What changed in this filing

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Item 1. Financial Statements

2025-02-24 compared with 2025-02-24 · 207 added, 255 removed, 587 unchanged (44% of the section changed)

2 unchanged sentences

(in thousands, except share and per share data)

September 30,

2024 December 31,

21 unchanged sentences

Lease liabilities 1,262 3,435

Deferred income — —

Debt 38,930 27,711

8 unchanged sentences

10,000,000 authorized shares;

- 0 - issued and outstanding shares at September 30, 2024 and December 31, 2023

- 0 - issued and outstanding shares at June 30, 2024 and December 31, 2023

Common stock, $ 0.01 par value:

200,000,000 authorized shares at September 30, 2024 and December 31, 2023;

69,963,447 issued and outstanding at September 30, 2024 and 60,998,191 issued and outstanding at December 31, 2023

200,000,000 authorized shares at June 30, 2024 and December 31, 2023;

61,766,054 issued and outstanding at June 30, 2024 and 60,998,191 issued and outstanding at December 31, 2023

Additional paid-in capital 1,162,726 1,131,266

Accumulated other comprehensive income 1,800 1,291

Accumulated other comprehensive (loss) income ( 652 ) 1,291

Accumulated deficit ( 612,195 ) ( 471,418 )

8 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

12 unchanged sentences

( 9,282 ) ( 7 ) ( 18,958 ) ( 14 )

Other (expense) income, net ( 10 ) 8 ( 14 ) ( 14 )

Other expense, net ( 4 ) ( 9 ) ( 4 ) ( 23 )

Impairment on equity securities

13 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

2 unchanged sentences

Net loss ( 68,782 ) ( 21,954 ) ( 142,898 ) ( 82,717 )

Other comprehensive income

Net unrealized gain on marketable debt securities 2,452 1,151 510 6,244

Other comprehensive income (loss)

Net unrealized gain (loss) on marketable debt securities ( 498 ) 1,765 ( 1,942 ) 5,093

Comprehensive loss ( 69,280 ) ( 20,189 ) ( 144,840 ) ( 77,624 )

21 unchanged sentences

Issuance of common stock under the Employee Stock Purchase Plan 53,996 1 929 — — — 930

Comprehensive loss — — — ( 498 ) ( 67,337 ) ( 1,445 ) ( 69,280 )

Stock-based compensation — — 17,190 — — — 17,190

Balance, June 30, 2024 As Restated 61,766,054 $ 619 $ 1,162,726 $ ( 652 ) $ ( 612,195 ) $ ( 1,784 ) $ 548,714

Sale of common stock and pre-funded warrants, net of issuance cost 8,093,712 81 189,098 — — — 189,179

Issuance of common stock upon exercise of stock awards 59,254 1 684 — — — 685

Issuance of restricted stock units 44,427 — — — — — —

Comprehensive income (loss) as restated — — — 2,452 ( 46,288 ) ( 1,154 ) ( 44,990 )

Comprehensive loss as restated — — — ( 498 ) ( 67,337 ) ( 1,445 ) ( 69,280 )

Stock-based compensation — — 17,190 — — — 17,190

Balance, September 30, 2024 As Restated (unaudited) 69,963,447 $ 701 $ 1,364,846 $ 1,800 $ ( 658,483 ) $ ( 2,938 ) $ 705,926

Balance, June 30, 2024 As Restated (unaudited) 61,766,054 $ 619 $ 1,162,726 $ ( 652 ) $ ( 612,195 ) $ ( 1,784 ) $ 548,714

Common Stock Additional

16 unchanged sentences

Stock-based compensation — — 13,563 — — — 13,563

Balance, June 30, 2023 60,600,060 $ 607 $ 1,101,131 $ ( 1,860 ) $ ( 421,002 ) $ — $ 678,876

Issuance of common stock upon exercise of stock awards 34,743 — 356 — — — 356

Issuance of restricted stock units 31,097 — — — — — —

Comprehensive income (loss) — — — 1,151 ( 24,269 ) — ( 23,118 )

Stock-based compensation — — 12,896 — — 12,896

Balance, September 30, 2023 (unaudited) 60,665,900 $ 607 $ 1,114,383 $ ( 709 ) $ ( 445,271 ) $ — $ 669,010

Balance, June 30, 2023 (unaudited) 60,600,060 $ 607 $ 1,101,131 $ ( 1,860 ) $ ( 421,002 ) $ — $ 678,876

See accompanying notes .

1 unchanged sentence

(in thousands)

Nine Months Ended

September 30,

Six Months Ended

(As Restated)

32 unchanged sentences

Proceeds from sale of marketable securities 9,969 —

Net cash (used in) provided by investing activities ( 65,124 ) 92,065

Net cash provided by investing activities 98,334 46,739

Cash flows from financing activities

Proceeds from issuance of common stock and pre-funded warrants 201,256 —

Common stock and pre-funded warrants issuance costs ( 12,077 ) —

Proceeds from issuance of common stock upon exercise of stock awards 1,927 1,601

7 unchanged sentences

$ 31,152 $ 34,710

Nine Months Ended

September 30,

Six Months Ended

Supplemental disclosure of cash flow information

3 unchanged sentences

Supplemental disclosures of non-cash activities

Unrealized gain on marketable debt securities $ 510 $ 6,244

Unrealized (loss) gain on marketable securities $ ( 1,942 ) $ 5,093

ROU assets obtained $ 7,166 $ —

5 unchanged sentences

Notes to Financial Statements

September 30, 2024

June 30, 2024

Summary of Significant Accounting Policies

21 unchanged sentences

These reclassifications did not affect the prior period's total assets, liabilities, stockholders' equity, net loss or cash flows.

During the nine months ended September 30, 2024, we adopted a change in

During the six months ended June 30, 2024, we adopted a change in

presentation on our consolidated statements of loss to include loss from disposal of fixed assets in operating expenses.

5 unchanged sentences

The Company assesses its intangible assets for impairment if indicators are present or changes in circumstances suggest that impairment may exist.

There was no impairment charge recorded for the three and nine months ended September 30, 2024 and 2023.

There was no impairment charge recorded for the three and six months ended June 30, 2024 and 2023.

The Company capitalizes certain in-process intangible assets that are then abandoned when they are no longer pursued or used in current research activities.

We abandoned $ 1.4 million and $ 2.2 million of in-process intangible assets during the three and nine months ended September 30, 2024, respectively.

We abandoned $ 0.2 million and $ 0.8 million of in-process intangible assets during the three and nine months ended September 30, 2023, respectively.

We abandoned $ 0.4 million and $ 0.8 million of in-process intangible assets for the three and six months ended June 30, 2024.

We abandoned $ 0.3 million and $ 0.6 million of in-process intangible assets during the three and six months ended June 30, 2023.

Marketable Debt and Equity Securities

1 unchanged sentence

The investment policy limits the maturity of any individual security to a maximum of 36 months.

The average maturity of securities in the portfolio as of September 30, 2024 is less than 12 months.

The average maturity of securities in the portfolio as of June 30, 2024 is less than 12 months.

The Company invests its excess cash primarily in marketable debt securities issued by investment grade institutions.

