CytomX Therapeutics, Inc. 10-Q

Item 4 Controls and Procedures 31 PART II – OTHER INFORMATION Item 1. Legal Proceedings 32 Item 1A. Risk Factors 32 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 75 Item 3. Defaults Upon Senior Securities 75 Item 4. Mine Safety Disclosures 75 Item 5. Other Information 75 Item 6. Exhibits 76 Signatures 77 2 Forward-Looking Statements This Quarterly Report on Form 10-Q contains certain forward-looking statements that involve risks and uncertainties. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as “may,” “might,” “should,” “could,” “predict,” “potential,” “believe,” “expect,” “continue,” “will,” “anticipate,” “seek,” “estimate,” “intend,” “plan,” “projection,” “would,” “annualized” and “outlook,” or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management’s beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions, estimates and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements. A number of important factors could cause our actual results to differ materially from those indicated in these forward-looking statements, including those factors identified in “Risk Factors” or “Management’s Discussion and Analysis of Financial Condition and Results of Operations” or the following: • our expectations regarding the potential benefits, activity, effectiveness and safety of our product candidates and therapeutics developed utilizing our Probody® platform technology; • the initiation, timing, progress and results of our ongoing clinical trials, research and development programs, preclinical studies, and Investigational New Drug Application (“IND”), Clinical Trial Application, New Drug Application (“NDA”), Biologics License Application (“BLA”); and other regulatory submissions; • the timing of the completion of our ongoing clinical trials and the timing and availability of clinical data from such clinical trials; • our ability to identify and develop additional product candidates; • our dependence on collaborators for developing, obtaining regulatory approval for and commercializing product candidates in the collaboration; • our or a collaborator’s ability to obtain and maintain regulatory approval of any of our product candidates; • our receipt and timing of any milestone payments or royalties under any research collaboration and license agreements or arrangements; • our expectations and beliefs regarding the evolution of the market for cancer therapies and development of the immuno-oncology industry; • the rate and degree of market acceptance of any approved product candidates; • the commercialization of any approved product candidates; • our ability to establish and maintain collaborations and retain commercial rights for our product candidates in such collaborations; • the implementation of our business model and strategic plans for our business, technologies and product candidates; • our estimates of our expenses, ongoing losses, future revenue and capital requirements, including our estimate of cash flow savings as a result of our restructuring plan announced in July 2022; • our ability to obtain additional funds for our operations; • our or any collaborator’s ability to obtain and maintain intellectual property protection for our technologies and product candidates and our ability to operate our business without infringing the intellectual property rights of others; • our reliance on third parties to conduct our preclinical studies or any future clinical trials; • our reliance on third-party supply and manufacturing partners to supply the materials and components for, and manufacture, our research and development, preclinical and clinical trial product supplies; • our ability to attract and retain qualified key management and technical personnel; • our ability to secure and maintain licenses of intellectual property to protect our technologies and product candidates; • our financial performance; 3 • developments relating to our competitors, our industry, international conflict or uncertainties; and • 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; 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. Factors that may cause actual results to differ materially from current expectations include, among other things, those listed under Part II, Item 1A. Risk Factors and discussed elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update or revise these forward-looking statements for any reason, even if new information becomes available in the future. This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for certain drugs and therapeutic biologics, including data regarding the estimated size of those markets, their projected growth rates and the incidence of certain medical conditions. Information that is based on estimates, forecasts, projections or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained these industry, business, market and other data from reports, research surveys, studies and similar data prepared by third parties, industry, medical and general publications, government data and similar sources. In some cases, we do not expressly refer to the sources from which these data are derived. Except where the context otherwise requires, in this Quarterly Report on Form 10-Q, “we,” “us,” “our” and the “Company” refer to CytomX Therapeutics, Inc. Trademarks This Quarterly Report on Form 10-Q includes trademarks, service marks and trade names owned by us or other companies. All trademarks, service marks and trade names included in this Quarterly Report on Form 10-Q are the property of their respective owners. 4 PART I – FINANCIAL INFORMATION Item 1. Condensed Financi al Statements (Unaudited) CYTOMX THERAPEUTICS, INC. CONDENSED BAL ANCE SHEETS (in thousands, except share and per share data) September 30, December 31, 2023 2022 (Unaudited) (1) Assets Current assets: Cash and cash equivalents $ 26,024 $ 193,650 Short-term investments 168,086 — Accounts receivable 2,419 35,986 Prepaid expenses and other current assets 4,675 7,466 Total current assets 201,204 237,102 Property and equipment, net 4,060 5,072 Intangible assets, net 766 875 Goodwill 949 949 Restricted cash 917 917 Operating lease right-of-use asset 13,184 15,949 Other assets 87 27 Total assets $ 221,167 $ 260,891 Liabilities and Stockholders' Deficit Current liabilities: Accounts payable $ 1,705 $ 2,809 Accrued liabilities 20,689 28,532 Deferred revenue, current portion 124,396 121,267 Total current liabilities 146,790 152,608 Deferred revenue, net of current portion 112,261 180,059 Operating lease liabilities - long term 10,597 13,975 Other long-term liabilities 2,757 — Total liabilities 272,405 346,642 Commitments and contingencies (Note 9) Stockholders' deficit: Convertible preferred stock — — Common stock 1 1 Additional paid-in capital 673,109 637,117 Accumulated other comprehensive (loss) income ( 63 ) 10 Accumulated deficit ( 724,285 ) ( 722,879 ) Total stockholders' deficit ( 51,238 ) ( 85,751 ) Total liabilities and stockholders' deficit $ 221,167 $ 260,891 __________________ (1) The condensed balance sheet as of December 31, 2022 was derived from the audited financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. See accompanying notes to condensed financial statements. 5 CYTOMX THERAPEUTICS, INC. CONDENSED STATEMENTS OF OPERA TIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share data) (Unaudited) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 Revenues $ 26,384 $ 11,147 $ 74,607 $ 33,040 Operating expenses: Research and development 16,448 30,367 58,294 92,085 General and administrative 6,813 10,490 22,191 32,782 Total operating expenses 23,261 40,857 80,485 124,867 Income (loss) from operations 3,123 ( 29,710 ) ( 5,878 ) ( 91,827 ) Interest income 2,699 616 7,334 946 Other (expense) income, net ( 7 ) 30 ( 39 ) 339 Income (loss) before income taxes 5,815 ( 29,064 ) 1,417 ( 90,542 ) Provision for income taxes 2,823 — 2,823 — Net income (loss) $ 2,992 $ ( 29,064 ) $ ( 1,406 ) $ ( 90,542 ) Other comprehensive income (loss): Unrealized (loss) gain on short term investments, net of tax ( 98 ) 367 ( 73 ) ( 553 ) Comprehensive income (loss) $ 2,894 $ ( 28,697 ) $ ( 1,479 ) $ ( 91,095 ) Net income (loss) per share: Basic $ 0.04 $ ( 0.44 ) $ ( 0.02 ) $ ( 1.38 ) Diluted $ 0.04 $ ( 0.44 ) $ ( 0.02 ) $ ( 1.38 ) Shares used to compute net income (loss) per share Basic 80,731,951 65,912,334 71,225,433 65,618,162 Diluted 80,991,722 65,912,334 71,225,433 65,618,162 See accompanying notes to condensed financial statements. 