What changed in this filing

/stocks — the workspaceLOADING

Item 4. Controls and Procedures

2023-05-09 compared with 2022-11-08 · 295 added, 322 removed, 484 unchanged (56% of the section changed)

36 unchanged sentences

or the following:

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;

the extent to which 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;

19 unchanged sentences

our financial performance;

developments relating to our competitors or our industry or to international conflict and uncertainties.

developments relating to our competitors, our industry, international conflict or uncertainties.

Any forward-looking statements in this Quarterly Report on Form 10-Q reflect our current views with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements.

20 unchanged sentences

(in thousands, except share and per share data)

September 30,

Current assets:

8 unchanged sentences

Operating lease right-of-use asset

Liabilities and Stockholders' Equity

Liabilities and Stockholders' Equity (Deficit)

Current liabilities:

7 unchanged sentences

Commitments and contingencies (Note 8)

Stockholders' equity:

Convertible preferred stock, $ 0.00001 par value;

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

Common stock, $ 0.00001 par value;

150,000,000 shares authorized and 65,950,242 and 65,392,758 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively

Stockholders' equity (deficit):

Convertible preferred stock

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income

Accumulated deficit

Total stockholders' equity

Total liabilities and stockholders' equity

Total stockholders' deficit

Total liabilities and stockholders' equity (deficit)

__________________

5 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

Operating expenses:

4 unchanged sentences

Interest income

Other income (expense), net

Other comprehensive loss:

Unrealized gain (loss) on investments, net of tax

Other income, net

Other comprehensive income (loss):

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

Comprehensive loss

5 unchanged sentences

CONDENSED STATEMENTS OF STOC KHOLDERS’

EQUITY (DEFICIT)

(in thousands, except share data)

1 unchanged sentence

Stockholders'

Income (Loss)

Equity (Deficit)

Balance at December 31, 2022

Exercise of stock options

Release of RSUs

Stock-based compensation

Other comprehensive loss

Other comprehensive income

Balance at March 31, 2023

Exercise of stock options

Issuance of common stock under the ESPP

Stock-based compensation

Other comprehensive loss

Balance at June 30, 2022

Release of PSUs

Stock-based compensation

Other comprehensive gain

Balance at September 30, 2022

Comprehensive

1 unchanged sentence

Income (Loss)

Equity (Deficit)

Balance at December 31, 2021

Issuance of common stock in follow-on offering, net of issuance costs

Exercise of stock options

Stock-based compensation

Other comprehensive income

Other comprehensive loss

Balance at March 31, 2022

Exercise of stock options

Issuance of common stock under the ESPP

Stock-based compensation

Other comprehensive income

Balance at June 30, 2021

Exercise of stock options

Stock-based compensation

Other comprehensive income

Balance at September 30, 2021

See accompanying notes to condensed financial statements.

2 unchanged sentences

(in thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash flows from operating activities:

2 unchanged sentences

Depreciation and amortization

Amortization of premium (accretion of discounts) on investments

Accretion of discounts on short-term investments

Stock-based compensation expense

6 unchanged sentences

Deferred revenue

Net cash used in operating activities

Net cash provided by (used) in operating activities

Cash flows from investing activities:

Purchases of property and equipment

Purchases of investments

Maturities of investments

Net cash (used in) provided by investing activities

Purchase of short-term investments

Net cash used in investing activities

Cash flows from financing activities:

Proceeds from issuance of common stock, net of issuance costs

Proceeds from employee stock purchase plan and exercise of stock options

Proceeds from exercise of stock options

Net cash provided by financing activities

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

Net decrease in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

2 unchanged sentences

CytomX Therapeutics, Inc.

Notes to Condensed Financi al Statements (Unaudited)

Description of the Business

Notes to Condensed Financial Statements (Unaudited)

Descriptio n of the Business

CytomX Therapeutics, Inc.

12 unchanged sentences

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 and nine months ended September 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 condensed results of operations for the three months ended March 31, 2023 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, 2022 filed with the SEC.

4 unchanged sentences

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:

September 30, 2022

The Company considers all highly liquid investments purchased with original maturities of three months or less at the date of purchase to be cash equivalents.

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

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

March 31, 2023

December 31, 2022

September 30, 2021

March 31, 2022

December 31, 2021

2 unchanged sentences

Restricted cash - non-current assets

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

Revenue Recognition

4 unchanged sentences

CytomX Therapeutics, Inc.

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

Notes to Condensed Financial Statements (Unaudited)

The Company assesses whether the promises in its arrangements with customers are distinct performance obligations that should be accounted for separately.

3 unchanged sentences

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

At each reporting date, the Company re-evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price by using the most likely amount method.

At each reporting date, the Company re-evaluates whether the milestones are considered probable of being achieved and estimates the amount to be included in the transaction price by using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price in such period of determination.

4 unchanged sentences

instead, they are included when the sales or usage occur.

Due to the early stage of the Company’s licensed technology, the license of such technology is typically combined with research and development services and steering committee participation as one performance obligation.

Under the collaboration and license agreements, each collaboration target or program is generally considered to be a separate combined performance obligation.

The transaction price in each arrangement is allocated to the identified performance obligations based on the relative standalone selling price (“SSP”) of each distinct performance obligation, which requires judgment.

In instances where SSP is not directly observable, such as when a license or service is not sold separately, SSP is determined using information that may include market conditions and other observable inputs.

Variable consideration is allocated to certain performance obligations if it is triggered by the Company’s efforts to satisfy or a specific outcome from satisfying these performance obligations.

In the event that the Company receives non-cash consideration such as consideration in the form of a research license and research support services from the counterparty, the transaction price of a non-monetary exchange that has commercial substance is estimated based on the fair value of the non-cash consideration received, which may be determined through a valuation analysis.

The Company recognizes revenue from upfront payments over the estimated period of performance under the agreement using an input method for the performance obligation.

In applying the input method of revenue recognition, the Company uses actual full-time equivalent (FTE) hours incurred relative to estimated total FTE hours expected to be incurred for each combined performance obligation over the estimated research service period of each collaboration target.

In certain cases, the Company’s performance creates an asset that does not have an alternative use to the customer and the Company has an enforceable right to payment at all times for performance completed to date.

1 unchanged sentence

The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition.

AbbVie Ireland Unlimited Company (“AbbVie”), one of the Company’s collaboration partners, entered into a license agreement with Seagen Inc., formerly Seattle Genetics, Inc.

(“SGEN”) to license certain intellectual property rights.

As part of the Company’s collaboration agreement with AbbVie, the Company was required to pay SGEN sublicense fees for certain milestone achievements and an annual maintenance fee.

These sublicense fees are treated as reductions to the transaction price and combined with the performance obligation to which they relate.

Any consideration payable to the Company’s customers is treated as a reduction to the transaction price and revenue, unless the payment to the customer is in exchange for distinct good and services.

Contract Balances

1 unchanged sentence

Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional.

The Company determines if an arrangement is or contains a lease at inception.

Operating leases are recorded as operating lease right-of-use (“ROU”) assets and operating lease liabilities in the Company’s balance sheet.

ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease.

Operating lease

CytomX Therapeutics, Inc.

Notes to Condensed Financial Statements (Unaudited)

ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term.

The Company uses an implicit rate when readily available, or its incremental borrowing rate based on the information available at lease commencement date in determining the present value of lease payments.

The operating lease ROU assets also include any lease prepayments made and reduced by lease incentives.

The Company’s lease terms may include options to extend the lease when it is reasonably certain that such option will be exercised.

Lease expenses are recognized on a straight-line basis over the lease term.

The Company elected the short-term lease recognition exemption.

The Company’s operating lease arrangement includes lease and non-lease components which are generally accounted for separately.

The Company recognizes sublease income on a straight-line basis over the sublease term and records sublease income on a net basis against rent expense.

Net Loss Per Share

2 unchanged sentences

Diluted net loss per share is the same as basic net loss per share since the effect of the potentially dilutive securities is anti-dilutive.