1 unchanged sentence

These assets are carried at fair value and any impairment losses and recoveries related to the underlying issuer’s credit standing are recognized within other income (expense), while non-credit related impairment losses and recoveries are recognized within accumulated other comprehensive income (loss).

There were no impairment losses or recoveries recorded for the three and nine months ended September 30, 2024 and 2023.

There were no impairment losses or recoveries recorded for the three and six months ended June 30, 2024 and 2023.

Accrued interest on marketable debt securities is included in the marketable securities’ carrying value.

Each reporting period, the Company reviews its portfolio of marketable debt securities, using both quantitative and qualitative factors, to determine if each security’s fair value has declined below its amortized cost basis.

During the three and nine months ended September 30, 2024, the Company recorded an unrealized gain of $ 2.5 million and $ 0.5 million, respectively, in its portfolio of marketable debt securities.

During the three and nine months ended September 30, 2023, the Company recorded a net unrealized gain of $ 1.2 million and $ 6.2 million, respectively.

The unrealized gain is due to the changing interest rate environment.

The net unrealized gain is recorded in other comprehensive income for the three and nine months ended September 30, 2024 and 2023.

During the three and six months ended June 30, 2024, the Company recorded an unrealized loss of $ 0.5 million and $ 1.9 million in its portfolio of marketable debt securities.

During the three and six months ended June 30, 2023, the Company recorded an unrealized gain of $ 1.8 million and $ 5.1 million.

The unrealized loss is due to the changing interest rate environment and is not due to changes in the credit quality of the underlying securities.

The unrealized gain (loss) is recorded in other comprehensive income (loss) for the three and six months ended June 30, 2024 and 2023.

The Company receives equity securities in connection with certain licensing transactions with its partners.

2 unchanged sentences

If the Company sells an investment, any realized gain or loss on the sale of the securities will be recognized within other income (expense) in the consolidated statements of loss in the period of sale.

The Company also had an investment in equity securities without a readily determinable fair value, where the Company elected the measurement alternative to record the investment at its initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

There is no impairment charge for the three months ended September 30, 2024.

There was an impairment charge of $ 20.4 million recorded for the nine months ended September 30, 2024 in connection with the valuation of equity securities without a readily determinable fair value.

There was no impairment charge recorded for the three and nine months ended September 30, 2023.

Following the closing of Zenas' initial public offering on September 16, 2024, the Company no longer holds an investment in equity securities without a readily determinable fair value.

The Company also has investments in equity securities without a readily determinable fair value, where the Company elects the measurement alternative to record the investment at its initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

There was an impairment charge of $ 20.4 million recorded for the six months ended June 30, 2024 in connection with equity securities without a readily determinable fair value.

There was no impairment charge recorded for the three and six months ended June 30, 2023.

Liability Related to the Sale of Future Revenues

10 unchanged sentences

There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2023 Annual Report on Form 10-K.

Restatement of a Previously Issued Financial Statements

In connection with the preparation of the Company’s financial statements for the year ended December 31, 2024, the Company determined that the Ultomiris Royalty Sale Agreement with OMERS entered into in November 2023 was incorrectly accounted for as deferred income and should have been accounted for as debt and that the Company understated the amount of its research and experimental expenses that should have been capitalized under Section 174 of the Code for the year ended December 31, 2023 as well as misstatement related to its state tax obligations, and therefore identified uncertain tax positions for federal and state.

The impact of the restatement on the consolidated balance sheet as of September 30, 2024 is as follows (in thousands):

September 30, 2024

Restatement of Previously Issued Financial Statements

The impact of the restatement on the consolidated balance sheet as of June 30, 2024 is as follows (in thousands):

June 30, 2024

As Reported Adjustment As Restated

Accounts receivable 22,073 13,850 35,923

15 unchanged sentences

Total liabilities and stockholders’ equity $ 826,167 $ 14,452 $ 840,619

The impact of the restatement on the consolidated statements of loss for the three months ended September 30, 2024 is as follows (in thousands):

Three Months Ended September 30, 2024

The impact of the restatement on the consolidated statements of loss for the three months ended June 30, 2024 is as follows (in thousands):

Three Months Ended June 30, 2024

As Reported Adjustment As Restated

12 unchanged sentences

$ ( 1.07 ) $ ( 0.02 ) $ ( 1.09 )

The impact of the restatement on the consolidated statement of loss for the nine months ended September 30, 2024 is as follows (in thousands):

Nine Months Ended September 30, 2024

The impact of the restatement on the consolidated statement of loss for the six months ended June 30, 2024 is as follows (in thousands):

Six Months Ended June 30, 2024

As Reported Adjustment As Restated

3 unchanged sentences

Interest expense ( 1,921 ) ( 17,037 ) ( 18,958 )

Total other income (expense), net ( 15,828 ) ( 17,037 ) ( 32,865 )

Loss before income tax expense ( 136,000 ) ( 6,898 ) ( 142,898 )

6 unchanged sentences

$ ( 2.18 ) $ ( 0.11 ) $ ( 2.29 )

The impact of the restatement on the consolidated statements of comprehensive loss for the three months ended September 30, 2024 is as follows (in thousands):

Three Months Ended September 30, 2024

The impact of the restatement on the consolidated statements of comprehensive loss for the three months ended June 30, 2024 is as follows (in thousands):

Three Months Ended June 30, 2024

As Reported Adjustment As Restated

Net loss ( 67,408 ) ( 1,374 ) ( 68,782 )

Other comprehensive income

Net unrealized gain on marketable debt securities 2,452 — 2,452

Other comprehensive loss

Net unrealized loss on marketable debt securities ( 498 ) — ( 498 )

Comprehensive loss ( 67,906 ) ( 1,374 ) ( 69,280 )

2 unchanged sentences

$ ( 66,461 ) $ ( 1,374 ) $ ( 67,835 )

The impact of the restatement on the consolidated statement of comprehensive loss for the nine months ended September 30, 2024 is as follows (in thousands):

Nine Months Ended September 30, 2024

The impact of the restatement on the consolidated statement of comprehensive loss for the six months ended June 30, 2024 is as follows (in thousands):

Six Months Ended June 30, 2024

As Reported Adjustment As Restated

Net loss ( 136,117 ) ( 6,781 ) ( 142,898 )

Other comprehensive income

Net unrealized gain on marketable debt securities 510 — 510

Other comprehensive loss

Net unrealized loss on marketable debt securities ( 1,942 ) — ( 1,942 )

Comprehensive loss ( 138,059 ) ( 6,781 ) ( 144,840 )

2 unchanged sentences

$ ( 135,938 ) $ ( 6,781 ) $ ( 142,719 )

The impact of the restatement on the consolidated statements of cash flows for the nine months ended September 30, 2024 is as follows (in thousands):

Nine Months Ended September 30, 2024

The impact of the restatement on the consolidated statements of cash flows for the six months ended June 30, 2024 is as follows (in thousands):

Six Months Ended June 30, 2024

As Reported Adjustment As Restated

6 unchanged sentences

Accounts receivable

( 10,783 ) 790 ( 9,993 )

Income taxes ( 5,782 ) ( 117 ) ( 5,899 )

3 unchanged sentences

Reduction of liability for sale of future royalties

Net cash provided by financing activities 186,983 5,738 192,721

( 3,614 ) 3,614 —

Net cash (used in) provided by financing activities ( 757 ) 3,614 2,857

Fair Value of Financial Instruments

2 unchanged sentences

The fair value of the other financial instruments closely approximates their fair value due to their short-term maturities.

