CASI Pharmaceuticals 10Q 2021 Q3 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2021

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

For the transition period from ___________ to _____________.

Commission file number 0-20713

CASI PHARMACEUTICALS, INC.

(Exact name of registrant as specified in its charter)


Delaware	58-1959440
(State or other jurisdiction of	(I.R.S. Employer Identification No.)
incorporation or organization)

9620 Medical Center Drive, Suite 300

Rockville, Maryland

(Address of principal executive offices)

20850

(Zip code)

(240) 864-2600

(Registrant’s telephone number, including area code)

(Former name, former address and former fiscal year, if changed since last report)

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


Title of each class	Trading Symbol(s)	Name of exchange on which registered
Common Stock	CASI	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ⌧ NO ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ⌧ NO ◻

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


Large accelerated filer ◻	Accelerated filer ◻	Non-accelerated filer þ	Smaller reporting company ☑
			Emerging growth company ☐

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

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

YES ☐ NO ⌧

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the most recent practicable date.



Class		Outstanding at November 8, 2021
Common Stock $.01 Par Value		139,797,487

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CASI PHARMACEUTICALS, INC.

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		PAGE
PART I. FINANCIAL INFORMATION		4

Item 1 --	Consolidated Financial Statements	4

Unaudited Condensed Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020		4

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss for the Three and Nine months ended September 30, 2021 and 2020		5

Unaudited Condensed Consolidated Statements of Stockholders’ Equity for the Three and Nine months ended September 30, 2021 and 2020		6

Unaudited Condensed Consolidated Statements of Cash Flows for the Nine months ended September 30, 2021 and 2020		8

Notes to Unaudited Condensed Consolidated Financial Statements		9

Item 2 --	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3 --	Quantitative and Qualitative Disclosures About Market Risk	35

Item 4 --	Controls and Procedures	35

Part II. OTHER INFORMATION		36

Item 1 --	Legal Proceedings	36

Item 1A --	Risk Factors	36

Item 2 --	Unregistered Sales of Equity Securities and Use of Proceeds	36

Item 3 --	Defaults Upon Senior Securities	36

Item 4 --	Mine Safety Disclosures	36

Item 5 --	Other Information	36

Item 6 --	Exhibits	37

SIGNATURES		38

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TRADEMARKS AND SERVICE MARKS

We own or have rights to trademarks and trademark applications for use in connection with the operation of our business, including, but not limited to, CASI and CASI PHARMACEUTICALS. All other trademarks appearing in this Quarterly Report on Form 10-Q that are not identified as marks owned by us are the property of their respective owners.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements also may be included in other statements that we make. All statements that are not descriptions of historical facts are forward-looking statements. These statements can generally be identified by the use of forward-looking terminology such as “believes,” “expects,” “intends,” “may,” “will,” “should,” or “anticipates” or similar terminology. These forward-looking statements include, among others, statements regarding the timing of our commercial launch of products, clinical trials, our cash position and future expenses, and our future revenues.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made, and we assume no duty to update forward-looking statements. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

Actual results could differ materially from those currently anticipated due to a number of factors, including: the risk that we may be unable to continue as a going concern as a result of our inability to raise sufficient capital for our operational needs; the possibility that we may be delisted from trading on The Nasdaq Capital Market if we fail to meet continued listing standards; the volatility in the market price of our common stock; the outbreak of the COVID-19 pandemic and its effects on global markets and supply chains; the risk of substantial dilution of existing stockholders in future stock issuances; the difficulty of executing our business strategy on a global basis including China; our inability to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates or future candidates; legal or regulatory developments in China that adversely affect our ability to operate in China, our lack of experience in manufacturing products and uncertainty about our resources and capabilities to do so on a clinical or commercial scale; risks relating to the commercialization, if any, of our products and proposed products (such as marketing, safety, regulatory, patent, product liability, supply, competition and other risks); our inability to predict when or if our product candidates will be approved for marketing by the U.S. Food and Drug Administration (FDA), European Medicines Agency (EMA), National Medical Products Administration (NMPA), or other regulatory authorities; our inability to enter into strategic partnerships for the development, commercialization, manufacturing and distribution of our proposed product candidates or future candidates; the risks relating to the need for additional capital and the uncertainty of securing additional funding on favorable terms; the risks associated with our product candidates, and the risks associated with our other early-stage products under development; the risk that result in preclinical and clinical models are not necessarily indicative of clinical results; uncertainties relating to preclinical and clinical trials, including delays to the commencement of such trials; our ability to protect our intellectual property rights; our ability to design and implement a development plan for our ANDAs held by CASI Wuxi; the lack of success in the clinical development of any of our products; and our dependence on third parties; the risks related to our dependence on Juventas to conduct the clinical development of CNCT19 and to partner with us to co-market CNCT19; risks related to our dependence on Juventas to ensure the patent protection and prosecution for CNCT19; risks relating to the commercialization, if any, of our proposed products (such as marketing, safety, regulatory, patent, product liability, supply, competition and other risks); risks relating to interests of our largest stockholders and our Chairman and CEO that differ from our other stockholders; and risks related to the development of a new manufacturing facility by CASI Wuxi. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition.

We caution readers not to place undue reliance on any forward-looking statements, which only speak as of the date made. Additional information about the factors and risks that could affect our business, financial condition and results of operations, are contained in our filings with the SEC, including, but not limited to, our Annual Reports on Form 10-K, our Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K, each of which is available at www.sec.gov.

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PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Balance Sheets

(In thousands, except share and per share data)



	September 30, 2021		December 31, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	53,126	$	57,064
Investment in equity securities, at fair value		9,503		9,309
Accounts receivable, net of $0 allowance for doubtful accounts		5,418		4,645
Inventories		1,727		1,356
Prepaid expenses and other		2,190		1,651
Total current assets		71,964		74,025

Property, plant and equipment, net		6,778		2,062
Intangible assets, net		12,358		13,210
Long-term investments		34,177		29,442
Right of use assets		9,499		8,696
Other assets		1,498		299
Total assets	$	136,274	$	127,734

LIABILITIES, REDEEMABLE NONCONTROLLING INTEREST AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	6,324	$	3,669
Accrued and other current liabilities		2,550		3,015
Bank borrowings		1,084		826
Notes payable		—		466
Total current liabilities		9,958		7,976

Deferred income		2,342		2,351
Other liabilities		14,460		13,834
Total liabilities		26,760		24,161

Commitments and contingencies (Note 19)

Redeemable noncontrolling interest, at redemption value (Note 11)		22,907		22,033

Stockholders’ equity:
Preferred stock, $1.00 par value: 5,000,000 shares authorized and 0 shares issued and		0		0
outstanding
Common stock, $0.01 par value:
250,000,000 shares authorized at September 30, 2021 and December 31, 2020
139,877,032 shares and 124,023,374 shares issued at September 30, 2021 and December 31, 2020, respectively;
139,797,487 shares and 123,943,829 shares outstanding at September 30, 2021 and December 31, 2020, respectively		1,399		1,240
Additional paid-in capital		692,041		658,246
Treasury stock, at cost: 79,545 shares held at September 30, 2021 and December 31, 2020		(8,034)		(8,034)
Accumulated other comprehensive income		1,169		589
Accumulated deficit		(599,968)		(570,501)
Total stockholders’ equity		86,607		81,540
Total liabilities, redeemable noncontrolling interest and stockholders' equity	$	136,274	$	127,734

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)


	Three Months Ended September 30					Nine Months Ended September 30
	2021		2020			2021		2020
Revenues:
Product sales	$	8,075	$	4,205		$	20,900	$	10,215
Lease income		37		37			110		104
Total revenues		8,112		4,242			21,010		10,319

Costs of revenues:
Cost of goods sold		1,831		1,012			4,625		5,549
Royalty fee		1,586		816			4,132		2,007
Total costs of revenues		3,417		1,828			8,757		7,556

Operating expenses:
Research and development		2,895		2,803			10,408		7,682
General and administrative		5,259		5,347			16,184		13,490
Selling and marketing		3,433		2,062			9,508		4,879
Loss on disposal of property, plant, equipment		—		—			65		—
Gain on disposal of intangible assets		0		0			0		(450)
Impairment of intangible assets		—		—			—		1,537
Acquired in-process research and development		0		10,862			6,555		11,943
Total operating expenses		11,587		21,074			42,720		39,081

Loss from operations		(6,892)		(18,660)			(30,467)		(36,318)
Non-operating income/(expense):
Interest income, net		79		432			261		775
Other income		487		20			540		47
Foreign exchange gains (losses)		(6)		(526)			289		(278)
Change in fair value of investments		(3,687)		1,978			(205)		2,287
Impairment loss of long-term investments		—		—			(865)		—
Net loss		(10,019)		(16,756)			(30,447)		(33,487)
Less: loss attributable to redeemable noncontrolling interest		(314)		(309)			(980)		(584)
Accretion to redeemable noncontrolling interest redemption value		519		506			1,586		1,185
Net loss attributable to CASI Pharmaceuticals, Inc.	$	(10,224)	$	(16,953)		$	(31,053)	$	(34,088)
					��
Net loss per share (basic and diluted)	$	(0.07)	$	(0.14)		$	(0.23)	$	(0.32)
Weighted average number of common shares outstanding (basic and diluted)		139,797,487		117,940,405			134,861,366		105,922,281

Comprehensive loss:
Net loss	$	(10,019)	$	(16,756)		$	(30,447)	$	(33,487)
Foreign currency translation adjustment		15		2,383			848		1,221
Total comprehensive loss	$	(10,004)	$	(14,373)		$	(29,599)	$	(32,266)
Less: Comprehensive loss attributable to redeemable noncontrolling interest		(309)		(309)			(712)		(584)
Comprehensive loss attributable to common stockholders	$	(9,695)	$	(14,064)		$	(28,887)	$	(31,682)

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Stockholders’ Equity

(In thousands, except share data)


													Accumulated
									Additional				Other
	Preferred Stock				Common Stock				Paid-in		Treasury		Comprehensive		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Loss		Deficit		Total
Balance at June 30, 2021		—	$	—		139,797,487	$	1,399	$	690,539	$	(8,034)	$	1,159	$	(590,263)	$	94,800
Stock-based compensation expense, net of forfeitures		—		—		—		—		2,021		—		—		—		2,021
Foreign currency translation adjustment		—		—		—		—		—		—		10		—		10
Net loss attributable to CASI Pharmaceuticals, Inc.		—		—		—		—		(519)		—		—		(9,705)		(10,224)
Balance at September 30, 2021		—	$	—		139,797,487	$	1,399	$	692,041	$	(8,034)	$	1,169	$	(599,968)	$	86,607


													Accumulated
									Additional				Other
	Preferred Stock				Common Stock				Paid-in		Treasury		Comprehensive		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Loss		Deficit		Total
Balance at December 31, 2020		0	$	0		123,943,829	$	1,240	$	658,246	$	(8,034)	$	589	$	(570,501)	$	81,540
Issuance of common stock pursuant to financing agreements		—		—		15,853,658		159		32,341		0		0		0		32,500
Stock issuance costs		—		—		—		—		(2,019)		0		0		0		(2,019)
Stock-based compensation expense, net of forfeitures		0		0		0		0		5,059		0		0		0		5,059
Foreign currency translation adjustment		0		0		0		0		0		0		580		0		580
Net loss attributable to CASI Pharmaceuticals, Inc.		0		0		0		0		(1,586)		0		0		(29,467)		(31,053)
Balance at September 30, 2021		0	$	0		139,797,487	$	1,399	$	692,041	$	(8,034)	$	1,169	$	(599,968)	$	86,607

