Inhibrx Biosciences, Inc. 10-Q

Item 1. Financial Statements. Inhibrx Biosciences, Inc. Condensed Consolidated Balance Sheets (In thousands, except share data and par value) (Unaudited) SEPTEMBER 30, DECEMBER 31, 2024 2023 Assets Current assets: Cash and cash equivalents $ 196,332 $ 277,924 Accounts receivable 455 778 Receivables from related parties 672 — Prepaid expenses and other current assets 9,987 16,656 Total current assets 207,446 295,358 Property and equipment, net 6,879 6,419 Operating right-of-use asset 1,525 2,952 Other non-current assets 6,712 3,164 Total assets $ 222,562 $ 307,893 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 12,370 $ 10,954 Accrued expenses 29,890 43,295 Current portion of operating lease liability 1,835 2,063 Total current liabilities 44,095 56,312 Long-term debt, including final payment fee — 206,968 Non-current portion of operating lease liability — 1,110 Total liabilities 44,095 264,390 Commitments and contingencies (Note 9) Stockholders’ equity Preferred stock, $ 0.0001 par value; 15,000,000 shares authorized as of September 30, 2024 and December 31, 2023; no shares issued or outstanding as of September 30, 2024 and December 31, 2023. — — Common stock, $ 0.0001 par value; 120,000,000 shares authorized as of September 30, 2024 and December 31, 2023; 14,475,904 and 47,369,511 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively. 1 5 Additional paid-in-capital 236,733 657,232 Accumulated deficit ( 58,267 ) ( 613,734 ) Total stockholders’ equity 178,467 43,503 Total liabilities and stockholders’ equity $ 222,562 $ 307,893 The accompanying notes are an integral part of these condensed consolidated financial statements. 4 Inhibrx Biosciences, Inc. Condensed Consolidated Statements of Operations (In thousands, except per share data) (Unaudited) THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2024 2023 2024 2023 Revenue: License fee revenue $ — $ 119 $ 100 $ 166 Total revenue — 119 100 166 Operating expenses: Research and development 38,893 38,057 170,376 109,549 General and administrative 7,904 7,889 111,244 21,549 Total operating expenses 46,797 45,946 281,620 131,098 Loss from operations ( 46,797 ) ( 45,827 ) ( 281,520 ) ( 130,932 ) Other income (expense): Gain related to transaction with Acquirer — — 2,021,498 — Interest expense — ( 8,149 ) ( 13,491 ) ( 23,617 ) Interest income 2,892 2,324 8,937 7,221 Other income (expense), net 41 ( 135 ) 15 ( 422 ) Total other income (expense) 2,933 ( 5,960 ) 2,016,959 ( 16,818 ) Income (loss) before income tax expense ( 43,864 ) ( 51,787 ) 1,735,439 ( 147,750 ) Provision for income taxes — 2 2 7 Net income (loss) $ ( 43,864 ) $ ( 51,789 ) $ 1,735,437 $ ( 147,757 ) Earnings (loss) per share Basic $ ( 2.84 ) $ ( 4.39 ) $ 119.04 $ ( 13.19 ) Diluted $ ( 2.84 ) $ ( 4.39 ) $ 117.09 $ ( 13.19 ) Shares used in computing earnings (loss) per share Basic 15,468 11,788 14,578 11,201 Diluted 15,468 11,788 14,821 11,201 The accompanying notes are an integral part of these condensed consolidated financial statements. 5 Inhibrx Biosciences, Inc. Condensed Consolidated Statements of Stockholders’ Equity (In thousands) (Unaudited) Common Stock (Shares) Common Stock (Amount) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity Balance as of December 31, 2023 47,369 $ 5 $ 657,232 $ ( 613,734 ) $ 43,503 Stock-based compensation expense — — 6,397 — 6,397 Issuance of shares upon exercise of stock options 1,865 — 40,378 — 40,378 Net loss — — — ( 78,710 ) ( 78,710 ) Balance as of March 31, 2024 49,234 $ 5 $ 704,007 $ ( 692,444 ) $ 11,568 Stock-based compensation expense — — 46,174 — 46,174 Issuance of shares upon exercise of stock options 1,584 — 31,300 — 31,300 Issuance of shares upon exercise of warrants 2,746 — — — — Acquisition of Former Parent’s common stock, stock options, and warrants by the Acquirer ( 53,564 ) ( 5 ) ( 563,754 ) ( 1,179,970 ) ( 1,743,729 ) Issuance of shares in Distribution 14,476 1 16,041 — 16,042 Net income — — — 1,858,011 1,858,011 Balance as of June 30, 2024 14,476 $ 1 $ 233,768 $ ( 14,403 ) $ 219,366 Stock-based compensation expense — — 2,965 — 2,965 Net loss — — — ( 43,864 ) ( 43,864 ) Balance as of September 30, 2024 14,476 $ 1 $ 236,733 $ ( 58,267 ) $ 178,467 6 Common Stock (Shares) Common Stock (Amount) Additional Paid-In Capital Accumulated Deficit Total Stockholders’ Equity Balance as of December 31, 2022 43,564 $ 4 $ 430,426 $ ( 372,373 ) $ 58,057 Stock-based compensation expense — — 5,636 — 5,636 Issuance of shares upon exercise of stock options 31 — 356 — 356 Net loss — — — ( 48,916 ) ( 48,916 ) Balance as of March 31, 2023 43,595 $ 4 $ 436,418 $ ( 421,289 ) $ 15,133 Stock-based compensation expense — — 6,253 — 6,253 Issuance of shares upon exercise of stock options 72 — 854 — 854 Net loss — — — ( 47,052 ) ( 47,052 ) Balance as of June 30, 2023 43,667 $ 4 $ 443,525 $ ( 468,341 ) $ ( 24,812 ) Stock-based compensation expense — — 6,530 — 6,530 Issuance of shares upon exercise of stock options 2 — 21 — 21 Issuance of common stock and pre-funded warrants in private placement, net of issuance costs 3,621 1 199,644 — 199,645 Net loss — — — ( 51,789 ) ( 51,789 ) Balance as of September 30, 2023 47,290 $ 5 $ 649,720 $ ( 520,130 ) $ 129,595 The accompanying notes are an integral part of these condensed consolidated financial statements. 7 Inhibrx Biosciences, Inc. Condensed Consolidated Statements of Cash Flows (In thousands) (Unaudited) NINE MONTHS ENDED SEPTEMBER 30, 2024 2023 Cash flows from operating activities Net income (loss) $ 1,735,437 $ ( 147,757 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation and amortization 1,596 893 Accretion of debt discount and non-cash interest expense 2,065 3,652 Stock-based compensation expense 55,536 18,419 Non-cash lease expense 1,427 1,309 Loss on disposal of fixed assets 12 3 Non-cash gain on transaction with Acquirer ( 1,998,809 ) — Changes in operating assets and liabilities: Accounts receivable 323 ( 88 ) Receivables from related parties ( 672 ) 14 Prepaid expenses and other current assets 377 ( 19,268 ) Other non-current assets ( 3,548 ) — Accounts payable 21,022 ( 801 ) Accrued expenses 35,883 8,678 Operating lease liability ( 1,338 ) ( 1,376 ) Deferred revenue, current portion — ( 166 ) Net cash used in operating activities ( 150,689 ) ( 136,488 ) Cash flows from investing activities Purchase of fixed assets ( 2,581 ) ( 1,151 ) Net cash used in investing activities ( 2,581 ) ( 1,151 ) Cash flows from financing activities Proceeds from issuance of common stock and pre-funded warrants in private placement — 200,000 Issuance costs associated with issuance of common stock and pre-funded warrants in private placement — ( 130 ) Proceeds from the exercise of stock options 71,678 1,231 Net cash provided by financing activities 71,678 201,101 Net increase (decrease) in cash and cash equivalents ( 81,592 ) 63,462 Cash and cash equivalents at beginning of period 277,924 273,865 Cash and cash equivalents at end of period $ 196,332 $ 337,327 Supplemental schedule of non-cash investing and financing activities Payable for purchase of fixed assets $ 6 $ 108 Issuance costs associated with the issuance of common stock and pre-funded warrants in private placement in accounts payable $ — $ 225 The accompanying notes are an integral part of these condensed consolidated financial statements. 