What changed in this filing

/stocks — the workspaceLOADING

Item 4. Controls and Procedures

2022-08-04 compared with 2022-05-05 · 170 added, 108 removed, 585 unchanged (32% of the section changed)

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or the following:

the extent to which the COVID-19 pandemic and related governmental regulations and restrictions may impact our business, including our research, clinical trials, which include ongoing site initiation and patient enrollment, manufacturing and financial condition;

the extent to which the COVID-19 or any future pandemic and related governmental regulations and restrictions may impact our business, including our research, clinical trials, which include ongoing site initiation and patient enrollment, manufacturing and financial condition;

our expectations regarding the potential benefits, activity, effectiveness and safety of our product candidates and therapeutics developed utilizing our Probody® platform technology;

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the implementation of our business model and strategic plans for our business, technologies and product candidates;

our estimates of our expenses, ongoing losses, future revenue and capital requirements;

our estimates of our expenses, ongoing losses, future revenue and capital requirements, including our estimate of cash flow savings as a result of our recently announced restructuring plan;

our ability to obtain additional funds for our operations;

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Convertible preferred stock, $ 0.00001 par value;

10,000,000 shares authorized and no shares issued and outstanding at March 31, 2022 and December 31, 2021.

10,000,000 shares authorized and no shares issued and outstanding at June 30, 2022 and December 31, 2021.

Common stock, $ 0.00001 par value;

150,000,000 shares authorized and 65,398,355 and 65,392,758 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively

150,000,000 shares authorized and 65,756,492 and 65,392,758 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

Additional paid-in capital

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Three Months Ended

Six Months Ended

Operating expenses:

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Interest income

Other income, net

Other comprehensive income (loss):

Unrealized gain (loss) on short-term investments, net of tax

Other income (expense), net

Other comprehensive loss:

Unrealized gain (loss) on investments, net of tax

Comprehensive loss

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Balance at March 31, 2022

Exercise of stock options

Issuance of common stock under the ESPP

Stock-based compensation

Other comprehensive loss

Balance at June 30, 2022

Comprehensive

Stockholders'

Income/(Loss)

Balance at December 31, 2020

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Balance at March 31, 2021

Exercise of stock options

Issuance of common stock under the ESPP

Stock-based compensation

Other comprehensive income

Balance at June 30, 2021

See accompanying notes to condensed financial statements.

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(in thousands)

Three Months Ended

Six Months Ended

Cash flows from operating activities:

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Purchases of property and equipment

Maturities of short-term investments

Net cash (used in) provided by investing activities

Purchases of investments

Maturities of investments

Net cash provided by (used in) investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

Proceeds from exercise of stock options

Proceeds from employee stock purchase plan and exercise of stock options

Net cash provided by financing activities

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Cash, cash equivalents and restricted cash, end of period

Supplemental disclosures of noncash investing items:

Purchases of property and equipment in accounts payable and accrued liabilities

See accompanying notes to condensed financial statements.

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The accompanying interim condensed financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented.

The condensed results of operations for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The condensed results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the full year or for any other future year or interim period.

The accompanying condensed financial statements should be read in conjunction with the audited financial statements and the related notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC.

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Actual results could differ from those estimates.

Restricted Cash

Restricted cash represents a standby letter of credit issued pursuant to an office lease.

Cash, cash equivalents and restricted cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported within the condensed balance sheets that sum to the total of the amounts shown in the condensed statements of cash flows:

March 31, 2022

June 30, 2022

December 31, 2021

March 31, 2021

June 30, 2021

December 31, 2020

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Restricted cash - non-current assets

Restricted cash represents a standby letter of credit issued pursuant to an office lease.

Revenue Recognition

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Three Months Ended

Six Months Ended

Options, RSUs and ESPP to purchase common stock

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The following tables set forth the fair value of the Company’s investments subject to fair value measurements on a recurring basis and the level of inputs used in such measurements:

March 31, 2022

June 30, 2022

(in thousands)

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Government bonds

Total securities

December 31, 2021

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Government bonds

Total securities

No securities have contractual maturities of greater than twelve months .

As of March 31, 2022, the unrealized losses on the Company’s investment in US Government bonds were caused by interest rate changes and were not attributable to credit losses.

As of June 30, 2022, the unrealized losses on the Company’s investment in US Government bonds were caused by interest rate changes and were not attributable to credit losses.

The remaining contractual terms of those investments are less than a year.

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Three Months Ended

Six Months Ended

(in thousands)

Bristol Myers Squibb

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The Company’s share of later stage co-development costs for each CD71 conditionally activated ADC is capped, provided that AbbVie may offset the Company’s co-development cost above the capped amounts from future payments such as milestone payments and royalties.