The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820).

The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosures (ASC 820).

ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosure about fair value measurements.

8 unchanged sentences

The assets recorded at fair value are classified within the hierarchy as follows for the periods reported (in thousands):

September 30, 2024

June 30, 2024

(unaudited) December 31, 2023

6 unchanged sentences

Our policy is to record transfers of assets between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value.

During the three and nine months ended September 30, 2024 and 2023, there were no transfers between Level 1 and Level 2.

During the three and six months ended June 30, 2024 and 2023, there were no transfers between Level 1 and Level 2.

Net Loss Per Common Share

4 unchanged sentences

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

7 unchanged sentences

$ ( 1.09 ) $ ( 0.37 ) $ ( 2.29 ) $ ( 1.38 )

For each of the three and nine months ended September 30, 2024 and 2023, all outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per common share as the effect of including such securities would have been anti-dilutive.

For the three and six months ended June 30, 2024 and 2023, all outstanding potentially dilutive securities have been excluded from the calculation of diluted net loss per common share as the effect of including such securities would have been anti-dilutive.

Comprehensive Loss

Comprehensive loss is comprised of net loss and other comprehensive income.

For each of the three and nine-month periods ended September 30, 2024 and 2023, the only component of other comprehensive income is net unrealized gain on marketable debt securities.

There were no material reclassifications out of accumulated other comprehensive income (loss) during each of the three and nine-month periods ended September 30, 2024 and 2023.

Comprehensive loss is comprised of net loss and other comprehensive income (loss).

For each of the three and six-month periods ended June 30, 2024 and 2023, the only component of other comprehensive income (loss) is net unrealized gain (loss) on marketable debt securities.

There were no material reclassifications out of accumulated other comprehensive loss during each of the three and six-month periods ended June 30, 2024 and 2023.

Marketable Debt and Equity Securities

The Company’s marketable debt securities held as of September 30, 2024 and December 31, 2023 are summarized below:

September 30, 2024 Amortized

The Company’s marketable debt securities held as of June 30, 2024 and December 31, 2023 are summarized below:

June 30, 2024 Amortized

Losses Fair Value

17 unchanged sentences

Total investments $ 668,757

The maturities of the Company’s marketable debt securities as of September 30, 2024 are as follows:

September 30, 2024 Amortized

The maturities of the Company’s marketable debt securities as of June 30, 2024 are as follows:

June 30, 2024 Amortized

Cost Estimated

3 unchanged sentences

$ 554,875 $ 554,234

The unrealized losses on available-for-sale investments and their related fair values as of September 30, 2024 and December 31, 2023 are as follows:

The unrealized losses on available-for-sale investments and their related fair values as of June 30, 2024 and December 31, 2023 are as follows:

Less than 12 months 12 months or greater

September 30, 2024 Fair value Unrealized

June 30, 2024 Fair value Unrealized

losses Fair value Unrealized

(in thousands)

Corporate Securities $ 119,044 $ ( 217 ) $ 11,895 $ ( 62 )

Government Securities 246,154 ( 132 ) 79,478 ( 242 )

$ 365,198 $ ( 349 ) $ 91,373 $ ( 304 )

Less than 12 months 12 months or greater

6 unchanged sentences

The unrealized losses from the available-for-sale securities are due to changes in the interest rate environment and not changes in the credit quality of the underlying securities in the portfolio.

The Company’s equity securities include securities with a readily determinable fair value and securities without a readily determinable fair value.

Equity securities with a readily determinable fair value are carried at fair value with changes in fair value recognized each period and reported within other income (expense), net.

For equity securities without a readily determinable fair value, the Company elects the measurement alternative to record these investments at their initial cost and evaluates such investments at each reporting period for evidence of impairment, or observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

The Company sold 443,909 shares of common stock of Astria Therapeutics, Inc.

(Astria) in the second quarter of 2024, and sold the remaining 253,958 shares of common stock of Astria in July 2024.

The Company does not hold any shares of common stock of Astria as of September 30, 2024.

The Company recorded realized gains of $ 0.1 million and $ 1.3 million for the three and nine months ended September 30, 2024, respectively.

The Company held 697,867 shares of common stock as of September 30, 2023, which were classified as equity securities with a readily determinable fair value.

The Company recorded unrealized losses of $ 0.6 million and $ 4.5 million for the three and nine months ended September 30, 2023, respectively.

The Company currently holds 1,885,533 shares of common stock of INmune Bio, Inc.

The 1,885,533 shares of INmune common stock are classified as equity securities with a readily determinable fair value.

For the three and nine months ended September 30, 2024, the Company recorded unrealized losses of $ 6.5 million and $ 11.1 million, respectively.

For the three and nine months ended September 30, 2023, the Company recorded an unrealized loss of $ 4.4 million and an unrealized gain of $ 0.8 million, respectively.

The Company currently holds 717,144 shares of common stock of Viridian Therapeutics, Inc.

The shares of Viridian common stock are classified as equity securities with a readily determinable fair value.

The Company recorded unrealized gains of $ 7.0 million and $ 0.7 million for the three and nine months ended September 30, 2024, respectively.

The Company recorded unrealized losses of $ 6.1 million and $ 9.9 million for the three and nine months ended September 30, 2023, respectively.

The Company holds an equity interest in Zenas BioPharma, Inc.

The Company’s equity interests previously included preferred stock in Zenas when Zenas was a privately-held company.

The preferred shares were received as an upfront payment and a milestone payment for licensing certain clinical and preclinical assets from the Company and did not have a readily determinable fair value.

The Company elected the measurement alternative to carry the Zenas equity at cost minus impairment, plus or minus changes resulting from observable price changes in an orderly transaction for the identical or a similar investment of the same issuer.

During the six months ended June 30, 2024, the Company recorded $ 20.4 million of impairment charge due to an impairment analysis using the measurement alternative for the valuation of a security without a readily determinable fair value.

On September 16, 2024, following the closing of Zenas' initial public offering, the Company's preferred stock in Zenas was automatically converted to 3,098,380 shares of common stock which were then classified as equity securities with a readily determinable fair value.

The Company subsequently discontinued the use of the measurement alternative in valuing its equity interest in Zenas.

As a result, the Company recorded an unrealized gain of $ 8.6 million for each of the three and nine months ended September 30, 2024.

Equity securities with a readily determinable fair value, which are categorized as Level 1 in the fair value hierarchy under ASC 820, and their fair values (in thousands) as of September 30, 2024 and December 31, 2023 are as follows:

The Company’s equity securities include securities with a readily determinable fair value.

These investments are carried at fair value with changes in fair value recognized each period and reported within other income (expense), net.

For the three and six months ended June 30, 2024, net losses of $ 12.0 million and $ 9.7 million were recorded under other income (expense) related to these securities.

For the three and six months ended June 30, 2023, a net gain of $ 0.3 million and a net loss of $ 2.6 million were recorded under other income (expense).