6 CYTOMX THERAPEUTICS, INC. CONDENSED STATEMENTS OF STOC KHOLDERS’ EQUITY (DEFICIT) (in thousands, except share data) (Unaudited) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2022 66,228,046 $ 1 $ 637,117 $ 10 $ ( 722,879 ) $ ( 85,751 ) Release of RSUs 110,892 — — — — — Stock-based compensation — — 2,409 — — 2,409 Other comprehensive income — — — 16 — 16 Net loss — — — — ( 3,311 ) ( 3,311 ) Balance at March 31, 2023 66,338,938 1 639,526 26 ( 726,190 ) ( 86,637 ) Exercise of stock options 16,535 — 26 — — 26 Release of RSUs 212,312 — — — — — Issuance of common stock under the ESPP 199,994 — 291 — — 291 Stock-based compensation — — 2,371 — — 2,371 Other comprehensive income — — — 9 — 9 Net loss — — — — ( 1,087 ) ( 1,087 ) Balance at June 30, 2023 66,767,779 1 642,214 35 ( 727,277 ) ( 85,027 ) Release of RSUs 105,000 — — — — — Issuance pre-funded warrants and warrants, net of issuance cost — — 29,669 — — 29,669 Stock-based compensation — — 1,226 — — 1,226 Other comprehensive loss — — — ( 98 ) — ( 98 ) Net income — — — — 2,992 2,992 Balance at September 30, 2023 66,872,779 $ 1 $ 673,109 $ ( 63 ) $ ( 724,285 ) $ ( 51,238 ) Accumulated Additional Other Total Common Stock Paid-in Comprehensive Accumulated Stockholders' Shares Amount Capital Income (Loss) Deficit Equity (Deficit) Balance at December 31, 2021 65,392,758 $ 1 $ 623,344 $ ( 242 ) $ ( 623,562 ) $ ( 459 ) Exercise of stock options 5,597 — 7 — — 7 Stock-based compensation — — 3,370 — — 3,370 Other comprehensive loss — — — ( 677 ) — ( 677 ) Net loss — — — — ( 31,981 ) ( 31,981 ) Balance at March 31, 2022 65,398,355 1 626,721 ( 919 ) ( 655,543 ) ( 29,740 ) Exercise of stock options 95,393 — 91 — — 91 Issuance of common stock under the ESPP 262,744 — 360 — — 360 Stock-based compensation — — 4,490 — — 4,490 Other comprehensive loss — — — ( 243 ) — ( 243 ) Net loss — — — — ( 29,496 ) ( 29,496 ) Balance at June 30, 2022 65,756,492 1 631,662 ( 1,162 ) ( 685,039 ) ( 54,538 ) Exercise of stock options 193,750 — — — — — Stock-based compensation — 2,695 — — 2,695 Other comprehensive income — — — 367 — 367 Net loss — — — — ( 29,064 ) ( 29,064 ) Balance at September 30, 2022 65,950,242 $ 1 $ 634,357 $ ( 795 ) $ ( 714,103 ) $ ( 80,540 ) See accompanying notes to condensed financial statements. 7 CYTOMX THERAPEUTICS, INC. CONDENSED STATEMEN TS OF CASH FLOWS (in thousands) (Unaudited) Nine Months Ended September 30, 2023 2022 Cash flows from operating activities: Net income (loss) $ ( 1,406 ) $ ( 90,542 ) Adjustments to reconcile net loss to net cash used in operating activities: Amortization of intangible assets 109 110 Depreciation and amortization 1,580 1,725 Accretion of discounts on short-term investments ( 5,193 ) ( 47 ) Stock-based compensation expense 6,006 10,555 Non-cash lease expense 2,765 2,532 Changes in operating assets and liabilities Accounts receivable 33,567 ( 986 ) Prepaid expenses and other current assets 2,792 7 Other assets ( 60 ) 6 Accounts payable ( 1,098 ) 2,441 Accrued liabilities and other long-term liabilities ( 8,465 ) ( 5,897 ) Deferred revenue ( 64,669 ) ( 29,299 ) Net cash used in operating activities ( 34,072 ) ( 109,395 ) Cash flows from investing activities: Purchases of property and equipment ( 574 ) ( 1,558 ) Purchases of short term investments ( 312,966 ) — Maturities of short term investments 150,000 — Net cash used in investing activities ( 163,540 ) ( 1,558 ) Cash flows from financing activities: Proceeds from issuance of pre-funded warrants and warrants, net of issuance cost 29,669 — Proceeds from employee stock purchase plan and exercise of stock options 317 458 Net cash provided by financing activities 29,986 458 Net decrease in cash, cash equivalents and restricted cash ( 167,626 ) ( 110,495 ) Cash, cash equivalents and restricted cash, beginning of period 194,567 206,447 Cash, cash equivalents and restricted cash, end of period $ 26,941 $ 95,952 See accompanying notes to condensed financial statements. 8 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) 1. Descriptio n of the Business CytomX Therapeutics, Inc. (the “Company”) is a clinical-stage, oncology-focused biopharmaceutical company developing potent biologics designed to be preferentially localized to tumors. The Company aims to build a commercial enterprise to maximize its impact on the treatment of cancer. The Company is advancing potential first-in-class and best-in-class antibody-based therapeutics created using its Probody® therapeutic technology platform that could meaningfully improve outcomes for cancer patients. Its proprietary and unique Probody technology platform is designed to enable “conditional activation” of antibody-based drugs in the tumor microenvironment while minimizing drug activity in healthy tissues and in circulation. The Company is located in South San Francisco, California and was incorporated in the state of Delaware in September 2010. 2. Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation The accompanying interim condensed financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Unaudited Interim Financial Information The accompanying interim condensed financial statements and related disclosures are unaudited, have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for a fair statement of the results of operations for the periods presented. The condensed results of operations for the three months and nine months ended September 30, 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. Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Cash, Cash Equivalents and Restricted Cash 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: September 30, 2023 December 31, 2022 September 30, 2022 December 31, 2021 (in thousands) Cash and cash equivalents $ 26,024 $ 193,650 $ 95,035 $ 205,530 Restricted cash - non-current assets 917 917 917 917 Total $ 26,941 $ 194,567 $ 95,952 $ 206,447 Revenue Recognition The Company’s revenues are primarily derived through its license, research, development and commercialization agreements. The terms of these types of agreements may include (i) licenses for the Company’s technology or programs, (ii) research and development services, and (iii) services or obligations in connection with participation in research or steering committees. Payments to the Company under these arrangements typically include one or more of the following: nonrefundable upfront and license fees, research funding, milestone and other 9 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) contingent payments to the Company for the achievement of defined collaboration objectives and certain preclinical, clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products. The Company assesses whether the promises in its arrangements with customers are distinct performance obligations that should be accounted for separately. Judgment is required to determine whether the license to the Company’s intellectual property is distinct from the research and development services or participation on steering committees. The Company’s collaboration and license agreements may include contingent payments related to specified research, development and regulatory milestones. Such milestone payments are typically payable under the collaborations when the collaboration partner claims or selects a target, or initiates or advances a covered product candidate in preclinical or clinical development, upon submission for marketing approval of a covered product with regulatory authorities, or upon receipt of actual marketing approvals of a covered product or for additional indications. 