Inclusive of payments received in 2017, 2018 and 2020, as of March 31, 2022, the Company has received $ 100.0 million in milestone payments under the CD71 Agreement.

Inclusive of payments received in 2017, 2018 and 2020, as of June 30, 2022, the Company has received $ 100.0 million in milestone payments under the CD71 Agreement.

Under the terms of the Discovery Agreement, AbbVie receives exclusive worldwide rights to develop and commercialize conditionally activated ADCs against up to two targets, one of which was selected in March 2017.

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The Company determined that the remaining potential milestone payments of both agreements, if recognized, are probable of significant revenue reversal as their achievement is highly dependent on factors outside the Company’s control.

Therefore, these payments continue to be fully constrained and are not included in the transaction price as of March 31, 2022.

As of March 31, 2022 and December 31, 2021, deferred revenue related to the CD71 Agreement performance obligation was $ 14.3 million and $ 16.1 million, respectively, and deferred revenue related to the Discovery Agreement performance obligation was $ 4.6 million and $ 5.2 million, respectively.

Therefore, these payments continue to be fully constrained and are not included in the transaction price as of June 30, 2022.

As of June 30, 2022 and December 31, 2021, deferred revenue related to the CD71 Agreement performance obligation was $ 9.5 million and $ 16.1 million, respectively, and deferred revenue related to the Discovery Agreement performance obligation was $ 4.0 million and $ 5.2 million, respectively.

On September 29, 2017, the Company and Amgen, Inc.

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Food and Drug Administration (“FDA”).

As of March 31, 2022 and December 31, 2021, deferred revenue related to the EGFR Products performance obligation was $ 19.8 million and $ 21.8 million, respectively.

As of March 31, 2022 and December 31, 2021, deferred revenue related to the Amgen Other Products performance obligation was $ 1.2 million and $ 1.4 million, respectively.

As of June 30, 2022 and December 31, 2021, deferred revenue related to the EGFR Products performance obligation was $ 19.6 million and $ 21.8 million, respectively.

As of June 30, 2022 and December 31, 2021, deferred revenue related to the Amgen Other Products performance obligation was $ 1.0 million and $ 1.4 million, respectively.

CYTOMX THERAPEUTICS, INC.

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Astellas is responsible for all preclinical research costs incurred by either party as set forth in the preclinical research plan and the Company will receive research and development service fees based on a prescribed full time employee ("FTE") rate.

As of March 31, 2022 and December 31, 2021, deferred revenue relating to the Astellas Agreement was $ 47.6 million and $ 51.6 million, respectively.

The amount due from Astellas under the Astellas Agreement was $ 1.0 million and $ 0.8 million as of March 31, 2022 and 2021, respectively.

As of June 30, 2022 and December 31, 2021, deferred revenue relating to the Astellas Agreement was $ 43.7 million and $ 51.6 million, respectively.

The amount due from Astellas under the Astellas Agreement was $ 1.0 million and $ 0.8 million as of June 30, 2022 and December 31, 2021, respectively.

Bristol Myers Squibb Company

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The Company reevaluated the remaining potential milestone payments and determined that significant revenue reversal was still probable as the achievement of such milestones was highly dependent on factors outside the Company’s control.

As a result, these payments continued to be fully constrained and are not included in the transaction price as of March 31, 2022.

As of March 31, 2022 and December 31, 2021, deferred revenue relating to the BMS Agreement was $ 91.3 million and $ 98.8 million, respectively.

As a result, these payments continued to be fully constrained and are not included in the transaction price as of June 30, 2022.

As of June 30, 2022 and December 31, 2021, deferred revenue relating to the BMS Agreement was $ 83.9 million and $ 98.8 million, respectively.

Contract Liabilities

The following table presents changes in the Company’s total contract liabilities during the three months ended March 31, 2022:

The following table presents changes in the Company’s total contract liabilities during the six months ended June 30, 2022:

(in thousands)

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Deferred revenue

The Company expects that the $ 178.8 million of deferred revenue related to the following contracts as of March 31, 2022 will be recognized as revenue as set forth below.

The Company expects that the $ 161.7 million of deferred revenue related to the following contracts as of June 30, 2022 will be recognized as revenue as set forth below.

However, the timing of revenue recognition could differ from the estimates depending on facts and circumstances impacting the various contracts, including progress of research and development, resources assigned to the contracts by the Company or its collaboration partners or other factors outside of the Company’s control.

The $ 9.5 million of deferred revenue related to the CD71 Agreement with AbbVie is expected to be recognized based on actual FTE effort and program progress until 2023 .

The $ 0.1 million of deferred revenue related to the first target under the Discovery Agreement with AbbVie is expected to be recognized ratably until the second quarter of 2022 .

