and fludarabine followed by infusion with KUR-502. Patients with R/R CD19-positive malignancies have limited effective treatment options. While CD19-directed autologous CAR-T cells are now available for these patients, they are limited by a requirement for patient leukapheresis, delays to receive treatment due to the requirement for autologous manufacturing, limited access, and variable final product quality. Off-the-shelf KUR-502 is designed to overcome these limitations. The ANCHOR study is being sponsored and conducted by Kuur’s collaborator, BCM and is currently recruiting patients.

KUR-503 is a product, in which NKT cells are engineered with a CAR targeting GPC3 (glypican-3). GPC3 is a molecule that is highly expressed on most hepatocellular carcinomas (HCC), but not normal liver or other non-neoplastic tissue, making it an ideal target. Because NKT cells home to the liver, they are excellent candidates to deliver immune effector therapy for patients with HCC. HCC is now the fourth most common cause of cancer related death worldwide, with an estimated 750,000 new cases each year. Although there have been some recent approvals of new agents to treat advanced HCC, these patients still have poor outcomes and there is a significant unmet need. KUR-503 is currently in preclinical development and the company is planning to submit an IND in 2022.

We believe that the acquisition of Kuur can potentially launch its cell therapy product portfolio to be one of the leaders in cell therapy. Kuur’s pipeline enables us to expand the cell therapy R&D pipeline by adding to Athenex’s current T cell receptor (TCR)-T immunotherapy program. The first cell therapy product in the TCR-T immunotherapy program, TCRT-ESO-A2, is based on an autologous approach of transducing a patient’s T cells with a T cell receptor (TCR) that recognizes a cancer antigen derived from the protein NYESO-1. The broad applicability of NKT cells allow for insertion of a CAR to target hematological malignancies and a TCR to target solid tumors

Pursuant to the terms of the Merger Agreement, we ~~will pay~~paid $70.0 million upfront to Kuur shareholders and its former employees and directors, comprised primarily of equity in the Company’s common stock. Additionally, Kuur shareholders and its former employees and directors are eligible to receive up to $115.0 million of milestone payments, which may be paid, at the Company’s sole discretion, in either cash or additional common stock of the Company, ~~(or~~or a combination of ~~both)~~both (see Footnote 5 Business Combination). We believe the acquisition strategically combines our TCR program with the groundbreaking NKT cell platform to provide a solution that may address some of the known limitations associated with the first generation of cell therapy treatments focused on autologous CAR-T.

On December 15, 2020, we announced that the FDA has approved Klisyri® (tirbanibulin) for the topical treatment of actinic keratosis (AK) on the face or scalp. Klisyri® is our first FDA approved branded proprietary product, manufactured by us, highlighting the vertically integrated capabilities of the Company ranging from a preclinical lead to a developed product for market launch. The Phase III trials evaluated the efficacy and safety of tirbanibulin ointment 1% (10 mg/g) in adults with actinic keratosis on the face or scalp and included 702 patients across 62 sites in the United States. Enrollment of patients was controlled to achieve a 2:1 ratio of facial: scalp treatment areas. Patients were randomly assigned in a 1:1 ratio to receive tirbanibulin ointment or vehicle ointment, which was self-administered to a contiguous treatment area of 25cm2 on the face or scalp containing 4-8 typical AK lesions once daily for five consecutive days. Both Phase III trials, KX01-AK-003 and KX01-AK-004, met the primary endpoint, which was defined as 100% clearance of AK lesions at Day 57 within the face or scalp treatment areas, each trial achieving a highly statistically significant result (p<0.0001). In KX01-AK-003, complete clearance was observed in 44% of the patients treated with tirbanibulin versus 5% for those treated with vehicle, and in KX01-AK-004, complete clearance was observed in 54% of the patients treated with tirbanibulin versus 13% for vehicle. Furthermore, tirbanibulin also achieved the secondary endpoint of partial (≥75%) clearance of lesions in each trial (68% of patients receiving tirbanibulin versus 16% receiving vehicle in KX01-AK-003, and 76% versus 20% respectively in KX01-AK-004). Both results were again highly statistically significant (p<0.0001). In both trials, patient-reported adverse events were mostly transient mild application-site pruritus and application-site pain. No patients experienced a serious adverse event or discontinuation due to tirbanibulin or vehicle in either clinical trial. Signs of local skin reactions assessed by investigators were mostly mild to moderate erythema, flaking or scaling that peaked at day 8 (maximum mean composite local skin reaction score ≤4.3 out of 18 across both trials) and resolved spontaneously in about 2 weeks.

Klisyri® was launched in the U.S., led by our partner Almirall S.A. (“Almirall”) on February 18, 2021, which resulted in a milestone payment of $20.0 million pursuant to the license agreement. Almirall will employ its expertise to support the development of tirbanibulin in Europe and Almirall will also commercialize the product in European countries, including Russia, if approved in those jurisdictions.

In September 2020, we announced that the U.S. FDA accepted for filing our NDA for Oral Paclitaxel for the treatment of metastatic breast cancer (“MBC”) and has granted the application Priority Review. Under the Prescription Drug User Fee Act (PDUFA), the FDA set a target action date of February 28, 2021. In February 2021, we received a Complete Response Letter (“CRL”) from the FDA regarding its NDA for Oral Paclitaxel for the treatment of metastatic breast cancer. The FDA issues a CRL to indicate that the review cycle for an application is complete and that the application is not ready for approval in its present form. In the CRL, the FDA indicated its concern of safety risk to patients in terms of an increase in neutropenia-related sequelae on the Oral Paclitaxel arm compared with the IV paclitaxel arm in the Phase III study. The FDA also expressed concerns regarding the uncertainty over the results of the primary endpoint of objective response rate (ORR) at week 19 conducted by blinded independent central review (BICR). The agency stated that the BICR reconciliation and re-read process may have introduced unmeasured bias and influence on the BICR. The agency recommended that we conduct a new adequate and well-conducted clinical trial in a patient population with metastatic breast cancer representative of the population in the U.S. The agency determined that additional risk mitigation strategies to improve toxicity, which may involve dose optimization and / or exclusion of patients deemed to be at higher risk of toxicity, are required to support potential approval of the NDA. We plan to request a meeting with the FDA to discuss the FDA’s response, engage in a dialogue on the design and scope of a clinical trial to address the agency’s requirements, and align on the next steps required to obtain approval. Our ability to potentially commercialize Oral Paclitaxel, and the timing of potential commercialization, is dependent on the discussion with the agency, our resubmission of its NDA, ultimate FDA approval, and potentially additional capital.

We are also evaluating Oral Paclitaxel in combination with other therapies, including anti-VEGF and anti-PD-1 therapies. We are studying Oral Paclitaxel with ramucirumab in a Phase 1b study in patients with advanced gastric cancer who failed previous chemotherapy. Our Phase 1/2 study of Oral Paclitaxel in combination with pembrolizumab, or Keytruda, in patients with advanced solid malignancies is ongoing.

In addition to our lead product candidate, development of our other Orascovery product candidates is ongoing. We are planning Phase 2 studies for both oral irinotecan and encequidar (“Oral Irinotecan”) and oral docetaxel and encequidar (“Oral Docetaxel”). A Phase 1 study of oral eribulin and encequidar (“Oral Eribulin”) in patients with solid tumors is ongoing.

The other ~~technologies~~technology in our ~~Oncology Innovation Platform are~~Cell Therapy platform is our TCR-T immunotherapy technology under which we are advancing TCR affinity-enhancing specific T-cell (TAEST) therapy with our first T cell therapy product, TCRT-ESO-A2. We are planning to begin enrollment for the Phase 1 trial of TCRT-ESO-A2 ~~and our Arginine deprivation therapy technology under which we are advancing PT01.~~

~~In September 2020, we announced that~~in the ~~FDA allowed our Investigational New Drug (IND) application for~~third quarter of 2021. TCRT-ESO-A2, an autologous T cell receptor (TCR)-T cell therapy targeting solid tumors that are NY-ESO-1 positive in HLA-A*02:01 positive patients. ~~TCRT-ESO-A2~~

We are still in the process of evaluating the impact of the acquisition of Kuur on our business. Kuur is ~~being developed by Axis Therapeutics Limited, a joint venture between Athenex~~still in early stage development of its product candidates and ~~Xiangxue Life Sciences Limited (“XLifeSc").~~we expect to incur significant research and development expenses as we advance the cell therapy business, including the payment of milestone payments and royalties under Kuur’s in-licensing arrangements. We ~~plan~~are also in the early stages of integrating Kuur’s business and we may not recognize any synergies and other benefits of the acquisition in the near term as we work to ~~initiate a~~integrate Kuur’s business.