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 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. The Company’s collaboration and license agreements may also include contingent payments related to sales-based milestones. Sales-based milestones are typically payable when annual sales of a covered product reach specified levels. Sales-based milestones are recognized at the later of when the associated performance obligation has been satisfied or when the sales occur. Unlike other contingency payments, such as regulatory milestones, sales-based milestones are not included in the transaction price based on estimates at the inception of the contract; 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. In these cases, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition. 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 Customer payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company satisfies its performance obligations under these arrangements. Amounts payable to the Company are recorded as accounts receivable when the Company’s right to consideration is unconditional. 10 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) Leases 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 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. 3. Net Income (Loss) Per Share Basic net income (loss) per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period. Diluted net income (loss) per share is calculated using the weighted-average number of common shares outstanding, plus potential dilutive common stock during the period. 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. The pre-funded warrants are included in both the basic and diluted EPS calculation. The following table presents the calculation of basic and diluted net income (loss) per share: Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 (in thousands, except share and per share data) Numerator: Net income (loss) $ 2,992 $ ( 29,064 ) $ ( 1,406 ) $ ( 90,542 ) Denominator: Basic Weighted-average common shares outstanding 66,779,192 65,912,334 66,523,404 65,618,162 Weighted-average prefunded warrants 13,952,759 — 4,702,029 — Weighted-average common shares outstanding used to calculate basic net income (loss) per share 80,731,951 65,912,334 71,225,433 65,618,162 Diluted Weighted-average common shares outstanding used to calculate basic net income (loss) per share 80,731,951 65,912,334 71,225,433 65,618,162 Effect of potentially dilutive securities: Stock option, ESPP & RSU 259,771 — — — Weighted-average common shares outstanding used to calculate diluted net income (loss) per share 80,991,722 65,912,334 71,225,433 65,618,162 Net income (loss) per share Basic $ 0.04 $ ( 0.44 ) $ ( 0.02 ) $ ( 1.38 ) Diluted $ 0.04 $ ( 0.44 ) $ ( 0.02 ) $ ( 1.38 ) 11 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) 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, September 30, 2023 2022 2023 2022 Options and ESPP to purchase common stock 13,863,671 15,098,721 14,046,593 14,385,488 Common stock warrants 11,162,208 — 3,720,736 — RSUs 884,232 1,340,216 1,659,636 1,175,110 Total 25,910,111 16,438,937 19,426,965 15,560,598 4. Fair Value Measurements and Investments In accordance with Accounting Standards Codification (“ASC”) 820-10, Fair Value Measurements and Disclosures, the Company determines the fair value of financial and non-financial assets and liabilities using the fair value hierarchy, which establishes three levels of inputs that may be used to measure fair value, as follows: • Level I: Inputs which include quoted prices in active markets for identical assets and liabilities. • Level II: Inputs other than Level I that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. • Level III: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. 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 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, 2023 Valuation Hierarchy Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Aggregate Fair Value (in thousands) Assets Money market funds Level I $ 26,363 $ — $ — $ 26,363 Restricted cash (money market funds) Level I 917 — — 917 U.S. Treasury Securities Level I 168,149 — ( 63 ) 168,086 Total $ 195,429 $ — $ ( 63 ) $ 195,366 December 31, 2022 Valuation Hierarchy Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Aggregate Fair Value (in thousands) Assets Money market funds Level I $ 64,706 $ — $ — $ 64,706 Restricted cash (money market funds) Level I 917 — — 917 U.S. Treasury Securities Level I 29,941 10 — 29,951 Total $ 95,564 $ 10 $ — $ 95,574 As of September 30, 2023, the remaining contractual terms of those investments are less than a year. 12 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) 5. Accrued Liabilities Accrued liabilities consisted of the following: September 30, December 31, 2023 2022 (in thousands) Research and clinical expenses $ 7,970 $ 13,089 Payroll and related expenses 7,097 8,060 Legal and professional expenses 821 1,413 Operating lease liabilities - short term 4,458 4,082 Restructuring expenses - 1,627 Other accrued expenses 343 261 Total $ 20,689 $ 28,532 6. Collaboration and License Agreements The following table summarizes the revenue by collaboration partner: Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 (in thousands) (in thousands) AbbVie $ — $ 2,972 $ 3,988 $ 11,498 Amgen 1,627 337 5,124 2,931 Astellas 4,630 5,880 18,685 15,303 Bristol Myers Squibb 14,028 1,958 35,630 3,308 Regeneron 2,913 — 5,249 — Moderna 3,186 — 5,931 — Total revenue $ 26,384 $ 11,147 $ 74,607 $ 33,040 AbbVie Ireland Unlimited Company In April 2016, the Company and AbbVie entered into two agreements, a CD71 Co-Development and Licensing Agreement (the “CD71 Agreement”) and a Discovery Collaboration and Licensing Agreement (as amended and restated in June 2019, the “Discovery Agreement” and together with the CD71 Agreement the “AbbVie Agreements”). Under the terms of the CD71 Agreement, the Company and AbbVie were co-developing a conditionally activated antibody-drug conjugate (“ADC”), CX-2029, 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. 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 would evaluate the potential next steps for CX-2029 following the decision from AbbVie, to not advance CX-2029 into additional clinical studies. A s a result of AbbVie’s decision, the 2016 CD71 License and Collaboration Agreement has been terminated and the Company re-acquired 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 concluded with no plans to advance the discovery targets into clinical studies or to pursue new programs. The Discovery Agreement was also terminated and all target rights have reverted back to CytomX . In August 2023, the Company entered into a Transition Agreement (the “Transition Agreement”) with AbbVie Global Enterprises Ltd. ("AbbVie Global", an affiliate entity of AbbVie), pursuant to which the Company regained exclusive worldwide rights to develop CX-2029. The Transition Agreement supersedes the recently terminated CD71 Agreement and grants certain intellectual property rights from AbbVie Global to enable the continued development of CX-2029 by Company for all human and nonhuman diagnostic, prophylactic, and therapeutic uses. Pursuant to the Transition Agreement, AbbVie Global is eligible to receive tiered sales royalties for CX-2029 ranging from the 13 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) low-to-mid single digit percentages. The Company will also pay Seattle Genetics, Inc. (“Seagen”) potential future development, regulatory, and commercial milestones, and tiered sales royalties ranging from the mid-to-high single digits percentages related to certain CX-2029 linker payload technology licensed from Seagen. In the fourth quarter of 2023, the Company decided to not to make any further substantial investments in the CX-2029 program in the near-term. Amgen, Inc. On September 29, 2017, the Company and Amgen, Inc. (“Amgen”) entered into a Collaboration and License Agreement (the “Amgen Agreement”). Pursuant to the Amgen Agreement, the