AGENUS INC 10-Q

Item 1. Financial Statements AGENUS INC. AND SUBSIDIARIES CONDENSED CONSOLIDA TED BALANCE SHEETS (Amounts in thousands, except share and per share amounts) September 30, 2022 (unaudited) December 31, 2021 ASSETS Cash and cash equivalents $ 208,354 $ 291,931 Short-term investments 9,876 14,992 Accounts receivable 8,823 1,518 Prepaid expenses 21,989 20,362 Other current assets 2,390 3,171 Total current assets 251,432 331,974 Property, plant and equipment, net of accumulated amortization and depreciation of $ 53,158 and $ 50,539 at September 30, 2022 and December 31, 2021, respectively 101,030 60,029 Operating lease right-of-use assets 37,824 31,054 Goodwill 23,936 24,876 Acquired intangible assets, net of accumulated amortization of $ 15,587 and $ 13,955 at September 30, 2022 and December 31, 2021, respectively 6,877 8,488 Other long-term assets 7,920 9,537 Total assets $ 429,019 $ 465,958 LIABILITIES AND STOCKHOLDERS’ (DEFICIT) EQUITY Current portion, long-term debt $ 13,458 $ 728 Current portion, liability related to sale of future royalties and milestones 72,569 62,040 Current portion, deferred revenue 12,762 12,425 Current portion, operating lease liabilities 1,898 2,627 Accounts payable 39,711 30,486 Accrued liabilities 28,950 42,091 Other current liabilities 3,725 6,546 Total current liabilities 173,073 156,943 Long-term debt, net of current portion — 12,823 Liability related to sale of future royalties and milestones, net of current portion 198,692 191,708 Deferred revenue, net of current portion 3,069 11,200 Operating lease liabilities, net of current portion 63,817 42,109 Contingent purchase price considerations 739 1,689 Other long-term liabilities 1,465 1,577 Commitments and contingencies STOCKHOLDERS’ (DEFICIT) EQUITY Series A-1 convertible preferred stock; 31,620 shares designated, issued, and outstanding at September 30, 2022 and December 31, 2021; liquidation value of $ 33,619 at September 30, 2022 0 0 Common stock, par value $ 0.01 per share; 800,000,000 and 400,000,000 shares authorized at September 30, 2022 and December 31, 2021, respectively; 294,948,117 and 256,897,910 shares issued at September 30, 2022 and December 31, 2021, respectively 2,949 2,569 Additional paid-in capital 1,614,836 1,520,212 Accumulated other comprehensive income 644 1,492 Accumulated deficit ( 1,638,814 ) ( 1,489,833 ) Total stockholders’ (deficit) equity attributable to Agenus Inc. ( 20,385 ) 34,440 Non-controlling interest 8,549 13,469 Total stockholders’ (deficit) equity ( 11,836 ) 47,909 Total liabilities and stockholders’ (deficit) equity $ 429,019 $ 465,958 See accompanying notes to unaudited condensed consolidated financial statements. 2 AGENUS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS O F OPERATIONS AND COMPREHENSIVE LOSS (Unaudited) (Amounts in thousands, except per share amounts) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Revenue: Research and development $ 4,573 $ 238,986 $ 13,220 $ 242,265 Royalty sales milestone 7,934 — 25,250 — Service revenue 1,041 1,375 4,167 4,201 Other revenue — — — 35 Non-cash royalty revenue related to the sale of future royalties 9,224 12,593 27,001 28,903 Total revenues 22,772 252,954 69,638 275,404 Operating expenses: Cost of service revenue ( 308 ) ( 817 ) ( 2,875 ) ( 2,589 ) Research and development ( 46,011 ) ( 42,937 ) ( 133,412 ) ( 125,122 ) General and administrative ( 18,105 ) ( 21,385 ) ( 55,971 ) ( 54,388 ) Contingent purchase price consideration fair value adjustment 7 ( 275 ) 950 ( 13,531 ) Operating (loss) income ( 41,645 ) 187,540 ( 121,670 ) 79,774 Other income (expense): Gain on extinguishment of debt — 6,197 — 6,197 Non-operating income 537 121 9,654 2,059 Interest expense, net ( 15,607 ) ( 16,581 ) ( 44,538 ) ( 49,147 ) Net (loss) income ( 56,715 ) 177,277 ( 156,554 ) 38,883 Dividends on Series A-1 convertible preferred stock ( 53 ) ( 53 ) ( 159 ) ( 158 ) Less: net loss attributable to non-controlling interest ( 2,493 ) ( 1,275 ) ( 7,573 ) ( 2,702 ) Net (loss) income attributable to Agenus Inc. common stockholders $ ( 54,275 ) $ 178,499 $ ( 149,140 ) $ 41,427 Per common share data: Basic net (loss) income attributable to Agenus Inc. common stockholders $ ( 0.19 ) $ 0.76 $ ( 0.54 ) $ 0.19 Diluted net (loss) income attributable to Agenus Inc. common stockholders $ ( 0.19 ) $ 0.72 $ ( 0.54 ) $ 0.18 Weighted average number of Agenus Inc. common shares outstanding: Basic 286,854 235,407 274,170 219,677 Diluted 286,854 246,726 274,170 232,512 Other comprehensive loss: Foreign currency translation loss $ ( 1,505 ) $ ( 83 ) $ ( 848 ) $ ( 2,595 ) Other comprehensive loss ( 1,505 ) ( 83 ) ( 848 ) ( 2,595 ) Comprehensive (loss) income $ ( 55,780 ) $ 178,416 $ ( 149,988 ) $ 38,832 See accompanying notes to unaudited condensed consolidated financial statements. 3 AGENUS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) (Amounts in thousands) Series C-1 Series A-1 Convertible Convertible Preferred Stock Preferred Stock Common Stock Treasury Stock Number of Shares Amount Number of Shares Par Value Number of Shares Par Value Additional Paid-In Capital Number of Shares Amount Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Accumulated Deficit Total Balance at December 31, 2021 — $ — 32 $ 0 256,899 $ 2,569 $ 1,520,212 — $ — $ 1,492 $ 13,469 $ ( 1,489,833 ) $ 47,909 Net loss — — — — — — — — — — ( 2,279 ) ( 48,325 ) ( 50,604 ) Other comprehensive loss — — — — — — — — — ( 522 ) — — ( 522 ) Share-based compensation — — — — — — 4,205 — — — 742 — 4,947 Shares sold at the market — — — — 7,039 70 19,112 — — — — — 19,182 Issuance of director deferred shares — — — — 5 — 19 — — — — — 19 Issuance of shares for services — — — — 21 1 80 — — — — — 81 Vesting of nonvested shares — — — — 143 1 ( 1 ) — — — — — — Exercise of stock options and employee share purchases — — — — 136 1 367 — — — — — 368 Issuance of shares for employee bonus — — — — 3,845 38 6,245 ( 1,347 ) ( 3,380 ) — — — 2,903 Retirement of treasury shares — — — — ( 1,347 ) ( 13 ) — 1,347 3,380 — — — 3,367 Balance at March 31, 2022 — $ — 32 $ 0 266,741 $ 2,667 $ 1,550,239 — $ — $ 970 $ 11,932 $ ( 1,538,158 ) $ 27,650 Net loss — — — — — — — — — — ( 2,801 ) ( 46,434 ) ( 49,235 ) Other comprehensive income — — — — — — — — — 1,179 — — 1,179 Share-based compensation — — — — — — 3,818 — — — 797 — 4,615 Shares sold at the market — — — — 15,782 158 28,079 — — — — — 28,237 Issuance of shares for milestone achievement — — — — 180 2 498 — — — — — 500 Issuance of shares for services — — — — 7 1 19 — — — — — 20 Exercise of stock options — — — — 6 — 14 — — — — — 14 Issuance of subsidiary shares for employee bonus — — — — — — — — — — 294 — 294 Issuance of shares for employee bonus — — — — 246 2 363 ( 100 ) ( 251 ) — — — 114 Retirement of treasury shares — — — — ( 100 ) ( 1 ) — 100 251 — — — 250 Balance at June 30, 2022 — $ — 32 $ 0 282,862 $ 2,829 $ 1,583,030 — $ — $ 2,149 $ 10,222 $ ( 1,584,592 ) $ 13,638 Net loss — — — — — — — — — — ( 2,493 ) ( 54,222 ) ( 56,715 ) Other comprehensive loss — — — — — — — — — ( 1,505 ) — — ( 1,505 ) Share-based compensation — — — — — — 3,614 — — — 820 — 4,434 Shares sold at the market — — — — 11,753 117 27,713 — — — — — 27,830 Issuance of shares for services — — — — 10 — 19 — — — — — 19 Vesting of nonvested shares — — — — 67 — — — — — — — — Exercise of stock options and employee share purchases — — — — 259 3 460 — — — — — 463 Balance at September 30, 2022 — $ — 32 $ 0 294,951 $ 2,949 $ 1,614,836 — $ — $ 644 $ 8,549 $ ( 1,638,814 ) $ ( 11,836 ) 4 See accompanying notes to unaudited condensed consolidated financial statements. 5 AGENUS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT) (Unaudited) (Amounts in thousands) Series C-1 Series A-1 Convertible Convertible Preferred Stock Preferred Stock Common Stock Treasury Stock Number of Shares Amount Number of Shares Par Value Number of Shares Par Value Additional Paid-In Capital Number of Shares Amount Accumulated Other Comprehensive Income (Loss) Non-controlling Interest Accumulated Deficit Total Balance at December 31, 2020 12 $ 26,917 32 $ 0 196,093 $ 1,961 $ 1,257,502 — $ — $ 2,772 $ ( 7,826 ) $ ( 1,465,907 ) $ ( 211,498 ) Net loss — — — — — — — — — — ( 726 ) ( 53,677 ) ( 54,403 ) Other comprehensive loss — — — — — — — — — ( 3,774 ) — — ( 3,774 ) Share-based compensation — — — — — — 3,669 — — — 263 — 3,932 Shares sold at the market — — — — 18,950 190 60,669 — — — — — 60,859 Payment of CEO payroll in shares — — — — 19 — 68 — — — — — 68 Issuance of shares for services — — — — 5 — 20 — — — — — 20 Conversion of series C-1 convertible preferred stock ( 2 ) ( 4,321 ) — — 2,000 20 4,301 — — — — — 4,321 Exercise of stock options and employee share purchases — — — — 796 8 2,518 — — — — — 2,526 Balance at March 31, 2021 10 $ 22,596 32 $ 0 217,863 $ 2,179 $ 1,328,747 — $ — $ ( 1,002 ) $ ( 8,289 ) $ ( 1,519,584 ) $ ( 197,949 ) Net loss — — — — — — — — — — ( 701 ) ( 83,290 ) ( 83,991 ) Other comprehensive income — — — — — — — — — 1,262 — — 1,262 Share-based compensation — — — — — — 5,075 — — — 356 — 5,431 Shares sold at the market — — — — 3,392 34 9,113 — — — — — 9,147 Issuance of warrants — — — — — — 70 — — — — — 70 Payment of CEO payroll in shares — — — — 24 — 87 — — — — — 87 Issuance of shares for services — — — — 9 — 31 — — — — — 31 Conversion of series C-1 convertible preferred stock ( 2 ) ( 4,321 ) — — 2,000 20 4,301 — — — — — 4,321 Exercise of stock options — — — — 1,012 10 3,062 — — — — — 3,072 Issuance of shares for employee bonus — — — — 1,486 15 2,757 ( 521 ) ( 1,497 ) — — — 1,275 Retirement of treasury shares — — — — ( 521 ) ( 5 ) — 521 1,497 — — — 1,492 Balance at June 30, 2021 8 $ 18,275 32 $ 0 225,265 $ 2,253 $ 1,353,243 — $ — $ 260 $ ( 8,634 ) $ ( 1,602,874 ) $ ( 255,752 ) Net income (loss) — — — — — — — — — — ( 1,275 ) 178,552 177,277 Other comprehensive loss — — — — — — — — — ( 83 ) — — ( 83 ) Share-based compensation — — — — — — 4,411 — — — 365 — 4,776 Shares sold at the market — — — — 12,674 126 77,305 — — — — — 77,431 Issuance of subsidiary shares to noncontrolling interest — — — — — — 6,757 — — — 3,243 — 10,000 Payment of CEO payroll in shares — — — — 3 — 15 — — — — — 15 Issuance of shares for services — — — — 6 — 24 — — — — — 24 Conversion of series C-1 convertible preferred stock ( 8 ) ( 18,275 ) — — 8,459 85 18,190 — — — — — 18,275 6 Exercise of stock options and employee share purchases — — — — 848 8 3,223 — — — — — 3,231 Vesting of nonvested shares — — — — 192 2 ( 2 ) — — — — — — Issuance of shares for employee bonus — — — — 94 1 358 ( 29 ) ( 157 ) — — — 202 Retirement of treasury shares — — — — ( 29 ) — — 29 157 — — — 157 Balance at September 30, 2021 0 $ — 32 $ 0 247,512 $ 2,475 $ 1,463,524 — $ — $ 177 $ ( 6,301 ) $ ( 1,424,322 ) $ 35,553 See accompanying notes to unaudited condensed consolidated financial statements . 