Equity securities with a readily determinable fair value, which are categorized as Level 1 in the fair value hierarchy under ASC 820, and their fair values (in thousands) as of June 30, 2024 and December 31, 2023 are as follows:

Fair Value Fair Value

September 30, 2024 December 31, 2023

June 30, 2024 December 31, 2023

Astria Common Stock $ 2,311 $ 5,360

1 unchanged sentence

Viridian Common Stock 9,330 15,619

Zenas Common Stock 52,425 —

$ 28,271 $ 42,210

Equity securities without a readily determinable fair value and their carrying values (in thousands) as of September 30, 2024 and December 31, 2023 are as follows:

Carrying Value Carrying Value

September 30, 2024 December 31, 2023

Zenas Preferred Stock $ — $ 64,210

Net gain (loss) recorded related to these equity securities are recorded under other income (expense).

Below is a reconciliation of net gain (loss) recorded on equity securities during the three and nine months ended September 30, 2024 and 2023:

The Company sold 443,909 shares of common stock of Astria Therapeutics, Inc.

(Astria) and held 253,958 shares of common stock of Astria as of June 30, 2024.

In July 2024, the Company sold the remaining shares of the common stock of Astria.

The common stock has a readily determinable fair value.

For the remaining equity interest in Astria held at June 30, 2024, the Company recorded an unrealized loss of $ 1.3 million and an unrealized gain of $ 0.4 million for the three and six months ended June 30, 2024, respectively.

The Company recorded unrealized losses of $ 3.5 million and $ 3.9 million related to its equity interest in Astria for the three and six months ended June 30, 2023, respectively.

The Company currently holds 1,885,533 shares of common stock of INmune Bio, Inc.

The 1,885,533 shares of INmune common stock are classified as equity securities with a readily determinable fair value.

For the three and six months ended June 30, 2024, the Company recorded unrealized losses of $ 5.5 million and $ 4.6 million, respectively, related to its investment in INmune.

For the three and six months ended June 30, 2023, the Company recorded unrealized gains of $ 4.9 million and $ 5.2 million, respectively.

The Company currently holds 717,144 shares of common stock of Viridian Therapeutics, Inc.

The shares of Viridian common stock are classified as equity securities with a readily determinable fair value.

recorded unrealized losses of $ 3.2 million and $ 6.3 million for the three and six months ended June 30, 2024, respectively.

The Company recorded unrealized losses of $ 1.2 million and $ 3.9 million for the three and six months ended June 30, 2023, respectively, related to the shares of Viridian common stock.

Below is a reconciliation of net gain (loss) recorded on equity securities during the three and six months ended June 30, 2024 and 2023:

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

1 unchanged sentence

$ ( 12,027 ) $ 288 $ ( 9,702 ) $ ( 2,610 )

Net gain recorded on sale of equity securities 92 — 1,280 —

Net gain (loss) recorded on sale of equity securities

( 2,012 ) — 827 —

Unrealized gain (loss) recorded on equity securities held at the reporting date

$ ( 10,015 ) $ 288 $ ( 10,529 ) $ ( 2,610 )

The Company also has investments in equity securities without a readily determinable fair value.

The Company elects the measurement alternative to record these investments at their initial cost and evaluates such investments at each reporting period for evidence of impairment, or observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

Equity securities without a readily determinable fair value and their carrying values (in thousands) as of June 30, 2024 and December 31, 2023 are as follows:

Carrying Value Carrying Value

June 30, 2024 December 31, 2023

Zenas Preferred Stock $ 43,780 $ 64,210

The Company currently holds an equity interest in Zenas BioPharma, Inc.

(Zenas), a private biotechnology company.

The Company’s equity interests include preferred stock in Zenas which were received as upfront payments and a milestone payment for licensing certain clinical and preclinical assets from the Company.

The Company elected the measurement alternative to carry the Zenas equity at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer.

During the six months ended June 30, 2024, we recorded $ 20.4 million of impairment charge as a result of Zenas closing a Series C financing transaction on May 3, 2024.

Stock Based Compensation

In June 2023, our Board of Directors (the Board) and stockholders approved the 2023 Equity Incentive Plan (the 2023 Plan), which became effective as of June 14, 2023, and superseded the 2013 Equity Incentive Plan (the 2013 Plan).

No additional awards may be granted under the 2013 Plan.

In June 2023, our Board of Directors (the Board) and stockholders approved the 2023 Equity Incentive Plan (the 2023 Plan), which became effective as of June 14, 2023.

The Board and the requisite stockholders previously approved the 2013 Equity Incentive Plan (the 2013 Plan).

We suspended the 2013 Plan, and no additional award may be granted under the 2013 Plan.

The 2023 Plan reserve consists of 3,000,000 shares and the remaining available shares from the 2013 Plan as of the effective date of the 2023 Plan.

1 unchanged sentence

The 2023 Plan does not include a provision for an automatic increase in shares, also known as an evergreen provision.

As of September 30, 2024, the total number of shares of common stock available for issuance under the 2023 Plan is 18,617,423 , which includes shares of common stock that were available for issuance under the 2013 Plan as of the

effective date of the 2023 Plan.

As of September 30, 2024, a total of 2,510,949 options have been granted under the 2023 Plan.

As of June 30, 2024, the total number of shares of common stock available for issuance under the 2023 Plan is 18,721,104 , which includes shares of common stock that were available for issuance under the prior Plans as of the effective date of the 2023 Plan.

As of June 30, 2024, a total of 2,380,651 options have been granted under the 2023 Plan.

In November 2013, the Board and our stockholders approved the ESPP, which became effective as of December 5, 2013.

As of September 30, 2024, the total number of shares of common stock available for issuance under the ESPP is 987,344 .

Unless otherwise determined by the Board, beginning on January 1, 2014, and continuing until January 1, 2023, the total number of shares of common stock available for issuance under the ESPP automatically increased annually on January 1 by the lesser of (i) 1 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock.

As of June 30, 2024, the total number of shares of common stock available for issuance under the ESPP is 987,344 .

of the immediately preceding year, or (ii) 621,814 shares of common stock.

The automatic increase has expired, and the number of shares of common stock available for issuance under the ESPP was not increased on January 1, 2024.

As of September 30, 2024, we have issued a total of 787,474 shares of common stock under the ESPP.

During the nine months ended September 30, 2024, the Company awarded 1,026,220 RSUs under the 2023 Plan to certain employees and non-employee directors.

As of June 30, 2024, we have issued a total of 787,474 shares of common stock under the ESPP.

During the six months ended June 30, 2024, the Company awarded 959,071 RSUs to certain employees.

The standard vesting of these awards is generally in three equal annual installments and is contingent on an employee’s continued service to the Company.

The fair value of these awards is determined based on the intrinsic value of the stock on the date of grant and will be recognized as stock-based compensation expense over the requisite service period.

As of September 30, 2024, a total of 1,112,887 RSUs have been granted under the 2023 Plan.

As of June 30, 2024, a total of 1,045,738 RSUs have been granted under the 2023 Plan.

The Company extended vesting periods and expiration dates of equity awards for employees who retired in April 2024.

There was a $ 3.1 million incremental expense as a result of the extension of the expiration dates, and there was a $ 1.2 million expense as a result of the extension of the vesting periods.