Company received an upfront payment of $ 40.0 million in October 2017. Concurrent with the Amgen Agreement, the Company and Amgen entered into a Share Purchase Agreement pursuant to which Amgen purchased 1,156,069 shares of the Company’s common stock at a price of $ 17.30 per share for total proceeds of $ 20.0 million. In October 2021, CytomX and Amgen executed an amendment to the Amgen Agreement primarily to (1) extend the target selection date for Amgen to select its additional targets for research and development, and (2) reduce the total number of milestone events and increase the total amount of milestone payments for EGFR Products. In May 2023, CytomX and Amgen executed an amendment to the Amgen Agreement to extend the target selection period for Amgen to select its additional targets for research and development as further discussed below. Under the terms of the Amgen Agreement, as amended, the Company and Amgen will co-develop a conditionally activated T-cell engaging bispecific therapeutic targeting epidermal growth factor receptor (the “EGFR Products”). The Company is responsible for early-stage development of EGFR Products and Amgen will be responsible for late-stage development and commercialization of EGFR Products. Following early-stage development, the Company will have the right to elect to participate financially in the global co-development of EGFR Products with Amgen, during which the Company would bear a certain percentage of the worldwide development costs for EGFR Products and Amgen would bear the rest of such costs (the “EGFR Co-Development Option”). If the Company exercises its EGFR Co-Development Option, the Company will share in somewhat less than 50 % of the profit and losses from sales of such EGFR Products in the U.S., subject to certain caps, offsets, and deferrals. If the Company chooses not to exercise its EGFR Co-Development Option, the Company will not bear any costs of later stage development. The Company is also eligible to receive up to $ 460.0 million in development, regulatory, and commercial milestone payments for EGFR Products, and royalties in the low-double-digit to mid-teen percentage of worldwide commercial sales, provided that if the Company exercises its EGFR Co-Development option, it shall receive a profit and loss split of sales in the United States and royalties in the low-double-digit to mid-teen percentage of commercial sales outside of the United States. In January 2022, the IND for the EGFR product (CX-904) was allowed to proceed by the U.S. Food and Drug Administration (“FDA”). Amgen also has the right to select a total of up to three targets, including the two additional targets discussed below. The Company and Amgen collaborate in the research and development of conditionally activated T-cell engaging bispecifics products directed against such targets. Amgen has selected one such target (the “Amgen Other Product”). If Amgen exercises its option within a specified period of time, it can select two such additional targets (the “Amgen Option Products” and, together with the Amgen Other Product, the “Amgen Products”). Except with respect to preclinical activities to be conducted by CytomX, Amgen will be responsible, at its expense, for the development, manufacture, and commercialization of all Amgen Products. If Amgen exercises all of its options and advances all three of the Amgen Products, CytomX is eligible to receive up to $ 950.0 million in upfront, development, regulatory, and commercial milestones and tiered high single-digit to low-teen percentage royalties. The Company concluded that, at the inception of the agreement and subsequent amendments, Amgen’s option to select the two additional targets is not a material right and does not represent a performance obligation of the agreement. At the initiation of the collaboration, CytomX had the option to select, from programs specified in the Amgen Agreement, an existing preclinical stage T-cell engaging bispecific product from the Amgen preclinical pipeline. In March 2018, CytomX selected the program and this program is currently in preclinical development. CytomX is responsible, at its expense, for converting this program to a conditionally activated T-cell engaging bispecific product, and thereafter, will be responsible for development, manufacturing, and commercialization of the product (“CytomX Product”). 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, 2023 and December 31, 2022, deferred revenue related to the EGFR Products performance obligation was $ 13.4 million and $ 18.0 million, respectively. As of September 30, 2023 and December 31, 2022, deferred revenue related to the Amgen Other Products performance obligation w as $ 0.1 million and $ 0.6 million, respectively. 14 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) Astellas Pharma Inc. The Company and Astellas Pharma, Inc. (“Astellas”) entered into a Collaboration and License Agreement (the “Astellas Agreement”) on March 23, 2020, the effective date, 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. 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 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”). The Cost Share Option, if exercised, will also provide the option for the Company to co-commercialize such product in the United States. The Company does not consider the Cost Share Option as a performance obligation at the inception of the agreement as participation is at the Company’s discretion. 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. 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. 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 related performance obligation of the collaboration target which resulted in the clinical candidate nomination for further development. As of September 30, 2023 and December 31, 2022, deferred revenue relating to the Astellas Agreement wa s $ 34.7 m illion and $ 44.5 million, respectively. The amount due from Astellas under the Astellas Agreement wa s $ 1.3 mill ion and $ 1.0 million as of September 30, 2023 and December 31, 2022, respectively. Bristol Myers Squibb Company On May 23, 2014, the Company and Bristol Myers Squibb Company (“Bristol Myers Squibb”) entered into a Collaboration and License Agreement (the “BMS Agreement”) to discover and develop compounds for use in human therapeutics aimed at multiple immuno-oncology targets using the Company’s Probody therapeutic technology. The effective date of the BMS Agreement was July 7, 2014. Under the terms of the BMS Agreement, the Company granted Bristol Myers Squibb exclusive worldwide rights to develop and commercialize Probody therapeutics for up to four oncology targets. Bristol Myers Squibb had additional rights to substitute up to two collaboration targets within three years of the effective date of the BMS Agreement. These rights expired in May 2017. Each collaboration target had a two-year research term and the two additional targets had to be nominated by Bristol Myers Squibb within five years of the effective date of the BMS Agreement. 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 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. On March 17, 2017, the Company and Bristol Myers Squibb entered into Amendment Number 1 to Extend Collaboration and License Agreement (“Amendment 1”). Amendment 1 granted Bristol Myers Squibb exclusive worldwide rights to develop and commercialize Probody therapeutics for up to eight additional targets. The effective date of Amendment 1 was April 25, 2017 (“Amendment Effective Date”). 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. 15 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) 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 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 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 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, 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. 