The $ 4.0 million of deferred revenue related to the second target under the Discovery Agreement with AbbVie is expected to be recognized ratably until 2024 .

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Stock Options

Activities for the Company’s stock option plans for the three months ended March 31, 2022 were as follows:

Activities for the Company’s stock option plans for the six months ended June 30, 2022 were as follows:

Options Outstanding

Exercise Price

Balance at December 31, 2021

Balances at December 31, 2021

Options granted

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Option forfeited/expired

Balance at March 31, 2022

The Company recorded $ 2.9 million of stock-based compensation expense related to the stock option plans for both the three months end March 31, 2022 and 2021.

Balances at June 30, 2022

The Company recorded $ 2.8 million and $ 3.3 million of stock-based compensation expense related to the stock options for the three months ended June 30, 2022 and 2021, respectively.

The Company recorded $ 5.7 million and $ 6.3 million of stock-based compensation expense related to the stock options for the six months ended June 30, 2022 and 2021, respectively.

Time-based RSUs ("TRSU")

Activities for the Company’s TRSUs for the three months ended March 31, 2022 were as follows:

Activities for the Company’s TRSUs for the six months ended June 30, 2022 were as follows:

Weighted Average Grant Date Fair Value Per Share

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RSU's cancelled

Balance at March 31, 2022

The Company recorded $ 0.3 million and $ 0 of stock-based compensation expense related to the TRSUs for the three months end March 31, 2022 and 2021, respectively.

Balance at June 30, 2022

The Company recorded $ 0.4 million and $ 0.7 million of stock-based compensation expense related to the TRSUs for the three and six months ended June 30, 2022, respectively.

The Company began granting TRSUs in the fourth quarter of 2021.

Performance-based RSUs ("PSUs")

In October 2021, the Company granted 435,000 PSUs as recognition awards to executive employees with an aggregated grant date fair value of $ 2.3 million.

50% of the PSUs granted will vest within one year of the grant date upon achievement of certain specific milestones and the remaining 50% will vest within two years of the grant date upon achievement of additional company objectives.

Activities for the Company’s PSUs for the three months ended March 31, 2022 were as follows:

50% of the PSUs granted will vest within one year of the grant date upon achievement of certain specific milestones ("Tranche 1") and the remaining 50% will vest within two years of the grant date upon achievement of additional company objectives ("Tranche 2").

The Company determined that it is not probable that the performance conditions will be satisfied for each of these Tranches and hence no compensation cost was recorded for these awards for the year ended December 31, 2021.

As of June 30, 2022, the Company determined that the achievement of the milestones for Tranche 1 was probable and hence recorded $ 1.0 million of stock-based compensation expense for the three and six months ended June 30, 2022.

As the achievement of the milestones for Tranche 2 was not considered probable, no compensation cost was recorded for these awards as of and for the three and six months ended June 30, 2022.

CYTOMX THERAPEUTICS, INC.

Notes to Condensed Financial Statements (Unaudited)—(Continued)

Activities for the Company’s PSUs for the six months ended June 30, 2022 were as follows:

Weighted Average Grant Date Fair Value Per Share

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PSU's cancelled

Balance at March 31, 2022

As of March 31, 2022, the Company determined that it is not probable that the performance conditions will be satisfied and hence recorded no compensation cost for these awards as of and for the three months ended March 31, 2022.

CYTOMX THERAPEUTICS, INC.

Notes to Condensed Financial Statements (Unaudited)—(Continued)

Balance at June 30, 2022

Stock-based Compensation

Total stock-based compensation recorded related to options, time-based RSUs and the ESPP was as follows:

Total stock-based compensation recorded related to options, TRSUs, PSUs and the ESPP was as follows:

Three Months Ended

Six Months Ended

(in thousands)

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On October 13, 2021, the Court granted the parties’

stipulation to stay all pending case deadlines except for certain matters.

All case deadlines are stayed until the Court resolves the parties’

claim construction disputes.

The Company believes that the lawsuit is without merit and intends to vigorously defend itself, and has no t recorded any amount for claims associated with this lawsuit as of March 31, 2022.

The Company maintains a full valuation allowance against its net deferred tax assets due to the Company’s history of losses as of March 31, 2022 and December 31, 2021 .

stipulation to stay all pending case deadlines except for certain matters, pending resolution of claim construction.

On May 9, 2022, the Court entered a claim construction ruling.

Also on May 9, 2022, the case was assigned to the District of Delaware’s Vacant Judgeship.

No new case deadlines have been set.

The Company believes that the lawsuit is without merit and intends to vigorously defend itself, and has no t recorded any amount for claims associated with this lawsuit as of June 30, 2022.