Total employee, director and non-employee stock-based compensation expense recognized for the three and nine months ended September 30, 2024 and 2023 are as follows (in thousands):

There is a $ 3.1 million incremental expense as a result of the extension of the expiration dates, and there is a $ 1.2 million expense as a result of the extension of the vesting periods.

Total employee, director and non-employee stock-based compensation expense recognized for the three and six months ended June 30, 2024 and 2023 are as follows (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

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Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

14 unchanged sentences

Options exercised ( 162,895 ) $ 11.83

Balance at September 30, 2024 12,603,466 $ 28.44 5.96 $ 6,942

Balance at June 30, 2024 12,661,426 $ 28.48 6.18 $ 5,813

Exercisable 8,295,121 $ 29.38 4.76 $ 5,745

We calculate the intrinsic value as the difference between the exercise price of the options and the closing price of common stock of $ 20.11 per share as of September 30, 2024.

The weighted-average fair value of options granted during the nine-month periods ended September 30, 2024 and 2023 were $ 22.21 and $ 30.07 per share, respectively.

There were 2,068,582 options granted during the nine-month period ended September 30, 2023.

We estimated the fair value of each equity award, including stock options and shares issued under our ESPP, using the Black-Scholes option-pricing model based on the date of grant of such stock option or ESPP share issuance date, with the following weighted average assumptions for the three and nine months ended September 30, 2024 and 2023:

We calculate the intrinsic value as the difference between the exercise price of the options and the closing price of common stock of $ 18.93 per share as of June 30, 2024.

The weighted-average fair value of options granted during the six-month periods ended June 30, 2024 and 2023 were $ 22.43 and $ 30.65 per share, respectively.

There were 1,941,412 options granted during the six-month period ended June 30, 2023.

issuance date, with the following weighted average assumptions for the three and six months ended June 30, 2024 and 2023:

Options Options

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

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Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

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Expected dividend yield — % — % — % — %

As of September 30, 2024, the unamortized compensation expense related to unvested stock options was $ 50.4 million.

As of June 30, 2024, the unamortized compensation expense related to unvested stock options was $ 56.9 million.

The remaining unamortized compensation expense will be recognized over the next 2.7 years.

As of September 30, 2024, the unamortized compensation expense under our ESPP was $ 1.0 million.

As of June 30, 2024, the unamortized compensation expense under our ESPP was $ 1.3 million.

The remaining unamortized expense will be recognized over the next 1.4 years.

The following table summarizes the RSU activity for the nine-month period ended September 30, 2024:

The following table summarizes the RSU activity for the six-month period ended June 30, 2024:

Units Weighted

5 unchanged sentences

Forfeited ( 119,483 ) 29.80

Unvested RSUs at September 30, 2024 1,753,764 $ 25.57

As of September 30, 2024, the unamortized compensation expense related to unvested RSUs was $ 31.6 million.

Unvested RSUs at June 30, 2024 1,778,656 $ 26.02

As of June 30, 2024, the unamortized compensation expense related to unvested RSUs was $ 37.0 million.

The remaining unamortized expense will be recognized over the next 2.1 years.

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The Lease Agreement provides for two separate phases of lease and occupancy.

The first phase commenced on August 1, 2022 and provided the Company with an improvement allowance up to $ 17.0 million.

The first phase commenced on August 1, 2022 and provides the Company with an improvement allowance up to $ 17.0 million.

The second phase of the lease agreement will commence no later than September 30, 2026 and includes an additional improvement allowance up to $ 3.3 million.

In August 2022, the Company entered into an amendment pursuant to which the Company received an additional $ 5.0 million in tenant improvement allowance in exchange for an increase in the rental rate of the phase 1 space.

In August 2022, the Company entered into an amendment, which the Company received an additional $ 5.0 million in tenant improvement allowance in exchange for an

increase in the rental rate of the phase 1 space.

The Company received delivery of the second phase premises on December 1, 2022.

The Company placed the new facility into service in February 2023.

In January 2024, the Company entered into an amendment, in which the Company was paid $ 0.7 million of tenant improvement allowance from the second phase for HVAC costs in the first phase.

In January 2024, the Company entered into an amendment, in which the Company will be paid for $ 0.7 million of tenant improvement allowance from the second phase for HVAC costs in the first phase.

In August 2023, the Company entered into a Sublease Agreement for office space in San Diego, California.

The term of the Sublease Agreement began in September 2023 and ends in December 2027.

The term of the Sublease Agreement begins in September 2023 and ends in December 2027.

In connection with the Sublease Agreement, the Company provided a $ 0.4 million Letter of Credit to the landlord.

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The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

The following table reconciles the undiscounted cash flows for the operating leases at September 30, 2024 to the operating lease liabilities recorded on the balance sheet (in thousands):

The following table reconciles the undiscounted cash flows for the operating leases at June 30, 2024 to the operating lease liabilities recorded on the balance sheet (in thousands):

Years ending December 31,

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Total lease liabilities $ 68,418

The following table summarizes lease costs and cash payments for the three and nine months ended September 30, 2024 and 2023 (in thousands):

The following table summarizes lease costs and cash payments for the three and six months ended June 30, 2024 and 2023 (in thousands):

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

3 unchanged sentences

Cash paid for amounts included in the measurement of lease liabilities $ 807 $ 721 $ 1,877 $ 1,445

As of September 30, 2024, the weighted-average remaining lease term for operating leases is 10.5 years, and the weighted-average discount rate for operating leases is 7.0 %.

As of September 30, 2023, the weighted-average remaining lease term for operating leases was 11.0 years, and the weighted-average discount rate for operating leases was 8.8 %.

As of June 30, 2024, the weighted-average remaining lease term for operating leases is 10.7 years, and the weighted-average discount rate for operating leases is 7.0 %.

As of June 30, 2023, the weighted-average remaining lease term for operating leases was 11.7 years, and the weighted-average discount rate for operating leases was 8.9 %.

Commitments and Contingencies

From time to time, the Company may be subject to various litigation and related matters arising in the ordinary course of business.

We are currently a party to an action initiated by Merus N.V.

(Merus) in the District of Delaware alleging that our manufacture, use, offer for sale, sale, and/or importation of common light chain antibodies and heterodimeric antibodies infringes certain claims of three Merus patents.

Merus filed its complaint against us on August 5, 2024.

Merus asserted claims of U.S.

9,944,695, 9,358,286 and 11,926,859 (collectively, the Asserted Patents).

Merus seeks a judgment of patent infringement, an order enjoining us from infringing the Asserted Patents, a damages award (together with interest), a declaration of willful infringement, and a finding that this case is exceptional.

On October 10, 2024, we filed a motion to dismiss the Merus complaint with prejudice under Rule 12(b)(6), in which we argued that all of the activities accused of infringement are covered by the 35 U.S.C.§ 271(e)(1) safe harbor.

Merus filed its response to our motion on October 31, 2024, and our deadline for replying to the Merus response is November 14, 2024.

We believe we have strong defenses to Merus' claims, including defenses of invalidity and/or non-infringement, but there is no guarantee that we will prevail.

The Company does not believe it is currently subject to other matters where there is at least a reasonable possibility that a material loss may be incurred.

The Company does not believe it is currently subject to any material matters where there is at least a reasonable possibility that a material loss may be incurred.