7 AGENUS INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (Unaudited) (Amounts in thousands, except per share amounts) Nine Months Ended September 30, 2022 2021 Cash flows from operating activities: Net loss $ ( 156,554 ) $ 38,883 Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 5,057 5,133 Share-based compensation 14,078 14,379 Non-cash royalty revenue ( 27,001 ) ( 28,903 ) Non-cash interest expense 44,629 48,295 (Gain) loss on sale or disposal of assets ( 6,601 ) 83 Gain on partial forgiveness of liability ( 2,791 ) — Gain on extinguishment of debt — ( 6,197 ) Change in fair value of contingent obligations ( 950 ) 13,531 Changes in operating assets and liabilities: Accounts receivable ( 7,079 ) ( 20,596 ) Prepaid expenses 3,659 ( 7,612 ) Accounts payable 1,339 4,885 Deferred revenue ( 7,855 ) ( 20,384 ) Accrued liabilities and other current liabilities ( 2,524 ) ( 11,181 ) Other operating assets and liabilities 14,558 2,756 Net cash (used in) provided by operating activities ( 128,035 ) 33,072 Cash flows from investing activities: Purchases of plant and equipment ( 38,716 ) ( 24,852 ) Proceeds from sale of property, plant and equipment 10,002 — Cash paid for business acquisition ( 3,652 ) — Purchases of available-for-sale securities ( 14,861 ) ( 4,999 ) Proceeds from sale of available-for-sale securities 20,000 — Net cash used in investing activities ( 27,227 ) ( 29,851 ) Cash flows from financing activities: Net proceeds from sale of equity 75,249 147,437 Proceeds from employee stock purchases and option exercises 845 8,829 Purchase of treasury shares to satisfy tax withholdings ( 3,789 ) — Payment of contingent purchase price consideration — ( 1,542 ) Repayments of debt — ( 462 ) Payment of finance lease obligation ( 248 ) ( 603 ) Net cash provided by financing activities 72,057 153,659 Effect of exchange rate changes on cash ( 372 ) ( 187 ) Net (decrease) increase in cash, cash equivalents and restricted cash ( 83,577 ) 156,693 Cash, cash equivalents and restricted cash, beginning of period 294,600 102,505 Cash, cash equivalents and restricted cash, end of period $ 211,023 $ 259,198 Supplemental cash flow information: Cash paid for interest $ 847 $ 862 Supplemental disclosures - non-cash activities: Purchases of plant and equipment in accounts payable and accrued liabilities $ 8,546 $ 3,481 Issuance of common stock, $ 0.01 par value, in connection with payment for services 120 75 Conversion of series C-1 convertible preferred stock to common stock, $ 0.01 par value — 26,917 Insurance financing agreement 933 987 Issuance of common stock, $ 0.01 par value, for payment of certain employee bonuses 6,634 3,126 Issuance of common stock, $ 0.01 par value, for milestone achievement 500 — Issuance of subsidiary shares for employee bonus 294 — Issuance of subsidiary shares to noncontrolling interest — 10,000 Lease right-of-use assets obtained in exchange for new operating lease liabilities 9,148 898 Lease right-of-use assets obtained in exchange for new finance lease liabilities 648 762 8 See accompanying notes to unaudited condensed consolidated financial statements. 9 AGENUS INC. AND SUBSIDIARIES NOTES TO UNAUDITED CONDENSED CO NSOLIDATED FINANCIAL STATEMENTS September 30, 2022 Note A - Business, Liquidity and Basis of Presentation Agenus Inc. (including its subsidiaries, collectively referred to as “Agenus,” the “Company,” “we,” “us,” and “our”) is a clinical-stage immuno-oncology (“I-O”) company advancing an extensive pipeline of immune checkpoint antibodies, adoptive cell therapies, through its subsidiary MiNK Therapeutics, Inc. (“MiNK”) and neoantigen vaccines, through its subsidiary SaponiQx, Inc. (“SaponiQx”), to fight cancer and infections. Our business is designed to drive success in I-O through speed, innovation and effective combination therapies. We believe that combination therapies and a deep understanding of each patient’s cancer will drive substantial expansion of the patient population benefiting from current and potential new I-O therapies. In addition to a diverse pipeline, we have assembled fully integrated end-to-end capabilities including novel target discovery, antibody generation, cell line development and current good manufacturing practice (“cGMP”) clinical manufacturing. We believe that these fully integrated capabilities enable us to produce novel candidates on timelines that are shorter than the industry standard. Leveraging our science and capabilities, we have forged important partnerships to advance our innovation. We are developing a comprehensive I-O portfolio driven by the following platforms and programs, which we intend to utilize individually and in combination: • our multiple antibody discovery platforms, including our proprietary display technologies, designed to drive the discovery of future checkpoint modulator (“CPM”) antibody candidates; • our antibody candidate programs, emanating from our CPM programs, including our lead asset, botensilimab, an Fc-enhanced CTLA-4, for which data was presented at the 2022 ESMO World Congress on Gastrointestinal Cancer demonstrating in combination with balstilimab (PD-1) significant activity in “cold tumors,” such as microsatellite stable colorectal cancer ("MSS CRC"), and for which we initiated worldwide studies in 2022 in both MSS CRC, in combination with balstilimab, and melanoma and expect to initiate a worldwide trial in pancreatic cancer by the end of 2022; • our saponin-based vaccine adjuvant platform under our subsidiary SaponiQx, principally including our QS-21 STIMULON™ adjuvant (“QS-21 Stimulon”); and • a pipeline of novel allogeneic invariant natural killer T cell (“iNKT”) therapies to treat cancer and other immune-mediated diseases controlled by our subsidiary, MiNK. Our business activities include product research, preclinical and clinical development, intellectual property prosecution, manufacturing, regulatory and clinical affairs, corporate finance and development activities, and support of our collaborations. Our product candidates require successful clinical trials and approvals from regulatory agencies, as well as acceptance in the marketplace. Part of our strategy is to develop and commercialize some of our product candidates by continuing our existing arrangements with academic and corporate collaborators and licensees and by entering into new collaborations. Our cash, cash equivalents and short-term investments at September 30, 2022 were $ 218.2 million, a decrease of $ 88.7 million from December 31, 2021. We have incurred losses since our inception. As of September 30, 2022, we had an accumulated deficit of $ 1.6 billion. During the past five years, we have successfully financed our operations through income and revenues generated from corporate partnerships, advance royalty sales and issuance of equity. Based on our current plans and projections, we believe our quarter end cash resources of $ 218.2 million at September 30, 2022 will be sufficient to satisfy our liquidity requirements for more than one year from when these financial statements were issued. Management continues to monitor the Company’s liquidity position and has the flexibility to adjust spending as needed in order to preserve and extend liquidity. We continuously evaluate the likelihood of success of our programs. As such, our decisions to continue to fund or eliminate funding of each of our programs are predicated on these determinations, on an ongoing basis. We are prepared to discontinue funding of any activities that do not impact our core priorities if they do not prove to be feasible, and to restrict capital expenditures and/or reduce the scale of our operations. We expect our potential sources of funding to include: (1) collaborations, out-licensing and/or partnering opportunities for our portfolio programs and product candidates with multiple parties, (2) milestone payments from our existing partnerships, (3) consummating additional third-party agreements, (4) selling assets, (5) securing project financing and/or (6) selling equity securities. The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete annual 10 consolidated financial statements. In the opinion of our management, the condensed consolidated financial statements include all normal and recurring adjustments considered necessary for a fair presentation of our financial position and operating results. All significant intercompany transactions and accounts have been eliminated in consolidation. Operating results for the nine months ended September 30, 2022, are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. For further information, refer to our consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission (“SEC”) on March 1, 2022. The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management bases its estimates on historical experience and on various assumptions that are believed to be reasonable under the circumstances. Actual results could differ materially from those estimates. For our foreign subsidiaries, the local currency is the functional currency. Assets and liabilities of our foreign subsidiaries are translated into U.S. dollars using rates in effect at the balance sheet date while revenues and expenses are translated into U.S. dollars using average exchange rates during the period. The cumulative translation adjustment resulting from changes in exchange rates are included in the consolidated balance sheets as a component of accumulated other comprehensive income in total stockholders’ equity (deficit). Note B - Net (Loss) Income Per Share The following table sets forth the computation of basic and diluted net (loss) income per share (in