CYTOMX THERAPEUTICS, INC.

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

The following weighted-average outstanding shares of potentially dilutive securities are excluded from the computation of diluted net loss per share for the periods presented, because including them would have been anti-dilutive:

Three Months Ended

Nine Months Ended

September 30,

Options, RSUs and ESPP to purchase common stock

Options and ESPP to purchase common stock

Fair Value Measurements and Investments

6 unchanged sentences

The carrying amounts of the Company’s financial instruments, including restricted cash, accounts receivable, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.

The Company’s financial instruments consist of Level I assets which consist primarily of highly liquid money market funds, some of which are included in restricted cash;

Treasury securities that are included in cash equivalent or short-term investments.

The Company’s financial instruments consist of Level I assets which consist primarily of highly liquid money market funds, some of which are included in restricted cash and U.S.

Treasury securities that are included in cash equivalents or short-term investments.

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:

September 30, 2022

March 31, 2023

(in thousands)

2 unchanged sentences

Treasury securities

CytomX Therapeutics, Inc.

Notes to Condensed Financial Statements (Unaudited)

December 31, 2022

3 unchanged sentences

Treasury securities

As of September 30, 2022, the unrealized losses on the Company’s investment in U.S.

Treasury securities 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.

The Company does not intend to sell the investments and it is not more likely than not that the Company will be required to sell the investments before recovery of their amortized cost bases.

CYTOMX THERAPEUTICS, INC.

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

As of March 31, 2023, the remaining contractual terms of those investments are less than a year.

Accrued Liabilities

Accrued liabilities consisted of the following:

September 30,

(in thousands)

5 unchanged sentences

Other accrued expenses

Research and Collaboration Agreements

Collaboration and License Agreements

The following table summarizes the revenue by collaboration partner:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Bristol Myers Squibb

3 unchanged sentences

and together with the CD71 Agreement the “AbbVie Agreements”).

Under the terms of the CD71 Agreement, the Company and AbbVie will co-develop a conditionally activated antibody-drug conjugate (“ADC”) against CD71, with the Company responsible for preclinical and early clinical development.

AbbVie will be responsible for later development and commercialization, with global late-stage development costs shared between the two companies.

The Company will assume 35 % of the net profits or net losses related to later development and commercialization unless it opts-out.

If the Company opts-out from participation of co-development of the CD71 conditionally activated ADC, which includes CX-2029, AbbVie will have sole right and responsibility for the further development, manufacturing and commercialization of such CD71 conditionally activated ADC.

Under the CD71 Agreement, the Company received an upfront payment of $ 20.0 million in April 2016, and was eligible to initially receive up to $ 470.0 million in development, regulatory and commercial milestone payments, a 35 % profit split on U.S.

sales, and royalties on ex-U.S.

sales at percentages in the high teens to low twenties if the Company participates in the co-development of the CD71 conditionally activated ADC subject to a reversion to a royalty on U.S.

sales, and reduction in royalties on ex-U.S.

sales, if the Company opts-out from the co-development of the CD71 conditionally activated ADC.

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 September 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.

The Company shall perform research services to discover the Probody therapeutics and create conditionally activated ADCs for the nominated collaboration targets.

From that point, AbbVie shall have sole right and responsibility for development and commercialization of products comprising or containing such conditionally activated ADCs (“Discovery Licensed Products”).

Under the Discovery Agreement, the Company received an upfront payment of $ 10.0 million in April 2016 and subsequently earned an additional $ 10.0 million milestone payment triggered by selection of the second target by AbbVie in June 2019.

The Company is also eligible

Under the terms of the CD71 Agreement, the Company and AbbVie were co-developing a conditionally activated antibody-drug conjugate (“ADC”) against CD71, with the Company being responsible for preclinical and early clinical development.

AbbVie was to be responsible for later development and commercialization, with global late-stage development costs shared between the two companies.

As of December 31, 2022, the Company has received in aggregate $ 100.0 million in upfront and milestone payments under the CD71 Agreement.

In March 2023, the Company announced that it will evaluate the potential next steps for CX-2029 following the decision from AbbVie, to not advance CX-2029 into additional clinical studies.

As a result of AbbVie’s decision, the 2016 CD71 License and Collaboration Agreement has been terminated and the Company has an exclusive option to re-acquire

CytomX Therapeutics, Inc.

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

to receive up to $ 265.0 million for each target, in development, regulatory and commercial milestone payments and royalties at percentages in the high single to low teens from commercial sales of any resulting conditionally activated ADCs.

The second target was selected under the Discovery Agreement that allows AbbVie to select a target for developing a conditionally activated ADC or a Probody.

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 September 30, 2022.

As of September 30, 2022 and December 31, 2021, deferred revenue related to the CD71 Agreement performance obligation was $ 6.6 million and $ 16.1 million, respectively, and deferred revenue related to the Discovery Agreement performance obligation was $ 3.5 million and $ 5.2 million, respectively.

Notes to Condensed Financial Statements (Unaudited)

full rights to CX-2029.

The Company has completed the performance obligation under the CD71 Agreement as of March 31, 2023 and recognized the related remaining deferred revenue of $ 4.0 million in the first quarter of 2023.

In December 2022, the research on the two discovery targets under the Discovery Agreement has concluded with no plans to advance the discovery targets into clinical studies or to pursue new programs.

The Company completed the performance obligation for the second target earlier than the original research term that was projected to end in 2024 and recorded a cumulative change in estimate of $ 4.4 million in the fourth quarter of 2022.

In March 2023, AbbVie gave notice that the Discovery Agreement would be terminated in 60 days and all target rights will revert back to CytomX .

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

23 unchanged sentences

Amgen is eligible to receive up to $ 203.0 million in development, regulatory, and commercial milestone payments for the CytomX Product, and tiered mid-single digit to low double-digit percentage royalties.

As of September 30, 2022 and December 31, 2021, deferred revenue related to the EGFR Products performance obligation was $ 19.4 million and $ 21.8 million, respectively.

As of September 30, 2022 and December 31, 2021, deferred revenue related to the Amgen Other Products performance obligation was $ 0.8 million and $ 1.4 million, respectively.

As of March 31, 2023 and December 31, 2022, deferred revenue related to the EGFR Products performance obligation wa s $ 16.4 million and $ 18.0 million, respectively.

As of March 31, 2023 and December 31, 2022, deferred revenue related to the Amgen Other Products performance obligation w as $ 0.4 million and $ 0.6 million, respectively.

CytomX Therapeutics, Inc.

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

Notes to Condensed Financial Statements (Unaudited)

Astellas Pharma Inc.

2 unchanged sentences

Under the terms of the Astellas Agreement, the Company granted Astellas an exclusive, worldwide right to develop and commercialize Probody therapeutics for up to four collaboration targets including one initial target and three additional targets (“Additional Targets”).

In addition, Astellas has the right to expand the number of Additional Targets from three up to five (the “Expansion Option”) before the third anniversary of the effective date.

In addition, Astellas had the right to expand the number of Additional Targets from three up to five (the “Expansion Option”) before the third anniversary of the effective date.

Furthermore, for a specified number of targets, at a pre-specified time prior to the initiation of the first pivotal study of a product against such target, the Company may elect to participate in certain development costs and share in the profits generated in the United States with respect to such product (“Cost Share Option”).

2 unchanged sentences

Pursuant to the Astellas Agreement, the consideration from Astellas is comprised of an upfront fee of $ 80.0 million and contingent payments for development, regulatory and sales milestones of up to an aggregate of approximately $ 1.6 billion.

If Astellas exercises its Expansion Option for the two Additional Targets, the Company would be eligible to receive additional upfront and milestone payments aggregating to approximately $ 0.9 billion.

The Company is also entitled to tiered royalties from high-single digit to mid-teen percentage royalties from potential future sales.

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 September 30, 2022 and December 31, 2021, deferred revenue relating to the Astellas Agreement was $ 39.6 million and $ 51.6 million, respectively.