8 Inhibrx Biosciences, Inc. Notes to Unaudited Condensed Consolidated Financial Statements 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Inhibrx Biosciences, Inc., or the Company, or Inhibrx Biosciences, is a clinical-stage biopharmaceutical company focused on developing a broad pipeline of novel biologic therapeutic candidates. The Company combines target biology with protein engineering, technologies, and research and development to design therapeutic candidates. The Company’s current pipeline is focused on oncology. Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission, or the SEC, related to an interim report on Form 10-Q. The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. The unaudited interim condensed consolidated financial statements reflect all adjustments which, in the opinion of management, are necessary for a fair statement of the results for the periods presented. All such adjustments are of a normal and recurring nature. The operating results presented in these unaudited interim condensed consolidated financial statements are not necessarily indicative of the results that may be expected for any future periods. Certain information and note disclosures normally included in annual financial statements prepared in accordance with GAAP have been condensed or omitted. Accordingly, the accompanying unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the related notes thereto for the fiscal year ended December 31, 2023, which are included in Exhibit 99.1 to our Registration Statement on Form 10, as amended (File No. 001-42031), which was filed with and declared effective by the SEC on May 24, 2024, or the Form 10. Separation and Distribution In January 2024, Inhibrx, Inc., or the Former Parent, announced its intent, as approved by its board of directors, to effect the spin-off of INBRX-101, an optimized, recombinant alpha-1 antitrypsin, or AAT, augmentation therapy in a registrational trial for the treatment of patients with alpha-1 antitrypsin deficiency. The Former Parent and the Company signed an Agreement and Plan of Merger, dated as of January 22, 2024, or the Merger Agreement, with Aventis Inc., a Pennsylvania corporation, or the Acquirer, and a wholly-owned subsidiary of Sanofi S.A., or Sanofi, and Art Acquisition Sub, Inc., a Delaware corporation, or the Merger Sub, and a wholly-owned subsidiary of Acquirer, along with a Separation and Distribution Agreement, dated as of January 22, 2024, by and among the Former Parent, the Company and Acquirer. The Merger Agreement provided for the acquisition by Acquirer of the Former Parent, or the Merger, to be accomplished through the merger of Merger Sub with and into the Former Parent with the Former Parent continuing as the surviving entity. On May 29, 2024, the Former Parent completed a distribution to holders of its shares of common stock of 92 % of the issued and outstanding shares of common stock of the Company, or the Distribution. On May 30, 2024, the Former Parent completed the Merger, pursuant to which (i) all assets and liabilities primarily related to INBRX-101, or the 101 Business, were transferred to the Acquirer, a wholly-owned subsidiary of Sanofi; and (ii) by way of a series of internal restructuring transactions, or the Separation, the Company acquired the assets and liabilities and corporate infrastructure associated with its ongoing programs, INBRX-106 and ozekibart (INBRX-109), and its discovery pipeline, as well as the remaining close-out obligations related to its previously terminated program, INBRX-105. Upon the closing of the Merger, the Company became a stand-alone, publicly traded company. In connection with the foregoing transactions, each Former Parent stockholder received: (i) $ 30.00 per share in cash, (ii) one contingent value right per share, representing the right to receive a contingent payment of $ 5.00 in cash upon the achievement of a regulatory milestone, and (iii) one SEC-registered, publicly listed, share of Inhibrx Biosciences 9 for every four shares of the Former Parent’s common stock held. The Acquirer retained an equity interest in the Company of 8 % upon the Distribution. The Acquirer paid transaction consideration of $ 1.9 billion, including the $ 30.00 per share consideration and the assumption of the Company’s third-party debt. See Note 3 for further discussion on the extinguishment of the Company’s Amended 2020 Loans with Oxford (as defined below). In addition, the Acquirer assumed all assets and liabilities under contracts primarily related to INBRX-101 upon close of the Merger. The Acquirer also reimbursed the Company or paid on behalf of the Company $ 68.0 million in transaction costs. The Acquirer may pay an additional $ 300.0 million in consideration under the contingent value rights issued upon the achievement of a regulatory milestone. Notwithstanding the legal form of the spin-off, the Separation and Distribution is being treated as a reverse spin-off for financial accounting and reporting purposes in accordance with ASC 505-60, Spinoffs and Reverse Spinoffs because (i) a wholly-owned subsidiary of the Acquirer merged with and into the Former Parent immediately following the Distribution; (ii) no senior management of the Former Parent were retained by the Former Parent following the Distribution; and (iii) the size of the Company’s operations relative to the 101 Business. As a reverse spin-off, the Company considers Inhibrx Biosciences as the accounting spinnor of the Former Parent, and the accounting successor to the Former Parent. Therefore, for periods prior to the spin-off, the Company’s financial statements are the historical financial statements of the Former Parent. For such periods, descriptions of historical business activities are presented as if the spin-off had already occurred, and the Former Parent’s activities related to such assets and liabilities had been performed by the Company. In addition, for all periods prior to the spin-off, all outstanding shares referenced in these financial statements are those shares outstanding of the Former Parent at each respective date, unless otherwise indicated as adjusted for the distribution ratio. Following the spin-off, all outstanding shares referenced are those of the Company, which, as discussed above, were issued on a four-to-one ratio of the Former Parent’s outstanding shares. The Company evaluated the sale of the 101 Business in accordance with ASC 205-20, Discontinued Operation s, and determined that the Separation does not represent a strategic shift and thus does not qualify as a discontinued operation. The Company next evaluated the sale of the 101 Business in accordance with ASC 805, Business Combinations , and determined that the 101 Business does not meet the definition of a business, given that substantially all of the fair value of the gross assets transferred is concentrated in one asset. The Company then evaluated the transaction under ASC 845, Nonmonetary Transactions , which contains guidance on the accounting for the distribution of nonmonetary assets to stockholders of an entity in a spin-off. In accordance with this guidance, the disposal of the 101 Business has been accounted for as a dividend-in-kind, with a gain recognized for the difference between the fair value and carrying value of the disposed assets. The Company recorded a gain on the transaction of $ 2.0 billion during the nine months ended September 30, 2024, which consists of the following components (in thousands): NINE MONTHS ENDED SEPTEMBER 30, 2024 Merger consideration for common stock, warrants, and stock options $ 1,727,687 Book value of Amended 2020 Loans assumed by Acquirer 211,315 Book value of net assets and liabilities related to INBRX-101 assumed by Acquirer 14,496 Transaction costs paid by Acquirer 68,000 Total gain recognized $ 2,021,498 The gain related to the Merger consideration payable to shareholders of $ 1.7 billion was recorded, net of consideration allocated to the shares issued to Acquirer, through a reduction to retained earnings of $ 1.2 billion, representing the amount of retained earnings available at the closing of the Merger, with the remaining amount of $ 563.8 million recorded through additional paid-in capital. 