thousands, except for per share data): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Amounts used for basic and diluted per share calculations: Net (loss) income attributable to Agenus Inc. common stockholders $ ( 54,275 ) $ 178,499 $ ( 149,140 ) $ 41,427 Weighted average number of Agenus Inc. common shares outstanding - basic 286,854 235,407 274,170 219,677 Effect of potentially dilutive securities: Share based compensation awards — 7,972 — 4,428 Convertible preferred stock — 3,050 — 8,407 Warrants — 297 — — Weighted average number of Agenus Inc. common shares outstanding - diluted 286,854 246,726 274,170 232,512 Net income (loss) attributable to Agenus Inc. per common share: Basic $ ( 0.19 ) $ 0.76 $ ( 0.54 ) $ 0.19 Diluted $ ( 0.19 ) $ 0.72 $ ( 0.54 ) $ 0.18 Basic net (loss) income per common share is calculated by dividing the net (loss) income attributable to common stockholders by the weighted average number of common shares outstanding (including common shares issuable under our Amended and Restated Directors’ Deferred Compensation Plan, or “DDCP”). Diluted (loss) income per common share is calculated by dividing (loss) income attributable to common stockholders by the weighted average number of common shares outstanding (including common shares issuable under our DDCP) plus the dilutive effect of outstanding instruments such as warrants, stock options, non-vested shares and convertible preferred stock. Because we reported a net loss attributable to common stockholders for the periods ended September 30, 2022, diluted loss per common share is the same as basic loss per common share, as the effect of utilizing the fully diluted share count would have reduced the net loss per common share. The following securities (listed on an as-if-converted-to-Common-Stock basis) have been excluded from the computation of diluted weighted average shares outstanding as of September 30, 2022 and 2021, as they would be anti-dilutive (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Warrants 1,980 — 1,980 1,980 Stock options 36,207 6,661 36,207 20,852 Non-vested shares 403 53 403 176 Series A-1 convertible preferred stock 333 — 333 333 11 Note C - Investments Cash equivalents and short-term investments consisted of the following as of September 30, 2022 and December 31, 2021 (in thousands): September 30, 2022 December 31, 2021 Cost Estimated Fair Value Cost Estimated Fair Value Institutional money market funds $ 180,167 $ 180,167 $ 219,903 $ 219,903 U.S. Treasury Bills 19,801 19,801 34,989 34,989 Total $ 199,968 $ 199,968 $ 254,892 $ 254,892 As a result of the short-term nature of our investments, there were minimal unrealized holding gains or losses for the three and nine months ended September 30, 2022 and 2021. Of the investments listed above, $ 190.1 million and $ 239.9 million were classified as cash equivalents and $ 9.9 million and $ 15.0 million as short-term investments on our condensed consolidated balance sheets as of September 30, 2022 and December 31, 2021, respectively. Note D - Goodwill and Acquired Intangible Assets The following table sets forth the changes in the carrying amount of goodwill for the nine months ended September 30, 2022 (in thousands): Balance, December 31, 2021 $ 24,876 Foreign currency translation adjustment ( 940 ) Balance, September 30, 2022 $ 23,936 Acquired intangible assets consisted of the following as of September 30, 2022 and December 31, 2021 (in thousands): As of September 30, 2022 Amortization period (years) Gross carrying amount Accumulated amortization Net carrying amount Intellectual property 7 - 15 years $ 16,525 $ ( 13,158 ) $ 3,367 Trademarks 4 - 4.5 years 1,323 ( 1,125 ) 198 Other 2 - 7 years 2,697 ( 1,304 ) 1,393 In-process research and development Indefinite 1,919 — 1,919 Total $ 22,464 $ ( 15,587 ) $ 6,877 As of December 31, 2021 Amortization period (years) Gross carrying amount Accumulated amortization Net carrying amount Intellectual property 7 - 15 years $ 16,850 $ ( 11,927 ) $ 4,923 Trademarks 4 - 4.5 years 1,277 ( 1,047 ) 230 Other 2 - 6 years 2,255 ( 981 ) 1,274 In-process research and development Indefinite 2,061 — 2,061 Total $ 22,443 $ ( 13,955 ) $ 8,488 The weighted average amortization period of our finite-lived intangible assets is 9 years. Amortization expense related to acquired intangibles is estimated at $ 0.6 million for the remainder of 2022, $ 1.8 million for the year ending December 31, 2023, $ 0.7 million for the year ending December 31, 2024 and $ 0.6 million for each of the years ending December 31, 2025 and 2026. 12 Note E - Debt Debt obligations consisted of the following as of September 30, 2022 and December 31, 2021 (in thousands): Debt instrument Balance at September 30, 2022 Current Portion: 2015 Subordinated Notes $ 12,937 Debentures 146 Other 375 Total $ 13,458 Debt instrument Balance at December 31, 2021 Current Portion: Debentures $ 146 Other 582 Long-term Portion: 2015 Subordinated Notes 12,823 Total $ 13,551 As of September 30, 2022 and December 31, 2021, the principal amount of our outstanding debt balance was $ 13.5 million and $ 13.8 million, respectively. Note F – Liability Related to the Sale of Future Royalties and Milestones The following table shows the activity within the liability account in the nine months ended September 30, 2022 (in thousands): Period from December 31, 2021 to September 30, 2022 Liability related to sale of future royalties and milestones - beginning balance $ 254,105 Non-cash royalty revenue ( 27,001 ) Non-cash interest expense recognized 44,469 Liability related to sale of future royalties and milestones - ending balance 271,573 Less: unamortized transaction costs ( 312 ) Liability related to sale of future royalties and milestones, net $ 271,261 Healthcare Royalty Partners In January 2018, we, through our wholly-owned subsidiary Antigenics, LLC (“Antigenics”), entered into a Royalty Purchase Agreement (the “HCR Royalty Purchase Agreement”) with Healthcare Royalty Partners III, L.P. and certain of its affiliates (collectively, “HCR”). Pursuant to the terms of the HCR Royalty Purchase Agreement, we sold to HCR 100 % of Antigenics’ worldwide rights to receive royalties from GlaxoSmithKline (“GSK”) on sales of GSK’s vaccines containing our QS-21 Stimulon adjuvant. At closing, we received gross proceeds of $ 190.0 million from HCR. Although we sold all of our rights to receive royalties on sales of GSK’s vaccines containing QS-21, as a result of our obligation to HCR, we are required to account for the $190.0 million in proceeds from this transaction as a liability on our condensed consolidated balance sheet that will be recognized into revenue in proportion to the royalty payments from GSK to HCR over the estimated life of the HCR Royalty Purchase Agreement. The liability is classified between the current and non-current portion of liability related to sale of future royalties and milestones in the condensed consolidated balance sheets based on the estimated royalty payments to be received by HCR in the next 12 months from the financial statement reporting date. In the second quarter of 2022, the final milestone under the HCR Royalty Purchase Agreement was achieved, as sales of GSK’s vaccines containing our QS-21 Stimulon adjuvant exceeded $ 2.75 billion for the 12 months ended June 30, 2022. As the $ 25.3 million milestone will be paid through the royalties received from GSK, we recognized revenue (up to the milestone amount) as the underlying royalties are earned. As such, based on underlying royalties earned in the second and third quarters of 2022, we recorded 13 royalty sales milestone revenue of $ 17.3 million during the quarter ended June 30, 2022, and a $ 7.9 million receivable and corresponding royalty sales milestone revenue in the quarter ended September 30, 2022. During the nine months ended September 30, 2022, we recognized $ 27.0 million of non-cash royalty revenue, and we recorded $ 44.5 million of related non-cash interest expense related to the HCR Royalty Purchase Agreement. As royalties are remitted to HCR from GSK, the balance of the recorded liability will be effectively repaid over the life of the HCR Royalty Purchase Agreement. To determine the amortization of the recorded liability, we are required to estimate the total amount of future royalty payments to be received by HCR. The sum of these amounts less the $190.0 million proceeds we received will be recorded as interest expense over the life of the HCR Royalty Purchase Agreement. Periodically, we assess the estimated royalty payments to be paid to HCR from GSK, and to the extent the amount or timing of the payments is materially different from our original estimates, we will prospectively adjust the amortization of the liability, and the related recognition of interest expense. During the nine months ended September 30, 2022, our estimate of the effective annual interest rate over the life of the agreement decreased to 24.9 %, which results in a life of contract interest rate of 22.4 %. Note G - Accrued Liabilities Accrued liabilities consisted of the following as of September 30, 2022 and December 31, 2021 (in thousands): September 30, 2022 December 31, 2021 Payroll $ 9,697 $ 14,206 Professional fees 6,429 6,433 Contract manufacturing costs 1,302 5,824 Research services 6,557 8,550 Other 4,965 7,078 Total $ 28,950 $ 42,091 Note H - Fair Value Measurements We measure our contingent purchase price considerations at fair value. The fair values of our contingent purchase price considerations, $ 0.7 million, are based on significant inputs not observable in the market, which require them to be reported as Level 3 liabilities within the fair value hierarchy. The valuation of these liabilities use assumptions we believe would be made by a market participant and are mainly based on estimates from a Monte Carlo simulation of our share price, as well as other factors impacting the probability of triggering the milestone payments. Share price was evolved using a geometric Brownian motion, calculated daily for the life of the contingent purchase price considerations. The significant unobservable inputs include the anticipated timelines to achieve the contingent purchase milestones and