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 June 30, 2023, 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 September 30, 2023. As of September 30, 2023 and December 31, 2022, deferred revenue relating to the BMS Agreement wa s $ 133.5 millio n 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), manufacturing, 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 provided Moderna with an option to participate in an equity financing by CytomX at market price, subject to certain terms, conditions and regulatory requirements. 16 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) As of September 30, 2023 and December 31, 2022, deferred revenue relating to the Moderna Agreement was $ 29.1 m illion and $ 35.0 million, respectively. The amount due from Moderna under the Moderna Agreement wa s $ 0 and $ 35.0 million as of September 30, 2023 and December 31, 2022, respectively. 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, manufacturing 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 September 30, 2023 and December 31, 2022, deferred revenue relating to the Regeneron Agreement was $ 25.9 million and $ 30.0 million, respectively. The amount due from Regeneron under the Regeneron Agreement wa s $ 1.1 mill ion and $ 0 million as of September 30, 2023 and December 31, 2022, respectively. Contract Liabilities The following table presents changes in the Company’s total contract liabilities during the nine months ended September 30, 2023 and 2022: Balance at 12/31/2022 Additions Revenue Recognized Balance at 09/30/2023 (in thousands) Contract liabilities: Deferred revenue $ 301,326 $ 3,921 $ ( 68,590 ) $ 236,657 Balance at 12/31/2021 Additions Revenue Recognized Balance at 09/30/2022 (in thousands) Contract liabilities: Deferred revenue $ 284,760 $ 3,401 $ ( 32,701 ) $ 255,460 The Company expects that the $ 236.7 million of deferred revenue related to the following contracts as of September 30, 2023 will be recognized as revenue based on actual FTE effort and estimated 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 $ 13.4 million of deferred revenue related to the Amgen EGFR Products is expected to be recognized until 2026 . • The $ 0.1 million of deferred revenue related to the Amgen Other Products is expected to be recognized until 2024 . • The $ 34.7 million of deferred revenue related to the Astellas Agreement, together with research and development service fees, is expected to be recognized until 2026 . 17 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) • The $ 133.5 million of deferred revenue related to the BMS Agreement is expected to be recognized until 2025 . • The $ 29.1 million of defe rred revenue related to the Moderna Agreement, together with research and development service fees, is expected to be recognized until 2027 . • The $ 25.9 mi llion of deferred revenue related to the Regeneron Agreement, together with research and development service fees, is expected to be recognized until 2026 . 7 . Common Stock In July 2023, the Company entered into an agreement with BVF Partners L.P. (“BVF”) for a private placement that resulted in an aggregate net proceeds of approximately $ 29.7 million, after deducting issuance costs of approximately $ 0.3 million. In the private placement, CytomX issued pre-funded warrants to BVF to purchase up to 14,423,077 shares of common stock, accompanying Tranche 1 warrants to purchase up to 5,769,231 shares of common stock and accompanying Tranche 2 warrants to purchase up to 5,769,231 shares of common stock, at a combined price of $ 2.08 per share. The following table summarizes the Company's outstanding warrants as of September 30, 2023: Pre-funded Warrants Tranche 1 Warrants Tranche 2 Warrants Number of warrants Weighted- Average Exercise Price Per Share Number of warrants Weighted- Average Exercise Price Per Share Number of warrants Weighted- Average Exercise Price Per Share Warrants Outstanding 14,423,077 $ 0.00001 5,769,231 $ 4.16 5,769,231 $ 6.24 The pre-funded warrants will expire in July 2043 , while Tranche 1 and Tranche 2 warrants will expire in July 2025 and July 2026 , respectively. 8 . Stock-Based Compensation Stock Options Activities for the Company’s stock option plans for the nine months ended September 30, 2023 were as follows: Options Outstanding Number of Options Weighted- Average Exercise Price Per Share Balance at December 31, 2022 13,289,838 $ 7.67 Options granted 1,779,373 2.29 Options exercised ( 16,535 ) 1.57 Option forfeited/expired ( 1,761,008 ) 6.23 Balance at September 30, 2023 13,291,668 $ 7.15 The Company recorde d $ 0.5 milli on and $ 2.3 million of stock-based compensation expense related to the stock options for the three months ended September 30, 2023 and 2022, respectively. The Company record ed $ 4.1 millio n and $ 8.0 million of stock-based compensation expense related to the stock options for the nine months ended September 30, 2023 and 2022, respectively. 18 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) Time-based RSUs ("TRSU") Activities for the Company’s TRSUs for the nine months ended September 30, 2023 were as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share Balance at December 31, 2022 1,212,884 $ 2.81 TRSUs awarded 643,892 2.45 TRSUs vested ( 323,204 ) 2.37 TRSUs cancelled ( 97,368 ) 3.41 Balance at September 30, 2023 1,436,204 $ 2.71 The Company recorded $ 0.5 million and $ 0.1 million of stock-based compensation expense related to the TRSUs for the three months ended September 30, 2023 and 2022, respectively. The Company recorded $ 1.5 million and $ 0.8 million of stock-based compensation expense related to the TRSUs for the nine months ended September 30, 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. 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 . In September 2023, the performance condition for 2021-Tranche 2 was modified and the award was vested in in September 2023. As a result, the Company recorded $ 0.1 million of stock-based compensation expense for 2021-Tranche 2 for the three and nine months ended September 30, 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 December 31, 2022, and September 30, 2023, the Company determined that it is probable that the performance conditions for 2022-Tranche 1 will be satisfied and recorded $ 55,000 , $ 33,000 and $ 95,000 c ompensation cost, respectively, for those awards for the year ended December 31, 2022 and for the three and nine months ended September 30, 2023. As of December 31, 2022 and September 30, 2023, the Company determined that it is not probable that the performance conditions for 2022-Tranche 2 will be satisfied and recorded no compensation cost for those awards through September 30, 2023. 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 September 30, 2023. Activities for the Company’s PSUs for the nine months ended September 30, 2023 were as follows: Number of Shares Weighted Average Grant Date Fair Value Per Share Balance at December 31, 2022 383,750 $ 2.96 PSUs awarded 760,000 2.54 PSUs vested ( 105,000 ) 5.34 PSUs cancelled ( 48,750 ) 4.28 Balance at September 30, 2023 990,000 $ 2.32 19 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) Stock-based Compensation Total stock-based compensation recorded was as follows: Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 2023 2022 (in thousands) Stock-based compensation expense: Research and development $ 126 $ 931 $ 2,001 $ 5,928 General and administrative 1,100 1,764 4,005 4,627 Total stock-based compensation expense $ 1,226 $ 2,695 $ 6,006 $ 10,555 9 . Commitments and Contingencies Legal Proceedings On March 4, 2020 , Vytacera Bio, LLC filed a patent infringement lawsuit against the Company in the U.S. District Court for the District of Delaware. The lawsuit alleges that the Company's use, offers to sell, and/or sales of the Probody® technology platform for basic research applications constitutes infringement. The complaint seeks unspecified monetary damages. In September 2022, the Company filed a motion to dismiss the case and the Court granted the parties’ stipulation to stay all pending case deadlines until that motion is finally resolved. On October 30, 2023, Magistrate Judge Burke issued a Report & Recommendation that recommended granting Company’s motion to dismiss all counts of the complaint. The case will remain stayed pending Judge Williams’ ruling on the Report & Recommendation. 