10 Liquidity As of September 30, 2024, the Company had an accumulated deficit of $ 58.3 million and cash and cash equivalents of $ 196.3 million. From its inception and through September 30, 2024, the Company has devoted substantially all of its efforts to therapeutic drug discovery and development, conducting preclinical studies and clinical trials, enabling manufacturing activities in support of its therapeutic candidates, pre-commercialization activities, organizing and staffing the Company, establishing its intellectual property portfolio and raising capital to support and expand these activities. The Company believes that its existing cash and cash equivalents will be sufficient to fund the Company’s operations for at least 12 months from the date these unaudited condensed consolidated financial statements are issued. The Company plans to finance its future cash needs through equity offerings, debt financings or other capital sources, including potential collaborations, licenses, strategic transactions and other similar arrangements. If the Company does raise additional capital through public or private equity or convertible debt offerings, the ownership interests of its existing stockholders will be diluted, and the terms of those securities may include liquidation or other preferences that adversely affect its stockholders’ rights. If the Company raises capital through additional debt financings, it may be subject to covenants limiting or restricting its ability to take specific actions, such as incurring additional debt or making certain capital expenditures. To the extent that the Company raises additional capital through strategic licensing, collaboration or other similar agreements, it may have to relinquish valuable rights to its therapeutic candidates, future revenue streams or research programs at an earlier stage of development or on less favorable terms than it would otherwise choose, or to grant licenses on terms that may not be favorable to the Company. There can be no assurance as to the availability or terms upon which such financing and capital might be available in the future. If the Company is unable to secure adequate additional funding, it will need to reevaluate its operating plan and may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible, delay, scale back or eliminate some or all of its development programs, or relinquish rights to its technology on less favorable terms than it would otherwise choose. These actions could materially impact its business, financial condition, results of operations and prospects. The rules and regulations of the SEC or any other regulatory agencies may restrict the Company’s ability to conduct certain types of financing activities, or may affect the timing of and amounts it can raise by undertaking such activities. Use of Estimates The preparation of these unaudited condensed consolidated financial statements in conformity with GAAP requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expense and the disclosure of contingent assets and liabilities in the Company’s financial statements and accompanying notes. The Company’s most significant estimates relate to evaluation of whether revenue recognition criteria have been met, accounting for development work and preclinical studies and clinical trials, determining the assumptions used in measuring stock-based compensation, the incremental borrowing rate estimated in relation to the Company’s operating lease, and valuation allowances for the Company’s deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. The Company’s actual results may differ from these estimates under different assumptions or conditions. Cash and Cash Equivalents Cash and cash equivalents are comprised of cash held in financial institutions including readily available checking, overnight sweep, and money market accounts. Concentrations of Credit Risk Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits by the Federal Deposit Insurance Corporation, or the FDIC, of up to $250,000. The Company’s cash management and investment policy limits investment instruments to investment-grade securities 11 with the objective to preserve capital and to maintain liquidity until the funds can be used in operations. The Company has not experienced any losses in such accounts and believes it is not exposed to significant risk on its cash balances due to the financial condition of the depository institutions in which those deposits are held. Fair Value Measurements The Company determines the fair value measurements of applicable assets and liabilities based on a three-tier fair value hierarchy established by accounting guidance and prioritizes the inputs used in measuring fair value. These tiers include: • Level 1 - Quoted prices in active markets for identical assets or liabilities. • Level 2 - Inputs other than Level 1 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 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. During the nine months ended September 30, 2023, the Company’s investments in debt securities consisted of U.S. Treasury Bills, which were classified as Level 1 in the fair value hierarchy. Due to the short-term nature of these securities which were classified as cash equivalents, the amortized value approximated fair value and the Company did not remeasure these instruments at fair value. As of September 30, 2024 and December 31, 2023, the Company held no investments in debt securities. The Company’s long-term debt outstanding as of December 31, 2023 was classified as Level 2 in the fair value hierarchy. As of September 30, 2024 and December 31, 2023, the Company had no financial instruments measured at fair value on a recurring basis. Accrued Research and Development and Clinical Trial Costs Research and development costs are expensed as incurred based on estimates of the period in which services and efforts are expended, and include the cost of compensation and related expenses, as well as expenses for third parties who conduct research and development on the Company’s behalf, pursuant to development and consulting agreements in place. The Company’s preclinical studies and clinical trials are performed internally, by third party contract research organizations, or CROs, and/or clinical investigators. The Company also engages with contract development and manufacturing organizations, or CDMOs, for clinical supplies and manufacturing scale-up activities related to its therapeutic candidates. Invoicing from these third parties may be monthly based upon services performed or based upon milestones achieved. The Company accrues these expenses based upon estimates determined by reviewing cost information provided by CROs and CDMOs, other third-party vendors and internal clinical personnel, and contractual arrangements with CROs and CDMOs and the scope of work to be performed. Costs incurred related to the Company’s purchases of in-process research and development for early-stage products or products that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred. Costs incurred related to the licensing of products that have not yet received marketing approval to be marketed, or that are not commercially viable and ready for use, or have no alternative future use, are charged to expense in the period incurred. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred income taxes are recorded for temporary differences between financial statement carrying amounts and the tax basis of assets and liabilities. Deferred tax assets and liabilities reflect the tax rates expected to be in effect for the years in which the differences are expected to reverse. A valuation allowance is provided if it is more likely than not that some or all of the deferred tax assets will not be realized. 12 Earnings (Loss) Per Share Basic earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of common stock outstanding during the same period. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted average number of shares of common stock and potentially dilutive common shares outstanding during the same period. The Company excludes common stock equivalents from the calculation of diluted net earnings (loss) per share when the effect is anti-dilutive. The weighted average number of shares of common stock used in the basic and diluted net income (loss) per common stock calculations includes the weighted-average pre-funded warrants outstanding during the period as they are exercisable at any time for nominal cash consideration. During the nine months ended September 30, 2024, outstanding shares during the period consist both of shares of the Former Parent and of the Company. For purposes of computing earnings (loss) per share only, for all periods presented in its condensed consolidated statements of operations, the Company adjusted all outstanding shares of the Former Parent, including potentially dilutive securities, by the four-to-one distribution ratio used in the Distribution. In periods in which the Company has net income, the Company applies the treasury stock method to determine the dilutive effect of potentially dilutive securities. Potentially dilutive securities included in the diluted earnings per share are as follows (in thousands): NINE MONTHS ENDED SEPTEMBER 30, 2024 Outstanding stock options 242 Warrants to purchase common stock 1 Total 243 In periods in which the Company has a net loss, basic loss per share and diluted loss per share are identical since the effect of potentially dilutive common shares is anti-dilutive and therefore excluded. Accordingly, for the three months ended September 30, 2024 and the three and nine months ended September 30, 2023, there is no difference in the number of shares used to calculate basic and diluted shares outstanding. Potentially dilutive securities not included in the calculation of diluted loss per share are as follows (in thousands): AS OF SEPTEMBER 30, 2024 2023 Outstanding stock options 910 1,667 Warrants to purchase common stock — 12 Total 910 1,679 Segment Information The Company operates under one segment which develops biologic therapeutic candidates. Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. Recent Accounting Pronouncements From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies. The Company believes that the impact of the recently issued accounting pronouncements that are not yet effective will not have a material impact on its condensed consolidated financial condition or results of operations upon adoption. 13 Recently Issued but Not Yet Adopted Accounting Pronouncements In November 2023, the FASB issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. The amendments are effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented in the financial statements. The Company is currently evaluating this ASU to determine its impact on the Company’s consolidated financial statements and related disclosures. In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvement to Income Tax Disclosures to enhance the transparency and decision usefulness of income tax disclosures. Two primary enhancements related to this ASU include disaggregating existing income tax disclosures relating to the effective tax rate reconciliation and income taxes paid. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 on a prospective basis. Early adoption is permitted. The Company is currently evaluating the impact of this accounting standard update on the Company’s consolidated financial statements and related disclosures. In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which requires additional disclosure about specific expense categories in the notes to financial statements. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the impact of this accounting standard update on the Company’s consolidated financial statements and related disclosures. 2. OTHER FINANCIAL INFORMATION Prepaid Expense and Other Current Assets Prepaid expense and other current assets were comprised of the following (in thousands): AS OF AS OF SEPTEMBER 30, 2024 DECEMBER 31, 2023 Clinical trials (1) $ 4,435 $ 5,409 Clinical drug substance and product manufacturing (2) 3,055 9,888 Licenses 1,092 728 Outside research and development services (3) 657 265 Other 748 366 Prepaid expense and other current assets $ 9,987 $ 16,656 (1) Relates primarily to the Company’s prepayments to third-party CROs for management of clinical trials and prepayments for drug supply to be used in combination with the Company’s therapeutics. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development. (2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development. (3) Relates to the Company’s usage of third-parties for other research and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development. 14 Property and Equipment, Net Property and equipment, net were comprised of the following (in thousands): AS OF AS OF SEPTEMBER 30, 2024 DECEMBER 31, 2023 Machinery and equipment $ 9,740 $ 8,480 Furniture, fixtures, and other 556 540 Leasehold improvements 795 441 Computer software 3,857 53 Construction in process (1) 147 3,592 Total property and equipment 15,095 13,106 Less: accumulated depreciation and amortization ( 8,216 ) ( 6,687 ) Property and equipment, net $ 6,879 $ 6,419 (1) As of December 31, 2023, consists of renovations to the Company’s office space and software not yet placed in service. Depreciation and amortization expense for the three and nine months ended September 30, 2024 and September 30, 2023 consisted of the following (in thousands): THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2024 2023 2024 2023 Research and development $ 660 $ 261 $ 1,291 $ 740 General and administrative 100 43 305 153 Total depreciation and amortization expense $ 760 $ 304 $ 1,596 $ 893 Accrued Expenses Accrued expenses were comprised of the following (in thousands): AS OF AS OF SEPTEMBER 30, 2024 DECEMBER 31, 2023 Clinical trials (1) $ 14,853 $ 9,224 Clinical drug substance and product manufacturing (2) 1,276 22,805 Other outside research and development (3) 5,054 1,129 Compensation-related 6,466 6,506 Professional fees 1,883 780 Interest expense — 2,348 Other 358 503 Accrued expenses $ 29,890 $ 43,295 (1) Relates primarily to the Company’s usage of third-party CROs for management of clinical trials. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development. (2) Relates primarily to the Company’s usage of third-party CDMOs for clinical and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development. (3) Relates to the Company’s usage of third-parties for other research and development efforts. See “Accrued Research and Development Clinical Trial Costs” in Note 1 for further discussion of the components of research and development. 15 3. DEBT 2020 Loan Agreement In July 2020, the Company entered into a loan and security agreement, or the 2020 Loan Agreement, with Oxford Finance LLC, or Oxford. Under the original 2020 Loan Agreement and subsequent amendments between November 2020 and October 2022, or collectively, the Amended 2020 Loan Agreement, the Company received an aggregate principal amount of $ 200.0 million over seven tranches, or Terms A-G. Prior to the Separation, the outstanding term loans were to mature on January 1, 2027, or the Amended Maturity Date. Under the Amended 2020 Loan Agreement, and through the Separation, the repayment schedule provided for interest-only payments through February 1, 2025, followed by 23 months of principal and interest payments. Upon the Amended Maturity Date, a final payment of 9.0 % of the original principal amount would be due to Oxford. This final payment of $ 18.0 million was being accreted over the life of the Amended 2020 Loan Agreement using the effective interest method. The Company had the option to prepay the outstanding balance of the term loans in full prior to the Amended Maturity Date, subject to a prepayment fee ranging from 1.0 % to 3.0 %, depending upon the timing of the prepayment. In connection with the Separation, the Company’s outstanding debt was assumed by the Acquirer. Prior to the close of the Merger, the Company had $ 200.0 million in gross principal outstanding in term loans under the Amended 2020 Loan Agreement. The Acquirer assumed the outstanding debt balance in full, consisting of the $ 200.0 million in gross principal, the $ 18.0 million final payment fee, and accrued interest of $ 2.3 million, net of debt discounts of $ 9.0 million. The Company determined the Acquirer’s assumption and subsequent repayment of the outstanding debt constitutes an extinguishment of the debt as the Company has been legally released from being the primary obligor under the liability. The Company did not make any payment upon the extinguishment of the debt and did not incur any prepayment penalties. Upon the Acquirer’s assumption of the outstanding debt, the Company recorded a gain of $ 211.3 million, the net carrying amount of the Amended 2020 Loans upon extinguishment, within the gain related to transaction with Acquirer in its condensed consolidated statements of operations. Interest Expense Prior to the Separation, interest expense was calculated using the effective interest method and was inclusive of non-cash amortization of the debt discount and accretion of the final payment. During the nine months ended September 30, 2024, interest expense was $ 13.5 million, $ 2.1 million of which related to non-cash amortization of the debt discount and accretion of the final payment. During the three months ended September 30, 2023, interest expense was $ 8.1 million, $ 1.2 million of which related to non-cash amortization of the debt discount and accretion of the final payment. During the nine months ended September 30, 2023, interest expense was $ 23.6 million, $ 3.7 million of which related to non-cash amortization of the debt discount and accretion of the final payment. The Company did not incur any interest expense during the three months ended September 30, 2024. 4. STOCKHOLDERS’ EQUITY Amended and Restated Certificate of Incorporation On May 29, 2024, upon effecting the Separation, the Company’s certificate of incorporation was amended and restated to authorize 120,000,000 shares of common stock and 15,000,000 shares of preferred stock, each with a par value of $ 0.0001 per share. Common Stock Following the Distribution and as of May 29, 2024, the Company had 14,475,904 shares of common stock outstanding. The Company issued one SEC-registered, publicly listed, share of Inhibrx Biosciences for every four shares of the Former Parent’s common stock held, resulting in 13,316,140 shares of common stock issued to common stockholders of the Former Parent. Upon the Distribution, the Former Parent retained an equity interest in the Company of 8 %, or 1,157,926 shares. The Company issued 1,838 shares of common stock to Oxford in connection with the Oxford Warrants (as defined below) in the Distribution. 16 Securities Purchase Agreement In August 2023, the Company entered into a Securities Purchase Agreement, as amended, or the Purchase Agreement, with certain institutional and other accredited investors, or Purchasers, pursuant to which the Company sold and issued 3,621,314 shares of the Company’s common stock for $ 19.35 per share and, with respect to certain Purchasers, pre-funded warrants to purchase 6,714,636 shares of the Company’s common stock in a private placement transaction, or the Private Placement. The purchase price of the pre-funded warrants was $ 19.3499 per pre-funded warrant, with an exercise price of $ 0.0001 per share. The Company received gross proceeds of approximately $ 200.0 million from the Private Placement, before deducting $ 0.4 million of offering expenses payable by the Company. The pre-funded warrants were equity-classified and carried at the instruments’ fair value upon issuance. The pre-funded warrants were exercisable upon issuance pursuant to certain beneficial ownership limitations as defined in the Purchase Agreement and will expire when exercised in full. During the second quarter of 2024, certain Purchasers exercised 2,747,245 pre-funded warrants on a cashless basis for a net of 2,746,454 shares of the Former Parent’s common stock. In connection with the execution of the Merger Agreement, the Former Parent entered into an Agreement Relating to the Pre-Funded Warrant to Purchase Common Stock and Securities Purchase Agreement, dated as of January 22, 2024, by and between the Former Parent and each holder of the pre-funded warrants purchased in the Private Placement so that on the date of the Distribution, any remaining pre-funded warrants of the Former Parent not already exercised to purchase the Former Parent’s common stock became exercisable for an equivalent number of shares of the Company’s common stock at an exercise price of $ 0.0001 per share, pursuant to certain beneficial ownership limitations. The Company has evaluated the amendment and accounted for