The Company maintains a full valuation allowance against its net deferred tax assets due to the Company’s history of losses as of June 30, 2022 and December 31, 2021 .

The Company files income taxes in the U.S.

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Based on the Company's current expectations and understanding of the reasonably possible outcomes, the Company does not anticipate that the resolution of this matter would result in a material impact on its financial position or results of operations.

CYTOMX THERAPEUTICS, INC.

Notes to Condensed Financial Statements (Unaudited)—(Continued)

Subsequent event

Restructuring

On July 6, 2022 the Company announced Phase 2 topline results for praluzatamab ravtansine in breast cancer and its decision to not advance this program ("praluzatamab ravtansine") alone given the data and financial market conditions.

The Company will seek a collaboration partnership to further develop praluzatamab ravtansine in patients with advanced breast cancer.

On July 13, 2022, the Company announced a restructuring plan to prioritize its resources on its emerging pre-clinical and early clinical pipeline as well as its existing collaboration partnerships.

The restructuring plan will result in a reduction to its workforce by approximately 40 %, and is expected to be completed by the fourth quarter of 2022.

The Company estimates that it will incur aggregate restructuring charges of approximately $ 10.0 million, primarily related to one-time severance payments and other employee-related costs, in the third and fourth quarters of 2022.

Management’s Discuss ion and Analysis of Financial Condition and Results of Operations

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Having demonstrated favorable tolerability and encouraging anti-tumor activity in separate dose-escalation Phase 1 studies, praluzatamab ravtansine and CX-2029 are currently in Phase 2 clinical studies.

Praluzatamab ravtansine is currently being evaluated in a three-arm study in patients with advanced human epidermal growth factor receptor 2 (“HER2”)-non-amplified breast cancer.

Arms A and B are examining praluzatamab ravtansine monotherapy in patients with hormone receptor-positive (“HR+”)/HER2-non-amplified breast cancer and triple-negative breast cancer (“TNBC”), respectively.

Arm C is studying praluzatamab ravtansine in combination with pacmilimab (CX-072), our wholly-owned PD-L1 inhibitor, in patients with TNBC.

We expect to enroll approximately 40 efficacy-evaluable patients in each arm of the study.

Patient enrollment has been completed in Arm A while Arms B and C of the study are ongoing.

Initial data for Arms A and B are expected in the second half of 2022.

For CX-2029, our CD71-directed ADC is being evaluated as monotherapy in a four-cohort Phase 2 expansion study designed to enroll twenty-five efficacy evaluable patients per cohort in the following malignancies:

squamous non-small cell lung cancer (“sqNSCLC”), head and neck squamous cell carcinoma (“HNSCC”), esophageal and gastro-esophageal junction cancers, and diffuse large B-cell lymphoma.

Preliminary data from the sqNSCLC and HNSCC cohorts were disclosed in December 2021 and showed encouraging activity in patients with sqNSCLC.

Patient enrollment has been completed in the squamous non-small cell lung cancer cohort.

The study remains open for enrollment

in the esophageal and gastro-esophageal junction cancers cohort, and the diffuse large B-cell lymphoma cohort.

Data updates for the squamous non-small cell lung cancer cohort are expected in the second half of 2022.

Our strong clinical pipeline also includes cancer immunotherapeutic candidates against validated targets such as CTLA-4.

Our partner, Bristol Myers Squibb, is conducting a randomized Phase 2 study evaluating BMS-986249, a Probody version of the CTLA-4-targeting antibody, ipilimumab, in combination with the anti-PD-1 antibody, nivolumab, in patients with metastatic melanoma.

Praluzatamab ravtansine is our conditionally activated ADC directed toward CD166 and is being evaluated in a three-arm study in patients with advanced human epidermal growth factor receptor 2 (“HER2”)-non-amplified breast cancer.

Arms A and B examined praluzatamab ravtansine monotherapy in patients with hormone receptor-positive/HER2-non-amplified breast cancer and triple-negative breast cancer (“TNBC”), respectively.

Arm C studied praluzatamab ravtansine in combination with pacmilimab (CX-072), our wholly-owned PD-L1 inhibitor, in patients with TNBC.

In July 2022, Phase 2 topline results were disclosed for Arms A and B as of data cut-off date May 2022.

Arm A met the primary endpoint of confirmed objective response rate greater than 10% by central radiology review.

The safety profile in Arm A was generally consistent with Phase 1 observations and the DM4 payload, with high-grade toxicities or toxicities resulting in dose modification predominantly ocular or neuropathic in nature.

Specifically, 30% of patients in Arm A discontinued treatment for an adverse event.

Grade 3 or greater ocular and neuropathic toxicities were 15% and 10%, respectively.

All patients in Arm A were treated at the initial starting dose of 7 mg/kg administered every three weeks.