With respect to Arginine deprivation therapy, the Phase 1 trial in 1H 2021. TCRT-ESO-A2 is similar to TAEST16001, an autologous cell-based therapy being developed simultaneously by XLifeSc for clinical application in China in that both therapies express the same affinity-enhanced TCR.

~~PT01 targets cancer growth and survival by removing the supply of arginine to cancers that have a disrupted urea cycle. The FDA allowed our IND application for the clinical investigation~~ of PT01 for the treatment of patients with advanced malignancies ~~in 2019. We plan to initiate first human exposure in 2021.~~is currently enrolling patients.

Since early 2020, after monitoring developments related to the spread of COVID-19, we have undertaken a number of measures in response to the COVID-19 pandemic, with a goal to prioritize the health and safety of our employees and ensure continuity in our business. These measures included implementing a work-from-home policy at various times and other efforts in accordance with recommendations by local authorities for certain of our personnel across the globe as well as imposing restrictions on travel and in-person meetings to protect the health and safety of our workforce while we continue to advance our clinical programs and operations. We have continued to add additional safety procedures and tools in all our locations. We adhere to all state and federal requirements as the same may be in force from time to time.

We have been deemed an “essential business” by New York State and, as a result, we have experienced minimal disruptions at our New York-based operations in Clarence and Buffalo. Despite these efforts, we may from time to time experience additional disruptions related to the COVID-19 pandemic resulting from employees falling ill with COVID-19. We have supplied our employees with face coverings and other necessary personal protective equipment and have taken other measures to reduce the risk of the spread of COVID-19 at our work sites. We are actively monitoring our operations and supply chain across the globe and are making adjustments to respond to logistical challenges that arise due to the COVID-19 pandemic where ~~appropriate.~~appropriate, particularly due to the emergence and spread of the COVID-19 Delta variant, which has already impacted our operations and supply chain in the first half of 2021 as discussed further below. We have continued to produce medicines that are used to treat COVID-19 as part of our commitment to contribute to the COVID-19 relief effort.

With respect to our clinical development program, for our earlier stage product candidates, we have experienced and expect to continue to experience slowed enrollment for our clinical trials as well as suspensions in our clinical trials as healthcare resources are

diverted to address the COVID-19 pandemic. We remain committed to advancing our pipeline while ensuring the safety of all participants as well as the integrity of the data. We will continue to monitor developments with respect to the COVID-19 pandemic as well as industry and regulatory best practices for continuing clinical development programs during the pandemic, including, if and where appropriate, the use of virtual communications, interviews and visits as well as self-administration and remote monitoring techniques to address health and safety concerns while minimizing disruptions and delays to our clinical development timelines.

We also put in place a number of measures intended to adjust or allocate resources towards prioritizing key business operations such as clinical and regulatory activities for later-stage product candidates and pre-launch commercial activities, and to delay or defray compensation costs in order to preserve our cash on hand and liquidity during a volatile period in the U.S. and global capital markets.

However, a lack of sustained recovery or further deterioration in market conditions related to the general economy and the industries in which we operate, a sustained trend of weaker than anticipated financial performance, further decline in our share price for a sustained period of time, or an increase in the market-based weighted average cost of capital, among other factors, could significantly impact the impairment analysis and may result in future impairment charges that, if incurred, could have a material adverse effect on our financial condition and results of operations.

While the disruptions to our business caused by the pandemic are currently expected to be temporary, there is still uncertainty regarding the pandemic's overall duration and the severity of any future outbreaks. The ~~recent~~ surge of COVID-19 cases in the last couple of months in India, a country where we source supplies and maintain partnerships that are key to our specialty drug business, including API, presents business and supply chain disruption risks for us to the extent the virus is not able to be contained, there is widespread sickness and disruptions on operations and also in the event state governments in India impose additional lockdowns, restrictions on the operations of businesses and other containment measures to combat the spread of the virus. The scope and impact of any such measures is not yet known and will depend on a number of factors, including the ultimate spread and severity of the outbreaks in India and the scope, duration and impact of containment measures on individuals and businesses. If our partners in India experience significant or extended disruptions to their business due to COVID-19, it could result in substantial supply shortages and harm our special drug business, as well as our overall financial condition and results of operations.

As a result of the significant decrease in our market capitalization since we last performed a goodwill impairment test in the fourth quarter of 2020, we evaluated the impact on each of its reporting units to assess whether there was a triggering event during the first quarter of 2021, requiring it to perform a goodwill impairment test (ASC350-20-35). We determined a triggering event occurred and, as such, performed an interim goodwill quantitative impairment test for our reporting units. We compared the fair value of our Global Supply Chain Platform and Oncology Innovation Platform reporting units to carrying value. Based on the results, the fair value of each of our reporting units exceeded their carrying value, and the goodwill was not impaired (see Note 56 Intangible Assets, Net). However, there can be no assurances that goodwill will not be impaired in future periods. Estimating the fair value of goodwill requires the use of estimates and significant judgments that are based on a number of factors. These estimates and judgments may not be within our control and accordingly it is reasonably possible that the judgments and estimates could change in future periods.

We have three operating segments: our Oncology Innovation Platform, Global Supply Chain Platform and Commercial Platform. Since inception, we have devoted a substantial amount of our resources to research and development of our lead product candidates under our Orascovery and Src Kinase Inhibition ~~research~~technology platforms, ~~and TCR-T Immunotherapy~~as well as under the Cell Therapy platform and Arginine Deprivation Therapy technology, and to buildup of our commercial infrastructure. We have incurred significant net losses since inception.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, our net loss was ~~$25.6~~$59.3 million, compared to ~~$19.7~~$60.8 million for the same period in 2020. As of ~~March 31,~~June 30, 2021 and December 31, 2020, we had an accumulated deficit of ~~$738.7~~$773.0 million and $713.6 million, respectively. We expect to incur significant expenses and operating losses for the foreseeable future. We anticipate that our expenses will cover the following activities as we:

We have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to our Senior Credit Agreement and Revenue Interest Financing Agreement, or potentially pursuant to new arrangements with different lenders. We may borrow funds on terms that may include restrictive covenants, including covenants that restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets. In addition, we expect to continue to opportunistically seek access to the equity capital markets to support our development efforts and operations. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.

We have funded our operations to date primarily from the issuance and sale of our common stock through public offerings, senior secured loans, private placements, and to a lesser extent, from convertible bond financing, revenue, and grant funding. As of ~~March 31,~~June 30, 2021, we had cash and cash equivalents of ~~$48.0~~$76.9 million, restricted cash of $16.5 million, and short-term investments of ~~$123.2~~$53.3 million.

We derive our consolidated revenue primarily from (i) the sales of generic injectable products by our Commercial Platform; (ii) licensing and collaboration projects conducted by our Oncology Innovation Platform, which generates revenue in the form of upfront payments, milestone payments, and payments received for providing research and development services for our collaboration projects and for other third parties; (iii) the sales of 503B and API products by our Global Supply Chain Platform; and (iv) grant awards from government agencies and universities for our continuing research and development efforts.

We do not anticipate revenue being generated from sales of our product candidates under development in our Oncology Innovation Platform until we have obtained regulatory approval. We cannot assure you that we will succeed in achieving regulatory approval for our drug candidates as planned, or at all.

Along with sourcing from third-party manufacturers, we manufacture clinical products in our cGMP facility in New York. Cost of sales primarily includes the cost of finished products, raw materials, labor costs, manufacturing overhead expenses and reserves for expected scrap, as well as transportation costs. Cost of sales also includes depreciation expense for production equipment, changes to our excess and obsolete inventory reserves, certain direct costs such as shipping costs, net of costs charged to customers, and royalty costs related to in-license agreements.

Research and development (“R&D”) expenses consist of the costs associated with in-licensing of product candidates, milestone payments, conducting preclinical studies and clinical trials, activities related to regulatory filings and correspondences, and other R&D activities. Our current R&D activities mainly relate to the clinical development of our Oncology Innovation Platform.

We expense R&D costs as incurred. We record costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment or clinical site activations. We do not allocate employee-related costs, depreciation, rental and other indirect costs to specific R&D programs because these costs are deployed across multiple product programs under R&D.