this as a modification to the original Purchase Agreement. As part of the Separation and Distribution, each holder of outstanding pre-funded warrants received (i) $ 30.00 per pre-funded warrant in cash, less the applicable exercise price per share, (ii) one contingent value right per share, representing the right to receive a contingent payment of $ 5.00 in cash upon the achievement of a regulatory milestone, and (iii) one pre-funded warrant of Inhibrx Biosciences for every four of the Former Parent’s pre-funded warrants held. Following the Separation and Distribution and as of September 30, 2024, pre-funded warrants to purchase 991,849 shares of the Company’s common stock are outstanding at an exercise price of $ 0.0001 per share. The pre-funded warrants are exercisable upon issuance pursuant to certain beneficial ownership limitations as defined in the Purchase Agreement, as amended, and will expire when exercised in full. Warrants Issued in Connection with Amended 2020 Loan Agreement Prior to the Separation and Distribution, the following equity-classified warrants issued to Oxford in connection with the Amended 2020 Loan Agreement, or the Oxford Warrants, were outstanding, in addition to the pre-funded warrants discussed above: Warrants Expiration Date Shares of Common Stock Issuable Upon Exercise of Warrants Exercise Price per Share 2020 Oxford Warrants July 15, 2030 7,354 $ 17.00 2022 Oxford Warrants February 18, 2032 40,000 $ 45.00 As part of the Separation and Distribution, each holder of eligible outstanding warrants received (i) $ 30.00 per warrant in cash, less the applicable exercise price per share (ii) one contingent value right per share, representing the right to receive a contingent payment of $ 5.00 in cash upon the achievement of a regulatory milestone, and (iii) one SEC-registered, publicly listed, share of Inhibrx Biosciences for every four of the Former Parent’s warrants held. All outstanding warrants with an exercise price which exceeded the total consideration of $ 35.00 were canceled upon the Merger for no consideration. As of September 30, 2024, no Oxford Warrants were outstanding. 17 Common Stock Reserved for Future Issuance Common stock reserved for future issuance as of September 30, 2024 for the Company and December 31, 2023 for the Former Parent consisted of the following (in thousands): AS OF AS OF SEPTEMBER 30, 2024 DECEMBER 31, 2023 Options to purchase common stock issued and outstanding 3,641 6,494 Shares available for future equity grants 359 533 Pre-funded warrants issued and outstanding 992 6,715 Warrants issued and outstanding — 47 Total common stock reserved for future issuance 4,992 13,789 5. EQUITY COMPENSATION PLAN 2017 Plan The Company’s share-based compensation plan, the Amended and Restated 2017 Employee, Director and Consultant Equity Incentive Plan, or the 2017 Plan, provided for the issuance of incentive stock options, restricted and unrestricted stock awards, and other stock-based awards. The 2017 Plan was terminated in connection with the Merger. Stock Option Activity The Company recognized compensation costs related to stock-based awards, including stock options, based on the estimated fair value of the awards on the date of grant. The Company granted options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant. The options were subject to four-year vesting with a one-year cliff and had a contractual term of 10 years. A summary of the Company’s stock option activity under its 2017 Plan for the nine months ended September 30, 2024 is as follows (in thousands, except for per share data and years): Number of Shares Weighted Average Exercise Price Outstanding as of December 31, 2023 6,494 $ 23.22 Exercised ( 3,449 ) $ 21.11 Forfeited ( 9 ) $ 32.03 Settled in connection with the Merger ( 2,884 ) $ 24.75 Canceled in connection with the Merger ( 152 ) $ 41.56 Outstanding as of September 30, 2024 — Vested and exercisable as of September 30, 2024 — The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2024 and September 30, 2023 was $ 65.3 million and $ 1.3 million, respectively. Aggregate intrinsic value of stock options exercised and outstanding was calculated using the fair value of common stock on the date of exercise and the fair value of common stock as of September 30, 2024, respectively. The total fair value of stock options vested during the nine months ended September 30, 2024 and September 30, 2023 was $ 42.5 million and $ 19.0 million, respectively. Following the Merger and as of May 30, 2024, no stock options remained outstanding under the 2017 Plan. Settlement of Stock Options Upon Merger All outstanding options with an exercise price less than or equal to the total consideration of $ 35.00 vested immediately upon the Merger and were settled for the consideration of: (i) $ 30.00 per share in cash, less the applicable exercise price of their stock option and (ii) one contingent value right per share, representing the right to 18 receive a contingent payment of $ 5.00 in cash upon the achievement of a regulatory milestone. In connection with the acceleration of the eligible stock options, the Company recognized $ 39.3 million in stock compensation expense. All outstanding options with an exercise price which exceeded the total consideration of $ 35.00 were canceled upon the Merger for no consideration. In connection with the cancellation of all unvested options with an exercise price above $ 35.00 , the Company recognized all remaining stock compensation expense of $ 1.8 million. Stock-Based Compensation Expense The weighted-average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option pricing model, as well as the resulting weighted-average fair value, for the nine months ended September 30, 2023 were as follows: NINE MONTHS ENDED SEPTEMBER 30, 2023 Risk-free interest rate 3.76 % Expected volatility 84.33 % Expected dividend yield — % Expected term (in years) 6.08 Weighted average fair value $ 16.89 The Company did not grant any stock options under the 2017 Plan during the nine months ended September 30, 2024. Stock-based compensation expense for stock options under the 2017 Plan consisted of the following (in thousands): THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2024 2023 2024 2023 Research and development $ — $ 4,326 $ 32,809 $ 12,420 General and administrative — 2,204 18,725 5,999 Total stock-based compensation expense $ — $ 6,530 $ 51,534 $ 18,419 As of September 30, 2024, the Company had no remaining unrecognized stock-based compensation expense related to its stock options under the 2017 Plan following the termination of the plan subsequent to the Merger. 2024 Plan In connection with the Separation, the Company adopted the 2024 Omnibus Incentive Plan, or the 2024 Plan, which provides for the issuance of incentive stock options, restricted and unrestricted stock awards, and other stock-based awards. As of September 30, 2024, an aggregate of 4.0 million shares of common stock were authorized for issuance under the 2024 Plan, of which 0.4 million remained available for issuance. Stock Option Activity The Company recognizes compensation costs related to stock-based awards, including stock options, based on the estimated fair value of the awards on the date of grant. The Company grants options with an exercise price equal to the fair market value of the Company’s stock on the date of the option grant. The options are subject to four-year vesting with a one-year cliff and have a contractual term of 10 years. 