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													Accumulated
									Additional				Other
	Preferred Stock				Common Stock				Paid-in		Treasury		Comprehensive		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Loss		Deficit		Total
Balance at June 30, 2020		—	$	—		100,928,829	$	1,010	$	614,617	$	(8,034)	$	(3,890)	$	(540,364)	$	63,339
Issuance of common stock for options exercised		—		—		15,000		—		22		—		—		—		22
Issuance of common stock pursuant to financing agreements		—		—		23,000,000		230		43,470		—		—		—		43,700
Stock issuance costs		—		—		—		—		(2,757)		—		—		—		(2,757)
Stock-based compensation expense, net of forfeitures		—		—		—		—		1,793		—		—		—		1,793
Foreign currency translation adjustment		—		—		—		—		—		—		2,383		—		2,383
Net loss attributable to CASI Pharmaceuticals, Inc.		—		—		—		—		(506)		—		—		(16,447)		(16,953)
Balance at September 30, 2020		—	$	—		123,943,829	$	1,240	$	656,639	$	(8,034)	$	(1,507)	$	(556,811)	$	91,527


													Accumulated
									Additional				Other
	Preferred Stock				Common Stock				Paid-in		Treasury		Comprehensive		Accumulated
	Shares		Amount		Shares		Amount		Capital		Stock		Loss		Deficit		Total
Balance at December 31, 2019		0	$	0		97,771,698	$	979	$	606,686		(8,034)	$	(2,728)	$	(523,908)	$	72,995
Issuance of common stock for options and warrants exercised		—		—		2,737,795		27		3,847		—		—		—		3,874
Repurchase of stock options to satisfy tax withholding obligations		0		0		0		0		(251)		0		0		0		(251)
Issuance of common stock pursuant to financing agreements		—		—		23,434,336		234		44,865		—		—		—		45,099
Stock issuance costs		0		0		0		0		(3,008)		0		0		0		(3,008)
Stock-based compensation expense, net of forfeitures		0		0		0		0		5,685		0		0		0		5,685
Foreign currency translation adjustment		0		0		0		0		0		0		1,221		0		1,221
Net loss attributable to CASI Pharmaceuticals, Inc.		0		0		0		0		(1,185)		0		0		(32,903)		(34,088)
Balance at September 30, 2020		0	$	0		123,943,829	$	1,240	$	656,639	$	(8,034)	$	(1,507)	$	(556,811)	$	91,527

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

(In thousands)


	Nine Months Ended

	September 30, 2021		September 30, 2020
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(30,447)		(33,487)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation for property, plant and equipment		393		389
Loss on disposal of property, plant and equipment		65		—
Amortization of intangible assets		1,009		1,095
Reduction in the carrying amount of the right-of-use assets		1,031		973
Gain on disposal of intangible assets		—		(450)
Impairment of intangible assets		—		1,537
Stock-based compensation expense		5,059		5,685
Acquired in-process research and development		6,555		11,943
Government grant as a result of loan forgiveness		(472)		—
Change in fair value of investments		205		(2,287)
Impairment loss of long-term investments		865		—
Changes in operating assets and liabilities:
Accounts receivable		(773)		(2,785)
Inventories		(371)		3,822
Prepaid expenses and other assets		(539)		(434)
Accounts payable		26		(2,434)
Accrued liabilities and other liabilities		(1,770)		(1,398)
Deferred income		(37)		(23)
Net cash used in operating activities		(19,201)		(17,854)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from disposal of intangible assets		—		1,700
Proceeds from disposal of property and equipment		10		—
Purchases of property, plant and equipment		(3,730)		(367)
Loan to a related party		—		(10,033)
Receipt of repayment of loan from a related party		—		10,033
Cash paid to acquire in-process research and development		(6,555)		(11,678)
Cash paid to acquire convertible loan in Black Belt Tx Limited		(86)		(83)
Receipt of repayment of Black Belt convertible note		172		—
Cash paid to acquire convertible loan in Alesta Tx		(261)		—
Cash paid to acquire convertible loan in Cleave		(5,500)		—
Receipt of government grants related to land use right		—		2,278
Net cash used in investing activities		(15,950)		(8,150)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable		—		466
Proceeds from bank borrowings		709		—
Repayment of bank borrowings		(463)		—
Stock issuance costs		(2,019)		(2,800)
Proceeds from sale of common stock		32,500		45,099
Proceeds from exercise of stock options		—		3,874
Repurchase of stock options to satisfy tax withholding obligations		—		(251)
Net cash provided by financing activities		30,727		46,388

Effect of exchange rate change on cash and cash equivalents		486		587
Net increase (decrease) in cash and cash equivalents		(3,938)		20,971

Cash and cash equivalents at beginning of period		57,064		53,621
Cash and cash equivalents at end of period	$	53,126	$	74,592

Supplemental disclosure of cash flow information:
Interest paid	$	0	$	0
Income taxes paid	$	0	$	0

Non-cash investing activities:
Purchases of property, plant and equipment in accounts payable	$	2,680	$	—

See accompanying condensed notes.

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CASI Pharmaceuticals, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation, Organization and Principal Activities

Basis of Presentation

CASI Pharmaceuticals, Inc. (“CASI” or the “Company”) (Nasdaq: CASI) is a U.S. biopharmaceutical company focused on developing and commercializing innovative therapeutics and pharmaceutical products in China, the United States, and throughout the world. The Company is focused on acquiring, developing and commercializing products that augment its hematology/oncology therapeutic focus as well as other areas of unmet medical need. The Company is executing its plan to become a biopharmaceutical leader by launching medicines in the greater China market leveraging its China-based regulatory, clinical and commercial competencies and its global drug development expertise.

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its subsidiaries, in which CASI, directly or indirectly, has a controlling financial interest. These subsidiaries include Miikana Therapeutics, Inc. (“Miikana”), CASI Pharmaceuticals (China) Co., Ltd. (“CASI China”), CASI Pharmaceuticals (Wuxi) Co., Ltd. (“CASI Wuxi”), CASI Biopharmaceuticals (WUXI) Co., Ltd. (“CASI Biopharmaceuticals”), and CASI Pharmaceuticals (Hainan) Co., Ltd. (“CASI Hainan”). CASI China is a non-stock Chinese entity with 100% of its interest owned by CASI. CASI China received approval for a business license from the Beijing Industry and Commercial Administration in August 2012 and has operating facilities in Beijing. CASI Hainan is a wholly owned subsidiary of CASI China and was established in June 2021. CASI Biopharmaceuticals is a wholly owned subsidiary of CASI Wuxi and was established in April 2019. The Company controls CASI Wuxi through 80% voting rights (see Note 11). Accordingly, the financial statements of CASI Wuxi have been consolidated in the Company’s consolidated financial statements since its inception. All inter-company balances and transactions have been eliminated in consolidation. The Company currently operates in 1 operating segment, which is the development of innovative therapeutics addressing cancer and other unmet medical needs for the global market.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, such condensed consolidated financial statements do not include all of the information and disclosures required by U.S. generally accepted accounting principles for complete consolidated financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. The accompanying December 31, 2020 financial information was derived from the Company’s audited financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the consolidated balance sheet of the Company as of December 31, 2020 and the related consolidated statements of operations and comprehensive loss, stockholders’ equity and cash flows for the year ended December 31, 2020.

Liquidity Risks and Management’s Plans

In 2012, with new leadership, the Company shifted its business strategy to China and has since built an infrastructure in China that includes sales and marketing, medical affairs, regulatory and clinical development and in the foreseeable future, distribution and manufacturing. The majority of the Company’s operations are now located in China. The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing clinical and development activities and expansion of the Company’s operations. The Company’s Beijing office is primarily responsible for the Company’s day-to-day operations and the Company’s commercial team of over 100 hematology/oncology sales and marketing specialists based in China. CASI Wuxi is part of the long-term strategy to support the Company’s future clinical and commercial distribution and manufacturing needs, to manage the Company’s supply chain for certain products, and to develop a GMP manufacturing facility in China.

The Company has primarily funded its operations through the proceeds from the sales of common stock. To date, the Company has product revenue and management expects operating losses to continue for the foreseeable future.

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with the terms of the sales agreement, the Company may offer and sell shares of common stock having an aggregate offering price of not more than $20,000,000.

Taking into consideration the cash and cash equivalents balance as of September 30, 2021, the Company believes that it has sufficient resources to fund its operations at least one year beyond the date that the unaudited condensed consolidated financial statements are issued. As of September 30, 2021, the Company had a consolidated cash balance of $53.1 million. The Company intends to continue to exercise tight controls over operating expenditures and will continue to pursue opportunities, as required, to raise additional capital and will also actively pursue non- or less-dilutive capital raising arrangements.

Risks and Uncertainties

The Company has experienced operational interruptions as a result of COVID-19, including the temporary disruption of operations in China during 2020 due to a Chinese government mandated quarantine protocol, including mandatory business closures, social distancing measures, and various travel restrictions. In the first quarter 2020, during which the peak of the pandemic occurred in China, the Company experienced some disruptions to its EVOMELA^® marketing and sales activities due to travel restrictions and the prioritization of hospitals and physicians to attend to patients with COVID-19 infection. Although the Company's operations in China have normalized, there can be no assurance that such operations will continue to do so.

To the extent that such events occur, demand for the Company's products may decline, and the Chinese government or other governments may impose additional restrictions resulting in further shutdowns, further work restrictions, and the disruption of the Company’s supply and distribution channels; there can be no assurance that such restrictions will not be imposed again.

The Company currently relies on a single source for its supply of EVOMELA^®. If the supplier refuses or is unable to provide products for any reason (including the occurrence of an event like the COVID-19 pandemic that makes delivery impractical), the Company would be required to negotiate an agreement with a substitute supplier and obtain regulatory approval for the manufacturing change, which would likely interrupt the manufacturing of EVOMELA^® , cause delays and increase costs.

The COVID-19 pandemic has adversely affected, and may continue to adversely affect, the economies and financial markets of many countries, which may result in a period of regional, national, and global economic slowdown or regional, national, or global recessions that could affect the Company's ability to continue to commercialize and expand distribution of EVOMELA^® (Melphalan For Injection) or other drugs in the Company’s existing product pipeline. The effectiveness of the Company's sales teams may be negatively impacted by the lack of travel and their reduced ability to engage with decision-makers. In addition, economic and other uncertainties may adversely affect other parties' willingness to negotiate and execute product licenses and thus hamper the Company's ability to in-license clinical-stage and late-stage drug candidates in China or elsewhere.

Clinical trials, whether planned or ongoing, may be affected by the COVID-19 pandemic. The COVID-19 pandemic has also impacted the Company's targeted start time of its CID-103 trial due to the lock-down of many medical facilities in Europe. Study procedures (particularly any procedures that may be deemed non-essential), site initiation, participant recruitment and enrollment, participant dosing, shipment of the Company's product candidates, distribution of clinical trial materials, study monitoring, site inspections and data analysis may be paused or delayed due to changes in hospital or research institution policies, federal, state or local regulations, prioritization of hospital and other medical resources toward COVID-19 efforts, or other reasons related to the pandemic. In addition, there could be a potential effect of COVID-19 on the operations of the health regulatory authorities, which could result in delays of reviews and approvals, including with respect to the Company's product candidates. Any prolongation or de-prioritization of the Company's clinical trials or delay in regulatory review resulting from such disruptions could materially affect the development and approval of the Company's product candidates.

2. License and Distribution Agreements

Acrotech License Arrangements

The Company has product rights and perpetual exclusive licenses from Acrotech Biopharma L.L.C. (“Acrotech”) to develop and commercialize its commercial product EVOMELA® (Melphalan Hydrochloride For Injection) in the greater China region (which includes Mainland China, Taiwan, Hong Kong and Macau), as well as similar rights to assets ZEVALIN® (Ibritumomab Tiuxetan) and MARQIBO® (Vincristine Sulfate Liposome Injection). The exclusive licenses held by the Company were originally licensed from

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Spectrum Pharmaceuticals, which they later transferred to Acrotech. On December 3, 2018, the Company received NMPA’s approval for importation, marketing and sales in China and in August 2019 the Company launched EVOMELA® in China. The NMPA required post-marketing study is ongoing.