We cannot determine with certainty the duration, costs and timing of the current or future preclinical or clinical studies of our drug candidates. The duration, costs, and timing of clinical studies and development of our drug candidates will depend on a variety of factors, including:

A change in the outcome of any of these variables with respect to the development of a drug candidate, including without limitation delays caused by the ongoing COVID-19 pandemic, could mean a significant change in the costs and timing associated with the development of that drug candidate.

R&D activities are central to our business model. We expect our R&D expenses to continue to increase for the foreseeable future as we continue to support the clinical ~~trials~~and regulatory development activities of our Orascovery platform product candidates, ~~and~~ our Src kinase inhibition platform product candidates, our Cell therapy platform product candidates, as well as initiate and prepare for additional clinical and preclinical studies, including for ~~the cell therapy~~our arginine biologics products and other small molecule programs. We also expect spending to increase in the R&D for API, 503B and specialty products. There are numerous factors associated with the successful commercialization of any of our drug candidates, including future trial design and various regulatory requirements, many of which cannot be determined with accuracy at this time based on our stage of development. Additionally, future commercial, regulatory and public health, including the ongoing COVID-19 pandemic, factors beyond our control will likely impact our clinical development programs and plans.

Selling, general and administrative, (“SG&A”), expenses primarily consist of compensation, including salary, employee benefits and stock-based compensation expenses for sales and marketing personnel, and for administrative personnel that support our general operations such as executive management, legal counsel, financial accounting, information technology, and human resources personnel. SG&A expenses also include professional fees for legal, patent, consulting, auditing and tax services, as well as other direct and allocated expenses for rent and maintenance of facilities, development of the facility in Dunkirk, NY, insurance and other supplies used in the selling, marketing, general and administrative activities. SG&A expenses also include costs associated with our commercialization efforts for our proprietary drugs, such as market research, brand strategy and development work on market access, scientific publication, product distribution, and patient support.

We anticipate that our SG&A expenses will increase in future periods to support increases in our research and development. We expect these increases will likely result in increased headcount, increased share compensation charges, expanded infrastructure and increased costs for insurance. We also anticipate increases to legal expenses due to the on-going class action lawsuit (see Note 1517 Commitments and Contingencies), insurance premium, compliance, accounting and investor and public relations expenses associated with being a public company.

Three Months Ended ~~March 31,~~June 30, 2021 Compared to Three Months Ended ~~March 31,~~June 30, 2020

The following table sets forth a summary of our condensed consolidated results of operations for the three months ended ~~March 31,~~June 30, 2021 and 2020, together with the changes in those items in dollars and as a percentage. This information should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our operating results in any period are not necessarily indicative of the results that may be expected for any future period.

	Three Months Ended March 31,												Three Months Ended June 30,
	2021			2020			Change						2021			2020			Change
	(in thousands)			(in thousands)			(in thousands)			%			(in thousands)			(in thousands)			(in thousands)			%
Revenue
Product sales, net	$	20,360		$	18,547		$	1,813			10	%	$	21,385		$	40,167		$	(18,782	)		-47	%
License fees and other revenue		20,665			28,388			(7,723	)		-27	%		538			5			533		NM
Total revenue		41,025			46,935			(5,910	)					21,923			40,172			(18,249	)
Cost of sales		(16,405	)		(19,572	)		3,167			-16	%		(19,663	)		(33,006	)		13,343			-40	%
Gross profit		24,620			27,363			(2,743	)					2,260			7,166			(4,906	)
Research and development expenses		(23,070	)		(17,192	)		(5,878	)		34	%		(21,127	)		(22,015	)		888			-4	%
Selling, general, and administrative expenses		(22,120	)		(25,748	)		3,628			-14	%		(21,231	)		(17,486	)		(3,745	)		21	%
Interest income		29			413			(384	)		-93	%		132			185			(53	)		-29	%
Interest expense		(4,908	)		(1,673	)		(3,235	)		193	%		(5,684	)		(1,565	)		(4,119	)		263	%
Income tax expense		(154	)		(2,881	)		2,727			-95	%
Loss on extinguishment of debt														—			(7,230	)		7,230			-100	%
Income tax benefit (expense)														11,035			(106	)		11,141		NM
Net loss		(25,603	)		(19,718	)		(5,885	)					(34,615	)		(41,051	)		6,436
Less: net loss attributable to non-controlling interests		(553	)		(289	)		(264	)		91	%		(341	)		(600	)		259			-43	%
Net loss attributable to Athenex, Inc.	$	(25,050	)	$	(19,429	)	$	(5,621	)				$	(34,274	)	$	(40,451	)	$	6,177

Revenue from product sales ~~increased~~decreased to ~~$20.4~~$21.4 million for the three months ended ~~March 31,~~June 30, 2021, from ~~$18.5~~$40.2 million for the three months ended ~~March 31,~~June 30, 2020, ~~an increase~~a decrease of ~~$1.8~~$18.8 million or ~~10%~~47%. This ~~increase~~decrease was primarily attributable to ~~an increase of $2.8 million~~a decrease in APD product sales of ~~503B~~$20.4 million primarily as the result of a decrease in demand for COVID-19 related drugs from the prior year, including some significant non-recurring orders of approximately $14.1 million. In addition, in the first half of 2021, we experienced significant COVID-related challenges in our Indian supply chain and to a lesser extent in China. As a result, we did not receive some inventory from our partners located in these countries for a certain period of time. We also experienced a higher amount of product sales in 2020 because we started fulfilling demand for certain drugs used to treat patients hospitalized with COVID in the U.S. and demand for FDA shortage products. As a result, the product revenues in the second quarter of last year were particularly high, given the COVID pandemic had just started. Fluctuations in the infection rate and the spread of the global health pandemic and market demand ~~can~~may continue to significantly affect our product sales in the future. API product sales ~~increased~~decreased by ~~$0.8 million~~$0.2 million. These were partially offset by an increase in 503B and contract manufacturing revenue of $1.5 million and $0.4 million, respectively.

License fees and other revenue increased by $0.5 million, for the three months ended June 30, 2021. This increase was primarily due to $0.2 million grant revenue and $0.2 million in royalties received from ~~supply~~Almirall for the sales of Klisyri after the product launch in the U.S. in February 2021.

Cost of sales for the three months ended June 30, 2021 totaled $19.7 million, a decrease of $13.3 million, or 40%, as compared to ~~our partner Almirall~~$33.0 million for the three months ended June 30, 2020. The decrease was primarily due to a decrease of $13.1 million in cost of APD product sales, generally in-line with the decrease in the product sales. Additionally, cost of sales related to royalties for license income decrease by $1.2 million from the royalty payment incurred in 2020 on the license revenue from Xiangxue. Cost of API product sales decreased by $0.3 million. Cost of 503B product sales increased by $1.3 million as production levels increased.

R&D expenses for the three months ended June 30, 2021 totaled $21.1 million, a decrease of $0.9 million, or 4%, as compared to $22.0 million for the three months ended June 30, 2020. This was primarily due to a decrease in regulatory costs, clinical operations, and preclinical operations and included the following:

The decrease in these R&D expenses was partially offset by a $3.3 million increase in oral paclitaxel and encequidar API costs in preparation for product launch, a $2.6 million increase in drug licensing costs, primarily due to a license milestone payment related to Arginine deprivation therapy, a $0.9 million increase in R&D related compensation expenses, and a $0.3 million increase in 503B and cell therapy development costs.

SG&A expenses for the three months ended June 30, 2021 totaled $21.2 million, an increase of $3.7 million, or 21%, as compared to $17.5 million for the three months ended June 30, 2020. This was primarily due to a $3.5 million increase in professional fees and other expenses related to the acquisition of Kuur, a $1.2 million increase in compensation related costs, a $0.4 million increase from the change in fair value of contingent consideration, and an increase of $0.3 million in operating costs including insurance costs and IT costs. These increases were partially offset by a $1.7 million decrease of costs for preparing to commercialize Oral Paclitaxel as significant pre-launch activities occurred in 2020 and slowed upon receipt of the Complete Response Letter in February 2021.

Interest income consisted of interest earned on our short-term investments totaled $0.1 million and $0.2 million for the three months ended June 30, 2021 and 2020, respectively. Interest expense totaled $5.7 million and $1.6 million for the three months ended June 30, 2021 and 2020, respectively. Interest expense in the current period was incurred from the Senior Credit Agreement with Oaktree and the write-off of deferred debt issuance costs related to the revenue interest financing, while interest expense in the prior period was primarily incurred from debt under a former credit agreement with Perceptive Advisors LLC and its affiliates.