our estimated credit spread, the weighted average values of which (weighted based on the value of each contingent liability), are shown in the table below. September 30, 2022 December 31, 2021 Period of time to achieve milestones (in years) 2.25 2.50 Credit spread 9.4 % 5.4 % 14 Liabilities measured at fair value are summarized below (in thousands): Description September 30, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Contingent purchase price considerations $ 739 $ — $ — $ 739 Total $ 739 $ — $ — $ 739 Description December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Liabilities: Contingent purchase price consideration $ 1,689 $ — $ — $ 1,689 Total $ 1,689 $ — $ — $ 1,689 The following table presents our liabilities measured at fair value using significant unobservable inputs (Level 3), as of September 30, 2022 (in thousands): Balance, December 31, 2021 $ 1,689 Change in fair value of contingent purchase price considerations during the period ( 950 ) Balance, September 30, 2022 $ 739 The fair value of our outstanding debt balance at September 30, 2022 and December 31, 2021 was $ 13.4 million and $ 13.6 million, respectively, based on the Level 2 valuation hierarchy of the fair value measurements standard using a present value methodology that was derived by evaluating the nature and terms of each note and considering the prevailing economic and market conditions at the balance sheet date. The principal amount of our outstanding debt balance at September 30, 2022 and December 31, 2021 was $ 13.5 million and $ 13.8 million, respectively. Note I - Revenue from Contracts with Customers Gilead Collaboration Agreement On December 20, 2018, we entered into a series of agreements with Gilead Sciences, Inc. (“Gilead”) focused on the development and commercialization of up to five novel immuno-oncology therapies. Pursuant to the terms of the license agreement, the option and license agreements and the stock purchase agreement we entered into with Gilead (collectively, the “Gilead Collaboration Agreements”), at the closing of the transaction on January 23, 2019, we received an upfront cash payment from Gilead of $ 120.0 million and Gilead made a $ 30.0 million equity investment in Agenus. On November 6, 2020, we received notice from Gilead that it was returning AGEN1423 to us and voluntarily terminating the applicable license agreement. The termination was effective as of February 4, 2021. In the third quarter of 2021 we ceased development of AGEN1223 and in October 2021 the AGEN1223 option and license agreement was formally terminated. The AGEN2373 option and license agreement and the stock purchase agreement remain in full force and effect. We remain eligible to receive a $ 50.0 million exercise fee and, if exercised, up to $ 520.0 million in aggregate potential milestones. Collaboration Revenue For the three months ended September 30, 2022, and 2021, we recognized approximately $ 4.5 million and $ 18.2 million, respectively, of research and development revenue based on the partial satisfaction of the over time performance obligations as of quarter end. For the period ended September 30, 2021, the amount also included deferred revenue recognized in connection with the termination of AGEN1223 development. For the nine months ended September 30, 2022, we recognized research and development revenue of $ 5.0 million related to the achievement of a milestone and $ 7.1 million based on the partial satisfaction of the over time performance obligations as of period 15 end. For the nine months ended September 30, 2021, we recognized research and development revenue of $ 20.6 million based on the partial satisfaction of the over time performance obligations as of period end and the termination of AGEN1223 development. We expect to recognize deferred research and development revenue of $ 7.0 million and $ 7.7 million for the remainder of 2022 and 2023, respectively, related to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2022. Disaggregation of Revenue The following tables present revenue (in thousands) for the three and nine months ended September 30, 2022 and 2021, disaggregated by geographic region and revenue type. Revenue by geographic region is allocated based on the domicile of our respective business operations. Three months ended September 30, 2022 United States Rest of World Total Revenue Type Royalty sales milestone $ 7,934 $ — $ 7,934 Research and development services 121 — 121 Other services — 1,041 1,041 Recognition of deferred revenue 4,452 — 4,452 Non-cash royalties 9,224 — 9,224 $ 21,731 $ 1,041 $ 22,772 Three months ended September 30, 2021 Revenue Type License fees and milestones $ 220,000 $ — $ 220,000 Clinical product revenue 587 — 587 Research and development services 210 — 210 Other services — 1,375 1,375 Recognition of deferred revenue 18,189 — 18,189 Non-cash royalties 12,593 — 12,593 $ 251,579 $ 1,375 $ 252,954 Nine months ended September 30, 2022 United States Rest of World Total Revenue Type License fees and milestones $ 5,000 $ — $ 5,000 Royalty sales milestone 25,250 — 25,250 Research and development services 1,154 — 1,154 Other services — 4,167 4,167 Recognition of deferred revenue 7,066 — 7,066 Non-cash royalties 27,001 — 27,001 $ 65,471 $ 4,167 $ 69,638 Nine months ended September 30, 2021 Revenue Type License fees and milestones $ 220,000 $ — $ 220,000 Clinical product revenue 587 — 587 Research and development services 1,065 — 1,065 Other services — 4,201 4,201 Recognition of deferred revenue 20,613 — 20,613 Recognition of deferred grant revenue 35 — 35 Non-cash royalties 28,903 — 28,903 $ 271,203 $ 4,201 $ 275,404 Contract Balances Contract assets primarily relate to our rights to consideration for work completed in relation to our research and development services performed but not billed at the reporting date. The contract assets are transferred to receivables when the rights become unconditional. Currently, we do not have any contract assets which have not transferred to a receivable. We had no asset impairment 16 charges related to contract assets in the period. Contract liabilities primarily relate to contracts where we received payments but have not yet satisfied the related performance obligations. The advance consideration received from customers for research and development services or licenses bundled with other promises is a contract liability until the underlying performance obligations are transferred to the customer. The following table provides information about contract liabilities from contracts with customers (in thousands): Nine months ended September 30, 2022 Balance at beginning of period Additions Deductions Balance at end of period Contract liabilities: Deferred revenue $ 23,625 $ 162 $ ( 7,956 ) $ 15,831 The change in contract liabilities is primarily related to the recognition of $ 7.1 million of revenue related to the Gilead Collaboration Agreements during the nine months ended September 30, 2022. Deferred revenue related to the Gilead Collaboration Agreements of $ 14.7 million as of September 30, 2022, which was comprised of the $ 142.5 million initial transaction price, less $ 127.8 million of license and collaboration revenue recognized from the effective date of the contract, will be recognized as the combined performance obligation is satisfied. We also recorded a $ 1.2 million receivable as of September 30, 2022, for research and development and other services provided. During the nine months ended September 30, 2022, we did not recognize any revenue from amounts included in the contract asset or the contract liability balances from performance obligations satisfied in previous periods. No ne of the costs to obtain or fulfill a contract were capitalized. Note J - Share-based Compensation Plans We primarily use the Black-Scholes option pricing model to value stock options granted to employees and non-employees, including stock options granted to members of our Board of Directors. However, the fair value of stock option market-based awards is calculated based on a Monte Carlo simulation as of the date of issuance. All stock options have 10 -year terms and generally vest ratably over a 3 or 4-year period. A summary of option activity for the nine months ended September 30, 2022 is presented below: Options Weighted Average Exercise Price Weighted Average Remaining Contractual Term (in years) Aggregate Intrinsic Value Outstanding at December 31, 2021 32,764,087 $ 3.66 Granted 7,729,112 2.95 Exercised ( 73,913 ) 2.38 Forfeited ( 3,035,347 ) 3.23 Expired ( 1,177,296 ) 4.44 Outstanding at September 30, 2022 36,206,643 $ 3.52 7.12 $ 464,888 Vested or expected to vest at September 30, 2022 36,206,643 $ 3.52 7.12 $ 464,888 Exercisable at September 30, 2022 20,713,305 $ 3.73 5.89 $ 287,186 The weighted average grant-date fair values of stock options granted during the nine months ended September 30, 2022 and 2021 were $ 1.77 and $ 2.83 , respectively. As of September 30, 2022 , there was approximately $ 33.0 million of total unrecognized share-based compensation expense related to these stock options and stock options granted under a subsidiary plan which, if all milestones are achieved, will be recognized over a weighted average period of 2.2 years. Certain employees and consultants have been granted non-vested stock. The fair value of non-vested market-based awards is calculated based on a Monte Carlo simulation as of the date of issuance. The fair value of other non-vested stock is calculated based on the closing sale price of our common stock on the date of issuance. 