The Company is obligated to make future payments to third parties pursuant to certain license agreements, including sublicense fees, royalties, and payments that become due and payable on the achievement of certain development and commercialization milestones.

As the amount and timing of sublicense fees and the achievement and timing of these milestones are not probable and estimable, such commitments have not been included on the Company’s balance sheets for the periods ended September 30, 2024 and December 31, 2023.

The Company has also entered into agreements with third-party vendors that will require us to make future payments upon the delivery of goods and services in future periods.

Collaboration and Licensing Agreements

The following is a summary description of the material collaboration arrangements in the three and nine months ended September 30, 2024 and 2023.

The following is a summary description of the material collaboration arrangements in the three and six months ended June 30, 2024 and 2023.

Alexion Pharmaceuticals, Inc.

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On November 3, 2023, the Company entered into the Ultomiris Royalty Sale Agreement with OMERS, in which OMERS acquired the rights to certain royalties associated with the existing license relating to Ultomiris in exchange for cash consideration.

For the nine months ended September 30, 2024, Company earned and recognized $ 42.1 million in non-cash royalty revenue under the Ultomiris Royalty Sale Agreement.

The Company recognized $ 15.7 million and $ 42.1 million of non-cash royalty revenue during the three and nine months ended September 30, 2024, respectively, and $ 11.8 million and $ 33.4 million of royalty revenue under this arrangement for the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, there is $ 15.7 million receivable and no deferred revenue related to this agreement.

For the six months ended June 30, 2024, Company earned and recognized $ 26.4 million in non-cash royalty revenue under the Ultomiris Royalty Sale Agreement.

The Company recognized $ 13.8 million and $ 26.4 million of non-cash royalty revenue during the three and six months ended June 30, 2024, respectively, and $ 11.2 million and $ 21.6 million of royalty revenue under this arrangement for the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, there is $ 13.8 million receivable and no deferred revenue related to this agreement.

Payment of this receivable will be made directly to OMERS.

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Hoffmann-La Roche Ltd (collectively, Genentech) for the development and commercialization of novel IL-15 collaboration products (Collaboration Products), including efbalropendekin alfa (also named XmAb306 and RG6323), the Company’s IL-15/IL15Rα-Fc candidate.

Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb306, and we shared in 45 % of development and commercialization costs of Collaboration Products.

We were also eligible to share in 45 % of net profits and losses from the sale of approved products.

Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb306, and we shared in 45 % of development and commercialization costs of Collaboration Products, and we were eligible to share in 45 % of net profits and losses from the sale of approved products.

However, in the fourth quarter of 2023, we agreed with Genentech to convert our current development cost and profit-sharing arrangement into a royalty and milestone payment-based arrangement.

Pursuant to the terms of the amended agreement with Genentech, effective June 1, 2024, Genentech assumed sole responsibility over all clinical, regulatory and commercial activities.

We are eligible to receive up to $ 600.0 million in milestones, including $ 115.0 million in development milestones, $ 185.0 million in regulatory milestones and $ 300.0 million in sales-based milestones and tiered royalties ranging from low double-digit to mid-teen percentages.

The Company did not recognize revenue related to the Genentech Agreement for the three and nine months ended September 30, 2024 or 2023.

As of September 30, 2024, there is a $ 7.6 million payable related to cost-sharing development activities during the first half of 2024 for development studies being conducted under the Genentech Agreement.

There is no deferred revenue as of September 30, 2024 related to this agreement.

Gilead Sciences, Inc.

In January 2020, the Company entered into a Technology License Agreement (the Gilead Agreement) with Gilead Sciences, Inc.

(Gilead), in which the Company provided Gilead an exclusive license to its Cytotoxic Fc and Xtend Fc technologies for an initial identified antibody and options for up to three additional antibodies directed to the same molecular target.

In the second quarter 2020, Gilead exercised its options for the three additional antibody compounds.

No revenue was recognized for the three and nine months ended September 30, 2024.

For the three and nine months ended September 30, 2023, the Company recognized $ 6.0 million in revenue related to development milestones.

There is no deferred revenue as of September 30, 2024 related to this agreement.

The Company did not recognize revenue related to the Genentech Agreement for the three and six months ended June 30, 2024 or 2023.

As of June 30, 2024, there is a $ 7.6 million payable related to cost-sharing development activities during the first half of 2024 for development studies being conducted under the Genentech Agreement.

There is no deferred revenue as of June 30, 2024, as obligations to perform research activities have expired.

Janssen Biotech, Inc., a Johnson & Johnson company

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J&J will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate.

The Company did not recognize revenue for the three and nine months ended September 30, 2024, and the Company recognized $ 7.5 million of revenue for the three and nine months ended September 30, 2023 under the J&J Agreement.

As of September 30, 2024, there is no deferred revenue related to this Agreement.

The Company did not recognize revenue for the three and six months ended June 30, 2024 and 2023 under the J&J Agreement.

As of June 30, 2024, there is no deferred revenue related to this Agreement.

Second J&J Agreement

2 unchanged sentences

The Agreement became effective on November 5, 2021.

The Company collaborated with J&J on clinical development of plamotamab and shared development costs with J&J paying 80 % and the Company paying 20 % of certain development costs.

In June 2024, the Company was notified that J&J was terminating its rights to plamotamab, which termination became effective in June 2024.

The Company collaborated with J&J on clinical development of plamotamab with J&J and shared development costs with J&J paying 80 % and the Company paying 20 % of certain development costs.

In June 2024, the Company was notified that J&J will terminate its rights to plamotamab.

The Company is generally responsible for conducting research activities under the Second J&J Agreement, and J&J is generally responsible for all development, manufacturing, and commercialization activities for CD28 Licensed Antibodies that are advanced.

Revenue from the research activities was recognized over a period of time through the end of the research term that services were rendered as we determined that the input method was the appropriate approach to recognize income for such services.

There is a receivable of $ 2.3 million as of September 30, 2024, related to cost-sharing activities for the development of plamotamab under the Second J&J Agreement.

No revenue was recognized for the three and nine months ended September 30, 2024, and the Company recognized $ 6.2 million and $ 33.6 million of revenue for the three and nine months ended September 30, 2023, respectively.

There is no deferred revenue as of September 30, 2024 related to the Second J&J Agreement as obligations to perform research activities have expired.

There is a receivable of $ 5.2 million as of June 30, 2024, related to cost-sharing activities for development of plamotamab under the Second J&J Agreement.

No revenue was recognized for the three and six months ended June 30, 2024, and the Company recognized $ 22.2 million and $ 27.5 million of revenue for the three and six months ended June 30, 2023, respectively.

There is no deferred revenue as of June 30, 2024 related to the Second J&J Agreement as obligations to perform research activities have expired.

MorphoSys AG/Incyte Corporation

In June 2010, the Company entered into a Collaboration and License Agreement (the MorphoSys Agreement) with MorphoSys AG (MorphoSys), which was subsequently amended.

Under the MorphoSys Agreement, we granted MorphoSys an exclusive worldwide license to the Company’s patents and know-how to research, develop and commercialize the XmAb5574 product candidate (subsequently renamed MOR208 and tafasitamab) with the right to sublicense under certain conditions.

In February 2024, Incyte Corporation assumed all of MorphoSys' right, title and interest in the MorphoSys Agreement and acquired exclusive global development and commercialization rights to tafasitamab.