For the three months ended June 30, 2021, income tax benefit amounted to $11.0 million, compared to income tax expense of $0.1 million for the same period in 2020. The income tax benefit is primarily the result of taxable temporary difference due to the ~~launch~~deferred tax liability recognized for the indefinite lived intangible assets acquired in connection with the acquisition of Kuur’s IPR&D. This taxable temporary difference is considered a source of taxable income to support the realization of deferred tax assets from the acquirer which resulted in a reversal of our valuation allowance. The income tax expense in the prior year was primarily attributable to foreign income tax withholdings on our revenue earned under our out-license arrangements.

The following table sets forth a summary of our condensed consolidated results of operations for the six months ended June 30, 2021 and 2020, together with the changes in those items in dollars and as a percentage. This information should be read together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. Our operating results in any period are not necessarily indicative of the ~~drug in February 2021. These increases were offset by~~results that may be expected for any future period.

	Six Months Ended June 30,
	2021			2020			Change
	(in thousands)			(in thousands)			(in thousands)			%
Revenue
Product sales, net	$	41,745		$	58,714		$	(16,969	)		-29	%
License fees and other revenue		21,203			28,393			(7,190	)		-25	%
Total revenue		62,948			87,107			(24,159	)
Cost of sales		(36,068	)		(52,578	)		16,510			-31	%
Gross profit		26,880			34,529			(7,649	)
Research and development expenses		(44,197	)		(39,207	)		(4,990	)		13	%
Selling, general, and administrative expenses		(43,351	)		(43,234	)		(117	)		0	%
Interest income		161			598			(437	)		-73	%
Interest expense		(10,592	)		(3,238	)		(7,354	)		227	%
Loss on extinguishment of debt		—			(7,230	)		7,230		NM
Income tax benefit (expense)		10,881			(2,987	)		13,868		NM
Net loss		(60,218	)		(60,769	)		551
Less: net loss attributable to non-controlling interests		(894	)		(889	)		(5	)		1	%
Net loss attributable to Athenex, Inc.	$	(59,324	)	$	(59,880	)	$	556

Revenue from product sales decreased to $41.7 million for the six months ended June 30, 2021, from $58.7 million for the six months ended June 30, 2020, a decrease of ~~$2.3~~$17.0 million or 29%. This decrease was primarily attributable to a significant prior year increase in APD ~~sales.~~product sales of $22.7 million as the result of increased demand for COVID-19 related drugs and for FDA shortage products during 2020, including some significant non-recurring orders.In addition, in the first half of 2021, we experienced significant COVID-related challenges in our Indian supply chain and to a lesser extent in China. As a result, we were not able to receive some inventory from our partners located in these regions for a certain period of time. Fluctuations in the infection rate and the spread of the global health pandemic and market demand may continue to significantly affect our product sales in the future. This decrease was partially offset by an increase in 503B product sales, contract manufacturing revenue, and API product sales of $4.4 million, $0.8 million, and $0.6 million, respectively.

License fees and other revenue decreased ~~by $7.7~~to $21.2 for the six months ended June 30, 2021, from $28.4 million for the six months ended June 30, 2020, a decrease of $7.2 million, or ~~27%~~25%. For the ~~three~~six months ended ~~March 31,~~June 30, 2021, we recorded $20.0 million of license revenue pursuant to the 2017 Almirall License Agreement upon the launch of Klisyri in the U.S., in February 2021, and $0.5 million related to the upfront fee pursuant to the Second Amendment to the 2011 PharmaEssentia License Agreement. For the ~~three~~six months ended ~~March 31,~~June 30, 2020 we recognized $28.3 million in license revenue, net of $1.7 million value added tax (“VAT”), pursuant to the 2019 Xiangxue License Agreement.

Cost of sales for the ~~three~~six months ended ~~March 31,~~June 30, 2021 totaled ~~$16.4~~$36.1 million, a decrease of ~~$3.2~~$16.5 million, or ~~16%~~31%, as compared to ~~$19.6~~$52.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020. The decrease was primarily due to a decrease of $14.4 million in cost of APD product sales, generally in-line with the ~~$2.0~~decrease in the product sales. Cost of sales related to royalties for license income also decreased by $3.2 million from the royalty payment incurred in 2020 on the license revenue from Xiangxue. ~~The decrease in cost of specialty product sales was in-line with the decrease in revenue.~~ Cost of 503B ~~and API~~ product sales increased ~~slightly~~by $1.3 million as production levels increased. ~~Changes in the availability of products and market demand could increase or decrease our revenue and gross profit related to these products in the future.~~

R&D expenses for the ~~three~~six months ended ~~March 31,~~June 30, 2021 totaled ~~$23.1~~$44.2 million, an increase of ~~$5.9~~$5.0 million, or ~~34%~~13%, as compared to ~~$17.2~~$39.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020. This was primarily due to an increase in ~~pre-launch product development~~ costs ~~preclinical operations, and~~related to Oral Paclitaxel, drug licensing costs, compensation, and preclinical operations, and included the following:

The increase in these R&D expenses was partially offset by a ~~$2.9~~decrease of $5.4 million ~~decrease~~ in clinical ~~studies and patient costs on Oral Paclitaxel~~operations after completion of the Phase 3 studies for tirbanibulin ointment and Oral Paclitaxel, a ~~$0.6~~decrease of $4.1 million in regulatory costs in connection with our NDA preparations, and decrease of $0.1 million in ~~regulatory, API development, and~~ 503B ~~development costs.~~product development.

SG&A expenses for the ~~three~~six months ended ~~March 31,~~June 30, 2021 totaled ~~$22.1~~$43.4 million, ~~a decrease~~an increase of ~~$3.6~~$0.1 million, or ~~14%~~0%, as compared to ~~$25.7~~$43.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020. This was primarily due to a ~~decrease of $4.4~~$3.5 million increase in professional fees and other expenses related to the acquisition of Kuur, a $1.9 million increase in compensation related costs, an increase of $1.2 million in operating costs including insurance costs and IT costs, and a $0.4 million increase from the change in fair value of contingent consideration. These increases were partially offset by a $6.1 million decrease of costs for preparing to commercialize Oral Paclitaxel as significant pre-launch activities occurred in 2020 and slowed upon receipt of the Complete Response Letter in February 2021. ~~This was partially offset by an increase of $0.7 million of general and administrative costs related to increased hiring, professional fees, IT costs, and other operational costs.~~

Interest income consisted of interest earned on our short-term investments ~~totaled less than $0.1~~and decreased to $0.2 million ~~and $0.4~~from $0.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Interest expense totaled ~~$4.9~~$10.6 million and ~~$1.7~~$3.2 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. Interest expense in the current period was incurred from the Senior Credit Agreement with Oaktree and the write-off of deferred debt issuance costs related to the revenue interest financing, while interest expense in the prior period was primarily incurred from debt under a former credit agreement with Perceptive Advisors LLC and its ~~affiliates.~~affiliates.

We recognized $7.2 million loss on the extinguishment of debt related to the termination of the senior secured loan agreement with Perceptive for the six-months ended June 30, 2020.

For the ~~three~~six months ended ~~March 31,~~June 30, 2021, ~~we incurred~~income tax benefit amounted to $10.9 million, compared to income tax expense of ~~$0.2 million, compared to $2.9~~$3.0 million for the same period in 2020. The ~~decrease~~income tax benefit in the current year is primarily the result of taxable temporary difference due to the deferred tax liability recognized for the indefinite lived intangible assets acquired in connection with the acquisition of Kuur’s IPR&D. This taxable temporary difference is considered a source of taxable income to support the realization of deferred tax assets from the acquirer which resulted in a reversal of our valuation allowance. The income tax expense in the prior year was primarily attributable to foreign income tax withholdings on our revenue earned under our out-license arrangements ~~in the prior year.~~.

