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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38112

 

ATHENEX, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

43-1985966

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

 

 

1001 Main Street, Suite 600

Buffalo, NY

14203

(Address of principal executive offices)

(Zip Code)

 

(716) 427-2950

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.001 per share

 

ATNX

 

The Nasdaq Global Select Market

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of July 22, 2022, the registrant had 121,608,388 shares of common stock, $0.001 par value per share, outstanding.

 

 

 


 

Table of Contents

 

 

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

Item 1.

 

Financial Statements

 

1

 

 

Condensed Consolidated Balance Sheets (Unaudited)

 

1

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited)

 

2

 

 

Condensed Consolidated Statements of Stockholders’ Deficit (Unaudited)

 

3

 

 

Condensed Consolidated Statements of Cash Flows (Unaudited)

 

5

 

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

32

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

50

Item 4.

 

Controls and Procedures

 

51

PART II.

 

OTHER INFORMATION

 

52

Item 1.

 

Legal Proceedings

 

52

Item 1A.

 

Risk Factors

 

52

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

53

Item 3.

 

Defaults Upon Senior Securities

 

53

Item 4.

 

Mine Safety Disclosures

 

54

Item 5.

 

Other Information

 

54

Item 6.

 

Exhibits

 

54

Signatures

 

56

 

 

i


 

PART I—FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements.

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

(unaudited)

(In thousands, except share and per share data)

 

 

 

June 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

22,139

 

 

$

35,202

 

Restricted cash

 

 

13,825

 

 

 

16,500

 

Short-term investments

 

 

1,189

 

 

 

10,207

 

Accounts receivable, net of chargebacks and other deductions of $26,662 and
   $
22,868, respectively, and provision for credit losses of $9,795 and $9,196,
   respectively

 

 

33,824

 

 

 

26,286

 

Inventories

 

 

37,851

 

 

 

27,049

 

Prepaid expenses and other current assets

 

 

3,975

 

 

 

5,321

 

Discontinued operations, current portion

 

 

4,943

 

 

 

12,831

 

Total current assets

 

 

117,746

 

 

 

133,396

 

Property and equipment, net

 

 

4,194

 

 

 

5,181

 

Intangible assets, net

 

 

72,472

 

 

 

71,896

 

Operating lease right-of-use assets, net

 

 

4,885

 

 

 

5,509

 

Other assets

 

 

991

 

 

 

1,087

 

Discontinued operations, non-current portion

 

 

21,599

 

 

 

50,379

 

Total assets

 

$

221,887

 

 

$

267,448

 

Liabilities and stockholders' equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

21,397

 

 

$

14,519

 

Accrued expenses

 

 

39,285

 

 

 

23,892

 

Current portion of operating lease liabilities

 

 

2,077

 

 

 

2,393

 

Current portion of long-term debt and finance lease obligations

 

 

23,738

 

 

 

46,096

 

Discontinued operations, current portion

 

 

3,674

 

 

 

9,147

 

Total current liabilities

 

 

90,171

 

 

 

96,047

 

Long-term liabilities:

 

 

 

 

 

 

Long-term operating lease liabilities

 

 

3,898

 

 

 

4,411

 

Long-term debt and finance lease obligations

 

 

22,226

 

 

 

95,607

 

Royalty financing liability

 

 

75,006

 

 

 

 

Deferred tax liabilities

 

 

1,751

 

 

 

1,751

 

Contingent consideration

 

 

24,129

 

 

 

24,076

 

Other long-term liabilities

 

 

2,689

 

 

 

3,046

 

Discontinued operations, non-current portion

 

 

7,490

 

 

 

8,058

 

Total liabilities

 

 

227,360

 

 

 

232,996

 

Commitments and contingencies (See Note 18)

 

 

 

 

 

 

Stockholders' equity:

 

 

 

 

 

 

Common stock, par value $0.001 per share, 250,000,000 shares authorized at June 30,
   2022 and December 31, 2021;
119,323,823 and 111,802,968 shares issued at June 30,
   2022 and December 31, 2021, respectively;
117,650,903 and 110,130,048 shares
   outstanding at June 30, 2022 and December 31, 2021, respectively

 

 

119

 

 

 

111

 

Additional paid-in capital

 

 

980,819

 

 

 

972,404

 

Accumulated other comprehensive income (loss)

 

 

1,471

 

 

 

(487

)

Accumulated deficit

 

 

(962,989

)

 

 

(913,412

)

Less: treasury stock, at cost; 1,672,920 shares at June 30, 2022 and
   December 31, 2021

 

 

(7,485

)

 

 

(7,485

)

Total Athenex, Inc. stockholders' equity

 

 

11,935

 

 

 

51,131

 

Non-controlling interests

 

 

(17,408

)

 

 

(16,679

)

Total stockholders' (deficit) equity

 

 

(5,473

)

 

 

34,452

 

Total liabilities and stockholders' (deficit) equity

 