The amount due from Astellas under the Astellas Agreement was $ 1.7 million and $ 0.8 million as of September 30, 2022 and December 31, 2021, respectively.

In January 2023, the Company announced that it achieved a clinical candidate milestone under the Astellas Agreement which triggered a $ 5.0 million milestone payment to the Company.

The $ 5.0 million milestone payment was fully recognized in the first quarter of 2023 as the Company had completed its performance obligation related to the collaboration target.

As of March 31, 2023 and December 31, 2022, deferred revenue relating to the Astellas Agreement wa s $ 41.8 m illion and $ 44.5 million, respectively.

The amount due from Astellas under the Astellas Agreement wa s $ 1.0 mill ion and $ 1.0 million as of March 31, 2023 and 2022, respectively.

Bristol Myers Squibb Company

6 unchanged sentences

The research term for each collaboration target could be extended in one year increments up to three times.

Pursuant to the BMS Agreement, the financial consideration from Bristol Myers Squibb was comprised of an upfront payment of $ 50.0 million, and the Company was initially entitled to receive contingent payments of up to $ 25.0 million for additional targets and up to an aggregate of $ 1,192.0 million for development, regulatory and sales milestones.

Pursuant to the BMS Agreement, the financial consideration from Bristol Myers Squibb was comprised of an upfront payment of $ 50.0 million and estimated research and development service fees, and the Company was initially entitled to receive contingent payments of up to $ 25.0 million for additional targets and contingent payments for development, regulatory and sales milestones.

In addition, the Company was entitled to royalty payments in the mid-single digits to low double-digit percentages from potential future sales.

The Company also received research and development service fees based on a prescribed FTE rate that was capped.

On March 17, 2017, the Company and Bristol Myers Squibb entered into Amendment Number 1 to Extend Collaboration and License Agreement (“Amendment 1”).

2 unchanged sentences

Under the terms of Amendment 1, the Company continued to have obligations to Bristol Myers Squibb to discover and conduct preclinical development of Probody therapeutics against any targets they chose to select during the research period under the terms of Amendment 1.

Pursuant to Amendment 1, the financial consideration from Bristol Myers Squibb was comprised of an upfront payment of $ 200.0 million and the Company was initially eligible to receive contingent payments for development, regulatory and sales milestones of up to an aggregate of $ 3,586.0 million for the eight targets.

The Company was also entitled to tiered mid-single to low double-digit percentage royalties from potential future sales.

Amendment 1 did not change the term of the Bristol Myers Squibb’s royalty obligation under the BMS Agreement.

Pursuant to Amendment 1, the financial consideration from Bristol Myers Squibb was comprised of an upfront payment of $ 200.0 million, estimated research and development service fees, and contingent payments for development, regulatory and sales milestones for the eight

CytomX Therapeutics, Inc.

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

licensed product in a country, or (iii) the expiration of any applicable regulatory, pediatric, orphan drug or data exclusivity with respect to such product.

The initial transaction price for the BMS Agreement and Amendment 1, collectively, was $ 272.8 million consisting of the upfront fees of $ 250.0 million, research and development service fees of $ 10.8 million and milestone payments received of $ 12.0 million upon the adoption of ASC 606 on January 1, 2018.

Notes to Condensed Financial Statements (Unaudited)

The Company was also entitled to tiered mid-single to low double-digit percentage royalties from potential future sales.

Amendment 1 did not change the term of Bristol Myers Squibb’s royalty obligation under the BMS Agreement.

Bristol Myers Squibb’s royalty obligation continues on a licensed-product by licensed-product basis until the later of (i) the expiration of the last claim of the licensed patents covering the licensed products in the country, (ii) the twelfth anniversary of the first commercial sale of a licensed product in a country, or (iii) the expiration of any applicable regulatory, pediatric, orphan drug or data exclusivity with respect to such product.

The initial transaction price for the BMS Agreement and Amendment 1, collectively, was $ 304.7 million consisting of the upfront fees of $ 250.0 million, target selection fees for the third and fourth targets of $ 25.0 million, estimated research and development service fees of $ 17.7 million and milestone payments received up to January 1, 2018, of $ 12.0 million.

The Company determined that the remaining potential milestone payments were probable of significant revenue reversal as their achievement was highly dependent on factors outside the Company’s control.

Therefore, these payments were fully constrained and were not included in the transaction price upon the adoption of ASC 606 on January 1, 2018.

The BMS Agreement represents an obligation to continuously make the Probody therapeutic technology platform available to Bristol Myers Squibb.

Therefore, the initial transaction price is recognized over the estimated research service period, which ends on April 25, 2025 .

The initial transaction price for the combined obligation for each collaboration target is recognized using an input measure.

In February 2021, the Company and Bristol Myers Squibb entered into Amendment Number 2 to amend the Collaboration and License Agreement (“Amendment 2”), as amended by Amendment 1.

Subsequent to Amendment 2, Bristol Myers Squibb has the exclusive worldwide rights to develop and commercialize Probody therapeutics for up to five oncology targets.

Under the terms of Amendment 2, the period for target selection has been extended and the Company will continue to collaborate with Bristol Myers Squibb to discover and conduct preclinical development of Probody therapeutics against targets selected by Bristol Myers Squibb over the estimated research period, which ends in April 2025.

Pursuant to Amendment 2, the Company is eligible to receive contingent payments for development, regulatory and sales milestones of up to an aggregate of $ 1,779.0 million.

Subsequent to Amendment 2, in addition to Bristol Myers Squibb’s ongoing development of the CTLA-4 program, Bristol Myers Squibb also had the exclusive worldwide rights to develop and commercialize Probody therapeutics for up to five oncology targets.

Under the terms of Amendment 2, the period for target selection was extended and the Company will continue to collaborate with Bristol Myers Squibb to discover and conduct preclinical development of Probody therapeutics against targets selected by Bristol Myers Squibb over the estimated research period, which is projected to end in April 2025.

Pursuant to Amendment 2, the Company was eligible to receive contingent payments for development, regulatory and sales milestones.

It is also entitled to tiered mid-single to low double-digit percentage of royalties from potential future sales.

In addition, the Company will no longer be entitled to receive the research and development service fee as part of the arrangement.

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 September 30, 2022.

As of September 30, 2022 and December 31, 2021, deferred revenue relating to the BMS Agreement was $ 76.5 million and $ 98.8 million, respectively.

The Company accounted for Amendment 2 as a modification and reallocated the remaining unrecognized transaction price to the remaining performance obligations.

In October 2022, the Company and Bristol Myers Squibb entered into Amendment Number 3 to amend the Collaboration and License Agreement (“Amendment 3”), as amended by Amendment 1 and Amendment 2, to clarify the rights and restrictions of certain new proprietary antibodies that the parties exchanged.

There were no substantive changes to each party's performance obligations.

As of December 31, 2022, the Company is eligible for up to approximately $ 2.1 billion in contingent payments for development, regulatory and sales milestones based on the ongoing collaboration projects, including the CTLA-4 program, with BMS.

The Company reevaluated the remaining potential milestone payments and determined that significant revenue reversal was 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 were not included in the transaction price as of March 31, 2023.

As of March 31, 2023 and December 31, 2022, deferred revenue relating to the BMS Agreement wa s $ 161.5 mi llion and $ 169.2 million, respectively.

ModernaTX, Inc.

The Company and ModernaTX, Inc.

(“Moderna”) entered into a Collaboration and License Agreement (the “Moderna Agreement”) on December 30, 2022, the effective date, to collaborate on discovery and preclinical research and development activities to create investigational messenger RNA (mRNA) based conditionally activated therapies using the Company’s Probody therapeutic technology.

Moderna is solely responsible for the development (preclinical and clinical), manufacture, and commercialization of any products under the Moderna Agreement.

Under the terms of the Moderna Agreement, the Company granted Moderna an exclusive, worldwide right to develop and commercialize Probody therapeutics for the collaboration programs.