Arm B did not pass the protocol-defined futility boundary in patients with advanced TNBC and enrollment into Arms B and C will be discontinued.

Arm B evaluated patients at starting doses of 7 mg/kg or 6 mg/kg.

The toxicity profile of the 7 mg/kg starting dose in Arm B was consistent with the 7 mg/kg starting dose in Arm A.

In the 6 mg/kg cohort in Arm

B, no patients discontinued treatment for an adverse event as of the data cut-off date and Grade 3 or greater ocular or neuropathic related events were 3% and 0%, respectively.

Based on these results, the Company was encouraged by the emerging safety profile of 6 mg/kg and will seek a partnership to further develop praluzatamab ravtansine in patients with advanced breast cancer.

CX-2029 is being evaluated as monotherapy in a four-cohort Phase 2 expansion study designed to enroll twenty-five efficacy evaluable patients per cohort in the following malignancies:

squamous non-small cell lung cancer (“sqNSCLC”), head and neck squamous cell carcinoma (“HNSCC”), esophageal and gastro-esophageal junction (“E/GEJ”) cancers, and diffuse large B-cell lymphoma (“DLBCL”).

Patient enrollment into the study is now complete in all three solid cancer indications, including the E/GEJ cancer cohort.

The DLBCL cohort was deprioritized due to strategic and competitive reasons and did not enroll any patients.

A data update for the fully enrolled sqNSCLC cohort is expected in the fourth quarter of 2022.

Data from the E/GEJ cancer cohort continues to mature.

Our partner, Bristol Myers Squibb, is conducting a randomized Phase 2 study evaluating BMS-986249, a Probody version of ipilimumab, the anti-CTLA-4 antibody, in combination with nivolumab, the anti-PD-1 antibody, in patients with metastatic melanoma.

In addition, BMS-986249 is being studied in combination with nivolumab in three additional indications:

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Underscoring our commitment to destroying cancer differently, we have recently introduced a third treatment modality into the clinic from our Probody platform, reinforcing our leadership in the field of conditional activation of biologic therapeutics.

As part of our partnership with Amgen, we are advancing CX-904, a conditionally activated TCB candidate against the epidermal growth factor receptor (“EGFR”) on tumor cells and CD3 on T cells.

Our investigational new drug application (“IND”) for CX-904 was allowed to proceed by the FDA in January 2022 and we initiated the Phase 1 study start-up activities to evaluate CX-904 as a treatment for patients with advanced solid tumors.

In preclinical studies, we are advancing a conditionally activated cytokine program that includes a locally activatable form of interferon-alpha-2b, and a conditionally activated ADC program directed toward the epithelial cell adhesion molecule (“EpCAM”), a w idely expressed tumor antigen.

We are also continuously engaged in drug discovery efforts towards the generation of new clinical candidates across multiple modalities for the treatment of cancer, including additional TCBs, reflecting the versatility of our Probody platform.

As part of our partnership with Amgen, we have advanced CX-904, a conditionally activated TCB candidate against EGFR and CD3.

Our investigational new drug application (“IND”) for CX-904 was allowed to proceed by the FDA in January 2022.

In May 2022, the first patient was dosed in a Phase 1 study evaluating CX-904 as a treatment for patients with advanced solid tumors.

Our pipeline also includes CX-801, a wholly-owned interferon ("IFN") alpha-2b Probody.

Preclinically, CX-801 demonstrated a wide therapeutic index with an enhanced tolerability profile versus unmasked IFN, without compromising its potent antitumor effects.

CX-801 has broad potential applicability in traditionally immuno-oncology sensitive as well as insensitive (cold) tumors.

An IND submission for CX-801 is planned in the second half of 2023.

Another wholly-owned emerging product candidate is CX-2051, a conditionally activated ADC paired with a next-generation payload and directed toward EpCAM with potential applicability across multiple EpCAM-expressing epithelial cancers.

We plan to submit an IND for this program in the second half of 2023.

We are also continuously engaged in drug discovery efforts towards the generation of new clinical candidates across multiple modalities for the treatment of cancer, including additional ADCs, Cytokines and TCBs, reflecting the versatility of our Probody platform.

We do not have any products approved for sale, and we continue to incur significant research and development and general administrative expenses related to our operations.

We are not profitable and have incurred losses in each year since our founding in 2008.

Our net loss was $23.9 million for the three months ended March 31, 2022.

As of March 31, 2022 and December 31, 2021, we had an accumulated deficit of $557.6 million and $533.7 million, respectively.

Our net loss was $24.2 million and $48.1 million for the three and six months ended June 30, 2022, respectively.

As of June 30, 2022 and December 31, 2021, we had an accumulated deficit of $581.8 million and $533.7 million, respectively.