Since our inception, we have incurred net losses and negative cash flows from our operations. Substantially all of our losses have resulted from funding our R&D programs, SG&A costs associated with our operations, and the development of our specialty drug operations in our Commercial Platform and 503B operations and the investment we ~~are making~~made in our pre-launch activities in anticipation of commercializing our proprietary drugs. We incurred net losses of ~~$25.6~~$60.2 million and ~~$19.7~~$60.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. As of ~~March 31,~~June 30, 2021, we had an accumulated deficit of ~~$738.7~~$773.0 million. Our operating activities used ~~$29.9~~$69.1 million and ~~$45.5~~$70.1 million of cash during the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, respectively. We intend to continue to advance our various clinical and pre-clinical programs which we expect will lead to continuous cash outflow of R&D costs and though we have reduced our planned expenditures in 2021 while there is uncertainty around the best path forward for Oral Paclitaxel, we expect to increase our investments in commercialization activities for our proprietary drugs, if approved. In addition, we can provide no assurance that our funding requirements to diversify our product portfolio for specialty drug products in our Commercial Platform and 503B operations will decline in the future. Our principal sources of liquidity as of ~~March 31,~~June 30, 2021 were cash and cash equivalents totaling ~~$48.0~~$76.9 million, restricted cash of $16.5 million, held in a controlled bank account in connection with the Senior Credit Agreement with Oaktree, and short-term investments totaling ~~$123.2~~$53.3 million, which are generally high-quality investment grade corporate debt securities.

Our obligations under the Senior Credit Agreement are guaranteed by us and certain of our existing domestic subsidiaries and subsequently acquired or organized subsidiaries subject to certain exceptions. Our obligations under the Senior Credit Agreement and the related guarantees thereunder are secured, subject to customary permitted liens and other agreed upon exceptions, by (i) a pledge of all of the equity interests of our direct subsidiaries, and (ii) a perfected security interest in all of our tangible and intangible assets.

The Senior Credit Agreement contains customary representations and warranties and customary affirmative and negative covenants, including, among other things, restrictions on indebtedness, liens, investments, mergers, dispositions, prepayment of other indebtedness, and dividends and other distributions, subject to certain exceptions, including specific exceptions with respect to product commercialization and development activities. In addition, the Senior Credit Agreement contains certain financial covenants, including, among other things, maintenance of minimum liquidity and a minimum revenue test, measured quarterly until the last day of the second consecutive fiscal quarter where the consolidated leverage ratio does not exceed 4.5 to 1, provided that thereafter we cannot allow our consolidated leverage ratio to exceed 4.5 to 1, measured quarterly. Failure of the Company to comply with the financial covenants will result in an event of default, subject to certain cure rights of the Company. At ~~March 31,~~June 30, 2021, we were in compliance with all applicable covenants.

We have borrowed and, in the future, may borrow additional capital from institutional and commercial banking sources to fund future growth, including pursuant to the Senior Credit Agreement, or potentially pursuant to new arrangements with different lenders. We may borrow additional funds on terms that may include restrictive covenants, including covenants that further restrict the operation of our business, liens on assets, high effective interest rates, financial performance covenants and repayment provisions that reduce cash resources and limit future access to capital markets. In addition, we expect to continue to opportunistically seek access to the equity capital markets to support our development efforts and operations. To the extent that we raise additional capital by issuing equity securities, our stockholders may experience substantial dilution. To the extent that we raise additional funds through collaboration or partnering arrangements, we may be required to relinquish some of our rights to our technologies or rights to market and sell our products in certain geographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders.

As of ~~March 31,~~June 30, 2021, we had cash and cash equivalents of ~~$48.0~~$76.9 million, restricted cash of $16.5 million, and short-term investments of ~~$123.2~~$53.3 million. We believe that the existing cash and cash equivalents, restricted cash, and short-term investments will enable us to meet our current operational liquidity needs and fund operations into the ~~second half~~fourth quarter of 2022. The Company’s estimates are based on relevant conditions that are known and reasonably knowable at the date of these consolidated financial statements being available for issuance and are subject to change due to changes in business, industry or macroeconomic ~~conditions~~. conditions. Further, we do not expect to have access to additional capital under the Senior Credit Agreement and the Revenue Interest Financing Agreement, and will need to find alternative sources of financing until such time as Oral Paclitaxel is approved or will need to renegotiate these arrangements. We have based these estimates on assumptions that may prove to be wrong, and it could spend the available financial resources much faster than expected and need to raise additional funds sooner than anticipated.

We have made certain changes to our budgeted expenses in light of the CRL for Oral Paclitaxel we received in February 2021 ~~pending further discussion~~and the Type A meeting with the FDA, ~~on the best pathway forward for Oral Paclitaxel,~~ including curtailing commercialization expenses and investing in additional products for our specialty pharma business. However, we expect that our expenses will increase as we continue to fund clinical and preclinical development of our research programs by advancing certain product candidates in our pipeline, including product candidates on our Orascovery and Src Kinase Inhibition technology platforms, our cell therapy programs, our specialty drug products, working capital and other general corporate purposes. Capital expenditure at both Dunkirk and Sintaho facilities will continue to grow and be significant as we build out both plants to manufacture drugs including 503B, Tirbanibulin APIs and injectable products. We have based our estimates on assumptions that might prove to be wrong and our estimates are also subject to change depending on the outcome of our discussions with the FDA with respect to Oral Paclitaxel, and we might use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to accurately estimate the amounts of increased capital outlays and operating expenditures necessary to complete the development and commercialization of our drug candidates.

Our future capital requirements will depend on many factors, some or all of which may be impacted by the COVID-19 pandemic, including:

Until we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements, and government grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect rights of holders of common stock. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and might require the issuance of warrants, which could potentially dilute the ownership interest of holders of common stock. If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we might have to relinquish valuable rights to our technologies, future revenue streams or research programs or to grant licenses on terms that might not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we might be required to delay, limit, reduce, or terminate our product development or future commercialization efforts or grant rights to develop and market products or drug candidates that we would otherwise prefer to develop and market ourselves.

The following table provides information regarding our cash flows for the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020:

The use of cash in our operating activities resulted primarily from our net loss adjusted for non-cash charges and changes in components of working capital. The primary use of our cash in the periods presented was to fund our R&D, regulatory and other clinical trial costs, drug licensing costs, inventory purchases, pre-launch commercialization activities, and other expenditures related to sales, marketing and administration.

Net cash used in operating activities decreased ~~$15.7~~$1.0 million, or ~~34%~~1%, for the ~~three~~six months ended ~~March 31, 2021. The decrease is primarily attributable to the increase in product sales and collection of license fees during the three months ended March 31,~~June 30, 2021.

Net cash used in operating activities was ~~$29.9~~$69.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021. This resulted primarily from our net loss of ~~$25.6~~$60.2 million, adjusted for non-cash charges of ~~$4.3~~$9.7 million, non-cash income benefit of $10.9 million related to the reversal of our valuation allowance on our deferred tax assets to offset the deferred tax liability assumed in connection with the acquisition of Kuur’s IPR&D, and by cash used by our operating assets and liabilities of ~~$8.6~~$7.6 million. Our operating assets ~~increased $3.4~~decreased $1.4 million for accounts receivable mainly related to the ~~increased~~decreased sales of ~~503B~~specialty products, increased ~~$2.5~~$0.3 million in prepaid expenses and other assets, and increased $0.9 million for inventory of all drug ~~products, and offset by $2.2 million decrease in prepaid expenses and other assets.~~products. Our operating liabilities decreased by ~~$12.3~~$7.8 million mainly due to a decrease in accrued selling fees and royalties on our specialty drugs and a decrease in accrued ~~purchases of specialty drug inventory, and accrued interest paid in the current period on our Senior Credit Agreement with Oaktree,~~costs for product launch, partially offset by an increase in accrued ~~wages~~license fees and ~~benefits.~~accrued interest. Our net non-cash charges during the ~~three~~six months ended ~~March 31,~~June 30, 2021 ~~primarily~~ consisted of ~~$2.2~~$4.7 million of stock-based compensation expense, ~~$1.3~~$2.5 million depreciation and amortization expense, ~~and $0.8~~$1.5 million amortization of debt ~~discount.~~discount, $0.6 million write-off of deferred debt issuance costs related to the revenue interest financing, and $0.4 million change in fair value of contingent consideration.