In exchange, the Company received an upfront payment of $ 35.0 million in January 2023, including $ 5.0 million of prepaid research and development service fees.

The Company will continue to receive research and development service fees according to the preclinical research work plans based on a prescribed FTE rate and is eligible to receive up to approximately $ 1.2 billion in future development, regulatory, and commercial milestone payments.

The Company is also eligible to receive tiered royalties from high-single digit to low-teen percentage rates of annual global net sales of any products that are commercialized under the Moderna Agreement.

The Moderna Agreement also provides Moderna with an option to participate in a future equity financing by CytomX at market price, subject to certain terms, conditions and regulatory requirements.

As of March 31, 2023 and December 31, 2022, deferred revenue relating to the Moderna Agreement was $ 34.3 million and $ 35.0 million, respectively.

CytomX Therapeutics, Inc.

Notes to Condensed Financial Statements (Unaudited)

Regeneron Pharmaceuticals, Inc.

The Company and Regeneron Pharmaceuticals Inc.

(“Regeneron”) entered into a Collaboration and License Agreement (the “Regeneron Agreement”) on November 16, 2022, to collaborate on creation of conditionally-activated investigational bispecific cancer therapies utilizing the Company’s Probody® therapeutic platform and Regeneron’s Veloci-Bi® bispecific antibody development platform.

The Company and Regeneron will collaborate on preclinical research and discovery activities for initially agreed upon collaboration programs (“Collaboration Program”) with an option to expand additional Collaboration Programs (“Additional Collaboration Program Option”).

Under the Collaboration and License Agreement, the Company granted Regeneron an exclusive, worldwide, royalty-bearing license under certain Company intellectual property to develop, manufacture, commercialize and otherwise exploit licensed products (“Licensed Products”) for all human and non-human diagnostic, prophylactic and therapeutic uses in oncology.

Regeneron is responsible for funding the cost of preclinical research and discovery activities of both parties for all Licensed Products and for funding the cost of development, manufacture and commercialization of all Licensed Products worldwide.

Pursuant to the Regeneron Agreement, the consideration from Regeneron is comprised of an upfront fee of $ 30.0 million, contingent payments for development and regulatory milestones and commercial milestone payments of up to an aggregate of approximately $ 0.8 billion.

If Regeneron exercises its Additional Collaboration Program Option, the Company would be eligible to receive additional upfront and milestone payments aggregating up to approximately $ 1.2 billion.

The Company is also entitled to tiered royalties from high-single digit to low-teen percentage royalties from potential future sales.

In addition, the Company will receive research and development service fees based on a prescribed FTE rate.

As of March 31, 2023 and December 31, 2022, deferred revenue relating to the Regeneron Agreement was $ 29.5 million and $ 30.0 million, respectively.

Contract Liabilities

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

The following table presents changes in the Company’s total contract liabilities during the three months ended March 31, 2022 and 2023:

Revenue Recognized

(in thousands)

1 unchanged sentence

Deferred revenue

The Company expects that the $ 146.4 million of deferred revenue related to the following contracts as of September 30, 2022 will be recognized as revenue as set forth below.

Revenue Recognized

(in thousands)

Contract liabilities:

Deferred revenue

The Company expects that t he $ 283.9 m illion of deferred revenue related to the following contracts as of March 31, 2023 will be recognized as revenue based on actual FTE effort and program progress 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 $ 6.6 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 $ 3.5 million of deferred revenue related to the second target under the Discovery Agreement with AbbVie is expected to be recognized ratably until 2024 .

The $ 19.4 million of deferred revenue related to the Amgen EGFR Products is expected to be recognized based on actual FTE effort and program progress until 2026 .

The $ 0.8 million of deferred revenue related to the Amgen Other Products is expected to be recognized ratably until 2023 .

The $ 39.6 million of deferred revenue related to the Astellas Agreement is expected to be recognized ratably until 2025 .

The $ 76.5 million of deferred revenue related to the BMS Agreement is expected to be recognized ratably until 2025 .

The $ 16.4 million of deferred revenue related to the Amgen EGFR Products is expected to be recognized until 2026 .

The $ 0.4 million of deferred revenue related to the Amgen Other Products is expected to be recognized until 2023 .

The $ 41.8 million of deferred revenue related to the Astellas Agreement, together with research and development service fees, is expected to be recognized until 2026 .

The $ 161.5 million of deferred revenue related to the BMS Agreement is expected to be recognized until 2025 .

The $ 34.3 million of deferred revenue related to the Moderna Agreement, together with research and development service fees, is expected to be recognized until 2028 .

The $ 29.5 million of deferred revenue related to the Regeneron Agreement, together with research and development service fees, is expected to be recognized until 2026 .

CytomX Therapeutics, Inc.

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

Notes to Condensed Financial Statements (Unaudited)

Stock-Based Compensation

Stock Options

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

Activities for the Company’s stock option plans for the three months ended March 31, 2023 were as follows:

Options Outstanding

Exercise Price

Balances at December 31, 2021

Balance at December 31, 2022

Options granted

1 unchanged sentence

Option forfeited/expired

Balances at September 30, 2022

The Company recorded $ 2.3 million and $ 3.0 million of stock-based compensation expense related to the stock options for the three months ended September 30, 2022 and 2021, respectively.

The Company recorded $ 8.0 million and $ 9.3 million of stock-based compensation expense related to the stock options for the nine months ended September 30, 2022 and 2021, respectively.

Balance at March 31, 2023

The Company recorded $ 1.9 million and $ 2.9 million of stock-based compensation expense related to the stock option plans for the three months end March 31, 2023 and 2022, respectively.

Time-based RSUs ("TRSU")

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

Activities for the Company’s TRSUs for the three months ended March 31, 2023 were as follows:

Weighted Average Grant Date Fair Value Per Share

Balance at December 31, 2022

RSUs cancelled

Balance at September 30, 2022

The Company recorded $ 0.1 million and $ 0.8 million of stock-based compensation expense related to the TRSUs for the three and nine months ended September 30, 2022, respectively.

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

RSU's awarded

RSU's cancelled

Balance at March 31, 2023

The Company recorded $ 0.4 million and $ 0.3 million of stock-based compensation expense related to the TRSUs for the three months end March 31, 2023 and 2022, respectively.

Performance-based RSUs ("PSUs")

In October 2021, the Company granted 435,000 PSUs 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 ("2021-Tranche 1") and the remaining 50% will vest within two years of the grant date upon achievement of additional company objectives ("2021-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.

During the second quarter of 2022, the Company determined that the achievement of the milestones for 2021-Tranche 1 was probable and hence recorded $ 1.0 million of stock-based compensation expense.

In July 2022, the Company determined that the performance condition for 2021-Tranche 1 was met and recorded $ 32,000 and $ 1.0 million of stock-based compensation expense for the three and nine months ended September 30, 2022, respectively.

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

Vesting for 50% of the PSUs granted will occur within one year of the grant date upon achievement of certain specific milestones ("2021-Tranche 1") and the remaining 50% will vest within two years of the grant date upon achievement of additional company objectives ("2021-Tranche 2").

In July 2022, the Company determined that the performance condition for 2021-Tranche 1 was met and recorded $ 1.0 million of stock-based compensation expense for the year ended December 31, 2022.

As the achievement of the milestones for Tranche 2 was not considered probable, no compensation cost was recorded for 2021-Tranche 2 of these awards through March 31, 2023.

In August 2022, the Company granted 250,000 PSUs to executive employees with an aggregated grant date fair value of approximately $ 0.4 million.

Vesting for 50% of the PSUs granted will occur upon attaining certain specific milestones by December 2023 (“2022-Tranche 1”), and the remaining 50% will vest upon attaining certain specific milestones by December 2024 (“2022-Tranche 2”).

As of September 30, 2022, the Company determined that it is probable that the performance conditions for 2022-Tranche 1 will be satisfied and hence recorded $ 20,000 compensation cost for those awards for the three and nine months ended September 30, 2022.