In June 2010, the Company entered into a Collaboration and License Agreement with MorphoSys AG (MorphoSys), which was subsequently amended.

Under the agreement, we granted MorphoSys an exclusive worldwide license to the Company’s patents and know-how to research, develop and commercialize the XmAb5574 product candidate

(subsequently renamed MOR208 and tafasitamab) with the right to sublicense under certain conditions.

In February 2024, Incyte Corporation acquired exclusive global development and commercialization rights to tafasitamab.

If certain developmental, regulatory and sales milestones are achieved, the Company is eligible to receive future milestone payments and royalties.

On November 3, 2023, the Company entered into the Monjuvi Royalty Sale Agreement with OMERS, pursuant to which OMERS acquired the rights to certain royalties earned after July 1, 2023 associated with the existing license relating to Monjuvi.

The Company recognized $ 2.1 million and $ 6.5 million of non-cash royalty revenue during the three and nine months ended September 30, 2024, respectively.

The Company recognized $ 2.7 million and $ 6.6 million of royalty revenue during the three and nine months ended September 30, 2023, respectively.

As of September 30, 2024, there is a receivable of $ 2.1 million related to estimated royalties due under the arrangement.

As of September 30, 2024, there is no deferred revenue related to this agreement.

Omeros Corporation

In August 2020, the Company entered into a Technology License Agreement (the Omeros Agreement) with Omeros Corporation (Omeros), in which the Company provided Omeros a non-exclusive license to its Xtend Fc technology, an exclusive license to apply its Xtend technology to an initial identified antibody and options to apply its Xtend technology to three additional antibodies.

No revenue was recognized for the three and nine months ended September 30, 2024.

For the three and nine months ended September 30, 2023, the Company recognized $ 5.0 million of milestone revenue related to a development milestone.

As of September 30, 2024, there is no deferred revenue related to this Agreement.

The Company recognized $ 1.6 million and $ 4.4 million of non-cash royalty revenue during the three and six months ended June 30, 2024, respectively.

The Company recognized $ 2.0 million and $ 3.9 million of royalty revenue during the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, there is a receivable of $ 2.1 million related to estimated royalties due under the arrangement.

As of June 30, 2024, there is no deferred revenue related to this agreement.

Shanghai Mabgeek Biotech Co., Ltd.

1 unchanged sentence

(Mabgeek), and the Company and Mabgeek entered into Amendment No.

1 on June 21, 2024 (collectively, the Mabgeek Agreement).

1 on June 21, 2024 (collectively, Mabgeek Agreement).

Under the Mabgeek Agreement, the Company received an upfront payment of $1.5 million and up to $11.9 million of milestones.

1 unchanged sentence

The Company evaluated the Mabgeek Agreement and determined that the single performance obligation was access to a non-exclusive license to certain patents of the Company which were transferred to Mabgeek in June 2024.

No revenue was recognized for the three months ended September 30, 2024.

The Company recognized $ 1.5 million of license revenue related to the Mabgeek Agreement for the nine months ended September 30, 2024.

There is no deferred revenue as of September 30, 2024 related to this agreement.

The Company recognized $ 1.5 million of license revenue related to the agreement for the three and six months ended June 30, 2024.

There is no deferred revenue as of June 30, 2024 related to this agreement.

Vega Therapeutics, Inc.

2 unchanged sentences

In March 2024, Vega notified the Company that it initiated a Phase 1 study, and the Company recorded milestone revenue of $ 0.5 million.

The Company recognized $ 0.5 million of revenue for the nine months ended September 30, 2024.

No revenue was recognized for the three months ended September 30, 2024 or the three and nine months ended September 30, 2023.

The Company recognized $ 0.5 million of revenue for the six months ended June 30, 2024.

No revenue was recognized for the three months ended June 30, 2024 or the three and six months ended June 30, 2023.

Vir Biotechnology, Inc.

4 unchanged sentences

Vir and its marketing partner, GSK, began recording sales for sotrovimab beginning in June 2021.

The Company recognized nominal amounts of revenue for the three months ended September 30, 2024 and 2023.

The Company recognized $ 0.1 million and $ 1.5 million of revenue for the nine months ended September 30, 2024 and 2023, respectively.

As of September 30, 2024, there is no receivable related to estimated royalty due under this agreement, and there is no deferred revenue related to this agreement.

The Company recognized $ 0.1 million of revenue for the six months ended June 30, 2024, and the Company recognized $ 0.1 million and $ 1.5 million of royalty revenue for the three and six months ended June 30, 2023, respectively.

As of June 30, 2024, there is no receivable related to estimated royalty due under this agreement, and there is no deferred revenue related to this agreement.

Zenas BioPharma, Inc.

In November 2020, the Company entered into a License Agreement (the Zenas Agreement) with Zenas, pursuant to which the Company received an equity interest in Zenas in exchange for the exclusive, worldwide rights to develop and commercialize drug candidates from the Company.

The equity in Zenas was recorded at the fair value as of the date of the Zenas Agreement and was reviewed each reporting period for impairment or other evidence of change in value.

In November 2021, the Company entered into a second License Agreement (the Second Zenas Agreement) with Zenas, pursuant to which the Company received additional equity in Zenas in exchange for the exclusive worldwide rights to develop and commercialize the Company’s obexelimab (XmAb5871) drug candidate.

The equity in Zenas is recorded at the fair value as of the date of the Zenas Agreement and is reviewed each reporting period for impairment or other evidence of change in value.

In November 2021, the Company entered into a second License Agreement (Second Zenas Agreement) with Zenas, pursuant to which the Company received additional equity in Zenas in exchange for the exclusive worldwide rights to develop and commercialize the Company’s obexelimab (XmAb5871) drug candidate.

Under the license, the Company is eligible to receive development, regulatory and sales milestones in connection with the development of obexelimab and royalties on net sales of approved products.

2 unchanged sentences

The warrant in Zenas was recorded at its fair value as of the date of the Second Zenas Agreement and was reviewed each reporting period for impairment or other evidence of change in value.

The preferred shares received in

exchange for the warrant were recorded at their fair value at the date of the exchange and were reviewed each reporting period for impairment or other evidence of change in value.

The preferred shares received in exchange for the warrant were recorded at their fair value at the date of the exchange and is reviewed each reporting period for impairment or other evidence of change in value.

In 2023, Zenas initiated a Phase 3 clinical study with obexelimab and also dosed a second patient in the study.

The Company received a development milestone in the form of additional preferred stock in Zenas with a fair value of $ 10.0 million.

On September 16, 2024, following the closing of Zenas' initial public offering, the Company's preferred stock ownership automatically converted to 3,098,380 shares of common stock of Zenas, which is classified as equity securities with a readily determinable fair value.

As a result, the Company discontinued the use of the measurement alternative to record its equity interest in Zenas.

The Company did not recognize any revenue for the three and nine months ended September 30, 2024, or the three months ended September 30, 2023.

The Company recognized $ 10.0 million of milestone revenue for the nine months ended September 30, 2023, and there is no deferred revenue related to this agreement.

The Company recognized an impairment charge of $ 20.4 million in the six months ended June 30, 2024 due to an impairment analysis resulting from the Zenas Series C financing transaction.