Net cash used in operating activities was ~~$45.5~~$70.1 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020. This resulted primarily from our net loss of ~~$19.7~~$60.8 million, adjusted for non-cash charges of ~~$3.8~~$15.4 million, and by cash used by our operating assets and liabilities of ~~$29.7 million, the majority of which was due to the licensing fee receivable.~~$24.7 million. Our operating assets increased ~~$34.7~~$21.9 million for accounts receivable mainly related to the contract asset recognized from license revenue in the ~~three months ended March 31, 2020 as well as increases~~current period and the increased sales of specialty products ~~$3.1~~during the six-months ended June 30, 2020, and decreased by $1.5 million for inventory of all drug products, and ~~partially offset by a $3.7 million decrease in~~$1.0 for prepaids and other assets. Our operating liabilities increased by ~~$4.4~~$5.3 million mainly due to an increase ~~related the construction of our Dunkirk facility.~~in accrued selling costs and rebates, and an increase in accrued wages and benefits, and other operating liabilities. Our net non-cash charges during the ~~three~~six months ended ~~March 31,~~June 30, 2020 primarily consisted of ~~$2.3~~$7.2 million of loss on extinguishment of debt, $5.3 million of stock-based compensation expense, and ~~$1.1~~$2.1 million depreciation and amortization expense.

Net cash provided by investing activities was ~~$7.0~~$74.7 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, compared to ~~$10.5~~$18.1 million ~~used in investing activities~~ in the ~~three~~six months ended ~~March 31,~~June 30, 2020. The difference was primarily due to more cash being provided by the sales and maturities of short-term investments and cash acquired from the acquisition of Kuur, partially offset by an increase in cash paid for property and equipment at our API and Dunkirk facilities and cash paid for in-licenses fees related to our specialty drugs during the ~~three~~six months ended ~~March 31,~~June 30, 2021.

Net cash provided by financing activities was ~~$0.8~~$1.4 million for the ~~three~~six months ended ~~March 31,~~June 30, 2021, which consisted of ~~$0.9~~$1.6 million from the exercise of stock options, and $0.8 million proceeds from the issuance of debt, partially offset by ~~$0.1~~$1.0 million repayment of debt and finance lease obligations.

Net cash provided by financing activities was ~~$0.7~~$41.6 million for the ~~three~~six months ended ~~March 31,~~June 30, 2020, which primarily consisted of ~~$0.4~~$94.2 million from the ~~issuance~~draw downs of debt from our credit facility with Oaktree and $1.0 million to fund our new API plant in China, $5.8 million from the issuance of warrants to Oaktree, and ~~$0.3~~$0.8 million from the exercise of stock ~~options.~~options and sale of common stock, partially offset by $54.1 million repayment of Perceptive debt and $6.1 million issuance costs of the new Oaktree debt.

A summary of our contractual obligations as of ~~March 31,~~June 30, 2021 is as follows:

	Payments Due by Period										Payments Due by Period
	Within 1 Year		1 to 3 years		3 to 5 years		More than 5 years		Total Amounts Committed		Within 1 Year		1 to 3 years		3 to 5 years		More than 5 years		Total Amounts Committed
	(in thousands)										(in thousands)
Operating leases	$	3,389	$	4,702	$	3,085	$	367	$	11,543	$	3,307	$	4,434	$	2,663	$	289	$	10,693
Long-term debt		1,560		25,473		27,900		107,666		162,599		4,360		25,507		132,868		—		162,735
Finance lease obligations		430		502		99		—		1,031		382		492		60		—		934
Licensing fees		1,066		1,000		—		—		2,066		3,066		800		—		—		3,866
	$	6,445	$	31,677	$	31,084	$	108,033	$	177,239	$	11,115	$	31,233	$	135,591	$	289	$	178,228

The above table includes the Company’s operating leases and the amounts committed under those leases by each location: (1) the rental of our global headquarters in the Conventus Center for Collaborative Medicine in Buffalo, NY; (2) the rental of our R&D facility in the IC Development Centre in Hong Kong; (3) the rental of the Commercial Platform headquarters in Chicago, IL; (4) the rental of our clinical research headquarters in Cranford, NJ; (5) the rental of our clinical data management center in Taipei, Taiwan; (6) the rental of eight facilities of our contract research organization throughout Latin America; (7) the rental of our Global Supply Chain distribution office in Houston, TX; (8) the rental of our Global Supply Chain API manufacturing facility in Chongqing, China; and (9) the rental of other facilities and equipment located mainly in Buffalo, NY.

The long-term debt is comprised of (1) the principal and fees related to the ~~first and second tranche of~~three tranches drawn on our Senior Credit Agreement with Oaktree; (2) our credit arrangement with Chongqing Maliu Riverside Development and Investment Co., LTD; and (3) our mortgage assumed in connection with the acquisition of CDE.

The finance lease obligations represent the lease of various equipment for our facilities in and near Buffalo, NY.

The license fee obligations are due in connection with our in-licensing arrangements for certain of the Commercial Platform’s specialty products.

We do not maintain any off-balance sheet partnerships, arrangements, or other relationships with unconsolidated entities or others, often referred to as structured finance or special purpose entities, which are established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Our condensed consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets and liabilities, which are not readily apparent from other sources. We base our estimates and judgments on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ from these estimates under different assumptions or conditions.

We believe that the assumptions and estimates associated with R&D expenses, chargebacks, stock-based compensation and inventory reserves have the most significant impact on our condensed consolidated financial statements. Therefore, we consider these to be our critical accounting policies and estimates.

Contingent consideration arising from a business acquisition is included as part of the purchase price and is recorded at fair value as of the acquisition date. Subsequent to the acquisition date, the Company remeasures contingent consideration arrangements at fair value at each reporting period until the contingency is resolved. The changes in ~~our critical accounting policies~~fair value are recognized within selling, general, and ~~estimates as compared to~~administrative expenses in the ~~critical accounting policies~~Company’s consolidated statement of operations and ~~estimates disclosed~~comprehensive loss. Changes in ~~Management’s Discussion~~fair values reflect new information about the likelihood of the payment of the contingent consideration and ~~Analysis~~the passage of ~~Financial Condition and Operations included in our Annual Report on Form 10-K for the year ended December 31, 2020.~~time.

In the normal course of business, we evaluate all new accounting pronouncements issued by the FASB, the SEC, or other authoritative accounting bodies to determine the potential impact they may have on our condensed consolidated financial statements.

A significant portion of our business is located outside the United States and, as a result, we generate revenue and incur expenses denominated in currencies other than the U.S. dollar, a majority of which is denominated in Chinese Renminbi (“RMB”). In the ~~three~~six months ended ~~March 31,~~June 30, 2021 and 2020, approximately 0% and 1%, respectively, of our sales, excluding intercompany sales, were denominated in foreign currencies. As a result, our revenue can be impacted by fluctuations in foreign currency exchange rates. We expect that foreign currencies will represent a lower percentage of our sales in the future due to the anticipated growth of our U.S. business. Our international selling, marketing, and administrative costs related to these sales are largely denominated in the same foreign currencies, which somewhat mitigates our foreign currency exchange risk rate exposure.

A portion of our revenues and expenses, and a portion of our assets and liabilities are denominated in RMB. The People’s Republic of China (“PRC”) government uses a single rate of exchange as quoted daily by the People’s Bank of China, (“PBOC”). The PRC imposes a number of procedural requirements that limit the ability to readily convert RMB into U.S. dollars or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approvals of foreign currency payments by the PBOC or other institutions require submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

Additionally, the value of the RMB is subject to changes in PRC central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

We had cash, cash equivalents, restricted cash, and short-term investments of ~~$187.7~~$146.7 million as of ~~March 31,~~June 30, 2021. Our primary exposure to market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. However, because of the short-term nature of the instruments in our portfolio, a sudden change in U.S. market interest rates is not expected to have a material impact on our condensed consolidated financial condition or results of operations. We do not believe that our cash or cash equivalents have significant risk of default or illiquidity.

Our management, with the participation of our Chief Executive Officer and Board Chairman (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer), evaluated the effectiveness of our disclosure controls and procedures as of ~~March 31,~~June 30, 2021. The term “disclosure controls and procedures,” as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well-designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of ~~March 31,~~June 30, 2021, our Chief Executive Officer and Board Chairman (Principal Executive Officer) and our Chief Financial Officer (Principal Financial and Accounting Officer) concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

On May 4, 2021, the Company entered into the Merger Agreement with Kuur Therapeutics, Inc., a Delaware corporation (“Kuur”) whereby it acquired 100% of the outstanding shares of Kuur. Under the terms of the Merger Agreement, the Company’s wholly owned subsidiary, Athenex Pharmaceuticals LLC, a Delaware limited liability company, merged with and into Kuur, with Kuur surviving as a wholly owned subsidiary of the Company. We are currently integrating Kuur into our operations and internal control processes and, pursuant to the Securities and Exchange Commission staff interpretative guidance that assessment of a recently acquired business may be omitted from the scope of an assessment for a period not to exceed one year from the date of acquisition, the scope of our assessment of our internal controls over financial reporting at June 30, 2021 does not include Kuur.