As of September 30, 2022, the

As of December 31, 2022, and March 31, 2023, the Company determined that it is probable that the performance conditions for 2022-Tranche 1 will be satisfied and hence recorded $ 55,000 and $ 29,000 compensation cost, respectively, for those awards for the year ended December 31, 2022 and for the three months ended March 31, 2023.

As of December 31, 2022 and March 31, 2023, the Company determined that it is not probable that the performance conditions for 2022-Tranche 2 will be satisfied and hence recorded no compensation cost for those awards through March 31, 2023.

CytomX Therapeutics, Inc.

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

Company determined that it is not probable that the performance conditions for 2022-Tranche 2 will be satisfied and hence recorded no compensation cost for those awards for the three and nine months ended September 30, 2022.

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

Notes to Condensed Financial Statements (Unaudited)

In February 2023, the Company granted 710,000 PSUs to executive employees with an aggregated grant date fair value of approximately $ 1.8 million.

Vesting for 50% of the PSUs granted will occur upon attaining certain specific milestones by December 2024 (“2023-Tranche 1”), and the remaining 50% will vest upon attaining certain specific milestones by December 2025 (“2023-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 through March 31, 2023.

Activities for the Company’s PSUs for the three months ended March 31, 2023 were as follows:

Weighted Average Grant Date Fair Value Per Share

Balance at December 31, 2022

PSUs cancelled

Balance at September 30, 2022

PSU's awarded

PSU's cancelled

Balance at March 31, 2023

Stock-based Compensation

The total stock-based compensation expense for each of the three and nine months ended September 30, 2022 included $ 0.1 million in research and development expense, and $ 0.1 million in general and administrative expenses related to the modification of certain awards in connection with the restructuring in the third quarter of 2022.

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

Total stock-based compensation recorded was as follows:

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

11 unchanged sentences

stipulation to stay all pending case deadlines until that motion is finally resolved.

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 September 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 September 30, 2022 and December 31, 2021 .

The Company believes that the lawsuit is without merit and intends to vigorously defend itself.

The Company does not believe a loss is probable and has no t recorded any amount as a contingent liability for claims associated with this lawsuit as of March 31, 2023.

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, 2023 and December 31, 2022 .

The Company files income taxes in the U.S.

6 unchanged sentences

CytomX Therapeutics, Inc.

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

Notes to Condensed Financial Statements (Unaudited)

Restructuring

1 unchanged sentence

The restructuring plan resulted in a reduction to its workforce of approximately 40 %.

Restructuring costs of $ 2.0 million and $ 5.1 million were recorded in general and administrative expense and research and development expense, respectively, for the three- and nine-months ended September 30, 2022.

In connection with the restructuring, the Company has recorded a total of $ 0.2 million stock-based compensation related to the modification of awards, of which $ 0.1 million was recorded in general and administrative expense and $ 0.1 million in research and development expense.

The following is a summary of accrued restructuring costs as of September 30, 2022 (in thousands):

Restructuring costs of $ 2.4 million and $ 5.1 million were recorded in general and administrative expense and research and development expense, respectively, in the third and fourth quarters of 2022.

The restructuring was substantially complete as of December 31, 2022.

The following is a summary of accrued restructuring costs as of March 31, 2023 (in thousands):

Severance and Benefits Costs

1 unchanged sentence

Stock Based Compensation

Non-cash charges

Balance at September 30, 2022

The total costs expected to be incurred in connection with the restructuring are estimated to be approximately $ 7.9 million.

The Company expects to incur an additional $ 0.8 million of restructuring costs related to severance and benefits in the three months ended December 31, 2022.

The restructuring is expected to be substantially complete by the fourth quarter of 2022.

Balance at December 31, 2022

Change in estimates

Balance at March 31, 2023

The Company has a lease of office and laboratory space located in South San Francisco, California for the Company’s corporate headquarters (the “2016 Lease”).

The 2016 Lease has an initial term of ten years through 2026 and the Company has an option to extend the initial term for an additional five years at the then fair rental value as determined pursuant to the 2016 Lease.

In March 2023, the Company entered into a sublease agreement for a portion of its existing office and laboratory space.

The sublease is classified as an operating lease whereby sublease income is recognized on a straight-line basis over the sublease term that expires on September 30, 2026.

For the three months ended March 31, 2023, sublease income was immaterial.

March 31, 2023

(in thousands)

Future sublease income payments

Remainder of 2023

Total sublease income payments

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

5 unchanged sentences

Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.

We are a clinical-stage, oncology-focused biopharmaceutical company dedicated to destroying cancer differently.

We are a clinical-stage, oncology-focused biopharmaceutical company focused on developing novel conditionally activated, biologics localized to the tumor microenvironment.

We aim to build a commercial enterprise to maximize our impact on the treatment of cancer.

By pioneering a novel class of conditionally activated biologic candidates, powered by our Probody® therapeutic technology platform, we lead the field of conditionally activated oncology therapeutics and have established conditional activation as a strategic area of biologics research and development.

By pioneering a novel class of localized biologic drug candidates, powered by our Probody® therapeutic technology platform, we lead the field of conditionally activated oncology therapeutics and have established biologics localization as a strategic area of research and development.

Our goal is to transcend the limits of current cancer treatments by successfully leveraging therapeutic targets and strategies that were once thought to be inaccessible.

Our proprietary, unique and versatile Probody technology platform is designed to enable conditional activation of biologic therapeutic candidates within the tumor microenvironment, while minimizing drug activity in healthy tissues and circulation.

Our proprietary and versatile Probody technology platform is designed to enable conditional activation of biologic therapeutic candidates within the tumor microenvironment, while minimizing drug activity in healthy tissues and circulation.

Our industry-leading platform is built on a strong foundation of tumor biology expertise, including deep knowledge of tumor-associated enzymes known as proteases.

4 unchanged sentences

Allowing the pursuit of high potential targets that were previously considered “undruggable”

due to their ubiquitous expression on healthy tissues;

Enhancing an experimental treatment’s “therapeutic window,”

due to their ubiquitous expression on normal tissues;

Enhancing a potential product’s “therapeutic window,”

the balance between tolerability and anti-tumor activity;

Enabling the development of new combination therapies, including immunotherapies, by improving tolerability.

We are employing our conditional activation platform technology to advance novel investigational medicines in some of the most needed areas of cancer research and development including antibody-drug conjugates (“ADCs”), T-cell engaging bispecific antibodies (“TCBs”), and immune modulators such as cytokines and checkpoint inhibitors (“CPIs”).

Our robust portfolio of differentiated, experimental treatments includes a broad range of wholly-owned and partnered molecules spanning pre-clinical to Phase 2 across multiple therapeutic modalities in which conditionally activated molecules could unlock significant therapeutic potential for the treatment of cancer.

CX-2029, partnered with Abbvie, is a conditionally activated ADC directed toward the previously undruggable target CD71.

We are employing our leading, conditional activation platform technology to address some of the biggest challenges today in oncology biologics research and development.

These include the validation of potential new targets for antibody-drug conjugates (“ADCs”), opening solid tumor opportunities for T-cell engaging bispecific antibodies (“TCBs”), and increasing the therapeutic window for immune modulators such as cytokines and checkpoint inhibitors (“CPIs”).

Additionally, we have recently initiated a research collaboration with our Probody platform beyond cancer into other therapeutic areas.

We have utilized our multi-modality Probody platform to build a promising, broad pipeline of potential first-in-class and best-in-class therapeutics that includes molecules in clinical testing including:

CX-2029, a Probody ADC targeting CD71;

CX-904, a conditionally activated TCB, targeting the epidermal growth factor receptor (“EGFR”) on tumor cells and the CD3 receptor on T cells and BMS-986288, a Probody version of a non-fucosylated anti-CTLA-4 antibody.

We also have a broad pre-clinical pipeline across our collaborations and internally, including two wholly-owned next-generation molecules in investigational new drug application (“IND”) enabling studies.