The Company is currently evaluating future development options for ZEVALIN® and MARQIBO® due to the evolving standard of care environment, the rare and niche indications for these products, potential US regulatory action and its commitment to prioritize resources.

China Resources Guokang Pharmaceuticals Co., Ltd

In March 2019, the Company entered into a three-year exclusive distribution agreement with China Resources Guokang Pharmaceuticals Co., Ltd (“CRGK”) to appoint CRGK on an exclusive basis as its distributor to distribute EVOMELA^® in the territory of the People’s Republic of China (excluding Hong Kong, Taiwan and Macau), subject to certain terms and conditions. The Company’s internal marketing and sales team are responsible for commercial activities, including, for example, direct interaction with Key Opinion Leaders (KOL), physicians, hospital centers and the generating of sales. Commercial sales of EVOMELA^® were launched in August 2019. For the three months ended September 30, 2021 and 2020, the Company recognized $8.1 million and $4.2 million of revenues from sales of EVOMELA® under this arrangement. For the nine months ended September 30, 2021 and 2020, the Company recognized $20.9 million and $10.2 million of revenues from sales of EVOMELA^® under this arrangement.

Juventas Cell Therapy

In June 2019, the Company entered into a license agreement for exclusive worldwide license to commercialize an autologous anti-CD19 T-cell therapy product (CNCT19) from Juventas Cell Therapy Ltd. (“Juventas”) (the “Juventas license agreement”). Juventas is a China-based company engaged in cell therapy.

In September 2020, Juventas and its shareholders (including CASI Biopharmaceuticals) agreed to certain terms and conditions required by a new third-party investor to facilitate the Series B financing of Juventas, pursuant to which the Company agreed to amend and supplement the original licensing agreement (the "Supplementary Agreement") by agreeing to pay Juventas certain percentage of profits generated from commercial sales of CNCT19. The Supplementary Agreement also specifies a minimum annual target net profit to be distributed to Juventas and certain other terms and obligations. In return, the Company obtained additional equity interests in Juventas (see Note 4).

Under the Supplementary Agreement, Juventas and the Company will jointly market CNCT19, including, but not limited to, establishing medical teams, developing medical strategies, conducting post-marketing clinical studies, establishing Standardized Cell Therapy Centers, establishing and training providers with respect to cell therapy, testing for cell therapy, and monitoring quality controls (cell collection and transfusion, etc.), and patient management (adverse reactions treatment, patients’ follow-up visits, and establishment of a database). The Company also will reimburse Juventas for a portion of Juventas’ marketing expenses as reviewed and approved by a joint commercial committee to be constituted. The Company will continue to be responsible for recruiting and establishing a sales team to commercialize CNCT19.

BioInvent International AB

In October 2020, the Company entered into an exclusive licensing agreement with BioInvent International AB (“BioInvent”) for the development and commercialization of novel anti-FcγRIIB antibody, BI-1206, in mainland China, Taiwan, Hong Kong and Macau. BioInvent is a biotechnology company focused on the discovery and development of first-in-class immune-modulatory antibodies for cancer immunotherapy. BI-1206 is BioInvent’s lead drug candidate and is being investigated in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda^® (pembrolizumab), in patients with solid tumors, and in a Phase 1/2a trial in combination with MabThera^® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL).

Under the terms of the agreement, BioInvent and CASI will develop BI-1206 in both hematological malignancies and solid tumors, with CASI responsible for commercialization in China and associated markets. CASI made a $5.9 million upfront payment in November 2020 to BioInvent and will pay up to $83 million in development and commercial milestone payments plus tiered royalties in the high-single to mid-double-digit range on net sales of BI-1206. Because BI-1206 underlying the acquired rights has not reached

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technological feasibility and has no alternative uses, the Company expensed $5.9 million as acquired in-process research and development in the fourth quarter of 2020.

Black Belt Therapeutics Limited

In April 2019, the Company entered into a license agreement with Black Belt Therapeutics Limited (“Black Belt”) for exclusive worldwide rights to CID-103, an investigational anti-CD38 monoclonal antibody (Mab) (formerly known as TSK011010). The Company expects that its clinical materials and commercial inventory will be supplied by one or more contract manufacturers with whom the Company has contracted with. Under the terms of the agreement, CASI obtained global rights to CID-103 for an upfront payment of 5 million euros ($5.7 million) as well as certain milestone and royalty payments. In June 2021, the Company achieved the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, and made $750,000 milestone payment in June 2021 and €250,000 ($298,000) payment in August 2021 under the terms of the agreement. Because CID-103 underlying the acquired rights has not yet reached technological feasibility and has no alternative uses, the Company expensed 5 million euros as acquired in-process research and development in the consolidated statement of operations and comprehensive loss for the year ended December 31, 2019, and $1.06 million as acquired in-process research and development in the unaudited consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2021.

Cleave Therapeutics, Inc.

In March 2021, the Company entered into an exclusive license with Cleave Therapeutics, Inc. (“Cleave”) for the development and commercialization of CB-5339, an oral novel VCP/p97 inhibitor, in both hematological malignancies and solid tumors, in Mainland China, Hong Kong, Macau and Taiwan. Cleave is a clinical-stage biopharmaceutical company focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in the treatment of patients with cancer.

CB-5339 is being evaluated by Cleave in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS). Because CB-5339 has not yet reached technological feasibility and has no alternative uses, the Company expensed $5.5 million as acquired in-process research and development in the accompanying consolidated statements of operations and comprehensive loss for the nine months ended September 30, 2021.

Pharmathen Global BV

On October 29, 2019, the Company entered into an exclusive distribution agreement with Pharmathen Global BV ("Pharmathen") for the development and distribution of octreotide long acting injectable (Octreotide LAI) microsphere in China. Octreotide LAI formulations, which are approved in various European countries, are considered a standard of care for the treatment of acromegaly and the control of symptoms associated with certain neuroendocrine tumors. Subject to regulatory and marketing approvals, the Company intends to advance and commercialize this established product in China.

The terms of the agreement include an upfront payment of 1 million euros which was paid by the Company in 2019, and up to 2 million euros of additional milestone payments, of which 1.5 million euros ($1.7 million) was expensed in the year ended December 31, 2020 as acquired in-process research and development following Pharmathen’s achievement of certain milestones. CASI is responsible for the development, import drug registration, product approval and commercialization in China. CASI has a 10-year non-royalty exclusive distribution period after the product launch at agreed supply costs for the first three years.

Riemser Pharma GmbH

In August 2019, the Company entered into a distribution agreement in China with Riemser Pharma GmbH (“Riemser”) to a novel formulation of thiotepa, a chemotherapeutic agent, which has multiple potential indications including use as a conditioning treatment for use prior to allogenic hematopoietic stem cell transplantation. Thiotepa has a long history of established use in the hematology/oncology setting. Pursuant to the distribution agreement, CASI obtained the exclusive distribution right of the products in China, and Riemser will be responsible for manufacturing and supplying CASI with clinical materials and commercial inventory. The Company is applying NADA registration and, subject to regulatory and marketing approvals, the Company intends to advance and commercialize this product in China.

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3. Summary of Significant Accounting Policies

Revenue Recognition

Product sales recognized in the consolidated statements of operations are considered revenue from contracts with customers and, accordingly, the Company recognizes revenue using the following steps:

●

Identification of the contract, or contracts, with a customer;

●

Identification of the performance obligations in the contract;

●

Determination of the transaction price, including the identification and estimation of variable consideration;

●

Allocation of the transaction price to the performance obligations in the contract; and

●

Recognition of revenue when the Company satisfies a performance obligation.

The Company recognizes revenue on sales of EVOMELA^® when the control of the product is transferred to the distributor, which occurs upon delivery of the product to the carrier appointed by the distributor, in an amount that reflects the consideration to which the Company expects to be entitled to in exchange for the product, excluding amounts collected on behalf of third parties (e.g. value-added taxes). Payment terms for these sales are due within 90 days. The arrangement does not include any variable consideration.

The costs of assurance type warranties that provide the customer the right to exchange purchased product that does not meet appropriate quality standards are recognized when they are probable and are reasonably estimable. As of September 30, 2021, the Company did not incur, and therefore did not defer, any material costs to obtain or fulfill contracts. The Company did not have any contract assets or contract liabilities as of September 30, 2021.

Use of Estimates

The preparation of unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The Company’s significant accounting estimates relate to recoverability of operating lease right-of-use assets, intangible assets and long-term investments, net realizable value and obsolescence allowance for inventory, deferred tax assets and valuation allowance, allowance for doubtful accounts, stock-based arrangements and fair value of investments. Management bases its estimates on historical experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results may differ from those estimates, and such differences may be material to the consolidated financial statements.

4. Investment in equity securities, at fair value and long-term investments

Investment in equity securities, at fair value

MaxCyte Inc.

The Company has an equity investment in the common stock of MaxCyte, a publicly traded company. The Company’s investment in this equity security is carried at its fair value, with changes in fair value reported in the statement of operations each reporting period.

The fair value of this security was measured using its quoted market price, a Level 1 input, and was $4.6 million as of September 30, 2021 and $2.7 million as of December 31, 2020 (see Note 17).

BioInvent International AB

In October 2020, in conjunction with its license agreement entered into with BioInvent (see Note 2), a publicly traded company, CASI made a $6.3 million investment (equivalent to SEK 53.8 million) to acquire 1.2 million new shares (after 25:1 reverse stock split) of BioInvent, and 14,700,000 warrants, each warrant with a right to subscribe for 0.04 shares (after 25:1 reverse stock split) in BioInvent within a period of five years.

The investments in the ordinary shares and warrants of BioInvent are carried at fair value, with changes in fair value reported in the statement of operations each reporting period. The fair value of the ordinary shares was measured using its quoted market price, a Level 1 input, and was $4.9 million as of September 30, 2021 and $6.6 million as of December 31, 2020 (see Note 17).

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The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. The fair value of the warrants was $352,000 as of September 30, 2021 (see Note 17), with assumptions including an expected life of 4.16 years, an assumed volatility of 44.95 %, and a risk-free interest rate of 0.0456 %.

The following table summarizes the Company’s investment in equity securities at Fair Value as of September 30, 2021:


				Gross
(In thousands)				unrealized		Aggregate fair
Description	Classification	Cost		gains (losses)		value
MaxCyte - equity interest	Investment	$	—	$	4,591	$	4,591
BioInvent - equity interest	Investment	$	5,661	$	(749)	$	4,912
Total						$	9,503

Unrealized gains or (losses) on the Company’s equity investment for the three months ended September 30, 2021 and 2020 were $(3,729,000) and $862,000. Unrealized gains or (losses) on the Company’s equity investment for the nine months ended September 30, 2021 and 2020 were $(294,000) and $1,171,000. Unrealized gains or (losses) on the Company’s equity investment are recognized as change in fair value of investment in equity securities in the accompanying unaudited condensed consolidated statements of operations and comprehensive loss.

Long-term investments

Long-term investments consisted of the following:


	September 30,		December 31,
(In thousands)	2021		2020
Available-for-sale debt securities:
Black Belt Tx Limited - convertible loan	$	264	$	83
Securities measured at fair value:
BioInvent International AB - warrants		352		840
Cleave Therapeutics, Inc. - convertible loan		5,589		—
Equity securities without readily determinable fair value:
Black Belt Tx Limited - equity interest		1,385		2,250
Juventas Cell Therapy Ltd - equity interest		26,375		26,059
Juventas Cell Therapy Ltd - put option		212		210
Total	$	34,177	$	29,442

Alesta Therapeutics B.V. (previously Black Belt Tx Limited)

In April 2019, in conjunction with its license agreement the Company entered into with Black Belt (see Note 2), the Company made a 2 million euros ($2,249,600) equity investment in the ordinary shares of a newly established, privately held UK Company, Black Belt Tx Limited (“Black Belt Tx”), representing a 14.1% equity interest with the right to appoint a non-voting board observer.