We expect to continue to incur significant losses for the foreseeable future.

Global health authorities, including the FDA, regulate many aspects of a product candidate’s life cycle, including research and development and preclinical and clinical testing.

We will need to commit significant time, resources, and funding to develop our wholly-owned and partnered product candidates in clinical trials, including praluzatamab ravtansine, CX-2029, pacmilimab, and CX-904 as well as any additional product candidates for which we initiate clinical studies in the future.

We will need to commit significant time, resources, and funding to develop our wholly-owned and partnered product candidates in clinical trials.

We are unable to provide the nature, timing, and estimated costs of the efforts necessary to complete the development of our product candidates because, among other reasons, of regulatory uncertainty, manufacturing limitations, and the pace of enrollment of our clinical trials, which is a function of many factors, including the availability and proximity of patients with the relevant condition.

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As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices.

Restructuring

On July 6, 2022, we announced Phase 2 topline results for praluzatamab ravtansine in breast cancer and our decision to not advance this program ("praluzatamab ravtansine") alone given the data and financial market conditions.

We will seek a collaboration partnership to further develop praluzatamab ravtansine in patients with advanced breast cancer.

On July 13, 2022, we announced a restructuring plan to prioritize its resources on our emerging pre-clinical and early clinical pipeline as well as our existing collaboration partnerships.

The restructuring plan will result in a reduction to our workforce by approximately 40%, and is expected to be completed by the fourth quarter of 2022.

that we will incur aggregate restructuring charges of approximately $10.0 million, primarily related to one-time severance payments and other employee-related costs, in the third and fourth quarters of 2022.

Impact of COVID-19

In December 2019, a strain of novel coronavirus-caused disease (now commonly known as COVID-19) was reported to have surfaced in Wuhan, China and in March 2020 the World Health Organization declared the outbreak a pandemic.

There continues to be uncertainty as to the extent and duration of the COVID-19 pandemic including the emergence and impact of new variants.

There continues to be uncertainty as to the extent and duration of the COVID-19 pandemic including the ongoing emergence and impact of new variants.

The COVID-19 pandemic continues to impact our ongoing operations, including clinical trials.

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On an ongoing basis, management evaluates its significant accounting policies and estimates.

base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ significantly from these estimates.

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A summary of our critical accounting policies and estimates is presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.

Except as noted below, there have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2022.

Except as noted below, there have been no material changes to our critical accounting policies and estimates for the six months ended June 30, 2022.

Uncertain Tax Position

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We expense research and development costs as incurred.

We expect our research and development expenses to increase substantially in absolute dollars in the future as we advance our product candidates through clinical trials, initiate additional clinical trials, and pursue regulatory approval of our product candidates.

Examples include our Phase 2 clinical trials for praluzatamab ravtansine (CX-2009) and CX-2029, potential future clinical trials for CX-2029 and for praluzatamab ravtansine in combination with pacmilimab (CX-072) and our Phase 1 clinical trial for CX-904 which is in the process of being initiated.

We expect our research and development expenses could vary substantially in the future as we prioritize our pipeline opportunities, advance our product candidates through clinical trials, initiate additional clinical trials, and pursue regulatory approval of our product candidates.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming.

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We may never succeed in achieving regulatory approval for any of our product candidates.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of

our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates.

As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates.

General and Administrative Expenses

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Other income (expense), net consists primarily of gains and losses resulting from changes to currency exchange rates.

Results of Operations

Results of Operations For the Three and Six Months Ended June 30, 2022 and 2021

The following table summarizes our revenue by collaboration partner during the respective periods:

Three Months Ended

Six Months Ended

(in thousands)

Bristol Myers Squibb

Total revenue

The increase in revenue of $1.2 million for the three months ended March 31, 2022 compared to the corresponding period of 2021 was primarily due to the CD71 Co-Development and Licensing Agreement with AbbVie based on a higher percentage of project completion in the first quarter of 2022.

The increase in revenue of $1.9 million and $3.0 million for the three and six months ended June 30, 2022, respectively, compared to the corresponding periods of 2021 was primarily due to:

An increase in revenue from AbbVie under the CD71 Co-Development and Licensing Agreement driven by a higher percentage of project completion in current periods;

Offset by a decrease in revenue from Amgen under the Amgen Agreement driven by lower percentage of completion of the CX-904 project in the current periods due to the increase in projected hours-to-completion within the same projected research period.

Operating Costs and Expenses

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Three Months Ended

(in thousands)

Six Months Ended

External costs incurred by product candidate (target):

(in thousands)

Praluzatamab ravtansine, CX-2009 (CD166)

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Total research and development expenses

The increase in research and development expenses for the three months ended March 31, 2022 compared to the corresponding period of 2021 was primarily attributable to the increase in laboratory contract services driven by an increase in manufacturing and development activities.