For our next generation molecules, we have selected the previously validated anti-cancer targets, the epithelial cell adhesion molecule (EpCAM) and interferon alpha-2b (IFNa2b), that have been limited in their potential due to systemic toxicities.

In the molecular design of CX-2051, an ADC, and CX-801, a masked cytokine, we have incorporated our platform expertise and clinical learnings to optimize predicted therapeutic index in order to potentially broaden the clinical utility of these promising targets through tumor localized conditional activation.

CX-2029, which was partnered with Abbvie until March 2023, is a conditionally activated ADC directed toward the previously undruggable target CD71.

Having demonstrated favorable tolerability and encouraging anti-tumor activity in Phase 1 studies, CX-2029 entered into a four-cohort Phase 2 expansion study initially 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”).

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

Patient enrollment into the sqNSCLC, HNSCC and E/GEJ cancer cohorts and the overall study is now complete.

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.

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.

The DLBCL cohort was later deprioritized due to strategic and

competitive reasons and did not enroll any patients.

In January 2023, a data update for the Phase 2 expansion was disclosed which included data across all fully enrolled cohorts.

The study results reflected an August 5, 2022 full data cut-off and an October 4, 2022 data snapshot for efficacy.

The data demonstrated encouraging clinical activity in unselected, heavily pre-treated patients with tumors of squamous histology including a 21% objective response rate (ORR) in squamous esophageal cancer and a 10% ORR in squamous non-small cell lung cancer (sqNSCLC).

The adverse event (AE) profile was consistent with Phase 1 observations with anemia (82.6%) being the most common treatment related adverse event (TRAE).

Anemia was managed with transfusions, dose delays, and dose reductions.

The treatment discontinuation rate due to AEs was 3.3% as a result of anemia.

In March 2023, CytomX announced that it will evaluate the potential next steps for CX-2029 following the decision from its collaboration partner, AbbVie, Inc., to not advance CX-2029 into additional clinical studies.

As a result of AbbVie’s decision, the 2016 CD71 License and Collaboration Agreement has been terminated and CytomX has an exclusive option to re-acquire full rights to CX-2029.

Praluzatamab ravtansine is our conditionally activated ADC directed toward CD166 which has been 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 the data cut-off date of 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 was 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 is seeking a partnership to further develop praluzatamab ravtansine in patients with advanced breast cancer.

The additional data from the Phase 2 study are expected to be presented by the end of 2022.

In July 2022, Phase 2 topline results were disclosed for Arms A and B.

Based on the reported results, the Company deprioritized further investment and announced it would seek a partnership to further develop praluzatamab ravtansine.

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.

2 unchanged sentences

Bristol Myers Squibb also continues to evaluate BMS-986288, a Probody version of non-fucosylated ipilimumab, as monotherapy or in combination with nivolumab in a Phase 1 / 2 clinical study.

Reinforcing our leadership in the field of conditional activation, we recently advanced our first T-cell engaging bispecific antibody (TCB) into the clinic.

CX-904 is a conditionally activated TCB against EGFR and CD3.

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

In February 2023, BMS prioritized BMS-986288 as its lead next-generation anti-CTLA-4 program over two other anti-CTLA-4 programs including BMS-986249.

Reinforcing our leadership in the field of conditional activation, in 2022 we advanced our first T-cell engaging bispecific antibody (TCB) into the clinic.

CX-904, partnered with Amgen, is a conditionally activated TCB against EGFR and CD3.

In preclinical studies, CytomX’s Probody EGFRxCD3 bispecific therapeutics demonstrated anti-tumor activity and better tolerability when compared to EGFRxCD3 bispecifics without Probody masking.

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.

Patient enrollment in the Phase 1 dose escalation portion of the study continues to progress.

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 camptothecin payload and directed toward the epithelial cellular adhesion molecule (EpCAM).

We reported in January 2023 that the initial single patient cohort phase of the study was complete and that the “3+3”

patient cohort phase had been initiated.

Our pipeline also includes CX-2051, a wholly-owned conditionally activated ADC paired with a next-generation camptothecin payload and directed toward the epithelial cellular adhesion molecule (EpCAM).

CX-2051 has been tailored to optimize the therapeutic index for the systemic treatment of EpCAM-expressing epithelial cancers where previous industry efforts targeting EpCAM have not been successful due to dose-limiting toxicities.

CX-2051 has demonstrated a wide predicted therapeutic index and strong preclinical activity and tolerability in multiple preclinical models, including colorectal cancer.

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.

Another wholly-owned emerging product candidate is CX-801, an interferon ("IFN") alpha-2b Probody.

IFNa2b provides a potentially superior approach to activating anti-tumor immune responses than other cytokines.

CX-801 is a dually masked, conditionally activated version of IFNa2b that has the potential to become a unique centerpiece of combination therapy for a wide range of tumor types.

An IND submission for CX-801 is planned 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, TCBs, and most recently, mRNAs reflecting the versatility of our Probody platform.

We currently have more than 15 active drug discovery and/or development programs.

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 $23.3 million and $71.4 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2022 and December 31, 2021, we had an accumulated deficit of $605.1 million and $533.7 million, respectively.

Our net loss was $3.3 million for the three months ended in March 31, 2023.

As of March 31, 2023 and December 31, 2022, we had an accumulated deficit of $726.2 million and $722.9 million, respectively.

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

1 unchanged sentence

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.

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.

We currently have no manufacturing capabilities and do not intend to establish any such capabilities in the near term.

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

The restructuring plan resulted in a reduction to our workforce of approximately 40%.

During the three months ended September 30, 2022, we recorded aggregate restructuring charges of approximately $7.1 million, primarily related to severance and benefits.

The aggregate restructuring charges under this restructuring plan are expected to be approximately $7.9 million.

We expect to incur an additional $0.8 million of restructuring costs related to severance and benefits in the three-months ended December 31, 2022.

We expect the restructuring to be substantially complete by the fourth quarter of 2022.

Impact of COVID-19

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

Any preventative or protective actions that we, our collaboration partners or others have taken, or may take, in respect of the virus may result in further disruption for our clinical trials, including clinical trials for CX-2029, CX-904, and praluzatamab ravtansine, manufacturing, research, financial reporting capabilities and operations generally and could potentially impact our patients, partners, employees and third parties.

Any preventative or protective actions that we, our collaboration partners or others have taken, or may take, in respect of the virus may result in further disruption for our clinical trials, including clinical trials for CX-904, manufacturing, research, financial reporting capabilities and operations generally and could potentially impact our patients, partners, employees and third parties.

Any resulting financial impact cannot be reasonably estimated at this time but may materially affect the business and our financial condition and results of operations.

8 unchanged sentences

Estimates are assessed each period and updated to reflect current information.

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 for the nine months ended September 30, 2022.

Uncertain Tax Position

We file income taxes in the U.S.

federal jurisdiction, the state of California and various other U.S.

We are currently under examination by the state of California for the years 2017 and 2018.

The examination contests our tax position on revenue apportionment for upfront and milestone payments resulting from our collaboration and licensing agreements.

As of the date of this filing, the state of California has not proposed adjustments to the tax returns.

Due to the ongoing nature of the examination and discussions with the state of California, we are unable to estimate a date by which this matter will be resolved or reasonably estimate the potential impact should the tax position be revised.

Based on our current expectations and understanding of the reasonably possible outcomes, we do not anticipate that the resolution of this matter would result in a material impact on our financial position or results of operations.

Research and Development Expenses

We record accrued liabilities for estimated costs of research, preclinical and clinical studies and contract manufacturing activities, which are a significant component of research and development expenses.

A substantial portion of our ongoing research and development activities is conducted by third-party service providers, including CROs.

Our contracts with CROs generally include pass-through costs, such as regulatory expenses, investigator fees, travel costs and other miscellaneous costs.

The financial terms of these contracts are subject to negotiations, which vary from contract to contract and may result in payments that do not match the periods over which materials or services are provided to us under such contracts.