Because the Company does not have significant influence over operating and financial policies of Black Belt Tx, and the equity interests do not yet have readily determinable fair value, the investment in Black Belt Tx is stated at cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment.

In July 2021, Alesta Therapeutics B.V. (“Alesta Tx”) was incorporated as the parent company holding all shares of Black Belt Tx with same ownership structure as Black Belt Tx. CASI obtained 14.1% equity interest in Alesta Tx in exchange for its 14.1% equity interest in Black Belt Tx. In July 2021, a new investor contributed 750,000 euros to Alesta Tx in exchange for 770,270 newly issued common stocks, representing 8.3% of the fully diluted capital. Upon the completion of the capital contribution, the company’s equity ownership in Alesta Tx was diluted from 14.1% to 12.9% with a fair value of $1,385,000, indicating an impairment of equity investment in Black Belt Tx. The Company recorded impairment of $865,000 representing the difference between the fair value of the investment and its carrying amount during the nine months ended September 30, 2021.

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In July 2020, the Company entered into a three-year convertible loan agreement with Black Belt Tx (the “Black Belt Tx Loan”) in the amount of 211,800 euros ($250,000) with a non-compounding annual interest rate of 6% payable, together with the principal balance, at maturity.

The loan principal will be disbursed in three equal installments of 70,600 euros. The first tranche of 70,600 euros ($83,000) was disbursed upon execution of the loan agreement in August 2020. The second tranche of 70,600 euros ($86,000) was disbursed in February 2021, upon Black Belt Tx’s achievement of certain operational targets as stipulated in the loan agreement and approved by the Black Belt Tx’s Board of Directors. The third tranche would have been disbursed if Black Belt Tx reaches certain additional operational targets as stipulated in the loan agreement and approved by Black Belt Tx's Board of Directors.

In the event that Black Belt Tx, on or prior to the maturity date, completes an equity financing round of at least €5,000,000 ($5.9 million), then the outstanding principal amount shall be automatically converted into such shares at 80% of the price per share issued divided by a compensating factor based on the number of years that the Black Belt Tx Loan has been outstanding. The investment in convertible loan is accounted for as investment in debt securities as available-for-sale instrument.

In July 2021, Black Belt Tx repaid the convertible loan of 146,566 euros to the Company, including 1st tranche of 70,600 euros, 2nd tranche of 70,600 euros and interest of 5,366 euros. Concurrently, the Company entered into a three-year convertible loan agreement with Alesta Tx (the “Alesta Tx Loan”) in the amount of 217,166 euros with a non-compounding annual interest rate of 6% payable, together with the principal balance, at maturity.

Juventas Cell Therapy Ltd

In June 2019, in conjunction with its license agreement entered into with Juventas (see Note 2), the Company, through CASI Biopharmaceuticals, made an RMB 80 million ($11,788,000) investment in Juventas, a privately held, China-based company, in Juventas’ Series A plus equity, which represented a 16.327% equity interest on a fully diluted basis, and the right to appoint a non-voting board observer. The Company is entitled to substantive liquidation preference over the founding shareholders of Juventas. In addition, the Juventas’ founding shareholder provided a put option to the Company pursuant to which the Company can put the equity investment to the founding shareholder at a fixed return of 8% per annum upon occurrence of certain events. The investment in the equity interests of the Juventas and the investment in put option to the founding shareholder were accounted for as investments in equity securities using the measurement alternative at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, as the fair value of the equity securities of Juventas is not readily determinable. The consideration of RMB 80 million ($11,788,000) was allocated into investment in equity interests and investment in put option based on their relative fair value on the transaction date.

In September 2020, in conjunction with the Supplementary Agreement entered into with Juventas (see Note 2), the Company obtained additional Series A plus equity interest in Juventas with substantive liquidation preference over Juventas' founding shareholder, resulting in the Company's equity ownership increasing to 16.45% (post-Juventas Series B financing) on a fully diluted basis. CASI Biopharmaceuticals is also entitled to appoint a director to Juventas’ board of directors. Juventas’ founding shareholder also provided a put option to the Company pursuant to which the Company can put the additional equity investment to the founding shareholder at RMB 70 million plus a fixed return of 8% per annum upon occurrence of certain events. The transaction closed on September 29, 2020. The fair value of the Company’s additional equity interest in Juventas and the new put option was estimated using significant estimates and assumptions, including multiples of selected comparable companies in applying the market approach model.

Since the equity interest with substantive liquidation preference is not in-substance common stock, the investment in the additional equity interests of Juventas was accounted for as an investment in equity securities at transaction date fair value with a corresponding credit to Other Liabilities. The profit-sharing liability represents the Company’s obligation to pay an increased share of future profits pursuant to the Supplementary Agreement (see Note 2) which was conveyed by the Company in exchange for the additional equity interests in Juventas. The Company views this as a payment from a vendor that should reduce cost of revenues over the period of royalty payments. The long-term liability will be derecognized as payments are made on a systematic and rational basis representing the pattern in which the Company expects to settle the profit-sharing payment during the commercialization period of CNCT19.

The investments are measured using the measurement alternative at its cost, minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer, as the fair

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value of the equity securities of Juventas is not readily determinable. The Company did not record any adjustments or impairments during the three and nine months ended September 30, 2021 related to this investment.

In June 2020, the Company entered into a one-year loan agreement with Juventas in the amount of RMB 30,000,000 ($4,243,000) with an annual interest rate of 20%. In August 2020, the Company entered into another one-year loan with Juventas in the amount of RMB 40 million ($5,790,000) for one year with an annual interest rate of 20%. In September 2020, the Company received early repayments for both principals and accrued interest from Juventas.

On October 26, 2021, Juventas Cell Therapy Ltd. (“Juventas”) completed its Series C financing through which it raised capital of RMB 410 million ($63 million). Upon the completion of Juventas Series C financing, the Company’s equity ownership in Juventas decreased to 12.01% on a fully diluted basis.

Cleave Therapeutics, Inc.

In March 2021, Cleave and the Company entered into a license agreement. Cleave and the Company will develop CB-5339 in both hematological malignancies and solid tumors, with CASI responsible for development and commercialization in China and associated markets. Cleave received a $5.5 million upfront payment and is eligible to receive up to $74 million in development and commercial milestone payments plus tiered royalties in the high-single to mid-double-digit range on net sales of CB-5339. In addition to the upfront cash payment, CASI made a $5.5 million investment in Cleave through a three-year convertible note with a non-compounding annual interest rate of 3% payable at maturity. The principal balance is also due at maturity. The proceeds will support and advance Cleave’s programs and general operations.

In the event that Cleave, on or prior to the maturity date, completes an equity financing round of preferred stock of at least $10.0 million, then the outstanding principal amount and accrued interest shall be automatically converted into such shares at 80% of the price per share issued. The investment in the convertible loan is designated an investment measured at fair value through profit or loss.

5. Inventories

Inventories at September 30, 2021 and December 31, 2020 consisted of the following:


(In thousands)	September 30, 2021		December 31, 2020
Finished goods	$	1,727	$	1,356
Raw materials		—		—
Total	$	1,727	$	1,356

NaN write down to the carrying amount of inventory have been recorded in the three and nine months ended September 30, 2021 and 2020.

6. Leases

Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. Rent expense is recognized on a straight-line basis over the lease term.

Operating lease liabilities (see below) are included in accrued and other current liabilities and other liabilities (noncurrent) in the unaudited condensed consolidated balance sheets as of September 30, 2021 and December 31, 2020.

All of the Company’s existing leases as of September 30, 2021 are classified as operating leases. As of September 30, 2021, the Company had 8 material operating leases for land and facilities with remaining terms expiring from 2021 through 2069 and a weighted average remaining lease term of 34.89 years. The Company has fair value renewal options for many of the Company’s existing leases, none of which are considered reasonably certain of being exercised or included in the minimum lease term. Weighted average discount rates used in the calculation of the lease liability is 3.58%. The discount rates reflect the estimated incremental borrowing rate, which includes an assessment of the credit rating to determine the rate that the Company would have to pay to borrow, on a collateralized basis for a similar term, an amount equal to the lease payments in a similar economic environment.

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In November 2019, CASI Wuxi entered into a fifty-year lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. The land parcel is 74,028.40 square meters. The Company classifies this lease as an operating lease. The Company prepaid all of the lease payments for the land use right in 2019 in the amount of RMB 45 million (equivalent to $6.5 million).

Rent expense for the nine months ended September 30, 2021 and 2020 was $1,158,000 and $1,153,000, respectively. There were 0 variable lease costs or sublease income for leased assets for the nine months ended September 30, 2021 and 2020.

Right of use assets and liabilities as of September 30, 2021 and December 31, 2020 in the condensed consolidated balance sheets were as follows:


	September 30,		December 31,
(In thousands)	2021		2020
Right of use assets	$	9,499	$	8,696

Accrued and other current liabilities	$	1,213	$	939
Other liabilities		1,434		965
Total lease liabilities	$	2,647	$	1,904

Supplemental cash flow information related to leases was as follows:


	Nine Months Ended September 30,
(In thousands)	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows	$	1,087	$	1,064

Right of use assets obtained in exchange for lease obligations:	$	1,661	$	1,030

A maturity analysis of the Company’s operating leases as of September 30, 2021 follows:

Future undiscounted cash flows:


(In thousands)
2021 (remaining three months)	$	355
2022		1,157
2023		803
Thereafter		373
Total		2,688

Discount factor		(41)
Lease liability		2,647
Amounts due within 12 months		1,213
Non-current lease liability	$	1,434

7. Intangible Assets

Intangible assets include ANDAs that were acquired as part of 2018 asset acquisitions of U.S. marketed generic products, as well as capitalized costs related to a cloud computing arrangement (CCA). These intangible assets were originally recorded at relative estimated fair values based on the purchase price for the asset acquisitions and are stated net of accumulated amortization and impairment, if any.

The ANDAs are amortized over their estimated useful lives of 13 years, using the straight-line method. The CCA is being amortized over its useful life of 5 years.

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In February 2020, the Company entered into an agreement with Chartwell Rx Sciences, LLC (“Chartwell”) in which the Company sold and transferred the control of 7 U.S. FDA-approved ANDAs to Chartwell in exchange for $450,000 in cash, which the Company received in March 2020. These ANDAs had a net book value of $0 at the time of sale. The Company is entitled to an additional $1 million, contingent upon Chartwell receiving certain FDA approvals relating to certain of these ANDAs. The Company recognized a gain on disposal of intangible assets in the amount of $450,000 in the accompanying unaudited condensed consolidated statement of operations and comprehensive loss for the three months ended March 31, 2020. The additional $1 million is treated as variable consideration. Because the amount of variable consideration is highly susceptible to factors outside the Company's influence and the Company’s experience with similar types of contracts is limited, the Company did not include the amount of variable consideration in recognition of gain on disposal of intangible assets for the three months ended March 31, 2020. The Company will recognize the variable consideration and additional gain on disposal of intangible assets when the constraint on variable consideration is resolved, i.e., Chartwell receives relevant FDA approvals. As of September 30, 2021, no FDA approvals has been obtained by Chartwell on those products.