The Company did not record an impairment charge or change in the value of the Zenas equity in the three and six months ended June 30, 2023.

The Company did not recognize any revenue for the three and six months ended June 30, 2024.

The Company recognized $ 10.0 million of milestone revenue for the three and six months ended June 30, 2023, and there is no deferred revenue related to this agreement.

Third-Party Licensee

In May 2024, the Company entered into a Patent License Agreement (Third-Party Licensee Agreement) with a third-party licensee.

The Company completed delivery of the performance obligation under the agreement, and the Company received a payment of $ 7.0 million in August 2024.

No revenue was recognized for the three months ended September 30, 2024, and the Company recognized $ 7.0 million of license revenue for the nine months ended September 30, 2024.

There is a no receivable as of September 30, 2024., and there is no deferred revenue related to this agreement.

The Company completed delivery of the performance obligation under the agreement, and the Company will receive a payment of $ 7.0 million.

The Company recognized $ 7.0 million of license revenue for the three and six months ended June 30, 2024, and there is a receivable of $ 7.0 million.

There is no deferred revenue related to this agreement.

Gale Therapeutics Inc.

4 unchanged sentences

In exchange for $ 7.5 million of funding, the Company acquired a majority stake in Gale.

Total charges of $ 2.7 million and $ 10.7 million under the Gale Services Agreement for the three and nine months ended September 30, 2024, respectively, were eliminated in consolidation.

In July 2024 and September 2024, the Company entered into a preferred stock purchase agreement to purchase additional shares in Gale for $ 3.0 million each, for a total of $ 6.0 million.

Total charges of $ 4.6 million and $ 8.0 million under the Gale Services Agreement for the three and six months ended June 30, 2024, respectively, were eliminated in consolidation.

In July 2024, the Company entered into a preferred stock purchase agreement to purchase additional shares in Gale for $ 3.0 million.

Revenues earned

The revenues recorded for the three and nine months ended September 30, 2024 and 2023 were earned principally from the following licensees (in millions):

The revenues recorded for the three and six months ended June 30, 2024 and 2023 were earned principally from the following licensees (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

2 unchanged sentences

Alexion $ 13.8 $ 11.2 $ 26.4 $ 21.6

Gilead — 6.0 — 6.0

Janssen — 22.2 — 27.5

MorphoSys/Incyte 2.1 2.7 6.5 6.6

Omeros — 5.0 — 5.0

$ 1.5 $ — $ 1.5 $ —

MorphoSys 1.6 2.0 4.4 3.9

Vega — — 0.5 —

Vir — 0.1 0.1 1.5

Viridian $ — $ — $ — $ —

Zenas $ — $ 10.0 $ — $ 10.0

Third Party Licensee

$ 7.0 $ — $ 7.0 $ —

Total $ 23.9 $ 45.5 $ 39.9 $ 64.5

The table below summarizes the disaggregation of revenue recorded for the three and nine months ended September 30, 2024 and 2023 (in millions):

The table below summarizes the disaggregation of revenue recorded for the three and six months ended June 30, 2024 and 2023 (in millions):

Three Months Ended

September 30, Nine Months Ended

September 30,

June 30, Six Months Ended

2024 2023 2024 2023

7 unchanged sentences

Remaining Performance Obligations and Deferred Revenue

The Company does not have any remaining performance obligations as of September 30, 2024.

As of September 30, 2023, the Company had deferred revenue of $ 9.2 million for conducting research activities pursuant to the Second J&J Agreement.

All deferred revenue as of September 30, 2023 was classified as current liabilities as the Company’s obligations to perform services are due on demand when requested by J&J under the Second J&J Agreement.

There is no provision for income tax for the three and nine months ended September 30, 2024 or 2023.

As of September 30, 2024, the Company’s deferred income tax assets are primarily comprised of deferred revenue, capitalized research and development expenses, federal and state tax net operating loss (NOL) carryforwards and research and development tax credit carryforwards, and have been fully offset by a valuation allowance.

The Company does not have any remaining performance obligation as of June 30, 2024.

As of June 30, 2023, the Company had deferred revenue of $ 7.9 million for conducting research activities pursuant to the Second J&J Agreement.

All deferred revenue as of June 30, 2023 was classified as current liabilities as the Company’s obligations to perform services are due on demand when requested by J&J under the Second J&J Agreement.

There is no provision for income tax for the three and six months ended June 30, 2024 or 2023.

As of June 30, 2024, the Company’s deferred income tax assets are primarily comprised of deferred revenue, capitalized research and development expenses, federal and state tax net operating loss (NOL) carryforwards and research and development tax credit carryforwards, and have been fully offset by a valuation allowance.

Sale of Future Royalties

1 unchanged sentence

The Company evaluated the arrangement and determined that the proceeds from the sale of future royalties should be classified as debt according to ASC 470 Debt .

At September 30, 2024, the estimated effective interest rate remains at 21.1 %.

The Company continues to reassess the estimate of total future royalty payments and prospectively adjusts the imputed interest rate and related amortization if the estimate is materially different.

For the three and nine months ended September 30, 2024, the Company recognized $ 15.7 million and $ 42.1 million of non-cash royalty revenue, respectively, and $ 8.2 million and $ 25.3 million of non-cash interest expense, respectively.

At June 30, 2024, the estimated effective interest rate remains at 21.1 %.

The Company will continue to reassess the estimate of total future royalty payments and prospectively adjust the imputed interest rate and related amortization if the estimate is materially different.

For the three and six months ended June 30, 2024, the Company recognized $ 13.8 million and $ 26.4 million of non-cash royalty revenue, respectively, and $ 8.4 million and $ 17.0 million of non-cash interest expense, respectively..

Monjuvi Royalty Sale Agreement

1 unchanged sentence

At June 30, 2024, the Company reassessed the estimate of total future royalty payments and updated the estimated effective interest rate to 17.5 %.

The Company continues to reassess the estimate of total future royalty payments and prospectively adjusts the imputed interest rate and related amortization if the estimate is materially different.

For the three and nine months ended September 30, 2024, the Company recognized $ 2.1 million and $ 6.5 million of non-cash royalty revenue, respectively, and $ 0.8 million and $ 2.7 million of non-cash interest expense, respectively.

The following table shows the activity within debt for the nine months ended September 30, 2024 (in thousands):

September 30, 2024

For the three and six months ended June 30, 2024, the Company recognized $ 1.6 million and $ 4.4 million of non-cash royalty revenue, respectively, and $ 0.8 million and $ 1.9 million of non-cash interest expense, respectively.

The following table shows the activity within debt for the six months ended June 30, 2024 (in thousands):

June 30, 2024

(As Restated)

7 unchanged sentences

Total debt $ 179,756

Sale of Common Stock

In September 2024, we completed an underwritten public offering pursuant to an automatic universal shelf registration statement on Form S-3 of 8,093,712 shares of common stock which included 1,458,600 shares issued pursuant to our underwriters’ exercise of their over-allotment option, as well as pre-funded warrants to purchase up to an aggregate of 3,088,888 shares of common stock.

We received net proceeds of $ 189.2 million after deducting underwriting discounts, commissions, and offering expenses.

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

What changed 10-Q/A

Item 1. Financial Statements