We accrue the costs incurred under agreements with these third parties based on actual work completed in accordance with the respective agreements.

In the event we make advance payments, they are recorded as prepaid expenses and recognized as the services are performed.

We determine the estimated costs through discussions with internal personnel and external service providers as to the progress of stage of completion of the services and the agreed-upon fees to be paid for such services.

We make significant judgments and estimates in determining the accrual balance in each reporting period.

As actual costs become known, we adjust our accruals.

Although we do not expect our estimates to be materially different than the actual amounts incurred, such estimates for the status and timing of services performed relative to the actual status and timing of services performed may vary and could result in us reporting amounts that are too high or too low in any one period.

Our accrual is dependent, in part, upon the receipt of timely and accurate reporting from CROs and other third-party vendors.

Variations in the assumptions used to estimate accruals including, but not limited to, the number of patients enrolled, the rate of patient enrollment and the actual services performed, may vary from our estimates, resulting in adjustments to clinical trial expenses in future periods.

Changes in these estimates that result in material changes to our accruals could materially affect our financial condition and results of operations.

There are no material changes to our critical accounting policies and estimates as presented in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.

Components of Results of Operations

Our revenue to date has been primarily derived from non-refundable license payments, milestone payments and reimbursements for research and development expenses under our research, collaboration, and license agreements.

We recognize revenue from upfront payments over the term of our estimated period of performance under the agreement using a cost-based input method or a common measure of progress for the entire performance obligation.

In addition to receiving upfront payments, we may also be entitled to milestone and other contingent payments upon achieving predefined objectives.

Revenue from milestones and other contingent payments, when it is probable that there will not be a significant revenue reversal, is also recognized over the performance period based on a similar method.

Reimbursements from Astellas and Bristol Myers Squibb for research and development costs when incurred under our research, collaboration and license agreements with them are classified as revenue.

We recognize revenue from upfront payments over the term of our estimated period of performance under the agreement using an input method for the entire performance obligation.

In applying the input method of revenue recognition, we use actual full-time equivalent (FTE) hours incurred relative to estimated total FTE hours expected to be incurred for each combined performance obligation over the estimated research service period of each collaboration target.

In addition to receiving upfront payments, we are entitled to variable payments related to research and development services provided and may be entitled to milestone and other contingent payments upon achieving predefined objectives.

Revenue from variable payments related to research and development or milestones and other contingent payments, when it is probable that there will not be a significant revenue reversal, are also recognized over the performance period based on a similar method.

For the foreseeable future, we do not expect to generate any revenue from the sale of products unless and until such time as our product candidates have advanced through clinical development and obtained regulatory approval.

We expect that any revenue we generate in the foreseeable future will fluctuate from year to year as a result of the timing and amount of milestones and other payments from our collaboration agreements with AbbVie, Amgen, Astellas, Bristol Myers Squibb and any other collaboration partners, and as a result of the fluctuations in the research and development expenses we incur in the performance of assigned activities under these agreements.

AbbVie, one of our collaboration partners, entered into a license agreement with Seagen Inc.

We expect that any revenue we generate in the foreseeable future will fluctuate from year to year as a result of the timing and amount of milestones and other payments from our collaboration agreements with Amgen, Astellas, Bristol Myers Squibb, Regeneron, Moderna and any other collaboration partners, and as a result of the fluctuations in the research and development expenses we incur in the performance of assigned activities under these agreements.

AbbVie, one of our previous collaboration partners, entered into a license agreement with Seagen Inc.

(“SGEN”) to license certain intellectual property rights.

As part of our collaboration agreement with AbbVie, we received a sublicense to these intellectual property rights and therefore paid SGEN sublicense fees.

As part of the collaboration agreement with AbbVie, we received a sublicense to these intellectual property rights and therefore paid SGEN sublicense fees.

These sublicense fees were treated as reductions to the transaction price and combined with the performance obligation to which they relate.

19 unchanged sentences

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

Results of Operations for the Three and Nine Months Ended September 30, 2022 and 2021

Results of Operations

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

Three Months Ended

September 30,

Nine Months Ended

September 30,

(in thousands)

Bristol Myers Squibb

Total revenue

The decrease in revenue of $0.7 million and increase of $2.4 million for the three and nine months ended September 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 an increase in projected hours-to-completion.

The increase in revenue of $14.5 million for the three months ended March 31, 2023 compared to the corresponding period of 2022 was primarily due to:

An increase in revenue under the BMS Agreement driven by higher percentage of completion of the existing and new targets selected in 2022;

An increase in revenue under the Astellas Agreement primarily driven by a $5.0 million clinical candidate milestone achieved in January 2023, partially offset by lower percentage of completion on targets in the current period;

An increase in revenue from recognition of the remaining deferred revenue of $4.0 million upon termination of the AbbVie CD71 Agreement.

Operating Costs and Expenses

2 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

External costs incurred by product candidate (target):

(in thousands)

External costs incurred by product candidate (target):

Praluzatamab ravtansine, CX-2009 (CD166)

CX-2029 (CD71)

Pacmilimab, CX-072 (PD-L1)

CX-904 (EGFRxCD3)

Other wholly owned and partnered programs

2 unchanged sentences

Total research and development expenses

Research and development expenses increased by $1.2 million for the three months ended September 30, 2022, compared to the corresponding periods of 2021 primarily driven by restructuring expenses of $5.1 million, offset by a decrease in personnel related expense and clinical trial expenses due to the workforce reduction and pipeline reprioritization announced in July 2022.

During the three months ended September 30, 2022, a refund of $0.7 million was recorded related to prepaid clinical trial expenses for the CX-072 program.

Research and development expenses increased by $14.5 million for the nine months ended September 30, 2022, compared to the corresponding periods of 2021 primarily driven by restructuring expenses of $5.1 million and an increase in lab contract services and personnel related expenses supporting our clinical and pre-clinical stage pipeline.

The decrease in research and development expenses for the three months ended March 31, 2023 compared to the corresponding period of 2022 was primarily due to a decrease in personnel related expenses, as well as winding down of laboratory contract services and clinical study activities related to the CX-2009 and CX-2029 programs, partially offset by an increase in laboratory contract services related to IND enabling activities.

General and Administrative Expenses

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

General and administrative expenses

General and administrative expenses decreased by $0.6 million for the three months ended September 30, 2022, compared to the corresponding period of 2021 primarily driven by a decrease in personnel related expenses due to the workforce reduction announced in July 2022 and a decrease in outside consulting, legal and intellectual property services, offset by an increase of $2.0 million for restructuring expenses.

General and administrative expenses increased by $3.1 million for the nine months ended September 30, 2022, compared to the corresponding period of 2021 primarily driven by $2.0 million of restructuring expenses and an increase in personnel related expenses.

Restructuring

During the three- and nine-months ended September 30, 2022, we recognized aggregate restructuring charges of approximately $7.1 million, primarily related to severance and benefits.

Restructuring costs of $2.0 million and $5.1 million were recorded in general and administrative expense and research and development expense, respectively, for the three- and nine-months ended September 30, 2022.

The total restructuring cost is expected to be approximately $7.9 million.

We expect to incur an additional $0.8 million of restructuring costs related to severance and benefits in the three months ended December 31, 2022.

We expect the restructuring to be substantially complete by the fourth quarter of 2022.

General and administrative expenses decreased by $2.6 million for the three months ended March 31, 2023 compared to the corresponding period of 2022, primarily due to a decrease in personnel related expenses due to the workforce reduction in 2022 and patent related legal expenses.

Interest Income and Other Income (Expense)

Three Months Ended

(in thousands)

Interest income

Other income, net

Total interest income and other income, net

Interest Income

Interest income increased by $2.3 million for the three months ended March 31, 2023 compared to the corresponding period of 2022 was primarily driven by higher interest rates in 2023.

Liquidity and Capital Expenditures

Sources of Liquidity

As of September 30, 2022, we had cash, cash equivalents and short-term investments of $194.3 million and an accumulated deficit of $605.1 million.