Intangible assets at September 30, 2021 consists of the following:


(In thousands)
Asset	Purchase Price		Accumulated Amortization		Estimated useful lives
ANDAs	$	15,832		(3,540)	13 years
Others		197		(131)	5 years
Total	$	16,029	$	(3,671)

The changes in intangible assets for nine months ended September 30, 2021 are as follows:


(In thousands)
Balance as of December 31, 2020	$	13,210
Amortization expense		(1,009)
Foreign currency translation adjustment		157
Balance as of September 30, 2021	$	12,358

Expected future amortization expense, is as follows:


(In thousands)
2021 (remaining three months)	$	334
2022		1,334
2023		1,334
2024		1,303
2025		1,303
2026 and thereafter		6,750

8. Grants

In April 2020, CASI Wuxi received RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as a government grant for this development project which was recorded as deferred income in April 2020. The grant will be amortized over the term of the lease of the land. Since April 2020, the Company has recognized RMB 481,000 in deferred income as of September 30, 2021, and therefore, RMB 15.4 million (equivalent to $2.4 million) remain as deferred income in the unaudited condensed balance sheet as of September 30, 2021. The Company recognized $12,000 and $12,000 of other income during the three months ended September 30, 2021 and 2020, respectively. The Company recognized $37,000 and $23,000 of other income during the nine months ended September 30, 2021 and 2020, respectively.

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9. Bank Borrowings

On November 3, 2020, Beijing Branch of China CITIC Bank Corporation Limited approved a guaranteed line of Credit (“Bank Borrowings) to the Company with maximum borrowings of RMB 10.0 million ($1.5 million). The joint and several liability guarantee was provided by Beijing Capital Financing Guarantee Co, Ltd. At December 31, 2020, the Company had outstanding borrowings under the Bank Borrowings of RMB 5.4 million ($826,000), which matures on November 7, 2021, and bears interest at a fixed rate of 3.35% per annum.

On February 3, 2021, the Company had additional bank borrowings of RMB 4.6 million ($0.7 million), of which RMB 3.0 million ($0.5 million) repaid on September 2, 2021 and the remainder balance matures on November 7, 2021. These additional bank borrowings bear interest at a fixed rate of 3.72% per annum.

Interest expense of $12,000 and $37,000 was recorded in the three and nine months ended September 30, 2021.

10. Notes Payable

On April 27, 2020, M&T Bank approved a $465,595 loan to the Company under the Paycheck Protection Program (PPP) pursuant to the Coronavirus Aid, Relief and Economic Security (CARES) Act that was signed into law on March 27, 2020. The loan, evidenced by a promissory note to M&T Bank as lender and dated April 29, 2020, has a term of two years, is unsecured, and is guaranteed by the Small Business Administration (SBA). The loan bears interest at a fixed rate of 1 percent per annum. Some or all of the loan may be forgiven if the Company complies with certain relevant conditions. In June 2020, the PPP was amended through enactment of the Paycheck Protection Program Flexibility Act of 2020 (PPPFA). Under the new act, the Company’s payments of principal and interest are deferred until October 2021. In September 2021, the loan principal of $465,595 and outstanding interest of $6,212 were forgiven.

Interest expenses of $900 and $1,200 were recorded in the three months ended September 30, 2021 and 2020. Interest expenses of $2,900 and $1,900 were recorded in the nine months ended September 30, 2021 and 2020.

11. Redeemable Noncontrolling Interest

On December 26, 2018, the Company, together with Wuxi Jintou Huicun Investment Enterprise, a limited partnership organized under Chinese law (“Wuxi LP”) established CASI Wuxi to build and operate a manufacturing facility in the Wuxi Huishan Economic Development Zone in Jiangsu Province, China. The Company holds 80% of the equity interests in CASI Wuxi and will invest, over time, $80 million in CASI Wuxi. The Company’s investment will consist of (i) $21 million in cash (paid in February 2019), (ii) a transfer of selected ANDAs valued at $30 million (transferred in May 2019), and (iii) an additional $29 million cash payment within three years from the date of establishment of CASI Wuxi. The payment schedule has been changed into 3 installments of $10 million paid in July 2021, $10 million and $9 million to be paid in 2022 and 2023, respectively. Wuxi LP holds 20% of the equity interest in CASI Wuxi through its investment in RMB of $20 million in cash (paid in March 2019). As the transfer of ANDAs valued at $30 million was to the Company’s consolidated subsidiary (CASI Wuxi), the Company recognized the transfer of the ANDAs at their carrying value and did not recognize a gain on the transfer.

Pursuant to the investment contract between the Company and Wuxi LP and Articles of Association of CASI Wuxi, the Company has the call option to purchase the 20% equity interest in CASI Wuxi held by Wuxi LP at any time within 5 years from the date of establishment of CASI Wuxi (i.e. up to December 26, 2023). Wuxi LP has the put option to require the Company to redeem the 20% equity interest in CASI Wuxi at any time after December 26, 2023. The redemption value under both the Company’s embedded put option and Wuxi LP’s embedded call option is equal to $20 million plus interest at the bank loan interest rate issued by the People's Bank of China for the period beginning with the initial capital contribution by Wuxi LP to the date of redemption. In addition, Wuxi LP has the put option to require the Company to redeem the 20% equity interest in CASI Wuxi at $20 million upon the occurrence of any of the following conditions: (i) the Company fails to fulfill its investment obligation to CASI Wuxi; (ii) CASI Wuxi suffers serious losses, discontinued operation, dissolution, goes into process of bankruptcy liquidation; or (iii) the Company substantially violates the investment contract and Articles of Association of CASI Wuxi.

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The investment of Wuxi LP in CASI Wuxi is treated as redeemable noncontrolling interest and is classified outside of permanent equity on the consolidated balance sheets because (1) the noncontrolling interest is not mandatorily redeemable financial instruments, and (2) it is redeemable at the option of the holder, or upon the occurrence of an event that is not solely within the control of the Company. The Company initially recorded the redeemable noncontrolling interest at its fair value of $20 million. The carrying amount of the redeemable noncontrolling interest is subsequently recorded at the greater of the amount of (1) the initial carrying amount, increased or decreased for the redeemable noncontrolling interest’s share of net income or loss in CASI Wuxi or (2) the redemption value, assuming the noncontrolling interest is redeemable at the balance sheet date. Accretion of the carrying amount of redeemable noncontrolling interest to the redemption value is recorded in additional paid-in capital.

Changes in redeemable noncontrolling interest during the three and nine month periods ended September 30, 2021 and 2020 are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands)	2021		2020		2021		2020
Balance at beginning of period	$	22,697	$	21,074	$	22,033	$	20,670
Cash contribution by Wuxi LP				0				0
Share of CASI Wuxi net loss		(314)		(309)		(980)		(584)
Accretion of redeemable noncontrolling interest		519		506		1,586		1,185
Foreign currency translation adjustment		5		—		268		—
Balance at end of period	$	22,907	$	21,271	$	22,907	$	21,271

12. Stockholders’ Equity

March 2021 Underwritten Public Offering

On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI.

The Company is using the net proceeds of this offering for working capital and general corporate purposes, which include, but are not limited to advancing the Company’s product portfolio, acquiring the rights to new product candidates and general and administrative expenses.

Common Stock Sales Agreements

The Company entered a Common Stock Sales Agreement (the “Sales Agreement”), as amended, with H.C. Wainwright & Co., LLC (“HCW”) that would allow the Company to sell up to $20 million of shares of common stock in “at-the-market” transactions, subject to compliance with the terms and conditions of the Sales Agreement. During the nine months ended September 30, 2021, the Company has not offered and sold any shares of common stock under the Sales Agreement.

On July 19, 2019, the Company entered into an Open Market Sale Agreement^SM with Jefferies LLC, as sales agent (the “Open Market Agreement”) pursuant to which the Company may elect to sell from time to time, at its option, up to $30 million in shares of the Company’s common stock, subject to the terms and conditions of the Open Market Agreement. During the nine months ended September 30, 2021, the Company has not offered and sold any shares of common stock under the Open Market Agreement.

As of September 30, 2021, the outstanding and exercisable number of warrants was 6,172,832. Total 8,271,709 number of warrants were issued by the Company in September 2018. On September 24, 2021, 2,098,877 number of warrants were expired. The weighted average exercise price was $3.69. All outstanding warrants are equity classified.

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13. Costs of Revenues

Costs of revenues consists primarily of the cost of inventories of EVOMELA and sales-based royalties related to the sale of EVOMELA. The Company is obligated to pay 20% of the Company’s revenue from EVOMELA as royalties for a period of 10 years after the commercial launch of the products in 2019.

14. Net Loss Per Share

The following table sets forth the basic and diluted net loss per share computation and provides a reconciliation of the numerator and denominator for the periods presented:


	Three Months Ended September 30,				Nine Months Ended September 30,
(In thousands, except share and per share data)	2021		2020		2021		2020
Numerator:
Net loss attributable to CASI Pharmaceuticals, Inc.	$	(10,224)	$	(16,953)	$	(31,053)	$	(34,088)
Denominator:
Weighted average number of common shares		139,797,487		117,940,405		134,861,366		105,922,281
Denominator for basic and diluted net loss per share calculation		139,797,487		117,940,405		134,861,366		105,922,281
Net loss per share
— Basic and diluted	$	(0.07)	$	(0.14)	$	(0.23)	$	(0.32)

As of September 30, 2021, and 2020, outstanding stock options totaling 31,357,040 and 15,956,030, respectively, and outstanding warrants totaling 6,172,832 and 8,271,709, respectively, were anti-dilutive, and therefore, were not included in the computation of weighted average shares used in computing diluted loss per share.

15. Stock-Based Compensation

On June 15, 2021, the 2021 Long-Term Incentive Plan (the “2021 Plan”) was approved by the Company's stockholders to replace the Company’s 2011 Long-Term Incentive Plan (the “2011 Plan”). Currently, the 2021 Plan is administered by the Company’s compensation committee. The maximum number of shares of Common Stock that are available for grants and awards equals to 20,000,000 shares of Common Stock, which includes 10,726,673 shares of Common Stock remaining under the Company’s 2011 Long-Term Incentive Plan (the “2011 Plan”) as of April 12, 2021.

As of September 30, 2021, a total of 12,405,448 shares remained available for grant under the Company’s 2021 Long-Term Incentive Plan.

The Company’s net loss for the nine months ended September 30, 2021 and 2020 includes $5.1 million and $5.7 million, respectively, of the Company’s share-based compensation. The share-based compensation expenses are recorded as components of general and administrative expense, selling and marketing expense, and research and development expense, as follows:


	Nine Months Ended September 30,
(In thousands)	2021		2020
Research and development	$	251	$	123
Sales and Marketing		212		—
General and administrative		4,596		5,562
Share-based compensation expense	$	5,059	$	5,685

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Compensation expense related to stock options is recognized over the requisite service period, which is generally the option vesting term of up to five years. Awards with performance conditions are expensed when it is probable that the performance condition will be achieved. For the nine month periods ended September 30, 2021 and 2020, $1,056,000 and $13,000 was expensed for stock option awards with performance conditions that were probable during the period, respectively.

The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of service based and performance-based stock options granted to employees. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an award. These assumptions include the risk-free interest rate, expected dividend yield, expected volatility, and the expected life of the award.

Following are the weighted-average assumptions used in valuing the stock options granted to employees during the nine month periods ended September 30, 2021 and 2020:


	Nine Months Ended September 30,
	2021		2020
Expected volatility	79.72	%	77.71	%
Range of expected volatility	76.64% to 81.5	%	75.84% to 81.63	%
Range of risk free interest rate	0.72% to 1.22	%	0.31% to 1.77	%
Expected term of option	6.18	years	6.03	years
Expected dividend yield	0.00	%	0.00	%

The weighted average fair value of stock options granted during the nine month periods ended September 30, 2021 and 2020 were $1.05 and $1.96, respectively.

On June 15, 2021, the Board approved a grant of stock options to Wei-Wu He. The grant consists of 4 million shares time-based and 4 million shares performance-based stock options.

A summary of changes in options under the Company’s stock option plans during the nine month period ended September 30, 2021 is as follows:


		Weighted Average
	Number of Options	Exercise Price
Outstanding at December 31, 2020	16,746,238	$	2.71
Exercised	0	$	0
Granted	15,989,552	$	1.57
Expired	(343,750)	$	4.76
Forfeited	(1,035,000)	$	2.65
Cancelled	0	$	0
Outstanding at September 30, 2021	31,357,040	$	2.11
Vested and expected to vest at September 30, 2021	31,357,040	$	2.11
Exercisable at September 30, 2021	14,110,876	$	2.54

Cash received from option exercises under all share-based payment arrangements for the nine month periods ended September 30, 2021 and 2020 was $0 million and $3.9 million, respectively.