$

221,887

 

 

$

267,448

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

1


 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Operations and Comprehensive Loss

(unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Product sales, net

 

$

25,786

 

 

$

20,394

 

 

$

54,154

 

 

$

38,881

 

License and other revenue

 

 

5,730

 

 

 

304

 

 

 

6,504

 

 

 

20,969

 

Total revenue

 

 

31,516

 

 

 

20,698

 

 

 

60,658

 

 

 

59,850

 

Cost of sales

 

 

23,092

 

 

 

19,117

 

 

 

45,613

 

 

 

34,158

 

Gross Profit

 

 

8,424

 

 

 

1,581

 

 

 

15,045

 

 

 

25,692

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

13,094

 

 

 

20,646

 

 

 

27,179

 

 

 

42,390

 

Selling, general, and administrative expenses

 

 

17,172

 

 

 

17,641

 

 

 

30,979

 

 

 

36,840

 

Total operating expenses

 

 

30,266

 

 

 

38,287

 

 

 

58,158

 

 

 

79,230

 

Operating loss

 

 

(21,842

)

 

 

(36,706

)

 

 

(43,113

)

 

 

(53,538

)

Interest income

 

 

46

 

 

 

32

 

 

 

122

 

 

 

61

 

Interest expense

 

 

4,307

 

 

 

5,608

 

 

 

8,820

 

 

 

10,538

 

(Gain) loss on partial extinguishment of debt

 

 

(2,051

)

 

 

 

 

 

1,450

 

 

 

 

Loss before income tax expense

 

 

(24,052

)

 

 

(42,282

)

 

 

(53,261

)

 

 

(64,015

)

Income tax expense (benefit)

 

 

(19

)

 

 

(11,035

)

 

 

8

 

 

 

(10,881

)

Net loss from continuing operations

 

 

(24,033

)

 

 

(31,247

)

 

 

(53,269

)

 

 

(53,134

)

Loss (gain) from discontinued operations (Note 4)

 

 

8,341

 

 

 

3,368

 

 

 

(2,963

)

 

 

7,084

 

Net loss

 

 

(32,374

)

 

 

(34,615

)

 

 

(50,306

)

 

 

(60,218

)

Less: net loss attributable to non-controlling interests

 

 

(217

)

 

 

(341

)

 

 

(729

)

 

 

(894

)

Net loss attributable to Athenex, Inc.

 

$

(32,157

)

 

$

(34,274

)

 

$

(49,577

)

 

$

(59,324

)

Unrealized gain (loss) on investment, net of income taxes

 

 

443

 

 

 

(19

)

 

 

470

 

 

 

(3

)

Foreign currency translation adjustment, net of income taxes

 

 

953

 

 

 

(263

)

 

 

1,488

 

 

 

14

 

Comprehensive loss

 

$

(30,761

)

 

$

(34,556

)

 

$

(47,619

)

 

$

(59,313

)

Basic and diluted loss per Athenex, Inc. common share (Note 15):

 

 

 

 

 

 

 

 

 

 

 

 

Net loss from continuing operations

 

$

(0.21

)

 

$

(0.30

)

 

$

(0.47

)

 

$

(0.53

)

Net (loss) gain from discontinued operations

 

 

(0.07

)

 

 

(0.03

)

 

 

0.03

 

 

 

(0.07

)

Net loss per share attributable to Athenex, Inc. common
   stockholders, basic and diluted (See Note 15)

 

$

(0.28

)

 

$

(0.33

)

 

$

(0.44

)

 

$

(0.60

)

Weighted-average shares used in computing net loss per share
   attributable to Athenex, Inc. common stockholders, basic
   and diluted (See Note 15)

 

 

113,006,158

 

 

 

103,370,268

 

 

 

111,762,029

 

 

 

98,427,561

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Stockholders’ Deficit

(unaudited)

(In thousands, except share data)

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
other

 

 

Treasury Stock

 

 

Total
Athenex,
Inc.

 

 

Non-

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

paid-in
capital

 

 

Accumulated
deficit

 

 

comprehensive
loss

 

 

Shares

 

 

Amount

 

 

stockholders'
equity

 

 

controlling
interests

 

 

stockholders'
equity

 

Balance at January 1, 2021

 

 

95,066,195

 

 

$

95

 

 

$

901,864

 

 

$

(713,644

)

 

$

(1,134

)

 

 

(1,672,920

)

 

$

(7,406

)

 

$

179,775

 

 

$

(14,427

)

 

$

165,348

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

2,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,205

 

 

 

 

 

 

2,205

 

Restricted stock expense

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

29

 

Stock options exercised

 

 

119,425

 

 

 

 

 

 

852

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

852

 

 

 

 

 

 

852

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(25,050

)

 

 

 

 

 

 

 

 

 

 

 

(25,050

)

 

 

(553

)

 

 

(25,603

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

293

 

 