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 September 30, 2023 . 10. Income Taxes 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, 2023 and December 31, 2022 . The Company files income taxes in the U.S. federal jurisdiction, the state of California and various other U.S. states. The Company is currently under examination by the state of California for the years 2017 and 2018. The examination contests the Company’s tax position on revenue apportionment for upfront and milestone payments resulting from the Company’s collaboration and licensing agreements. In September 2023, the Company received Notice of Proposed Assessment (“NOPA”) from the Franchise Tax Board of approximately $ 2.8 million of taxes and penalties which the Company recorded as tax provision for the three and nine months ended September 30, 2023 related to state taxes and unrecognized tax benefit. The provision is recorded in other long term liabilities. Of the unrecognized tax benefits as of September 30, 2023, approximately $ 2.8 million would affect the Company’s effective tax rate if recognized. Penalties of $ 0.4 million have been accrued in the nine months ended September 30, 2023. In addition, the Company would utilize additional carryforward attributes resulting in a reduction in deferred tax assets of $ 5.7 million, net of federal tax benefit, with an offsetting reduction in valuation allowance. The Company plans to contest the proposed assessment. Due to the ongoing nature of the examination and discussions with the state of California, the Company is unable to estimate a date by which this matter will be resolved. 11. Restructuring On July 13, 2022, the Company announced a restructuring plan to prioritize its resources on its emerging pre-clinical and early clinical pipeline as well as its existing collaboration partnerships. The restructuring plan resulted in a reduction to its workforce of approximately 40 %. 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 complete as of September 30, 2023. The following is a summary of accrued restructuring costs as of September 30, 2023 (in thousands): 20 CytomX Therapeutics, Inc. Notes to Condensed Financial Statements (Unaudited) Severance and Benefits Costs Contract Termination Cost Stock Based Compensation Total Total restructuring cost recorded $ 7,617 $ 178 $ 175 $ 7,970 Cash payment ( 5,812 ) — — ( 5,812 ) Change in estimates ( 293 ) ( 14 ) — ( 307 ) Non-cash charges — — ( 175 ) ( 175 ) Balance at December 31, 2022 1,512 164 — 1,676 Cash payment ( 1,457 ) ( 50 ) — ( 1,507 ) Change in estimates ( 55 ) ( 114 ) — ( 169 ) Balance at September 30, 2023 $ — $ — $ — $ — 12. Lease s Sublease 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 and nine months ended September 30, 2023, sublease income was $ 0.3 mil lion and $ 0.6 million, respectively. September 30, 2023 (in thousands) Future sublease income payments Remainder of 2023 $ 325 2024 1,333 2025 1,379 2026 1,067 Total sublease income payments $ 4,104 21 CytomX Therapeutics, Inc. Item 2. Management’s Discuss ion and Analysis of Financial Condition and Results of Operations You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2022, included in our Annual Report on Form 10-K as filed with the U.S. Securities and Exchange Commission (“SEC”) on March 27, 2023. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled “Risk Factors.” 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. Overview 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 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 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. Proteases are tightly controlled in normal tissues but often poorly regulated and active in tumor microenvironments where they play important roles in cancer cell migration, invasion and metastasis. Leveraging our deep scientific knowledge, we conceived of and constructed our Probody therapeutic platform which allows us to genetically engineer biologic therapeutic candidates to contain protease-cleavable masks. Our masking strategy is designed to reduce binding of biologic therapeutics to their targets until the mask is removed by proteases in the tumor microenvironment, providing more selective targeting of the tumor. We believe this innovative approach has the potential to improve cancer treatment in three ways: 1. Allowing the pursuit of high potential targets that were previously considered “undruggable” due to their ubiquitous expression on normal tissues; 2. Enhancing a potential product’s “therapeutic window,” the balance between tolerability and anti-tumor activity; and 3. Enabling the development of new combination therapies, including immunotherapies, by improving tolerability. 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 development including: 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 for which the Company expects to file investigational new drug applications (“IND”) by the end of 2023. 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: 22 CytomX Therapeutics, Inc. 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. 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 would evaluate 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 re-acquired full rights to CX-2029. In the fourth quarter of 2023, the Company decided to not to make any further substantial investments in the CX-2029 program in the near-term. Our partner, Bristol Myers Squibb, is conducting a randomized Phase 2 study evaluating BMS-986249, a Probody version of ipilimumab, the anti-CTLA-4 antibody, in combination with nivolumab, the anti-PD-1 antibody, in patients with metastatic melanoma. In addition, BMS-986249 is being studied in combination with nivolumab in three additional indications: advanced hepatocellular carcinoma, metastatic castration-resistant prostate cancer and advanced TNBC. 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. 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. 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. In the fourth quarter of 2023, the Company decided to initiate backfilling of certain dose escalation cohorts. The Company anticipates initial CX-904 Phase 1 dose escalation data in the first half of 2024. 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 by the end of 2023. 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 by the end of 2023. 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. Based on the reported results, the Company deprioritized further investment. 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. As of September 30, 2023 and December 31, 2022, we had an accumulated deficit of $724.3 million and $722.9 million, respectively. 23 CytomX Therapeutics, Inc. Global health authorities, including the FDA, regulate many aspects of a product candidate’s life cycle, including research and development and preclinical and clinical testing. We will need to commit significant time, resources, and funding to develop our wholly-owned and partnered product candidates in clinical trials. 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. 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. Impact of COVID-19 The COVID-19 pandemic previously impacted our ongoing operations, including clinical trials, however, any resulting financial impact cannot be reasonably estimated. The extent to which the COVID-19 or any other pandemic may continue to impact our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of such pandemic and the actions necessary to contain the disease or treat its impact, among others. We will continue to monitor the COVID-19 situation closely and operate in accordance with all relevant health and safety guidelines as they evolve in response to changing public health conditions. Critical Accounting Policies and Estimates The preparation of our Condensed Financial Statements requires us to make estimates and judgments that affect the reported amounts in the financial statements and related disclosures. On an ongoing basis, management evaluates its significant accounting policies and estimates. We base our estimates on historical experience and on various market-specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates. 