16. Income Taxes

At December 31, 2020, the Company had a $2.1 million unrecognized tax benefit. The Company recorded a full valuation allowance on the deferred tax asset after offsetting unrecognized tax benefit recognized in the consolidated financial statements as of December 31, 2020.

During the nine months ended September 30, 2021, there were 0 material changes to the measurement of unrecognized tax benefits in various tax jurisdictions.

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17. Fair Value Measurements

The majority of the Company’s financial instruments (consisting of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, notes payable and bank borrowings) are carried at cost which approximates their fair values due to the short-term nature of the instruments. The Company’s investments in equity securities are carried at fair value, and investments in convertible loans are carried at fair value (see Note 4).

Fair value is the price that would be received from the sale of an asset or paid to transfer a liability assuming an orderly transaction in the most advantageous market at the measurement date. U.S. GAAP establishes a hierarchical disclosure framework which prioritizes and ranks the level of observability of inputs used in measuring fair value. These tiers include:

●

Level 1—Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

●

Level 2—Observable market-based inputs other than quoted prices in active markets for identical assets or liabilities.

●

Level 3—Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs.

Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level at which to classify them each reporting period. This determination requires the Company to make subjective judgments as to the significance of inputs used in determining fair value and where such inputs lie within the hierarchy.

The Company has equity investments in the common stock of two publicly traded companies. The Company’s investments in these equity securities are carried at their estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the common stock is based on quoted market price for the investees’ common stock, a Level 1 input.

The Company has an equity investment in the warrants of a publicly traded company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4). The fair value of the warrants was measured using observable market-based inputs other than quoted prices in active markets for identical assets or liabilities, level 2 inputs. The Company uses the Black-Scholes-Merton valuation model to estimate the fair value of warrants. Option valuation models, including Black-Scholes-Merton, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the fair value determination of a warrant.

The Company has an investment in the convertible debt of a privately held UK Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input.

The Company has an investment in the convertible debt of a privately held California Company. The Company’s investment is carried at its estimated fair value, with changes in fair value reported in the consolidated statement of operations and comprehensive loss each reporting period (see Note 4) using Level 3 input. The Company uses the Binomial model to estimate the fair value of the convertible debt.

The following tables present the Company’s financial assets and liabilities accounted for at fair value on a recurring basis as of September 30, 2021 and December 31, 2020, by level within the fair value hierarchy:

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(In thousands)	Fair Value at
Description	September 30, 2021		Level 1		Level 2		Level 3
Investments in Current and non-Current Assets
Investments in common stock	$	9,503	$	9,503	$	0	$	0
Investment in warrants - Designated as investment measured at FVTPL	$	352	$	0	$	352	$	—
Investment in convertible loan - AFS	$	264	$	0	$	0	$	264
Investment in convertible loan - Designated as investment measured at FVTPL	$	5,589	$	0	$	0	$	5,589


(In thousands)	Fair Value at
Description	December 31, 2020		Level 1		Level 2		Level 3
Investments in Current and non-Current Assets
Investments in common stock	$	9,309	$	9,309	$	0	$	0
Investment in warrants - Designated as investment measured at FVTPL	$	840	$	—	$	840	$	—
Investment in convertible loan - AFS	$	83	$	0	$	0	$	83

Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company measures equity investments without readily determinable fair values at its cost, minus impairment, if any, plus or minus changes resulting from observable transactions of identical or similar securities of the same issuer. On June 30, 2021, the Company remeasured the investment in equity securities in Black Belt (see Note 4) to the fair value of $1,385,000. The Company estimated the fair value of the securities using Level 2 inputs based on the transaction price of identical securities issued by the investee.

Non-Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company has 0 non-financial assets and liabilities that are measured at fair value on a recurring basis.

Non-Financial Assets and Liabilities Measured at Fair Value on a Non-Recurring Basis

The Company has 0 non-financial assets and liabilities that are measured at fair value on a non- recurring basis.

18. Related Party Transactions

Juventas. On July 1, 2019 the Company entered into a one-year equipment lease with Juventas in the amount of RMB 80,000 ($15,000) a month, which is classified as an operating lease. Transactions with Juventas are considered to be related party transactions as the Company’s CEO and Chairman is the chairman and one of the founding shareholders of Juventas. The lease was renewed for another year in July 2020 and in June 2021 with the same monthly lease income. During the three months ended September 30, 2021 and 2020, the Company recognized lease income of RMB 240,000 ($37,000) and RMB 240,000 ($37,000) respectively. During the nine months ended September 30, 2021 and 2020, the Company recognized lease income of RMB 720,000 ($110,000) and RMB 720,000 ($104,000) respectively.

Spectrum/Acrotech. In 2018, the Company entered into commercial purchase obligation commitments for EVOMELA^® from Spectrum Pharmaceuticals, Inc. (“Spectrum”), totaling $9.2 million under a short-term supply agreement for EVOMELA^®. As of September 30, 2021, Spectrum is a 4.9% stockholder of the Company. The amount due to Spectrum was $0.2 million as of December 31, 2019 which was paid in 2020. There have been no transactions with Spectrum during the nine months ended September 30, 2021. The Company also accrued $2.6 million for material costs related to EVOMELA^® during the year ended December 31, 2019. As of September 30, 2021, all amounts due to Spectrum have been settled.

BioCheck. In June 2019, the Company entered into a one-year agreement primarily for the sublease of certain office and lab space with BioCheck Inc. (“BioCheck”) in the amount of $60,000 ($5,000 a month), which is classified as an operating lease. Transactions with BioCheck are considered to be related party transactions because the Company’s Chairman and CEO is also the Chairman of BioCheck. Transactions with ETP, parent of BioCheck, and a more than 5% shareholder of the Company, are also considered to be related party transactions because Dr. Wei-Wu He is also the chairman of ETP.

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Because the Company required additional office space, in January 2020, the agreement was amended for annualized rents in the amount of $144,000 ($12,000 a month) with a stipulation that the new rent was retroactive to October 1, 2019. The lease expired on June 9, 2021 and was not renewed. During the nine months ended September 30, 2021 and 2020, the Company recognized rent expense of $60,000 and $108,000, respectively.

March 2021 Underwritten Public Offering Transactions. On March 26, 2021, the Company closed an underwritten public offering of 15,853,658 shares of the Company’s common stock (the “Offering”) at a price to the public of $2.05 per share. The gross proceeds to CASI from the Offering were $32.5 million before deducting the underwriting discounts and commissions and offering expenses payable by CASI.

ETP Global Fund L.P. (“ETP Global”), whose founding and managing member is CASI's Chairman and CEO, purchased shares of common stock in the Offering at the public offering price and on the same terms as the other purchasers in the Offering. ETP Global, which is a current shareholder of CASI, purchased 3,000,000 shares at the public offering price of $2.05 per share for a total of $6.15 million.

19. Commitments

In conjunction with the Cleave agreement entered into during 2021 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of September 30, 2021, 0 milestones have been achieved.

In conjunction with the BioInvent agreement entered into during 2020 (see Note 2), the Company is responsible for certain milestone and royalty payments. As of September 30, 2021, 0 milestones have been achieved.

In conjunction with the Black Belt agreement entered into during 2019 (see Note 2), the Company is responsible for certain milestone and royalty payments. In June 2021, the Company achieved the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, and made $750,000 milestone payment in June 2021 and 250,000 euros ($298,000) in August 2021. As of September 30, 2021, 0 other milestones have been achieved.

In conjunction with the Pharmathen agreement entered into during 2019 (see Note 2), the Company is responsible for 1 remaining milestone payment. As of September 30, 2021, the remaining milestone has not been achieved.

In conjunction with the Laurus Labs agreement entered into during 2018, the Company is responsible for certain remaining milestone payments. As of September 30, 2021, the remaining milestones have not been met.

In November 2019, CASI Wuxi entered into a lease agreement for the right to use state-owned land in China for the construction of a manufacturing facility. On August 27, 2020, CASI Wuxi entered into a Construction Project Contract (the "Construction Contract") with China Electronic System Engineering No. 2 Construction Co., Ltd. ("China Engineering"). Pursuant to the Construction Contract, CASI Wuxi will pay a contract price of RMB 74,588,000 (equivalent to $10,923,000) to retain China Engineering to complete the phase 1 project of CASI Wuxi's research and development production base, consisting of construction and installation of a combined factory building, warehouse, guard house and public works. As of September 30, 2021, the commitment under the Construction Contract was RMB 66,688,000 ($10,320,000). The estimated completion date is October 2023.

In April 2021, CASI Wuxi entered into a freeze dryer and filling line equipments production agreement with Shanghai Dong Fu Long Technology Limited Co. in the total amount of RMB15,500,000 (equivalent to $2,400,000). The Company paid the deposit of RMB 4,650,000 ($720,000). As of September 30, 2021, the remaining RMB 9,670,000 ($1,500,000) has not been paid. RMB 3,470,000 ($540,000) will be due when CASI obtains quality acceptance approval, another RMB 4,650,000 ($720,000) due when CASI obtains acceptance report (SAT report), and last RMB 1,550,000 ($240,000) due when CASI receives guarantee from the bank. This last 10% payment is subject to quality acceptance condition. Their bank will issue a guarantee document to CASI. After one year following the SAT report, if there is no quality issue exists, the bank will unfreeze the 10% fund to Dong Fu Long.

In August 2021, CASI Wuxi entered into a construction agreement with China Engineering in the total amount of RMB 28,800,000 (equivalent to $4,470,000) for WuXi factory building remodelling and installation. As of September 30, 2021, the commitment under the agreement was RMB 20,000,000 ($3,100,000).

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In September 2021, CASI Wuxi entered into a construction agreement with China Engineering in the total amount of RMB 11,700,000 (equivalent to $1,811,000) for supply chain & warehouse remodelling and installation. As of September 30, 2021, the commitment outstanding under the agreement was RMB 9,995,000 ($1,547,000).

The Company is subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, unless otherwise disclosed herein, are material.

20. Subsequent Events

On October 29, 2021, the Company has entered into a common stock sales agreement (“stock sales agreement”), with H.C. Wainwright & Co., LLC (“Wainwright”), relating to shares of common stock of the Company, $0.01 par value per share. In accordance with the terms of the sales agreement, the Company may offer and sell shares of common stock having an aggregate offering price of not more than $20,000,000.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Overview

CASI Pharmaceuticals, Inc. (“CASI,” the “Company,” or “we” or "our") (Nasdaq: CASI) is a U.S. biopharmaceutical company focused on developing and commercializing innovative therapeutics and pharmaceutical products in China, the United States, and throughout the world. The Company is focused on acquiring, developing and commercializing products that augment its hematology oncology therapeutic focus as well as other areas of unmet medical need. The Company is executing its plan to become a biopharmaceutical leader by launching medicines in the greater China market, leveraging its China-based regulatory, clinical and commercial competencies and its global drug development expertise.

The Company launched its first commercial product, EVOMELA^® (Melphalan for Injection), in China in August 2019. In China, EVOMELA^® is approved for use as a conditioning treatment prior to stem cell transplantation and as a palliative treatment for patients with multiple myeloma. The other core hematology/oncology assets in the Company’s pipeline include:

●

CNCT19 is an autologous CD19 CAR-T investigative product (CNCT19) being developed by the Company’s partner Juventas Cell Therapy Ltd (“Juventas”) for which the Company has co-commercial and profit-sharing rights. CNCT19 is being developed as a potential treatment for patients with hematological malignancies which express CD19 including, B-cell acute lymphoblastic leukemia (“B-ALL”) and B-cell non-Hodgkin lymphoma (“B-NHL”). CNCT19’s Phase 1 studies of B-ALL and B-NHL in China have been completed by Juventas, with the Phase 2 B-NHL registration study and the Phase 2 B-ALL registration study of CNCT19 both currently enrolling in China.