19 A summary of the Company’s stock option activity under its 2024 Plan for the nine months ended September 30, 2024 is as follows (in thousands, except for per share data and years): Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term (In Years) Aggregate Intrinsic Value Outstanding as of December 31, 2023 — Granted 3,671 $ 15.85 Forfeited ( 30 ) $ 15.86 Outstanding as of September 30, 2024 3,641 $ 15.85 9.7 $ 54 Vested and exercisable as of September 30, 2024 — No stock options were exercised or vested during the nine months ended September 30, 2024. The Company expects all outstanding stock options to vest. There was no activity under the 2024 Plan during the nine months ended September 30, 2023. Stock-Based Compensation Expense The weighted-average assumptions used by the Company to estimate the fair value of stock option grants using the Black-Scholes option pricing model, as well as the resulting weighted-average fair value, for the nine months ended September 30, 2024 were as follows: NINE MONTHS ENDED SEPTEMBER 30, 2024 Risk-free interest rate 4.56 % Expected volatility 86.32 % Expected dividend yield — % Expected term (in years) 6.06 Weighted average fair value $ 11.89 Stock-based compensation expense for stock options under the 2024 Plan consisted of the following (in thousands): THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, 2024 Research and development $ 1,717 $ 2,320 General and administrative 1,248 1,682 Total stock-based compensation expense $ 2,965 $ 4,002 There was no expense incurred under the 2024 Plan during the three or nine months ended September 30, 2023. As of September 30, 2024, the Company had $ 39.3 million of total unrecognized stock-based compensation expense related to its stock options, which is expected to be recognized over a weighted-average period of 3.6 years. 20 6. LICENSE REVENUES The following table summarizes the total revenue recorded in the Company’s condensed consolidated statements of operations (in thousands): THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30, 2024 2023 2024 2023 License fee revenue Regeneron Pharmaceuticals, Inc. $ — $ — $ 100 $ — Other — 119 — 166 Total license fee revenue $ — $ 119 $ 100 $ 166 License and Collaboration Agreements Regeneron In June 2020, the Company entered into an Option and License Agreement with bluebird bio, Inc., or bluebird, pursuant to which the Company granted to bluebird exclusive worldwide rights to develop binders and cell therapy products containing single domain antibodies, or sdAbs, directed to specified targets, consisting of two initial programs and up to an additional 8 programs. The Company retained all rights to the specific sdAbs outside of the cell therapy field. In November 2021, this agreement was assigned to 2seventy bio, Inc., or 2seventy, in connection with bluebird’s internal restructuring and subsequent spin-out of 2seventy, and subsequently in April 2024, this agreement, or the 2020 Regeneron Agreement, was assigned to Regeneron Pharmaceuticals, Inc., or Regeneron, in connection with the divestiture of 2seventy’s oncology and autoimmune pipeline to Regeneron. In June 2022, 2seventy selected a third program and paid a non-refundable upfront option fee of $ 0.2 million in exchange for a development license. The Company granted an option in which Regeneron may acquire an exclusive license with respect to all binders and cell therapy products developed under this agreement, which entitles the Company to additional fees upon exercise of the option. In connection with each program for which Regeneron exercises its option, Regeneron will be required to pay the Company a one-time, non-refundable, non-creditable fee in the low-single-digit millions. The Company is also entitled to receive certain developmental milestone payments of up to an aggregate of $ 51.5 million per therapeutic, as well as percentage tiered royalties on future product sales with rates in the mid-single digits. Due to the uncertainty in the achievement of the developmental milestones and future sales, the variable consideration associated with the future milestone payments has been fully constrained (excluded) from the transaction price until such time that the Company concludes that it is probable that a significant reversal of previously recognized revenue will not occur. These estimates will be re-assessed at each reporting period. In June 2022, pursuant to the terms regarding the addition of new programs in the 2020 Regeneron Agreement, the Company received a $ 0.2 million upfront option fee related to the selection of a third program and transferred the related know-how and development license. The Company recognized the $ 0.2 million of revenue at the point in time in which the program was added and the program term began. In May 2024, pursuant to the option extension terms in the 2020 Regeneron Agreement, Regeneron requested to extend the option term for this program by an additional six months in exchange for an option extension fee of $ 0.1 million. The Company recognized the $ 0.1 million of revenue related to this extension at the point in time in which the extension was granted. During the nine months ended September 30, 2024, the Company recognized $ 0.1 million of revenue related to this agreement. The Company did no t recognize any revenue under this agreement during the three months ended September 30, 2024 or the three and nine months ended September 30, 2023. 7. RELATED PARTY TRANSACTIONS From time to time, the Company will enter into an agreement with a related party in the ordinary course of its business. These agreements are ratified by the Company’s Board of Directors or a committee thereof pursuant to policy. 21 Separation and Distribution In connection with the Separation, as discussed in Note 1, the Former Parent completed a distribution to holders of its shares of common stock of 92 % of the issued and outstanding shares of common stock of the Company, or the Distribution. The Former Parent retained an equity interest in the Company of 8 %, or 1,157,926 shares upon the Distribution. Accordingly, the Company identified the Acquirer as a related party following the Merger with the Former Parent. Transition Services Agreement In connection with the Separation, the Company also entered into the Transition Services Agreement with the Former Parent under which the Company or one of its affiliates provide the Former Parent or other Sanofi entities with certain transition services for a limited time to ensure an orderly transition following the Separation. The services that the Company agreed to provide to the Former Parent or other Sanofi entities under the Transition Services Agreement include certain finance and accounting, including payroll, tax, and procurement, information technology, legal and intellectual property, clinical study support, technical operations, regulatory, quality assurance, commercial and medical affairs, and other services. The Former Parent pays the Company for any such services received by the Former Parent or other Sanofi entities, as applicable, at agreed amounts