As of March 31, 2023, we had cash, cash equivalents and investments of $204.5 million and an accumulated deficit of $726.2 million, compared to cash, cash equivalents and investments of $193.7 million and an accumulated deficit of $722.9 million as of December 31, 2022.

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.

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.

In November 2022, we entered into a Collaboration and License Agreement with Regeneron Pharmaceuticals, Inc.

(the “Regeneron Agreement”) to collaborate on preclinical research activities to discover and develop certain antibody compounds for the treatment of cancer using the Company’s Probody therapeutic technology.

Pursuant to the Regeneron Agreement, we collected an upfront fee of $30.0 million.

In December 2022, we entered into a Collaboration and License Agreement with ModernaTX, Inc.

(the “Moderna Agreement”) to collaborate on discovery and preclinical research and development activities to create investigational messenger RNA (mRNA) based conditionally activated therapies using the Company’s Probody therapeutic technology.

Pursuant to the Moderna Agreement, we collected an upfront fee and prepaid research funding of $35.0 million in January 2023.

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 resulted in a reduction to our workforce by approximately 40%, and is expected to be substantially completed by the fourth quarter of 2022.

We estimate that we will incur aggregate restructuring charges of approximately $7.9 million, primarily related to one-time severance payments and other employee-related costs.

Of the $7.9 million, $7.1 million was incurred in the third quarter of 2022 and the remaining $0.8 million is expected to be incurred in the fourth quarters of 2022.

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

The restructuring plan resulted in a reduction to our workforce by approximately 40%, and was substantially completed by the fourth quarter of 2022.

We incurred aggregate restructuring charges of approximately $7.5 million, primarily related to one-time severance payments and other employee-related costs.

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

8 unchanged sentences

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

Nine Months Ended

September 30,

Three Months Ended

(in thousands)

Net cash used in operating activities

Net cash (used in) provided by investing activities

Net cash provided by (used) in operating activities

Net cash used in investing activities

Net cash provided by financing activities

Net (decrease) increase in cash and cash equivalents

Net decrease in cash, cash equivalents and restricted cash

Cash Flows from Operating Activities

During the nine months ended September 30, 2022, cash used in operating activities was $109.4 million, which consisted of a net loss of $71.4 million and a net decrease of $52.9 million relating to the change of our net operating assets and liabilities, offset by non-cash charges of $14.9 million.

The non-cash charges primarily consisted of $10.6 million in stock-based compensation, $2.5 million in non-cash lease expense and $1.8 million in depreciation and amortization.

During the three months ended March 31, 2023, cash provided by operating activities was $9.4 million, which consisted of a net loss of $3.3 million, adjusted by non-cash charges of $2.4 million and a net increase of $10.3 million relating to the change of our net operating assets and liabilities.

The non-cash charges primarily consisted of $2.4 million in stock-based compensation, $0.9 million in non-cash lease expense, $0.6 million in depreciation and amortization, partially offset by $1.5 million in accretion of discounts on investments.

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

a net decrease of $48.5 million in deferred revenue resulting from the continued recognition of deferred revenue from existing customers;

a decrease of $3.5 million in accounts payable, accrued and other long-term liabilities primarily due to timing of payment;

a decrease of $1.0 million in cash flows from increase in accounts receivable caused by increase in service revenue.

During the nine months ended September 30, 2021, cash used in operating activities was $87.8 million, which consisted of a net loss of $57.4 million and a net decrease of $44.7 million relating to the change of our net operating assets and liabilities, offset by non-cash charges of $14.3 million.

The non-cash charges primarily consisted of $9.6 million in stock-based compensation, $2.3 million in non-cash lease expense, $2.1 million in depreciation and amortization and $0.3 million in amortization of premium on investments.

a net decrease of $17.4 million in deferred revenue resulting from the continued recognition of deferred revenue from existing and new customers;

a decrease of $8.0 million in accounts payable, accrued and other long-term liabilities primarily due to decrease of payroll-related expenses and restructuring related expenses as well as timing of other payments;

an increase of $34.9 million in cash flows from accounts receivable primarily related to the receipt of the $35.0 million upfront payment and prepaid research under the Moderna agreement entered into in December 2022.

a increase $0.8 million in cashflows from prepaid and other current assets primarily due to decrease in advance payments to our third party manufacturing vendors and timing of payments.

During the three months ended March 31, 2022, cash used in operating activities was $41.3 million, which consisted of a net loss of $32.0 million, a net decrease of $14.1 million relating to the change of our net operating assets and liabilities, adjusted by non-cash charges of $4.8 million.

The non-cash charges primarily consisted of $3.4 million in stock-based compensation, $0.8 million in non-cash lease expense and $0.6 million in depreciation and amortization.

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

1 unchanged sentence

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;

an increase of $4.5 million in cash flows from other assets, prepaid and other current assets primarily due to reduced advance payments to our third party manufacturing vendors and timing of payments.

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.

Cash Flows from Investing Activities

During the nine months ended September 30, 2022, cash used in investing activities was $1.6 million of capital expenditures used to purchase property and equipment.

During the nine months ended September 30, 2021, cash provided by investing activities was $22.7 million, which consisted of $124.0 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 $1.4 million of capital expenditures used to purchase property and equipment.

During the three months ended March 31, 2023, cash used in investing activities was $146.6 million used to purchase short-term investments.

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.

Cash Flows from Financing Activities

During the nine months ended September 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 nine months ended September 30, 2021, cash provided by financing activities consisted of $107.7 million of net proceeds from the follow-on public offering and $1.8 million of proceeds from the exercise of stock options and employee stock purchases under the employee stock purchase plan.

During the three months ended March 31, 2023, there were no 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.

Contractual Obligations

During the nine months ended September 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.

During the three months ended March 31, 2023, 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, 2022.

Quantitative and Qualitat ive Disclosure About Market Risk

We are exposed to market risks in the ordinary course of our business.

These risks primarily relate to interest rate risks.

We had cash, cash equivalents and short-term investments of $194.3 million and $305.2 million as of September 30, 2022 and December 31, 2021, respectively, which consists of bank deposits, money market funds and U.S.

government bonds.

Such interest-bearing instruments carry a degree of interest rate risk;

however, historical fluctuations of interest income have not been significant.

We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure.

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

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

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

Controls and Proc edures

5 unchanged sentences

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 Principal Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 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”).

Based upon such evaluation, our Chief Executive Officer and Principal Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

In connection with preparing our financial statements for the year ending December 31, 2022 and evaluating new collaboration and license agreements initiated in the fourth quarter of 2022, we re-evaluated our previous application of ASC 606 for our collaboration and license agreements and identified an error.

Upon reassessment, we have determined that certain revenue should be recognized over time using an input method as an appropriate measure of progress, rather than ratably over the estimated research period.

The Company’s internal control to perform a technical accounting analysis for collaboration and license agreements failed to operate as designed.

As a result, we concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022.

The Company identified a material weakness in internal control over financial reporting related to its application of ASC 606 for license and collaboration agreements.

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, 2023, the end of the period covered by this Quarterly Report on Form 10-Q.

Based on their evaluation and subject to the foregoing, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were not effective as of March 31, 2023.

Status of Remediation of Material Weakness

To remediate this material weakness, during the three months ended March 31, 2023, we have implemented and continue to improve the operation of our controls related to the application of ASC 606 to our collaboration and license agreements and the related controls to measure the progress in satisfying the performance obligations.

While we believe that these efforts will improve our internal control over financial reporting, the implementation of our remediation is ongoing and will require validation and testing of the design and operating effectiveness of our internal controls over a sustained period of financial reporting cycles.

The actions that we are taking are subject to ongoing senior management review, as well as audit committee oversight.

We will not be able to conclude whether the steps we are taking will fully remediate the material weaknesses in our internal control over financial reporting until we have completed our remediation efforts and subsequent evaluation of their effectiveness.

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 September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except as discussed above, 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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II –

1 unchanged sentence

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