●

BI-1206 is an antibody which has a novel mode-of-action, blocking the inhibitory antibody checkpoint receptor FcγRIIB to unlock anti-cancer immunity in both hematological malignancies and solid tumors for which the Company has licensed exclusive greater China rights from BioInvent International AB (“BioInvent”). BI-1206 is being investigated by BioInvent in a Phase 1/2 trial, in combination with anti-PD1 therapy Keytruda^® (pembrolizumab), in patients with solid tumors, and in a Phase 1/2a trial in combination with MabThera^® (rituximab) in patients with relapsed/refractory non-Hodgkin lymphoma (NHL). BI-1206 restores activity of rituximab in patients with relapsed/refractory non-Hodgkin’s lymphoma.

●

CB-5339 is a novel VCP/p97 inhibitor focused on valosin-containing protein (VCP)/p97 as a novel target in protein homeostasis, DNA damage response and other cellular stress pathways for therapeutic use in cancer. The Company entered into an exclusive license in March 21, 2021 with Cleave Therapeutics, Inc. (Cleave”) for the development and commercialization of CB-5339 in Mainland China, Hong Kong, Macau and Taiwan. CB-5339, an oral second-generation, small molecule VCP/p97 inhibitor, is being evaluated in a Phase 1 clinical trial in patients with acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS).

●

CID-103 is a full human IgG1 anti-CD38 monoclonal antibody recognizing a unique epitope that has demonstrated encouraging preclinical efficacy and safety profile compared to other anti-CD38 monoclonal antibodies for which the Company has exclusive global rights. CID-103 is being developed for the treatment of patients with multiple myeloma. The Company achieved in June 2021 the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma.

The Company also has greater China rights to ZEVALIN^® (Ibritumomab Tiuxetan), a CD20-directed radiotherapeutic antibody that is approved in the U.S. to treat patients with non-Hodgkin lymphoma (“NHL”) and MARQIBO^® (vincristine sulfate LIPOSOME injection) a novel, sphingomyelin/cholesterol liposome-encapsulated, formulation of vincristine sulfate, a microtubule inhibitor, approved by the FDA for the treatment of adult patients with Philadelphia chromosome-negative (Ph-) acute lymphoblastic leukemia (ALL) in second or greater relapse or whose disease has progressed following two or more anti-leukemia therapies. However, due to the evolving standard of care environment, the rare and niche indication for these products, potential US regulatory action and the Company’s commitment to prioritize resources, the Company is currently evaluating its options for these products. In addition, the Company’s assets include a few FDA-approved ANDAs which the Company is evaluating due to generic drug pricing reforms by the Chinese government and its impact on the pricing and competitiveness of these products.

The Company’s business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand its hematology/oncology franchise. In many cases its business development

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strategy includes direct equity investments in the licensor company. The Company intends for its pipeline to reflect a diversified and risk-balanced set of assets that include (1) late-stage clinical drug candidates in-licensed for China regional rights, (2) proprietary or licensed innovative drug candidates, and (3) select high quality pharmaceuticals that fit its therapeutic focus. The Company uses a market-oriented approach to identify pharmaceutical/biotechnology candidates that the Company believes to have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under the Company’s global drug development strategy. Although oncology with a focus on hematological malignancies is its principal clinical and commercial target, the Company is opportunistic about other therapeutic areas that can address unmet medical needs.

CASI has built an integrated biopharmaceutical company dedicated to the successful development and commercialization of innovative and other therapeutic products. The Company will continue to pursue building a robust pipeline of drug candidates for development and commercialization in China as our primary market, and if rights are available for the rest of the world. For in-licensed products, we use a market-oriented approach to identify pharmaceutical/biotechnology candidates that we believe have the potential for gaining widespread market acceptance, either globally or in China, and for which development can be accelerated under our drug development strategy. We have focused on US/EU approved product candidates, and product candidates with proven targets or product candidates that have reduced clinical risk with a greater emphasis on innovative therapeutics. Our business development strategy is currently focused on acquiring additional targeted drugs and immuno-oncology therapeutics through licensing that will expand our hematology/oncology franchise. In many cases our business development strategy includes direct equity investments in the licensor company.

We believe our China operations offer a significant market and growth potential due to the extraordinary increase in demand for high quality medicines coupled with regulatory reforms in China that facilitate the entry of new pharmaceutical products into the country. We will continue to in-license clinical-stage and late-stage drug candidates, and leverage our cross-border operations and expertise, and hope to be the partner of choice to provide access to the China market. We expect the implementation of our plans will include leveraging our resources and expertise in both the U.S. and China so that we can maximize regulatory, development and clinical strategies in both countries.

In 2012, with new leadership, the Company shifted its business strategy to China and has since built an infrastructure in China that includes sales and marketing, medical affairs, regulatory and clinical development and in the foreseeable future, manufacturing. In 2014, the Company changed its name to “CASI Pharmaceuticals, Inc.” The majority of the Company’s operations are now located in China. The Company expects to continue to incur operating losses for the foreseeable future due to, among other factors, its continuing clinical and development activities and expansion of our operations. Our operations in China are conducted primarily through two of our subsidiaries, CASI Pharmaceuticals (China) Co., Ltd. (“CASI China”) and CASI Pharmaceuticals (Wuxi) Co., Ltd. (“CASI Wuxi”). Our Beijing office is primarily responsible for our day-to-day operations and our commercial team of over 100 hematology/oncology sales and marketing specialists based in China. CASI Wuxi is part of the long-term strategy to support our future clinical and commercial manufacturing needs, to manage our supply chain for certain products, and to develop a GMP manufacturing facility in China.

Impact of COVID-19

The Company has experienced operational interruptions as a result of COVID-19, including the temporary disruption of operations in China during 2020 due to a Chinese government mandated quarantine protocol, including mandatory business closures, social distancing measures, and various travel restrictions. Although the Company's operations in China have normalized, there can be no assurance that such operations will continue to do so or that there will not be a renewed outbreak of COVID-19 due to new variants of the virus or other significant contagious diseases in China or elsewhere. To the extent that such events occur, demand for the Company's products may decline, and the Chinese government or other governments may impose additional restrictions resulting in further shutdowns, further work restrictions, and the disruption of the Company’s supply and distribution channels.

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recessions that could affect the Company's ability to continue to commercialize and expand distribution of EVOMELA^® (Melphalan For Injection) or other drugs in the Company’s existing product pipeline. The effectiveness of the Company's sales teams may be negatively impacted by the lack of travel and their reduced ability to engage with decision-makers. In the first quarter 2020, during which the peak of the pandemic occurred in China, the Company experienced some disruptions to their EVOMELA^® marketing and sales activities due to travel restrictions and the prioritization of hospitals and physicians to attend to patients with COVID-19 infection. During the remainder of 2020, operations returned to expected levels; however, there can be no assurance that such restrictions will not be imposed again. In addition, economic and other uncertainties may adversely affect other parties' willingness to negotiate and execute product licenses and thus hamper the Company's ability to in-license clinical-stage and late-stage drug candidates in China or elsewhere.

The Company currently relies on a single source for its supply of EVOMELA^®. If the supplier refuses or is unable to provide products for any reason (including the occurrence of an event like the COVID-19 pandemic that makes delivery impractical), the Company would be required to negotiate an agreement with a substitute supplier, which, assuming a substitute supplier was available, would likely interrupt the manufacturing of EVOMELA^®, cause delays and increase costs.

The COVID-19 pandemic impacted our targeted start time of our CID-103 trial due to the lock down of many medical facilities in Europe. Nevertheless, the Company achieved in June 2021, the First-Patient-In (FPI) in the Phase 1 dose escalation and expansion study of CID-103, in patients with previously treated, relapsed or refractory multiple myeloma. The study is designed to assess the safety, tolerability, pharmacology and clinical activity of CID-103. As the pandemic continues to unfold, the extent of the pandemic’s effect on our operations will depend in large part on future developments, which cannot be predicted with confidence at this time.

RESULTS OF OPERATIONS

Three months ended September 30, 2021 Compared with Three months ended September 30, 2020

Operating Items

Revenues

Product Sales

Revenues consist of product sales of EVOMELA^® that launched during August 2019. Revenue was $8.1 million for the three months ended September 30, 2021 compared to $4.2 million for the three months ended September 30, 2020. Revenues increased by 92% in the third quarter of 2021 as compared to same quarter in 2020 due to the continued growth in EVOMELA^® sales.

Lease Income

Lease income consists primarily of an equipment lease with Juventas (a related party). Lease income was $37,000 for the three months ended September 30, 2021 and the three months period ended September 30, 2020.

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Operating Expenses

Cost of Revenues

Cost of revenues consists primarily of the cost of inventories of EVOMELA^® and sales-based royalties related to the sale of EVOMELA^®.

Costs of revenues were $3.4 million for the three months ended September 30, 2021 compared to $1.8 million for the three months ended September 30, 2020, which includes royalty of $1.6 million and $0.8 million for the same period. Costs of revenues excluding royalty were $1.8 million and $1.0 million for the three months ended September 30, 2021 and 2020. Costs of revenues excluding royalty as a percentage of revenues were 23% in the three months ended September 30, 2021 compared to 24% in the three months ended September 30, 2020.

Research and Development Expenses

Research and development (R&D) expenses consist primarily of compensation and other expenses related to research and development personnel, research collaborations, costs associated with internal and contract preclinical testing and clinical trials of our product candidates, including the costs of drug substance and drug product, regulatory maintenance costs of ANDAs, facilities expenses, and amortization expense of acquired ANDAs.

Research and development expenses for the three months ended September 30, 2021 were $2.9 million, compared with $2.8 million for the three months ended September 30, 2020.

Included in our research and development expenses for the three months ended September 30, 2021 are direct project costs of $0.8 million for preclinical development activities primarily related to our CID-103 program compared to $1.1 million for the three months ended September 30, 2020, $0.5 million amortization and filing fees related to our ANDAs acquired in 2018 compared to $0.9 million for the three months ended September 30, 2020, and $0.5 million for drugs in-licensed from Acrotech (previously Spectrum) compared to $0.8 million for the three months ended September 30, 2020.

General and Administrative Expenses

General and administrative expenses include compensation and other expenses related to executive, finance, business development and administrative personnel, professional services, investor relations and facilities.

General and administrative expenses for the three months ended September 30, 2021 and the three months ended September 30, 2020 were $5.3 million.

Selling and Marketing Expenses

Selling and marketing expenses are the direct costs related to the sales of EVOMELA^® that was launched in China in August 2019, such as sales force salaries, bonus, advertising, and other marketing efforts.

Selling and marketing expenses for the three months ended September 30, 2021 were $3.4 million, compared with $2.1 million for the three months ended September 30, 2020. The increase in selling and marketing expenses was due to expansion of sales team in China in 2021 and the increase of travel cost due to recovery from the COVID-19 in 2021.

Acquired in-process Research and Development

There were no acquired in-process R&D expenses for the three months ended September 30, 2021. Acquired in-process R&D expenses for the three months ended September 30, 2020 was $10.9 million related to the 2020 milestone fee paid to Pharmathen of $0.6 million, and the 2020 milestone fees paid to Juventas of $10.3 million.

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Non-Operating Items

Interest income, net

Interest income, net for the three months ended September 30, 2021 was $79,000 compared with $432,000 for the three months ended September 30, 2020. The decrease in interest income, net, is mainly due to the amount reported for three months ended September 30, 2020 included interest income of $351,000 from loans made to Juventas (a related party).