as set forth in the Transition Services Agreement. During the three and nine months ended September 30, 2024, the Company billed the Former Parent for $ 0.1 million and $ 0.2 million, respectively, for services performed under the Transition Services Agreement. The Company recognized this amount as other income. The Company has received $ 0.1 million, and the remaining balance of $ 0.1 million is recorded as receivables from related parties in the Company’s condensed consolidated balance sheets as of September 30, 2024. Additionally, the Transition Services Agreement requires the Former Parent to reimburse the Company for certain severance payments made by the Company to certain Company employees whose employment was terminated as a result of the Merger. During the three and nine months ended September 30, 2024, the Company billed the Former Parent for $ 1.0 million of severance payments to former employees. The Company has received $ 0.4 million, and the remaining balance of $ 0.6 million is recorded as receivables from related parties in the Company’s condensed consolidated balance sheets as of September 30, 2024. Pharmacovigilance Agreement In connection with the Separation, the Company entered into a Pharmacovigilance Agreement with the Former Parent, pursuant to which the parties agreed to implement processes and procedures for sharing information as required for each party’s compliance with its regulatory and pharmacovigilance responsibilities. 8. LEASES Operating Leases In September 2017, the Company entered into a seven-year lease agreement as its sole location in La Jolla, California. The lease expires in June 2025 with an option to extend the lease an additional five years , which is not included in the right-of-use asset and lease liabilities. The lease contained an initial base rent of approximately $ 0.1 million per month with 2 % annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which to be determined annually. In May 2019, the Company executed an amendment to its lease agreement to expand its facilities and began occupying this space in January 2020. The amended lease terminates coterminously with the initial lease agreement and contains an initial base rent of approximately $ 30,000 per month with 2 % annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which is to be determined annually. 22 The operating right-of-use asset and operating lease liability as of September 30, 2024 and December 31, 2023 were as follows (in thousands): AS OF AS OF SEPTEMBER 30, 2024 DECEMBER 31, 2023 Operating right-of-use asset $ 1,525 $ 2,952 Operating lease liability Current $ 1,835 $ 2,063 Non-current — $ 1,110 Total operating lease liability $ 1,835 $ 3,173 During each of the three months ended September 30, 2024 and September 30, 2023, the Company recognized operating lease expense of $ 0.9 million. During the nine months ended September 30, 2024 and September 30, 2023, the Company recognized operating lease expense of $ 2.5 million and $ 2.6 million, respectively. During the three months ended September 30, 2024 and September 30, 2023, the Company paid $ 0.4 million and $ 0.5 million in cash for amounts included in the measurement of the operating lease liability, respectively. During the nine months ended September 30, 2024 and September 30, 2023, the Company paid $ 1.5 million and $ 1.6 million in cash for amounts included in the measurement of the operating lease liability, respectively. As of September 30, 2024 and December 31, 2023, the Company’s operating lease had a remaining term of 0.8 years and 1.5 years, respectively. The Company discounts its lease payments using its incremental borrowing rate as of the commencement of the lease. The Company determined a weighted-average discount rate of 8.2 % as of September 30, 2024 and December 31, 2023. Future minimum rental commitments for the Company’s operating leases reconciled to the operating lease liability are as follows (in thousands): AS OF SEPTEMBER 30, 2024 2024 (three months) 755 2025 1,137 Thereafter — Total future minimum lease payments $ 1,892 Less: imputed interest ( 57 ) Current portion of operating lease liability 1,835 9. COMMITMENTS AND CONTINGENCIES Litigation Other than as described below, the Company is not party to any material legal proceedings. From time to time, it may be involved in legal proceedings or subject to claims incident to the ordinary course of business. Regardless of the outcome, such proceedings or claims can have an adverse impact on the Company because of defense and settlement costs, diversion of resources and other factors, and there can be no assurances that favorable outcomes will be obtained. I-Mab Biopharma Litigation On March 1, 2022, I-Mab Biopharma filed a lawsuit against the Former Parent and Brendan Eckelman, the Company’s co-founder and Chief Scientific Officer, in the United States District Court for the District of Delaware, C.A. No. 22-00276-CJB, asserting claims for misappropriation of trade secrets related to Dr. Eckelman’s service as an expert witness for Tracon Pharmaceuticals, Inc., or Tracon, in Tracon’s arbitration against I-Mab Biopharma. I-Mab Biopharma sought royalty damages and alternative damages in the form of unjust enrichment. 23 As of September 30, 2024, the Company did not expect an adverse outcome in the trial scheduled for October 2024, or any damages to be awarded, and thus has not recorded a liability on its books as of September 30, 2024. See Note 10 for further discussion of the trial subsequent to the period. 10. SUBSEQUENT EVENTS I-Mab Biopharma Litigation On November 4, 2024, the Company announced a legal victory in the trade secrets case discussed in Note 9 brought by I-Mab Biopharma in the United States District Court for the District of Delaware. The jury found in favor of the Company, rejecting all allegations of misappropriation before it. I-Mab Biopharma had initiated the lawsuit on March 1, 2022, alleging that the Company and its Chief Scientific Officer, Brendan Eckelman, Ph.D., improperly accessed and used proprietary information related to several of I-Mab Biopharma’s research projects during a prior arbitration proceeding involving I-Mab Biopharma, for which Dr. Eckelman served as an expert witness. However, the jury found no basis for these claims in finding in favor of the Company, and thus the Company is not liable for any damages in this matter. Certain matters remain before the Court. Operating Lease On November 12, 2024, the Company entered into a three-year lease agreement for its sole location in La Jolla, California, which the Company currently occupies under two existing lease agreements expiring June 30, 2025. The new lease term begins on July 1, 2025 and expires on June 30, 2028 with an option to extend the lease an additional three years . The lease contains an initial base rent of $ 0.2 million per month with 3 % annual escalations, plus a percentage of taxes and operating expenses incurred by the lessor in connection with the ownership and management of the property, the latter of which is to be determined annually. In addition, the lease provides for a four-month rent abatement period of approximately $ 0.7 million. This abatement will be applied to the existing lease agreements beginning in the fourth quarter of 2024. 24