17 A summary of non-vested stock activity for the nine months ended September 30, 2022 is presented below: Non-vested Shares Weighted Average Grant Date Fair Value Outstanding at December 31, 2021 1,018,051 $ 2.39 Granted 4,432,830 2.48 Vested ( 4,316,962 ) 2.58 Forfeited ( 731,167 ) 1.81 Outstanding at September 30, 2022 402,752 $ 2.34 As of September 30, 2022 , there was approximately $ 2.0 million of unrecognized share-based compensation expense related to these non-vested shares and non-vested shares granted under a subsidiary plan which will be recognized over a period of 1.6 years. During the nine months ended September 30, 2022 , 326,203 shares were issued under the 2019 Employee Stock Purchase Plan, 73,913 shares were issued as a result of stock option exercises and 210,499 shares were issued as a result of the vesting of non-vested stock. Additionally, 4,090,080 shares were issued as payment for certain employee bonuses, with 1,446,849 of those shares being withheld to cover taxes, resulting in a net share issuance of 2,643,231 . The impact on our results of operations from share-based compensation for the three and nine months ended September 30, 2022 and 2021, was as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Research and development $ 1,200 $ 1,185 $ 3,731 $ 3,349 General and administrative 3,234 3,591 10,265 10,790 Total share-based compensation expense $ 4,434 $ 4,776 $ 13,996 $ 14,139 Note K – Restricted Cash As of both September 30, 2022, and December 31, 2021, we maintained non-current restricted cash of $ 2.7 million. This amount is included within “Other long-term assets” in our condensed consolidated balance sheets and is comprised of letters of credit required under two of our facility leases. The following table provides a reconciliation of cash, cash equivalents and restricted cash that sums to the total of the same such amounts shown in the condensed consolidated statements of cash flows (in thousands): Nine Months Ended September 30, 2022 Nine Months Ended September 30, 2021 Beginning of Period End of Period Beginning of Period End of Period Cash and cash equivalents $ 291,931 $ 208,354 $ 99,871 $ 256,529 Restricted cash 2,669 2,669 2,634 2,669 Cash, cash equivalents and restricted cash $ 294,600 $ 211,023 $ 102,505 $ 259,198 Note L – Equity At the Market Offerings On March 1, 2022, we filed a prospectus supplement with the SEC in connection with the potential offer and sale of up to 100,000,000 shares of common stock (the “Placement Shares”) from time to time in “at the market” offerings pursuant to an At Market Issuance Sales Agreement by and between Agenus and B. Riley Securities, Inc. (the “Sales Agent”), dated as of July 22, 2020 (the “Sales Agreement”). Sales pursuant to the Sales Agreement will be made only upon instructions by us to the Sales Agent, and we cannot provide assurances that we will issue any Placement Shares pursuant to the Sales Agreement. 18 During the three and nine months ended September 30, 2022, we received net proceeds of approximately $ 27.8 million and $ 75.2 million from the sale of approximately 11.8 million and 34.6 million shares of our common stock at an average price per share of approximately $ 2.44 and $ 2.24 , respectively, in at-the-market offerings under the Sales Agreement. Authorized Shares On August 4, 2022, at a special meeting of stockholders, our stockholders approved an amendment to our Amended and Restated Articles of Incorporation, as amended, to increase our authorized shares of common stock from 400,000,000 to 800,000,000 . The increase in our authorized shares of common stock became effective upon the filing of the amendment to our Articles of Incorporation with the Delaware Secretary of State on August 5, 2022. Note M – Related Party Transactions During the quarter ended June 30, 2022, our Audit and Finance Committee approved a contract between a wholly-owned subsidiary of Agenus and Protagenic Therapeutics, Inc. (“Protagenic”), for the performance of clinical trial services totaling approximately $ 1.3 million. These services are expected to be completed over the next year. Dr. Garo H. Armen, our Chief Executive Officer, is Executive Chairman of and has a greater than 10 % equity interest in Protagenic. Note N - Recent Accounting Pronouncements Recently Issued, Not Yet Adopted In January 2017, the FASB issued ASU 2017-04, Intangibles – Goodwill and Other (Topic 350) that will eliminate the requirement to calculate the implied fair value of goodwill to measure a goodwill impairment charge. Instead, an impairment charge will be based on the excess of a reporting unit’s carrying amount over its fair value. The guidance is effective for the Company in the first quarter of fiscal 2023. Early adoption is permitted. We do not anticipate the adoption of this guidance to have a material impact on our consolidated financial statements, absent any goodwill impairment. No other new accounting pronouncement issued or effective during the nine months ended September 30, 2022 had or is expected to have a material impact on our consolidated financial statements or disclosures. Note O – Subsequent Events At the Market Offerings During the period of October 1, 2022 through November 4, 2022, we received net proceeds of approximately $ 22.3 million from the sale of approximately 9.9 million shares of our common stock under the Sales Agreement. 19 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Forward Looking Statements This Quarterly Report on Form 10-Q and other written and oral statements we make from time to time contain certain “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 (the “Exchange Act”). You can identify these forward-looking statements by the fact they use words such as “could,” “expect,” “anticipate,” “estimate,” “target,” “may,” “project,” “guidance,” “intend,” “plan,” “believe,” “will,” “potential,” “opportunity,” “future” and other words and terms of similar meaning and expression in connection with any discussion of future operating or financial performance. You can also identify forward-looking statements by the fact that they do not relate strictly to historical or current facts. Such forward-looking statements are based on current expectations and involve inherent risks and uncertainties, including factors that could delay, divert or change any of them, and could cause actual outcomes to differ materially from current expectations. These statements relate to, among other things, our business strategy, our research and development, our product development efforts, our ability to commercialize our product candidates, the activities of our licensees, our prospects for initiating partnerships or collaborations, the timing of the introduction of products, the effect of new accounting pronouncements, uncertainty regarding our future operating results and our profitability, anticipated sources of funds as well as our plans, objectives, expectations, and intentions. We have included more detailed descriptions of these risks and uncertainties and other risks and uncertainties applicable to our business that we believe could cause actual results to differ materially from any forward-looking statements in Part II-Item 1A “Risk Factors” of this Quarterly Report on Form 10-Q. We encourage you to read those descriptions carefully. Although we believe we have been prudent in our plans and assumptions, no assurance can be given that any goal or plan set forth in forward-looking statements can be achieved. We caution investors not to place significant reliance on forward-looking statements contained in this document; such statements need to be evaluated in light of all the information contained in this document. Furthermore, the statements speak only as of the date of this document, and we undertake no obligation to update or revise these statements. ASV®, Agenus™, MiNK™, Prophage™, Retrocyte Display™ and STIMULON™ are trademarks of Agenus Inc. and its subsidiaries. All rights reserved. Overview We are a clinical-stage immuno-oncology (“I-O”) company advancing an extensive pipeline of immune checkpoint antibodies, adoptive cell therapies (through our subsidiary MiNK) and neoantigen vaccines (through our subsidiary SaponiQx), to fight cancer and infections. Our business is designed to drive success in I-O through speed, innovation and effective combination therapies. We believe that combination therapies and a deep understanding of each patient’s cancer will drive substantial expansion of the patient population benefiting from current I-O therapies. In addition to a diverse pipeline, we have assembled fully integrated end-to-end capabilities including novel target discovery, antibody generation, cell line development and current good manufacturing practice (“cGMP”) clinical manufacturing. We believe that these fully integrated capabilities enable us to produce novel candidates on timelines that are shorter than the industry standard. Leveraging our science and capabilities, we have forged important partnerships to advance our innovation. We are developing a comprehensive I-O portfolio driven by the following platforms and programs, which we intend to utilize individually and in combination: • our multiple antibody discovery platforms, including our proprietary display technologies, designed to drive the discovery of future checkpoint modulator (“CPM”) antibody candidates; • our antibody candidate programs, including our CPM programs, such as our lead candidate botensilimab (AGEN1181); • our saponin-based vaccine adjuvant platform under our subsidiary SaponiQx, principally including our QS-21 STIMULON™ adjuvant (“QS-21 Stimulon”); and • our subsidiary, MiNK, which has a pipeline of novel allogeneic invariant natural killer T cell (“iNKT”) therapies to treat cancer and other immune-mediated diseases. We assess development, commercialization and partnering strategies for each of our product candidates periodically based on several factors, including pre-clinical and clinical trial results, competitive positioning and funding requirements and resources. Our lead program, botensilimab (AGEN1181), is advancing in multiple clinical programs which we have designed to support regulatory pathways for accelerated development with botensilimab as a monotherapy and in combination with balstilimab. We initiated worldwide trials for botensilimab in microsatellite stable colorectal cancer and melanoma in 2022 and expect to initiate a worldwide trial for botensilimab in pancreatic cancer by the end of 2022. 