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, 2022. Except as noted below, there have been no material changes to our critical accounting policies and estimates for the nine months ended September 30, 2023. 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. For example, during the three and nine months ended September 30, 2023, we recorded a $0.7 million credit upon final reconciliation of the CX-072 clinical trial and a $0.6 million credit in closing out certain activities of the CX-2009 clinical trial. Changes in these estimates that result in material changes to our accruals could materially affect our financial condition and results of operations. 24 CytomX Therapeutics, Inc. Components of Results of Operations Revenue 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 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 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 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. Milestone payments, when considered probable of being reached and when a significant revenue reversal would not be probable of occurring, are also recorded net of the associated sublicense fees and included in the transaction price. Research and Development Expenses Our research and development expenses consist primarily of costs incurred to conduct research, such as the discovery and development of our product candidates, clinical development, including activities with third parties, such as contract research organizations (“CRO”) and contract development and manufacturing organizations (“CMO”), and the manufacture of drug products used in clinical trials, as well as the development of product candidates pursuant to our research, collaboration and license agreements. Research and development expenses include personnel costs, including stock-based compensation expense, contractor services, laboratory materials and supplies, depreciation and maintenance of research equipment, and an allocation of related facilities costs. We expense research and development costs as incurred. We expect our research and development expenses could vary substantially in the future as we prioritize our pipeline opportunities, advance our product candidates through clinical trials, initiate additional clinical trials, and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates may be affected by a variety of factors including: the safety and efficacy of our product candidates, early clinical data, investment in our clinical program, the ability of collaborators to successfully develop our licensed product candidates, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates. General and Administrative Expenses General and administrative expenses include personnel costs, expenses for outside professional services and other allocated expenses. Personnel costs consist of salaries, bonuses, benefits and stock-based compensation. Outside professional services consist of accounting and audit services, legal and other consulting fees. Allocated expenses primarily consist of rent expense related to our office and information technology related costs. Income Taxes Income taxes are recorded in accordance with ASC 740, Accounting for Income Taxes, or ASC 740, which provides for deferred taxes using an asset and liability approach. We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in our financial statements or tax returns. We determine our deferred tax assets and liabilities based on differences between the financial reporting and tax bases of assets and liabilities, which are measured using the enacted tax rates and laws that will be in effect when 25 CytomX Therapeutics, Inc. the differences are expected to reverse. Valuation allowances are provided, if based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. We also account for uncertain tax positions in accordance with the provisions of ASC 740. When uncertain tax positions exist, we recognize the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. The determination as to whether the tax benefit will more likely than not be realized is based upon the technical merits of the tax position as well as consideration of the available facts and circumstances. Interest Income Interest income primarily consists of interest income from our cash equivalents and investments, and accretion of discounts or amortization of premiums on our investments. Other Income (Expense), Net Other income (expense), net consists primarily of gains and losses resulting from changes to currency exchange rates. 26 CytomX Therapeutics, Inc. Results of Operations Revenue The following table summarizes our revenue by collaboration partner during the respective periods: Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 Change 2023 2022 Change (in thousands) (in thousands) AbbVie $ — $ 2,972 $ (2,972 ) $ 3,988 $ 11,498 $ (7,510 ) Amgen 1,627 337 1,290 5,124 2,931 2,193 Astellas 4,630 5,880 (1,250 ) 18,685 15,303 3,382 Bristol Myers Squibb 14,028 1,958 12,070 35,630 3,308 32,322 Regeneron 2,913 — 2,913 5,249 — 5,249 Moderna 3,186 — 3,186 5,931 — 5,931 Total revenue $ 26,384 $ 11,147 $ 15,237 $ 74,607 $ 33,040 $ 41,567 The increase in revenue of $15.2 million for the three months ended September 30, 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 Regeneron Agreement and Moderna Agreement due to new preclinical studies that commenced during the current year; • An increase in revenue under the Amgen Agreement primarily driven by higher percentage of completion of the CX-904 development in the current period due to an increase in projected hours-to-completion in prior year same period; • A decrease in revenue under the Astellas Agreement due to a higher level activity in the 2022 period leading up to the achievement of a clinical candidate milestone in January 2023. • A decrease in revenue under the AbbVie Agreement due to termination of the agreement in March 2023. The increase in revenue of $41.6 million for the nine months ended September 30, 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 Regeneron Agreement and Moderna Agreement due to new preclinical studies that commenced during the current period; • An increase in revenue under the Astellas Agreement primarily driven by a $5.0 million clinical candidate milestone achieved in January 2023; • An increase in revenue under the Amgen Agreement driven by higher percentage of completion the CX-904 development in the current period due to an increase in projected hours-to-completion in prior year same period; • A decrease in revenue under the AbbVie Agreement due to termination of the agreement in March 2023, partially offset by an increase from the remaining deferred revenue of $4.0 million that was recognized in full in the first quarter of 2023. 