The $5.1 million and $13.2 million increase in research and development expenses for the three and six months ended June 30, 2022, respectively, compared to the corresponding periods of 2021 was primarily due to an increase in personnel related expenses and laboratory contract services supporting our pre-clinical and clinical stage pipeline.

The development expenses are expected to decrease over time due to the restructuring plans announced in July 2022, resulting in a pipeline reprioritization and a reduction to our workforce.

General and Administrative Expenses

Three Months Ended

Six Months Ended

(in thousands)

General and administrative expenses

General and administrative expenses increased by $1.3 million for the three months ended March 31, 2022 compared to the corresponding period of 2021 primarily due to an increase in personnel related expenses as well as professional expenses driven by patent related legal expenses and other outside consulting services.

General and administrative expenses increased by $2.4 million for the three months ended June 30, 2022, compared to the corresponding period of 2021 primarily due to an increase in personnel related expenses as well as professional expenses driven by outside consulting services.

General and administrative expenses increased by $3.7 million for the six months ended June 30, 2022, compared to the corresponding period of 2021 primarily due to an increase in personnel related expenses as well as outside consulting, legal and intellectual property services.

General and administrative expenses are expected to decrease over time due to the restructuring plan announced in July 2022, resulting in a reduction to our workforce.

Liquidity and Capital Expenditures

Sources of Liquidity

As of March 31, 2022, we had cash, cash equivalents and investments of $262.5 million and an accumulated deficit of $557.6 million, compared to cash, cash equivalents and investments of $305.2 million and an accumulated deficit of $533.7 million as of December 31, 2021.

As of June 30, 2022, we had cash, cash equivalents and short-term investments of $228.2 million and an accumulated deficit of $581.8 million, compared to cash, cash equivalents and short-term investments of $305.2 million and an accumulated deficit of $533.7 million as of December 31, 2021.

In January and February 2021, in an underwritten public offering of our common stock, we raised an aggregate net proceeds of approximately $107.7 million.

To date, we have financed our operations primarily through sales of our common stock in conjunction with the IPO, subsequent stock offerings and through our at-the-market offering, sales of our convertible preferred securities prior to our IPO and payments received under our collaboration agreements.

Based upon our current operating plan, we expect our existing capital resources will be sufficient to fund operations for a period of at least twelve months from the issuance date of the financial statements included in this report.

On July 13, 2022, we announced a restructuring plan to prioritize resources on our emerging pre-clinical and early clinical pipeline as well as our existing collaboration partnerships.

The restructuring plan will result in a reduction to our workforce by approximately 40%, and is expected to be completed by the fourth quarter of 2022.

We estimate that we will incur aggregate restructuring charges of approximately $10.0 million, primarily related to one-time severance payments and other employee-related costs, in the third and fourth quarters of 2022.

Based upon our current operating plan, we expect our existing capital resources will be sufficient to fund operations into 2025.

However, if the anticipated operating results and future financing are not achieved in future periods, our planned expenditures may need to be reduced in order to extend the time period over which the then-available resources would be able to fund the operations.

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The following table summarizes our cash flows for the periods indicated:

Three Months Ended

Six Months Ended

(in thousands)

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash provided by (used in) investing activities

Net cash provided by financing activities

Net increase (decrease) in cash, cash equivalents and restricted cash

Net increase (decrease) in cash and cash equivalents

Cash Flows from Operating Activities

During the three months ended March 31, 2022, cash used in operating activities was $41.3 million, which consisted of a net loss of $23.9 million, adjusted by non-cash charges of $4.8 million and a net decrease of $22.2 million relating to the change of our net operating assets and liabilities.

During the six months ended June 30, 2022, cash used in operating activities was $75.6 million, which consisted of a net loss of $48.1 million, adjusted by non-cash charges of $10.7 million and a net decrease of $38.2 million relating to the change of our net operating assets and liabilities.

The non-cash charges primarily consisted of $7.9 million in stock-based compensation, $1.6 million in non-cash lease expense and $1.2 million in depreciation and amortization.

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a net decrease of $33.3 million in deferred revenue resulting from the continued recognition of deferred revenue from existing customers;

a decrease of $5.2 million in accounts payable, accrued and other long-term liabilities primarily due to timing of payments and an increase in research and clinical expenses;

a decrease of $0.9 million in cash flows from accounts receivable and prepaid and other current assets primarily due to increased advance payments to our third party manufacturing vendors and timing of payments.