20 In October 2021, we announced the withdrawal of our biologics license application (“BLA”) for balstilimab monotherapy to treat second-line cervical cancer. Our decision came at the recommendation of the United States Food and Drug Administration (“FDA”) following the full approval of pembrolizumab, four months earlier than the FDA goal date. The BLA submission for balstilimab was accepted for filing and received Fast Track and Priority Review designation from the FDA, with a target action date of December 16, 2021. As part of the BLA review process, we successfully completed three FDA inspections, with no cited issues, concerns, or Form-483s. Based on this change to the treatment landscape with another company’s full approval, we are no longer pursuing U.S. registration for the combination of balstilimab and zalifrelimab in second-line cervical cancer. We have formed collaborations with multiple companies such as Bristol-Myers Squibb Company (“BMS”), Betta Pharmaceuticals Co., Ltd. (“Betta”), Gilead Sciences, Inc. (“Gilead”), Incyte Corporation (“Incyte”), Merck Sharpe & Dohme (“Merck”) and Recepta Biopharma SA (“Recepta”). Through these alliances, as well as our own internal programs, we currently have more than a dozen antibody programs in pre-clinical or clinical development. Pursuant to our collaboration agreement with Incyte, we have exclusively licensed to Incyte monospecific antibodies targeting GITR, OX40, TIM-3 and LAG-3, which Incyte is currently advancing in various clinical trials, as well as an additional undisclosed target that Incyte is advancing in preclinical studies. Under the terms of our agreement, Incyte is responsible for all future development expenses, and we are eligible to receive up to an additional $500.0 million in potential milestone payments plus royalties on any future sales. Pursuant to our collaboration and license agreement with Merck, we exclusively licensed to Merck a monospecific antibody targeting ILT4, which Merck is advancing in a Phase 2 clinical trial. Under the terms of our agreement, Merck is responsible for all future development expenses, and we are eligible to receive up to an additional $85.0 million in potential milestone payments plus royalties on any future sales. In September 2018, we, through our wholly-owned subsidiary, Agenus Royalty Fund, LLC, entered into a royalty purchase agreement (the “XOMA Royalty Purchase Agreement”) with XOMA (US) LLC (“XOMA”). Pursuant to the terms of the XOMA Royalty Purchase Agreement, XOMA purchased 33% of all future royalties and 10% of all future milestone payments that we are entitled to receive from Incyte and Merck, net of certain of our obligations to a third party. After taking into account our obligations under the XOMA Royalty Purchase Agreement, as of September 30, 2022, we remain eligible to receive up to $450.0 million and $76.5 million in potential development, regulatory and commercial milestones from Incyte and Merck, respectively. In December 2018, we entered into a series of agreements with Gilead to collaborate on the development and commercialization of up to five novel I-O therapies (the “Gilead Collaboration Agreements”). Pursuant to the Gilead Collaboration Agreements, Gilead received worldwide exclusive rights to our bispecific antibody, AGEN1423, as well as the exclusive option to exclusively license AGEN1223, a bispecific antibody, and AGEN2373, a monospecific antibody. All three assets have entered clinical development. In November 2020, Gilead elected to return AGEN1423 to us and to voluntarily terminate the license agreement effective as of February 4, 2021. In the third quarter of 2021, we ceased development of AGEN1223 and in October 2021 the AGEN1223 option and license agreement was formally terminated. The AGEN2373 option agreement remains in place, and we are responsible for developing the program up to the option decision point, at which time Gilead may acquire exclusive rights to the program on option exercise. We have the right to opt-in to share Gilead’s development and commercialization costs in the United States in exchange for a profit (loss) share on a 50:50 basis and revised milestone payments. In March 2022, we received a $5.0 million clinical milestone under the AGEN2373 option agreement. Pursuant to the terms of the AGEN2373 option agreement, we remain eligible to receive up to $5.0 million in aggregate milestone payments prior to option exercise, a $50.0 million option exercise fee and, if exercised, up to an additional $520.0 million in aggregate milestone payments, as well as royalties on any future sales. In June 2020, we entered into a license and collaboration agreement (the “Betta License Agreement”) with Betta, pursuant to which we granted Betta an exclusive license to develop, manufacture and commercialize balstilimab and zalifrelimab in Republic of China, Hong Kong, Macau and Taiwan (“Greater China”). Under the terms of the Betta License Agreement, we received $15.0 million upfront and are eligible to receive up to $100.0 million in milestone payments plus royalties on any future sales in Greater China. In May 2021, we entered into a License, Development and Commercialization Agreement (“BMS License Agreement”) with BMS to collaborate on the development and commercialization of our pre-clinical proprietary anti-TIGIT bispecific antibody program AGEN1777. Under the BMS License Agreement, we granted BMS an exclusive worldwide license under certain of our intellectual property rights to develop, manufacture and commercialize AGEN1777 and its derivatives in all fields; provided, we retained an option to access the licensed antibodies for use in clinical studies in combination with certain of our other pipeline assets subject to certain restrictions. Pursuant to the BMS License Agreement, we received a non-refundable upfront cash payment of $200.0 million in July 2021 and are eligible to receive up to $1.36 billion in aggregate development, regulatory and commercial milestone payments plus tiered royalties. In exchange, BMS is responsible for all of the development, regulatory approval, manufacturing and commercialization costs with respect to products containing AGEN1777. We have the option, but not the obligation, to co-fund a minority of the global development costs of products containing AGEN1777 or its derivatives, in exchange for increased tiered royalties. Finally, we also have the option to co-promote AGEN1777 in the U.S. In October 2021, we announced that the first patient was dosed in the AGEN1777 Phase 1 clinical trial, triggering the achievement of a $20.0 million milestone. 21 In September 2021, we announced the launch of SaponiQx to spearhead innovation in novel adjuvant discovery and vaccine design, including in relation to our saponin-based adjuvants. We also announced our partnership with Ginkgo Bioworks, Inc. to develop SaponiQx’s novel saponin products from sustainably sourced raw materials, with a goal to meet the current demands placed on the vaccine industry for pandemic vaccines. Our QS-21 Stimulon adjuvant is partnered with GlaxoSmithKline (“GSK”) and is a key component in multiple GSK vaccine programs. These programs are in various stages, with the most advanced being GSK’s approved shingles vaccine, Shingrix, which was approved in the United States by the FDA in October 2017. In January 2018, we entered into a Royalty Purchase Agreement with Healthcare Royalty Partners III, L.P. and certain of its affiliates (together, “HCR”), pursuant to which HCR purchased 100% of our worldwide rights to receive royalties from GSK on GSK’s sales of vaccines containing our QS-21 Stimulon adjuvant. We do not incur clinical development costs for products partnered with GSK. We were also entitled to receive up to $40.35 million in milestone payments from HCR based on sales of GSK’s vaccines as follows: (i) $15.1 million upon reaching $2.0 billion last-twelve-months net sales any time prior to 2024 (the “First HCR Milestone”) and (ii) $25.25 million upon reaching $2.75 billion last-twelve-months net sales any time prior to 2026 (the “Second HCR Milestone”). We received the First HCR Milestone after GSK’s net sales of Shingrix for the twelve months ended December 31, 2019 exceeded $2.0 billion. The Second HCR Milestone was achieved after GSK’s net sales of Shingrix for the twelve months ended June 30, 2022 exceeded $2.75 billion. As the milestone will be paid through the royalties received from GSK, recognized revenue (up to the milestone amount) as the underlying royalties were earned. As such, based on underlying royalties earned in the second and third quarters of 2022, we recorded royalty sales milestone revenue of $17.3 million during the quarter ended June 30, 2022, and a $7.9 million receivable and corresponding royalty sales milestone revenue in the quarter ended September 30, 2022. The $17.3 million royalty sales milestone receivable recorded in the quarter ended June 30, 2022 was received in the third quarter of 2022. Our business activities include product research and preclinical and clinical development, intellectual property prosecution, manufacturing, regulatory and clinical affairs, corporate finance and development activities, and support of our collaborations. Our product candidates require successful clinical trials and approvals from regulatory agencies, as well as acceptance in the marketplace. Part of our strategy is to develop and commercialize some of our product candidates by continuing our existing arrangements with academic and corporate collaborators and licensees and by entering into new collaborations. MiNK Therapeutics is focused on the development of unmodified iNKT cell therapies for the treatment of cancer and other life-threatening immune-mediated diseases. There are three active clinical trials evaluating AGENT-797, an allogeneic iNKT therapy, for the treatment of patients with solid tumor cancers with AGENT-797 alone and in combination with KEYTRUDA or OPDIVO, multiple myeloma, and viral Acute Respiratory Distress secondary to COVID-19. Data readouts are planned by the end of 2022. In October 2021, MiNK Therapeutics completed an initial public offering of 3,333,334 shares of its common stock, trading on the Nasdaq Capital Market under the ticker symbol “INKT”, at a public offering price of $12.00 per share. The gross proceeds from the offering, before deducting underwriting discounts and commissions and other offering expenses, were approximately $40.0 million. Subsequently, the underwriters in the initial public