~~There~~Except for internal controls related to integration activities associated with our acquisition of Kuur, there were no changes in ~~our~~the Company's internal ~~control~~controls over financial reporting ~~identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred~~ during the fiscal quarter ended ~~March 31,~~June 30, 2021, that have materially affected, or are reasonably likely to materially affect, ~~our internal control over financial reporting. We have not experienced any material impact to our~~the Company's internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID-19 pandemic. We are continually monitoring and assessing the COVID-19 situation on our internal controls to minimize the impact on their design and operating effectiveness.reporting.

Following our receipt of the CRL in February 2021 and the subsequent decline of the market price of the Company’s common stock, two purported securities class action lawsuits were filed in the U.S. District Court for the Western District of New York on March 3, 2021 and March 22, 2021, respectively, against the Company and certain members of its management team seeking to recover damages for alleged violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.

The complaints generally allege that between August 7, 2019 and February 26, 2021 (the purported class period), the Company and the individual defendants made materially false and misleading statements regarding the Company's business in connection with the Company’s development of Oral Paclitaxel for the treatment of metastatic breast cancer and the likelihood of FDA approval, and that the plaintiffs suffered losses when the Company’s stock price dropped after its announcement on February 26, 2021 regarding receipt of the CRL. The complaints seek class certification, damages, fees, costs, and expenses. Motions to appoint a lead plaintiff and consolidate the two cases were fully briefed as of May 17, 2021, and are now pending before the court. The defendants expect that the court will issue an order consolidating these two lawsuits ~~will be consolidated~~ and appointing a lead plaintiff ~~appointed~~ in the coming months. Additional similar lawsuits might be filed. The Company and the individual defendants believe that the claims in these lawsuits are without merit, and the Company has not recorded a liability related to ~~the lawsuits~~this shareholder class action lawsuit as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims but there can be no assurances as to the outcome.

On June 3, 2021, a shareholder derivative lawsuit was filed in the United States District Court for the District of Delaware by Timothy J. Wonnell, allegedly on behalf of the Company, that piggy-backs on the securities class actions referenced above. The complaint names Johnson Lau, Rudolf Kwan, Timothy Cook, and members of the Board as defendants, and generally alleges that they caused or failed to prevent the securities law violations asserted in the securities class actions. The Company and the individual defendants believe the claims are without merit, and the Company has not recorded a liability related to this lawsuit as the risk of loss is remote. The Company and the individual defendants intend to vigorously defend against these claims but there can be no assurances as to the outcome.

For a discussion of the Company’s potential risks or uncertainties, please ~~see~~see: (i) “Part I—Item 1A—Risk Factors” and “Part II—Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the ~~SEC~~SEC; (ii) “Part II—Item 1A—Risk Factors” and “Part I—Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021 filed with the SEC; and (iii) the additional risks described below.

We face litigation and legal proceedings and, while we cannot predict the outcomes of such proceedings and other contingencies with certainty, some of these outcomes could adversely affect our business and financial condition.

Following our receipt of the CRL in February 2021 and the subsequent decline of the market price of the Company’s common stock, two purported class action lawsuits were filed in the U.S. District Court for the Western District of New York on March 3, 2021 and March 22, 2021, respectively, against the Company and certain members of its management team. Defending against these and any future lawsuits and legal proceedings may involve significant expense, be disruptive to our business operations and divert our management's attention and resources. Negative publicity surrounding such legal proceedings may also harm our reputation, our stock price, and adversely impact our business and financial condition.

Further, we cannot predict with certainty the outcomes of these legal proceedings. The outcome of some of these legal proceeding could require us to take, or refrain from taking, actions which could negatively affect our operations or could require us to pay substantial amounts of money adversely affecting our financial condition and results of operations.

The resurgence of COVID-19 in India and other countries where we source supplies may create supply chain risk and disruption risks.

The recent surge of COVID-19 cases in India during the first quarter and continuing throughout the second quarter, a country where we source supplies and maintain partnerships that are key to our generics business, including API, presents business and supply chain disruption risks for the Company to the extent the virus is not able to be contained, there is widespread sickness and disruptions on operations and also in the event state governments in India impose additional lockdowns, restrictions on the operations of businesses and other containment measures to combat the spread of the virus. The scope and impact of any such measures is not yet

known and will depend on a number of factors, including the ultimate spread and severity of the outbreaks in India and the scope, duration and impact of containment measures on individuals and businesses. If our partners in India experience significant or extended disruptions to their business due to COVID-19, it could result in substantial supply shortages and harm our generics business, as well as our overall financial condition and results of operations.

The Kuur acquisition will increase our capital requirements and failure to successfully integrate Kuur’s business and operations may adversely affect the combined Company’s future results.

We believe that the acquisition of Kuur will result in certain benefits, including certain cost synergies, drive product innovations, and operational efficiencies. However, to realize these anticipated benefits, the businesses of will depend on the Company’s ability to successfully integrate Kuur’s business. We may fail to realize the anticipated benefits of the acquisition in our expected time frame, if at all, for a variety of reasons and the acquisition subjects the Company to a number of additional risks, including the following:

The integration may result in additional and unforeseen expenses or delays. If Athenex is not able to successfully integrate Kuur’s business and operations, or if there are delays in combining the businesses, the anticipated benefits of the Merger may not be realized fully or at all or may take longer to realize than expected.

Our access to additional capital under the Senior Credit Agreement, Sagard Revenue Interest Financing Agreement and our out-licensing agreements is dependent on the fulfillment of certain conditions, where applicable, and achievement of certain milestones, some of which may be difficult to achieve in the near term, if at all.

Under our senior secured loan agreement, dated June 19, 2020 and related securities agreements with Oaktree Fund Administration, LLC, as administrative agent, and the lenders party thereto (the “Senior Credit Agreement”), the Revenue Interest Financing Agreement entered into with Sagard on August 4, 2020 (the “Revenue Interest Financing Agreement”) and our out-licensing arrangements, our ability to access additional capital is dependent on our ability to achieve various regulatory and commercial milestones related to our Oral Paclitaxel program, and there is substantial uncertainty whether we will be able to achieve such milestones. Our Senior Credit Agreement provides that we must meet funding conditions related to the approval and commercialization of Oral Paclitaxel to draw down the remaining $75.0 million of commitments under Senior Credit Agreement. Each of the Senior Credit Agreement and the Revenue Interest Financing Agreement entered into with Sagard on August 4, 2020 (the “Revenue Interest Financing Agreement”) also require bringdowns of various representations and warranties as a condition to funding and our access to funding under the Revenue Interest Financing Agreement is dependent on the approval of Oral Paclitaxel. The Revenue Interest Financing Agreement also provides Sagard with a termination right in the event we do not receive a marketing authorization for Oral Paclitaxel by December 31, 2021. Given that the FDA is requiring us to complete an additional clinical trial, there is a substantial likelihood that we will not be able to receive FDA approval by this date, the agreement will be subject to Sagard’s right of termination and we will generally not be able to access additional funds under our financing arrangements until we receive FDA approval of Oral Paclitaxel.

Further, in the event we do not meet the funding conditions and/or achieve the various commercial and regulatory milestones in our out-licensing agreements, in which case we will need to raise additional capital and can provide no assurances that we will be able to do so when needed or on acceptable terms. In the event we are unable to access additional capital we would be forced to delay, reduce or eliminate our research and drug development programs or commercialization efforts. In addition, the failure to meet these conditions and milestones would have broader implications on the value and prospects of our Company and could impair our ability to raise such additional necessary capital, grow our business, retain key employees and continue our operations.

The FDA may require a trial design that is cost prohibitive to our ability to commercialize Oral Paclitaxel for MBC.

During the second quarter of 2021, the Company held a Type A meeting with the FDA in response to its CRL regarding the Company’s NDA for Oral Paclitaxel. The Company’s ability to potentially commercialize Oral Paclitaxel for the treatment of metastatic breast cancer, and the timing of such potential commercialization, is dependent on our ability to reach an agreement with the FDA on the path forward for the program, the requirements and progress of a potential new clinical study, the Company’s resubmission of its NDA, ultimate FDA approval, and potentially additional capital. The FDA may require a trial design that will be cost prohibitive or significantly delay any FDA approval for MBC such that we decide not to continue our efforts to commercialize Oral Paclitaxel for this indication, which could have materially and adversely impact our prospects. For additional information, please see “Financial Statements—Note 1—Company and Nature of Business”.