During the three months ended March 31, 2021, cash used in operating activities was $29.9 million, which consisted of a net loss of $15.6 million, adjusted by non-cash charges of $4.6 million and a net decrease of $18.9 million relating to the change of our net operating assets and liabilities.

The non-cash charges primarily consisted of $3.0 million in stock-based compensation, $0.8 million in non-cash lease expense and $0.7 million in depreciation and amortization.

a decrease of $5.3 million in accounts payable, accrued and other long-term liabilities primarily due to timing of payment;

an increase of $0.4 million in cash flows from accounts receivable and prepaid and other current assets primarily due to decreased advance payments to our third party manufacturing vendors and timing of payments.

During the six months ended June 30, 2021, cash used in operating activities was $58.1 million, which consisted of a net loss of $34.8 million and a net decrease of $33.0 million relating to the change of our net operating assets and liabilities, offset by non-cash charges of $9.7

The non-cash charges primarily consisted of $6.5 million in stock-based compensation, $1.5 million in non-cash lease expense, $1.4 million in depreciation and amortization and $0.3 million in amortization of premium on investments.

The change in our net operating assets and liabilities was primarily due to:

a net decrease of $15.2 million in deferred revenue resulting from the continued recognition of deferred revenue from existing and new customers;

a decrease of $5.4 million in accounts payable, accrued and other long-term liabilities;

an increase of $1.7 million in cash flows from accounts receivable, prepaid and other current assets.

a net decrease of $30.6 million in deferred revenue resulting from the continued recognition of deferred revenue from existing customers;

a decrease of $6.7 million in accounts payable, accrued and other long-term liabilities primarily due to timing of payment and a reduction in research and clinical expenses;

an increase of $4.4 million in cash flows from other assets, prepaid and other current assets.

Cash Flows from Investing Activities

During the three months ended March 31, 2022, cash used in investing activities was $0.7 million of capital expenditures used to purchase property and equipment.

During the three months ended March 31, 2021, cash provided by investing activities was $59.0 million, which consisted of $60.0 million in proceeds received upon the maturity of marketable securities, partially offset by $1.0 million of capital expenditures used to purchase property and equipment.

During the six months ended June 30, 2022, cash used in investing activities was $1.1 million of capital expenditures used to purchase property and equipment.

During the six months ended June 30, 2021, cash provided by investing activities was $13.0 million, which consisted of $114.0 million in proceeds received upon the maturity of short-term marketable securities, partially offset by $99.9 million used in the purchase of long-term investments and $1.1 million of capital expenditures used to purchase property and equipment.

Cash Flows from Financing Activities

During the three months ended March 31, 2022, cash provided by financing activities consisted of $7,000 of proceeds from the exercise of stock options.

During the three months ended March 31, 2021, cash provided by financing activities consisted of $107.7 million of net proceeds from the follow-on public offering during the quarter and $1.0 million of proceeds from the exercise of stock options.

During the six months ended June 30, 2022, cash provided by financing activities consisted of $0.5 million of proceeds from the exercise of stock options and employee stock purchases under the employee stock purchase plan.

During the six months ended June 30, 2021, cash provided by financing activities consisted of $107.7 million of net proceeds from the follow-on public offering and $1.7 million of proceeds from the exercise of stock options and employee stock purchases under the employee stock purchase plan.

Contractual Obligations

During the three months ended March 31, 2022, there were no material changes in contractual obligations from the amounts disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

During the six months ended June 30, 2022, there were no material changes in contractual obligations from the amounts disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021.

Quantitative and Qualitat ive Disclosure About Market Risk

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These risks primarily relate to interest rate risks.

We had cash, cash equivalents and short-term investments of $262.5 million and $305.2 million as of March 31, 2022 and December 31, 2021, respectively, which consists of bank deposits, money market funds and U.S.

We had cash, cash equivalents and short-term investments of $228.2 million and $305.2 million as of June 30, 2022 and December 31, 2021, respectively, which consists of bank deposits, money market funds and U.S.

government bonds.

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We have not historically been exposed to material risks due to changes in interest rates.

Based on our investment positions as of March 31, 2022, a hypothetical 100 basis point change in interest rates would not have material effect in the fair value of the portfolio.

Based on our investment positions as of June 30, 2022, a hypothetical 100 basis point change in interest rates would not have material effect in the fair value of the portfolio.

Controls and Proc edures

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Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

cost-benefit relationship of possible controls and procedures.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022, the end of the period covered by this Quarterly Report on Form 10-Q.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022, the end of the period covered by this Quarterly Report on Form 10-Q.

Management’s assessment of internal control over financial reporting was conducted using the criteria defined in the Internal Control—Integrated Framework (2013 framework) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

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Changes in Internal Controls Over Financial Reporting

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our fiscal quarter ended June 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II –

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 4. Controls and Procedures