offering exercised their option to acquire an additional 500,000 shares at the public offering price and such shares were delivered on November 3, 2021. MiNK Therapeutics has exclusively licensed the INKT technology from Agenus and retains the rights to develop and expand a proprietary pipeline of engineered CAR-INKTs, TCRs, and INKT bispecific engagers. Historical Results of Operations Three months ended September 30, 2022 compared to the three months ended September 30, 2021 Research and development revenue We recognized research and development revenue of approximately $4.6 million and $239.0 million during the three months ended September 30, 2022 and 2021, respectively. Research and development revenues in the third quarter of 2022 primarily consisted of $4.5 million related to the recognition of deferred revenue earned under our Gilead Collaboration Agreements. Research and development revenues in the third quarter of 2021 primarily consisted of $220.0 million related to an upfront license fee and milestone earned under our BMS License Agreement and $18.2 million related to the recognition of deferred revenue earned under our Gilead Collaboration Agreements. Non-cash royalty revenue related to the sale of future royalties In January 2018, we sold 100% of our worldwide rights to receive royalties from GSK on sales of GSK’s vaccines containing our QS-21 Stimulon adjuvant to HCR. As described in Note F to our Condensed Consolidated Financial Statements, this transaction has been recorded as a liability that amortizes over the estimated life of our Royalty Purchase Agreement with HCR. As a result of this liability accounting, even though the royalties are remitted directly to HCR, we record these royalties from GSK as revenue. Non-cash royalty revenue related to our agreement with GSK decreased $3.4 million, to approximately $9.2 million for the three months ended September 30, 2022, from $12.6 million for the three months ended September 30, 2021, due to the achievement of the final sales milestone under our Royalty Purchase Agreement with HCR and the recognition of approximately $7.9 million of these royalties as royalty milestone revenue in the three months ended September 30, 2022. 22 Royalty sales milestone revenue We recognized royalty sales milestone revenue of approximately $7.9 million during the three months ended September 30, 2022, related to the achievement of the final milestone under our Royalty Purchase Agreement with HCR. This $25.3 million milestone was achieved when sales of GSK’s vaccines containing our QS-21 Stimulon exceeded $2.75 billion for the 12 months ended June 30, 2022. As the milestone will be paid through the royalties received from GSK, we recognized revenue (up to the milestone amount) as the underlying royalties were earned. Research and development expense Research and development expense includes the costs associated with our internal research and development activities, including compensation and benefits, occupancy costs, manufacturing costs, costs of consultants, and administrative costs. Research and development expense increased 7% to $46.0 million for the three months ended September 30, 2022 from $42.9 million for the three months ended September 30, 2021. Increased expenses in the three months ended September 30, 2022 primarily relate a $1.0 million increase in personnel related expenses, primarily due to increased headcount, a $5.1 million increase in expenses attributable to the activities of our subsidiaries and a $0.3 million increase in other research and development expenses. These increases were partially offset by a $3.2 million decrease in third-party services and other expenses, largely due to the timing of expenses related to the advancement of our antibody programs. General and administrative expense General and administrative expense consists primarily of personnel costs, facility expenses, and professional fees. General and administrative expenses decreased 15% to $18.1 million for the three months ended September 30, 2022 from $21.4 million for the three months ended September 30, 2021. Decreased expenses in the three months ended September 30, 2022 primarily relate to a $4.4 million decrease in professional fees, primarily due to reduced commercial readiness activities, and a $1.2 million decrease in personnel related expenses, primarily due to decreased headcount and decreased share-based compensation expense. These decreases were partially offset by a $2.1 million increase in expenses attributable to the activities of our subsidiaries and a $0.3 million increase in other general and administrative expenses. Contingent purchase price consideration fair value adjustment Contingent purchase price consideration fair value adjustment represents the change in the fair value of our purchase price considerations, which mainly resulted from changes in our share price and changes in the credit spread since each reporting period end. The fair value of our contingent purchase price considerations is mainly based on estimates from a Monte Carlo simulation of our share price. Non-operating income (expense) Non-operating income (expense) includes our foreign currency translation adjustment and other income or expense. Non-operating income increased $0.4 million for the three months ended September 30, 2022, from income of $0.1 million for the three months ended September 30, 2021 to income of $0.5 million for the three months ended September 30, 2022, primarily due larger foreign currency exchange gains in the three months ended September 30, 2022 compared the three months ended September 30, 2021. Interest expense, net Interest expense, net decreased to approximately $15.6 million for the three months ended September 30, 2022 from $16.6 million for the three months ended September 30, 2021, due to decreased non-cash interest recorded in connection with our Royalty Purchase Agreement with HCR. Nine months ended September 30, 2022 compared to the nine months ended September 30, 2021 Research and development revenue We recognized research and development revenue of approximately $13.2 million and $242.3 million during the nine months ended September 30, 2022 and 2021, respectively. Research and development revenues in the first nine months of 2022 primarily consisted of a $5.0 million milestone and $7.7 million related to the recognition of deferred revenue, both earned under our Gilead Collaboration Agreements. Research and development revenues in the first nine months of 2021 primarily consisted of $220.0 million related to an upfront license fee and milestone earned under our BMS License Agreement and $20.6 million related to the recognition of deferred revenue earned under our Gilead Collaboration Agreements. Non-cash royalty revenue related to the sale of future royalties In January 2018, we sold 100% of our worldwide rights to receive royalties from GSK on sales of GSK’s vaccines containing our QS-21 Stimulon adjuvant to HCR. As described in Note F to our Condensed Consolidated Financial Statements, this transaction has been recorded as a liability that amortizes over the estimated life of our Royalty Purchase Agreement with HCR. As a result of this liability accounting, even though the royalties are remitted directly to HCR, we will record these royalties from GSK as revenue. 23 Non-cash royalty revenue related to our agreement with GSK decreased $1.9 million, to approximately $27.0 million for the nine months ended September 30, 2022, from $28.9 million for the nine months ended September 30, 2021, due to the achievement of the final sales milestone under our Royalty Purchase Agreement with HCR and the recognition of approximately $25.3 million of these royalties as royalty milestone revenue in the nine months ended September 30, 2022. Royalty sales milestone revenue We recognized royalty sales milestone revenue of approximately $25.3 million during the nine months ended September 30, 2022, related to the achievement of the final milestone under our Royalty Purchase Agreement with HCR. This $25.3 million milestone was achieved when sales of GSK’s vaccines containing our QS-21 Stimulon exceeded $2.75 billion for the 12 months ended June 30, 2022. As the milestone will be paid through the royalties received from GSK, we recognized revenue (up to the milestone amount) as the underlying royalties were earned. Research and development expense Research and development expense includes the costs associated with our internal research and development activities, including compensation and benefits, occupancy costs, manufacturing costs, costs of consultants, and administrative costs. Research and development expense increased 7% to $133.4 million for the nine months ended September 30, 2022 from $125.1 million for the nine months ended September 30, 2021. Increased expenses in the nine months ended September 30, 2022 primarily relate to a $5.0 million increase in personnel related expenses, primarily due to increased headcount and increased share based compensation expense, a $11.9 million increase in expenses attributable to the activities of our subsidiaries and a $0.7 million increase in other research and development expenses. These increases were partially offset by a $9.2 million decrease in third-party services and other expenses, largely due to the timing of expenses related to the advancement of our antibody programs. General and administrative expense General and administrative expense consists primarily of personnel costs, facility expenses, and professional fees. General and administrative expenses increased 3% to $56.0 million for the nine months ended September 30, 2022 from $54.4 million for the nine months ended September 30, 2021. Increased expenses in the nine months ended September 30, 2022 primarily relate to a $6.5 million increase in expenses attributable to the activities of our subsidiaries and a $0.7 million increase in other general and administrative expenses. These increases were partially offset by a $4.2 million decrease in professional fees, primarily due to reduced commercial readiness activities, and a $1.4 million decrease in personnel related expenses, primarily due to decreased