Manufacturing risks, including our inability to manufacture API used in the clinical trials of our proprietary product candidates could adversely affect our ability to commercialize our products and product candidates.

Our business strategy depends on our ability to manufacture API in sufficient quantities and on a timely basis so as to meet our needs to manufacture our product candidates for our clinical trials and to meet consumer demand for our products, while adhering to product quality standards, complying with regulatory requirements and managing manufacturing costs. We are subject to numerous risks relating to our manufacturing capabilities, including:

In addition, we conduct manufacturing operations at our facilities in Chongqing, China to manufacture API. As a result, our business is subject to risks associated with those facilities in particular and doing business in China generally, including:

We recently received verbal notice from the DEMC in July 2021 that we will be required to terminate the production activities at our Taihao API facility at the end 2021. We are engaging in a dialogue with the DEMC but if we are unable to continue production activities, we will need to incur significant capital expenditures to move production lines, including that of our tirbanibulin API, to our Sintaho API facility, and we may experience supply chain issues as a result which could impair our ability to meet our supply obligations to our partners.

These risks are likely to be exacerbated by our limited experience with our current products and manufacturing processes. If, as we expect, our need for API increases, or demand for our products increase, we will have to invest additional resources to purchase components, hire and train employees and enhance our manufacturing processes and may have to use alternate suppliers of API to meet our needs. If we fail to increase our production capacity efficiently, our sales may not increase in line with our forecasts and our operating margins could fluctuate or decline. Any of these factors may affect our ability to manufacture our product and could reduce our revenues and profitability.

~~Not applicable~~On May 4, 2021 we consummated the acquisition of Kuur, and in connection with such acquisition we issued in a private placement: (i) 14,228,066shares of common stock of the Company to the stockholders of Kuur, valued at $52,786,124 based on a per share price of$3.71;and (ii) 1,373,601 shares of common stock of the Company to certain key employees and certain directors of Kuur valued at $5,645,500 based on a per share price of $4.11. The shares were issued in reliance upon the exemption under Section 4(a)(2) of the Securities Act. For additional information, please see “Part I, Item 1, Note 5—Business Combination.”

The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth below.

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.

Delaware	43-1985966
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1001 Main Street, Suite 600 Buffalo, NY	14203
(Address of principal executive offices)	(Zip Code)

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common Stock, par value $0.001 per share		ATNX		The Nasdaq Global Select Market

		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets (Unaudited)	1
	Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)	2
	Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)	3
	Condensed Consolidated Statements of Cash Flows (Unaudited)	4
	Notes to Condensed Consolidated Financial Statements (Unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	2427
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	3442
Item 4.	Controls and Procedures	3542
PART II.	OTHER INFORMATION	3643
Item 1.	Legal Proceedings	3643
Item 1A.	Risk Factors	3643
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3646
Item 3.	Defaults Upon Senior Securities	3646
Item 4.	Mine Safety Disclosures	3646
Item 5.	Other Information	3746
Item 6.	Exhibits	3847
Signatures		4048

Initial Allocation of Consideration:
Stock issued (14,228,066 shares at $3.71)	$	52,786
Contingent consideration		19,839
Purchase price:	$	72,625
Net assets acquired:
Cash and cash equivalents	$	1,425
Prepaid expenses and other current assets		133
In-process research & development		63,500
Accounts payable		(39	)
Accrued expenses		(1,037	)
Deferred income tax liability		(12,717	)
Transaction incentive liability		(8,925	)
Total identifiable net assets		42,340
Goodwill		30,285
Total purchase price allocation	$	72,625

Unaudited pro forma financial information	Three Months Ended June 30,						Six Months Ended June 30,
(Athenex and Kuur Consolidated)	2021			2020			2021			2020
Consolidated revenue	$	21,923		$	40,172		$	62,948		$	88,157
Consolidated net loss	$	(31,261	)	$	(35,682	)	$	(58,197	)	$	(55,502	)

Balance as of May 4, 2021	$	19,839
Adjustment to fair value		398
Balance as of June 30, 2021	$	20,237

	For the Six Months Ended June 30, 2021
	(In Thousands)
	Oncology Innovation Platform		Global Supply Chain Platform		Commercial Platform		Consolidated Total
United States	$	20,444	$	9,829	$	29,050	$	59,323
South Korea		—		1,112		—		1,112
India		—		906		—		906
China		17		841		—		858
Other foreign countries		510		239		—		749
Total revenue	$	20,971	$	12,927	$	29,050	$	62,948

	For the Six Months Ended June 30, 2020
	(In Thousands)
	Oncology Innovation Platform		Global Supply Chain Platform		Commercial Platform		Consolidated Total
United States	$	—	$	4,700	$	38,822	$	43,522
China		28,314		324		—		28,638
United Kingdom		—		—		12,933		12,933
South Korea		—		1,693		—		1,693
Other foreign countries		79		242		—		321
Total revenue	$	28,393	$	6,959	$	51,755	$	87,107

	Six Months Ended June 30
	2021			2020
	(in thousands)
Net cash used in operating activities	$	(69,090	)	$	(70,068	)
Net cash provided by investing activities		74,728			18,125
Net cash provided by financing activities		1,449			41,573
Net effect of foreign exchange rate changes		267			(403	)
Net increase (decrease) in cash, cash equivalents, and restricted cash	$	7,354		$	(10,773	)

		Incorporated by Reference (Unless Otherwise Indicated)
Exhibit Number	Exhibit Title	Form	File	Exhibit	Filing Date

10.1	Manufacture and Supply Agreement dated as of January 15, 2021 by and between Athenex Pharmaceutical Division, LLC and Ingenus Pharmaceuticals, LLC.	Form 10-K	001-38112	10.52	March 1, 2021

10.2	Second Amendment to License Agreement dated as of February 15, 2021 by and between Athenex, Inc. and PharmaEssentia Corp.	—	—	—	Filed herewith

10.3	Agreement and Plan of Merger, by and among Athenex, Inc., Athenex Pharmaceuticals LLC, Kuur Therapeutics, Inc., the holders of the shares of Series C Preferred Stock or Series C-1 Preferred Stock (the “Merger Stockholders”), Kevin S. Boyle, Sr., Kurt C. Gunter and Melinda K. Lackey (the “Key Employees”), the members of the Company Board (as defined therein) (the “Independent Company Directors”) and Shareholder Representative Services LLC, solely as representative, agent and attorney-in-fact of the Merger Stockholders, Key Employees and Individual Company Directors, dated May 4, 2021.	Form 8-K	001-38112	10.1	May 5, 2021

10.4	Lock-Up Agreement between Athenex, Inc. and Touchstone Innovations Businesses LLP (IP Group), dated May 4, 2021.	Form 8-K	001-38112	10.2	May 5, 2021

10.5	Lock-Up Agreement between Athenex, Inc. and each of the parties named therein, dated as of May 4, 2021.	Form 8-K	001-38112	10.3	May 5, 2021

31.1	Certification of the Chief Executive Officer and Board Chairman (Principal Executive Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith

31.2	Certification of the Chief Financial Officer (Principal Financial and Accounting Officer) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith

32.1	Certification of the Chief Executive Officer and Board Chairman (Principal Executive Officer) and the Chief Financial Officer (Principal Financial and Accounting Officer) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.	—	—	—	Filed herewith

101.INS	Inline 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.	—	—	—	Filed herewith

101.SCH	Inline XBRL Taxonomy Extension Schema Document.	—	—	—	Filed herewith

101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document.	—	—	—	Filed herewith

101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document.	—	—	—	Filed herewith

101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document.	—	—	—	Filed herewith

101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document.	—	—	—	Filed herewith

104	Cover Page Interactive Data File (embedded within the Inline XBRL document)	—	—	—	Filed herewith

	Athenex, Inc.

Date: ~~May 6,~~August 5, 2021	By:	/s/ Johnson Y.N. Lau
		Chief Executive Officer and Board Chairman (Principal Executive Officer)

Date: ~~May 6,~~August 5, 2021	By:	/s/ Randoll Sze
		Chief Financial Officer (Principal Financial and Accounting Officer)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Small reporting company

Emerging growth company