 

 

 

 

 

 

 

293

 

 

 

 

 

 

293

 

Balance at March 31, 2021 (unaudited)

 

 

95,185,620

 

 

 

95

 

 

 

904,950

 

 

 

(738,694

)

 

 

(841

)

 

 

(1,672,920

)

 

 

(7,406

)

 

 

158,104

 

 

 

(14,980

)

 

 

143,124

 

Sale of common stock

 

 

33,373

 

 

 

 

 

 

133

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

133

 

 

 

 

 

 

133

 

Issuance of common stock in connection with acquisition of Kuur and settlement of transaction incentive liability assumed

 

 

15,601,667

 

 

 

16

 

 

 

58,412

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58,428

 

 

 

 

 

 

58,428

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

2,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,387

 

 

 

 

 

 

2,387

 

Restricted stock expense

 

 

 

 

 

 

 

 

57

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

57

 

 

 

 

 

 

57

 

Stock options exercised

 

 

160,000

 

 

 

 

 

 

727

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

727

 

 

 

 

 

 

727

 

Treasury stock repurchase

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(79

)

 

 

(79

)

 

 

 

 

 

(79

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(34,274

)

 

 

 

 

 

 

 

 

 

 

 

(34,274

)

 

 

(341

)

 

 

(34,615

)

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(282

)

 

 

 

 

 

 

 

 

(282

)

 

 

 

 

 

(282

)

Balance at June 30, 2021 (unaudited)

 

 

110,980,660

 

 

$

111

 

 

$

966,666

 

 

$

(772,968

)

 

$

(1,123

)

 

 

(1,672,920

)

 

$

(7,485

)

 

$

185,201

 

 

$

(15,321

)

 

$

169,880

 

 

 

 

 

Common Stock

 

 

Additional

 

 

 

 

 

Accumulated
other

 

 

Treasury Stock

 

 

Total
Athenex,
Inc.

 

 

Non-

 

 

Total

 

 

 

Shares

 

 

Amount

 

 

paid-in
capital

 

 

Accumulated
deficit

 

 

comprehensive
(loss) income

 

 

Shares

 

 

Amount

 

 

stockholders'
equity

 

 

controlling
interests

 

 

stockholders'
equity (deficit)

 

Balance at January 1, 2022

 

 

111,802,968

 

 

$

111

 

 

$

972,404

 

 

$

(913,412

)

 

$

(487

)

 

 

(1,672,920

)

 

$

(7,485

)

 

$

51,131

 

 

$

(16,679

)

 

$

34,452

 

Sale of common stock through ATM, net of costs of $52

 

 

1,646,026

 

 

 

2

 

 

 

1,693

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,695

 

 

 

 

 

 

1,695

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

1,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,623

 

 

 

 

 

 

1,623

 

Restricted stock expense

 

 

 

 

 

 

 

 

251

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

251

 

 

 

 

 

 

251

 

Issuance of warrant

 

 

 

 

 

 

 

 

148

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

148

 

 

 

 

 

 

148

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(17,420

)

 

 

 

 

 

 

 

 

 

 

 

(17,420

)

 

 

(512

)

 

 

(17,932

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

562

 

 

 

 

 

 

 

 

 

562

 

 

 

 

 

 

562

 

Balance at March 31, 2022 (unaudited)

 

 

113,448,994

 

 

 

113

 

 

 

976,119

 

 

 

(930,832

)

 

 

75

 

 

 

(1,672,920

)

 

 

(7,485

)

 

 

37,990

 

 

 

(17,191

)

 

 

20,799

 

Sale of common stock through ATM, net of costs of $86

 

 

5,501,866

 

 

 

5

 

 

 

2,775

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,780

 

 

 

 

 

 

2,780

 

Sale of common stock through ESPP

 

 

372,963

 

 

 

1

 

 

 

187

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

188

 

 

 

 

 

 

188

 

Stock-based compensation cost

 

 

 

 

 

 

 

 

1,358

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,358

 

 

 

 

 

 

1,358

 

Restricted stock expense

 

 

 

 

 

 

 

 

245

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

245

 

 

 

 

 

 

245

 

Issuance of warrant

 

 

 

 

 

 

 

 

135

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

135

 

 

 

 

 

 

135

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(32,157

)

 

 

 

 

 

 

 

 

 

 

 

(32,157

)

 

 

(217

)

 

 

(32,374

)

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,396

 

 

 

 

 

 

 

 

 

1,396

 

 

 

 

 

 

1,396

 

Balance at June 30, 2022 (unaudited)

 

 

119,323,823

 

 

$

119

 

 

$

980,819

 

 

$

(962,989

)

 

$

1,471

 

 

 

(1,672,920

)

 

$

(7,485

)

 

$

11,935

 

 

$

(17,408

)

 

$

(5,473

)

 

3


 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


 

ATHENEX, INC. AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

 

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss from continuing operations

 

$