share-based compensation expense. Contingent purchase price consideration fair value adjustment Contingent purchase price consideration fair value adjustment represents the change in the fair value of our purchase price considerations, which mainly resulted from changes in our share price and changes in the credit spread since each reporting period end. The fair value of our contingent purchase price considerations is mainly based on estimates from a Monte Carlo simulation of our share price. Non-operating income (expense) Non-operating income (expense) includes our foreign currency translation adjustment and other income or expense. Non-operating income increased $7.6 million for the nine months ended September 30, 2022, from income of $2.1 million for the nine months ended September 30, 2021 to income of $9.7 million for the nine months ended September 30, 2022, primarily due to the recognition of a $6.6 million gain on the sale of property, plant and equipment and a $2.8 million gain on the partial forgiveness of a liability in the nine months ended September 30, 2022 compared to foreign currency exchange gains in the nine months ended September 30, 2021. Interest expense, net: Interest expense, net decreased to approximately $44.5 million for the nine months ended September 30, 2022 from $49.1 million for the nine months ended September 30, 2021, due to decreased non-cash interest recorded in connection with our Royalty Purchase Agreement with HCR. 24 Research and Development Programs For the nine months ended September 30, 2022, our research and development programs consisted largely of our antibody programs as indicated in the following table (in thousands). Nine Months Ended September 30, Year Ended December 31, Research and Development Program Product 2022 2021 2020 2019 Antibody programs Various $ 93,897 $ 141,266 $ 118,200 $ 126,400 Vaccine adjuvant QS-21 Stimulon 7,323 5,912 304 872 Cell therapies Various 18,288 15,507 11,022 20,131 Other research and development programs Various 13,904 15,923 13,091 20,936 Total research and development expenses $ 133,412 $ 178,608 $ 142,617 $ 168,339 Research and development program costs include compensation and other direct costs plus an allocation of indirect costs, based on certain assumptions and our review of the status of each program. Our product candidates are in various stages of development and significant additional expenditures will be required if we start new clinical trials, encounter delays in our programs, apply for regulatory approvals, continue development of our technologies, expand our operations, and/or bring our product candidates to market. The total cost of any particular clinical trial is dependent on a number of factors such as trial design, length of the trial, number of clinical sites, number of patients, and trial sponsorship. The process of obtaining and maintaining regulatory approvals for new therapeutic products is lengthy, expensive, and uncertain. Because of the current stage of our product candidates, among other factors, we are unable to reliably estimate the cost of completing our research and development programs or the timing for bringing such programs to various markets or substantial partnering or out-licensing arrangements, and, therefore, when, if ever, material cash inflows are likely to commence. Liquidity and Capital Resources We have incurred annual operating losses since inception, and we had an accumulated deficit of $1.6 billion as of September 30, 2022. We expect to incur significant losses over the next several years as we continue development of our technologies and product candidates, manage our regulatory processes, initiate and continue clinical trials, and prepare for potential commercialization of products. To date, we have financed our operations primarily through corporate partnerships, advance royalty sales and the issuance of equity. From our inception through September 30, 2022, we have raised aggregate net proceeds of approximately $1.72 billion through the sale of common and preferred stock, the exercise of stock options and warrants, proceeds from our Employee Stock Purchase Plan, royalty monetization transactions, and the issuance of convertible and other notes. We maintain an effective registration statement (the “Registration Statement”), covering an unlimited amount of common stock, preferred stock, warrants, debt securities and units. The Registration Statement includes prospectuses covering the offer, issuance and sale of up to 200 million shares of our common stock from time to time in “at-the-market offerings” pursuant to an At Market Issuance Sales Agreement (the “Sales Agreement”) with B. Riley Securities, Inc. as our sales agent. We sold approximately 34.6 million and 9.9 million shares of our common stock pursuant to the Sales Agreement during the nine months ended September 30, 2022 and the period of October 1, 2022 through November 4, 2022, respectively, and received aggregate net proceeds totaling $97.6 million. As of November 4, 2022, approximately 93.7 million shares remained available for sale under the Sales Agreement. In the past 10 years we have funded our operations largely from 1) cash received from partners and royalty financing transactions and 2) equity offerings; in that order. We transact ATMs from time to time in order to manage our cash balances to make sure cash balances do not drop below a certain level based on our anticipated uses of cash. We execute at-the-market offerings based on market conditions and our stock price. We do not have in place a program whereby at-the-market offerings are executed automatically based on our trading volume. As of September 30, 2022, we had debt outstanding of $13.5 million in principal. In February 2015, we issued senior subordinated promissory notes in the aggregate principal amount of $14.0 million with annual interest at 8% (the “2015 Subordinated Notes”). In February 2020, we amended $13.5 million of the 2015 Subordinated Notes, extending the due date by three years to February 2023. The remaining $0.5 million of the 2015 Subordinated Notes were repaid in February 2020. In April 2020, we repaid an additional $0.5 million of the 2015 Subordinated Notes, leaving $13.0 million outstanding. Our cash, cash equivalents and short-term investments at September 30, 2022 were $218.2 million, a decrease of $88.7 million from December 31, 2021. 25 During the past five years, we have successfully financed our operations through income and revenues generated from corporate partnerships, advance royalty sales and issuance of equity. Based on our current plans and projections, we believe our quarter end cash resources of $218.2 million as of September 30, 2022, will be sufficient to satisfy our liquidity requirements for more than one year from when these financial statements were issued. Management continues to monitor the Company’s liquidity position and has the flexibility to adjust spending as needed in order to preserve and extend liquidity. We continuously evaluate the likelihood of success of our programs. As such, our decisions to continue to fund or eliminate funding of each of our programs are predicated on these determinations, on an ongoing basis. We are prepared to discontinue funding of any activities that do not impact our core priorities if they do not prove to be feasible, and to restrict capital expenditures and/or reduce the scale of our operations. We expect our potential sources of funding to include: (1) collaborations, out-licensing and/or partnering opportunities for our portfolio programs and product candidates with multiple parties, (2) milestone payments from our existing partnerships, (3) consummating additional third-party agreements, (4) selling assets, (5) securing project financing and/or (6) selling equity securities. Our future cash requirements include, but are not limited to, supporting clinical trial and regulatory efforts and continuing our other research and development programs. Since inception, we have entered into various agreements with contract manufacturers, institutions, and clinical research organizations (collectively “third party providers”) to perform pre-clinical activities and to conduct and monitor our clinical studies and trials. Under these agreements, subject to the enrollment of patients and performance by the applicable third-party provider, we have estimated our total payments to be $497.5 million over the term of the related activities. Through September 30, 2022, we have expensed $439.6 million as research and development expenses and $423.2 million has been paid under these agreements. The timing of expense recognition and future payments related to these agreements is subject to the enrollment of patients and performance by the applicable third-party provider. We plan to enter into additional agreements with third party providers and we anticipate significant additional expenditures will be required to initiate and advance our various programs. Part of our strategy is to develop and commercialize some of our product candidates by continuing our existing collaboration arrangements with academic and collaboration partners and licensees and by entering into new collaborations. As a result of our collaboration agreements, we will not completely control the efforts to attempt to bring those product candidates to market. For example, our collaboration with Incyte for the development, manufacture and commercialization of CPM antibodies against certain targets is managed by a joint steering committee, which is controlled by Incyte. Net cash (used in) provided by operating activities for the nine months ended September 30, 2022 and 2021 was ($128.0) million and $33.1 million, respectively. Our future ability to generate cash from operations will depend on achieving regulatory approval and market acceptance of our product candidates, achieving benchmarks as defined in existing collaboration agreements, and our ability to enter into new collaborations. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Forward Looking Statements” in Part I, Item 2, and the risks highlighted under Part II, Item 1A. “Risk Factors”, of this Quarterly Report on Form 10-Q.