27 CytomX Therapeutics, Inc. Operating Costs and Expenses Research and Development Expenses The following table summarizes our research and development expenses by program incurred during the respective periods presented: Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 Change 2023 2022 Change External costs incurred by product candidate (target): (in thousands) (in thousands) Praluzatamab ravtansine, CX-2009 (CD166) $ (368 ) $ 5,480 $ (5,848 ) $ 1,452 $ 14,099 $ (12,647 ) CX-2029 (CD71) 696 2,813 (2,117 ) 1,755 7,892 (6,137 ) Pacmilimab, CX-072 (PD-L1) (551 ) (572 ) 21 (227 ) 464 (691 ) CX-904 1,054 1,083 (29 ) 1,896 2,595 (699 ) Other wholly owned and partnered programs 5,708 3,038 2,670 20,378 11,082 9,296 General research and development expenses 2,216 2,770 (554 ) 7,471 10,478 (3,007 ) 8,755 14,612 (5,857 ) 32,725 46,610 (13,885 ) Internal costs 7,693 15,755 (8,062 ) 25,569 45,475 (19,906 ) Total research and development expenses $ 16,448 $ 30,367 $ (13,919 ) $ 58,294 $ 92,085 $ (33,791 ) Research and development expenses decreased by $14.0 million and $33.8 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022. This was primarily due to a decrease in personnel related expenses as a result of the workforce reduction in 2022, 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. During the three and nine months ended September 30, 2023, we recorded a $0.7 million credit upon final reconciliation of the CX-072 clinical trial and a $0.6 million credit in closing out certain activities of the CX-2009 clinical trial. General and Administrative Expenses Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 Change 2023 2022 Change (in thousands) (in thousands) General and administrative expenses $ 6,813 $ 10,490 $ (3,677 ) $ 22,191 $ 32,782 $ (10,591 ) General and administrative expenses decreased by $3.7 million and $10.6 million for the three months and nine months ended September 30, 2023, respectively, compared to the corresponding periods of 2022 primarily due to a decrease in personnel related expenses as a result of the workforce reduction in 2022, reduced external vendor services, and lower building rent as a result of a partial sublease of the Company’s headquarters. Interest Income and Other Income (Expense) Three Months Ended Nine Months Ended September 30, September 30, 2023 2022 Change 2023 2022 Change (in thousands) (in thousands) Interest income $ 2,699 $ 616 $ 2,083 $ 7,334 $ 946 $ 6,388 Other income (expense), net (7 ) 30 (37 ) (39 ) 339 (378 ) Total interest and other income $ 2,692 $ 646 $ 2,046 $ 7,295 $ 1,285 $ 6,010 28 CytomX Therapeutics, Inc. Interest Income Interest income increased by $2.0 million and $6.0 million for the three months and nine months ended September 30, 2023, compared to the corresponding periods of 2022 was primarily driven by higher interest rates in 2023. Liquidity and Capital Expenditures Sources of Liquidity As of September 30, 2023, we had cash, cash equivalents and investments of $194.1 million and an accumulated deficit of $724.3 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, payments received under our collaboration agreements and proceeds from private placements of our common stock, warrants and pre-funded warrants. 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. In July 2023, we completed a private placement that resulted in initial gross proceeds of approximately $30.0 million. 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 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 the second half of 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. The amounts and timing of our actual expenditures depend on numerous factors, including the progress of our preclinical and clinical development efforts, the results of any clinical trials and other studies, our operating costs and expenditures and other factors described under the caption “Risk Factors” in this Quarterly Report on Form 10-Q. The cost and timing of developing our product candidates is highly uncertain and subject to substantial risks and changes. As such, we may alter our expenditures as a result of contingencies such as the failure of one or all of our product candidates currently in clinical development, the acceleration of one or all of our product candidates in clinical development, the initiating of clinical trials for additional product candidates, the identification of more promising product candidates in our research efforts or unexpected operating costs and expenditures. We will need to raise additional funds in the future. There can be no assurance, however, that such efforts will be successful; or if they are successful, that the terms and conditions of such financing will be favorable to us. Summary Statement of Cash Flows The following table summarizes our cash flows for the periods indicated: Nine Months Ended September 30, 2023 2022 (in thousands) Net cash used in operating activities $ (34,072 ) $ (109,395 ) Net cash used in investing activities (163,540 ) (1,558 ) Net cash provided by financing activities 29,986 458 Net increase (decrease) in cash and cash equivalents $ (167,626 ) $ (110,495 ) 29 CytomX Therapeutics, Inc. Cash Flows from Operating Activities During the nine months ended September 30, 2023, cash used in operating activities was $34.1 million, which consisted of a net loss of $1.4 million and a net decrease of $38.0 million relating to the change of our net operating assets and liabilities, offset by non-cash charges of $5.3 million. The non-cash charges primarily consisted of $6.0 million in stock-based compensation, $2.8 million in non-cash lease expense, $1.7 million in depreciation and amortization, partially offset by $5.2 million in accretion of discounts on investments. The change in our net operating assets and liabilities was primarily due to: • a net decrease of $64.7 million in deferred revenue resulting from the continued recognition of deferred revenue from existing and new customers; • a decrease of $9.6 million in accounts payable, accrued and other long-term liabilities primarily due to decrease of payroll-related expenses, restructuring related expenses, and laboratory contract services; offset by • an increase of $33.6 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. • an increase of $2.7 million in cashflows from prepaid and other current assets primarily due to a decrease in advance payments to our third party manufacturing vendors and timing of payments. During the nine months ended September 30, 2022, cash used in operating activities was $109.4 million, which consisted of a net loss of $90.5 million and a net decrease of $33.7 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. The change in our net operating assets and liabilities was primarily due to: • a net decrease of $29.3 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; and • a decrease of $1.0 million in cash flows from increase in accounts receivable caused by increase in service revenue. Cash Flows from Investing Activities During the nine months ended September 30, 2023, cash used in investing activities was $163.5 million, which consisted of $313.0 million used in the purchase of short-term investments and $0.5 million of capital expenditures used to purchase property and equipment, partially offset by $150.0 million in proceeds received upon the maturity of marketable securities. 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. Cash Flows from Financing Activities During the nine months ended September 30, 2023, cash provided by financing activities consisted of $29.7 million of net proceeds from issuance of pre-funded warrants and warrants and $0.4 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, 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. Contractual Obligations During the nine months ended September 30, 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. 30 CytomX Therapeutics, Inc. Item 3. Quantitative and Qualitat ive Disclosure About Market Risk 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. Item 4. Controls and Proc edures Evaluation of Disclosure Controls and Procedures The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”) refers to controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its Principal Executive and Principal Financial Officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives. Our management, with the participation of our Principal Executive and Principal Financial Officers, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 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 Principal Executive and Principal Financial Officers concluded that our disclosure controls and procedures were effective as of September 30, 2023. 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, 2023 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 31 CytomX Therapeutics, Inc. PART II – OTHER INFORMATION