Other income

Other income for the three months ended September 30, 2021 was $487,000 compared with $20,000 for the three months ended September 30, 2020. Other incomes of $12,000 and $12,000 recorded in the three months ended September 30, 2021 and 2020, respectively, relate to the April 2020 CASI Wuxi’s receipt of RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as government grant for the development of leased state-owned land in China for the construction of a manufacturing facility. The grant was recorded as deferred income in April 2020. The grant is been amortized over the term of the lease of the land. Other incomes of $471,807 recorded in the three months ended September 30, 2021 relates to the loan to the Company under the Paycheck Protection Program (PPP) that was forgiven in September 2021.

Foreign exchange losses

Foreign exchange losses for the three months ended September 30, 2021 were $6,000 compared with losses of $526,000 for the three months ended September 30, 2020. The foreign exchange losses are primarily due to accounts receivable with CRGK.

Change in fair value of investments

The changes in fair value of investments for the three months ended September 30, 2021 and 2020 were losses of $3,687,000 and gains of $1,978,000, respectively. The changes represent unrealized gains or losses on the Company’s investments in equity securities and long-term investment.

Nine months ended September 30, 2021 Compared with Nine months ended September 30, 2020

Operating Items

Revenues

Product Sales

Revenues consist of product sales of EVOMELA^® that launched during August 2019. Revenue was $20.9 million for the nine months ended September 30, 2021 compared to $10.2 million for the nine months ended September 30, 2020. Revenues increased by 105% in the first nine months of 2021 as compared to same period in 2020 due to the continued growth in EVOMELA^® sales.

Lease Income

Lease income consists primarily of an equipment lease with Juventas (a related party). Lease income was $110,000 for the nine months ended September 30, 2021 compared to $104,000 for the nine months period ended September 30, 2020.

Operating Expenses

Cost of Revenues

Cost of revenues consists primarily of the cost of inventories of EVOMELA^® and sales-based royalties related to the sale of EVOMELA^®.

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Costs of revenues were $8.8 million for the nine months ended September 30, 2021 compared to $7.6 million for the nine months ended September 30, 2020, which includes royalty of $4.1 million and $2.0 million for the same period. Costs of revenues excluding royalty were $4.6 million and $5.5 million for the nine months ended September 30, 2021 and 2020. Costs of revenues excluding royalty as a percentage of revenues decreased from 54% in the nine months ended September 30, 2020 to 22% in the nine months ended September 30, 2021, due to the new alternate manufacturer now in place, resulting in a considerable decrease in the unit cost of inventories of EVOMELA^®.

Research and Development Expenses

Research and development expenses for the nine months ended September 30, 2021 were $10.4 million, compared with $7.7 million for the nine months ended September 30, 2020. The increases in R&D expenses are primarily due to an increase in R&D expenses incurred related to the development of CID-103.

Included in our research and development expenses for the nine months ended September 30, 2021 are direct project costs of $5.0 million for preclinical development activities, primarily related to our CID-103 program compared to $2.9 million for the nine months ended September 30, 2020, $1.5 million amortization and filing fees related to our ANDAs acquired in 2018 compared to $1.9 million for the nine months ended September 30, 2020, and $1.2 million for drugs in-licensed from Acrotech (previously Spectrum) compared to $1.5 million for the nine months ended September 30, 2020.

General and Administrative Expenses

General and administrative expenses for the nine months ended September 30, 2021 were $16.2 million, compared with $13.5 million for the nine months ended September 30, 2020. The increase in general and administrative expenses was primarily due to an increase in professional fees.

Selling and Marketing Expenses

Selling and marketing expenses for the nine months ended September 30, 2021 were $9.5 million, compared with $4.9 million for the nine months ended September 30, 2020. The increase in selling and marketing expenses was due to expansion of sales team in China and the increase of travel cost due to recovery from COVID-19 in 2021.

Loss on disposal of property, plant and equipment

Loss on disposal of property, plant and equipment for the nine months ended September 30, 2020 was $65,000, compared to $0 for the nine months ended September 30, 2020 . The loss on disposal is due to the sale of lab equipments in the period.

Gain on disposal of intangible assets

There was no gain (loss) on disposal of intangible assets for the nine months ended September 30, 2021.

Gain on disposal of intangible assets for the nine months ended September 30, 2020 was $0.5 million. The gain on disposal is due to the $0.5 million gain on the sale of seven ANDAs during the first quarter of 2020.

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Impairment of intangible assets

There was no impairment of intangible assets for the nine months ended September 30, 2021. Impairment of intangible assets for the nine months ended September 30, 2020 was $1.5 million.

Acquired in-process Research and Development

Acquired in-process R&D expenses for the nine months ended September 30, 2021 was $6.6 million, compared to $11.9 million for the nine months ended September 30, 2020. The amount reported for the nine months ended September 30, 2021 was the upfront payment of $5.5 million to Cleave for the development of CB-5339 and milestone payments of $1.06 million for the development of CID-103. The amount reported for the nine months ended September 30, 2020 related to the two 2020 milestone fees paid to Pharmathen of $1.7 million, and the 2020 milestone fees paid to Juventas of $10.3 million.

Non-Operating Items

Interest income, net

Interest income, net for the nine months ended September 30, 2021 was $261,000 compared with $775,000 for the nine months ended September 30, 2020. The decrease in interest income, net, is mainly because to the amount reported for nine months ended September 30, 2020 included interest income of $375,000 from loans made to Juventas (a related party).

Other income

Other income for the nine months ended September 30, 2021 was $540,000 compared with $47,000 for the nine months ended September 30, 2020. Other incomes of $37,000 and $23,000, recorded in the nine months ended September 30, 2021 and 2020, relate to the April 2020 CASI Wuxi’s receipt of RMB 15.9 million (equivalent to $2.2 million) from the Jiangsu Province Wuxi Huishan Economic Development Zone as government grant for the development of leased state-owned land in China for the construction of a manufacturing facility. The grant was recorded as deferred income in April 2020. The grant is been amortized over the term of the lease of the land. Other incomes of $471,807 recorded in the three months ended September 30, 2021 relates to the loan to the Company under the Paycheck Protection Program (PPP) that was forgiven in September 2021.

Foreign exchange gains (losses)

Foreign exchange gains for the nine months ended September 30, 2021 were $289,000 compared with losses of $278,000 for the nine months ended September 30, 2020. The foreign exchange gains (losses) are primarily due to accounts receivable with CRGK.

Change in fair value of investments

The changes in fair value of investments for the nine months ended September 30, 2021 and 2020 were losses of $205,000 and gains of $2,287,000, respectively. The changes represent unrealized gains or losses on the Company’s investments in equity securities and long-term investment.

Impairment loss of long-term investments

Impairment loss of long-term investments for the nine months ended September 30, 2021 was $865,000 relating to the investment in Black Belt Tx. The Company did not record any impairment loss of long-term investments during the nine months ended September 30, 2020.

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LIQUIDITY AND CAPITAL RESOURCES

To date, we have been engaged primarily in research and development activities. As a result, we have incurred and expect to continue to incur operating losses for the foreseeable future. Based on our current plans, we expect our current available cash and cash equivalents to meet our cash requirements for at least through November 12, 2022.

We will require significant additional funding to fund operations until such time, if ever, we become profitable. We intend to augment our cash balances by pursuing other forms of capital infusion, including strategic alliances or collaborative development opportunities with organizations that have capabilities and/or products that are complementary to our capabilities and products in order to continue the development of our potential product candidates that we intend to pursue to commercialization. If we seek strategic alliances, licenses, or other alternative arrangements, such as arrangements with collaborative partners or others, to raise further financing, we may need to relinquish rights to certain of our existing product candidates, or products we would otherwise seek to develop or commercialize on our own, or to license the rights to our product candidates on terms that are not favorable to us.

We will continue to seek to raise additional capital to fund our commercialization efforts, expansion of our operations, research and development, and for the acquisition of new product candidates, if any. We intend to explore one or more of the following alternatives to raise additional capital:

●

selling additional equity securities;

●

selling debt securities or entering into borrowing arrangements;

●

out-licensing product candidates to one or more corporate partners;

●

completing an outright sale of non-priority assets; and/or

●

engaging in one or more strategic transactions.

We also will continue to manage our cash resources prudently and cost-effectively.

There can be no assurance that adequate additional financing under such arrangements will be available to us on terms that we deem acceptable, if at all. If additional funds are raised by issuing equity securities, dilution to existing stockholders may result, or the equity securities may have rights, preferences, or privileges senior to those of the holders of our common stock. If we fail to obtain additional capital when needed, we may be required to delay or scale back our commercialization efforts, our advancement of the Spectrum products, and the ANDA products, or plans for other product candidates, if any.

As of September 30, 2021, we had cash and cash equivalents of $53.1 million, with working capital of $62.0 million.

FINANCING ACTIVITIES

March 2021 Underwritten Public Offering

The Offering was made by means of a written prospectus supplement and accompanying prospectus forming part of a shelf registration statement on Form S-3, previously filed with the SEC on November 20, 2020, which was declared effective on December 2, 2020. We have filed a final prospectus supplement, dated March 24, 2021, with the SEC relating to the Offering.

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Sales Agreements

On February 23, 2018, the Company entered into a Common Stock Sales Agreement (the “Sales Agreement”), as amended, with H.C. Wainwright & Co., LLC (“HCW”) that would allow the Company to sell up to $20 million of shares of common stock in “at-the-market” transactions, subject to compliance with the terms and conditions of the Sales Agreement.

On July 19, 2019, the Company entered into an Open Market Sale Agreement^SM with Jefferies LLC, as sales agent (the “Open Market Agreement”), pursuant to which the Company may elect to sell from time to time, at its option, up to $30 million in shares of the Company’s common stock, through Jefferies LLC, as sales agent.

During the nine months ended September 30, 2021, the Company has not offered and sold any shares of common stock under the Sales Agreement, and a total of 143,248 shares, resulting in net proceeds to the Company of $475,000 have been issued since inception.

During the nine months ended September 30, 2021, the Company has not offered and sold any shares of common stock under the Open Market Agreement, and a total of 493,000 shares, resulting in net proceeds to the Company of $1,539,000, have been issued since inception.

For the nine months ended September 30, 2021, no shares were issued under either the Sales Agreement or the Open Market Agreement.

INTEREST RATE CHANGES

Management does not believe that our working capital needs are sensitive to changes in interest rates.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Based on an evaluation under the supervision and with the participation of the Company’s management, the Company’s Chief Executive Officer and President/Principal Financial Officer have concluded that the Company’s disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) were effective as of September 30, 2021 to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and President/Principal Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

We believe that a controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

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Changes in Internal Control Over Financial Reporting

There have not been any changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2021 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are subject in the normal course of business to various legal proceedings in which claims for monetary or other damages may be asserted. Management does not believe such legal proceedings, unless otherwise disclosed herein, are material.

ITEM 1A. RISK FACTORS

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussion set forth in Item 1A of CASI’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and the information under “Special Note Regarding Forward-Looking Statements” included in this report. There have been no material changes to our risk factors from those disclosed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

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ITEM 6. EXHIBITS

EXHIBIT INDEX


31.1		Rule 13a-14(a) Certification of Chief Executive Officer**
31.2		Rule 13a-14(a) Certification of Principal Financial Officer**
32.1		Section 1350 Certification of Chief Executive Officer**
32.2		Section 1350 Certification of Principal Financial Officer**
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.**
101.SCH		Inline XBRL Taxonomy Extension Schema Document.**
101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document.**
101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document.**
101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document.**
101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document.**
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101 filed herewith).

*Management Contract or any compensatory plan, contract or arrangement

**Filed Herewith

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SIGNATURES

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


		CASI PHARMACEUTICALS, INC.
		(Registrant)


Date: November 12, 2021		/s/ Wei-Wu He
		Wei-Wu He
		Chief Executive Officer


Date: November 12, 2021		/s/ Larry (Wei) Zhang
		Larry (Wei) Zhang
		Principal Financial Officer

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CASI Pharmaceuticals (CASI) 10-Q2021 Q3 Quarterly report

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